Due Process in International Commercial Arbitration

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Author: Matti S. Kurkela | Santtu Turunen | Conflict Management Institute (COMI)

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DUE PROCESS IN I N T E R N AT I O N A L COMMERCIAL A R B I T R AT I O N

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DUE PROCESS IN I N T E R N AT I O N A L COMMERCIAL A R B I T R AT I O N SECOND EDITION

MATTI S. KURKELA SANTTU TURUNEN AND CONFLICT MANAGEMENT INSTITUTE (COMI)

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1 Oxford University Press, Inc., publishes works that further Oxford University’s objective of excellence in research, scholarship, and education. Oxford New York Auckland Cape Town Dar es Salaam Hong Kong Karachi Kuala Lumpur Mexico City Nairobi New Delhi Shanghai Taipei Toronto

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Copyright © 2010 by Oxford University Press, Inc. Published by Oxford University Press, Inc. 198 Madison Avenue, New York, New York 10016 Oxford is a registered trademark of Oxford University Press Oxford University Press is a registered trademark of Oxford University Press, Inc. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior permission of Oxford University Press, Inc. _____________________________________________ Library of Congress Cataloging-in-Publication Data Kurkela, Matti, 1951– Due process in international commercial arbitration / Matti S. Kurkela, Santtu Turunen, and Conﬂict Management Institute (COMI).— 2nd ed. p. cm. Includes bibliographical references and index. ISBN 978-0-19-537713-2 ((hardback) : alk. paper) 1. Arbitration and award, International. 2. Due process of law. 3. Arbitration agreements, Commercial. I. Turunen, Santtu. II. Helsingin yliopisto. Conﬂict Management Institute. III. Title. K2400.K86 2010 347'.09–dc22 2009046433 _____________________________________________ 1 2 3 4 5 6 7 8 9 Printed in the United States of America on acid-free paper. Note to Readers This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is based upon sources believed to be accurate and reliable and is intended to be current as of the time it was written. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional services. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. Also, to conﬁrm that the information has not been affected or changed by recent developments, traditional legal research techniques should be used, including checking primary sources where appropriate. (Based on the Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations.)

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Dedication With a thousand thanks to Pirjo, Jaakko (5), Tuomo (4) and Saana (2) for the joy in my life and to the staff and colleagues at Hannes Snellman for giving me the facilities and their support in my endeavours Matti S. Kurkela Dedicated to those who strive for the settlement of conﬂicts by sophisticated and civilized methods in our global community Matti S. Kurkela, Santtu Turunen and Conﬂict Management Institute(COMI)

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Preface to the Second Edition

Due process is an emerging doctrine in international arbitration. Increasing attention is paid to fairness of arbitral procedure and the procedural safeguards in the proceedings. On the other hand, the traditional beneﬁts of ﬂexibility, efﬁciency and ﬁnality of arbitration as a method of dispute resolution have to be considered. Thus, the doctrine of due process is not only current, but also critical for the future of arbitration as a method of dispute resolution. We would like to thank professor (h.c.) Matti S. Kurkela for his pioneer work with the ﬁrst edition of the book, and the trust vested in COMI with the second edition. The second edition of the book is produced by University of Helsinki Conﬂict Management Institute, COMI. COMI is a research institute focused on judicial conﬂict management. Arbitration is one of the key areas of research in COMI. The institute has coordinated research work, published several books and organized various seminars on law of arbitration. It has also developed teaching of arbitration at the faculty of law of the University of Helsinki. The support association of the institute also offers institutionalised arbitration. Finally, we would like to thank Santtu Turunen for doing extensive work on the 1st edition, work that has make this new edition possible. He conducted the research necessary for updating and wrote new sections with great care and skill. This 2nd edition would not exist without his immense labor. The board of COMI, including professor Jarno Tepora and research director Risto Koulu, has reviewed the changes in the second edition. In addition, COMI would like to thank all the people who have taken part in the process of preparing the book, and especially the production team of Oxford University Press. Helsinki, January 20, 2010 Jarno Tepora and Risto Koulu

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Foreword to the First Edition

International arbitrations “ﬂoat” above national jurisdictions like many international transactions. To submit international arbitration to a national law may be grossly artiﬁcial. The great issue is the extent to which the great principles of arbitration law and the arbitration practice or “usage” are common or uniform to trading nations and are as such horizontal or “ﬂoating” in lieu of forming a vertical pyramid like national laws. In my research on letters of credit in the 1980’s I attempted to develop an acid test to identify substantive lex mercatoria in banking and ﬁnancial transactions. The test included three elements: the international character of the transaction; a reasonable expectation of a trade usage being applicable regardless of contacts to any jurisdiction and the reasonableness and equitability of such a rule. The same test could mutatis mutandis be applied to international arbitration: international character; reasonable expectation of an arbitration “usage” to be applicable; reasonableness and equitability. The practitioners of international arbitration have sometimes argued for an international appeal board or panel for rapid review and control of the enforceability of the awards given. Perhaps we could introduce such a control mechanism, at the ﬁrst stage perhaps a non-binding review of “due process” on a consultative basis to promote the enforceability of the awards, to give guidance to national courts and to eliminate the risks of arbitrary or manifestly erroneous awards. The Conﬂict Management Institute of the University of Helsinki Law School could perhaps prepare and submit a proposal in this respect. I am very grateful for the great assistance of my assistant Heidi Lautjärvi in writing this book, the devoted staff of Hannes Snellman library for helping me in the research and my partners at Hannes Snellman for giving me the opportunity and facilities to write this book. Helsinki, March 18, 2005 Matti S. Kurkela

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Foreword to the Second Edition

The idea of the book is to outline the basis of fundamental procedural requirements in international commercial arbitration, due process in arbitration. Arbitration usually substitutes ordinary court procedure, and despite the private nature of the method of dispute resolution, arbitral awards are ﬁnal and widely enforceable. As a trade-off for the mandate and status as a legal substitute for ordinary court procedure as well as for the binding nature and enforceability of the award, there are procedural requirements which have to be respected. The starting point of the analysis is the nature of due process as a procedural counterpart of substantive lex mercatoria. International arbitration and due process norms in international arbitration in a way ﬂoat above national jurisdictions, just like international transactions and lex mercatoria. International practices create law not only in substantive but also in procedural domain. In this second edition, the normative nature, justiﬁcation and the theoretical ground of due process requirements are discussed further. In addition to international practices, due process requirements are more intensively bound to the common basis of fundamental procedural rights of various legal cultures. The changes in the second edition of the book are focused on building an even stronger foundation for the doctrine of arbitral due process and further intensifying the structure of the book. The intention of the book is to advance understanding of the procedural rights in arbitration as an entity, place the single norms and guidelines in context and make it easier to apply due process argumentation in practice. Some speciﬁc questions, for example requirement of independence and impartiality of arbitrators have been discussed in more detail compared to the ﬁrst edition. Generally, also references to the current discussions in ﬁeld of arbitration have been made. Finally, I would like to thank the collegues at COMI, the research director of COMI Risto Koulu, Matti S. Kurkela research assistant Riikka Koulu and the production team of Oxford University Press for help and co-operation in preparing the second edition of the book. Helsinki, January 20, 2010 Santtu Turunen

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About the Authors

MATTI S. KURKELA, PROFESSOR(h.c.) +358-400-688584 D.S.U. (Paris 2) LL.M. (Harvard) Avocat à la Cour de Paris Finland: Laivurinkatu 6 A 00150 Helsinki matti.kurkela @ mattiskurkela.ﬁ www.mattiskurkela.ﬁ. The title Professor (h.c.) was granted to Matti S. Kurkela by the President of the Republic of Finland. Matti S. Kurkela holds a doctorate of law from the University of Helsinki, an LL.M. from Harvard Law School and a D.S.U. from the University of Paris. He has also been admitted to The Paris Bar. He was one of member in Helsinki Bar before Paris Bar. As docent Matti S. Kurkela lectures in international trade law and private international law at the University of Helsinki. He has published several books and articles on ﬁnancial and contract law and on arbitration. His doctoral thesis treats bank guarantees in international trade. Matti S. Kurkela’s ﬁeld of practice includes mainly ﬁnancial and contract law and M&A. He has also acted as arbitrator in national and international arbitration proceedings.

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SANTTU TURUNEN Researcher, University of Helsinki Conﬂict Management Institute (COMI) LL.M., University of Helsinki santtu.turunen@comi.ﬁ Santtu Turunen works as a researcher at the University of Helsinki Conﬂict Management Institute based at University of Helsinki Law Faculty. He has written several articles concerning arbitration, and edited books in the ﬁeld of law. For example, Turunen has edited a collection of articles on Finnish arbitral award published in the publication series of the COMI institute. Turunen has also acted as an arbitrator in the institutionalised arbitration offered by the support association of the University of Helsinki Conﬂict Management Institute.

UNIVERSITY OF HELSINKI CONFLICT MANAGEMENT INSTITUTE (COMI) comi@comi.ﬁ www.comi.ﬁ COMI P.O. Box 4 00014 University of Helsinki Finland University of Helsinki Conﬂict Management Institute COMI is a research institute focused on judicial conﬂict management. Arbitration is one of the key areas of research in COMI. The institute has coordinated research work, published several books and organised various seminars on law of arbitration. It has also developed teaching of arbitration at the faculty of law of the University of Helsinki. The support association of the institute also offers institutionalised arbitration. For more information, see www.comi.ﬁ.

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MATTI S. KURKELA, PROFESSOR(H.C.)

Summary Contents

Preface to the Second Edition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii Foreword to the First Edition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix Foreword to the Second Edition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi About the Authors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii Abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxiii 1 Due Process and Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 The New York Convention as A Starting Point . . . . . . . . . . . . . . . . . . 15 3 Arbitration Agreement as the Basis of Jurisdiction . . . . . . . . . . . . . . 43 4 Aspects of Jurisdiction other than the Agreement . . . . . . . . . . . . . . . 81 5 The Panel and Due Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 6 Due Process Related to Facts and Evidence . . . . . . . . . . . . . . . . . . . 141 7 The Role of the Panel in the Proceedings . . . . . . . . . . . . . . . . . . . . 173 8 Fair Arbitration—Opportunity to Present One’s Case . . . . . . . . . . . 185 9 Due Process, Lex Proceduralia, Fair Arbitration—Procedural Foundation of Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201 List of References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207 Appendices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 541

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Contents

Preface to the Second Edition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii Foreword to the First Edition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix Foreword to the Second Edition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi About the Authors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii Abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxiii Chapter 1

Due Process and Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1 The Origin of Due Process Requirements in Arbitration . . . . . . . . . . 1 1.2 How Should Due Process Requirements in Arbitration Be Deﬁned? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.3 The Floating Nature of the Law of Due Process—Analogy to Lex Mercatoria . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.4 The Method of Deﬁning Due Process and Lex Proceduralia in Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 1.5 Due Process as a Principle of Law . . . . . . . . . . . . . . . . . . . . 12 Chapter 2

The New York Convention as A Starting Point . . . . . . . . . . . . . . . . . . . . 15 2.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 2.2 Public Policy (“Ordre Public”) as a Ground to Refuse Recognition and Enforcement . . . . . . . . . . . . . . . . . . . . . . 17 2.2.1 A Vague Category . . . . . . . . . . . . . . . . . . . . . . . . . 17 2.2.2 Procedural Aspects: Just a Right, Not a Duty; Actions Ex Ofﬁcio and Sua Sponte . . . . . . . . . . . . . . . . 18 2.2.3 What Constitutes Public Policy? . . . . . . . . . . . . . . . . . . 20 2.2.4 ILA on Fundamental Principles . . . . . . . . . . . . . . . . . . 22 xvii

2.2.5 ILA on Public Policy Rules . . . . . . . . . . . . . . . . . . . . . 24 2.3 Arbitrability of the Subject Matter. . . . . . . . . . . . . . . . . . . . . 24 2.4 Arbitration Agreement (“Mandate in Concreto”) and the Convention . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 2.4.1 Agreement as the Basis of the Procedure . . . . . . . . . . . . . 25 2.4.2 Breach of the Procedural Agreement as a Ground to Refuse Recognition and Enforcement . . . . . . . . . . . . . 26 2.4.3 Ultra Petita—Matters Beyond the Scope . . . . . . . . . . . . . . 28 2.4.4 Waiver Doctrine and the Breach of the Procedural Agreement . . . . . . . . . . . . . . . . . . . . 32 2.5. Incapacity and Invalidity . . . . . . . . . . . . . . . . . . . . . . . . . 35 2.5.1 Incapacity of the Party and Invalidity of the Agreement . . . . . . 35 2.5.2 Incapacity of a Person . . . . . . . . . . . . . . . . . . . . . . . 35 2.5.3 Invalidity of the Arbitration Agreement . . . . . . . . . . . . . . 36 2.6. Ability to Present One’s Case . . . . . . . . . . . . . . . . . . . . . . 37 2.6.1 Ability to Present One’s Case as a Fundamental General Requirement. . . . . . . . . . . . . . . . . . . . . . . 37 2.6.2 Ability to Present One’s Case According to the Agreement and the Law of the Seat . . . . . . . . . . . . . . 39 2.7 Award has to be Final (“Condition Subsequent”) . . . . . . . . . . . . . 40 2.8 Conclusions on the Analysis of Article V of the Convention . . . . . . . . 41 Chapter 3

Arbitration Agreement as the Basis of Jurisdiction . . . . . . . . . . . . . . . . . 43 3.1 Agreement on Basis of Jurisdiction—Mandate in Concreto Based on Mandate in Abstracto . . . . . . . . . . . . . . . . . . . . . 43 3.2 Existence of an Arbitration Agreement . . . . . . . . . . . . . . . . . . 46 3.2.1 The Written Form . . . . . . . . . . . . . . . . . . . . . . . . . 46 3.2.2 Competence to Determine Competence . . . . . . . . . . . . . 48 3.2.3 The Validity of the Agreement . . . . . . . . . . . . . . . . . . . 51 3.3. On Interpretation of the Arbitration Agreement . . . . . . . . . . . . . 52 3.3.1 Methods of Interpretation . . . . . . . . . . . . . . . . . . . . . 52 3.3.2 Assignment and Transfer . . . . . . . . . . . . . . . . . . . . . . 55 3.3.3 Time Limit for the Award . . . . . . . . . . . . . . . . . . . . . 56

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3.3.4 Time Limit in the Arbitration Clause as a Statute of Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 3.3.5 Guarantor’s or Indemnitor’s Right to Invoke an Arbitration Agreement . . . . . . . . . . . . . . . . . . . . . 60 3.4 Unconscionability or Unreasonability . . . . . . . . . . . . . . . . . . . 62 3.5 The Enforceability of an Arbitration Agreement and Due Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 3.5.1 Agreement Deﬁning Due Process?. . . . . . . . . . . . . . . . . 66 3.5.2 Good Faith of the Parties . . . . . . . . . . . . . . . . . . . . . 68 3.5.3 Possible Action in Case of Disloyalty . . . . . . . . . . . . . . . . 69 3.5.4 Non-Respect of the Agreement by the Arbitral Tribunal as Violation of Due Process . . . . . . . . . . . . . . . . . . . . 70 3.5.5 Manifest Disregard of Agreement and Substantive Law as Violation of Due Process . . . . . . . . . . . . . . . . . 73 3.5.6 Disregard of Facts as Violation of Due Process . . . . . . . . . . . 76 3.5.7 “Carte Blanche” Prayer for Relief and Due Process . . . . . . . . 77 3.6 Arbitration Agreement and Due Process—Summary . . . . . . . . . . . 78 Chapter 4

Aspects of Jurisdiction other than the Agreement . . . . . . . . . . . . . . . . . 81 4.1 Due Process and Jurisdiction—Problems Related to Aspects Other than the Agreement . . . . . . . . . . . . . . . . . . 81 4.2 Parties to the Proceedings . . . . . . . . . . . . . . . . . . . . . . . . 81 4.3 Arbitrability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 4.4 Res Judicata . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 4.4.1 Deﬁning Res Judicata . . . . . . . . . . . . . . . . . . . . . . . 85 4.4.2 “Effects” of Enforcement Dimensions . . . . . . . . . . . . . . . 89 4.5 Lis Pendens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 4.5.1 Lis Pendens Doctrine in Arbitration . . . . . . . . . . . . . . . . 90 4.5.2 When Are the Proceedings Parallel? Test of Identity or Similarity and the Enforcement Effects Test . . . . . . . . . . . 91 4.5.3 The Effect of Parallel Proceedings . . . . . . . . . . . . . . . . . 92 4.6 Forum Non Conveniens . . . . . . . . . . . . . . . . . . . . . . . . . . 95 4.6.1 Doctrine of Forum Non Conveniens . . . . . . . . . . . . . . . . 95

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4.6.2 Special Considerations in Arbitration . . . . . . . . . . . . . . . 97 4.7 Conditions Imposed by the Applicable Rules . . . . . . . . . . . . . . . 98 4.7.1 Security for Fees and Costs of the Arbitral Tribunal and Institution . . . . . . . . . . . . . . . . . . . . . . . . . . 98 4.7.2 Security for Attorneys’ Fees and Legal Costs of the Parties . . . . 99 4.7.3 Security for Loss or Damage . . . . . . . . . . . . . . . . . . 100 4.7.4 Security for the Claims or for the Enforcement of the Award . . . . . . . . . . . . . . . . . . . . . . . . . 101 4.8 Conditions Imposed by the Panel within its Autonomy . . . . . . . . 101 4.9 Conditions Imposed by the Agreement of the Parties: Duty to Mediate or Negotiate . . . . . . . . . . . . . . . . . . . . 102 4.10 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 Chapter 5

The Panel and Due Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 5.1 The Arbitration Panel in the Dispute Resolution Context . . . . . . . 107 5.2 The Composition of the Panel . . . . . . . . . . . . . . . . . . . . . 108 5.3 Challenging the Arbitrators . . . . . . . . . . . . . . . . . . . . . . 109 5.4 Impartiality and Independence . . . . . . . . . . . . . . . . . . . . 111 5.4.1 The Requirement of Impartial and Independent Arbitrators . . . . . . . . . . . . . . . . . . . . 111 5.4.2 The Meaning of Independency and Impartiality in Arbitration . . . . . . . . . . . . . . . . . . . 113 5.4.3 Same but Different? The Standard of Impartiality in Arbitration . . . . . . . . . . . . . . . . . . . 115 5.4.4 What Constitutes Bias? . . . . . . . . . . . . . . . . . . . . . 118 5.4.5 Duty to Disclose . . . . . . . . . . . . . . . . . . . . . . . . 120 5.4.6 IBA Guidelines—Green, Orange, Red, and Nonwaivable Red Lists . . . . . . . . . . . . . . . . . . . . 122 5.4.7 Requirement of Impartial Conduct . . . . . . . . . . . . . . . 126 5.5 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 5.6 Communication with the Parties . . . . . . . . . . . . . . . . . . . . 128 5.7 Role of the Secretary . . . . . . . . . . . . . . . . . . . . . . . . . 130 5.8 Fees and Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130 5.9 Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132

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5.10 Conﬁdentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136 5.11 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138 Chapter 6

Due Process Related to Facts and Evidence . . . . . . . . . . . . . . . . . . . . . . 141 6.1 The Structure of a Legal Decision: Facts and Due Process . . . . . . . 141 6.2 Facts in Legal Decision: Relevance, Sufﬁciency and Truth . . . . . . . 142 6.3 On the Burden of Proof . . . . . . . . . . . . . . . . . . . . . . . . 147 6.4 Role of Arbitral Panel in Establishing the Facts . . . . . . . . . . . . . 149 6.4.1 Conﬂicts of Traditions and Culture . . . . . . . . . . . . . . . 149 6.4.2 Guidance via Consultations . . . . . . . . . . . . . . . . . . 150 6.4.3 Direct Intervention by the Panel . . . . . . . . . . . . . . . . 151 6.5 Enforcement of Evidentiary Measures . . . . . . . . . . . . . . . . . 152 6.5.1 “Toolbox” of Measures for Bringing Evidence into Proceedings. . . . . . . . . . . . . . . . . . . 152 6.5.2 “Internal” Orders . . . . . . . . . . . . . . . . . . . . . . . 153 6.5.3 “External” Orders . . . . . . . . . . . . . . . . . . . . . . . 154 6.5.4 Fact-Finding by the Arbitrators . . . . . . . . . . . . . . . . . 156 6.5.5 Organizing the Evidentiary Hearings . . . . . . . . . . . . . . 157 6.5.6 “Entire Agreement Clauses” and Other Agreements on Admissibility of Evidence . . . . . . . . . . . . . . . . . . 158 6.6 Questions and Answers . . . . . . . . . . . . . . . . . . . . . . . . 160 6.7 Discovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161 6.8 Witnesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162 6.8.1 Prior to Hearings . . . . . . . . . . . . . . . . . . . . . . . . 162 6.8.2 Language . . . . . . . . . . . . . . . . . . . . . . . . . . . 164 6.8.3 “Nothing but the Truth” . . . . . . . . . . . . . . . . . . . . 164 6.8.4 Hostility, Evasiveness or Psychological or Emotional Ties . . . . . . . . . . . . . . . . . . . . . . . . 165 6.8.5 Questioning . . . . . . . . . . . . . . . . . . . . . . . . . . 166 6.8.6 Cross-Examination and Special Arrangements . . . . . . . . . 168 6.8.7 Timing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169 6.8.8 Compensation for Witnesses . . . . . . . . . . . . . . . . . . 169 6.9 Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169

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6.10 Other Evidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171 6.11 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172 Chapter 7

The Role of the Panel in the Proceedings . . . . . . . . . . . . . . . . . . . . . . . 173 7.1 Managing the Proceedings . . . . . . . . . . . . . . . . . . . . . . . 173 7.2 The Panel and the Facts of the Case . . . . . . . . . . . . . . . . . . 174 7.3 Jura Novit Arbiter and the “Burden of Education” . . . . . . . . . . . . 178 7.4 Administration of Remedies and Consultations . . . . . . . . . . . . . 180 7.5 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183 Chapter 8

Fair Arbitration—Opportunity to Present One’s Case . . . . . . . . . . . . . 185 8.1 Fair Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185 8.2 Equality of Arms and Reasonable Opportunity to Present One’s Case . . . . . . . . . . . . . . . . . . . . . . . . . . 186 8.3 Right to a Counsel of One’s Choice . . . . . . . . . . . . . . . . . . . 191 8.4 Conﬂict between Timeliness and Opportunity to Present One’s Case . . . . . . . . . . . . . . . . . . . . . . . . . 192 8.5 Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196 8.6 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199 Chapter 9

Due Process, Lex Proceduralia, Fair Arbitration—Procedural Foundation of Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201 9.1 The Three Facets: Due Process, Fair Arbitration and Lex Proceduralia . . . . . . . . . . . . . . . . . . . . . . . . . . 201 9.2 How to Formulate a Due Process Argument . . . . . . . . . . . . . . 203 9.3 Fairness or Finality? Conﬂicts of Principles and Goals . . . . . . . . . . 204 9.4 Access to Arbitration and Fair Hearing . . . . . . . . . . . . . . . . . 206

List of References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207 Appendices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 541

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CONTENTS

Abbreviations

AAA Rules

American Arbitration Association, Commercial Arbitration Rules and Mediation Procedures (Including Procedures for Large, Complex Commercial Disputes), as Amended and Effective on June 1, 2009

Act 1996

Arbitration Act 1996 (of England)

Argentina Act

National Code of Civil and Commercial Procedure Law 17.454 of September 19 1967, as reformed by Law 22.434 of March 16 1981, text consolidated according to Decree 1.042 of 1981, as reported in Jan Paulsson (ed), International Handbook on Commercial Arbitration, (Kluwer Law International 1984 Last updated: January 1985 Supplement No. 3) pp. 3–7.

CIETAC Rules

China International Economic and Trade Arbitration Commission (CIETAC), Ethical Rules for Arbitrators, as Effective on May 1, 2005

Civil Rights Covenant

International Covenant on Civil and Political Rights, Adopted and opened for signature, ratiﬁcation and accession by United Nations General Assembly Resolution 2200A (XXI) of 16 December 1966, entry into force 23 March 1976, in accordance with Article 49

COMI Rules

University of Helsinki Conﬂict Management Institute—Rules

Convention or The Convention

Convention on the Recognition and Enforcement of Foreign Arbitration Awards, New York, June 10, 1958

ECHR

European Convention for the Protection of Human Rights and Fundamental Freedoms as amended by Protocol No. 11, Rome, 4.XI.1950

FAA

United States Arbitration Act

xxiii

FCCC Expedited Rules

Central Chamber of Commerce of Finland Arbitration Rules and Rules and Rules for Expedited Arbitration of the Arbitration Institute of the Central Chamber of Commerce of Finland, as Effective on June 1, 2004

France Act

French Code of Civil Procedure–Book IV–Arbitration as reported in Jan Paulsson (ed), International Handbook on Commercial Arbitration, (Kluwer Law International 1984 Last updated: February 1998 Supplement No. 26) pp. 26–12

German Law

German Arbitration Law 1998, in force 1 January 1998 as reported in Jan Paulsson (ed), International Handbook on Commercial Arbitration, (Kluwer Law International 1984 Last updated: December 2001 Supplement No. 34) pp. 26–14

IBA

International Bar Association

IBA Ethics

IBA Rules of Ethics for International Arbitrators (1987)

IBA Guidelines

IBA Guidelines on Conﬂicts of Interest in International Arbitration (May 2004)

IBA Rules

IBA Rules on Taking of Evidence in International Commercial Arbitration

ICC

International Chamber of Commerce

ICC Rules

ICC Rules of Arbitration in force as from January 1, 1998 (ICC Publication No 808), as Amended January 1, 2008

ILA

International Law Association

Italy Act

Italian Code of Civil Procedure, Book Four, Title VIII, Arbitration, Amended by Legislative Decree of 2 February 2006, No. 40, as reported in Jan Paulsson (ed), International Handbook on Commercial Arbitration, (Kluwer Law International 1984 Last updated: April 2007 Supplement No. 49)

Japan Act

Japanese Arbitration Law, No. 138 of 2003, in force 1 March 2004, as reported in Jan Paulsson (ed), International Handbook on Commercial Arbitration, (Kluwer Law International 1984 Last updated: March 2005 Supplement No. 43) pp. Annex I-1–Annex I-20

LCIA

London Court of International Arbitration

LCIA Rules

London Court of International Arbitration: Rules, Clauses & Costs

xxiv

ABBREVIATIONS

Recommendations

ILA Resolution on Public Policy as a Bar to Enforcement of International Awards, 2002

Russian Law

Russian arbitration law as reported by Prof. Sergei Lebedev, “Law of the Russian Federation on International Commercial Arbitration” (in force 14 August 1993), as reported in Jan Paulsson (ed), International Handbook on Commercial Arbitration, Supplement 17. Kluwer Law International, January 1994

Spanish Act

Spanish Law 60/2003 of 23 December on Arbitration (in force 26 March 2004), as reported in Jan Paulsson (ed), International Handbook on Commercial Arbitration, (Kluwer Law International 1984 Last updated: July 2004 Supplement No. 41) pp. Annex I-1–Annex I-17

Swiss Rules

Swiss Rules of International Arbitration (2006)

Transnational Rules

Transnational Rules in International Commercial Arbitration, Edited by Emmanuel Gaillard, ICC Publication No. 180/4, Paris 1993

UCC

Uniform Commercial Code 2002 Edition

UCP

ICC Uniform Customs and Practice for Documentary Credits, 1993 Revision in force as of January 1, 1994

UNCITRAL

United Nations Commission on International Trade Law (UNCITRAL) UNCITRAL Model Law on International Commercial Arbitration UN Resolution on the UNCITRAL Model Law, December 18, 2006

UNIDROIT

International Institute for the Uniﬁcation of Private Law (UNIDROIT) Principles of International Commercial Contracts 2004, Rome 2004

WIPO WIPO Rules

World Intellectual Property Organization WIPO Arbitration Rules (see e.g., www.arbiter.wipo.int)

ABBREVIATIONS

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Chapter 1

Due Process and Arbitration

1.1 THE ORIGIN OF DUE PROCESS REQUIREMENTS IN ARBITRATION The concept of due process may be given different meanings. However, at its most fundamental level, the concept refers to the idea that no one should be deprived of his rights without due process of law. The most traditional and popularly known context of due process is probably criminal trials, but due process requirements concern civil cases as well. Usually due process is seen as a set of criteria that protect a private person in relation to the State and authorities. Due process requirements are considered to be a part of constitutional protection of an individual. But in the arbitration context, this starting point needs to be reconsidered. Arbitration is a private mechanism for dispute resolution. Parties do not—at least not directly—need protection against the State. In arbitration, instead of the otherwise competent court, the parties give their dispute to a private arbitration tribunal to be decided. The competence of the tribunal is derived from the parties, and the tribunal’s actions are based on the contract between the parties, and thus conceptually on freedom of contract. Consequently, the competence of the tribunal is not based on the power of the State within its jurisdiction, but rather the parties’ own actions. For these reasons, at ﬁrst glance due process does not seem relevant to arbitration. However, a fundamental feature of arbitration is that the arbitral award (the decision of the tribunal) is a ﬁnal and binding determination of the parties’ rights and obligations.1 Arbitral awards are widely enforceable, including internationally. Thus the States delegate jurisdictional power to arbitral tribunals indirectly through agreement of the parties. With this delegation of power comes a type of trade-off in the form of standards of quality applicable to arbitration. Making certain the award is enforceable is one of the most central duties of the arbitral tribunal. If the arbitral tribunal wants to issue an 1

For a further discussion of deﬁnitions and essential features of arbitration, see JULIAN LEW ET AL., COMPARATIVE INTERNATIONAL COMMERCIAL ARBITRATION 1–14 (1997). 1

enforceable award, the process has to meet certain quality standards. These minimum quality standards are, of course, procedural. They can be called due process requirements just like the minimum standards in ordinary court procedure. In the same way, they establish the minimum procedural safeguards necessary for someone to be deprived of his property or other rights. As such, they can be considered aspects of such elements as procedural fairness, opportunity to be heard, and equal treatment as well as access to justice.2 In addition to the delegation-of-power argument in justiﬁcation of due process requirements, there are further reasons for requiring arbitration to meet a minimum quality standard. An arbitration agreement not only entitles the parties to initiate arbitral proceedings according to the agreement and relevant laws but normally also prevents a party from starting a procedure in a general court. Thus, an arbitration agreement limits access to court and thus access to justice, which is generally considered a human right or at least a right at the constitutional level. The European Court of Human Rights has decided that right of access to court and a public trial in a court of law can be waived in favor of arbitration via an agreement. However, this does not mean the European Convention on Human Rights (“ECHR”) would not have any meaning in relation to arbitration. As arbitration is a kind of a surrogate for normal court procedure, some procedural standards need to be upheld to compensate for loss of access to court. The other procedural rights of Article 6 (1) of the ECHR are at least indirectly applicable in arbitration as well (e.g., the right to oral hearing), and the Convention States of ECHR have to protect them.3 Also it may be argued, that the human rights of the ECHR are to some extent horizontally applicable to relations between private persons and that the states need to take positive measures to ensure, protect and to secure the rights.4 The idea at this point is not to analyze the actual impact of the human rights conventions on arbitration but just to point out that the exclusive nature of arbitration as a method of dispute resolution does result in a need and justiﬁcation for certain minimum procedural standards.

2

3

4

2

Kaufmann-Kohler writes: “A comparative review of recent statutes and cases shows a consensus about two overriding principles, and yet a third appears to be emerging. Party autonomy in matters of procedure and due process are both well established across national arbitration regimes. The term “due process” here refers to a number of notions with varying names under different national laws, including natural justice, procedural fairness, the right or opportunity to be heard, the so-called principle de la contradiction and equal treatment. More recently, procedural efﬁciency has been increasingly advocated by scholarly writers and taken into account in practice by arbitral tribunals and courts. However, it has not achieved the same recognition as the ﬁrst two principles.” Gabrielle Kaufmann-Kohler, Globalization of Arbitral Procedure, 36 VANDERBILT J. TRANSN’L L. 1321 (Oct. 2003). See GEORGIOS PETROCHILOS, PROCEDURAL LAW IN INTERNATIONAL ARBITRATION 141 (2004). The relevance and applicability of the ECHR in arbitration is a wide topic that has generated some discussion. See e.g., id., Fredrik Rinquist, Do Procedural Human Rights Requirements Apply to Arbitration—A Study of Article 6(1) of the European Convention on Human Rights and Its Bearing upon Arbitration, Affarsjuridiska uppsatser (2006), and Sébastien Besson, Arbitration and Human Rights, 24 ASA BULLETIN (2006) passim. See for example ALEKSANDAR JAKSIC, ARBITRATION AND HUMAN RIGHTS (2002) at 108–113, 118–27 and 215 – 219. DUE PROCESS AND ARBITRATION

1.2 HOW SHOULD DUE PROCESS REQUIREMENTS IN ARBITRATION BE DEFINED? It is obvious that the method of deﬁning due process deﬁnes the whole concept. Depending on the method, due process may be given different meanings. The most common approach is usually the national and black letter law approach: due process exists when the procedure established is compatible with a speciﬁc national procedural law or set of rules. The applicable national law is chosen on the basis of a certain set of interpretative rules of private international law (e.g., of arbitration). However, national arbitration laws generally do not provide a solid basis for deﬁning procedural minimum standards. Most of the provisions in national arbitration laws are not mandatory. Accordingly, parties may agree on some other way of trying the case instead of following a certain procedural detail or provision in national law. More often the parties refer to some other set of procedural rules (e.g., rules of an arbitral institute). In these cases the whole procedure and not just some details are deﬁned on some basis other than the applicable national arbitration law. Also, the national law is typically relatively open, at least compared to laws concerning ordinary civil procedure. The arbitrators have a lot of discretion on many speciﬁc questions. For example, if the national law guarantees an opportunity to be heard, it is not always clear when an adequate opportunity is given to a party.5 In the arbitration context, an excellent example is the problematic requirement of opportunity to present one’s case as stated in the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“the Convention”). As national laws are in many ways nonmandatory and/or empty of content, they are not a very suitable basis for deﬁning the concept of due process as a minimum standard of procedural safeguards, at least not alone. There is also no such directly applicable black letter law regarding procedural minimum standards, as for example the ECHR is in relation to the ordinary procedure in most of the European countries. However, there are more or less indirect national and international minimum standards of procedural safeguards in arbitration.6 Those can be derived ﬁrst of all from the

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For example, the German Law is very openly formulated apart from some due process requirements: “(1) The parties shall be treated with equality and each party shall be given a full opportunity of presenting his case. (2) Counsel may not be excluded from acting as authorized representatives. (3) Otherwise, subject to the mandatory provisions of this Book, the parties are free to determine the procedure themselves or by reference to a set of arbitration rules. (4) Failing an agreement by the parties, and in the absence of provisions in this Book, the arbitral tribunal shall conduct the arbitration in such manner as it considers appropriate. The arbitral tribunal is empowered to determine the admissibility of taking evidence, take evidence and assess freely such evidence.” German Arbitration Law 1998, in force 1 January 1998 in JAN PAULSSON (ED), INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION, (Kluwer Law International 1984 Last updated: December 2001 Supplement No. 34) pp. 26 – 14. See GARY B. BORN, INTERNATIONAL COMMERCIAL ARBITRATION (2009), at 1765: All leading international arbitration conventions indirectly recognize and give effect to mandatory requirements of procedural fairness and regularity of the arbitral proceedings. They do so by permitting arbitral awards to be denied recognition if basic requirements of procedural

HOW SHOULD DUE PROCESS REQUIREMENTS IN ARBITRATION BE DEFINED?

3

norms concerning enforceability of the award.7 If an award does not fulﬁll certain procedural standards, it is not enforceable. Combining the meaning of minimum due process requirements in arbitration with enforceability is also natural because the justiﬁcation of procedural safeguards is linked with the delegation of jurisdictional powers through the enforcement. Although due process requirements in arbitration have wider basis and meaning in arbitration, this is a good starting point for the analysis. For an arbitral award to be enforceable, the disagreement must be resolved in the arbitration and the procedural rules applied must meet the fundamental procedural requirements set forth in the applicable arbitration statute. The in abstracto right to submit matters to arbitration within the framework of the statute amounts to outsourcing of judiciary functions by the sovereign State. The violations of fundamental principles in a concrete case may ultimately deprive the award of its enforceability ipso facto or ipso jure (“nullity”) and ex ofﬁcio or subject to other conditions or party action (“voidability”). The right, mandate, or license to settle disputes in arbitration and the enforceability of the award are subjected to hard conditions. This mandate to outsource judiciary functions of the sovereign state in abstracto (and in particular, the conditions of the mandate) describes the most fundamental rules of procedure—that is, due process. Even if due process is indeed understood as a kind of a core or foundation of all procedural rules (the violation or disregard of which will lead to unenforceability of the award or decision), this does not provide us with simple and unambiguous criteria. First, it does not include any speciﬁc substantial criteria. The question of what constitutes the core that cannot be violated is not yet answered. Second, even enforceability as to the criteria is to some extent ambiguous. The unenforceability may be automatic and of a kind that cannot be remedied. Further, enforceability may be denied ex ofﬁcio by competent authorities or the unenforceability may be of another character requiring further action by the parties or those against whom enforcement is being sought. Unenforceability may also be remedied by lapse of time if no action has been taken within the period provided by law. An award or a decision may further be enforceable in one jurisdiction but unenforceable in another. These summary examples warrant the conclusion that there are various degrees of unenforceability. This means that procedural rules are of varying force even within a single jurisdiction, and the complexity grows when the analysis is extended to a large number of jurisdictions, no matter how closely related these jurisdictions may otherwise be. Should the analysis be extended to cover a multitude of laws of countries actively engaged in international trade and international exchange, we would inevitably confront one question above all others: Do all these jurisdictions recognize certain identical or similar principles as grounds for denying enforcement, and, if so, what are these principles? Furthermore, can we identify a common core of procedural rules of all

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fairness have not been satisﬁed, while leaving room for non-discriminatory, non-idiosyncratic rules of mandatory national law aimed at ensuring procedural fairness and equality. See also PETROCHILOS, supra note 3, at 39 about the applicable law: “The law of the arbitration is in a sense the law of the enforcement (courts)”. DUE PROCESS AND ARBITRATION

nations or the trading community? This could be approached as some kind of procedural constitution or “lex mercatoria” of procedure.

1.3 THE FLOATING NATURE OF THE LAW OF DUE PROCESS—ANALOGY TO LEX MERCATORIA When it comes to material commercial law, there has been a revolutionary change in legal concepts during the past ﬁfty years. Many researchers with the support of legal writing and case law in arbitration in particular acknowledge there is a core of material law common to a great majority of trading nations: lex mercatoria.8 This common property ﬂoats above all jurisdictions and covers horizontally many parts of national laws. The acceptance and signiﬁcance of lex mercatoria is surprising, as still quite recently material law was a concept sacred to a nation. Its jurisdiction formed a vertical hierarchy of rules in their own right that were at least prima facie independent from (if not directly hostile to) even jurisdictions geographically and conceptually close to the state. This core common to many nations and many trading men might have been concealed from us for a time by political movements and ideologies that blurred the sight, but which was revealed again by the opening markets, the growing speed of communication, and the reaping of the beneﬁts of international trade. To many of those engaged in international business law, more and more often the differences in national material laws appear only superﬁcial in the ﬁnal analysis; the terminology is perhaps strange, the concepts likewise, and the theories inconsistent with those acquired in basic education, or even totally new. However, if we penetrate “the fog” created by the words and analyze in-depth how the rules are reﬂected in reality or what their ﬁnal impact is on a set of facts, we are often amazed by the similarity of the solution to an issue. Sometimes legal systems take different paths to reach the same goal (or they may take the same path, but use another name for it). Yet why is the outcome often the same in essence? Many believe the explanation lies in a common heritage of legal culture and education, or, what is more radical, in human consciousness: ultimately we were born with and share the same basic values whether or not we want to recognize it. In the ﬁeld of material law, the hierarchy of the rules of law has become more and more sophisticated: there is an increasing number of “layers” of rules of different 8

Resolution on Transnational Rules Adopted at the 65th International Law Association Conference in Cairo on Apr. 26, 1992, p. 247: “Having regard to the preliminary report of the Committee on International Commercial Arbitration, dealing with the validity and enforceability of arbitral awards based on transnational rules; recommends the following: The fact that an international arbitrator has based an award on transnational rules (general principles of law, principles common to several jurisdictions, international law, usages of trade, etc.) rather than on one law of a particular State should not in itself affect the validity or enforceability of the award; (1) where the parties have agreed that the arbitrator may apply transnational rules; or where the parties have remained silent concerning the applicable law. Invites the Committee to pursue its work on the content and implementation of speciﬁc transnational rules.”

THE FLOATING NATURE OF THE LAW OF DUE PROCESS—ANALOGY TO LEX MERCATORIA

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strength.9 In the very hardest core of law, the rules cannot be contracted out and may be applied ex ofﬁcio. In many national laws, this core is described as ordre public or public policy. We may, however, distinguish international public policy from national public policy.10 Thus there are at least two layers in the concept of ordre public: national and international. In addition there are international treaties, both bilateral and multilateral. Treaties are often based on a model or standard, but they are not wholly uniform. In the hierarchy, their status is somewhat sui generis. Besides ordre public, national laws distinguish mandatory rules from dispositive ones. The ﬁrst are always binding and supersede an express agreement to the contrary whereas the latter may be contracted out. Mandatory rules limit or restrict the freedom of contract. They should often be applied despite a choice of another material law even when that choice is not expressly made to avoid the applicability of those mandatory rules. It is often difﬁcult to tell even when moving within one jurisdiction where the line should be drawn between ordre public and mandatory rules on the one hand and between mandatory and nonmandatory rules on the other. The diversion of the national norms and the foggy nature of constitutive-level laws may be one reason for the renaissance of lex mercatoria, which has inspired scholars and practitioners alike. This inspiration has produced remarkable achievements in legal writing in attempts to codify the “law merchant”.11 In addition, there is a growing body of case law in its support.12 These efforts have “sealed” the regained status of law 9

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UNIDROIT 1.4 mentions among other rules of supranational origin: “Nothing in these Principles shall restrict the application of mandatory rules, whether of national, international or supranational origin, which are applicable in accordance with the relevant rules of private international law.” See, e.g., ILA Recommendations commented on below. UNIDROIT principles of International Commercial Contracts, Rome 2004; lex mercatoria has been a very debated issue. Although the issue is by no means exhausted, a reiteration of the discussion and opinions expressed in this context is not warranted. For the references to the debate and an admirable analysis of the theory and practice, see PHILIPPE FOUCHARD ET AL., TRAITÉ DE L’ARBITRAGE COMMERCIAL INTERNATIONAL 813–47 (1996). Audley Sheppard, Interim ILA Report on Public Policy as a Bar to Enforcement of International Arbitral Awards, 19 LCIA ARBITRATION INT’L 240 (2003). “Deciding a dispute on some basis other than rules of law has been held not to be contrary to public policy. For example, the Austrian Supreme Court found no infringement of public policy where an ICC arbitral tribunal sitting in Vienna applied an ‘international lex mercatoria’. The French courts have reached a similar conclusion. In D.S.T. v. Rakoil (1987), the English court of Appeal rejected the argument that enforcement of an award based upon ‘internationally accepted principles of law governing contractual relations’ (and more speciﬁcally, common practice in international arbitrations, particularly in the ﬁeld of oil drilling concessions), rather than upon any national system of law, should be refused on grounds of public policy. Section 46(1)(b) of the English Arbitration Act 1996, which provides that the parties may agree the basis upon which the tribunal is to determine the dispute, has removed any lingering doubt that the English courts might consider an award made on the basis of lex mercatoria, or ex aequo et bono, or amiable composition to be contrary to public policy.” See Pierre Mayer, Litispendance, connexité et chose jugée dans l’arbitrage international 105–17, in LIBER AMICORUM CLAUDE REYMOND; AUTOUR DE L’ARBITRAGE (2004). Lew writes on p. 94 in Reﬂections: “(iv) Where the parties have not agreed on an applicable national law, but the case is clearly international and neither party is willing to submit to the DUE PROCESS AND ARBITRATION

merchant and encourage future efforts aimed at further endorsements producing a wider and more easily identiﬁable uniformity. This is crucial as there are no formal criteria of validity for each and every norm of lex mercatoria in each and every context or legal system. However, the nonformal validity and the content-based nature of lex mercatoria make it a useful tool in a situation where distinguishing the most important and constitutive norms in national law and international treaties is difﬁcult. Procedural law—and more speciﬁcally due process requirements—seems to suffer from similar kinds of problems as the ﬁeld of material law. Different procedural rules related to fairness of procedure may be of unequal strength with some leading to ipso facto or ipso jure unenforceability while others have no such immediate effect. Some rules might be considered as due process requirements in one country, but not in another. Hence, there seems to be a hierarchy and varying degrees of legal strength and signiﬁcance. The consequences of a violation or the available remedy seem to reﬂect how fundamental the rule of due process is considered to be and how serious its violation or disregard is deemed to be. Also at the international level there are many different kinds of norms that deal with procedural and due process requirements in arbitration. Different sets of rules, guidelines, and recommendations form a body of soft law that has to be dealt with. Actually it could be said that different sets of norms (also at the national level) lead to many different legal orders that exist simultaneously. It is difﬁcult to say to which extent these legal systems can be separated from the ofﬁcial, national legal systems or from other unofﬁcial legal orders based on soft law. The soft law norms ﬁll gaps in national laws, and at least to some extent bind the margin of discretion given to arbitrators in national laws. The soft law is by nature international. First, it is mostly based on rules national law of the other; arbitrators should, where appropriate, apply an international standard such as lex mercatoria, general principles of law or the UNIDROIT Principles. As the UNIDROIT Principles are a clear, manifest body of rules, with respect to which there are both travaux préparatoires and legal writings, as well as increasing case law relating to their application, they can be directly applicable. Equally, arbitrators can use the Principles to help elucidate or interpret the agreed contract terms. (v) Where arbitrators have selected lex mercatoria, general principles of law or some similar set of rules, or are even acting as amiables compositeurs or ex aequo et bono, the UNIDROIT Principles provide concrete rules which may be applicable for the speciﬁc contract involved. Where such rules are applicable they can and should be applied by arbitrators.” Dessemontet concludes on p. 50 in Reﬂections: “As arbitral tribunals increasingly apply the Principles, this should also lead to welcome feedback for their authors, who cannot remain indifferent to awards that reject the Principles as too divergent from current practice in international trade. Further, the publication of annotated editions of the Principles with citations of relevant cases would facilitate both the UNIDROIT Secretariat’s preparatory work for a possible revision and correct understanding of the practical signiﬁcance of the Principles. It might also prevent conﬂicting awards, where the differences are of minor importance and not the outcome of contrasting philosophies.” For case law, see Joachim Bonell, The UNIDROIT Principles as a Means of Interpreting and Supplementing International Uniform Law, at 29, in UNIDROIT PRINCIPLES OF INTERNATIONAL COMMERCIAL CONTRACTS: REFLECTIONS ON THEIR USE IN INTERNATIONAL ARBITRATION; A Special Supplement of the ICC International Court of Arbitration Bulletin (ICC Publication No. 642) (2002). THE FLOATING NATURE OF THE LAW OF DUE PROCESS—ANALOGY TO LEX MERCATORIA

7

and recommendations of more-or-less international organizations or service providers such as different arbitral institutes. Second, the international arbitration community adapts the rules discussed in the international arena into the practice of a more national character. Because of the substantial number of norms based on international conventions and soft law of a more-or-less international nature, it is fair to say the law of arbitration has an almost unique international nature. The traditional national doctrines of legal theory and sources of law are insufﬁcient in the law of arbitration where the validity of norms cannot be solely based on national legislation or precedents. Even if the national law were to function as a starting point for legal analysis, the unavoidable interplay with the different kinds of sets of norms or systems of law would necessarily lead to a result at least partly based on international or transnational material. In addition, the general practices that may partly deﬁne the interpretation in many legal problems are to a huge degree international. Even the practices that at ﬁrst glance seem to be national are probably not purely so. In arbitration, the cases are international and the community is international. Thus, there really cannot be solely national practices. Also, we should not forget that national laws in many ways are based on international conventions and model laws. Accordingly, the interpretive material and the goals behind single norms are to some extent similar. There is a need for some kind of cross-border and cross-legal order approach similar to lex mercatoria that also concerns procedural requirements.13 It should be no surprise that the law of due process seems to have a structure or character somewhat similar to that of the law merchant.14 However, the body of legal research and literature of due process in international arbitration are yet to emerge. Just as in material law and lex mercatoria, the law of due process needs to develop to have a wider and more easily identiﬁable uniformity. The goal would be to identify a set of norms that ﬂoats above national jurisdictions and various systems of soft law. This book is, naturally, a part of this project of creating a kind of lex proceduralia.15

1.4 THE METHOD OF DEFINING DUE PROCESS AND LEX PROCEDURALIA IN ARBITRATION As with lex mercatoria, the idea would be to try and ﬁnd the common denominator to national legislation, and in the case of arbitration, various kinds of soft law. Other international normative material could also be used. If we start from what are deemed to be the most serious violations of due process from a comparative aspect, how much 13 14 15

8

See also Luttrell at 187–200 (2009) about procedural lex mercatoria. Kaufmann-Kohler, supra note 2, at 1322, asks “Does a procedural lex mercatoria emerge?” The writer attempts to demonstrate to what extent this has already happened. Smit discusses lex mercatoria arbitralis, which seems to be a somewhat similar idea: “However, there does not seem to be any conceptual impediment to developing and applying rules of lex mercatoria arbitralis to questions relating to the validity and enforcement of arbitral awards.” Hans Smit, Proper Choice of Law and the Lex Mercatoria Arbitralis, in LEX MERCATORIA AND ARBITRATION 97 (Thomas E. Carbonneau ed., 1999). DUE PROCESS AND ARBITRATION

uniformity will we discover? How much and to which level in the hierarchy of the rules will we ﬁnd universal principles, wide agreement, or just some uniformity in legal systems? If we are to analyze the requirements of due process in commercial arbitration starting from the requirements set forth for the enforceability of awards, we could of course begin the analysis from various national procedural laws. This would indeed be a major challenge. The national laws, naturally, differ to some extent. For example, the German Law provides: (2) An arbitral award may be set aside only if: 1. the applicant shows sufﬁcient cause that: a) a party to the arbitration agreement referred to in sections 1029 and 1031 was under some incapacity pursuant to the law applicable to him; or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under German law; or b) he was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or c) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration; provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside; or d) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with a provision of this Book or with an admissible agreement of the parties and this presumably affected the award; or 2. the court ﬁnds that a) the subject-matter of the dispute is not capable of settlement by arbitration under German law; or b) recognition or enforcement of the award leads to a result which is in conﬂict with public policy (ordre public).16

Whereas the United States Arbitration Act (“FAA”) Section 10 provides: In either of the following cases the United States court in and for the district wherein the award was made may make an order vacating the award upon the application of any party to the arbitration: (a) Where the award was procured by corruption, fraud or undue means. (b) Where there was evident partiality or corruption in the arbitrators, or either of them. (c) Where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufﬁcient cause shown, or in refusing to hear evidence pertinent

16

German Arbitration Law 1998, section 1059, supra note 5.

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and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced. (d) Where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, ﬁnal, and deﬁnite award upon the subject matter submitted was not made. (e) Where an award is vacated and the time within which the agreement required the award to be made has not expired, the court may, in its discretion, direct a rehearing by the arbitrators.

For French law (code de procédure civile), see Article 1502, which provides that: An appeal against a decision granting recognition or enforcement may be brought only in the following cases: 1. If the arbitrator decided in the absence of an arbitration agreement on the basis of a void or expired agreement; 2. If the arbitral tribunal was irregularly composed or the sole arbitrator irregularly appointed; 3. If the arbitrator decided in a manner incompatible with the mission conferred upon him; 4. Whenever due process has not been respected; 5. If the recognition or enforcement is contrary to international public policy (ordre public).

At least at ﬁrst glance, the national rules look too general to be useful in identifying international due process requirements. Second, they seem to include norms of different levels of constitutionality. Third, they seem to tackle different kinds of important questions. The conclusion is that the scope of coverage should to be extended from an analysis of national conditions of due process to an international analysis. The idea is to ask whether there is a source of international due process beyond traditional methods of comparative law. This seems a natural approach especially when taking into account the international or transnational nature of arbitration law discussed above. Thus, the idea would be not to compare the national laws and construct general norms from these individual laws, but to try and directly discuss the international and transnational law of arbitration. First of all, the core of procedural minimum standards and due process is approached by studying the New York Convention (The Convention). This is a natural starting point if the meaning of due process is bound with the unenforceability of the award. Thus, in order to outline the hard core of “supranational” due process, a kind of a reverse method is used: if a violation of a procedural rule will lead to nullity or voidability of the award under the Convention, such procedural rule forms a part of international due process. However, there are also further sources of law than the one convention. Also the different kinds of soft law, institutional rules, other international conventions, model laws, human rights laws, and general procedural principles deﬁne the core of due process requirements in arbitration. As already outlined above, in the signatory States the ECHR is to some extent applicable also in arbitration. Basically all other procedural human rights requirements 10

DUE PROCESS AND ARBITRATION

except for access to court and publicity indirectly apply in arbitration unless they are waived. The signatory States have to protect these rights if the award is challenged.17 The practice of the European Court of Human Rights and body of legal research and literature based on the fair trial requirement of the ECHR can be used in trying to identify the most crucial procedural safeguards. Also, in some cases convention and case law may be directly applicable, depending of course on the law applicable to the speciﬁc procedure. Some kind of a prima facie order of sources is necessary for identifying lex proceduralia or transnational due process requirements in arbitration: 1) 2) 3) 4)

The New York Convention Human rights conventions International soft law concerning arbitration Principles of law formulated from various national procedural laws

The problem with the ﬁrst source, the Convention, is that it is relatively open. This is a challenge regarding other sources as well. However, the interpretation of the Convention is left to national courts, whereas others such as the ECHR is interpreted by a single institution, the European Court of Human Rights. International arbitration soft law is in many cases very speciﬁc, but it lacks the institutional and parliamentary support of national legislation. Also the soft law is not always focused on the constitutional level, but rather often has a relatively practical approach. National legislation is relevant in this respect only if it has transnational support, and it would be very unlikely that some internationally recognized due process principle would be supported by many national arbitration laws but not already be included in the primary international sources mentioned above. However, the prima facie order above is not intended for solving conﬂicts between the sources of lex proceduralia. To place the Convention “above” human rights conventions does not mean that in conﬂict situations the Convention would override human rights when formulating the content of due process requirements. The Convention is just a more natural starting point for the analysis, especially if lex proceduralia is prima facie deﬁned or at least approached via criteria of enforceability. The order is relatively ﬂexible, as there is no formal rule deﬁning due process requirements. The relation of lex proceduralia and the applicable national arbitration law is another question. In case of mandatory national law, it is more or less clear that lex proceduralia mostly has importance only as an interpretative tool, even though a conﬂict between mandatory national law and lex proceduralia might lead to the award being at least internationally unenforceable. In the case of nonmandatory national law, the tribunal should apply due process requirements instead of national law (at least if the

17

See PETROCHILOS, supra note 3, at 151–58, Rinquist, supra note 3, at 128–46, and the sources and cases cited there, inter alia X v. Federal Republic of Germany 1962 App. No. 1197/61 decision of 5 March 1962, Nordström-Janzon and Norström-Lehtinen v. the Netherlands, App. No. 28101/95, decision of 27 November 1996, Suovaniemi and Others v. Finland, App. No. 31737/96, decision of 23 February 1999.

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11

requirements are clear and rule-like) if they have direct institutional support from the sources mentioned above and if the award needs to be enforceable in countries other than the place of the arbitration. In many cases, a conﬂict between national laws and due process requirements might actually not even exist, as for example nationally binding international human rights and (national) fundamental rights may already supersede the ordinary national arbitration law. In addition, we should note the obvious fact that the concept of arbitral due process or lex proceduralia is an interpretative tool and not a source of law cited as an authority in the decision. After the analysis of various aspects of procedural safeguards in the Convention, the various elements of due process are discussed in substantial order. For example, the following elements of arbitration are discussed from a due process perspective: 1) 2) 3) 4) 5) 6)

The Arbitration Agreement as the Basis of Jurisdiction Aspects of Jurisdiction Other than the Agreement The Arbitration Panel and Due Process Due Process Related to Facts and Evidence The Role of the Panel in the Proceedings Fair Arbitration—Opportunity to Present One’s Case

These themes could actually be divided into only two major fair trial themes: access to court and fairness of the procedure. As arbitration limits access to ordinary courts, it is important the limitation be lawful. The requirements related to arbitration agreements and jurisdiction as well as in part the requirements related to composition of the tribunal control the limitation of access to courts. Procedural requirements related to facts and evidence in the proceeding as well as other strictly procedural questions (and in part the composition of the panel) have more to do with the fairness of the arbitration procedure. It is of course clear that this kind division would be in the end impossible as many questions (such as the composition panel as noted above) have to do with both of the topics. Also, it could be thought that the quality and fairness of the process would be relevant when considering limitations on access.

1.5 DUE PROCESS AS A PRINCIPLE OF LAW Before going into a more detailed substantial analysis of due process in the Convention and different elements of due process, one methodological question has to be discussed. The idea of the book could be to just try and identify the set of norms that deﬁne the international due process requirements as more or less speciﬁc rules that set exact limits to arbitral procedure. But this approach does not catch all the meaning of due process in arbitration. It would be good and both extremely useful and necessary to identify speciﬁc and concrete limits to what can be done procedurally in arbitration. Without any speciﬁc rules or minimum requirements as guidance, the due process requirements probably could not always be realized in a practical context. However, the problem with exact rules is that the limits are mostly not general and absolute, but dependent on the interpretation and context in speciﬁc cases. 12

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All issues can never be covered by any procedural or material codes or rules. Not only will there be room for discretion left on purpose to the judge or arbitrator, but also a need for procedural norms to steer the use of discretion and to govern issues not expressly or implicitly covered by the procedural statutes applied. In this sense, due process may be seen as something more than just the identiﬁed rules. To be able to interpret the norms correctly and understand the way with which they have to be applied, and to further develop the legal norms, we also need to identify the justiﬁcation and rationale behind the rule. Single rules that can be identiﬁed do have a common ground of justiﬁcation. Thus, in addition to single and speciﬁc rules, minimum requirements of due process could and should also be approached as parts of legal principles of arbitration law. As principles of law, due process requirements have a different ontology compared to rules and can be used more broadly. Some people separate rules and principles by the level of generality. It is often considered that rules are more speciﬁc orders, whereas principles describe the way things ought to be done at a more general level. For example, there could be a very speciﬁc rule that a party is always entitled to see all the documentary evidence in the case, and at more general level, the principle of opportunity to be heard. However, rules and principles are often separated by other criteria. Rules are said to apply in an all-or-nothing-way, whereas principles are seen as not necessarily the sole factor in determining the solution to the legal problem in question, but as arguments or norms that need to be balanced against other principles.18 Bayles uses an example of the norms that might apply to witnessing a will. There might be a rule that a will requires two witnesses. If there is only one witness, the will is invalid by law. What if instead of a rule, there was only principles related to the issue? For example, there might be a principle that people should be free to dispose of their property by any device they wish. But it might not necessarily follow from this principle that freely made wills would be upheld, because there might be a contrary principle that people should make adequate provisions for their children, which would lead the analysis in another direction.19 Thus, principles do not apply in all-or-nothing way, but they have weight, and conﬂicting principles have to be balanced against each other. Their weight is partly dependent on the institutional support of the principle in general and partly on the case-speciﬁc situation at hand. Thus principles in a way form a toolbox that can be used in all possible situations, not just those that have been resolved before. These principles are also useful in separating important rules from not-so-important ones. When discussing the differences of rules and principles, also the different criteria of validity should be noticed. Whereas the validity of rules in national laws is primarily assessed on formal criteria (whether they are in force according to the criteria set by the constitution of the state in question), the validity of legal principles relies on their acceptance in the legal community and legal culture. However, the acceptance is not deﬁned by a pure discussion of individual moral values of a judge, but rather by 18 19

See MICHAEL D. BAYLES, PRINCIPLES OF LAW. A NORMATIVE ANALYSIS 11–14 (1987) and RONALD DWORKIN TAKING RIGHTS SERIOUSLY 22–28 (1977). BAYLES, supra note 18, at 11.

DUE PROCESS AS A PRINCIPLE OF LAW

13

the institutionalized moral evaluations of the community and the culture. The concretisation of a principle in normative material in the relevant legal culture indicates institutional support for the principle in question, and binds it to the legal sphere. The criteria of validity as a separating quality between different categories of norms is maybe not that clear in arbitration, as neither the validity of many of the soft law rules often applied in arbitration nor the validity of the procedural norms in the agreements are of formal kind. In this book, three main methodical aspects relate to legal principles. First, the principles help to identify the due process requirements in the vast amount of single, speciﬁc rules. Second, principles receive institutional support from the single arbitration speciﬁc rules and soft law as well as from deep level procedural law norms that are internationally acknowledged, and thus the body of procedural principles of international arbitration could be construed on the basis of analysis of single norms that are widely recognized. Accordingly, the principles work in two ways, which might at ﬁrst sight seem logically troubling but in fact forms a sound basis of analysis. Also, the same norm can function as both a rule and a principle. For example, the concept of an opportunity to be heard is partly rule-like and absolute, but it has a wider basis in principle that could be called the contradictory principle. Third, understanding the nature of due process requirements as principles does increase their importance in both interpretation of law and arbitration practice. Due process principles steer the use of discretion, which is relatively wide in arbitration. It also seems clear that good and fair procedures should be maximized unless they need to be restricted for another reason. Finally, it should not be the ideology or the goal of the arbitrator to just use the internationally accepted minimum standard of procedural safeguards, but rather to pursue procedures that are as fair as possible for all parties. However, to repeat, trying to identify widely accepted and adopted rules provides institutional support for due process principles. It is just institutional support and acceptance of the legal community that separates legal principles from moral or other kinds of principles. Thus, identiﬁcation of the limits of the hard-core rules is the prerequisite of using the due process norms as principles as well. Underlining the normative character of due process is, however, important so that the few identiﬁed and exact internationally accepted minimum requirements will not be understood as the deﬁnite objective of procedure, or more simply said, as to be enough. Even in those cases in which the analysis is concentrated on the minimum requirements of enforcement (in which the due process requirements work as rules, and in which the important question is the often exclusive relation of other norms and lex proceduralia), one should remember that the procedure should not be as bad as possible but rather as good as possible, keeping in mind other principles and goals. Thus, the due process principles should be given thought when interpreting the national laws and ﬁlling the normative gaps as well as when using the margin of discretion in arbitration.

14

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Chapter 2

The New York Convention as A Starting Point

2.1 INTRODUCTION The New York Convention on the Recognition and Enforcement of Foreign Arbitration Awards (“the Convention”) has been one of the key factors in arbitration becoming an internationally accepted and adopted method of dispute resolution. The enforceability of the decisions of State courts has in the main been limited to a single jurisdiction (i.e., the jurisdiction where the decision was given). This very limited enforceability has been extended by a number of bilateral and multilateral treaties. The international enforceability of decisions of State courts, despite the many safeguards of legal protection including appeal, is still far behind the enforceability of arbitral awards. Despite efforts to guarantee the “right” outcome, the “right” decisions by State courts lack enforceability or are internationally distrusted, whereas arbitral awards with fewer such safeguards or guarantees are widely enforceable. On the one hand, this is almost a paradox, and on the other, one of the greatest success stories of international collaboration in the ﬁeld of arbitration. The Convention has been ratiﬁed by over a hundred nations. The Convention having been ratiﬁed by such a large number of independent nations demonstrates its due process requirements are internationally accepted and reﬂect the generally acknowledged fundamental procedural rights of the parties. Thus, if an arbitral award is not enforceable according to the Convention, it would certainly not meet due process requirements. The Convention is a natural starting point if the meaning of due process is bound with the unenforceability of the award. To outline the hard core of “supranational” due process, a kind of a reverse method is used: if a violation of a procedural rule will lead to nullity or voidability of the award under the Convention, such procedural rule forms a part of international due process. As a logical starting point, it could be assumed that if awards are recognized and enforceable, they must also meet at least the most important requirements of due process. It could also be assumed that these awards and the procedure that has led to them meet the core criterion of a mandatory procedural trade usage.

15

However, a simple and direct logical connection of due process requirements to the Convention is not justiﬁed. It may be said that it deﬁnes the core requirements, but the Convention consists at least partly of very open norms that need to be interpreted in the context of a particular case. In addition, the Convention does not function in a legal vacuum; its meaning and its interpretation is naturally and necessarily affected by surrounding sources of law as well as arbitration practices. Thus, the Convention as such is a natural starting point for the analysis, but not the end of it. Also, we should not think the arbitral process cannot or should not be any better than the minimum requirements of the Convention necessitate. Just as a materially false arbitral award might be enforceable, a procedurally unsatisfactory arbitration might lead to an enforceable award. There are due process standards that go further than the very core of international due process as a prerequisite of recognition and enforcement. In this chapter, the requirements of the New York Convention are discussed under the following topics: (a) Public Policy (“Ordre Public”) as a Ground to Refuse Recognition and Enforcement (b) Arbitrability of the Subject Matter (c) Requirement of Arbitration Agreement (“Mandate in Concreto”) and the Convention (d) Incapacity and Invalidity (e) Ability to Present One’s Case (f) Award has to be Final (“Condition Subsequent”) As we may notice immediately, some of the due process requirements seem at ﬁrst glance to be more substantive than procedural in nature. For example, recognition and enforcement can be refused on the grounds that an award is substantively against public policy (as is later explained in more detail). Also the second criterion which is related to the arbitrability of the subject matter seems more substantive than procedural. However, in procedure and procedural law in general as well as in arbitration, separating substantive and procedural issues can be difﬁcult. Especially as to arbitration and even more so in respect to international arbitration, the question of jurisdiction is very closely related to the material issues at hand and the applicable substantive law. Certain material requirements can be seen as prerequisites of jurisdiction as a procedural matter even though this might not be very orthodox in the view of some procedural law scholars. Thus, requirements that at ﬁrst seem to be material or substantive can in fact be seen as procedural. This also widens the concept of procedural due process in arbitration, with these due process requirements in arbitration not necessarily having to be seen as a substantive due process requirements. This having been said, there is no reason the requirements mentioned above could not also be categorized as substantive due process requirements in arbitration meaning that some substantive rights cannot be created or nulliﬁed in the arbitral procedure.

16

THE NEW YORK CONVENTION AS A STARTING POINT

2.2 PUBLIC POLICY (“ORDRE PUBLIC”) AS A GROUND TO REFUSE RECOGNITION AND ENFORCEMENT 2.2.1 A Vague Category Public policy as a ground to refuse recognition and enforcement of an award is a perfect example of the intertwining of the procedural and substantive in arbitration. Article V(2)(b) of the Convention provides: Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought ﬁnds that: . . . (b) The recognition or enforcement of the award would be contrary to the public policy of that country.

This ground refers to breach of natural justice or due process and forms a fairly vague category. There is consensus that the application provides for a serious irregularity, but despite that the argument encompasses virtually any complaint by an unsuccessful party.1

1

Sheppard argues: Enforcement may be refused on grounds of public policy in the event that there has been a breach of natural justice or due process. This is in addition to the ground in Article V.1(b) of the New York Convention, which provides that enforcement may be refused if the party against whom the award is invoked was not given proper notice of the formation/ identity of the tribunal or of the arbitration proceedings, or was otherwise unable to present his case. . . . This remains a vague category of public policy and one that encompasses virtually any complaint by an unsuccessful party. There is consensus, however, that there must be serious irregularity; for example, the ICSID Convention includes as grounds for annulment: ‘that there has been a serious departure from a fundamental rule of procedure’ (Article 52(d)).

Audley Sheppard, Interim ILA Report on Public Policy as a Bar to Enforcement of International Arbitral Awards, 19 LCIA ARB. INT’L 39(2003). See also William R. Spiegelberger, The Enforcement Rate of Foreign Arbitral Awards in Russia (Recent Developments in International Dispute Resolution Around the World), 17 THE WHITE & CASE INT’L DISP. RESOL. NEWSLETTER 7–8 (Dec. 2004): The old Russian saying: “don’t fear the law, fear the judge,” is not completely inapt when it comes to the enforcement of foreign arbitral awards in Russia. Although the Russian legislative regime—the aggregate of treaties and laws—is more or less in accord with most other sophisticated legal systems, the Russian courts appear to enforce foreign awards at a rate lower than those of other signatory states to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “Convention”). Our research to date has yielded about 35 reported cases in which the Russian courts have been called on to enforce a foreign award. In 20 cases the award was enforced, or likely to be enforced on remand, yielding a net enforcement rate of only 57%. Of all the Convention’s grounds for non-enforcement, the one most often raised (11 cases) was the public policy exception under Convention Article V(2)(b).

PUBLIC POLICY

17

2.2.2 Procedural Aspects: Just a Right, Not a Duty; Actions Ex Ofﬁcio and Sua Sponte The basic elements of the Article V 2 (b) of the Convention are: (i) the competent authority has right to refuse to recognize and enforce an award, but it is under no duty to do so (“may refuse”); (ii) the competent authority may refuse the recognition and enforcement ex ofﬁcio or sua sponte, i.e., no action needs to be taken or objections raised by a party or the one against whom enforcement is sought. This does not exclude such an action or objection by a party. The ground for refusal may be apparent or concealed and, in the latter case, some kind of a party action may be necessary to cause the competent authority to refuse the recognition and enforcement.2 (iii) The relevant or applicable public policy is prima facie the public policy of the country where enforcement is being sought (“lex fori”).3 This public policy may or may not have been considered by the arbitral tribunal. The public policy may or may not have been invoked or argued by the parties in the proceedings. The public policy should or should not have been applied by the arbitral tribunal. These issues relating to the past conduct of the arbitral proceedings having led to the award the enforcement of which is being sought and which enforcement may be refused ex ofﬁcio are neither directly relevant nor binding on the enforcement authority. Decisive is the result of possible recognition and enforcement.4 2

See Model Law Decisions: Arcata Graphics Buffalo Ltd. v. Movie (Magazine) Corp., Ontario Court of Justice, General Division (Eberle J.) 12 March 1993, Original in English, Unpublished: [1993] O.J. No. 568. “A public policy defence requires a breach of an essential, fundamental morality of Ontario.” According to ILA Recommendations 3(c): When the violation of a public policy rule of the forum alleged by a party cannot be established from a mere review of the award and could only become apparent upon a scrutiny of the facts of the case, the court should be allowed to undertake such reassessment of the facts.

3 4

This is a debated issue in light of the fact that enforcement may be sought in a multitude of countries. See, e.g, Commentary of Indian arbitration law by N. Krishnamurthi and F.S. Nariman, INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION (Supp. 22, Sept. 1996)), p. 28: Where damages were awarded without proof of actual loss, contrary to Indian law, the Supreme Court of India rejected the public policy defence under the Arbitration Protocol and Convention Act, 1937; likewise where enforcement of a foreign award under the 1937 Act was resisted on the ground that it would defeat the Indian Law of Limitation and therefore infringe public policy, the plea was rejected by the High Court of Calcutta—the ICC award was enforced. After 1961, the public policy defence has been raised under the Act of 1961 implementing the New York Convention in the following cases: (i) European Grain and Shipping Co. v. Seth Oil Mills—decision of the Bombay High Court, 29 January 1983, reported in Yearbook Commercial Arbitration IX (1984) pp. 411–415 (the defence raised was rejected) (ii) General Electric v. Renusagar—decision of the Bombay High Court, 12 October 1989, reported in Yearbook Commercial Arbitration XVI (1991) pp. 561–565 (the defence raised was rejected) (iii) COSID v. Steel Authority of India Ltd.—decision dated 12 July 1985, reported in Yearbook Commercial Arbitration XI (1986) pp. 502–507 (where the defence raised was upheld). Courts in India do not apply the restrictive criterion of international public policy. The Act 1961 as interpreted by courts requires, for the public

18

THE NEW YORK CONVENTION AS A STARTING POINT

As noticed above, respect of a national public policy in the enforcement proceedings may be deemed to be a part of due process. However, the respect is limited to the enforcement proceedings and to the public policy of the country of the enforcement procedure. The weight of this conclusion for the purposes of this research is further reduced by the right to refuse enforcement on the grounds of public policy being given to the authority of the country whose public policy is in question. It might be somewhat unrealistic to expect sovereign nations to waive their right to apply the very foundation of their legal system (i.e., their public policy) or to apply that of other countries. As discussed above, the issue of violation of public policy may or may not have been argued or considered during the proceedings themselves. The rules and principles applicable to arbitral proceedings as to when national public policy is to be taken into account or applied are not perfectly clear.5 Further, it is unclear if and when this should happen ex ofﬁcio, and if considered ex ofﬁcio, how this should be brought to the attention of the parties during the proceedings as their views and arguments are a matter of discretion. However, it does seem clear that this should be done in any case as a matter of due process to avoid there being an element of surprise in the award.6 Actually, the

policy defence to be upheld, that the court be satisﬁed that the enforcement of the award is contrary to Indian public policy. There is no control of the court on the merits of the arbitral decision. 5

6

See, e.g., Eco Swiss China Time Ltd v. Benetton International NV, ECJ 1.6.1999 C-126/97; Mitsubishi Motors Corporation v. Soler Chrysler-Plymouth Inc., 473 U.S. 614, 87 L.Ed. 2d 444 (1985); and Fritz Scherk v. Alberto-Culver Company, 417 U.S. 506, 41 L.Ed. 2d 270 (to mention just some of the most important ones). In Shirley Sloan Pty Ltd v. Merril Holdings Pty Ltd, Supreme Court of Western Australia, 2 March 2000, 18 April 2000 WASC 99, the court summarized the law as follows: There is no question as to the proposition that breach of the rules of natural justice amounts to “misconduct” for the purposes of s42(1)(a) of the Act. That is the effect of the deﬁnition of that term in s4 thereof. The real question is whether, where there is misconduct of that kind, it is such as should attract an exercise of the discretion which s42(1) affords to the court, on the application of a party to the arbitration agreement, to set aside the award either in whole or in part. It is unlikely that a court would exercise its discretion in that way, even in the case of a denial of natural justice, unless the denial was such as (to use the words of Isaacs J in Melbourne Harbour Trust Commissioners v Hancock (1927) 39 CLR 570 at 588) “has or may have unjustly prejudiced a party” in a respect material to the outcome of the arbitration (of Doran Constructions Pty Ltd v Health Administration Corporation (NSW) (1994) 12 BCL 59 at 62–63 and Van Dongen v Cooper [1967] WAR 143 at 145). It is difﬁcult to see why, even in the context of an Act which provides (by s19(3)) that the arbitrator is not, unless otherwise agreed in writing by the parties to the arbitration agreement, bound by the rules of evidence but may inform himself in relation to any matter in such manner as he thinks ﬁt, the legislature has seen ﬁt the include within the concept of “misconduct” a breach of the rules of natural justice. It is a matter of fairness. As was said by Goff LJ in Interbulk Ltd v Aiden Shipping Co Ltd [1984] 2 Lloyds Rep 66 at 75: “In truth, we are simply talking about fairness. It is not fair to decide a case against a party on an issue which has never been raised in the case without drawing the point to his attention so that he may have an opportunity of dealing with it, either by calling further evidence or by addressing argument on the facts or the law to the tribunal.” Ackner LJ, in the same case said (at 76) “if an arbitrator considers that the parties or their experts have missed the real point—a dangerous assumption to make. . .—then it is not only a matter of obvious prudence, but the arbitrator is obliged, in common fairness or, as it is

PUBLIC POLICY

19

opportunity to be heard about the public policy question is closely connected with a party’s right to an opportunity to present its case. Under the Convention, it is beyond any doubt that a competent national authority may refuse enforcement both when the public policy issue has been considered by the arbitral panel and when it was not brought up at all in the proceedings by the parties or sua sponte by the members of the arbitral panel. However, the economics and rationale of legal proceedings may often support the consideration of the public policy issue ex ofﬁcio, at least when it is probable it will be raised in the enforcement proceedings or when the issue appears to be of paramount legal importance not only in the jurisdiction of likely enforcement but in other jurisdictions per se or ex analogia. If the issue at hand would be a public policy issue in many jurisdictions, it may be deemed to reﬂect international public policy and international comity. Accordingly, due process may then require that the arbitral panel bring up the issue sua sponte if the parties have not done so and give the parties an opportunity to present their views before any decision is taken.

2.2.3 What Constitutes Public Policy? What constitutes the public policy of a country has not been deﬁned in the Convention.7 The concept of ordre public may be seen as very narrow or somewhat sometimes described, as a matter of natural justice, to put the point to them so that they may have an opportunity of dealing with it.” More recently, in Pacol Ltd v Joint Stock Co Rossakhar [2000] 1 Lloyds Rep 109 at 115 Colman J said: “In a paper arbitration the temptation to arrive at a conclusion which may not have been envisaged by either party by reference to matters upon which the parties have not had the opportunity of addressing the arbitrators or in respect of which they have not had the opportunity of adducing further evidence, may be a particular temptation which arbitrators should be careful to avoid.” There is, in this case, no real contest as to the fact that the arbitrator did not give to the parties the opportunity of dealing with the point canvassed in para 14 of his reasons. Neither party had raised it and neither expected the arbitrator to raise it. It is readily apparent from the afﬁdavit evidence put forward by the applicant that, had the parties been given an opportunity to deal with the point, it would have been shown to be one of no substance, at worst for the applicant, or, at best for the applicant, one which supported a conclusion different to that at which the arbitrator ultimately arrived. 7

Holtzmann reports: The New York Convention of 1958 permits a court to refuse enforcement of an arbitration award if it is contrary to public policy (Art. V). The courts of the United States have held that the refusal to enforce an arbitration award on the ground of public policy should be strictly limited and that enforcement should be denied only when, as one court said, the arbitration award violates the “most basic notions of morality and justice.” (Parsons & Whittemore Overseas Co. Inc. v. Société Général de L’Industrie du Papier RAKTA and Bank of America, 508 F.2d 969, U.S. Ct. of Appeals, 2d Cir., 1974, summarized in Yearbook Commercial Arbitration, Vol. I (1976) pp. 215–217). The courts recognize that, particularly since accession by the United States to the Convention, the international public policy of the United States favors the enforcement of international arbitration as an essential element in promoting foreign trade and world peace. This international policy has been given precedence over national public policies expressed in domestic laws.

Howard M. Holtzmann, Report on U.S. Arbitration Law, in INTERNATIONAL HANDBOOK 20

ON

THE NEW YORK CONVENTION AS A STARTING POINT

broader.8 In particular, distinguishing mandatory substantive law from public policy may sometimes be problematic and difﬁcult. Public policy may encompass both procedural (due process) and substantive issues.9 International public policy is in the process of emerging as an identiﬁable and deﬁned concept. In 2002, the International Law Association (ILA) adopted a resolution on Public Policy as a Bar to Enforcement of International Arbitral Awards (“Recommendations”).10 ILA Recommendations deﬁne international public policy as: [T]he body of principles and rules recognized by a State, which, by their nature, may bar the recognition or enforcement of an arbitral award rendered in the context of international commercial arbitration when recognition or enforcement of said award would entail their violation on account of either of the procedure pursuant to which it was rendered (procedural international public policy) or of its contents (substantive international public policy).

This deﬁnition brings up some very interesting elements. It refers to principles or rules recognized by a State as international public policy. However, it is not until the same or sufﬁciently similar procedural principles and rules are recognized by a large number of States that we will be dealing with truly international public policy or due process. The draftsmen of the Recommendations have recognized the problem, and the Recommendations Section (2b) provides: [I]n order to determine whether a principle forming part of its legal system must be considered sufﬁciently fundamental to justify a refusal to recognize or enforce an award, a court should take into account, on the one hand, the international nature of the case and its connection with the legal system of the forum, and, on the other hand, the existence or otherwise of a consensus within the international community as regards the principle under consideration. (emphasis added).

The Recommendations point out further that international conventions may be evidence of the existence of such a consensus. If one exists, according to the Recommendations the policy should be called transnational public policy as distinguished from international public policy. Further, the Recommendations draw a distinction between procedural international public policy and substantive international public policy. The former term, procedural

8

9

COMMERCIAL ARBITRATION 39 (Supplement 13, Sept. 1992). For example, it has been discussed to what extent various competition laws form a part of public policy. See i.a. Matti S. Kurkela, Richard C Levin, Christoph Liebscher and Patrick Sommer, Certain Procedural Issues in Arbitrating Competition Cases, 194 J. INT’L ARB. 2007. About public policy in China, see Tang Houzhi and Wang Shengchang in INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION 40 (Supp. 11, Jan. 1990): Violation of rules of ‘public policy’ (public social interest) constitutes a ground for setting aside, thus probably forming an exception to the rule ‘no control on the merits.’ The action relating to violation of rules of ‘public policy’ should always be in terms of an action for setting aside. However, it is generally understood that the terms ‘public policy’ should be construed narrowly to favor arbitration.

10

Adopted at the ILA’s 70th conference held in New Delhi, India, April 2–6, 2002.

PUBLIC POLICY

21

international public policy, seems to be a synonym for due process as used in this work. It could further be questioned if due process forms a part of public policy or ordre public as a means or process to achieve or reach the objectives or purpose of substantive law. Legal systems focus heavily on reaching the right substantive decision but are perhaps considerably less focused on procedural matters, including ensuring that all the relevant facts are fully established before material law is applied. The role of procedure is often seen as “instrumental”. However, it is clear that due process or procedural public policy also forms a part of public policy or ordre public. In addition to the transnational and international public policy, the ILA Recommendations divide international public policy into three groups of norms based on their character and ground. These three groups and the examples illustrating them in concreto are as follows: (i) Fundamental principles pertaining to justice and morality that the State wishes to protect even when it is not directly concerned. Example given: as to substantive fundamental principle abuse of rights and as to fundamental procedural principle the requirement that tribunals be impartial;11 (ii) Norms designed to serve the essential political, social or economic interests of the State, these being known as lois de police or public policy rules. Example given: antitrust law; (iii) The duty of the State to respect its obligations toward other States and international organizations. Example given: U.N. resolution imposing sanctions. This analysis of an authoritative character demonstrates there is a growing sophistication in legal thinking as to hierarchy and the strength of various rules of law as discussed above.12

2.2.4 ILA on Fundamental Principles The ILA Recommendations emphasize that the process of identifying and analyzing the fundamental principles should primarily be done within the framework of the rules of law of lex fori.13 This recommendation is in full conformity with Article V(2)(b) of the Convention quoted above. According to the Recommendations, the fundamental principles of the law applicable to the contract or those of the law of the place of 11 12

13

22

See, e.g., ECHR, Art. 17. The Recommendations point out that some rules (such as those regarding corruption) may fall into more than one category. Compare IBA Ethics 5.5 and 6 (see Appendix, p. 366). See Frances Meadows, OECD Bribery Convention Five Years On: How is it Working and How is it Monitored?, 5 IBA BUS. L. INT’L 305–525 (Sept. 2004). See, e.g., Resolution of the ILA on Public Policy as a Bar to Enforcement of International Arbitral Awards; Sheppard, supra note 1; and Pierre Mayer & Audley Sheppard, Final ILA Report on Public Policy as a Bar to Enforcement of International Arbitral Awards, 19 LCIA ARB. INT’L (2003). THE NEW YORK CONVENTION AS A STARTING POINT

performance or the seat of arbitration are irrelevant for the purpose of the analysis. However, rules of law foreign to lex fori may become relevant to the extent the fundamental principles of lex fori are identical to, similar to, or in consensus with the fundamental principles of those of the international legal community. These principles in common are referred to by the Recommendations as transnational public policy.14 ILA Recommendations 2(c) introduces further rules establishing the principles of waiver as an exception to the fundamental principles as follows: Where a party could have relied on a fundamental principle before the tribunal but failed to do so, it should not be entitled to raise said fundamental principle as a ground for refusing recognition or enforcement or the award. (emphasis added)

This recommendation, although representing partly procedural and arbitral traditions, requires a party to actively object to violations of procedural rules or the arbitration agreement in order not to be deemed to have accepted them. The recommendation may raise questions as to when a party could have relied on a fundamental principle. Was the failure due to lack of legal knowledge, deliberate choice, or facts unknown to the party? The Recommendation appears at least prima facie to be too inﬂexible and strict at least if “could have” is to be understood in abstracto. It is by no means clear that failure to do something in a procedure could or would constitute an effective waiver beyond perhaps the scope of a deliberate and educated choice or gross negligence. The rule provides that a party is estopped from invoking a fundamental principle. Should this be the case even when the court may ex ofﬁcio raise it when it is not concealed and is sufﬁciently fundamental? Apart from these procedural doubts, the rule raises material questions as well perhaps of even a more serious nature, such as whether fundamental principles in general can be waived and whether such a waiver is enforceable.15 The fundamental principles (“pertaining to justice or morality that the state wishes to protect even when it is not directly concerned”) are, by the deﬁnition of ILA, fundamental in the sense that they may or sometimes should be applied even ex ofﬁcio despite or regardless of a party’s acts or omissions as states and others than just a party to a dispute may have a vital interest in the enforcement of the fundamental principle over and above the enforcement of a settlement of a private dispute in an award. A party’s failure to invoke or rely on a fundamental rule at an earlier stage of the proceedings can hardly bar its application in the enforcement proceedings. A party should not have the power to waive fundamental rights when these reﬂect the vital interests of States, third parties, or society in general. The doctrine of waiver has little, if any room, within the sphere of fundamental public policy.16

14

15 16

Pierre Lalive, Ordre public transnational (ou réellement international) et arbitrage international, Revue de l’arbitrage 329 (1986). See also Fernando Mantilla-Serrano, Towards a Transnational Procedural Public Policy, 20 LCIA ARB. INT’L (2004). Compare with IBA Guidelines. Eco Swiss China Time Ltd v. Benton Int’l NV, ECJ 1.6.1999 C-126/97.

PUBLIC POLICY

23

2.2.5 ILA on Public Policy Rules If a public policy rule is of mere “mandatory” character, although classiﬁed as part of public policy of the country of enforcement, it should not be allowed to bar recognition and enforcement of an arbitral award. A public policy rule should bar recognition and enforcement when (i) the scope of the said rule is intended to encompass the situation under consideration; and (ii) the recognition or enforcement of the award would manifestly disrupt the essential political, social, or economic interests protected by the rule. Public policy is often understood as a principle declared or understood to be vital to the political, social, or economic interests of a county or society as a whole or a group of its citizens or residents. The ILA Recommendations make a distinction on the basis of the consequences of the recognition and enforcement of an award with respect to public policy rules. Only if the consequences would manifestly disrupt these interests should the recognition and enforcement be denied or refused. The Recommendations seem to impose additional qualiﬁcations on public policy when compared to the Convention. Should this distinction be made also in the proceedings so that violations of only such public policy rules that have manifestly disruptive consequences should be applied ex ofﬁcio or when raised by a party? Accordingly, should other “minor” violations of public policy rules not be relevant at all in the arbitral proceedings? Would this serve as a procedural international public policy rule on which sufﬁcient consensus within the international community can be achieved, and as such be a transnational public policy rule?

2.3 ARBITRABILITY OF THE SUBJECT MATTER Arbitrability means that the issue may be ﬁnally resolved in arbitral proceedings. Article V(2)(a) of the Convention provides: Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought ﬁnds that: (a) The subject matter of the difference is not capable of settlement by arbitration under the law of that country; . . . (emphasis added) All issues and matters are not arbitrable although the list of nonarbitrable issues has in general been reduced to only a few.17 Another dimension is that the arbitral award may have effects inter partes (between the parties) only and not erga omnes (as to everyone).

17

See, e.g. Eco Swiss, ECJ 1.6.1999 C-126/97; Mitsubishi Motors Corporation v. Soler ChryslerPlymouth Inc., 473 U.S. 614, 87 L.Ed. 2d 444 (1985); and Fritz Scherk v. Alberto-Culver Company, 417 U.S. 506, 41 L.Ed. 2d 270 (to mention just some of the most important cases).

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In a way, the issue of arbitrability is not all procedural: it also deals with the substantive issue of the scope of authority or power in abstracto (mandate) of arbitrators to adjudicate matters submitted to them. In this way, it is not unambiguously a due process issue (i.e., a rule relating to the way the proceedings are to be conducted). The issue is, however, also procedural. First, arbitrability is a question of jurisdiction of the tribunal and thus more or less clearly a procedural question. Second, there is the procedural dimension of investigation of the question of arbitrability (e.g., whether the arbitrator should raise this issue if the parties believe the issues submitted are arbitrable although they are not. Also, some or a part of the issues submitted may be arbitrable and some not). It is also possible that neither the parties nor the arbitrators become aware of the nonarbitrability of some of the issues. The issue of arbitrability may then be raised by the enforcement authority. It is further possible that the issues are arbitrable under the law of the place of arbitration or under other applicable rules, but nonarbitrable at one or more places of enforcement. In these instances, the issues need to be resolved in the enforcement proceedings and in accordance with the due process principle, but their arbitrability as such is covered by the material laws applicable to the dispute or the laws of the place of enforcement.

2.4 ARBITRATION AGREEMENT (“MANDATE IN CONCRETO”) AND THE CONVENTION 2.4.1 Agreement as the Basis of the Procedure Arbitration is based on an agreement of the parties. In the arbitration agreement, the parties authorize and give power (“a mandate”) in concreto to the arbitrators to settle their present or future disputes. By concluding the arbitration agreement, the parties, in general, exclude the application of laws and rules meant or designed to govern proceedings before State courts and assume at least implicitly those applicable to arbitration and general principles of legal proceedings. The arbitration agreement is governed by the freedom of contract.18 There are, however, certain limitations to it (e.g., as to arbitrability). The agreement is governed by the general rules of law as to formation of contract including invalidity and capacity of the parties as provided in Article V(1)(a) of the Convention.19 The arbitration agreement may also be subject to the test of unreasonableness or unconscionability as being too one-sided.

18

19

Perhaps the minimum key components of a good arbitration clause are: (1) the substantive law(s) applicable to the dispute; (2) the seat of arbitration; (3) the procedural rules applicable; and (4) the language(s) to be used. “The parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity, or the said agreement is not valid . . .”

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2.4.2 Breach of the Procedural Agreement as a Ground to Refuse Recognition and Enforcement Article V(1)(d) of the Convention provides: Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that: (d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; . . . (emphasis added)

This Article sets forth one of the “weak” grounds for refusal to enforce an award. The ﬁrst chapter of Article V(1) provides that refusal is conditional on (i.e., “only if”): (i) an action by the party against whom enforcement is sought (“request”); (ii) the party in question submitting sufﬁcient proof of violation of the procedural framework.

The procedural framework is based on two major elements: (1) primarily the agreement of the parties, and (2) failing such agreement, the law of the country where the arbitration took place (lex arbitri). We can also construct lex arbitri and its derivatives as a part of the agreement. The agreement of the parties may contain diverse elements. It may be a simple clause of a few words, or may refer the parties to ad hoc arbitration or to institutional arbitration. In the latter case the clause and the reference to an institution incorporates in general the rules of arbitration of that particular institution in the arbitration agreement. A simple ad hoc arbitration clause often expressly or implicitly incorporates into the agreement the arbitration law of a country. There are also ad hoc rules independent from national laws.20 The arbitration law referred to by the parties does not necessarily coincide with the place of arbitration (“the seat”), which may be in another country. The arbitration law of the country where the seat of arbitration is located is also applicable to the extent it is mandatory or in the absence of agreement by the parties. In addition, beyond the original arbitration agreement, the parties may conclude agreements supplementing or amending the arbitration agreement. This may happen prior to the initiation of the proceedings or during the proceedings covering speciﬁc issues or generic procedural principles to be applied.21 Finally, the arbitral panel has certain powers under the other applicable rules to issue binding procedural orders.

20 21

E.g., UNCITRAL Arbitration Rules. It may be a question of interpretation whether such a chain of agreements forms one agreement as amended or several agreements. Friedland gives the following model clause in Arbitration Clauses for International Contracts: The owner, the contractor and all subcontractors, specialty contractors, suppliers, engineers, designers, architects, lenders and bonding companies, and other parties concerned with the construction of the structure are bound, each to the other, by this arbitration clause, provided that they have signed this contract or a contract that incorporates this contract by reference or have signed any other agreement to be bound by this arbitration clause.

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Elements of the agreement can be described in a table of hierarchy of the rules: Ad hoc

Institutional

1. The “Original” Agreement and the law or rules referred to therein

1. The “Original” Agreement and the rules of the institution referred to therein

2. Subsequent agreements (prior to or during the proceedings)

2. Subsequent agreements (prior to or during the proceedings)

3. The arbitration law of the seat of arbitration

3. The arbitration law of the seat of arbitration

4. Procedural orders by the panel

4. Procedural orders by the panel

↑ D U E P R O C E S S ↓

All these elements are likely to contain (and also in an indirect way be) elements of due process, which covers the proceedings as a whole. Due process may be partly addressed by express provisions of any rules in the hierarchy or perhaps by none of them. It may be part of the applicable arbitration rules whether or not expressly referred to by the parties in the arbitration agreement or in the arbitration law imposed on the proceedings by the force of the law of the seat of arbitration. However, the implications of due process principles in national law or in the contract of the parties have to be separated from the international or transnational due process standard or lex proceduralia. The law of arbitration of a country may contain various elements: (i) special code or act on arbitration; (ii) codiﬁed or noncodiﬁed procedural principles (e.g., audi alteram partem or the impartiality of arbitrators); (iii) arbitration tradition or practice (“usage”); (iv) potentially applicable international human rights and fundamental rights of the country. The rules in the hierarchy form the procedural framework or “constitution” of the procedural code of a particular procedural decision or disagreement before a panel. PAUL D. FRIEDLAND, ARBITRATION CLAUSES FOR INTERNATIONAL CONTRACTS 201 (2000). ARBITRATION AGREEMENT (“MANDATE IN CONCRETO”) AND THE CONVENTION

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Procedural orders given by the panel must be in full conformity with this constitution. Should the orders or the conduct of the proceedings violate the procedural code, recognition and enforcement of the award may be refused. The rules in the hierarchy may have different force. Many of them may be waived by agreement or by conduct (acts or omission). As already noticed, the constitution is basically chosen by the parties, and indirectly it forms a contract of the parties. Having said this, the freedom of the parties to agree on procedural matters during the proceedings may be limited by the procedural powers of the arbitral panel derived from the original agreement. The degree to which the parties have freedom to agree in relation to the other norms in the procedural framework is a very interesting problem. There certainly is a limit on what the parties can agree to reach an enforceable award. For example, the parties cannot nominate themselves to be extra arbitrators in the case (which of course is a relatively extreme example). In some cases, the arbitrators need to keep the control of the procedure to maintain the minimum integrity of the procedure, which in many respects means applying the minimum due process requirements. The parties of course need to have control over the material dispute—the arbitrators cannot and should not stop them from reaching an agreement on the subject matter. But if the parties want to solve the dispute in arbitration, the dispute resolution procedure also needs to have certain minimum features of that speciﬁc procedure. If the material or substantive applicability of the speciﬁc dispute to arbitration is called arbitrability, there could be a similar term to refer to procedurally possible solutions in arbitration such as arbitral agreeability. Even if the framework above might look simple, it is far from so. In addition to what has been discussed above, the scope of the limits set in the original agreement as to the discretion of the tribunal is a difﬁcult question. The agreement might refer to some set of rules or arbitration law of a country. This means that not only the rules and that law would be applicable, but that other sources of law regarding the norms in question become relevant. The arbitration practice concerning institutional rules, legal literature, and case law from national courts and other arbitral tribunals are all relevant. Also the founding procedural principles and procedural minimum requirements of arbitral due process requirements come into the equation. As a result, the discretion of the tribunal as well as to some extent the power of the parties to stipulate the procedure might be within smaller margins than is generally considered.

2.4.3 Ultra Petita—Matters Beyond the Scope Ultra petita refers to a situation in which the mandate in concreto given by the parties to the arbitrators in the arbitration agreement is not respected by the arbitrators and they adjudicate beyond the scope of their authority derived from the parties. The arbitrators may even when acting within the scope of the arbitration agreement in abstracto decide on matters not submitted to them by way of prayer for relief. This is also related to party’s opportunity to be heard and ability to present one’s case discussed later.

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Article V(1)(c) of the Convention provides: Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that: (c) The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced; . . .

This provision of the Convention belongs to the group of “weak” grounds requiring party action and proof in order to result in nonrecognition and nonenforcement. The provision can be divided into two subsections: (i) the award deals with a difference beyond the scope of submission to arbitration (i.e., the arbitration agreement or clause; or (ii) the award contains decisions on matters beyond the scope of the submission to arbitration. Prima facie the two subsections have a very similar coverage, and we could on the basis of the wording alone argue that they overlap each other. The wording does not distinguish clearly issues beyond the scope of the agreement and those beyond the scope of the prayers for relief or defenses. Both are also subject to waiver, and elements of mandate in concreto. However, this semantic aspect and its further analysis do not appear to have anything other than academic value, and it would be an unproductive activity for the practical purposes of this work, will not be analyzed thoroughly. The ﬁrst subsection catches differences that are beyond the submission to arbitration. This refers to the arbitration agreement, or, in the narrower sense, to the arbitration clause between the parties. What falls within the scope of the arbitration agreement or clause is usually a question of interpretation or construction, but there have been trends in favor of a wide interpretation.22

22

Merkin writes: The English courts are, however, perfectly prepared to enforce a written agreement which does no more than indicate in the vaguest terms that the parties intend to refer disputes to arbitration, and are reluctant to hold an arbitration agreement to be void for uncertainty. This approach is possible by virtue of the Arbitration Act 1996, which provides a range of default terms relating, for example, to appointment of a sole arbitrator under s 15(3) of the Arbitration Act 1996, replacing s 6 of the Arbitration Act 1950, which will apply if the parties themselves have not agreed what should be done. A number of decisions illustrate this point.

ROBERT MERKIN, ARBITRATION LAW 116 (2004). He continues: Although the general principle remains that arbitration clauses will be given priority where there are conﬂicting contract terms, there may be some situations in which the arbitration clause cannot be regarded as forming part of the dispute resolution process agreed to by the

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The interpretation raises the issue of the law applicable to the arbitration agreement. The substantive law applicable to the arbitration agreement is not necessarily the same substantive law applicable to the underlying agreement or relationship.23 The arbitral panel is in general deemed to have the jurisdiction to decide whether it has jurisdiction regarding a difference submitted to arbitration.24 This jurisdiction is primary in the sense that the panel has the authority to resolve it, but subsidiary in the sense that the decision is often submitted to control by the courts of the seat of arbitration or by the enforcement authority as provided by the Convention.25 The jurisdictional issue may be raised by a party, but it may also be raised by the arbitrators. However, in the latter case, such raising of the issue may prove to be moot in the sense that the parties may be in perfect or “silent” agreement that the difference falls within the scope of the submission. Raising of the issue sua sponte is not, however, fruitless as when once raised and resolved, the parties cannot later on raise the issue as a ground for setting aside the award or for refusing its enforcement. If the issue is raised by a party objecting to the jurisdiction, a decision of the arbitrators in favor of arbitration may be subject to immediate appeal or appeal ﬁrst after the closing of the proceedings and rendering of the award.26 A party objecting to the parties. This was the conclusion reached by Garland J in MH Alshaya Co WLL v. Retek Information Systems Inc. 23

24 25 26

Id. at 119. The starting point is whether the parties have made an express choice of the law which is to govern their arbitration agreement. If there is such an express term, that choice will be regarded as conclusive even if the nominated law has no connection with the underlying contract to which it relates, given the divisibility of the arbitration agreement and the underlying contract. Indeed, the courts have been prepared to accept that disparate parts of a single agreement may be governed by different applicable laws. The obvious conclusion from the separability principle is that an express choice of law applicable to a substantive agreement which contains an arbitration clause does not necessarily extend to the arbitration clause itself, and it will be necessary to look at anything that the parties have expressly or impliedly agreed in relation to the arbitration. By way of example, if the substantive contract is stated to be governed by the law of New York, and it contains an arbitration clause which speciﬁes that arbitration is to be held in London as the seat of the arbitration, the almost inseparable relationship between the curial law of the arbitration and the law governing the arbitration agreement means that the law applicable to the arbitration agreement is more likely to be English than New York law. Id. at 193. This is the classic “competence de competence” issue. See UNCITRAL Art. 16(1) and (3) in the Appendices p. 490. See UNCITRAL Art. 16(2) in the Appendices, p. 490. Japan Act 2003 § 23 (4–5) (Japanese Arbitration Law, No. 138 of 2003, in force 1 March 2004, in JAN PAULSSON (ED), INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION, (Kluwer Law International 1984 Last updated: March 2005 Supplement No. 43) pp. Annex I-1–Annex I-20) (4) The arbitral tribunal shall give the following ruling or arbitral award, as the case may be, on a plea raised in accordance with paragraph (2): (i) a preliminary independent ruling or an arbitral award, when it considers it has jurisdiction; or (ii) a ruling to terminate arbitral proceedings, when it considers it has no jurisdiction. (5) If the arbitral tribunal gives a preliminary independent ruling that it has jurisdiction, any party may, within thirty days of receipt of notice of such ruling, request the court to decide

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arbitration on jurisdictional grounds may also attempt to obtain a court order to stop the arbitration. This may be an action under the relevant arbitration law or under protective measures provided by a code of procedure on various grounds.27 Should the arbitrators decline jurisdiction and dismiss the case, a party is not left without recourse. Instead of arbitration, the party is at liberty to take action in competent State courts. A party may perhaps also ﬁle a claim for declaratory judgment seeking a conﬁrmation that the difference falls within the arbitration agreement. In some circumstances such an action or appeal may be more attractive than starting litigation in state courts and probably facing problems of enforcement of the court decision at a later stage. Matters beyond the scope of submission may include the difference although a difference as a word is perhaps closer to a disagreement regarding a larger subject matter, while a matter is closer to an issue. For instance, the difference may be a distributorship agreement with the matter being failure to deliver on time or request for damages relating to an unjust termination of the agreement. Further, the matter may relate to a remedy sought by a party (e.g., declaratory relief, speciﬁc performance, injunction, or damages). Within the difference, there may be various issues or matters, some of which are closely related to the difference itself but which despite the closeness are not necessarily always directly within the scope of submission. The matters submitted to arbitration may not necessarily be ﬁxed at the initial stages or remain ﬁxed throughout the arbitration. Arbitration may be a very dynamic process changing its substance, coverage and scope. The matters submitted may be elaborated on by the parties or the claims and pleadings may lead to withdrawal of matters or to submission of substitute or new claims. In such instances, administration or management of the proceedings may become critical for the arbitral panel. At the same time, the parties need to be particularly focused on the changes in the scope of submission because failure to object to new matters may constitute a waiver barring the party from invoking the fact that some matters were not within the scope of submission later on. Failure to object may constitute a waiver, and once constituted by acts or omissions, the waiver incorporates the “alien” matter within the scope of the arbitration proceedings. The jurisdiction of the panel as to counterclaims or set-off raised may be a difﬁcult issue to resolve if the counterclaims are not directly related to the original difference submitted or otherwise clearly within the scope of the arbitration agreement. Article 21(5) of the Swiss Rules incorporates a favorable or liberal position as to set-off: The arbitral tribunal shall have jurisdiction to hear a set-off defence even when the relationship out of which this defence is said to arise is not within the scope of the arbitration clause or is the object of another arbitration agreement or forum-selection clause.

the matter. In such an event, while such a request is pending before the court, the arbitral tribunal may continue the arbitral proceedings and make an arbitral award. 27

E.g., invalidity of the agreement, sovereign immunity, expiration of mandate, public policy, nonarbitrability, etc.

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31

The time when counterclaims falling within the scope of submissions are to be ﬁled in order to be admitted and heard by the panel is another issue. At some stage, any new counterclaim (even those very closely linked to the original claim) must be dismissed by the panel and referred to new proceedings by the parties. To set aside an ultra petita award requires under Article I of the Convention party action, i.e., a request by the party and necessary proof. Since the arbitration agreement must be in writing and the award must likewise be in writing, the ultra petita issue may in most cases be decided on the basis of documents only after having heard the parties and no other evidence may be relevant. As far as the consequences of ultra petita are concerned, Article V(1(c)) provides that “if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced”. In the absence of similar separation provisions in Article V (2), it is not clear if the same principle would apply mutatis mutandis to issues not arbitrable at all or should this perhaps be interpreted e contrario. The right to waive arbitrators’ action in excess of party mandate, i.e., ultra petita, seems clear enough. To create a waiver of arbitrability by acts or omissions seems, however, excluded or is least very difﬁcult to argue for.

2.4.4 Waiver Doctrine and the Breach of the Procedural Agreement Waiver of rights may constitute an enforceable modiﬁcation of the arbitration agreement as well as a modiﬁcation of a material contract.28 For example, the waiver doctrine is relevant when deciding whether the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties. UNCITRAL Model Law Article 4 provides: A party who knows that any provision of this Law from which the parties may derogate or any requirement under the arbitration agreement has not been complied with and yet proceeds with the arbitration without stating his objection to such non-compliance without undue delay or, if a time-limit is provided therefore, within such period of time, shall be deemed to have waived his right to object.

In addition to express statements, waiver may occur via two very different elements: (1) acceptance by conduct and (2) omissions. The two elements are interrelated. Let us presume that a matter is raised during the arbitral proceeding and it is clearly beyond the scope of the original arbitration agreement. If the parties do not object in any way, 28

Arbitration Act of England 1996 § 73(1) (see the Appendices, p. 287). UNIDROIT Article 1.8: A party cannot act inconsistently with an understanding it has caused the other party to have and upon which that other party reasonably has acted in reliance to its detriment.

Waiver after breach is deﬁned in UCC 1-107: Any claim or right arising out of an alleged breach can be discharged in whole or in part without consideration by a written waiver. . . .

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THE NEW YORK CONVENTION AS A STARTING POINT

they may be deemed to have accepted an amendment of the original arbitration agreement to widen the scope thereof, even if it is not in writing, as long as it is otherwise unambiguous. Accordingly, they will be prevented from raising that defense at a later stage.29 Even if the new matter falls in the grey zone in the sense that it may or be beyond the scope of the submission, a failure to object may be deemed to indicate the understanding or interpretation of the arbitration agreement by the parties themselves that the new matter is within the scope of submission and jurisdiction. This failure to act will become irrevocably binding and the parties will be deemed to have waived (or accepted) the interpretation. The doctrine of waivers in contract matters is deeply rooted in the rules of international arbitration institutions and in some legal systems, but it has only a milder recognition in others. The latter sometimes operate rather on the concept of acceptance by conduct.30 However, in the sphere of arbitration, the waiver doctrine seems to be very well-established in serving the interests of the parties and the administration of justice in general. Waivers may be classiﬁed into at least four different categories. The ﬁrst division is based on time: one can waive in advance certain generic rights or a speciﬁc right. An example of a generic waiver given in advance is contained in Article 28(6) of the ICC Rules: By submitting the dispute to arbitration under these Rules, the parties . . . shall be deemed to have waived their right to any form of recourse insofar as such waiver can validly be made.

However, waivers given in advance may well be problematic as indicated by the reservation in the phrase “insofar as such waiver can validly be made”.31 In particular, 29

30

Arbitration agreements in general must be made in writing. This requirement does not seem to apply to agreements made during the proceedings although very often such agreements are recorded in submissions, minutes, procedural orders, or other documents. UNIDROIT Art. 2.1.6 (1): A statement made by or other conduct of the offeree indicating assent to an offer is an acceptance. Silence or inactivity does not in itself amount to acceptance.

and (3): However, if by, virtue of the offer or as a result of practices which the parties have established between themselves or of usage, the offeree may indicate assent by performing an act without notice to the offeror, the acceptance is effective when the act is performed. 31

France Act Art. 1484 provides: Whenever, in conformity with the distinction made in Article 1482, the parties have waived their right to appeal, or have not expressly reserved said right in the arbitration agreement, a motion to set aside the document characterized as an arbitral award may nevertheless be raised irrespective of any stipulation to the contrary. It may be granted only in the following cases: 1. If the arbitrator decided in the absence of an arbitration agreement or on the basis of a void or expired agreement; 2. If the arbitral tribunal was irregularly composed or the sole arbitrator irregularly appointed; 3. If the arbitrator decided in a manner incompatible with the mission conferred upon him; 4. Whenever due process (le principle de la contradiction) has not been respected;

ARBITRATION AGREEMENT (“MANDATE IN CONCRETO”) AND THE CONVENTION

33

this relates to generic waivers such as in Article 28(6) above. There are also rights that cannot be waived in general ex ante such as ordre public and public policy and rights that can be waived ex post but not necessarily ex ante (e.g., objection to impartiality of an arbitrator).32 After the violation of a right or an agreement occurs, a speciﬁc waiver may in most cases be validly given. This relates both to substantive contractual and other issues and to procedural rules or deviations from them. In ICC, practice of the waiver doctrine as to procedure is codiﬁed in Article 33: A party which proceeds with the arbitration without raising its objection to a failure to comply with any provision of these Rules, or of any other rules applicable to the proceedings, any direction given by the Arbitral Tribunal, or any requirement under the arbitration agreement relating to the constitution of the Arbitral Tribunal, or to the conduct of the proceedings, shall be deemed to have waived its right to object.

The Swiss Rules are fully in line, as provided in Article 30: A party who knows that any provision of, or requirement under, these Rules has not been complied with and yet proceeds with the arbitration without promptly stating its objection to such non-compliance, shall be deemed to have waived its right to object.

The waiver doctrine applies to conﬂict of interests as well, as provided in IBA Guidelines Article 4 (a), (b), and (c): (a) If, within 30 days after the receipt of any disclosure by the arbitrator or after a party learns of facts or circumstances that could constitute a potential conﬂict of interest for an arbitrator, a party does not raise an express objection with regard to

5. In all cases of nullity deﬁned in Article 1480; 6. If the arbitrator has violated public policy (ordre public).

32

As reported in Code of Civil Procedure—Book IV—Arbitration in JAN PAULSSON (ED), INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION, (Kluwer Law International 1984 Last updated: February 1998 Supplement No. 26) pp. 26–12. The Argentina Act Art 760 provides: 1. If means of recourse have been waived they shall be rejected without further substantiation. 2. Waiver of means of recourse shall not, however, prevent the admissibility of explanatory and nullity recourses based on essential errors in the procedure or when the arbitrators rendered their award after the term therefore had elapsed, or decided on issues not submitted to arbitration. In the latter case, the ensuring nullity shall be only partial if the award can be divided (fuere divisible). 3. This appeal shall be decided without any substantiation and only by taking into account the antecedents already incorporated into the arbitral record.

National Code of Civil and Commercial Procedure Law 17.454 of September 19 1967, as reformed by Law 22.434 of March 16 1981, text consolidated according to Decree 1.042 of 1981 in JAN PAULSSON (ED), INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION (Kluwer Law International 1984 Last updated: January 1985 Supplement No. 3) pp. 3–7.

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THE NEW YORK CONVENTION AS A STARTING POINT

that arbitrator, subject to paragraphs (b) and (c) of this General Standard, the party is deemed to have waived any potential conﬂict of interest by the arbitrator based on such facts or circumstances and may not raise any objection to such facts or circumstances at a later stage. (b) However, if facts or circumstances exist as described in General Standard 2(d), any waiver by a party or any agreement by the parties to have such a person serve as arbitrator shall be regarded as invalid. (c) A person should not serve as an arbitrator when a conﬂict of interest, such as those exempliﬁed in the waivable Red List, exists. Nevertheless, such a person may accept appointment as arbitrator or continue to act as an arbitrator, if the following conditions are met: (i) All parties, all arbitrators and the arbitration institution or other appointing authority (if any) must have full knowledge of the conﬂict of interest; and (ii) All parties must expressly agree that such person may serve as arbitrator despite the conﬂict of interest.

2.5 INCAPACITY AND INVALIDITY 2.5.1 Incapacity of the Party and Invalidity of the Agreement Article V (1(a)) of the New York Convention provides that: Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that: (a) The parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made. . . .

This provision deals with two issues neither of which is procedural in its essence: (1) the incapacity of the parties, and (2) the invalidity of the arbitration agreement. Both can de jure be classiﬁed as conditions precedent to the arbitration proceedings and thus procedural questions. However, both are decided on a material law basis, with one being related to the powers and capacity of natural or legal persons and the other to general principles of contract law.

2.5.2 Incapacity of a Person In the context of international commercial arbitration, presumably it is very uncommon to have an issue regarding the incapacity of a natural person. However, one may rise in connection with entrepreneurs or traders dealing in their personal capacity rather than behind a corporate veil. It may also rise in connection with the representation of

INCAPACITY AND INVALIDITY

35

legal persons (i.e., various forms of corporations) if their directors and ofﬁcers are affected by some kind of incapacity. More often the issue is raised if the directors and ofﬁcers have acted beyond their power and authority (“ultra vires”). This is an issue governed by the law applicable to the corporation. The material law applicable is the law governing the person in question, which for example may be the law of the seat of corporation, the place of business or residence.

2.5.3 Invalidity of the Arbitration Agreement Any issue regarding invalidity of the arbitration agreement is to be resolved on the basis of the material law applicable thereto.33 This law is not necessarily the same material law applicable to the underlying agreement to which the arbitration agreement relates. Under the prevailing doctrine, the arbitration agreement is usually regarded as an independent agreement separate from the underlying agreement and not affected by its fate.34 However, in practice it is very uncommon for the parties to agree on the law applicable to the arbitration agreement or to pay much or any attention thereto by way of indication or presumption as it hardly ever emerges as an issue in negotiations. For this reason, the subsidiary rule of the Convention (“failing any indication thereon”) becomes the main rule. In the absence of express choice or “any indication,” the law applicable to the arbitration agreement is that of the country where the award was made. In practice this means the law of the country where the arbitration has its seat (i.e., lex arbitri).

33

Private International Law Act of Switzerland Art. 178: 1. As regards its form, an arbitration agreement is valid if made in writing, by telegram, telex, telecopier or any other means of communication which permits it to be evidenced by a text. 2. As regards its substance, an arbitration agreement is valid if it conforms either to the law chosen by the parties, or to the law governing the subject-matter of the dispute, in particular the law governing the main contract, or if it conforms to Swiss law. 3. The validity of an arbitration agreement cannot be contested on the ground that the main contract may not be valid or that the arbitration agreement concerns a dispute which has not yet arisen.

34

Arbitration Act of England 1996 § 7 (see the Appendices, p. 258). See also Japan Act, supra note 26, at § 13(6): Even if in a particular contract containing an arbitration agreement, any or all of the contractual provisions, excluding the arbitration agreement, are found to be null and void, cancelled or for other reasons invalid, the validity of the arbitration agreement shall not necessarily be affected.

This applies in institutional arbitration as well. See ICC Rules Article 6(4) (ICC Rules of Arbitration in force as from Jan. 1, 1998 (ICC Publication No 808), as amended Jan. 1, 2008). 36

THE NEW YORK CONVENTION AS A STARTING POINT

2.6 ABILITY TO PRESENT ONE’S CASE 2.6.1 Ability to Present One’s Case as a Fundamental General Requirement Article V(1)(b) of the Convention provides: Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that . . . (b) The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case. . . .

For a party to present his case, many requirements must be met and many basic procedural elements must be in place. Many of these issues will be discussed in-depth later on in this work. The key issue is that even an agreement concerning the procedure does not necessarily mean that a party would have been able to present his case. The standard is procedural, not contractual, with the procedural standard being deﬁned not only by different kinds of procedural black letter law and arbitration-speciﬁc soft law, but also by arbitration practices (including the contractual practices surrounding arbitration, as already discussed above). From a legal research point of view, the ability to present one’s case is theoretically very interesting as it opens the door to different kinds of due process arguments and of sources of law. The generality of the requirement in a way undermines the importance of discussion concerning the law applicable to the proceedings. The applicable procedural law or lex arbitri might be decisive in setting the award aside at the national level, but the widely applicable general requirement of opportunity to present one’s case opens the enforcement discussion to international discussion and truly international due process requirements.35 The requirement of ability to present one’s case can be characterized as a general one for at least two reasons. First, in formulation it is very general and open in a way which means that very different kinds of procedural aspects fall under it. For example, the requirement has relevance in initiating proceedings, in hearings, and in evidence as well as in the award. Second, the level of generality of the requirement is higher than the level of generality of most of the other requirements in the convention. For example, incapacity of a person to make an arbitration agreement is relatively exact as a criterion of refusing recognition and enforcement, while ability to present one’s case is vague. The word unability used in the Convention does not refer to the subjective unability or a contractual standard of “ready, willing, and able,” but primarily to the objective opportunity to present one’s case. The subjective ability of a party or of his counsel to present his case (i.e., professional skills or the strength and elegance of argumentation) is not included in the “ability” referred to by the Convention and remains at a 35

About the discussion concerning applicable procedural law and the level of transnationality of it, see GEORGIOS PETROCHILOS, PROCEDURAL LAW IN INTERNATIONAL ARBITRATION 19–46 (2004).

ABILITY TO PRESENT ONE’S CASE

37

party’s risk. However, if a party has been denied his right to retain legal counsel of his choice to represent him, this may constitute unability under the Convention. The subsection of the Convention cited above enumerates three speciﬁc reasons for a refusal to enforce an award. The ﬁrst two are proper notice of appointment of arbitrator or of the arbitration proceedings related to initiation of the proceedings. The two alternatives are separated by the word or, which indicates that proper notice is the key element: a party must be informed about the initiation of the proceedings for him to have an opportunity to organize his defense and take other action including ﬁling counterclaims, gathering and organizing evidence, taking protective measures, etc. Whether the notice is proper must be assessed on the basis of the arbitration agreement and other applicable procedural rules, including the law of the seat of arbitration. If what constitutes proper notice is not well-deﬁned by the rules or law referred to in the arbitration agreement, the issue may become problematic as to the choice of applicable procedural rules. As indicated above, proper notice is required in order to allow a party to “present his case”.36 Thus the proper notice requirement is part of “presenting one’s case”, a condition precedent required absolutely to constitute due process and to make possible the rendering of an enforceable award. In the absence of other more speciﬁc rules, proper notice must at the minimum contain information that legal proceedings are pending, refer to the grounds for jurisdiction, and the identify the parties. The ability to present one’s case appears to be the most fundamental due process rule. The very core of the requirement is the foundation of legal proceedings often expressed by the maxim audi alteram partem. The objective is to have the two parties both present their case from their subjective point of view and allow them to bring all relevant evidence supporting their position before the impartial arbitrator, who may intervene in the proceedings when necessary. The same applies mutatis mutandis when there are more than just two parties. This generic description is easy to accept: allowing the two very subjective elements allows the parties to shed light on the issues from all angles and to reconstruct events, after which the arbitrator objectively and impartially strikes a “just” outcome or the proper balance in the conﬂict. However, in practice all this is more complex; sometimes parties fail to bring the necessary facts, mis- or malrepresent or conceal them, or simply do not recollect or know the facts sufﬁciently due to a lack of communication or other reasons. Facts keep coming, 36

Japan Act, supra note 26, at § 29(1): Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular civil dispute commence on the date on which one party gave the other party notice to refer that dispute to the arbitral proceedings.

See also id. at § 32(3). Proper notice means reasonable notice (“seasonably”). For what constitutes reasonable notice, compare UCC 1-204: (1) Whenever this Act requires any action to be taken within a reasonable time, any time which is not manifestly unreasonable may be ﬁxed by agreement. (2) What is a reasonable time for taking any action depends on the nature, purpose and circumstances of such action. (3) An action is taken “seasonably” when it is taken at or within the time agreed or if no time is agreed at or within a reasonable time.

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THE NEW YORK CONVENTION AS A STARTING POINT

with new ones emerging in sequences that are not planned or even contemplated and that are not all presented at the same time. The parties’ claims and the theories or grounds on which they base their claims may change or be incomplete. The parties cannot always know whether there is sufﬁcient evidence to persuade the panel, whether the established facts support the claims, or whether a subsidiary claim should be made. The remedies sought may not be available at law or in the light of the facts, but other substitute remedies would be if only the party prayed for them. The arbitral tribunal must manage the proceedings expeditiously and cost-effectively but also provide (in the arbitrators’ discretion) sufﬁcient guidance to the parties by way of procedural orders and instructions to fully establish the relevant facts. The proceedings should, if possible, exhaust the disputes in order to avoid new proceedings relating to the same set of facts or relationships (except perhaps on the basis of new theories or new evidence). All this must be done without jeopardizing the impartiality and objectivity of the adjudication. It is easy to see that the requirement of timeliness alone makes it sometimes difﬁcult to balance between the party’s ability to present his case and the other party’s right to enforce his substantive rights in the chosen dispute resolution mechanism. In practice, the lack of clarity regarding the limits on a party’s ability to present his case might lead to problems in case management, as pushing the procedure forward against the will of a reluctant party runs the risk of an unenforceable award.

2.6.2 Ability to Present One’s Case According to the Agreement and the Law of the Seat The due process standard “able to present one’s case” is closely linked to another due process rule under Article V(1)(d): “The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place.” The two elements (i.e., the arbitration agreement and the law of the seat of arbitration) are part of due process; they qualify and specify in part what constitutes due process in an individual case. The arbitration agreement may specify how a party is to be given the necessary opportunity “to present his case” but it cannot, at least ex ante, totally eliminate this right. Should this be the case, the proceedings would perhaps not constitute arbitral proceedings or legal proceedings and the judiciary would most likely refuse to recognize and enforce any award. The right to present one’s case cannot be wholly waived during the proceedings, or more exactly, the right to the opportunity to present one’s case cannot be wholly waived, but the party may at his option and in his sole discretion choose not to do so in concreto.37 In addition to the arbitration agreement, the law of the country of the seat of arbitration forms a part of due process. The arbitration agreement cannot entirely cover all 37

This may lead to changes in the procedural framework, in particular the rules applied with respect to the burden of proof.

ABILITY TO PRESENT ONE’S CASE

39

dispositive or “soft” issues of procedure. Then the arbitration law of the seat of arbitration or its general procedural principles may apply, including due process to the extent not already included in the above. However, procedural rules enacted speciﬁcally to apply to proceedings only before State courts in general cannot be applied at all in arbitration because the choice of arbitration is expressly or implicitly meant to eliminate exactly those rules and to replace them with other more ﬂexible or “tailor-made” rules.38 The arbitral proceedings are anchored in the arbitration law of the lex fori, which means that two “hard” elements are often brought to the legal framework of the proceedings: (1) the control of the legality of the arbitration proceedings by the court or other authority of the seat of arbitration, and (2) the availability of speciﬁed procedural measures in support of the arbitral proceedings (e.g., to hear witnesses, enforce procedural orders or partial or ﬁnal awards, compel production of documents, adopt interim measures, etc. depending on the law of the seat of arbitration).39 Lex fori is primarily a “blessing” to the proceedings and a supporting element, but also ultimately establishes the necessary control so that the mandate given to arbitrators by the legal system in abstracto and by the parties in concreto is not abused.

2.7 AWARD HAS TO BE FINAL (“CONDITION SUBSEQUENT”) Article V(1)(e) of the Convention provides: Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that: (e) The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.

This provision does not deal directly with procedural issues in the arbitration but constitutes rather “a condition subsequent”—enforcement of an award already given may be refused if: (i) the award is not ﬁnal, i.e., it may be subject to appeal or a period of time provided for in the applicable law for ﬁling an action for setting aside or other similar action has not run out and the award is not enforceable under the law of the country or in the country where it was made;

39

The rules governing proceedings often codify or reﬂect general procedural principles that apply equally to arbitration. Sometimes national laws refer to procedural laws covering State court proceedings to “ﬁll a vacuum” of rules or as an ex analogia source of procedural arbitration law. UNCITRAL Art. 27 (seeAppendices, p. 493).

40

THE NEW YORK CONVENTION AS A STARTING POINT

38

(ii) the award has been set aside, i.e., a competent authority has declared it null or void or unenforceable applying the law of the seat of arbitration or the law applicable to the award; or (iii) the award has been suspended, which means its enforcement has been denied or refused at least temporarily pending another action or depending on some other similar condition.

These circumstances are not of any particular interest for the purposes of due process although setting aside or a suspension of the award may and often are consequences due process violations in the arbitration. However, this provision does not in any way indicate what these violations may have been “under the law under which the award was made”.

2.8 CONCLUSIONS ON THE ANALYSIS OF ARTICLE V OF THE CONVENTION The above analysis and the relevance of the various subsections of the article V of the Convention for the purpose of deﬁning due process could be reported in a table in a summary fashion as follows: Article V:

Due Process

Conditions Precedent

1 (b) “Inability to present his case” i.e. “audi alteram partem”

1 (a) Incapacity, etc.

1 (c) Scope of submission i.e. beyond “mandate in concreto”

1 (c) Scope of submission, i.e. beyond “mandate in concreto”

1 (d) Procedural rules violated

2 (a) Not arbitrable, no “mandate in abstracto”

Conditions Subsequent 1 (e) Not final

2 (b) Public Policy (both substantive and procedural issues)

Some of the rules can simply be classiﬁed as conditions precedent or conditions subsequent. As an enforceable agreement resulting in an enforceable award, the mandate in abstracto or authority vested in the panel is subject to conditions as to how the proceedings are to be conducted and as to what may be enforced. The mandate of the panel (subject to public policy) is to establish the facts and to enforce the arbitration agreement and underlying agreement as the parties have agreed.

CONCLUSIONS ON THE ANALYSIS OF ARTICLE V OF THE CONVENTION

41

As already noticed above, in one sense, the law of arbitration is procedurally closely bound to the criteria and law of enforcement. This is especially true when the approach is concerned with identifying the most fundamental rules of due process in the Convention. A few remarks can be made on the basis of the analysis: 1) The line between substance and procedure is fading in arbitration, as many substantive norms deﬁne the jurisdiction of the tribunal. This is, actually, not very surprising as one of the two major groups of questions concerning due process requirements has to do with controlling the limitations on access to courts. Questions related to jurisdiction deﬁne the limitation of access to ordinary courts, and even the substantive public policy-related grounds on denying enforceability can be seen from this perspective as being in a way procedural. Some demands are such that an arbitral tribunal does not have jurisdiction to deny their protection or infringe them. 2) The criteria set forth in the Convention are not autonomous. First, the Convention refers to national laws and agreements of the parties. Second, it is of course de facto bound with internationally (or better transnationally) deﬁned meaning of concepts and terminology. Thus the normative meaning of the Convention comes from various sources. 3) The Convention is at least partly very openly formulated. For example, from a procedural point of view, the requirement that a party have the ability to present his case is open to various interpretations. 4) Accordingly, it seems difﬁcult to concretize due process requirements only on the basis of analyzing the Convention. The other sources of law of international arbitration also have to taken in account in the wider analysis below. In the next chapters, the content of international due process requirements is approached in a kind of problem-based manner and the various elements of due process are discussed in substantial order. For example, the following elements are discussed: Arbitration Agreement as Basis of Jurisdiction (Chapter 3) Other Aspects of Jurisdiction than the Agreement (Chapter 4) The Panel and Due Process (Chapter 5) Due Process Related to Facts and Evidence (Chapter 6) The Role of the Panel in the Proceedings (Chapter 7) Fair Arbitration—Opportunity to Present One’s Case (Chapter 8)

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THE NEW YORK CONVENTION AS A STARTING POINT

Chapter 3

Arbitration Agreement as the Basis of Jurisdiction

3.1 AGREEMENT ON BASIS OF JURISDICTION—MANDATE IN CONCRETO BASED ON MANDATE IN ABSTRACTO In arbitration, the jurisdiction of the tribunal is based on agreement of the parties. An arbitration agreement can be reduced to an authority or power granted by the parties to the arbitrators to settle their present or future differences (“mandate in concreto”) within the freedom of contract. The mandate in concreto is based on two mandates by the government (i.e., the people): (1) freedom of contract, and (2) delegation of judicial authority to render enforceable decisions (“mandate in abstracto”) subject to due process requirements. An arbitration agreement has both positive and negative jurisdictional effects. First, an arbitration agreement grants jurisdiction to the arbitral tribunal (positive effect). Second, arbitration normally excludes the jurisdiction of ordinary courts (negative effect). The existence of a valid arbitration agreement is a condition precedent to arbitral proceedings, and thus a due process requirement. No one should be compelled to arbitration against his will especially if there is no appeal to the ordinary court system. The exclusion of the possibility of resolving the dispute in an ordinary court restricts access to justice, which emphasizes the importance of the agreement. Thus, the arbitration agreement often restricts a party’s constitutional and human rights to a public hearing in a court of law. Accordingly it is important that a proper agreement be required and that the agreement on which jurisdiction is based be valid. The negative jurisdictional impact (i.e., that the dispute may not be heard before courts of law against the will of a party to an arbitration agreement and must be dismissed by the court) is probably one of the main effects of a valid arbitration clause.1 1

Holtzmann reports: If one party sues in court with respect to any disputes covered by an agreement to arbitrate, the court must, on the request of the other party, bar the suit so that the arbitration may be held in accordance with the terms of the agreement. The only question before the court in deciding on such a request is whether the issue involved in the suit is covered by an agreement to arbitrate (FAA Sect.3; UAA Sect.2). 43

Most clauses provide for exclusive arbitration and do not allow any “ordinary” appeal from the award regarding material issues. The parties may of course either expressly or implicitly waive their right to arbitration, and some national laws impose a duty on the parties to invoke the clause—sometimes even before answering the substantive issues. Article II(3) of the Convention provides: The court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it ﬁnds that the said agreement is null and void, inoperative or incapable of being performed. (emphasis added)

The Convention requires party action to enforce the arbitration, and passivity may constitute a waiver. The mandate in concreto or authority given is irrevocable except by agreement of all parties. As such, it is comparable to agreements granting an irrevocable power and authority to make decisions binding on the parties, such as agreements forming corporations that also grant irrevocable authority to certain corporate bodies to pass resolutions for and on behalf of their shareholders even in the absence of unanimity. In a way, it comes very close to the role of an engineer or architect in construction contracts. As such, there is nothing particularly exotic about it. However, an arbitration agreement is sui generis in some respects. The agreement is in general regarded as independent and separate from the underlying transaction.2 It deals primarily with procedural issues constituting an instrument for the enforcement of the underlying agreement. The arbitration agreement remains ancillary although Howard M. Holtzmann, Report on U.S. Arbitration Law, in INTERNATIONAL HANDBOOK COMMERCIAL ARBITRATION 14 (Supp. 13, Sept. 1992). Spanish Act Art. 11 provides:

ON

1. The arbitration agreement obliges the parties to comply with the agreement and prevents the courts from hearing disputes submitted to arbitration, provided that an interested party raises an objection (declinatoria) to jurisdiction.

2

(Law 60/2003 of 23 December on Arbitration (in force 26 March 2004) as reported in JAN PAULSSON (ED), INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION, (Kluwer Law International 1984 Last updated: July 2004 Supplement No. 41) pp. Annex I-1–Annex I-17 Prof. Bernardo M. Cremades in INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION (Supp. 13, Sept. 1992)). Holtzmann, supra note 1, at 14 reports: The laws of various states differ, with some, such as New York and those states that have enacted legislation based on the UNCITRAL Model Arbitration law, applying the separability doctrine and others considering that the arbitration clause and the rest of the contract are invisible parts of the same agreement. However, international cases are most likely to be governed by the federal law, which, as noted above, follows the separability doctrine. Therefore, it is unnecessary for the purposes of this chapter to consider the law in states that do not apply the separability doctrine. The case of Prima Paint v. Flood & Conklin, cited above, is important not only because it establishes the federal separability doctrine, but also because, in so doing, the Supreme Court once again emphasized the strong national policy of encouraging commercial arbitration. Thus, the Court said that it “honors” . . . the unmistakably clear Congressional purpose that the arbitration procedure, when selected by the parties to a contract, be speedy and not subject to delay and obstruction in the courts.

44

ARBITRATION AGREEMENT AS THE BASIS OF JURISDICTION

independent from the fate of the transaction, including its termination, cancellation, or invalidity.3 Standing alone, the arbitration clause has no substance, meaning, or right of existence. Yet the doctrine of independence is somewhat an overstatement of the implicit purpose and intent of the parties elevated to the level of doctrine by the necessities and needs of legal and business practices. International arbitration agreements are often sui generis in the sense that they are not children of national jurisdictions, but servants of international exchange, and as such instruments of law merchant. As a consequence, they are supranational rather than national in their character, attaching only slightly to national court systems through the seat of arbitration or in connection with their enforcement. The focus on and the special attention paid to arbitration are partly due to the lack of an appeal mechanism and the enforceability of the award. These two factors culminate in qualiﬁcations on the mandate created by the arbitration agreement: what are the material limitations to the power of the arbitrators (which is derived from the parties’ freedom to contract and settle) to settle the disputes arising under agreements? The power constituted by the arbitration agreement is expressly and implicitly limited to its compatibility with the substantive law to be applied. For the arbitrators to go beyond or deviate from this limitation, they must obtain an express authorization of the parties to proceed ex aequo et bono: in justice and fairness rather the strict rule of law.4 Of course, the parties themselves can settle their dispute ex aequo et bono at any time. However, as to procedure, the arbitrators enjoy great freedom to organize the hearings, and normally the arbitration agreement excludes rules applying to proceedings before State courts. An arbitration agreement may provide that all future disputes relating to a legal relationship or arising in connection therewith between the parties will be submitted to arbitration. Such a generic arbitration clause covers all future disagreements within the deﬁnition. By contrast, an arbitration agreement may provide that a speciﬁc and concrete disagreement that has already arisen shall be submitted to arbitration. Such a speciﬁc agreement does not extend to any unspeciﬁed future disputes.5 A speciﬁc or generic clause may refer either to ad hoc or institutional arbitration. The pros and cons 3 4

Compare with letters of credit or on-demand bonds. ICC Rules 17(3) (see Appendices, p. 410). ICC Rules of Arbitration in force as from Jan. 1, 1998 (ICC Publication No 808), as Amended Jan. 1, 2008). Japan Act § 36(2–3): (2) Failing agreement as provided in the preceding paragraph, the arbitral tribunal shall apply the substantive law of the State with which the civil dispute subject to the arbitral proceedings is most closely connected. (3) Notwithstanding the provisions prescribed in the preceding two paragraphs, the arbitral tribunal shall decide ex aequo et bono only if the parties have expressly authorized it to do so.

5

(Japanese Arbitration Law, No. 138 of 2003, in force 1 March 2004, in JAN PAULSSON (ED), INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION, (Kluwer Law International 1984 Last updated: March 2005 Supplement No. 43) pp. Annex I-1–Annex I-20.). Art. II(1) of the Convention recognizes expressly both generic and speciﬁc clauses “all or any differences which have arisen or which may arise”.

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45

of the choice is an ever-stimulating topic for discussion. However, one thing is certain: it is great to have alternatives to choose from.

3.2 EXISTENCE OF AN ARBITRATION AGREEMENT 3.2.1 The Written Form Arbitration agreements must be in writing. Under the Convention, written arbitration agreements must be recognized (Article II): 1. Each Contracting State shall recognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a deﬁned legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration.

For practical purposes, the requirement the arbitration agreements be written seems to be well-motivated. The same requirement is common in many national laws, thus reﬂecting the important legal consequences of concluding such an agreement and the need for speciﬁcity and exactness as to its terms and conditions. However, the requirement has been reduced or diluted considerably by lowering the criteria of what constitutes an agreement in writing.6 Article II(2) of the Convention deﬁnes writing as follows: The term “agreement in writing” shall include an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams. 6

Argentina Act Art. 740 provides: Under sanction of nullity the terms of reference must state the following: 1. Date of conclusion; name and domicile of the parties; 2. Name and domicile of the arbitrators except in the case contemplated in Article 743; 3. Issues submitted to arbitration including a description of the circumstances involved; 4. Penalty payable to the other party by the party ﬁling to carry out actions indispensable to effectiveness (para la realización) of the terms of reference.

and Art. 744 provides: 1. Once agreement is reached on the terms of reference, they shall be communicated to the arbitrators for the acceptance of their appointment before the clerk of the court under oath or promise of loyal and faithful fulﬁllment of their functions. 2. If any arbitrator renounces his appointment or accepts the challenge of his designation or becomes incapacitated or dies, he shall be replaced as provided for in the terms of reference. If nothing has been foreseen therein for this purpose, the new appointment shall be made by the judge.

(National Code of Civil and Commercial Procedure Law 17.454 of September 19 1967, as reformed by Law 22.434 of March 16 1981, text consolidated according to Decree 1.042 of 1981 as reported in JAN PAULSSON (ED), INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION, (Kluwer Law International 1984 Last updated: January 1985 Supplement No. 3) pp. 3–7 by Prof. Horacio A. Grigeria Naón in Argentina Procedural Law Covering Arbitration, in INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION (Supp. 11, Jan. 1990)). 46

ARBITRATION AGREEMENT AS THE BASIS OF JURISDICTION

The ﬂexibility in what constitutes a sufﬁcient writing may in some instances create a gray zone. There may be the necessary element of “writing” as such, but the agreement in writing may be in a document a party only refers to or behind a series of references (e.g., a reference to an invitation to offer), which in turn refers to general conditions containing an arbitration clause. Is this an agreement in writing—and is there an acceptance? There are also instances where an exchange of letters or other communications makes reference of a number of jurisdictions or arbitration clauses, thus allowing “cherry picking.” Which one of those references prevails?7 Should we try to establish a hierarchy, or is it simply a chronological exercise with the latest superseding any and all prior communications? What if the communications between the parties relate to a number of relatively independent transactions under a major framework agreement or general umbrella of collaboration, and some communications refer to arbitration clauses while others do not? Are they all covered by the umbrella, and if not, which ones are under the umbrella and which are not? There may be no simple answers.8 However, clearly the sequence of communications should establish not only the agreement in writing somewhere in the documentation or a reference to such an agreement in writing, but also such facts as may be deemed to establish acceptance of or at least constructive knowledge about the clause.9 7

UNIDROIT Art. 2.1.20: (1) No term contained in standard terms which is of such a character that the other party could not reasonably have expected it, is effective unless it has been expressly accepted by that party. (2) In determining whether a term is of such a character regard shall be had to its content, language and presentation.

UNIDROIT Art. 2.1.22: Where both parties use standard terms and reach agreement except on those terms, a contract is concluded on the basis of the agreed terms and of any standard terms which are common in substance unless one party clearly indicates in advance, or later and without undue delay informs the other party, that it does not intend to be bound by such a contract. 8

Derains and Schwartz write: Of course, even the question of whether an ICC arbitration agreement exists between all of the parties to an arbitration may give rise to contested, and possibly complex, issues of fact or law. For this reason, the Court’s only mandate under Article 7 (and Article 8.3) was to make a “prima facie” decision, which was, moreover, not intended to be deﬁnitive insofar as the parties preserved the right to submit the issue of the arbitration agreement’s existence to the courts (or to the arbitrators, if the Court decided that the arbitration should proceed). Depending on how it applied this prima facie test, the Court was nevertheless in a position to prevent an ICC arbitration from proceeding, at least until such time as a competent court might decide otherwise.

9

YVES DERAINS & ERIC SCHWARTZ, A GUIDE TO THE NEW ICC RULES OF ARBITRATION 81(1998). UNIDROIT Art. 2.1.6: (1) A statement made by or other conduct of the offeree indicating assent to an offer is an acceptance. Silence or inactivity does not in itself amount to acceptance. (2) An acceptance of an offer becomes effective when the indication of assent reaches the offeror. (3) However, if, by virtue of the offer or as a result of practices which the parties have established between themselves or of usage, the offeree may indicate assent by performing an act without notice to the offeror, the acceptance is effective when the act is performed.

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UNCITRAL Article 7 provides: (1) “Arbitration agreement” is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a deﬁned legal relationship, whether contractual or not. An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. (2) The arbitration agreement shall be in writing. An agreement is in writing if it is contained in a document signed by the parties or in an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement, or in an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by another. The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement provided that the contract is in writing and the reference is such as to make that clause part of the contract. (emphasis added)

The requirement of written form applies to the original agreement, but the original agreement may be subsequently modiﬁed by agreement of the parties prior to or during the proceedings by express agreement or conduct, or by way of waiver. The agreement may be a “moveable” thing subject to various changes. This applies in particular to agreements made during the arbitral proceedings by waiver, express stipulations, or conduct of the parties. Agreements concerning amendment of the original agreement, further agreements on speciﬁc procedural issues, or generic rules or principles to be applied in the arbitral proceedings may well be valid and enforceable failing an agreement in writing in the traditional sense. When the parties conclude such additional agreements prior to or during the arbitral tribunals, the question of whether they are modiﬁcations of the original agreement or new independent agreements is a matter of interpretation. A presumption in favor of modiﬁcation rather than a new agreement may more often be appropriate and justiﬁed. Often such additional agreements are recorded in the minutes of meetings or records of a hearing, terms of reference, correspondence, procedural orders of the panel, or other such corresponding documentation generated by or in the arbitral proceedings by the panel, secretary, or parties. In addition, a failure to object by a party may constitute an acceptance via passivity so as to allow the conclusion that an arbitration agreement between the parties has been reached.10 This leads to two issues that are matters of interpretation within the panel’s own jurisdiction: when is a party under a duty to deny a referred-to arbitration agreement, and when is a reference of such a character as to lead to the formation of a clause.11

3.2.2 Competence to Determine Competence In a prima facie analysis, an arbitral institution or the panel itself attempts to draw a preliminary conclusion as to the existence or nonexistence of an arbitration agreement and its terms and conditions to the extent necessary in relation to the issue of 10 11

48

Arbitration Act of England 1996 § 5(5) (see Appendices, p. 257). Id. § 30 (see Appendices, pp. 267–68). ARBITRATION AGREEMENT AS THE BASIS OF JURISDICTION

jurisdiction. The ﬁnal decision regarding jurisdiction (competence) is made by the tribunal. A prima facie analysis establishes a contingent jurisdiction in the panel to decide on its own jurisdiction (“competence de competence”).12 UNCITRAL Model Law Article 16 addresses the issue of “competence de competence”: (1) 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 which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause. (2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence. A party is not precluded from raising such a plea by the fact that he has appointed, or participated in the appointment of, an arbitrator. A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings. The arbitral tribunal may, in either case, admit a later plea if it considers the delay justiﬁed. (3) The arbitral tribunal may rule on a plea referred to in paragraph (2) of this article either as a preliminary question or in an award on the merits. If the arbitral tribunal rules as a preliminary question that it has jurisdiction, any party may request, within thirty days after having received notice of that ruling, the court speciﬁed in article 6 to decide the matter, which decision shall be subject to no appeal; while such a request is pending, the arbitral tribunal may continue the arbitral proceedings and make an award.

As noted above, although usually the panel will consider any jurisdiction question at the outset, it may wait until it has heard all matters and make its decision in connection with the ﬁnal award. Swiss Rules Article 21 (4) provide: In general, the arbitral tribunal should rule on a plea concerning its jurisdiction as a preliminary question. However, the arbitral tribunal may proceed with the arbitration and rule on such a plea in its ﬁnal award.

If the prima facie analysis does not lead to the establishment of an arbitration agreement and the action is dismissed, the parties may take action to have a court of law resolve the dispute.13 Alternatively, a party may consider ﬁling an action for declaratory relief in a court of law seeking conﬁrmation that there is an enforceable arbitration agreement. In some instances when the panel’s decision to decline arbitration seems clearly erroneous, an interim or temporary order to compel arbitration may be obtained. Even if the prima facie analysis leads to the conclusion that there “appears to be” an arbitration agreement in place, this preliminary conclusion by an institution, court, or the panel itself is not ﬁnal and binding. It may still be challenged in the arbitration by

12 13

E.g., ICC Rules Art. 6(4) (see Appendices, p. 406). Stefan Kröll, Recourse against Negative Decisions on Jurisdiction, 20 ARB. INT’L (2004).

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the parties even when the preliminary conclusion has been made by the panel itself. However, an objection to jurisdiction may have to be raised without undue delay to avoid the risk of a loss of the right or waiver.14 For example, Swiss Rules Article 21 (3) provides: As a rule, a plea that the arbitral tribunal does not have jurisdiction shall be raised in the Answer to the Notice of Arbitration, but in no event later than in the Statement of Defence referred to in Article 19, or, with respect to a counterclaim, in the reply to the counterclaim.

If the arbitral panel assumes jurisdiction, a party still has the right to challenge its decision in any proceedings aimed at setting the award aside or defending against its enforcement.15 Thus in absence of any waiver, the decision on assumption of jurisdiction by the panel is seldom ﬁnal. If the prima facie analysis indicates that there is sufﬁcient support for the existence of an arbitration agreement, the parties may accept this conclusion expressly or implicitly. In such an event the prima facie analysis becomes binding and can no longer be challenged. This may well be the most rational way for the parties to act even when there are serious doubts as to the justiﬁcation of the preliminary decision assuming jurisdiction or even when there is a certainty that the conclusion was erroneous. If the prima facie conclusion in favor of arbitration is challenged, in the worst case scenario this may lead to: (i) continuation of the arbitration proceedings at full intensity and undiminished force despite the reservation, objection, or protest ﬁled or made in the arbitral proceedings. The arbitration may require major efforts and may take months if not years to complete, (ii) simultaneous parallel litigation may have to be initiated in State courts for declaratory relief, protective measures, refusal to enforce the award, or to set it aside altogether. These proceedings may take years to complete. (iii) If the action in (ii) is successful, both a full-scale “double” litigation in courts of law will follow in the main dispute (already heard and perhaps decided in arbitration) and an action to recover the fees and costs incurred in the arbitration proceedings may have to be initiated. These proceedings may again take years to complete. The applicable laws may provide for more effective measures, and there may be better alternatives to challenge the jurisdiction than the nightmare scenario above. However, the scenario partly explains why the waiver doctrine is so well-established in many arbitration laws and in arbitration practice. The doctrine deserves full support by the legal community provided that the quality of arbitral proceedings is secured and due process safeguards are fully in place. From the party’s perspective, unless it wants

14 15

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Arbitration Act of England 1996 § 31 (see Appendices, p. 268). Arbitration Act of England 1996 § 32 (1–4) and 67 (see Appendices, pp. 268–69 and 283). ARBITRATION AGREEMENT AS THE BASIS OF JURISDICTION

such an outcome, the strength of the waiver doctrine requires it to take ﬁrm action to eliminate the risk its acts or omissions may constitute a waiver.

3.2.3 The Validity of the Agreement Even though it is established that an arbitration agreement exists, its validity may be challenged. If existence is not established, challenging validity becomes trickier, as in order for something to be challenged, its existence must be presumed. A party may simultaneously challenge validity, and seek clarity on the issue via a declaratory action along the lines of “should these facts be deemed to constitute an arbitration agreement, the claimant prays it be declared invalid or null”. Article II(3) of the Convention provides: The court of a Contracting State, when seized of an . . . , shall, . . . refer the parties to arbitration, unless it ﬁnds that the said agreement is null and void, inoperative or incapable of being performed.

Prior to the initiation of arbitral proceedings, a court may ﬁnd the arbitration agreement is null and void or unenforceable. A ruling may be based on “pathological” reasons (i.e., the arbitration clause has been drafted in a manner that renders it inoperative or incapable of being performed, or the clause indicates an appointing authority that has ceased to exist or never existed). These issues may be resolved by way of interpretation. If a court ﬁnds an arbitration agreement to be null and void or unenforceable, it will not dismiss the case and will refuse to refer the parties to arbitration. The arbitral panel may also hear and try claims regarding invalidity or nullity.16 Determining the validity of the arbitration agreement and that of the underlying agreement lies within the scope of the panel’s jurisdiction. Swiss Rules Article 21(1) and (2) provide: 1. The arbitral tribunal shall have the power to rule on objections that it has no jurisdiction, including any objections with respect to the existence or validity of the arbitration clause or of the separate arbitration agreement. 2. The arbitral tribunal shall have the power to determine the existence or the validity of the contract of which an arbitration clause forms a part. For the purposes of

16

Holtzmann, supra note 1, at 27 reports on the United States: Under federal and most state laws in the United States, the only basis for a party to contest the jurisdiction of an arbitrator is if the party denies the existence or validity of an agreement to arbitrate (FAA Sect.4; UAA Sect.2). If such a challenge is made only to the arbitrator, it will usually be decided by the arbitrator, although the ultimate power to decide the issue is in the court. Courts usually will consider the decision of the arbitrators only after the arbitration is concluded and an award has been rendered (see Chap. VI.2 below). The question whether a particular dispute is subject to arbitration is itself arbitrable. Therefore, arbitrators have the power to rule on their own competence or jurisdiction to decide certain issues before them under the agreement of the parties. If, however, competence is challenged on the grounds that no valid agreement to arbitrate exists, the issue is one for judicial resolution, typically in a court proceeding to prevent the arbitration, known as a “motion to stay”.

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Article 21, an arbitration clause which forms part of a contract and which provides for arbitration under these Rules shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.

If the arbitral tribunal has been properly constituted and is exercising its jurisdiction, it is fully “operative” and the arbitration agreement is obviously “capable of being performed”. The decision of the arbitral tribunal holding that the arbitration agreement is invalid or void will lead to the closing of the proceedings. The decision may be challenged and the issue may be retried in the courts. Depending on applicable arbitration laws, a decision holding the arbitration agreement valid and enforceable may be challenged during the proceedings or in enforcement proceedings after the rendering of the award as provided in Article V of the Convention.

3.3 ON INTERPRETATION OF THE ARBITRATION AGREEMENT 3.3.1 Methods of Interpretation Interpretation of the arbitration agreement refers to giving meaning to the wording of the arbitration agreement and trying to construct the intent of the parties that has led to the written agreement. At ﬁrst this seems to be more of a factual exercise than a legal problem. However, contract interpretation is always done in a legal context with legal norms guiding the interpretation. There is also a body of case law concerning interpretation of agreements. From a legal point of view, the law concerning interpreting arbitration contracts is even harder to place in legal categories and branches of jurisprudence than arbitration itself. The law of arbitration in a way crosses over the division between contract law and procedural law. Arbitration is based on contract, but traditionally the problems of interpretation often better ﬁt the concepts and models of procedural law. At least the questions agreed on are procedural, and thus the content of the agreements is also mainly procedural. However, interpretation of an arbitral agreement is a problem that at least at ﬁrst sight seems to a have a closer connection with contract law. From the branches of law point of view, it would probably be good to describe arbitration agreement interpretation as a contract law problem in a dispute resolution context. Arbitration agreements as agreements on procedural rules are as such agreements sui generis and the problems that arise are not fully comparable to issues of interpretation of other commercial agreements.17 The procedural context is visible in many ways. First, in many cases the problems are procedural. The primary question is whether the tribunal has jurisdiction, which of course is a procedural one. For example, questions of the scope of the agreement and exclusivity are thus in the end questions of jurisdiction. Second, when speciﬁc features

17

UNIDROIT Principles of Interpretation may be applied in addition to national rules of interpretation.

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of the procedure are concerned, the standard practices as well as criteria of what can be constructed as intent of the parties comes from procedural law. An arbitration agreement is often expressly or implicitly meant to exclude the application of rules relating to proceedings before State courts, but not to exclude general procedural principles and their application. In addition, due process principles are part of the body of law that concerns interpretation of the arbitration agreement. Their main relevance in relation to interpretation of the agreement is to control the limitation of access to courts as well as the quality and fairness of the procedure. Some arbitration-speciﬁc principles of interpretation have been developed. For example, there is discussion whether the approach to problems concerning the scope of the agreement or its exclusivity should be pro-arbitration or not. The waiver doctrine in arbitration could probably be be placed under the umbrella of arbitrationspeciﬁc law. As to the scope of the agreements in interpretation, the approach to arbitration agreements has changed during the past century.18 At the beginning, the theory supported a narrow construction as arbitration was regarded as a somewhat “radical” exception to normal proceedings, “ousting” the courts of their jurisdiction and power. Then the trend changed largely in favor of arbitration, but moving recently perhaps towards “neutrality” with some variety in national laws.19 This seems particularly motivated by international agreements. The importance of drafting a “tailor-made” arbitration agreement in an individual transaction or dispute (considering the time and interests at stake) has not been reduced.20 The trend seems to be toward an 18

Holtzmann, supra note 1, at 1 reports: The law in the United States has long and strongly favored recognition of agreements to arbitrate and enforcement of arbitral awards, both in domestic and international commerce. As early as 1855, the United States Supreme Court held that arbitration “as a mode of settling disputes should receive every encouragement from the courts.” (Burchell v. Marsh, 58 U.S. 344.)

19

Samuel writes: In the US, there was for a while a strong presumption in favour of ﬁnding that disputes were subject to arbitration. This had to be sat on ﬁrmly by the same US Supreme Court (albeit differently composed) that had played a part in propounding the doctrine in the ﬁrst place. The English courts had in the meantime expressly rejected this approach. In Ashville, May LJ made it clear that the judges had to construe arbitral agreements neutrally. In Switzerland, the Tribunal fédéral previously expressed strong pro-arbitration bias in its approach to jurisdictional issues in the Westinghouse case. In that case, the court declined to review the arbitrator’s ﬁndings of fact on which he had based his decision on jurisdiction. In this, court went far too far. In the hands of arbitrators of much less integrity than Claude Reymond, this could be perceived as an invitation to manipulate ﬁndings of fact to bind a party to an arbitration to which he had never agreed.

20

Adam Samuel, Fomento—A Tale of “Litispendance”, in ARBITRATION AND PRIVATE INTERNATIONAL LAW (2004). See the Second Circuit’s approach in JLM Industries, Inc. v. Stolt-Nielsen SA, 387 F.3d 163 (2d Cir 2004). See PAUL D. FRIEDLAND, ARBITRATION CLAUSES FOR INTERNATIONAL CONTRACTS (2000); JAN PAULSSON ET AL. THE FRESHFIELDS GUIDE TO ARBITRATION AND ADR, CLAUSES IN INTERNATIONAL CONTRACTS (2nd rev. ed. 1999). GARY B. BORN, INTERNATIONAL ARBITRATION AND FORUM SELECTION AGREEMENTS, PLANNING DRAFTING AND ENFORCING (1999).

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“all-catching” interpretation of arbitration clauses supported on the one hand by these issues in most cases being decided by the arbitral tribunal itself and on the other by the waiver doctrine. In particular, the waiver doctrine may be stretched to cover many situations if no decisive action is taken without undue delay by the party objecting to the panel’s assumption of jurisdiction or any other act or omission. A comparable approach also seems to have been adopted in terms of exclusivity. The question is whether arbitration agreements should be interpreted to establish exclusivity even in the absence of an express statement. In light of Article II of the Convention, this interpretation would seem sufﬁciently motivated, and the failure to insert the word exclusive should not be fatal. In any case, the word exclusive is considerably less necessary than the phrase “to the exclusion of conﬂict rules (private international law)” is in choice-of-law clauses as a safeguard against the application of conﬂict rules.21 The trend in interpreting arbitration agreements or clauses as to their scope has been toward a wide interpretation in line with the trend in favor of the arbitrability of issues. These “pro-arbitration” trends cover matters (i.e., issues) that in concreto have been submitted to arbitration under an arbitration agreement and matters that in abstracto may be so submitted. Another issue is the reach and applicability of an arbitration agreement to parties who are not in a strict sense parties thereto (i.e., when there is no privity of contract). This issue may be approached from another angle by asking who has the right to participate, intervene, or join in arbitral proceedings. In general, third parties have no such rights, and privity of contract forms a condition precedent to a person’s right to participate in the proceedings in any capacity.22 In addition, the conﬁdential nature of arbitration excludes even the presence of third parties from the proceedings without the consent of the parties.23 In a multi-party arbitration agreement, a party to the agreement has the right to participate and be present unless otherwise agreed, even when no claims have been made against or by that party. However, there may be situations where sufﬁcient grounds exist that the panel may by a procedural order limit a party’s right to be present if he is neither a defendant nor claimant in the proceedings if other parties to the dispute unanimously make the request. This may relate to trade secrets or other such matters of conﬁdential nature.24

21

Japan Act § 36(1): The arbitral tribunal shall decide the dispute in accordance with such rules of law as are agreed by the parties as applicable to the substance of the dispute. In such case, any designation of the law or legal system of a given State shall be construed, unless otherwise expressed, as directly referring to the substantive law of that State and not to its conﬂict of laws rules.

24

Japan Act, supra note 4. ICC Rules Art. 21(3) (see Appendices, p. 412). This rule deals primarily with the issue as to privacy of the hearings but reﬂects the same principles. Compare, however, with Swiss Rules Art. 4(2) that provides more ﬂexibility. Id. at Art, 20(7) and IBA Rules Art. 9(4) and (5) (IBA Rules on Taking of Evidence in International Commercial Arbitration). ICC Rules Art. 20 (7).

54

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22

23

We have to remember that the arbitration-speciﬁc principles discussed above (principle of wide scope and exclusivity of the arbitration agreement) are not normative principles such as due process or many principles of contract and procedural law. Principles of exclusivity and wide scope of the agreement are rather descriptive generalizations of what the result of interpretation with support of normative principles could be like. This means that an interpretation cannot be justiﬁed by them alone, although their institutional support can be used as an argument for an interpretation. For example, even though there are many good arguments for interpretations of wide scope and exclusivity, by themselves they are in a way empty arguments. In most of the cases, the access to justice argument is prima facie the most important argument in interpretation concerning dispute resolution mechanisms, or the scope or exclusivity of the agreement. Opposite to what is often presumed, the access to justice argument does not necessarily work towards restricting arbitration, as it might just be the other way around. Sometimes arbitration might in fact be the most efﬁcient guarantee of access to justice in the case at hand. This has to be decided taking the case-speciﬁc features into consideration. The next chapters deal with various typical problems related to interpretation of arbitration agreements and jurisdiction of the tribunal based on the agreement.

3.3.2 Assignment and Transfer What if a party to the underlying agreement assigns the agreement as a whole to a new party and this assignment is accepted by his contractual party, will the new party (assignee) be bound by the arbitration agreement as well (i.e., may it invoke the arbitration clause, and does it have to submit to the jurisdiction of the arbitral panel if a claim is ﬁled against it in arbitration)? What if the assignment is not accepted by the other contractual party? What if the assignment is not only accepted, but the assignor is also released from contractual liability? What if the assignment covers certain rights only, but not the agreement as a whole? Under the prevailing doctrine, an arbitration agreement is legally separate and independent from the underlying agreement.25 The strict, formal, and consistent application of this doctrine might lead to imposing a requirement of a separate assignment of the arbitration agreement as well. In many cases, this would be absurd. An arbitration agreement, although separate and independent, is ancillary in the sense that its assignment separately from the underlying agreement would have no substance or meaning. Assignment of an arbitration clause without the underlying agreement would be pure nonsense. Thus, the question is: does the assignment of an agreement or rights thereunder presumably also cover the arbitration agreement therein? No doubt this is an issue of interpretation if there is no legal presumption in the applicable law. The interpretation should rather be in favor of the assignment covering the arbitration agreement 25

UNCITRAL Model Law Art. 16(1) (see Appendices, p. 490) (United Nations Commission on International Trade Law (UNCITRAL) UNCITRAL Model Law on International Commercial Arbitration UN Resolution on the UNCITRAL Model Law, Dec. 18, 2006). See also UNIDROIT Art. 3.17.

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too, if the agreements are silent, at least in the absence of any indication to the contrary. Such a presumption may be stronger (1) if the arbitration clause is in the same document, (2) if the whole underlying agreement is assigned and not just some contractual rights (e.g., receivables) and (3) if the assignment amounts to a release of the assignor from the underlying agreement.26 An assignment de facto may also take place, in which case there is no acceptance or release by the other party, and the de facto assignee becomes a party under the agreement only factually or via the assignor. All action he takes, he needs to do formally in the name of the assignor, but at the assignee’s account and risk. Such assignments are often in use when the assignment would require consent by a contractual party or a third party, but such consent may not be easily acquired if at all.

3.3.3 Time Limit for the Award The applicable arbitration act may impose a time limit for rendering the award.27 Also, sometimes parties set a period of time in the arbitration agreement within which the 26

Nane Oganesyan, Law Firms Again Admitted before the Russian Arbitrazh Courts to Enforce Arbitral Awards, IBA NEWSLETTER: ARB. AND ADR 80 (International Bar Association Section on Business Law), Oct. 2004: Importantly, the proceedings in this matter also add to the controversial issue of transfer of an arbitration clause in case of assignment of the contract. The very fact that the Supreme Court did not rule on the substantive issues (which were addressed by both parties in their pleadings) indicated that it did not ﬁnd anything manifestly wrong in the lower court’s ﬁnding that the arbitration clause did not necessarily pass upon the assignee in a case where the remaining party did not give a consent to such an assignment. Prior jurisprudence shows that this forum is reluctant to give attention to side issues, even where they do not govern the ultimate decision.

27

Italy Act Art. 820 provides: The parties may, in the arbitration agreement or by agreement preceding the acceptance of the arbitrators, establish a time limit for the rendering of the award. Unless a time limit has been established for the rendering of the award, the arbitrators must render the award within two hundred and forty days from the acceptance of the appointment. In any case the time limit may be extended: (a) by means of written declarations by all parties addressed to the arbitrators; (b) by the president of the tribunal indicated in Article 810, paragraph 2, upon reasoned request by one of the parties or the arbitrators, after having heard the other parties; the time limit may be extended only prior to its expiry.

Unless the parties have provided otherwise, the time limit shall be extended by one hundred and eighty days in the following cases and for not more than once in each such case: (a) if evidence must be taken; (b) if expert advice is required ex ofﬁcio; (c) if an interim award or a partial award is rendered; (d) if the composition of the arbitral panel is changed or the sole arbitrator is replaced.

The time limit for the rendering of the award shall be suspended during the suspension of the proceedings. In any case, after the resumption of the proceedings the residual time limit, if shorter, shall be extended to ninety days. Code of Civil Procedure, Book Four, Title VIII, Arbitration, Amended by Legislative Decree of 2 February 2006, No. 40 as reported in JAN PAULSSON (ED), INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION, (Kluwer Law International 1984 Last updated: April 2007 Supplement No. 49). 56

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arbitral panel must render an award. Institutional rules often provide for similar deadlines although the period is perhaps automatically or semiautomatically extended in practice if the award has not been given within the period originally agreed upon or set.28 What are the consequences if the award has not been given within the period of time agreed to or provided for by the applicable rules?29 An arbitration agreement is a “mandate” given by the parties to the panel to settle the dispute in lieu of State courts. If a time limit has been expressly agreed upon or if such a limit is imposed by the rules incorporated into the agreement by reference, the mandate expires on the given deadline unless the parties have agreed or otherwise indicated that the deadline is a mere legally meaningless wish.30 Although perhaps motivated by good intentions, such an interpretation in the absence of unambiguous support would be radical as it would be contrary to general rules of interpretation of contract, which is based on a literal interpretation and on the presumption that contract clauses have a meaning and purpose and are not just “small talk” in writing.31 Finally, the parties may of course extend the deadline

28

AAA Rules 39 and 41 (see Appendices, p. 240) American Arbitration Association, Commercial Arbitration Rules and Mediation Procedures (Including Procedures for Large, Complex Commercial Disputes), as Amended and Effective on June 1, 2009); Arbitration Act of England 1996 § 50 (see Appendices, p. 277); See also ICC Rules Art. 24 (see Appendices, p. 413). Argentina Act, supra note 6, Art. 755 provides: 1. If the parties have not ﬁxed the term within the award is to be made, it shall be ﬁxed by the judge according to the circumstances of the case. 2. The term for issuing the award shall be continuous and shall only be interrupted when replacement of arbitrators is required. 3. If any of the parties dies, the term shall be extended for thirty days. 4. At the request of the arbitral tribunal, the judge can extend the term for rendering the award if the arbitrators are not responsible for the delay.

29

Italy Act, supra note 27, Art. 829 provides: Notwithstanding any prior waiver, a recourse for nullity may be ﬁled in the following cases:. . . (4) if the award exceeds the limits of the arbitration agreement, without prejudice to the provision of Article 817…; ... (6) if the award has been rendered after the expiry of the prescribed time limit, subject to the provision of Article 821.

30

France Act Art. 1456: If no time limit is ﬁxed in the arbitration agreement for the arbitrators’ mission it shall be six months from the day on which the last arbitrator accepts his mission. The statutory or contractual time limit for the arbitrators’ mission may be extended at the request of a party or of the arbitral tribunal by the President of the Tribunal de Grande Instance, or, in the case envisaged by Art. 1444.2, of the Tribunal de Commerce. (French Code of Civil Procedure—Book IV—Arbitration as reported in JAN PAULSSON (ED), INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION, (Kluwer Law International 1984 Last updated: February 1998 Supplement No. 26) pp. 26–12).

Argentina Act, supra note 6, Art. 756: Arbitrators who without justiﬁcation do not render their award within the stated term will lose all right to their fees and will be, furthermore, held liable for costs and damages. 31

UNIDROIT Art. 4.5:

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57

at their convenience but no one else can do it on their behalf unless this power is vested in a court of law or in an institution by the applicable rules.32 Should the deadline have passed without any award being rendered, certain issues need to be resolved. One is who bears responsibility for the failure, the costs and expenses incurred by the parties, and the arbitral panel’s fees and costs. This is an issue of liability. The reason for the failure may have been due to the parties, the arbitrator, or reasons beyond the parties’ or the arbitrator’s control (e.g., illness), and thus a sort of force majeure. Depending on the applicable rules, the arbitral panel may before the deadline (but perhaps no longer after the deadline) render a decision or award as to the costs and fees and who is liable for them when it becomes obvious that no award in the main difference can be given before the deadline passes and no extension is obtained. If the deadline has passed, another important material issue may arise. May the parties submit the disputes to courts of law, or was the deadline also a substantive statute of limitations barring any action on the dispute in the future, and thus amounting to a ﬁnal loss of rights?

3.3.4 Time Limit in the Arbitration Clause as a Statute of Limitation Does the failure to render an award within the agreed period of time provided for in the arbitration agreement function as a substantive statute of limitation barring any further action in any other court, or just a closing of the entry to arbitration leaving the parties with their ordinary rights and venues? If the arbitral proceedings were started within the period of time stipulated but not completed prior to its expiration, and if no award was given within the time limit, the initiation of the proceedings interrupts the running of the substantive statute of limitation.33 However, the mandate to arbitrate has been Contract terms shall be interpreted so as to give effect to all the terms rather than deprive some of them of effect. 32

Italy Act, supra note 27, Art. 821 provides for a waiver: The expiry of the time limit indicated in the preceding article may not be relied on as a ground for the nullity of the award if the party, before the deliberation of the award as evidenced by the decision (dispositivo) signed by the majority of the arbitrators, has failed to notify the other parties and the arbitrators of its intention to rely on the termination of the arbitrators’ authority

33

UNIDROIT Art. 10.6: (1) The running of the limitation period is suspended when the obligee performs any act, by commencing arbitral proceedings or in arbitral proceedings already instituted, that is recognised by the law of the arbitral tribunal as asserting the obligee’s right against the obligor. In the absence of regulations for arbitral proceedings or provisions determining the exact date of the commencement of arbitral proceedings, the proceedings are deemed to commence on the date on which a request that the right in dispute should be adjudicated reaches the obligor. (2) Suspension lasts until a binding decision has been issued or until the proceedings have been otherwise terminated.

The same applies to ADR, UNIDROIT Art. 10.7:

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exhausted, and new arbitral proceedings cannot be commenced except by agreement of all the parties. In this case, the parties must be presumed to have the right to bring the action before courts of law. Does the failure to initiate arbitration proceedings or to ﬁle claims in arbitration within the time provided have similar substantive effects? In addition, does a limitation period in an arbitration clause also constitute an implicit substantive statute of limitations? Under Article II(3) of the Convention, this seems to be the case as it provides a court “shall, at the request of one of the parties, refer the parties to arbitration” and hence dismiss the action. This article does not directly address the issue as to when the action is brought, but its obvious purpose is to cover any and all actions brought within the scope of the arbitration agreement. If the time for bringing action under the arbitration agreement has expired, the arbitration agreement seems to operate as a statute of limitations as well, although not expressly drafted as such. However, should an action be brought in a court of law within the time agreed or thereafter, but none of the parties raises the jurisdictional objection, this may constitute a waiver of the right to arbitration and perhaps also a waiver of the right to invoke prescription depending on the party’s pleadings and the applicable law.34 In some circumstances, a party may have the right to ﬁle an action in State courts despite an enforceable arbitration agreement under the applicable arbitration law or on the grounds of cancellation of the arbitration agreement because of breach thereof by another party.35 In the absence of clear rules to this effect, the issue seems to be one of interpretation. May a rebuttable presumption be made imposing on one or the other party the burden of proof of a contrary intention or purpose? In the light of arbitration practice, a presumption in favor of an implicit material statute of limitation seems justiﬁed at least in international commercial disputes. How much weight, if any, does the word exclusive bring to the interpretation? Does the exclusivity relate to the period of validity of the mandate for arbitration only, or is it a statute of limitations clause providing: “no later and in no other venue”? The word exclusive may create a presumption in favor of a substantive time bar indicating the purpose “here but nowhere else,” thereby shifting the burden of proof of another intention or purpose to the party advocating for another interpretation. However, this rule is not written in stone. For instance, it would seem to lose most of its persuasiveness if the exclusivity is one-sided as it is in many jurisdiction clauses of ﬁnancial and banking agreements. If the draftsmen left the issue open or could not agree on “the time bar effects”, the issue is one of interpretation.

The provisions of Articles 10.5 and 10.6 apply with appropriate modiﬁcations to other proceedings whereby the parties request a third person to assist them in their attempt to reach an amicable settlement of their dispute. 34 35

See Arbitration Act of England 1996 § 13(1–2) (see Appendices, p. 260). Finland Arbitration Act, § 6. This applies to repudiation, including failure to appoint an arbitrator or pay the security.

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3.3.5 Guarantor’s or Indemnitor’s Right to Invoke an Arbitration Agreement Many agreements or commitments are made only on the condition that the performance of a party is backed up by an undertaking of a third party as an additional security arrangement (guarantee). The guarantee or indemnity may cover all of the performance, a part of the performance, a speciﬁc obligation only, damages, repayment of monies or advances made, etc. For the sake of simplicity, the word guarantee is used to cover all types of these instruments and comparable security arrangements. The methods in which the security or guarantee functions and fulﬁls its purposes vary. It may be, for example: (i) a ﬁxed amount of money; (ii) an open amount of money (damages payable, remaining costs) generally with a “cap”; (iii) a speciﬁc performance (e.g., completing the works or causing them to be completed and/or ﬁnancing this regardless of what it may cost or with a cap (“bond”). The guarantee instrument may be, for example: a) b) c) d) e) f) g) h) i)

an indemnity agreement; a bank guarantee; a guarantee by a person or company; a commercial letter of credit (generally issued by a bank); a bond; an on-demand guarantee or standby letter of credit; a combination of a guarantee and a collateral; a collateral given as a security by a third party; an insurance.

These instruments, and the performance by the guarantor or indemnitor thereunder, are traditionally conditioned on certain things, but the terminology may vary in practice. The material terms and conditions may also vary considerably although the instruments have been issued as general guarantees or on-demand guarantees. The conditions or “the trigger” causing the guarantor’s obligation to mature are in general: (i) breach of an agreement or other corresponding failure by the principal debtor; and/or (ii) proof of damage or loss; and/or (iii) a court decision or an arbitral award; and/or (iv) a simple or a more motivated demand by the beneﬁciary of the instrument (i.e., the creditor).

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In the simplest form, a simple demand by the beneﬁciary is the only condition to trigger the payment obligation of a guarantor under an on-demand guarantee or a standby letter of credit. Should there be a dispute between the beneﬁciary and the guarantor (including or excluding the principal debtor), what are the rights of the parties to invoke the arbitration clause in the underlying agreement against the guarantor, or the rights of the guarantor against the other parties in the absence of an express agreement of the parties or express rules of the applicable law to the effect? If the guarantee instrument contains an arbitration or jurisdiction clause of its own, it may well be exclusive. Even in such an event the guarantor may acquire additional rights by way of subrogation from the principal debtor after the guarantor has performed under the guarantee instrument (and may thus, in theory, have two jurisdiction clauses to choose between). No doubt this is a question of interpretation. To what extent is it subject to ordinary rules of interpretation, or are there special features or aspects to be taken into account? Depending on the facts of the individual case, these may include the following: (i) the guarantee may be a unilateral undertaking (a letter of credit) or an agreement (an indemnity). Its bilateral or multilateral character may have an inﬂuence on the interpretation. (ii) if the guarantor has performed under the guarantee, the rights of the beneﬁciary (creditor) against the principal debtor are generally assigned to the guarantor by force of law or agreement (subrogation) for recovery from the principal debtor. The principal debtor may also have the right of recourse against the beneﬁciary for unfair calling of the guarantee or a counterclaim on another contractual ground. This could establish the right to the guarantor to invoke the arbitration clause in the underlying agreement. (iii) some guarantees are very closely related to or almost identical with the underlying agreement (providing for speciﬁc performance, bonds, etc.) whereas some are independent and separate thereof (letters of credit issued by banks). In the “independent” group, the interpretation in favor of extending the arbitration agreement to guarantors may not be as well-founded, whereas in the ﬁrst group it may be crystal clear. There is such a variety of instruments and conditions that general rules may be impossible to identify. There are, however, things in common to all these instruments. All the instruments are ancillary. Some are independent from, and some similar to or even identical with the obligation of the principal debtor. In the event of performance by the guarantor, the interpretation or analysis may change and the right to arbitrate may be less doubtful or even beyond doubt. If this is the case, should the situation prior to performance by the guarantor be treated any differently? In many cases, a presumption in favor of the guarantor’s right to invoke the arbitration clause seems well-motivated and rational. This applies, in particular, to situations where at least de facto involvement of all parties in the proceedings is necessary or de jure indispensable.

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3.4 UNCONSCIONABILITY OR UNREASONABILITY An arbitration agreement may be very one-sided. Sometimes this may be a natural consequence of the character of the underlying agreement or the probabilities as to which of the parties may need legal protection (e.g., licensing patented technology) and have no “reproachable” elements in it. The best example to demonstrate this justiﬁed one-sidedness comes from the ﬁnancial realm as in lending, as for the one who lends money almost any ordinary contractual right or remedy is necessary and reﬂects no elementary abuse or coercion.36 36

A sample clause used in the practice of law: (a) Any dispute, controversy or claim arising out of or relating to this Agreement, or the breach, termination or invalidity hereof, shall be settled by arbitration in accordance with the UNCITRAL Arbitration Rules as at present in force. There shall be one arbitrator and the appointing authority shall be the London Court of International Arbitration. The seat and place of arbitration shall be London, England and the English language shall be used throughout the arbitral proceedings. The parties hereby waive any rights under the Arbitration Act 1996 or otherwise to appeal any arbitration award to, or to seek determination of a preliminary point of law by, the court of England. The arbitral tribunal shall not be authorized to take or provide, and the Borrower agrees that it shall not seek from any judicial authority, any interim measures of protection or pre-award relief against the Bank, any provisions of UNCITRAL Arbitration Rules notwithstanding. The arbitral tribunal shall have authority to consider and include in any proceeding, decision or award any further dispute properly brought before it by the Bank (but no other party) insofar as such dispute arises out of any Financing Agreement, but, subject to the forgoing, no other parties or other disputes shall be included in, or consolidated with, the arbitral proceedings. In any arbitral proceeding, the certiﬁcate of the Bank as to any amount due to the Bank under any Financing Agreement shall be prima facie evidence of such amount. (b) Notwithstanding Section (a), this Agreement and the other Financing Agreements, and any rights of the Bank arising out of or relating to this Agreement or any other Financing Agreement, may, at the option of the Bank, be enforced by the Bank in the courts of the Russian Federation or in any other courts having jurisdiction. For the beneﬁt of the bank, the Borrower hereby irrevocably submits to the non-exclusive jurisdiction of the courts of England with respect to any dispute, controversy or claim arising out of or relating to this Agreement or any other Financing Agreement, or the breach, termination or invalidity hereof or thereof. The Borrower hereby irrevocably designates, appoints and empowers . . . to act as its authorised agent to receive service of process and any other legal summons in England for purposes of any legal action or proceeding brought by the Bank in respect of any Financing Agreement. The Borrower hereby irrevocably consents to the service of process or any other legal summons out of such courts by mailing copies thereof by registered airmail postage prepaid to its address speciﬁed herein. The Borrower covenants and agrees that, so long as it has any obligations under this Agreement, it shall maintain a duly appointed agent to receive service of process and any other legal summons in England for purposes of any legal action or proceeding brought by the Bank in respect of any Financing Agreement and shall keep the Bank advised of the identity and location of such agent. Nothing herein shall affect the right of the Bank to commence legal actions or proceedings against the Borrower in any manner authorised by the laws of any relevant jurisdiction. The commencement by the Bank of legal actions or proceedings in one or more jurisdictions shall not preclude the Bank from commencing legal actions or proceedings in any other jurisdiction, whether concurrently or not. The Borrower irrevocably waives any objection it may now or hereafter have on any grounds whatsoever to the laying of venue of any legal action or proceeding and any claim it

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However, there are instances where one-sidedness or other terms of conditions are unreasonably burdensome or amount to a de facto denial of justice.37 This hardship in the arbitration agreement may be due to the dominance of a party or its speciﬁc leverage resembling coercion.38 The element of unreasonableness may have existed already at the time the agreement was concluded or it may have arisen subsequently due to a change of circumstances in general or only as to one of the parties without his own fault. These equitable considerations may lead to an adjustment of the clause or even to its unenforceability. It may also be a factor in the interpretation even when not amounting to a ground for invalidity or unenforceability.39

may now or hereafter have that any such legal action or proceeding has been brought in an inconvenient forum. 37

Japan Act Supplementary provisions 3(2) and (4) provides: (2) A consumer may cancel a consumer arbitration agreement. Provided, this shall not apply in the event that the consumer is a claimant in arbitral proceedings based on the consumer arbitration agreement. ... (4) For the time being until otherwise enacted, any arbitration agreements concluded following the enforcement of this Law, the subject of which constitutes individual labor-related disputes (which means individual labor-related disputes as described in article 1 of the Law on Promoting the Resolution of Individual Labor Disputes [Law No.112 of 2001]) that may arise in the future, shall be null and void.

38

Japan Law, supra note 4. UNIDROIT Art. 3.10: (1) A party may avoid the contract or an individual term of it if, at the time of the conclusion of the contract, the contract or term unjustiﬁably gave the other party an excessive advantage. Regard is to be had, among other factors, to (a) the fact that the other party has taken unfair advantage of the ﬁrst party’s dependence, economic distress or urgent needs, or of its improvidence, ignorance, inexperience or lack of bargaining skill; and (b) the nature and purpose of the contract. (2) Upon the request of the party entitled to avoidance, a court may adapt the contract or term in order to make it accord with reasonable commercial standards of fair dealing. (3) A court may also adapt the contract or term upon the request of the party receiving notice of avoidance, provided that that party informs the other party of its request promptly after receiving such notice and before the other party has acted in reliance on it. The provisions of Article 3.13(2) apply accordingly.

UNIDROIT Art. 3.11: (1) Where fraud, threat, gross disparity or a party’s mistake is imputable to, or is known or ought to be known by, a third person for whose acts the other party is responsible, the contract may be avoided under the same conditions as if the behaviour or knowledge had been that of the party itself. (2) Where fraud, threat or gross disparity is imputable to a third person for whose acts the other party is not responsible, the contract may be avoided if that party knew or ought to have known of the fraud, threat or disparity, or has not at the time of avoidance acted in reliance on the contract. 39

Determination of the validity of the arbitration clause ultimately lies within the jurisdiction of the courts. However, the panel itself nonetheless decides even this issue as a “competence de competence” one at the ﬁrst stage, then allowing the proceedings to continue or dismissing the action altogether.

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63

The primary framework in which the problem of unfair arbitration agreements has to be judged is, of course, the question of access to justice. Access to justice might be hindered in many ways, including both economically or procedurally. If the arbitration agreement leads to a procedure so expensive that one of the parties cannot afford it, the party is denied access to justice. This has been discussed in practice as well. For example, an ICC tribunal relied expressly on Article 6(1) of the European Convention on Human Rights (ECHR) in holding that increasing one’s opponent’s arbitration costs was a reasonable limitation on the right of access to justice because it was possible for the party to litigate in State courts.40 However, the Supreme Court of Finland decided that when one of the parties had become insolvent and could not afford to get the case arbitrated, the arbitration agreement had become unreasonable. This was also due to the fact that the insolvent businessman could receive legal aid if the case were tried in court, but not in arbitration.41 What is interesting in the two cases from a legal argument point of view is that the Finnish Supreme Court approached the matter on the basis of national contract law and only used the procedural problem as a supporting argument or criterion in a contract law problem, whereas the ICC tribunal argued directly on the basis of human rights and access to justice. These differences show that the problems related to the cost of arbitration and access to justice are far from solved. To be clear, the problems related to cost of arbitration and access to justice can basically be discussed using three different terminologies: 1) Human rights and access to justice as due process principles also conﬁrmed in ECHR 6(1); 2) Contract law and the doctrines of supervening impossibility of performance and release on grounds of justice; and 3) Article II(3) of the Convention, which refers to an arbitration agreement incapable of being performed.42 The ultimate argument is clearly the procedural one, i.e. number one above. This perspective is probably most often the perspective of a State court deciding whether it has jurisdiction in the case and whether the negative jurisdictional effect of the arbitration agreement is hindering the proceedings. It might, of course, also be the perspective of an arbitral tribunal deciding on jurisdiction. In the latter case, contract law approaches or the relatively artiﬁcial Convention approach might more easily be applied. However, a party cannot be released from an arbitration agreement just by saying arbitration is too expensive. First, a party should not too easily free itself from the procedural agreements it has made, as they are basically binding. The party has to have something to support the argument that had it known the circumstances or had a realistic chance to act differently, the contract would not have been made. Second,

42

See GEORGIOS PETROCHILOS, PROCEDURAL LAW IN INTERNATIONAL ARBITRATION 126 (2004) and ICC 9667/1998 (2002), in Rev Arb 1009, 1015–16. Supreme Court of Finland decision [KKO 2003:60], see also PETROCHILOS, supra note 40, at 128. See PETROCHILOS, supra note 40, at 128.

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40 41

arbitration might not be the most expensive way to resolve the dispute of the parties. But in many cases, the problem in practice comes down to a question of resources, as the party with less may not be able to get the procedure started even if the case would be a clear winner. It might also be that the procedure is too onerous or the division of legal costs is such that substantive rights cannot be protected. Some additional criteria for the evaluation of unreasonableness of the contract could be given in addition to the access-to-justice argument. This circumstantial criterion could be seen as more contractual than procedural. In general, attention should be paid to the position of the parties of the contract and whether or not they are equal. Typically the parties are not in equal position if one is a major company and one is a consumer. Second, it might often be relevant whether the jurisdictional effect is based on an actual arbitration agreement or just an arbitration clause in a substantive contract. If arbitration is based on a clause, the agreement can more easily be found unreasonable. Third, the contract process might affect the evaluation. If the arbitration agreement is included in a standard contract and one of the parties has had no real chance to inﬂuence its content, this lends support for setting the arbitration clause aside. Clearly it is always important by whom the contract is formulated. The question of costs should be considered together with the circumstantial criteria described above. What is expensive is always relative. The costs of the expected arbitration should be compared with the usual costs of dispute resolution in the context in question. Naturally, if the alternative to arbitration is a State court, the cost of that court should be taken into consideration. We should also remember that in arbitration the award is ﬁnal so there are no costs of appeal. Arbitration has a reputation for being expensive, which is probably often true. Compared to the courts, in arbitration the costs of the judges and the infrastructure in a broader sense are allocated to the parties. However, courts are not cheap either. It varies from case to case whether a natural comparison is the cost of one round in state courts or whether one or more appeal procedures will likely be necessary. If the case is only about getting an enforceable decision, the natural comparison is to one trial only. But if the case is very unclear and the parties are motivated to see it through till the very end, a better comparison might be the costs of a ﬁnal decision in a single arbitration proceeding to possibly up to three rounds of trials and hearings in the courts. In addition, the easy enforceability of arbitral awards internationally may have value if the award needs to be enforceable in more than one country. In many cases, the higher cost of arbitration might be a myth. The arbitration agreement might be also unreasonable for other reasons unrelated to costs. For example, the procedures may be unreasonable due to an unfair selection of the panel43 or limitations on a party’s right to present his case.44 It might be that the procedure is not so unfair that it would violate minimum due process requirements on any single element, but seen as a whole may appear unbalanced or ineffective. In these cases it might be necessary to consider whether the arbitration agreement should be set aside on the basis of due process principles. 43 44

See, e.g., LARS HEUMAN, ARBITRATION LAW OF SWEDEN: PRACTICE AND PROCEDURE 114 (2003). See PETROCHILOS, supra note 40, at 127.

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Alternatively, an agreement does not necessarily need to be set aside completely to make it equitable as a partial change might be enough. For example, the process might be simpliﬁed to make it cheaper or the selection of the panel or procedure might be changed to make the arbitration more fair (and the agreement thus more equitable). This way the original intent to arbitrate or at least an acceptance of arbitration could be respected. However, whether modiﬁcation of the agreement is possible depends on the situation. If the question whether the arbitration agreement is sufﬁciently equitable to be binding arises when a jurisdictional determination is being made by a State court, the practical alternatives are either to accept jurisdiction due to problems in the arbitration agreement or to reject jurisdiction as a result of a binding arbitration agreement. Further possibilities exist if the problem comes up in arbitration or when enforcing the arbitration agreement. It should be clear that if the agreement is made equitable by tribunal due to the agreement originally being unreasonable or unfair, this cannot be considered as a breach of agreement by the tribunal. The tribunal of course has a duty to justify the decisions it makes in this respect.

3.5 THE ENFORCEABILITY OF AN ARBITRATION AGREEMENT AND DUE PROCESS 3.5.1 Agreement Deﬁning Due Process? The enforceability of an arbitration agreement as to its original contents, including its further modiﬁcations (in particular those made during the proceedings), is a very interesting issue.45 As an agreement, although perhaps sui generis, it is to be treated as any other contract with such exceptions as may be applicable due to its special character. We could question how many truly enforceable elements may exist apart from and beyond the jurisdictional effect. An answer is apparent in the light of the Convention in retrospect to Article V(1)(d): Recognition and enforcement of the award may be refused . . . proof that: . . . (d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties . . .

The key phrase here is “the arbitral procedure was not in accordance with the agreement”. The wording does not cover just the original agreement, but obviously all subsequent agreements including those made during the proceedings. Thus it seems that agreement of the parties on arbitral procedure or better respecting the agreement of the parties constitutes part of international due process. Even if no mechanical connection with due process and the agreement was made, clearly respect for the agreements 45

Most defaults relate to passivity of a party, and in general are dealt with in accordance with AAA Rule 29 (see Appendices, p. 237).

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of the parties is a key element in fairness of the procedure. Although it might sound strange for a traditional procedural law scholar, it is actually quite natural. Why should the parties not be able to stipulate on the procedure in general? After all, it is not a completely strange institution to court procedure. And if the parties are at least to a certain extent allowed to decide about the procedure, why should these agreements not be protected in general? Arbitral proceedings are based on the arbitration agreement forming the foundation and “the umbrella” under which the proceedings are conducted. In this sense, arbitral proceedings are contractual and all procedural acts and omissions of the parties and the arbitrators are contractual acts. Further, this would seem to mean that the arbitration agreement in itself must be enforceable in the arbitration. A breach or violation of the agreement on procedural matters may be committed by the other party to the agreement or by the arbitrators. But do all deviations from the agreement count? What are the criteria necessary to constitute an enforceable arbitration agreement? What are the sanctions if the parties’ agreement parties is not respected? Article V of the Convention provides that “the award may be refused” (emphasis added), which means the refusal is not automatic and requires action and proof. Is there discretion beyond this? Must the violation be material or signiﬁcant or of such a nature that it may have had an effect on the outcome? The Convention leaves the door open to many interpretations. As arbitration may be analyzed as a contractual performance (although perhaps somewhat sui generis as such), it is subject to contract principles. In order for a breach of the agreement to lead to refusal of enforceability, the breach should be material (i.e., there is a de minimis rule and insigniﬁcant deviations do not cause unenforceability). The right test of materiality might be whether the breach could have had an effect on the outcome rather than whether it actually did have an effect.46

46

Speciﬁc performance of a commercial agreement is limited by a number of considerations; UNIDROIT Art. 7.2.2: Where a party who owes an obligation other than one to pay money does not perform, the other party may require performance, unless— (a) performance is impossible in law or in fact; (b) performance or, where relevant, enforcement is unreasonably burdensome or expensive; (c) the party entitled to performance may reasonably obtain performance from another source; (d) performance is of an exclusively personal character; or (e) the party entitled to performance does not require performance within a reasonable time after it has, or ought to have, become aware of the non-performance.

If not available or claimed, other remedies are available. UNIDROIT Art. 7.2.5 provides: (1) An aggrieved party who has required performance of a non-monetary obligation and who has not received performance within a period ﬁxed or otherwise within a reasonable period of time may invoke any other remedy. (2) Where the decision of a court for performance of a non-monetary obligation cannot be enforced, the aggrieved party may invoke any other remedy.

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3.5.2 Good Faith of the Parties Theories have been launched that an arbitration agreement imposes a general obligations of good faith on both parties to collaborate to form an “ideal procedure”. There is also statutory support for this.47 In generic terms, this would mean that the parties are under a duty actively to take part in the proceedings in order to have the disputes settled expeditiously and cost effectively.48 Arbitration is based on a contract on procedure, and all contracts are subject to the duty of good faith.49 The duty should not be exaggerated, but it may apply at least to certain speciﬁc obligations even in the absence of rules to the effect. Swiss Rules Article 15(6) provides: All participants in the arbitral proceedings shall act in accordance with the requirements of good faith.

In reality, the party who feels insecure of his chances to prevail or knows that he is in breach of the underlying agreement and expects that the award will be against him is often not at all willing to contribute to the ideal procedure the parties perhaps contemplated before the disputes arose. In fact a party in breach may resort to various dilatory tactics and attempt to conceal the facts.50 47 48

Arbitration Act of England 1996 § 40 (see Appendices, p. 272). Id. § 41(3) (see Appendices, p. 272). UNIDROIT Art. 4.1: (1) A contract shall be interpreted according to the common intention of the parties. (2) If such an intention cannot be established, the contract shall be interpreted according to the meaning that reasonable persons of the same kind as the parties would give to it in the same circumstances.

49

UNIDROIT Art. 1.7: (1) Each party must act in accordance with good faith and fair dealing in international trade. (2) The parties may not exclude or limit this duty.

U.C.C. § 1-102(3): The effect of provisions of this Act may be varied by agreement, except as otherwise provided in this Act and except that the obligations of good faith, diligence, reasonableness and care prescribed by this Act may not be disclaimed by agreement but the parties may by agreement determine the standards by which the performance of such obligations is to be measured if such standards are not manifestly unreasonable.

and §1-203: Every contract or duty within this Act imposes an obligation of good faith in its performance or enforcement.

50

See Nudrat Majeed, Good Faith and Due Process: Lessons from the Shari’ah, 20 ARB. INT’L. (2004). Japan Act § 33 provides: (1) If the claimant violates the provisions of article 31, paragraph (1), the arbitral tribunal shall make a ruling to terminate the arbitral proceedings. Provided, this shall not apply in the case where there is sufﬁcient cause for the violation. (2) If the respondent violates the provisions of article 31, paragraph (2), the arbitral tribunal shall continue the arbitral proceedings without treating such violation in itself as an admission of the claimant’s allegations. (3) If any party fails to appear at an oral hearing or to produce documentary evidence, the arbitral tribunal may make the arbitral award on the evidence before it that has been collected up until such time. Provided, this shall not apply in the case where there is

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Reluctance or passivity may of course also be attributed to fully acceptable reasons. Is a party using his legitimate rights to defense when appearing not to collaborate or when violating his duty under the arbitration agreement to act in good faith? Although some kind of loyalty (at least at a technical level) is demanded in litigation in general courts, it could be said that a party has a broader duty of loyalty toward the opposing party and the tribunal in arbitration as the party has speciﬁcally agreed to solve the dispute in arbitration. It seems that at least failure to pay the security for costs and fees or an advance payment required by the panel or by the rules of the institute could constitute a breach of the arbitration agreement. As the duty is so speciﬁc, this may create an actionable right to be enforced in the very same arbitral proceedings as one of the claims or as a preliminary claim.51 Such a claim could in many cases be subjected to interim measures or temporary orders in courts of law, but this depends on the arbitration law and other rules applicable to the arbitration agreement.52 A party’s failure to perform in accordance with his duties under the arbitration agreement may be enforced in courts other than the arbitral tribunal itself, including via interim measures taken in the courts. As the ultimate control over arbitration rests with the courts, at least in theory the agreement may be enforced by way of a declaratory claim (as to interpretation) or by an order for speciﬁc performance.53 However, in reality this procedure may be too slow or otherwise impractical, in particular if a foreign State court decision or order cannot be immediately enforced in the arbitration.

3.5.3 Possible Action in Case of Disloyalty A breach of the arbitration agreement may give the other party the right to ﬁle the claim(s) in court instead of arbitration, resulting in de facto and de jure termination or cancellation of the arbitration agreement and constituting a (statutory) waiver.54 A breach of an arbitration agreement may even in other instances not covered by express sufﬁcient cause with respect to the failure to appear at an oral hearing or to produce documentary evidence. (4) The preceding three paragraphs shall not apply when otherwise agreed by the parties. 51

52

53

54

Japan Act, supra note 4. The law and practice in this area is developing; however, on its face it seems a party should prefer enforcement in arbitration by speciﬁc performance in lieu of other remedies or venues. See Xavier Favre-Bulle, Les consequences du non-paiement de la provision pour frais de l’arbitrage par une partie—Un tribunal arbitral peut-il condamner un défendeur au paiement de sa part de l’avance de frais?, ASA BULLETIN (2001). The panel and court may both have jurisdiction on these issues. The court may sometimes give orders ex parte, which seems not to be possible in arbitration unless expressly so authorized by the applicable rules. There may be partly overlapping jurisdiction in the arbitral panel and in state courts. Arbitration agreements should primarily be enforced by way of speciﬁc performance as opposed to damages, as damages as a remedy seem in most cases inappropriate and against the intention and will of the parties. E.g., Finnish Arbitration Act § 6 provides for the right of cancellation if the other party fails to appoint an arbitrator or pay a security.

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provisions of any statute or rule constitute such a waiver, releasing the other party from the jurisdictional limitations imposed on him by the arbitration agreement. It is difﬁcult to determine any reason arbitration agreements should be treated differently from other types of agreements except the right to enforce the arbitration agreement in the arbitration by speciﬁc performance or other remedies. Once the proceedings have gone forward, the right to cancel may be deemed to have been waived or at least the materiality required for cancellation is elevated considerably. An arbitration agreement may thus give grounds for a number of actions or rights such as: (i) An action (for speciﬁc performance) to enforce the agreement or a duty thereunder in the arbitration itself. This could in some cases be a decision, as an interim or protective measure, a partial award or procedural order by the arbitral panel; (ii) An action (for speciﬁc performance) to enforce the arbitration agreement or any duty thereunder in an action ﬁled in a state court having jurisdiction. This would in most cases be some kind of a protective or interim measure; (iii) The breach may constitute a waiver releasing the other party from the arbitration agreement and entitling the non-breaching party to cancel or terminate the arbitration agreement altogether and possibly also to claim damages for the breach. If the breach of the other party relates to the agreements reached between the parties during the arbitration proceedings, an action to enforce that agreement may not be heard by a court during the proceedings at all, as such an action could infringe on the autonomy of the arbitral proceedings and the power and authority of the panel to manage them. However, after the proceedings, such a bar would no longer exist, leaving the party the right to attempt to set an unfavorable award aside before courts of law. As a general principle, intervention by the courts in the arbitral proceedings during the proceedings should be limited to the very minimum even when it is indirectly in support of the proceedings.

3.5.4 Non-Respect of the Agreement by the Arbitral Tribunal as Violation of Due Process The arbitration agreement may be a simple clause or an extensive set of rules. In many cases, it refers to one or several sets of rules of arbitration or to statutes, which all by reference form “the arbitration agreement” as opposed to the simple “arbitration clause”. The arbitration agreement thus deﬁnes both the process of settling the difference and the substantive scope of the mandate. Disregard or violation of this procedural agreement may lead to the decision or award being set aside under the Convention or applicable laws.55 55

Japan Act, supra note 4, § 44(1)(vi–viii) provides: (vi) the composition of the arbitral tribunal or the arbitral proceedings were not in accordance with the provisions of the laws of Japan (or where the parties have otherwise reached an

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An arbitration agreement is a contract. The contract or agreement is sui generis covering mostly procedural issues.56 In a sense, it is a multiparty agreement to which the arbitrators are also parties when they agree to act as arbitrators. In England, the Act 1996 deﬁnes the duties of the panel as follows: (1) The tribunal shall (a) act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent, and (b) adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay or expense, so as to provide a fair means for the resolution of the matters falling to be determined. (2) The tribunal shall comply with that general duty in conducting the arbitral proceedings, in its decisions on matters of procedure and evidence and in the exercise of all other powers conferred on it.57

In an arbitration agreement, the parties have different rights and duties as with many other contracts—and there is nothing special about that. Once the arbitral panel has been constituted, it may face agreements on procedure of various types: (i) The “original” agreement and other agreements on procedure concluded by the parties prior to the initiation of the proceedings. (ii) Agreements concluded by the parties during the proceedings. (iii) Agreements concluded between the parties and the panel during the proceedings. Another category is the orders given by the panel in the absence of agreement by the parties (i.e., in the absence of an agreement on an issue that the panel has the mandate to set the rule, and in a sense “to conclude the agreement for the parties”). Even before the panel has been constituted, issues exist that are beyond the powers of the parties to agree on in general (e.g., ordre public) or special issues that are so intimately related to the proceedings and the person of the arbitrator that the parties cannot agree on them without the agreement of the arbitrator (e.g., the parties cannot agree that the arbitrator must conduct an inspection of construction works in a war zone). Accordingly, to form a binding agreement on procedure, some matters must be consented to by the arbitrators. Certain issues (e.g., relating to the conduct or management of the proceedings including the element of intelligence, division of burden of proof and establishing of relevant facts, burden of education, consideration, deliberations, what is to be deemed agreement on matters concerning the provisions of the law that do not relate to the public policy, such agreement); (vii) the claims in the arbitral proceedings relate to a dispute that cannot constitute the subject of an arbitration agreement under the laws of Japan; or (viii) the content of the arbitral award is in conﬂict with the public policy or good morals of Japan. 56 57

Lord Mustill disagrees to some extent in his in-depth analysis of an arbitration agreement. Michael J. Mustill, Is It a Bird, LIBER AMICORUM CLAUDE REYMOND 205–18 (2004). Arbitration Act of England 1996 § 33 (see Appendices, p. 269).

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established, legal conclusions, motivations to the decisions or awards, etc.) remain within the exclusive powers of the arbitrators. Thus, the parties do not have an unlimited freedom to agree on everything regarding procedure. Should the arbitrators not respect the arbitration agreement or agreements on procedure, a party may claim or demand the panel to remedy the failure. If this does not lead to the desired measures and respect for the agreement, a failure by a party to protest or reserve its right may constitute a waiver resulting in a loss of the right to have the award set aside or to prevent the enforcement of the award on this ground. The less signiﬁcant the failure, the more easily the waiver is constituted. What is signiﬁcant may vary and be very difﬁcult to assess, and an exact deﬁnition may not be given. If the breach of the panel is material and violates the very core of due process, and no reasonable action by the party in the arbitral proceedings has remedied the failure, court action may be available. The courts of the seat of arbitration and the arbitral law of the place of arbitration (i.e., lex arbitri) are the primary sources of legal protection either by way of ordinary action under arbitration law or by resort to protective or interim measures if this is possible under lex arbitri.58 In addition to remedies speciﬁcally available under lex arbitri, a violation of international due process may be a sufﬁcient ground for remedial action in court. Finally, actions to set aside the award or stop its enforcement are available, but they may not necessarily provide the relief sought. Should all the parties object to the arbitral tribunal’s acts or omissions, the parties may unanimously cause the arbitrator(s) to resign and terminate the proceedings (“the veto”).59 However, the arbitrator may defend his position if the issue lies within his exclusive powers, his acts or omissions are well-founded in due process or his personal ethics, or if the collusive acts of the parties have reduced his role to being an instrument of unlawful activity. Should such a conﬂict arise, a hearing should be held and the arbitrator should offer his resignation or, in an extreme case, simply refuse to continue and close the proceedings altogether.60 If the arbitrator has been acting in bad faith, deliberately concealing a bias, having concealed communications with a party or parties or their representatives beyond the hearings (violating thereby the audi alteram partem principle and depriving a party from presenting his case or failing to inform other arbitrators or parties exhaustively 58 59 60

Id. § 68 (1–3) (see Appendices, pp. 283–84). Id. at §§ 23 and 24 (see Appendices, pp. 264–65). Id. at § 25. See also Gabrielle Kaufmann-Kohler, Qui contrôle l’arbitrage? Autonomie des parties pouvoirs des arbitres at principe d’efﬁcacité, LIBER AMICORUM CLAUDE REYMOND 162 (2004): En résumé, soit l’arbitre n’a d’autre choix que de démissionner, soit sa sentence court le risqué de se voir refuser l’execution. Même si elle s’abat rarement, l’épée de Damoclès est là, qui menace l’effectivité de l’arbitrage.

If a party has submitted forged documents, a witness committed perjury, an expert testiﬁed in bad faith, or party having used other fraudulent methods or otherwise grossly acted in bad faith, such acts by a party may be deemed to constitute material breaches of the arbitration agreement as well as violations of due process and ordre public, with the consequence of making the award unenforceable or null.

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about such contacts or communications), or accepting concealed payments or fees or other compensation aside, such behavior (even when constituting only “a minor detail”) must be assessed with extreme strictness and may constitute a material breach of express or implied conditions of the arbitration agreement. Even in its most innocent forms, such conduct is likely to constitute a violation of due process and ordre public and may result in the voidability or nullity of the award.

3.5.5 Manifest Disregard of Agreement and Substantive Law as Violation of Due Process UNCITRAL Model Law Article 28 provides: (1) The arbitral tribunal shall decide the dispute in accordance with such rules of law as are chosen by the parties as applicable to the substance of the dispute. Any designation of the law or legal system of a given State shall be construed, unless otherwise expressed, as directly referring to the substantive law of that State and not to its conﬂict of laws rules. (2) Failing any designation by the parties, the arbitral tribunal shall apply the law determined by the conﬂict of laws rules which it considers applicable. (3) The arbitral tribunal shall decide ex aequo et bono or as amiable compositeur only if the parties have expressly authorized it to do so.61 (4) n all cases, the arbitral tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction.

As the mandate in concreto is limited to what the applicable material law provides, what are the consequences of the arbitral panel passing that borderline without express authorization? What if the decision or award is in (manifest) disregard of the law? To analyze this issue, we must presume that which has been established (i.e., the facts) are indisputable. It is clear that by changing what has been established, the issues

61

Argentina Act Art. 769 provides: Amiables compositeurs shall proceed without any legal formalities; They shall limit themselves to receiving the pleadings or documents submitted by the parties, to requesting from them the explanations they deem proper and to making the award according to their best knowledge and understanding.

Art. 771 provides: 1. No means of recourse can be raised against an award of amiables compositeurs, unless it was made after the expiration of the term therefore or decided on issues not submitted to arbitration. The parties can lodge a claim for its annulment within ﬁve days of the communication of the award to the parties. 2. After the claim for nullity has been lodged, the judge will communicate it to the other party for ﬁve days. Once this term has elapsed, with or without any answer from the other party, the judge shall make a ﬁnal decision on the validity or nullity of the award.

Argentina Act, supra note 6.

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change and the award may change.62 If facts have been fully established, enforcing the agreement requires proper application of the law, which in turn requires the law to have been substantively fully established. If we presume that the facts are “right” and the burden of proof is fully met, what remains to be done is to apply the substantive law to the facts. If we further presume that the law has been fully established and that no dispute exists as to its substance and the burden of education is thus fully met, the task of drawing the conclusions may be very easy and almost mechanical. However, there may remain issues of interpretation as to what a statement or particular clause in the agreement means and how it was understood, how the transaction is to be classiﬁed, and how a statute or principle should be applied, etc. These issues of interpretation are within the powers and authority of the arbitrators and whatever the outcome, if it remains within the authority of interpretation, there is no disregard of the law and no violation of the mandate. Furthermore, laws often on purpose leave great ﬂexibility, and, perhaps even more often (at least in the areas of business law), the slowness of the legislative process leaves vacuums where no speciﬁc statutory rules can be identiﬁed or established. Even in the latter case, the issue may often be decided based on “macro rules” such as principles of contract, the law or trade usages, etc. There is hardly anything really new that would not be covered by established principles of the law. The legislation sometimes gives wide (or at least formally) almost unlimited powers or discretion to the judge or arbitrator. This applies to an exceptional extent to rules 62

Sheppard reports: The courts in a number of countries have rejected the argument that an incorrect interpretation of substantive law by the tribunal is a sufﬁcient reason to refuse enforcement, for example: Switzerland, France, England, Germany and the Philippines.

Audley Sheppard, Interim ILA Report on Public Policy as a Bar to Enforcement of International Arbitral Awards, 19 LCIA ARB. INT’L 240 (2003). Compare with Chinise law as reported by Tang Houzhi and Wang Shengchang in INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION 35 (Supp. 11, Jan. 1990): The circumstances (grounds) for refusing enforcement of [u]domestic[/u] arbitration awards set forth in the second paragraph of Art. 217 of the Law on Civil Procedure (reproduced here as an Annex to the new Arbitration Law (see Annex II)) are as follows: (1) the parties have neither included an arbitration clause in their contract nor subsequently concluded a written arbitration agreement; (2) the matters decided in the award exceed the scope of the arbitration or are beyond the arbitral authority of the arbitral institution; (3) the formation of the arbitral tribunal or the arbitration procedure was not in conformity with statutory procedure; (4) the main evidence for ascertaining the facts was insufﬁcient; (5) application of law was truly incorrect; or (6) in arbitration, arbitrators committed embezzlement, accepted bribes, practiced graft or made an award that perverted the law. Apparently grounds (4) and (5) directly relate to the merits of the award. The People’s Court may rule ex ofﬁcio to deny enforcement of a domestic arbitration award if it ﬁnds that enforcement of the award will be contrary to the public social interest. (emphasis added).

Currently, Art 217 is Art 217 of the Civil Procedure Law of the People’s Republic of China, as reported in JAN PAULSSON (ED), INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION, (Kluwer Law International 1984) pp. 1 – 5. 74

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of unreasonableness or unconscionability known in many leading statutes.63 The issue of unreasonableness or unconscionability is subjective, but its consequences may be dramatic—de facto it may be in substance very close to a mandate ex aequo et bono.64 The issues in dispute must be decided in accordance with the agreement of the parties. The panel has no authority to act beyond that unless it has been expressly given ex aequo et bono authority. The agreement is comprised in general by both the written contract and by reference, the applicable law. Application of the law to the disagreement requires expertise in that law. However, in international arbitration, the panel does not necessarily have this expertise. “The burden of education” deals with this issue. If the position of the applicable law is not sufﬁciently established or if it is erroneously applied, the agreement of the parties is not properly enforced. Should this happen in bad faith or via collusion by the parties (i.e., by fraudulent methods), ordre public has been violated. If such an erroneous outcome is due to the gross negligence of the panel, even though the panel acted in good faith, this does not make the erroneous decision any better; thus, it may still constitute a violation of the authority and the agreement of the parties and as a consequence amount to a violation of ordre public, in particular if manifestly erroneous. If “the error”, however, is merely an issue of interpretation or opinion, there is no violation of ordre public. If the decision or award rendered is within the mandate in concreto (e.g., an issue of interpretation or classiﬁcation), and as such expressly or implicitly within the discretion left to the arbitrator, there is no grounds for setting it aside. The same applies to “errors” whether true errors only or possibly erroneous conclusions.65 These are matters that are at a party’s risk in arbitration as they are in courts of law. However, if the outcome is clearly erroneous and in manifest disregard of the agreement or made in bad faith, both the mandate in concreto and in abstracto may have been violated and a ground for setting aside or nullity exists.

63

64 65

Such general provisions authorizing courts to modify or disregard unconscionable or unreasonable terms and conditions of agreement appear in many statutes in many jurisdictions including the United States, Germany, and Scandinaviam countries. UNCITRAL Model Law Article 28(3) (see Appendices, p. 504). Des Williams, Setting Aside of International Award, 9 IBA NEWSLETTER: ARB. & ADR (International Bar Association Section on Business Law) 81, Oct. 2004: The court held that the errors of law made by the arbitrator went beyond mere errors in relation to the merits, and illustrated “circumstances in which the decision maker misconceives the whole nature of the enquiry or of his duties, thereby denying a party the right to a fair trial.” The court concluded that the errors of law committed by the arbitrator fell into the category of reviewable errors of law which amounted to gross irregularities resulting in an unfair trial. In the light of this ﬁnding, the court did not consider it necessary to deal with the other grounds for review. Telcordia is applying for leave to appeal against the judgement. If leave to appeal is granted, the appeal will ultimately be heard by the Supreme Court of Appeal.

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3.5.6 Disregard of Facts as Violation of Due Process What if the arbitrators render an award or a decision in (manifest) disregard of facts?66 It may be a simple mistake or an omission. A mistake may or may not affect the award or it may be the decisive element. It may be perfectly human, or it may be due to negligence or gross negligence. It may even be deliberate.67 Sometimes a mistake may happen because of a fraud or forgery committed by a party that is not discovered until later. The arbitrator is generally vested with extensive power to assess the evidence and draw his conclusions as to what has been established and what has not.68 It may be advisable for the arbitrators to discuss the status of evidence with the parties at some stage before giving the ﬁnal award. If however it should be beyond doubt that the arbitrator acted in disregard or in manifest disregard of undisputed facts, did he act in excess of his mandate? Undoubtedly this would be a violation of due process, as the material and procedural agreements of the parties have to respected. However, such situations are exceptional. Furthermore, the impression by the parties that the panel has by negligence or bias drawn the wrong conclusions from the evidence submitted can be reduced or eliminated by the panel by holding status hearings (“consultations”) at appropriate intervals. Even if such an error or disregard is established beyond any doubt, reopening of the proceedings is in general excluded. However, the party has other rights or remedies whose existence and extent depend on national law and the interpretation of the Convention. Extreme caution is to be used in such an analysis because there are as many realities as there are people—and this also applies to arbitrators. Matters of judgment in good faith or opinions are not reproachable and belong to the realm of human behavior. Errors cannot be excluded from arbitral proceedings. As unsatisfactory as these errors may materially be to a party’s interests, they are often fully within the scope of submission or power of the panel (i.e., the mandate in concreto) and belong to the risks assumed by the parties in choosing arbitration.

66

Sheppard, supra note 62, at 241: An award may also be contrary to the facts, or fundamentally perverse or irrational. It is generally regarded that such perversity (unaccompanied by some serious procedural irregularity) is not a sufﬁcient ground for refusing enforcement on grounds of public policy or otherwise.

67 68

Compare IBA Ethics 5.5 and 6 (IBA Rules of Ethics for International Arbitrators (1987)). Id. at Art. 9(1): The Arbitral Tribunal shall determine the admissibility, relevance, materiality and weight of evidence.

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3.5.7 “Carte Blanche” Prayer for Relief and Due Process Sometimes the parties ﬁle a generic prayer for relief along the following lines: . . . or any other such remedy or relief deemed just and equitable by the arbitrators. . . .69

What is this? It is not on its face speciﬁc enough to constitute a claim to be rejected or endorsed. The panel may request the claimant to be more speciﬁc. If this is done, the problem ceases to exist, but this is not always possible. The intention of the claimant is often to allow the panel to administer the relief and remedies not ex aequo et bono, but otherwise freely in line with the jura novit curia principle within their discretion and within the scope of the agreement.70 If both parties give such a mandate, there would not be any controversy, but as long as it is only unilateral, it does not constitute a part of the arbitration agreement. It is only a power or authority given unilaterally. The giving of such a carte blanche mandate is not per se unlawful. Should the respondent be heard speciﬁcally on such a prayer of his adversary? If he objects to such free administration of relief, the power cannot be exercised as such. If he accepts, there is no problem: the mandate has been given by both parties, thus constituting an agreement. If the respondent does not object or protest, this may also constitute a waiver and an agreement or estoppel is formed. If the panel reaches a conclusion that the relief prayed for is not available, but a corresponding relief that has not been speciﬁcally prayed for would and could be granted in addition to other relief prayed for on in lieu of such other relief, the arbitral tribunal may hesitate to take any action and decide not to grant such alternative relief as it could be ultra petita. This might result in the rejection of the claims and perhaps in a new arbitration where the issue of res judicata could be raised. On the other hand, to raise this issue of appropriate remedy may be fully in line with the jura novit arbiter rule, in

69

Franz Kellerhals, in his paper “How to Draft Your Prayers for Relief in International Arbitration” delivered at the ASA Conference of Sept. 3, 2004 in, Berne, Switzerland, raised the following issue about prayers: Can they contain conditions? Example No. 4 Antitrust Dispute (Pharmaceutical products): Claimant requests an award that (1) Respondent shall be ordered to refrain from publishing any information which explicitly or implicitly alleges that a comparative study shows differences in efﬁciency between “Colgate” and “Binaca,” unless this allegation is supported by a scientiﬁcally acknowledged research study. (2) . . . Consequences of awards drafted in insufﬁcient speciﬁc terms as a result of insufﬁciently clear prayers.

Example No. 5 Contract Dispute: The Claimant requests an award (1) . . . (2) granting it any remedy or relief that the arbitrators deem just and equitable and within the scope of the agreement of the parties, including, but not limited to, speciﬁc performance of the contract dated May 1,. . . . 70

Another alternative is to draft the relief sought in order of priority (i.e., primarily, then secondarily if the primary relief is not granted, etc.). However, this may become clumsy and tedious if the facts are unclear in the light of evidence and there are many theories or grounds available.

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particular after consultation with the parties.71 A more constructively spirited panel may convene a hearing, preferably giving notice of the hearing in writing including the agenda, to discuss the issue. If a new more speciﬁc claim is submitted as a consequence, the ultra petita problem may have been solved. If no speciﬁc claim is submitted but a carte blanche prayer for relief has and a hearing has been held, the granting of the relief not speciﬁcally prayed for could well be procedurally acceptable, at least in the absence of objections or protests by the other party. It would not necessarily be ultra petita any longer, and, in addition, both parties have been heard or “consulted.” This would perhaps be in accordance with the jura novit arbiter principle and the mission of arbitration: cost-effectiveness and expediency.

3.6 ARBITRATION AGREEMENT AND DUE PROCESS—SUMMARY An arbitration agreement has two important jurisdictional effects. First, it has a positive jurisdictional effect, which means that the tribunal speciﬁed in the agreement has jurisdiction to resolve the dispute between the parties. Second, it has a negative jurisdictional effect, which means that State courts do not have jurisdiction. Because of these effects, it is extremely important for the protection of both substantive and procedural rights of the parties that the selection of the cases for arbitration is fair and in accordance with the parties’ intention, and to a certain extent, even their interest. The nature of the arbitration agreement as a sui generis contract inﬂuenced by both contract and procedural law has often been discussed. It is not important to place arbitration agreements in speciﬁc branch of jurisprudence. Rather, it is important to try and merge the doctrines so that the result is fair, foreseeable, and efﬁcient. There have been attempts to construct interpretative principles especially concerning the scope of arbitration agreements such as those regarding whether the scope of the agreement should be read narrowly or widely and the principle of exclusivity. These arbitration-speciﬁc principles are not normative principles such as due process or the many principles of contract and procedural law. Rather they are descriptive generalizations of what the result of interpretation with support of normative principles could be like. This means that an interpretation cannot be justiﬁed by them alone, although they can be used as support in an argument for an interpretation. In most of the cases, the access to justice argument is prima facie the most important one for interpretation concerning dispute resolution mechanisms. However, in contrast to the general belief, the access to justice argument does not necessarily work for restricting arbitration, as the reverse may be true. Arbitration might in fact be the most

71

Compare with material law UCC § 1-106: (1) The remedies provided by this Act shall be liberally administered to the end that the aggrieved party may be put in as good a position as if the other party had fully performed but neither consequential or special nor penal damages may be had except as speciﬁcally provided in this Act or by other rule of law. (2) Any right or obligation declared by this Act is enforceable by action unless the provision declaring it speciﬁes a different and limited effect.

78

ARBITRATION AGREEMENT AS THE BASIS OF JURISDICTION

efﬁcient guarantee of access to justice in the case at hand. This has to be evaluated taking the case-speciﬁc features in consideration. Even though the arbitration agreement generally has to be followed—and following the agreement of the parties is also in some respects a part of due process—this does not mean the agreement can bind the parties or the tribunal to an unfair procedure. The due process requirement of fair arbitration as well as the requirements of access to justice and access to courts may lead to setting aside such an arbitration agreement either partially or completely.

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Chapter 4

Aspects of Jurisdiction other than the Agreement

4.1 DUE PROCESS AND JURISDICTION—PROBLEMS RELATED TO ASPECTS OTHER THAN THE AGREEMENT In addition to criteria related to the arbitration agreement, other aspects have to be considered when deciding the question of jurisdiction in arbitration. As already mentioned when discussing the Convention, these questions may concern which parties participate in the procedure and the arbitrability of the subject matter. The classical procedural questions of res judicata and lis pendens are relevant. As already discussed above, some of the due process requirements seem at ﬁrst more substantive than procedural (e.g., arbitrability). However, in procedure and procedural law in general as well as in arbitration, separating substantive and procedural issues can be difﬁcult. Especially in arbitration, the question of jurisdiction is very closely related to the material issues at hand and the applicable substantive law. Certain material requirements can be seen as prerequisites of jurisdiction as a procedural matters, although this would not be orthodox in view of some procedural law scholars.

4.2 PARTIES TO THE PROCEEDINGS First, the persons acting in the process must have a legitimate interest to act as a party in the procedure. This means they have to have a legal relationship (or better, an interest) according to the rules of substantive law to act in the procedure. Also, a party needs to be in the sphere of the arbitration agreement to be able to act in the case. For example, company A cannot initiate proceedings on grounds of an arbitration agreement between companies B and C.1 Another dimension is that the arbitral award may have effects inter partes only and not erga omnes. From the practical point of view, 1

There are of course exceptions based on deﬁnitions of corporate identity, etc. But basically in those cases also, there needs to be something to bind the company to the agreement. 81

this means the parties to the proceeding must be identiﬁed before a jurisdictional decision is made. Second, parties acting in the procedure cannot be under some incapacity. Article V(1)(a) of the Convention provides that recognition and enforcement of the award may be refused if the parties were, under the law applicable to them, under some incapacity. As already noticed above, the problem is extremely rare in the context of international commercial arbitration, at least as to the incapacity of a natural person. The problem may, however, rise in connection with entrepreneurs or traders dealing in their personal capacity and not behind a corporate veil. It may also rise in connection with the representation of legal persons (i.e., various forms of corporations) if their directors and ofﬁcers are affected by some kind of incapacity. Even more often, there might be discussion whether the ofﬁcers of a legal entity have acted in their power and authority. In addition, all the parties need to be included in the proceedings. Before going forward in arbitration or taking any measures of procedural or substantive signiﬁcance, all the parties to the arbitration agreement must be given notice of the initiation of the proceedings and the requests or claims ﬁled and be given a reasonable opportunity to take whatever action is deemed founded at this stage in accordance with the audi alteram partem principle unless the arbitration agreement provides otherwise.2 This applies in particular to multi-party arbitration clauses. In multi-party arbitration, it may be difﬁcult or impossible to know at the initial stages whether the conﬂict concerns all or just some of the parties to the agreement; therefore, it is absolutely necessary to put all on notice and give them a reasonable opportunity to present their views, defenses or claims.3 A party’s response may vary, as a party may: (i) signal total indifference (“this does not concern us and we do not wish to be involved at all”); (ii) note that the matter is of some importance and the party requests to be kept on notice to a certain extent (which needs to be deﬁned), but does not want to participate, be present, or ﬁle claims; (iii) reserve the right to be present and be actively involved although not formally as a party either as a claimant or as a defendant; (iv) assume total disregard or passivity whether or not the party has direct or indirect interests or whether or not claims against him have been made. There may certainly be other variations in the intensity and activity or passivity of a party to a multi-party arbitration agreement and the proceedings initiated thereunder even if the party is not a party to the material dispute. A party may have a direct or

2

3

82

See James R. Sentner, Jr., Who is Bound by Arbitration Agreements? Enforcement by and against Non-Signatories, 6 BUS. L. INT’L (Jan. 2005); Swiss Rules of International Arbitration (2006) Art. 8(3)–(5) (see Appendices, pp. 461–62). Bernard Hanotiau, A New Development in Complex Multiparty-Multicontract Proceedings: Classwide Arbitration, 20 ARB. INT’L 39 (2004). ASPECTS OF JURISDICTION OTHER THAN THE AGREEMENT

indirect interest in the matter and the award may have direct or indirect effects, legal or commercial, on his position or on the underlying transaction or its fate.4

4.3 ARBITRABILITY An arbitration agreement subjects the parties to the jurisdiction of the arbitral panel (i.e., in personam jurisdiction). However, for the arbitral panel to also have subject matter (in rem) jurisdiction, the matter must be arbitrable (i.e., the issue be ﬁnally resolved in arbitral proceedings). Arbitrability is thus a condition precedent to jurisdiction. A general qualiﬁcation of arbitration is that the matter in controversy must be legal. It must relate to enforceable rights and obligations, which in general means in concreto actions aimed at causing a speciﬁc change in material reality or at preventing such a change (e.g., by having something declared and clariﬁed). Most of the changes prayed for including those for the preserving the status quo may be measured in money (damages), but not all of them. Arbitrability is often deﬁned as causes of actions within the freedom of contract (i.e., matters that the parties could settle or agree on). Is this simple or just simplistic? Consider that matters not within the freedom of contract are not easy to deﬁne. Most of them may be characterized as ordre public or public policy.5 However, as discussed above, ordre public and public policy are by no means clear guidelines and may reach various national and international dimensions (i.e., the public policy of a particular jurisdiction).6 Arbitrability of a subject matter has been expanded to areas that 4

5

Arbitration Act 1996 of England § 72 (see Appendices, p. 287). Consolidation of arbitration cases is in general not possible in the absence of an agreement of all the parties: LARS HEUMAN, SKILJEMANNARÄTT 41 [Law of Arbitration] (1999). ALAN REDFERN & MARTIN HUNTER, LAW AND PRACTICE OF INTERNATIONAL COMMERCIAL ARBITRATION 25 (3rd ed. 1999). The China Law is described as follows: a. According to Art. 2 of the new Arbitration Law, contractual disputes and other disputes regarding rights and interests in property are arbitrable. However, the following disputes may not be arbitrated: 1. marital, adoption, guardianship, support and succession disputes; 2. administrative disputes that laws require to be handled by administrative authorities. Under other laws of the PRC, the following disputes are normally required to be resolved by relevant governmental authorities or by the competent People’s Courts: 1. disputes arising from infringement on the right of patents, trademarks and copyright; 2. disputes concerning bankruptcy; and 3. disputes relating to antitrust. However, with the implementation of the new Arbitration Law, one may argue that the foregoing disputes listed in items 1 to 3 are arbitrable since the new Arbitration Law apparently allows a dispute that is of a non-contractual nature to be submitted to arbitration. Furthermore, the new Arbitration Law by its wording in Art. 2 tends to exclude only two types of disputes as mentioned above from the ambit of arbitration.

6

(as reported by Tang Houzhi and Wang Shengchang in INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION 17 (Supp. 11, Jan. 1990)). Pascal Hollander, Arbitration: Belgium; Assessing Arbitrability under the New York Convention, INT’L LAW OFFICE: ARB. NEWSLETTER (International Bar Association), Feb. 2005: However, in a sharp contrast with Article V.2.a, Article II.3 of the convention does not state to which law the state court must refer in order to decide whether the dispute is arbitrable, at the

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undoubtedly belong to ordre public or public policy. The two perhaps paramount cases, Mitsubishi and Scherk clearly demonstrate this.7 Mitsubishi dealt with antitrust law and Scherk with securities issues, both of which are the main pillars and/or the foundation of the economic order and market economy. However, arbitrability is restrained or controlled by two major factors: (i) the direct effect and enforceability of an award is limited to the parties (“inter partes effect”) and the award does not bind third parties or authorities who are at liberty to take whatever action they deem appropriate;8 and (ii) the award, if incompatible with public policy, may be revisited or scrutinized by courts in connection with enforcement proceedings, which may result in the award being set aside or perhaps already initially declared void.9 stage of recognition of the arbitration agreement (at the outset of a court proceeding, when one of the parties raises an objection to the court’s jurisdiction). The convention’s silence on this issue has created legal uncertainty. Some commentators defend the view that a coherent interpretation requires that the arbitrability of a dispute be assessed by reference to the lex fori, whatever the stage at which it takes place. Others consider that such assessment must be done by referring to the law chosen by the parties to govern their arbitration agreement (i.e., the lex arbitri or, more generally, lex contractus, as the parties seldom submit their arbitration agreement to a law which differs from the substantive law chosen to govern their main agreement).

and Supreme Court Decision: In its decision issued on October 15 2004 the Supreme Court allowed the appeal. It ruled that: “Article II.3 of the New York Convention allows the court to which the issue of arbitrability of the dispute is submitted, on the occasion of an objection to jurisdiction, to decide this issue by reference to its own legal system. By doing so, the court determines the limits within which, in certain matters, private jurisdiction is compatible with the legal order.” The court further stated, in passing, that: “when the arbitration clause is submitted, by the choice of the parties, to a foreign law, the state court of which the jurisdiction is objected may rule out arbitrability if the public policy of its own legal system is affected by this choice.” 7 8 9

Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc., 473 U.S. 614, 87 L.Ed. 2d 444 (1985); Scherk v. Alberto-Culver Co., 417 U.S. 506, 41 L.Ed. 2d 270. Helsinki Court of Appeals 22.8.2003 2419 (S 01/1007). In Scherk, supra note 7, the majority opined: A parochial refusal by the courts of one country to enforce an international arbitration agreement would not only frustrate these purposes, but would invite unseemly and mutually destructive jockeying by the parties to secure tactical litigation advantages. In the present case, for example, it is not inconceivable that if Scherk had anticipated that Alberto-Culver would be able in this country to enjoin resort to arbitration he might have sought an order in France or some other country enjoining Alberto-Culver from proceeding with its litigation in the United States. Whatever recognition the courts of this country might ultimately have granted to the order of the foreign court, the dicey atmosphere of such a legal no-man’s-land would surely damage the fabric of international commerce and trade, and imperil the willingness and ability of businessmen to enter into international commercial agreements.

and the minority as follows: Moreover, the securities market these days is not made up of a host of small people scrambling to get in and out of stocks or other securities. The markets are overshadowed by huge institutional traders. The so-called “off shore funds” of which Scherk is a member, present perplexing problems under both the 1933 and 1934 Acts. The tendency of American investors to invest indirectly as through mutual funds may change the character of the regulation 84

ASPECTS OF JURISDICTION OTHER THAN THE AGREEMENT

4.4 RES JUDICATA 4.4.1 Deﬁning Res Judicata The nonexistence of res judicata is a condition precedent to arbitration.10 Res judicata has been deﬁned as follows: 1. An issue that has been deﬁnitely settled by judicial decision. 2. An afﬁrmative defense barring the same parties from litigating a second lawsuit on the same claim, or any other claim arising from the same transaction or series of transactions and that could have been—but was not—raised in the ﬁrst suit.11

but not its need. . . . Moreover, the international aura which the Court gives this case is ominous. We now have many multinational corporations in vast operations around the world—Europe, Latin America, the Middle East, and Asia. The investments of many American investors turn on dealings by these companies. Up to this day, it has been assumed by reason of Wilko that they were all protected by our various federal securities Acts. If these guarantees are to be removed, it should take a legislative enactment. I would enforce our laws as they stand, unless Congress makes an exception. The virtue of certainty in international agreements may be important, but Congress has dictated that when there are sufﬁcient contacts for our securities laws to apply, the policies expressed in those laws take precedence. Section 29 of the 1934 Act, which renders arbitration clauses void and inoperative, recognizes no exception for fraudulent dealings which incidentally have some international factors. The Convention makes provisions for such national public policy in Art. II (3). Federal jurisdiction under the 1934 Act will attach only to some international transactions, but when it does, the protections afforded investors such as Alberto-Culver can only be fullﬂedged. 10

It may also be a ground for setting aside as provided by Italy Act, supra note 5, Art. 829(8): [I]f the award is contrary to a previous award which is no longer subject to recourse or to a previous judgement having the force of res judicata between the parties, provided that this objection has been raised in the arbitration proceedings.

11

Code of Civil Procedure, Book Four, Title VIII, Arbitration, Amended by Legislative Decree of 2 February 2006, No. 40 as reported in JAN PAULSSON (ED), INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION, (Kluwer Law International 1984 Last updated: April 2007 Supplement No. 49) BLACK’S LAW DICTIONARY (Bryan A. Gardner ed., 9th ed., 2009). Black’s deﬁnition presupposes that there is a duty to raise a claim. But is there a duty to raise all potential claims in connection with a speciﬁc claim? Not necessarily, so although there may be a gray area that is subject to interpretation and the applicable procedural laws and material rules, this is by no means clear at least as far as international arbitration is concerned. See, e.g., Argentina Law Art. 754: 1. Arbitrators shall decide all issues submitted to their decision within the term established in the terms of reference or derived from any eventual extensions agreed upon by the parties. 2. It shall be presumed that all questions ancillary to the submitted issues and those, the resolution of which before arbitrators has been consented to by the parties, have been submitted to the decision of the arbitral tribunal.

(Argentinian National Code of Civil and Commercial Procedure Law 17.454 of September 19 1967, as reformed by Law 22.434 of March 16 1981, text consolidated according to Decree 1.042 of 1981, as reported in Jan Paulsson (ed), International Handbook on Commercial Arbitration, (Kluwer Law International 1984 Last updated: January 1985 Supplement No. 3) pp. 3–7.) See Christer Söderlund, Lis Pendens, Res Judicata and the Issue of Parallel Judicial Proceedings, in The Swedish Arbitration Act, 1999, Five Years On: A Critical Review of Strength and Weaknesses, Session IV: The Proceedings, 22 J. INT’L ARB. (Aug. 2005). RES JUDICATA

85

Res judicata is one of the classical problems of procedural law theory that has engaged the thoughts of procedural law scholars for ages; it has been discussed also in the arbitration context.12 Res judicata presupposes that there has been a former action that has already been heard and adjudicated by a court that had in rem and in personam jurisdiction: (i) (ii) (iii) (iv)

between the same parties; on the same ground; praying for the same relief; and decided on its merits.13

The easiest of these criteria is perhaps the ﬁrst one, namely that the dispute has been adjudicated between the same parties. In most cases, the identity of a person can be veriﬁed as it does not change and is not subject to interpretation.14 As to natural persons, this is very much true and, as far as legal persons are concerned, although subject to change (via bankruptcy, merger, etc.), the legal identity is usually not affected and remains veriﬁable without a major risk of confusion.15

12

13

About this discussion, see Filip De Ly & Audley Sheppard, ILA Interim Report on Res Judicata and Arbitration, 25 ARB. INT’L 35–66 (2009). At the International Law Association’s 72nd Biennial Conference in Toronto in 2006, the ILA International Commercial Arbitration Committee reported on “Lis Pendens and Arbitration” and “Res Judicata and Arbitration,” and the Conference adopted a number of recommendations on these topics. The committee sought to give guidance to arbitrators faced with a prior judgment or award that is argued to be res judicata: “Arbitral tribunals are not necessarily required to apply the same procedural rules as domestic courts and have greater freedom to apply procedural rules that are appropriate for international arbitration. For international arbitration, where arbitrations are often conducted under institutional international rules and increasingly uniform laws, a global harmonised approach to res judicata would be commendable and the ﬁnal report will have to elaborate on any such approach.” Id. at 38). Mayer writes: 4. Lorsque la demande dont est saisi l’arbitre a déjà été jugée par le tribunal d’un pays étranger au siège, l’arbitre qui s’estime compétent, et qui constate que le tribunal étatique a statué au mépris de la convention d’arbitrage, doit accepter de connaître de la demande. 5. Lorsqu’un autre arbitre a déjà jugée la demande soumise à l’arbitre, celui-ci n’a pas le pouvoir d’en connaître, sauf accord de toutes les parties. 6. Lorsqu’une partie invoque la chose déjà jugée par un autre tribunal (étatique ou arbitral) entre les mêmes parties, mais sur une demande différente, l’arbitre ne peut méconnaître la partie de la décision (jugement ou sentence) qui règle le sort de cette autre demande, sauf accord de toutes les parties. En revanche, il conserve sa liberté d’appréciation à l’égard des points de fait ou de droit que le premier tribunal a tranchés dans le cadre de son raisonnement.

14 15

86

Pierre Mayer, Litispendance, connexité et chose jugée dans l’arbitrage international, in LIBER AMICORUM CLAUDE REYMOND 202–03 (2004). Mergers, demergers, reorganizations, combinations, etc. may cause a problem as to identity: did the company survive or was it dissolved? Piercing the corporate veil and alter ego doctrines may somewhat confuse the prima facie clarity of the picture.

ASPECTS OF JURISDICTION OTHER THAN THE AGREEMENT

However, the “same ground” criterion may be problematic. Let us assume that an action for damages has been ﬁled and that there has already been another action for damages between the same parties. According to the claimant, the prior action was based on certain breaches of an agreement, and the latter is based on another set of breaches. If the acts and omissions of the defendant have constituted a number of interrelated breaches of both minor and major signiﬁcance, how well does the claimant need to deﬁne the breaches invoked as grounds in an action for damages? If in an attempt by the claimant to exhaustively and openly describe the past reality, all the breaches were listed and reported as facts in both statements of claims, can this conscientious reporting of facts in itself constitute res judicata although only some of those breaches were invoked as grounds for relief? Something else is required. When does a description of the past and a full disclosure of facts constitute a ground for a claim to be blocked by res judicata, resulting in an everlasting action-proof shield? What something else is required? Res judicata cannot be evoked simply by a description of facts that may or may not form “a breach of an agreement.” The grounds for a claim and the facts are not the same thing—and only the grounds may constitute res judicata. However, a claim on another legal basis might not be possible on the grounds of exactly the same facts as before. Thus, in addition to the same ground, there should be a prayer for some relief based on the new ground.16 The third issue of “same relief” is perhaps the most complicated one. It borders with the jura novit arbiter principle, but the border may not be clearly visible. If we assume the jura novit arbiter principle that was applied on the substitute relief (i.e., not expressly prayed for by the parties but considered by the panel and rejected), would this constitute res judicata as to a subsequent action for the same substitute relief ? If the jura novit arbiter principle leads to consideration by the panel of granting substitute relief that was not expressly prayed for, this should be discussed in a “consultation” hearing with the parties to avoid later confusion. If what may concretely follow from the application of the jura novit arbiter principle in the arbitral proceeding is not openly discussed in a hearing during the proceedings, the award (as just and brilliant as it might otherwise be) may be subjected to being set aside on the grounds of ultra petita if relief not expressly prayed for by the parties is either granted (as a substitute relief) or rejected. If the parties, however, are heard on the issues under consideration resulting from the application of the jura novit arbiter principle and the hearing does not result in any modiﬁcations of the prayers for relief, it might be advisable for the arbitral tribunal to expressly indicate in the award what their conclusions were as to the issues (i.e., not decided, rejected, endorsed, awarded) to avoid subsequent lack of clarity as to res judicata or ultra petita. The ILA ﬁnal report on res judicata considers the effect of a prior arbitral award and sets out the criteria for an award to have conclusive and preclusive effects. The Committee endorsed a triple identity test (namely same parties, cause of action, and

16

These requirements may impose high standards on the draftsmen of the statement of claims and on the arbitral panel reviewing them.

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claim for relief).17 In the ILA Recommendations on Lis Pendens and Res Judicata, the triple identity test is formulated as follows: An arbitral award has conclusive and preclusive effects in further arbitral proceedings if: − it has become ﬁnal and binding in the country of origin and there is no impediment to recognition in the country of the place of the subsequent arbitration; − it has decided on or disposed of a claim for relief which is sought or is being reargued in the further arbitration proceedings; − it is based upon a cause of action which is invoked in the further arbitration proceedings or which forms the basis for the subsequent arbitral proceedings; and − it has been rendered between the same parties.18

Further, according to the Recommendations: An arbitral award has conclusive and preclusive effects in the further arbitral proceedings as to: − determinations and relief contained in its dispositive part as well as in all reasoning necessary thereto; − issues of fact or law which have actually been arbitrated and determined by it, provided any such determination was essential or fundamental to the dispositive part of the arbitral award.19

In addition: An arbitral award has preclusive effects in the further arbitral proceedings as to a claim, cause of action or issue of fact or law, which could have been raised, but was not, in the proceedings resulting in that award, provided that the raising of any such new claim, cause of action or new issue of fact or law amounts to procedural unfairness or abuse.20

Another due process-related question would be whether there ought to be exceptions to conclusive and preclusive effects of arbitral awards if the awards were procured by fraud or unfair procedures not respecting due process. The ILA Committee considered these questions generally best to be left to the consideration of the national

17

18 19 20

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The Committee supported the application of issue estoppel. It also gave guarded endorsement to the application of an abuse of rights doctrine in limited circumstances. See Filip De Ly & Audley Sheppard, The International Law Association (ILA) International Commercial Arbitration Committee Reports on Lis Pendens and Res Judicata, Arbitration International, 25 ARB. INT’l 1–2 (2009). Filip De Ly & Audley Sheppard, ILA Recommendations on Lis Pendens and Res Judicata and Arbitration, Arbitration International, 25 ARB. INT’L 83–85, para. II/3 (2009). Id. at para. II/4. Id. at para II. See also Filip De Ly & Audley Sheppard, ILA Final Report on Res Judicata and Arbitration, 25 ARB. INT’L 67–82 (2009). ASPECTS OF JURISDICTION OTHER THAN THE AGREEMENT

enforcement courts according to national laws.21 However, clearly the international norms concerning due process are in part directly applicable also nationally, and in part share the same foundation and function as interpretative framework.

4.4.2 “Effects” of Enforcement Dimensions A decision given by a court (as opposed to an award in arbitration) may have different and probably considerably reduced international enforceability. The enforceability may relate to one or a few jurisdictions only whereas arbitral awards may be enforced in a large number of countries. Should this be taken into account when judging whether and to what extent a former decision in the same matter constitutes res judicata—and as such a condition precedent to the proceedings? It is also foreseeable that arbitration may be resorted to so as to gain wider enforceability for a decision already given in a country when court decisions of the country are not enforceable as such due to a lack of bilateral or multilateral treaties. As the ultimate objective of the law is to give legal protection in concreto and not just to declare in abstracto who was right, enforcement effects should be taken into account. If the enforcement effects of an earlier court decision in the same issue are more limited than those of an arbitral award, such an earlier decision does not automatically constitute res judicata.22 However, the decision is relevant in the proceedings 21

22

De Ly & Sheppard, ILA Final Report, supra note 20, at 79: “The limited acceptance of procedural unfairness or abuse regarding res judicata does not imply that the Committee endorses a general theory of procedural unfairness or abuse in international commercial arbitration. The broader ramiﬁcations of any such theory need further research including its characterization (contractual and/or procedural) and its scope of application which exceeds the ambit of the res judicata project.” Thus, “Finally, the Committee accepts that there ought to be exceptions to conclusive and preclusive effects of arbitral awards, for instance if the award was procured by fraud. Other exceptions may be left to the lex arbitri (e.g., revision of awards by means of recourse such as the requête civile or tierce opposition under which in certain circumstances discovery of new documents may provide a way to reopen a case or where a third party who is affected by an award may be entitled to reopen a case) or the lex causae which provide the background under which the parties have had their dispute arbitrated.” For the effects between different parties in English Law, see Sarita Patil Woolhouse, The Effect of an Arbitration Award on Subsequent Arbitration between Different Parties—An English Law Perspective, 7 INT’L ARB. L. REV. 156 (Oct. 2004): In an ideal world interdependent disputes like those in Lincoln v Sun Life would be decided by a single tribunal in a consolidated arbitration. However, a tribunal has no power to consolidate proceedings unless the parties agree on confer such a power. In most cases, the decision of an arbitral tribunal would be binding only on the parties to the arbitration and those claiming through them. The exceptions when an earlier award is held to be binding on a subsequent arbitration tribunal appear to have been made in the following cases: (a) when the earlier award, under a contractual machinery for dispute resolution, determined the rights and obligations of the parties to a contract A and B, so that the award can be treated as part of the contract and thus proved in the same way as any contract can be proved; and (b) where the breach of a charter-party and sub-charter is proved to be the same and the arbitrators have held the charterer under a charter-party liable to a sub-charterer in a particular amount the better view as a matter of principle is to say that the cause of the liability so determined was the breach of the charter-party. By analogy in cases involving re-sale of goods similar principle should apply.

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with its role and signiﬁcance in the arbitral proceedings varying between the two extremes in the discretion of the panel: (1) the proceedings may be fully reopened, or (2) the proceedings may be very limited (essentially circling around the earlier proceedings), with the award being based solely on the force of the earlier decision.

4.5 LIS PENDENS 4.5.1 Lis Pendens Doctrine in Arbitration Lis pendens (i.e., pending litigation) or lis alibi pendens (litigation pending elsewhere) may constitute a ground for dismissing an action or alternatively put it on hold pending the outcome of the other action.23 Thus, the nonexistence of lis pendens may be a condition precedent to the initiation of arbitral proceedings. Originally lis pendens was a doctrine applied in courts in one legal system or jurisdiction only when an identical or at least similar lawsuit was pending elsewhere (i.e., in the courts of another jurisdiction or in an arbitration, whether its seat is in the same or another jurisdiction). Does the lawsuit already pending create a ground for dismissal? It would seem that if the case is pending in violation of the arbitration agreement, which has not been effectively waived, the pending case could be disregarded altogether and the arbitration should proceed.24 As the problem is being approached from the perspective of arbitration, the effect of lis pendens from the perspective of a court need not be analyzed, although it may provide some guidance ex analogia. Before proceeding any further, we need to establish when lis pendens may be relevant. This analysis is comparable to that regarding res judicata, namely that there is a similar or identical action already pending. However, there is a major difference in that res judicata deals with what was already (ﬁnally) decided. What was decided relates to what was claimed or prayed for, and here lis pendens and res judicata overlap. The general rule is that a tribunal that otherwise is considered to have jurisdiction can proceed with arbitration despite parallel proceedings pending before a national 23

Private International Law Act of Switzerland Art. 181: The arbitral proceeding is pending as of the time when one of the parties submit its request to the arbitrator or arbitrators designated in the arbitration agreement or, in the absence of such designation, from the time when one of the parties initiates the procedure for the constitution of the arbitral tribunal.

24

See e.g., Manuel Liatowitsch, Die Anwendung der Litispendenzregel von Art. 9 IPRG durch schweizerische Schiedsgerichte: Ein Paradoxon? Überlegungen zu einem Bundesgerichtsentscheid vom 14. Mai 2001 im Lichte von BGE 124 III 83; Jean-Marie Vulliemin, “Litispendance et compétence internationale indirecte du juge étranger (Note sous ATF 127 III 279)”. See also Söderlund, supra note 10. This is in general the case as an arbitration clause in the main establishes exclusivity. Italy Act, supra note 11, Art. 819-ter provides: The arbitrators’ jurisdiction shall not be excluded by the pendency of the same dispute before the judge or by the connection between the dispute referred to them and a dispute pending before the judge.

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court or another arbitral tribunal. Proceedings are parallel if the parties and one or more of the issues are the same or substantially the same.

4.5.2 When are the Proceedings Parallel? Test of Identity or Similarity and the Enforcement Effects Test To constitute relevant lis pendens, the former action must have been: (i) between the same parties (ii) on the same grounds (iii) praying for the same relief. The ﬁrst criterion is relatively clear. If there are other parties involved in the subsequent arbitral proceedings, no such lis pendens is constituted that would justify dismissal of the case altogether. In special circumstances, the proceedings may be streamlined to take into account the pending case and its outcome. However, prudence is required as there is no certainty the other litigation will ever be pursued to its end. Yet the parallel proceedings may allow some measures that will reduce the risk of double expenditures. Here the phrase “the same ground” is more complex than as discussed in connection with res judicata. However, again if possible the facts and the grounds for claims should be distinguished. The phrase “the same relief” may be problematic, too. We should note in particular that protective or interim measures can hardly ever constitute a lis pendens that could lead to the dismissal of a claim. Such measures are not ﬁnal even when granted, and there are limitations as to their effects and international enforceability. In addition, the arbitral panel may have its own authority and power to adjudicate such issues in addition to the jurisdiction of various courts. A pending petition for “ﬁrst aid” cannot bar one from proper medical care. When analyzing the similarity, we may apply either a strict compliance doctrine or a more ﬂexible sufﬁcient similarity test. When analyzing a pending lawsuit that is subject to modiﬁcations and even withdrawal, strict compliance may well be a healthier approach as similarity may at any time erode or even be transformed into apparent dissimilarity. If all the criteria of similarity are there, the panel may apply another test, the “enforcement effects” test.25 To do so, the panel ﬁrst assumes the pending lawsuit 25

Samuel comments on a Swiss case as follows: It is the next step of the court’s argument that causes the problem. It applies “litispendance” to arbitration tribunals. It gives a number of reasons. Since arbitration awards are enforceable in the same way as judgements, there is the same need to avoid having contradictory arbitration awards in circulation as there is with judgements. Case law has established that if a foreign court whose judgement is enforceable in Switzerland concludes that it has jurisdiction, an arbitral tribunal is bound by that view. . . . Having decided that an arbitrator is bound by the “litispendance” requirements of Swiss law LDIP Art 9, the court moves onto consider whether the Panamian judgement on the case would be enforceable in Switzerland. Since the

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“as it is” is pursued to its ﬁnal end. It then examines how widely the decision will be enforceable geographically and whether the geographic coverage coincides or overlaps with the enforcement effects of any award that may be rendered in the arbitral proceedings. If the enforcement effects are identical in coverage, the issue merits further consideration. However, if they are not identical, and if the coverage overlaps only to a limited extent, the panel may elaborate further by identifying the jurisdictions that may be of relevance to the parties both in general and for enforcement purposes. Do the enforcement effects overlap in the area of likely enforcement? If not, to what extent would the enforcements effects of the decision and the award overlap with the jurisdictions of likely enforcement? If major difference in coverage still exists, the effect of the parallel proceedings to the consideration of the panel should be limited.

4.5.3 The Effect of Parallel Proceedings As already noted above, lis pendens does not in general constitute a legal bar to arbitration.26 This is true at least if the earlier lawsuit is pending in the courts of a jurisdiction other than that of the seat of arbitration unless otherwise provided by the applicable procedural rules (e.g., those of lex arbitri).27 This conclusion seems applicant was a Panamian company, this did not receive any discussion. Anyway, the Court rejected the argument that its approach of allowing a foreign court to delay and then bind a Swiss arbitral tribunal would enable a foreign country to deliberately ignore an arbitration agreement. Such a judgement, it pointed out, would not be enforceable in Switzerland. The case it cites for this states that enforcement of a judgement would be refused if an arbitration agreement applicable to the dispute complied with the New York Convention. The Court ﬁnishes by commenting obiter that the question of whether the applicant waived his rights to arbitrate has to be decided by Panamian law as the relevant lex fori. In doing so, it relied on one of its previous decisions. That concluded that where a party was alleged to have waived its right to arbitrate before a Swiss Cantonal court, that court was right to apply its own law to determine whether such a waiver had occurred.

26

27

Adam Samuel, Fomento—A Tale of “Litispendance”, in ARBITRATION AND PRIVATE INTERNATIONAL LAW 257 (2004). See De Ly & Sheppard, supra note 18, at 82, para I/1: “An arbitral tribunal that considers itself to be prima facie competent pursuant to the relevant arbitration agreement should, consistent with the principle of competence-competence, proceed with the arbitration (‘Current Arbitration’) and determine its own jurisdiction, regardless of any other proceedings pending before a national court or another arbitral tribunal in which the parties and one or more of the issues are the same or substantially the same as the ones before the arbitral tribunal in the Current Arbitration (‘Parallel Proceedings’). Having determined that it has jurisdiction, the arbitral tribunal should proceed with the arbitration, subject to any successful setting aside application.” Mayer, supra note 13, at 202 writes: Sauf accord de toutes les parties, l’arbitre ne doit pas se dessaisir au proﬁt du tribunal d’un pays étranger au siège, saisi, même antérieurement, de la même demande, s’il s’estime compétent et constate que le tribunal étatique a été saisi au mépris de la convention d’arbitrage. L’arbitre saisi d’une demande déjà pendante devant un autre arbitre, et qui constate que ce dernier a été régulièrement désigné et saisi, n’a pas le pouvoir de connaître de la demande,

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to be in line with UNCITRAL Model Law Article 8 and with subsection (2) in particular: (2) Where an action referred to in paragraph (1) of this article has been brought, arbitral proceedings may nevertheless be commenced or continued, and an award may be made, while the issue is pending before the court.

Thus, if the earlier action is pending in a court in another jurisdiction, the arbitral tribunal should proceed with the proceedings unless the party initiating the arbitration has effectively waived its rights under the arbitration agreement or unless there are other exceptional circumstances.28 However, it may be more problematic when the earlier action is pending in a court of the same jurisdiction, as the panel may refuse to go forward for reasons of “convenience.” There is also the risk that any award would be set aside if it conﬂicts with the court’s decision.29 According to the ILA recommendations, if the earlier proceeding is pending before another arbitral tribunal, the later tribunal should decline jurisdiction or stay the arbitration partly or completely on whatever conditions and for whatever duration it sees ﬁt, provided that it is not precluded from doing so under the applicable law, and provided that it appears: − the arbitral tribunal in the earlier parallel proceedings has jurisdiction to resolve the issues in question; and − there will be no material prejudice to the party opposing the request because of (i) an inadequacy of relief available in the parallel proceedings; (ii) a lack of due process in the parallel proceedings; (iii) a risk of annulment or nonrecognition or nonenforcement of an award that has been or may be rendered in the parallel proceedings; or (iv) some other compelling reason.30

sauf accord de toutes les parties. Sauf accord de toutes les parties, l’arbitre ne peut, sous prétexte de connexité, se dessaisir au proﬁt d’un tribunal étatique ou d’un autre arbitre d’une demande qui entre dans sa compétence et dont il a été régulièrement saisi. Il peut toutefois, à la requête d’une partie, surseoir à statuer jusqu’à ce que la juridiction saisie de la demande connexe ait rendu sa décision, s’il estime pouvoir trouver dans celle-ci des éléments d’information importants; il est libre d’apprécier l’opportunité d’un tel sursis, en tenant compte, notamment, de l’état d’avancement respectif et de la durée probable des deux instances. 28

29

30

See De Ly & Sheppard, supra note 18, at 83, para I/4: “Where the Parallel Proceedings are pending before a court of a jurisdiction other than the jurisdiction of the place of the arbitration, consistent with the principles of competence-competence, the tribunal should proceed with the Current Arbitration and determine its own jurisdiction, unless the party initiating the arbitration has effectively waived its rights under the arbitration agreement or save in other exceptional circumstances.” See id. at 83, para. I/3: “Where the Parallel Proceedings are pending before a court of the jurisdiction of the place of the arbitration, in deciding whether to proceed with the Current Arbitration, the arbitral tribunal should be mindful of the law of that jurisdiction, particularly having regard to the possibility of setting aside of the award in the event of conﬂict between the award and the decision of the court.” See id. at para. I/5.

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If the concurring former pending suit is pending in arbitration and not in a court, enforcement effects are likely to be identical or at least to overlap to a great extent. This would be a reason for the panel to consider what measures (if any) are necessary or at least beneﬁcial to reduce the double expenditure and the risk of awards with conﬂicting outcomes.31 The parties are the masters of the proceedings, but if they do not agree, the issue remains within the procedural powers of the arbitrators. The primary task of the arbitral panel is to settle the matter expeditiously and cost-effectively. It would not be fully in line with the mission to stop the proceedings altogether or to slow them down in anticipation of the outcome of the other pending case because of costeffectiveness only. There must be greater reasons for doing this if the parties do not agree on such an adjournment. The ILA Recommendations mention avoiding conﬂicting decisions and protecting parties as much as possible from oppressive tactics as elements to be considered alongside the costs.32 However, there is always the risk that the other proceeding is withdrawn or faces other problems that slow it down dramatically, which in turn would slow down the whole dispute resolution process. As a general rule, the panel should take a critical approach to staying the proceedings or declining jurisdiction on the basis of other proceedings if the parties do not agree on a more constructive approach. The ILA Recommendations conclude that the arbitral tribunal may, as a matter of sound case management, temporarily stay the proceedings on request of a party until the outcome (or partial or interim outcome) of the other pending proceeding (whether court, arbitration, supranational, or any active dispute settlement process). This may be done provided the arbitral tribunal is not precluded from doing so under the applicable law, the outcome of the other pending proceedings or settlement process is material to the outcome of the instant proceeding, and there will be no material prejudice to the party opposing the stay.33 If the enforcement effects test shows identical or wide

31

This was the outcome in two parallel R.S.Lauder arbitrations in Stockholm and London described by Söderlund, supra note 11, at 357 In the realm of parallel proceedings there is certainly reason to mention the recent Czech Republic investment arbitrations which for obvious reasons have aroused a great deal of attention. A Dutch company, “CME,” invested in operating a TV license in Czech Republic which (according to the company) was lost as a consequence of government interference. CME initiated arbitral proceedings in Stockholm making use of the arbitration option incorporated in the Dutch/Czech Bilateral Investment Treaty requesting substantial damages. Prior thereto an arbitration had been initiated in London by a private individual who ultimately controlled CME. Being a US national he was allowed to do this under the US/Czech Bilateral Investment Treaty. That arbitration took place in London. The factual succession of expropriatory actions complained of in the London arbitration were the one that also constituted the basis for the action in Stockholm. Notably the two tribunals reached opposite results. The London tribunal did not ﬁnd any liability on the part of the Czech Republic and dismissed the US national’s claim for damages. The Stockholm tribunal, however, held that the Czech Republic was in fact liable to CME and awarded damages in an amount of USD 269,814 million plus interest.

32 33

94

See also Bianca Bezdek, 20 ASA BULLETIN 249 (2002). See De Ly & Sheppard, supra note 18, at 83, para. I/2. See id. at para. I/6. ASPECTS OF JURISDICTION OTHER THAN THE AGREEMENT

coverage, it strongly speaks for considering action on the basis of lis pendens. If the concurring earlier matter is pending in arbitration rather than in court, the tests are the same, but as the likelihood of wide or identical coverage of enforcement effects grows, the issue merits a profound analysis in the interests of the parties and procedural efﬁciency and economy. If the earlier claim is identical and under the same arbitration agreement, there can hardly be any doubt: the latter proceedings must be put on hold or dismissed altogether unless the earlier proceedings are not proceeding or are likely to be closed without a judgment on the merits for reasons beyond the control of the parties and the arbitrators. However, unless otherwise provided by lex arbitri or other applicable rules, lis pendens and its effects remain within the discretion of the panel, and it is not a condition precedent of mandatory character to the continuation of the proceedings. From the perspective of this book, it is interesting that the ILA Recommendations mention lack of due process in the parallel proceedings as a reason not to stay the arbitration on the grounds of lis pendens.34 This underlines the emerging importance of the doctrine in arbitration. Finally, the tribunal does not have to raise the question of parallel proceedings by its own initiative. The question of parallel proceedings should be raised as soon as possible by a party if it is not to be waived.35

4.6 FORUM NON CONVENIENS 4.6.1 Doctrine of Forum Non Conveniens Forum non conveniens refers to a court which has in personam and in rem jurisdiction regarding the dispute, but which whether due to reasons of geographic distance, language, or applicable law is not a convenient or the most suitable forum for hearing the case.36 The doctrine refers to the convenience of the parties, but in practice the convenience of the court system and its personnel is sometimes taken into account. There are a few places where courts tend to be overloaded with cases not just of their own citizens but of foreigners. As ﬂattering as it may be to the courts and countries in question, it may be overly burdensome to these people. Such exceptional circumstances may lead to adding either explicitly or implicitly the convenience of the court to the real motivation for dismissal on the grounds of inconvenience. Black’s deﬁnes forum non conveniens as follows: The doctrine that an appropriate forum—even though competent under law—may divest itself of jurisdiction if, for the convenience of the litigants and witnesses, it

34 35 36

Id. at para. I/5. See id. at 84, para. I/7. See David W. Rivkin & Suzanne M. Grosso, Forum Non Conveniens: A Doctrine on the Move, 5 BUS. L. INT’L 1 (Jan. 2004). See also Dimitri Santoro, Forum Non Conveniens: A Valid Defense under the New York Convention?, 21 ASA BULLETIN (2003).

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appears that the action should proceed in another forum in which the action might originally have been brought.37

For the doctrine to be applied, there must be a more convenient forum readily available (i.e., otherwise mere inconvenience is not sufﬁcient and might amount to denial of justice).38 Hence convenience is a matter of comparison of various fori available to the parties and the procedural efﬁciency provided or offered by these courts. This is a task of considerable difﬁculty that imposes a heavy duty of education on the parties and the arbitrators. As we approach the issue from the perspective of an arbitral tribunal, we should primarily compare the pros and cons of arbitral efﬁciency with that of the courts of the country or countries that would otherwise or “originally” have jurisdiction and be available for hearing the action. Arbitral proceedings may in most cases prove superior in particular in the light of the enforcement effects test, which is relevant also in this analysis. However, this rule is not absolute, and some court systems offer cost-effective and expeditious proceedings (although these may be hampered or blessed by recourse to one or more levels of appeal). It is very unlikely we will need to compare the convenience of one arbitration versus another, as in addition to being mostly an academic exercise, it may prove to be impossible despite the relative uniformity of many arbitration laws or institutional rules because the parties, arbitrators, and infrastructures provide for such diversity that any attempt at a systematic analysis of two proceedings yet to be “tailor-made” would be in vain.

37 38

BLACK’S LAW DICTIONARY, supra note 11. Des Williams, Setting Aside of International Award, Newsletter, 9 IBA NEWSLETTER: ARB. & ADR 81 (International Bar Association Section on Business Law, Oct. 2004) Shortly after the partial award was made, Telcordia sought enforcement thereof in the US District Court for the District Columbia. In July 2003 Telcordia’s petition to enforce the partial award was dismissed for lack of personal jurisdiction and on forum non conveniens grounds. In onsidering the forum non conveniens issue, the US District Court held as follows: “Telcordia has not questioned the ability of South African courts to provide an alternative forum to resolve the parties’ dispute. In fact, the South African High Court is currently reviewing Telcom’s petition to set aside the partial arbitral award that Telcordia seeks to enforce. South Africa is a signatory to the New York Convention, making it possible for Telcordia to seek enforcement of the arbitral award in South Africa. Telcordia argues that it was foreseeable that it would seek enforcement of the arbitral award in the United States, merely because it is an American company and Telkom agreed to arbitration, but that argument—which essentially means that Telcordia agreed to South African law and South African courts with its ﬁngers crossed—is rejected on policy grounds.” Telcordia’s appeal to the United States Court of Appeal for the District of Columbia against the dismissal of Telcordia’s petition to enforce the partial award was heard in April 2004. The District Court’s judgement was afﬁrmed. Telcordia had asserted that the District Court had erred by dismissing the case on forum non conveniens grounds, because this ground is not speciﬁed in Articles V or VI of the New York Convention. The Court of Appeals held that it did not need to concern itself with the application of forum non conveniens in this context, nor did it need to address personal jurisdiction.

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4.6.2 Special Considerations in Arbitration In arbitration, a party may make a motion to dismiss the case on the ground of forum non conveniens. Such a motion could be deemed to be a breach of the arbitration agreement infringing the sacred pacta sunt servanda. A motion in itself does not, however, necessarily amount to a real breach, but is aimed at seeking permission from or declaration by the panel that in this particular case and in these particular circumstances the proceedings must be dismissed or put on hold pending another suit (whether already ﬁled or to be ﬁled). Could such a motion be granted by the tribunal? On its face, this seems impossible as arbitration is based on agreement (i.e., consent and express purpose), and often provides for exclusivity—accordingly, there is no convenient alternative. However, there is still a remote possibility such a request could be granted if forum non conveniens is classiﬁed as a procedural principle applicable to the arbitration in question or an implied condition of the arbitration agreement incorporating a procedural framework by reference. This possibility could also be realized through lex arbitri containing the principle of forum non conveniens and vesting the panel with such authority. What special or extreme circumstances would justify such a radical decision? The proceedings may simply be too heavy and too costly (e.g., involving several arbitrators, long distances, etc.) creating an unreasonable burden and true inconvenience as such.39 If the arbitral proceedings are used abusively (e.g., to cause the other party to “bleed to death” in legal fees and costs, to force production of sensitive documents for no apparent good reason or for unrelated purposes, or simply to harass and tie up management resources of a small competitor), could this constitute such special circumstances? 39

Compare the concept of hardship in UNIDROIT Art. 6.2.1–6.2.3: 6.2.1 Where the performance of a contract becomes more onerous for one of the parties, that party is nevertheless bound to perform its obligations subject to the following provisions on hardship. 6.2.2 There is hardship where the occurrence of events fundamentally alters the equilibrium of the contract either because the cost of a party’s performance has increased or because the value of the performance a party receives has diminished, and (a) the events occur or become known to the disadvantaged party after the conclusion of the contract; (b) the events could not reasonably have been taken into account by the disadvantaged party at the time of the conclusion of the contract; (c) the events are beyond the control of the disadvantaged party; and (d) the risk of the events was not assumed by the disadvantaged party. 6.2.3 (1) In case of hardship the disadvantaged party is entitled to request renegotiations. The request shall be made without undue delay and shall indicate the grounds on which it is based. (2) The request for renegotiation does not in itself entitle the disadvantaged party to withhold performance. (3) Upon failure to reach agreement within a reasonable time either party may resort to the court. (4) If the court ﬁnds hardship it may, if reasonable, (a) terminate the contract at a date and on terms to be ﬁxed; or (b) adapt the contract with a view to restoring its equilibrium.

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There may be other reasons such as using discovery to ﬁsh for evidence for another action or embarrassing the management. However, although such actions may be abusive, they do not constitute inconvenience under the forum non conveniens doctrine and may be remedied by other more appropriate measures. However, the non conveniens doctrine could be considered from an access to justice perspective, as this is the due process principle that might justify the application of non conveniens in arbitration. If for some reason the forum is such that it would deny access to justice, it could be considered a forum non conveniens. However, it would probably be better to classify this situation as a case of modifying the agreement on the grounds of equity, or even better, applying the contract in a way that ensures an equitable result. Thus, it would often not be the forum but the procedure that would be changed. To succeed in a forum non conveniens motion, a party should irrevocably commit to accepting another arbitration clause or jurisdiction clause that eliminates all or at least some elements of the asserted inconvenience. The panel cannot take such action on its own initiative, but in some circumstances it could suggest the parties attempt to agree on modiﬁcations of their arbitration agreement or enter into a new arbitration agreement to reduce costs and eliminate the inconvenience (e.g., by reducing the number of arbitrators or changing the place of arbitration).40 However, the panel on its own naturally has no power to amend or disregard the original arbitration agreement except in accordance with applicable contract law. Finally, William W. Park in his article “Arbitration in Banking and Finance” opines from a practical perspective: Unlike judges, arbitrators rarely (if ever) refuse to hear a dispute because of forum non conveniens or the parties’ lack of diversity of citizenship. If the parties can provide an adequate deposit to cover costs, professors around the world can usually be found eager to supplement meager academic stipends by serving as arbitrators.41

4.7 CONDITIONS IMPOSED BY THE APPLICABLE RULES 4.7.1 Security for Fees and Costs of the Arbitral Tribunal and Institution A requirement of paying fees or an advance as a security for fees and costs may be a condition precedent to arbitration proceedings.42 The ICC Rules provide for such in the form of a provisional advance covering the period until the Terms of Reference have been drawn up.43 National laws contain provisions to the same effect as the ICC Rules.

43

Matthias Scherer, The Place of “Seat” of Arbitration (Possibility, and/or Sometimes Necessity of its Transfer?)—Some Remarks on the Award in ICC Arbitration No. 10’623, 21 ASA BULLETIN (Mar. 2003). William W. Park, Arbitration in Banking and Finance, 17 ANN. REV. BANKING L. 213 (1998). A registration fee may be the ﬁrst condition precedent. See ICC Rules Art. 4(4). Arbitration Act 1996 of England § 38(3) (see Appendices, p. 271). ICC Rules Art. 30(1) and (2) (see Appendices, p. 415).

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40

41 42

Failure to pay the advance is sanctioned by (1) suspension of the proceedings and (2) withdrawal (dismissal) of the claims without prejudice.44 Article 30 of ICC Rules deals with the security for the fees and costs of the tribunal. Article 30(4) of the ICC Rules provides: When a request for an advance on costs has not been complied with, and after consultation with the Arbitral Tribunal, the Secretary General may direct the Arbitral Tribunal to suspend its work and set a time limit, which must be not less than 15 days, on the expiry of which the relevant claims, or counterclaims, shall be considered as withdrawn. . . .

Thus, the duty to pay the advance is expressly covered by the Rules and the Rules are by reference an integral part of the arbitration agreement. Under the ICC Rules, could an arbitral tribunal order a party to pay this advance, and could the order or award then be enforced against the defaulting party? The ICC Rules are silent on the issue, and a deﬁnite answer may not exist. The lex arbitri may give support for such an interpretation, and even in the absence of an express authorization, such an order does not appear extreme in light of the traditional doctrine of wide arbitral jurisdiction and enforceability of contractual rights in general.45 Also, access to justice as a key due process principle would support this interpretation, especially if continuing the proceedings seems reasonable and effective from an access to justice point of view considered from the perspectives of all parties.

4.7.2 Security for Attorneys’ Fees and Legal Costs of the Parties The institutional rules often do not cover the duty to deposit a security for the attorneys’ fees and costs of the parties.46 There are many reasons for this. However, ICC Rules do provide: The costs of the arbitration shall include . . . the reasonable legal and other costs incurred by the parties for the arbitration.47 44 45 46

47

ICC Rules Art. 30(4): “. . . Such party shall not be prevented, on the ground of such withdrawal, from reintroducing the same claims or counterclaims at a later date in another proceeding.” Swiss Rules Art. 41 (see Appendices, p. 474). As to Swiss law, see Bernard Berger, Prozesskostensicherheit (cautio iudicatum solvi) im Schiedsverfahren, 22 ASA BULLETIN (2004). See, however, London Court of International Arbitration: Rules, Clauses & Costs (LCIA Rules) Art. 25.2 (see Appendices, pp. 442–43). ICC Rules Art. 31(1). Derains and Schwartz write: Under Article 31(1), the arbitrators have complete discretion to allocate the costs as they see ﬁt. Unlike some other arbitration rules (such as, for example, the UNCITRAL Rules, Article 40, or those of the Arbitration Institute of the Stockholm Chamber of Commerce, Article 29), the Rules do not provide for the bearing of the costs “in principle” by the unsuccessful party. Nor is the arbitrators’ discretion necessarily limited by any related legal requirements. Not surprisingly, however, the treatment of costs by arbitrators is often inﬂuenced by their national backgrounds. In this regard, there are three different approaches that appear to be most commonly followed. One is to order that all of the costs be borne by one of the parties (i.e., the

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and further that: Decisions on costs other than those ﬁxed by the Court may be taken by the Arbitral Tribunal at any time during the proceedings.48

The latter provision could be understood as an authorization to order such a security deposit, but the absence of an express stipulation as to such an effect could with reference to Article 30 to the contrary be understood to exclude such a possibility. The issue is not signiﬁcant as decisions regarding costs may be made by the panel “at any time.” However, the question of securities could be relevant from a due process point of view as a requirement of a signiﬁcant advance could hinder access to arbitration.49

4.7.3 Security for Loss or Damage A duty to give a security for loss or damage potentially caused via a legal action or the enforcement of a decision or award is exceptional but not unknown in arbitration practice. To require such a deposit, there should be an express authorization in the applicable rules. In the absence of such express rules, the authority of the panel to order such a measure may be challenged, but such a power cannot be categorically excluded. On the contrary, it may be a part of the mission (i.e., giving legal protection). However, like all demands for securities, it might hinder access to arbitration and thus make it more difﬁcult to enforce substantive rights. At least two situations may be identiﬁed in which grounds for a subsequent damage claim might arise: 1) A decision or award is enforced, but then later amended or revoked altogether. Such a situation is not likely to arise in arbitration where the decisions and awards are in general ﬁnal without recourse to appeal. 2) An abusive claim was ﬁled, or action was taken for the sole purpose of causing damage or loss to the other party by way of costs and time required to defend that party’s rights, and the recovery of such costs may be uncertain.

losing party). It is, thus, for example, the usual rule in England that the successful litigant is entitled to an Award of costs (i.e., the costs follow the event). Another approach, prevalent in Germany, Switzerland and Austria, in particular, is the allocation of the costs in proportion to the outcome of the case (e.g., 75/25 or 60/40), taking into account the relative success of the claims and defences. Yet a further possibility is to require that the costs be shared equally by the parties or that they bear their own costs. Arbitral tribunals may also consider that administrative costs and arbitrators’ fees and expenses, on the one hand, should be treated differently from legal and other possible expenses, on the other.

48 49

100

YVES DERAINS & ERIC SCHWARTZ, A GUIDE TO THE NEW ICC RULES OF ARBITRATION 341–42 (1998). ICC Rules Art. 31(2). See GEORGIOS PETROCHILOS, PROCEDURAL LAW IN INTERNATIONAL ARBITRATION 126 (2004). ASPECTS OF JURISDICTION OTHER THAN THE AGREEMENT

The ﬁrst category applies to interim actions and protective measures. The ICC Rules have expressly addressed the issue authorizing the panel to require such a deposit in its discretion: The Arbitral Tribunal may make the granting of any such measure subject to appropriate security being furnished by the requesting party.50

From the point of view of access to justice, it is the second category that might cause problems. The threshold showing for such securities to be required should be rather high. Otherwise in some cases the decision regarding securities could decide the overall case.

4.7.4 Security for the Claims or for the Enforcement of the Award Security for the claims is not common in arbitration practice or law.51 In general, the parties are under no duty to give a security for the enforcement of the arbitral award,52 but interim protection may be available before the award becomes ﬁnal. In the enforcement proceedings under the Convention, a party taking action against the enforcement may be ordered to provide a suitable security.53 However, we have to draw a distinction between dispute resolution and enforcement procedures including interim measures. Requiring a security for enforcement as a prerequisite of jurisdiction could probably often lead to denying access to arbitration.

4.8 CONDITIONS IMPOSED BY THE PANEL WITHIN ITS AUTONOMY What conditions may the panel impose on the proceedings apart from those expressly authorized by the applicable rules? The panel may require a security for the costs of arbitration under institutional rules or applicable arbitration laws, but could the panel require such a security in the absence of such an express authorization? Could the panel on its own initiative or at the request of a party impose other such conditions not expressly provided for in the applicable rules such as submission of documents, duty to negotiate, or pre-arbitral discovery? In principle, there is conceptual support in the procedural autonomy and powers of the panel to take any such procedural actions or measures that serve the interests of the 50 51 52 53

ICC Rules Art. 23(1) (see Appendices, pp. 412–13). Swiss Rules Art. 26(2) (see Appendices, p. 468). LCIA Rules Art. 25.1 (see Appendices, pp. 442–43). See, however, Arbitration Act 1996 of England § 11 (see Appendices, p. 259). See Model Law Decisions: Europcar Italia S.p.A. v. Alba Tours International Inc., Ontario Court Justice, General Division (Dilks, J.), 21 January 1997, Original in English, Unpublished: [1997] O.J. No. 133; 23 O.T.C. 376; CLOUT. “The grounds permitting refusal of recognition and enforcement of an award in Article 36 are permissive, not mandatory. An application to enforce an award was suspended pending appeal in Italy, and the respondent was ordered to provide security.”

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parties and are necessary to carry out the task of the panel in a particular difference (mandate in concreto) or the mission of arbitration in general to grant relief and legal protection when warranted (mandate in abstracto and in concreto). This autonomy and power cannot be limited to what is expressly authorized. The autonomy is restrained or limited by the agreement of the parties, but in the absence of such agreement, the panel could or perhaps even should be presumed to be able to take any such procedural measures that serve in accomplishing its task and mission and on which the parties can agree in principle. There is no reason to tie the hands of the panel to what is expressly authorized in the applicable rules or in the agreement of the parties. These do not often cover relief or legal protection or do so only very superﬁcially. Ultimately, the limits of this autonomy and power may be deﬁned by the procedural rules and principles applicable to arbitration in general. The statutes or rules meant to be applicable speciﬁcally or exclusively to proceedings before courts are, however, inapplicable. The latter do not constitute principles of arbitration law and, in addition, may be more national than international in their character. However, some procedural principles are common to arbitration and court proceedings alike. A sound presumption would seem to be that the panel may take any and all actions that a court could take, and in addition, has broad authority to take other actions and impose other conditions as and when deemed necessary. The procedural authority resembles the ex aequo et bono authority regarding material issues. After all, why would arbitration be preferred if the procedure were as formal and rigid as before the courts? The great advantage of arbitration lies in its ﬂexibility. This does not, however, extend to substantive law issues where the panel’s authority is usually limited by what is provided in the agreement of the parties and the material law.54 Once again, the tribunal does have to pay special attention to guaranteeing parties’ access to justice and the possibility of enforcement of substantive rights. The tribunal also has to pay special attention to making the actual proceeding accessible and not raising the threshold for engaging in a legitimate proceeding for a reason that is not comparably important. Finally, the panel’s autonomy and authority could perhaps be compared to the right and the duty to manage a company: there must be freedom to take proper action when necessary without submitting all issues to the board of directors or shareholders.

4.9 CONDITIONS IMPOSED BY THE AGREEMENT OF THE PARTIES: DUTY TO MEDIATE OR NEGOTIATE The arbitration agreement or arbitration clause may contain contractual duties relating to the settlement of the matter prior to arbitration or such duties may be imposed in the terms and conditions of the underlying agreement. These duties may relate to negotiating prior to resorting to arbitration. 54

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What is substantive and what is procedural is not always distinguishable: for example, is the right or remedy to claim damages or speciﬁc performance substantive or procedural—or perhaps both? ASPECTS OF JURISDICTION OTHER THAN THE AGREEMENT

The duty to negotiate may be very speciﬁc and not just a generic duty to negotiate “in good faith to reach an amicable settlement out of court”. Sometimes the negotiation or mediation mechanism speciﬁes various tiers of negotiation (e.g., climbing the ladder of the corporate hierarchy before being referred to an outside mediator). It is not always clear whether such duties are enforceable rights, and even when enforceable, whether they are truly conditions precedent to arbitral proceedings in the sense that the proceedings cannot be started prior to completion of all the required “ADR steps”.55 Theories are being tested and clarity is being sought in the interest of expediency and avoiding unnecessary expense.56 In any case, the “steps” cannot be presumed to prevent a party from applying for protective or interim measures before courts of law.57 Do they then bar such measures in arbitration? This is undoubtedly an issue of construction and interpretation, but by whom? This issue of interpretation would at least prima facie seem to be within the jurisdiction of the arbitral tribunal. Does the initiation of arbitral proceedings (e.g., by ﬁling a request at an institution to have the tribunal constituted for the purpose of interpreting the agreement) and making a claim for interim or protective measures already violate the duty to negotiate or mediate? Protective and interim measures relate to the initial stages of arbitration and are not, in substance, part of the arbitral proceedings, although they are ancillary thereto. Having an arbitral tribunal constituted for these purposes does not categorically violate the 55

See Karl Mackie’s article, The Future for ADR Clauses after Cable & Wireless v. IBM, 19 LCIA ARB. INT’L., (2003). UNIDROIT establishes ADR as an effective measure to interrupt the running of statute of limitation. UNIDROIT Art. 10.7: The provisions of Articles 10.5 and 10.6 apply with appropriate modiﬁcations to other proceedings whereby the parties request a third person to assist them in their attempt to reach an amicable settlement of their dispute.

56

See Laminate Acquisition Co. v. BTR Australia Ltd [2004] I AII E.R. 737. Louise Barrington, ADR Clauses and a Duty to Negotiate in Good Faith, 9 IBA NEWSLETTER: ARB. & ADR 25–26 (Oct. 2004) wrote: Reyes J referred to the continental concept of “good faith” in adjudicating commercial disputes, and to the concern of English courts to ensure that ﬁduciaries do not act in bad faith towards beneﬁciaries. In light of this experience he said, “. . . it is difﬁcult to see why an English or Hong Kong Court should have any real difﬁculty in assessing whether parties have objectively acted in a spirit of cooperation and good faith.” Citing Queensland’s Judge Kirby, Reyes J said there is no blanket rule against the enforcement of all agreements to agree. Rather, the court needs to ask whether there are objective criteria against which reasonable compliance with the agreement can be assessed. If there are such criteria, the agreement may be enforced. In reaching this conclusion, the judge also considered the Judicial Working Party Report’s Proposal No 674, recommending that judges be empowered to make adverse costs orders in cases where mediation has been unreasonably refused, saying “It would be odd and contrary to common sense expectation for the law to say that, if one side deliberately ﬂaunts the agreement by not participating in mediation at all, the bargain cannot be enforced and the time and expense which both parties sought to minimise by agreeing to mediate cannot be avoided. . . . It would be equally strange for the Court to say that in all cases an agreement to mediate . . . is unenforceable, while the Court reserves to itself a power to penalise a party in costs for failing to mediate. . . .”

57

Even if expressly barred, such a waiver could hardly be enforceable in abusive or other such situations where duties are being deliberately violated or fraud is being committed. Arbitration Act 1996 of England § 9(2) (see Appendices, p. 258).

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purposes of “negotiation-mediation” duties. However, when a statement of claims for “ordinary” relief is ﬁled, the issue becomes more substantive. Agreements—even those with only the temporary effect of restraining access to legal protection—should in principle be narrowly construed. If the restraints imposed are signiﬁcant in light of the underlying transaction, the parties involved, or the circumstances in general, they may be unconscionable or unreasonable or even amount to denial of justice; thus, such restraints could as such be considered null and void as a violation of international ordre public. Such restraints may be classiﬁed as “waivers to legal protection”. In any case, they must be narrowly construed, and their enforceability must be unambiguous as to their use as conditions precedent. However, negotiation clauses in the contracts of the parties must be understood. If functional, such agreements could lead to effective dispute resolution, which is in a broader view also a prerequisite for access to justice. Yet it is clear that an analysis of the genuine purpose of the clause has to be made in casu. If it seems taking into consideration the contract and the circumstances of making the contract as well as the circumstances in the context of the dispute resolution in progress that the negotiation or similar clause could not possibly lead to timely resolution of the dispute in questions, the argument of effective protection of substantive rights seems even more valid.

4.10 SUMMARY Arbitrability is probably the most challenging and problematical procedural aspect or prerequisite of jurisdiction in addition to the arbitration agreement. Arbitrability is a very arbitration-speciﬁc problem that touches the very foundations of arbitration as a method of dispute resolution. Theoretically, it might have a lot to do with the core of due process: what claims can be examined and what rights can be established or validated might at least in the long run have something to do with the quality of the procedure and the procedural safeguards of arbitration. As arbitrability has a strong bond with substantive law, and as discussing it in much more detail would require a broad analysis of various substantive law areas, the analysis in this book remains superﬁcial. On the other hand, the other jurisdiction-related problems discussed above such as res judicata and lis pendens are classical procedural problems that are handled in detail in classical procedural law research. Although they do have arbitration-related “twists,” they are not discussed in more detail in this book. In general, in relation to all jurisdictional questions, access to justice and effective protection of substantive rights is prima facie the most important argument. However, we have to remember that at least traditionally, access to courts is the primary guarantee (or better, the necessary guarantee) of access to justice. This binds the jurisdictional questions more intensively than often thought to the procedural questions raised in arbitration. In order to guarantee access to justice and to be able to make access to courts less relevant, arbitration procedures have to be as fair, affordable, and certain

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ASPECTS OF JURISDICTION OTHER THAN THE AGREEMENT

as possible. Also, all the extra steps or requirements that might make access to arbitration more difﬁcult hinder the enforcement of the parties’ substantive rights. Exclusive jurisdiction of the tribunal might conﬂict with the parties’ right of access to courts. However, having to argue a dispute in more than one forums raises the costs of dispute resolution, thus making it more difﬁcult to enforce substantive rights. In that way it is a due process matter when the tribunal decides when appropriate that it does not have jurisdiction. On the other hand, the tribunal in question might just be a party’s only chance to de facto access to an effective dispute resolution method and enforcement of his substantive rights. Thus the due process argument requires the tribunal to ﬁnd it has jurisdiction when appropriate and not to unreasonably deny jurisdiction. The problem has to be decided by balancing the relevant arguments in each speciﬁc case at hand.

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Chapter 5

The Panel and Due Process

5.1 THE ARBITRATION PANEL IN THE DISPUTE RESOLUTION CONTEXT The composition and construction of the arbitration panel is clearly of great importance for the procedure as a whole, for legitimacy of the institution and each arbitral award, for the fairness of the arbitral proceedings and for compliance with due process requirements. In classical procedural law, the independence and impartiality of the courts and judges is one of the classical fair trial themes both in research and practice; no wonder it is interesting and important in arbitration as well. In State courts, the tribunals are permanent and independent from governmental control. The judges are permanent ofﬁcials who solve cases brought to them, and their authority and jurisdiction is based on law. In contrast, in arbitration most of the tribunals are not permanent. Tribunals are mostly constituted case by case, and the authority of the arbitrators and the jurisdiction of the tribunal are most of the time based on the arbitration agreement between the parties. Also, court procedure is rather exactly prescribed by law, but in arbitration the procedural details are often decided in the contract—or even more likely left to the discretion of the arbitrators. In ordinary court procedure, the parties can appeal, but arbitration leads to a ﬁnal decision. This short and self-evident comparison should highlight the importance of qualiﬁed, independent, and impartial tribunals in arbitration. However, the question of independency and impartiality is not only twice as important but also probably at least twice as difﬁcult in arbitration in comparison with court procedure. Even though it is discussed with the same terminology (and in many countries in similar norms), the context makes the problems and solutions look different. Impartiality is one of the key elements of the arbitration procedure. An impartial decision maker is what separates arbitration from some of the other forms alternative dispute resolution (ADR). Some ADR scholars might say that arbitration is not ADR, but rather private court procedure. This is based on the difference between the purposes in arbitration and traditional ADR such as mediation. In traditional ADR, the content of the agreement (i.e., the solution) is not important, as the primary goal is to 107

resolve the conﬂict in a sociological sense between the parties. In court procedure and in arbitration, the goal is to solve the legal dispute correctly on factual and legal bases regardless of the social situation between the parties after the decision. For example, it is actually questionable whether a mediator needs to be impartial as long as he gets the conﬂict resolved. This is because the mediator does not have the power to end the dispute as that remains with the parties. In arbitration, the arbitrator has all the power, not only over the substantive result, but in many cases over the procedure as well. Also, the idea in arbitration is that disagreeing parties let the third party resolve the matter. This way the impartial decision maker in a way deﬁnes arbitration in the ﬁeld of dispute resolution mechanisms. From a due process perspective, the position of the panel from its own point of view is not that interesting. However, the rights and duties of the arbitrators naturally reﬂect on the rights and duties of the parties. Accordingly, they might also connect with due process requirements. What constitutes the position of the arbitrator is a classic question in arbitration jurisprudence. Is it a contractual relationship, or is the position of arbitrator strictly based on law? Without getting too deeply into this problem (which is not a key issue for the objective of this work), it is probably safe to say that the legal position of the arbitrator is a mixture of both contract and law-based rights and obligations. An arbitrator cannot make enforceable decisions just on the basis of a contract, and thus the law gets to also partly deﬁne the rights and obligations of arbitrators in relation to the parties. However, no one has to arbitrate, and once one has committed to arbitrate, one is at least to some extent bound to it.1

5.2 THE COMPOSITION OF THE PANEL There are various ways of constituting an arbitral panel or appointing arbitrators: (1) as provided by a national arbitration act or institutional rules, (2) by appointment of a party or by appointment of an institution or a third party, (3) by the two arbitrators appointed, (4) by a court of law, (5) by agreement, or (6) by a mixture of these. The most common procedure for constituting an arbitral tribunal seems to be each party appointing one arbitrator and the two electing a third as chairman (if they can reach a consensus). In most cases the mechanism of appointment provides for a secondary safeguard should the primary appointing authority fail to nominate the arbitrator within the time period indicated or if the arbitrators fail to agree on the chairman. The number of arbitrators may also vary. The most common is perhaps a sole arbitrator, but three arbitrators are very common too, in particular in larger cases under institutional rules or in statutory ad hoc arbitration. ICC Article 8(1) and (2) provides: (1) The disputes shall be decided by a sole arbitrator or by three arbitrators. (2) Where the parties have not agreed upon the number of arbitrators, the Court shall appoint a sole arbitrator, save where it appears to the Court that the dispute is 1 108

See, e.g., LARS HEUMAN, SKILJEMANNARÄTT 220 [Law of Arbitration] (1999). THE PANEL AND DUE PROCESS

such as to warrant the appointment of three arbitrators. In such case, the Claimant shall nominate an arbitrator within a period of 15 days from the receipt of the notiﬁcation of the decision of the Court, and the Respondent shall nominate an arbitrator within a period of 15 days from the receipt of the notiﬁcation of the nomination made by the Claimant.

The rules applicable to the appointment of arbitrators (whether by an agreement, statute, or institutional rules) are part of international due process as demonstrated by the provisions of Article V(1)(d) of the Convention: Recognition and enforcement of the award may be refused . . . proof that: The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place;. . . .

In principle, the appointment mechanism is always primarily based on the agreement of the parties, and the statute or other rules of appointment are incorporated therein by reference. In the absence of an express reference, the vacuum is ﬁlled by the applicable arbitration law. Such a vacuum is not necessarily an omission or error by a party or parties, but often a well-informed and conscious choice equal in force to a speciﬁc agreement containing an express reference. Perhaps only occasionally the vacuum is something the parties could not agree on, leaving “the unknown” to be ﬁlled by whatever provisions the applicable law may contain. The fairness of the mechanism of constituting the panel is also an independent due process requirement. If the mechanism is very unbalanced, the agreement might not be equitable and it might be considered unreasonable from the point of view of one of the parties.2 The arbitration agreement and thus the jurisdiction of the tribunal might be challenged on that ground even if the suggested arbitrators would not clearly be biased or partial with the grounds being the agreement, not the arbitrators as such. Thus a defense claiming that the arbitrators are independent and impartial regardless of an unfair constituting procedure seems false. From a practical point of view, if a party thinks the arbitrators suggested in an unbalanced process are in fact impartial, the allegedly favored party could well agree to change the mechanism into a balanced one. This would be a timely solution to the problem. However, if there is no agreement on changing the procedure at that point, it is not certain the arbitrators would later be found partial despite their having been chosen in an apparently unfair manner. In fact, the threshold for ﬁnding the arbitrators partial might be high.

5.3 CHALLENGING THE ARBITRATORS Do the rules applicable to challenging arbitrators form part of what constitutes “the composition of the arbitral authority” under the Convention? In business practice,

2

Id. at 132.

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arbitration clauses seldom contain speciﬁc rules as to how an arbitrator could be challenged, but institutional rules often contain such speciﬁcs as do arbitration laws.3 UNCITRAL Model Law Article 13(1) and (2) provide: (1) The parties are free to agree on a procedure for challenging an arbitrator, subject to the provisions of paragraph (3) of this article. (2) Failing such agreement, a party who intends to challenge an arbitrator shall, within ﬁfteen days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstance referred to in article 12(2), send a written statement of the reasons for the challenge to the arbitral tribunal. Unless the challenged arbitrator withdraws from his ofﬁce or the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge.

The challenge may relate to qualiﬁcations agreed upon by the parties, qualiﬁcations provided by the applicable rules, or the applicable arbitration law or national or international due process. Most of these norms are substantive and go to the very core of arbitration. One of the most fundamental due process principles is that of impartiality, but in certain arbitration rules or agreements of parties the impartiality is reduced or waived by express reference to appointing “partial” or “biased” arbitrators from both or all sides.4 Sometimes expertise in a particular ﬁeld often seems to be the overriding interest of the parties superseding an orthodox requirement of impartiality.5 With reference to the Convention’s provisions, we could ask: was the composition of the arbitral tribunal in accordance with the agreement or with the lex arbitri if the rules relating to bias, disqualiﬁcation and resignation were not complied with or were disregarded? As such, the rules are part of the arbitration agreement by reference (although perhaps not part of the arbitration clause itself), we must conclude these ancillary mechanisms are so closely and so intimately connected with the appointment that they form part of what is to be deemed to be part of “the composition of the arbitral tribunal.” The arbitrator’s bias may be disclosed or concealed. In the latter case, the mere existence of the disqualiﬁcation process cannot have had any relevance as to the consequences of such a concealed bias. If a disqualiﬁcation process conducted in full compliance with the agreement of the parties arrives at a manifestly unjust decision allowing a grossly biased person to continue as an arbitrator despite objection, does it bar other action by the objecting party? Article 13(3) of the UNCITRAL Model Law provides: (3) If a challenge under any procedure agreed upon by the parties or under the procedure of paragraph (2) of this article is not successful, the challenging party may request, within thirty days after having received notice of the decision rejecting the challenge, the court or other authority speciﬁed in Article 6 to decide on the challenge, which decision shall be subject to no appeal; while such a request is 3 4 5

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ICC Rules of Arbitration in force as from January 1, 1998 (ICC Publication No 808), as Amended January 1, 2008 (“ICC Rules”) 11(2) and (3) (see Appendices, p. 409). See IBA Guidelines on Conﬂicts of Interest in International Arbitration (May 2004) (“IBA Guidelines”) 4(a) (see Appendices, p. 375). See id. 4(c). THE PANEL AND DUE PROCESS

pending, the arbitral tribunal, including the challenged arbitrator, may continue the arbitral proceedings and make an award.

The decision under the Model Law may be challenged but the proceedings may continue despite such challenge.

5.4 IMPARTIALITY AND INDEPENDENCE 5.4.1 The Requirement of Impartial and Independent Arbitrators As already said above, in general legal proceedings are expected to be conducted by impartial and independent arbitrators.6 To bring it to head, should this not the case we could delete the word legal before the word proceedings.7 In a commercial dispute, considerable economic interests may be at stake. This increases the moral hazard (i.e., the risk of unethical behavior or undue inﬂuence).8 Even the appearance of moral

6

See Model Law Decisions: Logy Enterprises Ltd. v. Haikou City Bonded Area Wansen Products Trading Co., Court of Appeal (Liu, Bokhary, Nazareth JJ.A.) 22 May 1997, published in English: 12(11) International Arbitration Report E-1 (Nov. 1997): CLOUT. A party seeking to show danger of bias must show real danger. The argument that arbitrator’s conclusion “could not readily be explained except by bias” may be rejected where the record before the court cannot support an inference of bias.

7

See, e.g., David Sandy, Independence, Impartiality, Arbitration and the Human Rights Act in England, 20 LCIA ARB. INT’L. (2004). Compare with amiable compositeurs in the Argentina Act Art. 768: 1. Amiables compositeurs can be only challenged for reasons supervening their appointment. 2. They can be legally challenged only on any of the following grounds: 1) Direct or indirect interest in the dispute; 2) Consanguinity with any of the parties within the fourth degree on the parents’ side or relationship with any of the parties within the second decree on the husband’s or wife’s side; 3) Manifest enmity on account of speciﬁc circumstances with any of the parties. 3. In the incidental plea concerning challenge, the procedural rules provided for arbitrators shall be observed.

8

(Argentinian National Code of Civil and Commercial Procedure Law 17.454 of September 19 1967, as reformed by Law 22.434 of March 16 1981, text consolidated according to Decree 1.042 of 1981, as reported in JAN PAULSSON (ED), INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION, (Kluwer Law International 1984 Last updated: January 1985 Supplement No. 3) pp. 3–7). About Chinese law, see Tang Houzhi and Wang Shengchang in INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION 22 (Supp. 11, Jan. 1990): According to Art. 38 of the new Arbitration Law, an arbitrator shall assume legal liability, if any of these circumstances exist: 1. the arbitrator has privately met with a party or agent or accepted an invitation to entertainment or a gift from a party or agent and the circumstance is serious; or 2. while arbitrating the case, the arbitrator committed embezzlement, accepted bribes, practiced graft or made an award that perverted the law. Although China has laws and regulations on bribery, gift-taking, and corruption as well as civil liability, the Arbitration Law, use of the term legal liability in Art. 38 implies that an

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hazard should be eliminated, and the rules relating to bias and impartiality are there for this purpose. This is still a major concern even in modern society.9 The IBA Guidelines10 Article 1 provides: Every arbitrator shall be impartial and independent of the parties at the time of accepting an appointment to serve and shall remain so during the entire arbitration proceeding until the ﬁnal award has been rendered or the proceeding has otherwise ﬁnally terminated.

The ICC Rules11 provide: Every arbitrator must be and remain independent of the parties involved in the arbitration.12

arbitrator would be subject to economic or criminal sanctions if the arbitrator deliberately commits misconduct during arbitration proceedings. 9

Japan Act §§ 50–52 establish a strong policy reﬂecting these Japanese values of honor and integrity and concerns shared with other trading nations: 50 (1) An arbitrator who accepts, demands or promises to accept a bribe in relation to its duty shall be punished by imprisonment with labor for not more than ﬁve years. In such case, when the arbitrator agrees to do an act in response to a request, imprisonment with labor for not more than seven years shall be imposed. (2) When a person to be appointed an arbitrator accepts, demands or promises to accept a bribe in relation to the duty to assume with agreement to do an act in response to a request, imprisonment with labor for not more than ﬁve years shall be imposed in the event of appointment. 51 When an arbitrator with agreement to do an act in response to a request, causes a bribe in relation to its duty to be given to a third person or demands or promises such bribe to be given to a third person, imprisonment with labor for not more than ﬁve years shall be imposed. 52 (1) When an arbitrator commits a crime described in the preceding two articles and consequently acts illegally or refrains from acting in the exercise of its duty, imprisonment labor for a deﬁnite term of not less than one year shall be imposed. (2) The provisions of the preceding paragraph shall apply when an arbitrator accepts, demands or promises to accept a bribe, or cause a bribe to be given to a third person or demands or promises a bribe to be given to a third person, in relation to having acted illegally or refrained from acting in the exercise of its duty. (3) When a person who was an arbitrator accepts, demands or promises to accept a bribe in relation to having acted illegally or refrained from acting in the exercise of its duty during its tenure as an arbitrator with agreement thereof in response to a request, imprisonment with labor for not more than ﬁve years shall be imposed.

Section 54 provides: A person who gives, offers or promises to give a bribe as provided for in articles 50 through 52 shall be punished by imprisonment with labor for not more than three years or a ﬁne of not more than two million ﬁve hundred thousand yen.

10 11 12

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(Japanese Arbitration Law, No. 138 of 2003, in force 1 March 2004, as reported in JAN PAULSSON (ED), INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION, (Kluwer Law International 1984 Last updated: March 2005 Supplement No. 43) pp. Annex I-1–Annex I-20). IBA Guidelines. ICC Rules. Id. Art. 7(1) (see Appendices, p. 406). THE PANEL AND DUE PROCESS

The problem of impartiality seems to be increasing rather than fading away. In the introduction to the IBA Guidelines, the eminent drafters described the issues accurately: Problems of conﬂicts of interest increasingly challenge international arbitration. Arbitrators are often unsure about what facts need to be disclosed, and they may make different choices about disclosures than other arbitrators in the same situation. The growth of international business and the manner in which it is conducted, including interlocking corporate relationships and larger international law ﬁrms, have caused more disclosures and have created more difﬁcult conﬂict of interest issues to determine. Reluctant parties have more opportunities to use challenges of arbitrators to delay arbitrations or to deny the opposing party the arbitrator of its choice. Disclosure of any relationship, no matter how minor or serious, has too often led to objections, challenge and withdrawal or removal of the arbitrator.

Before going into details, it is necessary to clarify the basic meaning and core of independency and impartiality in the arbitration context.

5.4.2 The Meaning of Independency and Impartiality in Arbitration There is some discussion concerning what independency and impartiality mean in an arbitration context.13 Binder writes: Impartiality (occasionally incorrectly referred to as “neutrality”) is the “test for the lack of impermissible bias in the mind of the arbitrator toward a party or toward the subject-matter in dispute,” as was outlined by M. Scott Donahey in this context. This test is a subjective one and it is not directed at the appearance of bias but to its actual presence, which is “inferred from the facts and circumstances surrounding the arbitrator’s exercise of the arbitral functions.” Independence, on the other hand, is a term that refers to the relationship between the arbitrator and the parties and indicates prior or current personal, social or business contact between them. The closer the relationship between these “spheres,” the less “independent” the arbitrator or tribunal is considered to be. Unlike the test for impartiality, the test for independence is an objective one, as prior business or ﬁnancial relations are easy to determine. Professor Lalive came up with a well-chosen, albeit cynical deﬁnition of the term at the VIth Symposium on International Arbitration (Paris, October 1988): “Independence implies the courage to displease, the absence of any desire, especially for the arbitrator appointed by a party, to be appointed once again as an arbitrator.14

Binder’s deﬁnitions seem to differ from the well-established counterparts used in ordinary procedure. According to Binder, impartiality is deﬁned by a subjective test and decisive is the actual presence of bias, where independence concerns the 13 14

See also Luttrell at 20–24 about the difference between concepts of impartiality and independency and the meaning of neutrality. Peter Binder, Italian Arbitration Law, in INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION 83–84 (Supp. 17, Jan. 1994).

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relationship between the parties and the arbitrator and is deﬁned by an objective test. In procedural law or general court procedure, impartiality seems to have a broader meaning deﬁned by an objective test. Independence on the other hand is attached to other kinds of criteria mostly concerned with the institutional position of courts and judges. Independence in Binder’s terminology seems to be something that is generally placed under impartiality. Impartiality in the general procedural context refers to the objectivity of the courts and the judges in individual cases. Objectivity here means freedom of bias and prejudice for any reason, whether related to the parties or the subject matter. The impartiality of the judge is usually deﬁned by a two part test in which subjective and objective impartiality are separated. First, the subjective test provides that a judge acts impartially in an individual case and is in fact not willing to promote the success of one of the parties in the case at hand. If there is no evidence to support the opposite, subjective impartiality is presumed. The problem is, as evident, that proving the subjective partiality of a judge is in practice impossible. That is why the objective test of impartiality is de facto decisive. The objective test provides that there should not be any objectively justiﬁed doubts concerning the impartiality of the judge in light of “externally visible circumstances”. In opposition to Binder’s terminology, the objective test is not limited to the judge’s relation to the parties in the case but rather to all the circumstances that might cast a shadow over the judge’s impartiality.15 It should be obvious that the question of impartiality of an arbitrator has to be decided on grounds of an objective test of bias.16 It should be very rare that the subjective test would be applicable as partiality would only be relevant in the most obvious cases. It would probably be fair to say that only nearly fraudulent behavior would lead to disqualiﬁcation if the subjective test was the only criterion. Also, being able to control the impartiality of a judge and avoid being judged by someone whose impartiality can be objectively questioned is clearly a due process requirement in arbitration as well. It may at times be in conﬂict with the requirements of practicality, and it certainly can be used to obstruct the proceedings, but the fairness and integrity of the proceedings have to given priority.17 15

16

17

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Another stranger in the arbitration terminology is neutrality, which is often used to refer to the national neutrality of the panel, or to an arbitrator nominated by a party but still acting neutrally and objectively (see M. Scott Donahey, The Independence and Neutrality of Arbitrators, 9 J. INT’L. ARB. 31 (1992) and Douglas Earl McLaren, Party-Appointed vs. List-Appointed Arbitrators: A Comparison, 20 J. INT’L ARB. 233 (2003)). See David A. Lawson, Impartiality and Independence of International Arbitrators— Commentary on the 2004 IBA Guidelines on Conﬂicts of Interest in International Arbitration, 23 ASA BULLETIN 22 (2005): “The differences in the existing statutes, rules and guidelines as to the impartiality and independence of international arbitrators have often been more a question of form than substance. The main exception to this is the ongoing dispute of whether to apply a subjective or an objective standard for measuring impartiality and independence of international arbitrators. Surprisingly, there has been little by way of academic discussion in this area.” As to applying the subjective and the objective test to arbitrators, see Otto L O De Witt Wijnen et al., Background Information on the IBA Guidelines on Conﬂicts of Interest in International Arbitration, 5 IBA BUS. L. INT’L 442(Sept. 2004). THE PANEL AND DUE PROCESS

Independency, on the other hand, is a difﬁcult concept in the arbitration context. In general, procedure independence refers to the institutional frame that allows judges and courts to work free of any outside pressure and be impartial. Attention is paid to there being a general impression of neutrality and institutional protection against outside pressure as well as to the way judges are appointed and the length of their term in ofﬁce.18 Even though independence refers more to the institutional setting, separating the requirements of independency and impartiality is difﬁcult.19 However, it should be clear that due to the requirement of independency, the arbitrators should be in a position that allows them to be objectively free of any orders from anyone concerning the case in question.

5.4.3 Same but Different? The Standard of Impartiality in Arbitration In the national arbitration law of many countries, the standard of independence and impartiality is the same as what is applied to judges in State courts.20 However, arbitral proceedings lack some of the institutional guarantees natural to the courts. The tribunals are in many cases appointed ad hoc and the arbitrators are not guaranteed a livelihood as arbitrators. Furthermore, the arbitrators have acted in various positions in the business and legal worlds and so are often much more closely connected to the outside world than ordinary judges. From many perspectives, this is a great beneﬁt, but from the perspective of impartiality this causes potential problems. One of the biggest single problems in applying similar standards of impartiality to both the judges and arbitrators has to do with the way arbitrators are nominated. Arbitrators are often nominated by the parties; for example, it is usual that both of the parties nominate one arbitrator and the arbitrators together decide the chairman of the tribunal. A question arises whether these party-appointed arbitrators can ever be impartial according to the same criteria applied to ordinary judges. Most likely, the answer is they can’t.21 It seems clear that at least in an objective test, an arbitrator might be seen to be encouraged to promote the case of the nominating party. These nominations are very 18 19 20 21

ECHR in Langborger v. Sweden (Application no. 11179/84). Judgment 22 June 1989, para 32. Id. “In this case it appears difﬁcult to dissociate the question of impartiality from that of independence”. See De Witt Wijnen, supra note 17, at 443–44. See also Peter Schlosser, Die Unparteilichkeit des Schiedsrichteramtes, ZEITSCHRIFT FÜR ZIVILPROZESS 139 (1980).“Die deutsche ZPO etwa hat durch die Verweisung auf das Recht der Richterablehnung klare Befangenheitstatbestände ausgewiesen, ohne nach der Art der Schiedsrichterbestellung zu fragen.—Wollte man mit diesem Grundsatz wirklich ernst machen, so könnte freilich so gut wie jeder von einer Partei benannte Schiedsrichter abgelehnt werden. Allein die Tatsache, dass der Prozessgegner eine Person als Schiedsrichter bestellt hat, ist geeignet, die Besorgnis ihrer Befangenheit zu begründen.” See also HEUMAN, supra note 1, at 238–39, and Stephen C. Rogers, Can Tripartite Arbitration Panels Reach Fair Results? 8 DISP. RESOL. MAG. 27 (2001).

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sought after, and being nominated carries with it ﬁnancial renumeration.22 An arbitrator naturally might feel a debt of gratitude toward the nominating party. Also, it is reasonable to presume that an arbitrator might expect a party in a similar position or branch of business to be in need of an arbitrator some time in the future. Finally, it is reasonable to think the satisfaction of a party regarding the award and procedure in general determines whether that party will nominate the arbitrator again. Thus it is not surprising that according to a study, 90 percent of the arbitrators nominated by a party vote in a way favorable to the nominating party.23 However, this does not mean we can assume the arbitrators subjectively mean to be partial. The point is that in applying an objective test, it is reasonable to suspect the impartiality of a party-nominated arbitrator if the test would be interpreted in a similar way as in court procedure. Also, it is a general procedural principle that impartiality is deﬁned by the objective test, as otherwise it would practically not have any relevance. It would actually be fair to say the requirement of impartiality as deﬁned by the objective test is in fact a due process requirement. Whether the standard of impartiality required or the waiver doctrine affects the result is a different thing. The conclusion is not, though, that all party-nominated arbitrators can always be disqualiﬁed. The standard of impartiality might be different in arbitration, and the waiver doctrine naturally changes the situation. Still, ascertaining the meaning of the impartiality requirement in arbitration seems to be difﬁcult for courts as well, and there seems to be no clear doctrine of what kind of impartiality is actually required.24 This easily leads to situations in which the partiality of arbitrators may seem to be accepted.25. This seems to be the case especially when it comes to party-appointed arbitrators, where the partiality might be seen to be automatically accepted and waived by the parties.26 22 23 24 25 26

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See Schlosser, supra note 21, at 124. See Seth Lieberman, Something’s Wrong in the State of Party-Appointed Arbitration: Healing ADR’s Black Eye That is “Nonneutral Neutrals”, 5 Cardozo J. Conﬂict Resol. 226 (2004). See Laurence Shore, Disclosure and Impartiality: An Arbitrator’s Responsibility vis-à-vis Legal Standards, DISP. RESOL. J. (Feb. 2002), passim. See Deseriee A. Kennedy, Predisposed with Integrity: The Elusive Quest for Justice in Tripartite Arbitrations, 8 GEORGETOWN J. LEGAL ETHICS 781 (1995). Id. at 768, and especially 770–71: “Concerned ﬁrst with maintaining the purported efﬁciencies of arbitration and judicial economy, courts hesitate to be used as a means of challenging arbitration awards and accordingly decline to review alleged errors of law, procedure or ethics. Courts typically remain unmoved by allegations of improper arbitrator relationships or conduct, especially with regard to party-appointed arbitrators. The judges argue that “(s)ince both parties, by agreeing to upon tripartite arbitration, have necessarily accepted the idea of partisan “appointees”, neither may object to the other’s designation of someone associated with his interest or related to him”. See also at 752: “. . . prevailing customs and judicial inaction licence an arbitrator to perform a number of services on behalf of his nominating party during the course of arbitration”. See also Lieberman, supra note 23, at 233–37: “Even those partyappointed appellate decisions that recognize the importance of arbitrator neutrality have simultaneously conceded that the party-appointed arbitrators may be partisan representatives of each sides.” . . . “Both arbitrators and the highest courts are unclear about the role of party-appointed arbitrators. This lack of clarity will only perpetuate the confusion already existing among practicing arbitrators and the parties that appoint them.” THE PANEL AND DUE PROCESS

In the legal literature concerning arbitration, it is often assumed that sympathies for another party do not hinder someone acting as an arbitrator as long as the arbitrator can set them aside and act conscientiously and professionally.27 However, this kind of approach seems unrealistic and only leads to the fundamental problem being ignored and left unsolved. As Rau writes, “A mythology that promotes the belief that international arbitrators can be relied on not to allow their sympathy ‘to override their conscience and professional judgment’—regardless of whether this is taken as empirical description or a mere aspiration—seems calculated only to increase these dangers of self-deception and sandbagging.”28 To be a bit more analytic, the idea that professional judgment could override latent sympathies seems to be a bit naïve and based on a relatively simplistic theory of epistemology and ontology in legal proceedings. It presumes there is an objective outsider perspective regarding both law and facts that is available to the arbitrator. However, that kind of objective view is never available, not in arbitration or in court procedure. Ideology, religion and history among other attachments cause people to observe the world from a certain perspective.29 Even if this is seen as a given fact in all dispute resolution, in arbitration there are probably more attachments and possibly more concrete attachments to certain sides in the dispute than in the courts. Therefore, there seems to be a gap between the rhetoric of impartiality and the idea of the requirements needed for a good and functioning arbitration practice. As Rau puts it, “(E)ven in the best of circumstances an ofﬁcial rhetoric of ‘independence’ and the tolerated latent ‘sympathy’ must exist in an uneasy tension.”30 It would seem that there are two possible solutions to this problem. First, it would be possible to openly admit that the standard of impartiality in arbitration is lower than in court procedure. In some form, this probably has to be done, especially what comes to institutional guarantees in the courts and the implications of the nomination practices. However, as stated above, if required by the parties, objective impartiality is one of the key due process requirements that cannot be sacriﬁced for reason of practical need.31

27 28 29

30 31

See HEUMAN, supra note 1, 238–39. Alan Scott Rau, On Integrity in Private Judging, 14 ARB. INT’L 115, para. I(b). (1998). See Bedjaoui s. 7 ss., para. I: “Like all men, an arbitrator has a conscience which gives him a certain outlook at the world. He cannot detach himself from all the emotional ties which, consciously or unconsciously, may inﬂuence his thoughts. Whenever men are judged, including judgement by arbitration, as we have already said, a wager is laid on impartiality. An arbitrator is not a disembodied, ﬂoating being, without origins, or ethnic, cultural, religious, social and other attachments. ‘There are’ states a report to the symposium of 20 November 1970 on arbitration, ‘some indistinct forms of which pose a very difﬁcult problem for those who will be demanding about indisputable impartiality. These forms are called Ideology (or that which we name ideology), Religion (or that which we name religion) and History (of more recent inspiration).’” Rau, supra note 28, at 115, para. I(b). See id. at para. I(a): “Occasional pronouncements on the ‘law of arbitration’ purport to identify the standards to which we hold arbitrators with those standards of impartiality demanded of public judicial ofﬁcers. More often, however, it is blithely assumed that our expectations of arbitrators must be considerably more relaxed”.

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Second, the waiver doctrine is there to rescue the impartiality of arbitrators. Potential biases are widely disclosed, and a party who has not raised the issue cannot later insist on partiality. Thus, it is said a party accepts the arbitrator and waives possible partiality based on disclosed facts. However, impartiality (at least in the frame formulated above) is a holistic concept, and judging the relationship of the disclosed and waived causes of partiality to the whole situation and possible later-arisen facts and causes is difﬁcult. Also, a waiver is problematic in relation to partiality, as it might be difﬁcult to openly challenge the fairness and integrity of the person who is going to resolve the dispute. But this is a general problem in procedural law. When judging the impartiality of a speciﬁc arbitrator or a speciﬁc panel, we should probably take the total picture into consideration. If the panel is relatively equal taking into consideration the process of its formulation, the background of the arbitrators and other attachments discussed above, and the position and nature of the speciﬁc dispute and the parties, we could probably be more understanding when determining whether factors could possibly constitute bias. In contrast, if the panel or the procedure of nominating it already is relatively unfair or unbalanced, we should give greater weight to every single possibility of bias. Also, if a party has already waived many single instances of bias, any newly emerging reasons should be given more importance and relevance. The requirement of impartiality and the discussion about it seems problematic in arbitration. On the one hand, a ﬂexible attitude towards the impartiality requirement further promotes the practicality of arbitration as a dispute resolution method, guarantees the ﬁnality of decisions and makes it easier to get a panel with the best substantive knowledge. On the other hand, the lack of neutrality and impartiality of the panel reduces the status and credibility of arbitration as a dispute resolution method especially in comparison to trial.32

5.4.4 What Constitutes Bias? After the more theoretical framework set forth above, the next questions involve what kind of things could actually constitute bias, and what kind of facts could lead to an arbitrator failing the objective test discussed above. So the criterion is objective: may the circumstance in question affect the person’s impartiality? Whether the particular circumstance has any concrete effect on the person’s work as part of the tribunal is irrelevant for the objective test. Bias arises from many factors, including: (i) economic dependence (employment, consultation, trading, joint interests); (ii) emotional ties, which may be friendly (such as family ties, friendship) or unfriendly (competitor, hostility, fear); 32

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See Kennedy, supra note 25, at 781: “Permitting non-neutral arbitrators to engage in advocacy and prejudge cases reduces the public’s conﬁdence in the fairness of the system and ensures that arbitration remains inferior to litigation. The continued relegation of arbitration to an inferior status, exhibits the courts’ historical distaste for arbitration. The judiciary’s mistrust of arbitration is manifested in its willingness to accept biased arbitrators’ involvement in the process and its refusal to raise the standards of partiality and misconduct.” THE PANEL AND DUE PROCESS

(iii) prior involvement in or knowledge about the matter; (iv) personal interests in common with a party or interests or ties with a person in (i) or (ii) above having an indirect interest in or relationship with the matter or a party; or (v) prior position taken as to the particular issue in dispute.33

In addition to a more or less self-evident list of things, we should pay special attention to the focus of the impartiality analysis. The analysis is always done in context, and the meaning of things might differ case by case. This has to be kept in mind when using the guidelines and lists described below. In general it could be mentioned that economic factors seem to have been put in a relatively pronounced position in the list of possible reasons of bias. At least in part this is probably because people are assumed to be motivated by money. It might also be because the simpliﬁed idea of partiality is ascribed to the active subjective will of an arbitrator to make one of the parties win. But because of the increased relevance of objective criteria of the analysis, other factors should have greater inﬂuence. It might be that friendship or even a personal relationship with one of the parties might have a greater importance in an objective and holistic analysis than a small amount of money paid for some service years ago. Under the IBA Guidelines (which partly replace the IBA Rules of Ethics), bias is determined by: (i) “Subjective analysis” test (a) An arbitrator shall decline to accept an appointment or, if the arbitration has already been commenced, refuse to continue to act as an arbitrator if he or she has any doubts as to his or her ability to be impartial or independent. (ii) Third party “objective doubt” test (b) The same principle applies if facts or circumstances exist, or have arisen since the appointment, that, from a reasonable third person’s point of view having knowledge of the relevant facts, give rise to justiﬁable doubts as to the arbitrator’s impartiality or independence, unless the parties have accepted the arbitrator in accordance with the requirements set out in General Standard (4). (iii) Objective test as to justiﬁable doubt (c) Doubts are justiﬁable if a reasonable and informed third party would reach the conclusion that there was a likelihood that the arbitrator may be inﬂuenced by factors other than the merits of the case as presented by the parties in reaching his or her decision. (iv) “Per se” rule (arbitrators are deemed to be human beings) (d) Justiﬁable doubts necessarily exist as to the arbitrator’s impartiality or independence if there is an identity between a party and the arbitrator, if the arbitrator is a legal representative of a legal entity that is a party in the

33

See also IBA Ethics Art. 3.

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arbitration, or if the arbitrator has a signiﬁcant ﬁnancial or personal interest in the matter at stake.

The guidelines underline the importance of the objective test. However, the requirement of likelihood to be inﬂuenced by factors other than merits as criteria of justiﬁability of doubts seems a bit exaggerated. From a due process point of view, it should be enough that it would be objectively possible the arbitrator would be inﬂuenced by factors other than merits as likelihood is difﬁcult to prove. However, we should read the guidelines as being soft rather than black letter law.

5.4.5 Duty to Disclose Independence and impartiality are safeguarded by the arbitrator’s duty to disclose facts or circumstances that may cast a doubt in these respects.34 If parties did not know about potential bias, they would not be able to challenge the impartiality of an arbitrator, and we could not rely on the waiver doctrine to solve problems related to bias. The duty to disclose covers a wider range of things and is far more extensive that what constitutes bias.35 UNCITRAL Model Law Article 12 provides: (1) When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose any circumstances likely to give rise to justiﬁable doubts as to his impartiality or independence. An arbitrator, from the time of his appointment and throughout the arbitral proceedings, shall without delay disclose any such circumstances to the parties unless they have already been informed of them by him. (2) An arbitrator may be challenged only if circumstances exist that give rise to justiﬁable doubts as to his impartiality or independence, or if he does not possess qualiﬁcations agreed to by the parties. A party may challenge an arbitrator appointed by him, or in whose appointment he has participated, only for reasons of which he becomes aware after the appointment has been made.36

Article 3 of the IBA Guidelines deﬁnes the duty to disclose as follows: (a) If facts or circumstances exist that may, in the eyes of the parties, give rise to doubts as to the arbitrator’s impartiality or independence, the arbitrator shall

34 35

ICC Rules Art. 7(2) and (3) (see Appendices, p. 406). See De Witt Wijnen et al., supra note 17, at 305–25; Japan Act § 18, supra note 9, at 3–4: (3) When a person is approached in connection with its possible appointment as an arbitrator, it shall fully disclose any circumstances likely to give rise to justiﬁable doubts as to its impartiality or independence. (4) An arbitrator, during the course of arbitral proceedings, shall without delay disclose any circumstances likely to give rise to justiﬁable doubts as to its impartiality or independence (unless the parties have already been informed of them by the arbitrator).

36

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See also Swiss Rules Art. 9, 10 and 11 (see Appendices, p. 462). See also IBA Ethics 5.1.

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disclose such facts or circumstances to the parties, the arbitration institution or other appointing authority (if any, and if so required by the applicable institutional rules) and to the co-arbitrators, if any, prior to accepting his or her appointment or, if thereafter, as soon as he or she learns about them. (b) It follows from General Standards 1 and 2(a) that an arbitrator who has made a disclosure considers himself or herself to be impartial and independent of the parties despite the disclosed facts and therefore capable of performing his or her duties as arbitrator. Otherwise, he or she would have declined the nomination or appointment at the outset or resigned. (c) Any doubt as to whether an arbitrator should disclose certain facts or circumstances should be resolved in favor of disclosure. (d) When considering whether or not facts or circumstances exist that should be disclosed, the arbitrator shall not take into account whether the arbitration proceeding is at the beginning or at a later stage.

In the current practice of law, this has sometimes been stretched to the extreme, with even the tiniest potential conﬂicts of interest, past or present, in a multijurisdictional law ﬁrm being disclosed as potential ground for bias.37 It is certainly safer and preferable to disclose rather than to conceal, but a trademark application ﬁled by an associate in Buenos Aires can hardly constitute a bias to a Paris partner of the same ﬁrm that would prevent them from becoming an arbitrator in the absence of other conﬂicts. The IBA Guidelines introduce a more “Protestant” view into what has to be disclosed. IBA Guidelines Article 6 provide: (a) When considering the relevance of facts or circumstances to determine whether a potential conﬂict of interest exists or whether disclosure should be made, the activities of an arbitrator’s law ﬁrm, if any, should be reasonably considered in each individual case. Therefore, the fact that the activities of the arbitrator’s ﬁrm involve one of the parties shall not automatically constitute a source of such conﬂict or a reason for disclosure. (b) Similarly, if one of the parties is a legal entity which is a member of a group with which the arbitrator’s ﬁrm has an involvement, such facts or circumstances should be reasonably considered in each individual case. Therefore, this fact alone shall not automatically constitute a source of a conﬂict of interest or a reason for disclosure. (c) If one of the parties is a legal entity, the managers, directors and members of a supervisory board of such legal entity and any person having a similar controlling inﬂuence on the legal entity shall be considered to be the equivalent of the legal entity.

37

See also IBA Ethics Art. 4. At the same time this may constitute another problem, namely, that of a duty of conﬁdentiality and the extent to which it prevents disclosure.

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IBA Guidelines Article 7 imposes on both the parties and the arbitrators a duty to investigate and disclose: (a) A party shall inform an arbitrator, the Arbitral Tribunal, the other parties and the arbitration institution or other appointing authority (if any) about any direct or indirect relationship between it (or another company of the same group of companies) and the arbitrator. The party shall do so on its own initiative before the beginning of the proceeding or as soon as it becomes aware of such relationship. (b) In order to comply with General Standard 7(a), a party shall provide any information already available to it and shall perform a reasonable search of publicly available information. (c) An arbitrator is under a duty to make reasonable enquiries to investigate any potential conﬂict of interest, as well as any facts or circumstances that may cause his or her impartiality or independence to be questioned. Failure to disclose a potential conﬂict is not excused by lack of knowledge if the arbitrator makes no reasonable attempt to investigate.

The duty to disclose can be seen to also have other purposes than just informing the parties of the factors that may possibly affect the objective impartiality of a judge. Broad disclosure makes the arbitrator consider his relationship to the case and the parties. It might be that during the disclosure process the arbitrator notices some biases or prejudices exist. In an ideal world, this would make the arbitrator pay special attention to being impartial in decisions where objective impartiality might be in question. This way the duty to disclose might be important not only from point of view of objective impartiality, but also from the subjective, pedagogical point of view of the arbitrator. Just as with many procedural questions, a fair procedure might not only be necessary as an intrinsic value but also as an instrumental guarantee of the quality of the decision.

5.4.6 IBA Guidelines—Green, Orange, Red, and Nonwaivable Red Lists Besides the duty to disclose, there is some soft law guidance as to what need not be disclosed. The IBA categorizes situations based on a range from “green” (no need to disclose as no conﬂict presented), to “orange” (potential conﬂict must be disclosed, but waiver exists if parties do not timely object), to “red” (conﬂict must be disclosed and may or may not be waivable). This is the IBA Guidelines Green List: 4.1. PREVIOUSLY EXPRESSED LEGAL OPINIONS

4.1.1 The arbitrator has previously published a general opinion (such as in a law review article or public lecture) concerning an issue which also arises in the arbitration (but this opinion is not focused on the case that is being arbitrated). 4.2. PREVIOUS SERVICES AGAINST ONE PARTY

4.2.1 The arbitrator’s law ﬁrm has acted against one of the parties or an afﬁliate of one of the parties in an unrelated matter without the involvement of the arbitrator.

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4.3. CURRENT SERVICES FOR ONE OF THE PARTIES

4.3.1 A ﬁrm in association or in alliance with the arbitrator’s law ﬁrm, but which does not share fees or other revenues with the arbitrator’s law ﬁrm, renders services to one of the parties or an afﬁliate of one of the parties in an unrelated matter. 4.4. CONTACTS WITH ANOTHER ARBITRATOR OR WITH COUNSEL FOR ONE OF THE PARTIES

4.4.1 The arbitrator has a relationship with another arbitrator or with the counsel for one of the parties through membership in the same professional association or social organization. 4.4.2 The arbitrator and counsel for one of the parties or another arbitrator have previously served together as arbitrators or as co-counsel. 4.5. CONTACTS BETWEEN THE ARBITRATOR AND ONE OF THE PARTIES

4.5.1 The arbitrator has had an initial contact with the appointing party or an afﬁliate of the appointing party (or the respective counsels) prior to appointment, if this contact is limited to the arbitrator’s availability and qualiﬁcations to serve or to the names of possible candidates for a chairperson and did not address the merits or procedural aspects of the dispute. 4.5.2 The arbitrator holds an insigniﬁcant amount of shares in one of the parties or an afﬁliate of one of the parties, which is publicly listed. 4.5.3 The arbitrator and a manager, director or member of the supervisory board, or any person having a similar controlling inﬂuence, in one of the parties or an afﬁliate of one of the parties, have worked together as joint experts or in another professional capacity, including as arbitrators in the same case.38

In addition, the guidelines also provide some direction as to what needs to be disclosed and what is usually considered to be waived if not reacted to, what has to be explicitly waived, and what cannot be waived at all. In the Orange List cases, the arbitrator is deemed to have been accepted if no timely objection is made. The Orange List is as follows: 3.1. PREVIOUS SERVICES FOR ONE OF THE PARTIES OR OTHER INVOLVEMENT IN THE CASE

3.1.1 The arbitrator has within the past three years served as counsel for one of the parties or an afﬁliate of one of the parties or has previously advised or been consulted by the party or an afﬁliate of the party making the appointment in an unrelated matter, but the arbitrator and the party or the afﬁliate of the party have no ongoing relationship. 3.1.2 The arbitrator has within the past three years served as counsel against one of the parties or an afﬁliate of one of the parties in an unrelated matter.

38

The user is instructed further as follows:A ﬂow chart is attached to these Guidelines for easy reference to the application of the Lists. However, it should be stressed that this is only a schematic reﬂection of the very complex reality. Always, the speciﬁc circumstances of the case prevail.

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3.1.3 The arbitrator has within the past three years been appointed as arbitrator on two or more occasions by one of the parties or an afﬁliate of one of the parties. 3.1.4 The arbitrator’s law ﬁrm has within the past three years acted for one of the parties or an afﬁliate of one of the parties in an unrelated matter without the involvement of the arbitrator. 3.1.5 The arbitrator currently serves, or has served within the past three years, as arbitrator in another arbitration on a related issue involving one of the parties or an afﬁliate of one of the parties. 3.2. CURRENT SERVICES FOR ONE OF THE PARTIES

3.2.1 The arbitrator’s law ﬁrm is currently rendering services to one of the parties or to an afﬁliate of one of the parties without creating a signiﬁcant commercial relationship and without the involvement of the arbitrator. 3.2.2 A law ﬁrm that shares revenues or fees with the arbitrator’s law ﬁrm renders services to one of the parties or an afﬁliate of one of the parties before the arbitral tribunal. 3.2.3 The arbitrator or his or her ﬁrm represents a party or an afﬁliate to the arbitration on a regular basis but is not involved in the current dispute. 3.3. RELATIONSHIP BETWEEN AN ARBITRATOR AND ANOTHER ARBITRATOR OR COUNSEL

3.3.1 The arbitrator and another arbitrator are lawyers in the same law ﬁrm. 3.3.2 The arbitrator and another arbitrator or the counsel for one of the parties are members of the same barristers’ chambers. 3.3.3 The arbitrator was within the past three years a partner of, or otherwise afﬁliated with, another arbitrator or any of the counsel in the same arbitration. 3.3.4 A lawyer in the arbitrator’s law ﬁrm is an arbitrator in another dispute involving the same party or parties or an afﬁliate of one of the parties. 3.3.5 A close family member of the arbitrator is a partner or employee of the law ﬁrm representing one of the parties, but is not assisting with the dispute. 3.3.6 A close personal friendship exists between an arbitrator and a counsel of one party, as demonstrated by the fact that the arbitrator and the counsel regularly spend considerable time together unrelated to professional work commitments or the activities of professional associations or social organizations. 3.3.7 The arbitrator has within the past three years received more than three appointments by the same counsel or the same law ﬁrm. 3.4. RELATIONSHIP BETWEEN ARBITRATOR AND PARTY AND OTHERS INVOLVED IN THE ARBITRATION

3.4.1 The arbitrator’s law ﬁrm is currently acting adverse to one of the parties or an afﬁliate of one of the parties. 3.4.2 The arbitrator had been associated within the past three years with a party or an afﬁliate of one of the parties in a professional capacity, such as a former employee or partner.

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3.4.3 A close personal friendship exists between an arbitrator and a manager or director or a member of the supervisory board or any person having a similar controlling inﬂuence in one of the parties or an afﬁliate of one of the parties or a witness or expert, as demonstrated by the fact that the arbitrator and such director, manager, other person, witness or expert regularly spend considerable time together unrelated to professional work commitments or the activities of professional associations or social organizations. 3.4.4 If the arbitrator is a former judge, he or she has within the past three years heard a signiﬁcant case involving one of the parties. 3.5. OTHER CIRCUMSTANCES

3.5.1 The arbitrator holds shares, either directly or indirectly, which by reason of number or denomination constitute a material holding in one of the parties or an afﬁliate of one of the parties that is publicly listed. 3.5.2 The arbitrator has publicly advocated a speciﬁc position regarding the case that is being arbitrated, whether in a published paper or speech or otherwise. 3.5.3 The arbitrator holds one position in an arbitration institution with appointing authority over the dispute. 3.5.4 The arbitrator is a manager, director or member of the supervisory board, or has a similar controlling inﬂuence, in an afﬁliate of one of the parties, where the afﬁliate is not directly involved in the matters in dispute in the arbitration.

The Red List is divided into waivable and nonwaivable bias. Nonwaivable conﬂicts indicate absolute “hard” protection, and as such they are a reﬂection of due process. This is the nonwaivable Red List of situations where the arbitrator cannot serve: 1.1. There is an identity between a party and the arbitrator, or the arbitrator is a legal representative of an entity that is a party in the arbitration. 1.2. The arbitrator is a manager, director or member of the supervisory board, or has a similar controlling inﬂuence in one of the parties. 1.3. The arbitrator has a signiﬁcant ﬁnancial interest in one of the parties or the outcome of the case. 1.4. The arbitrator regularly advises the appointing party or an afﬁliate of the appointing party, and the arbitrator or his or her ﬁrm derives a signiﬁcant ﬁnancial income therefrom.

Whether a potential arbitrator in his subjective analysis considers himself to be impartial and independent regardless of a Red List factor is irrelevant: this is a per se rule such as price-ﬁxing in antitrust laws, where it is always evil and there is no “rule of reason.” The Red List continues with lesser “evils,” which may be waived by the parties when fully disclosed. The waivable Red List is as follows: 2.1. RELATIONSHIP OF THE ARBITRATOR TO THE DISPUTE

2.1.1 The arbitrator has given legal advice or provided an expert opinion on the dispute to a party or an afﬁliate of one of the parties. 2.1.2 The arbitrator has previous involvement in the case.

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2.2. ARBITRATOR’S DIRECT OR INDIRECT INTEREST IN THE DISPUTE

2.2.1 The arbitrator holds shares, either directly or indirectly, in one of the parties or an afﬁliate of one of the parties that is privately held. 2.2.2 A close family member4 of the arbitrator has a signiﬁcant ﬁnancial interest in the outcome of the dispute. 2.2.3 The arbitrator or a close family member of the arbitrator has a close relationship with a third party who may be liable to recourse on the part of the unsuccessful party in the dispute. 2.3. ARBITRATOR’S RELATIONSHIP WITH THE PARTIES OR COUNSEL

2.3.1 The arbitrator currently represents or advises one of the parties or an afﬁliate of one of the parties. 2.3.2 The arbitrator currently represents the lawyer or law ﬁrm acting as counsel for one of the parties. 2.3.3 The arbitrator is a lawyer in the same law ﬁrm as the counsel to one of the parties. 2.3.4 The arbitrator is a manager, director or member of the supervisory board, or has a similar controlling inﬂuence, in an afﬁliate5 of one of the parties if the afﬁliate is directly involved in the matters in dispute in the arbitration. 2.3.5 The arbitrator’s law ﬁrm had a previous but terminated involvement in the case without the arbitrator being involved himself or herself. 2.3.6 The arbitrator’s law ﬁrm currently has a signiﬁcant commercial relationship with one of the parties or an afﬁliate of one of the parties. 2.3.7 The arbitrator regularly advises the appointing party or an afﬁliate of the appointing party, but neither the arbitrator nor his or her ﬁrm derives a signiﬁcant ﬁnancial income therefrom. 2.3.8 The arbitrator has a close family relationship with one of the parties or with a manager, director or member of the supervisory board or any person having a similar controlling inﬂuence in one of the parties or an afﬁliate of one of the parties or with a counsel representing a party. 2.3.9 A close family member of the arbitrator has a signiﬁcant ﬁnancial interest in one of the parties or an afﬁliate of one of the parties.

5.4.7 Requirement of Impartial Conduct The meaning and relevance of impartiality is not, however, limited to the person of the arbitrator, but covers the conduct of the proceedings from beginning to end, as can be seen in the ICC Rules: In all cases, the Arbitral Tribunal shall act fairly and impartially and ensure that each party has a reasonable opportunity to present its case.39

39

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ICC Rules Art. 15 (2). THE PANEL AND DUE PROCESS

Impartial proceedings mean equal procedural treatment of the parties to the extent this is possible due to the different roles of the parties as claimant and respondent or to other such reasons.40

5.5 WAIVER A waiver of conﬂict or bias is covered by Article 4 of the IBA Guidelines and follows the strong waiver tradition in arbitration spiced with common sense as it relates to a globalized economy and business. In the waiver doctrine of bias, it is essential that informed parties who are at least to a certain amount free to make their own decisions can accept a biased arbitrator if they so want. From an ADR perspective, this is neither unusual nor generally considered problematic, even though from the classical procedural law point of view the starting point usually is a completely independent and impartial judge regardless of party wishes. Even though it is considered at least sometimes a type of ADR, arbitration does necessitate some standard of due process and fairness concerning impartiality of the decision maker as the award should be an impartial decision based on facts and the norms applicable to the case in question. In other words, there is a minimum standard that is not waivable. Beyond that, the standards concerning disclosure and equitable contract have to do with the idea that any waiver should be informed and voluntary. Allowing a manifestly biased person to continue to act as an arbitrator in proceedings based on impartiality is likely to constitute such a violation of due process as to be actionable in any case. Such a right cannot be waived in abstracto.41 The right to impartial proceedings may be deemed to be a nonwaivable one both ex ante and in abstracto, except perhaps when the partiality has been institutionalized and is equal on both sides (i.e., there is a bias in favor of both or all groups of interest, such as occurs in labor law arbitration). The disqualiﬁcation process per se does not amount to a waiver whether based on statute, rules, or agreement if the result is not compatible with due process. A waiver ex post and in concreto may, however, arise if a party consciously and deliberately chooses not to object to or challenge the appointment of an arbitrator or fails to resort to the remedies or measures available. For a waiver to arise, the parties must have full knowledge of all the relevant facts constituting the bias. A good question is whether the waiver is binding if the award carries manifest earmarks of bias and partiality after a waiver of the bias. Should a party then be deemed to be bound by his own choice, which was presumably based on good faith reliance on the impartiality of the arbitrator despite the arbitrator’s bias?42 Such an outcome could appear unfounded and unjust. Also, the basic nature of arbitration is to deliver a neutral decision by a

40 41 42

Swiss Rules Art. 9 (see Appendices, p. 462). See IBA Guidelines 4(b) and 2(d). UNIDROIT Art. 1.7: (1) Each party must act in accordance with good faith and fair dealing in international trade. (2) The parties may not exclude or limit this duty.

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neutral third party. If a waiver was given, it was naturally done trusting the arbitrator would still respect his duty to be neutral. Thus, it would be not only from a procedural but also from a contractual point problematic to ﬁnd the waiver absolutely binding. However, it is very difﬁcult to prove that an arbitrator has not acted impartially, and the opposing party would probably ﬁnd an award in its favor acceptable as the expected outcome. Therefore, a party should consider carefully before accepting a partial arbitrator. If no waiver is deemed to have occurred by the prior reliance, the party must take action within a reasonable time or a waiver is created.43 The Convention provides: “The composition of the arbitral authority . . . in accordance with the agreement of the parties,” and the word agreement may be deemed to carry an implicit condition of both initial impartiality of an arbitrator and a duty to disclose all grounds for a bias, as well as an implicit covenant that the arbitrator’s initial impartiality shall not change, but that if it does so, the change shall be disclosed to the parties. The paramount role of the waiver doctrine as well as that of impartiality impose a duty of full disclosure as to a material bias including what may only appear to be a bias without any material or true substance.

5.6 COMMUNICATION WITH THE PARTIES The audi alteram partem principle (as reﬂected in the right to present one’s case) and the principle of impartiality both require that: (i) Every communication between a party and an arbitrator or the panel be made in the presence of all the parties allowing an immediate comment or answer or communicated to all of them in the same manner at the same time. This is

43

UNIDROIT Art. 3.5: (1) A party may only avoid the contract for mistake if, when the contract was concluded, the mistake was of such importance that a reasonable person in the same situation as the party in error would only have concluded the contract on materially different terms or would not have concluded it at all if the true state of affairs had been known, and (a) the other party made the same mistake, or caused the mistake, or knew or ought to have known of the mistake and it was contrary to reasonable commercial standards of fair dealing to leave the mistaken party in error; or (b) the other party had not at the time of avoidance acted in reliance on the contract. (2) However, a party may not avoid the contract if (a) it was grossly negligent in committing the mistake; or (b) the mistake relates to a matter in regard to which the risk of mistake was assumed or, having regard to the circumstances, should be borne by the mistaken party.

and Art. 3.8: A party may avoid the contract when it has been led to conclude the contract by the other party’s fraudulent representation, including language or practices, or fraudulent non-disclosure of circumstances which, according to reasonable commercial standards of fair dealing, the latter party should have disclosed.

128

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not limited by the “relevance” of the communication, but applies to any and all communications.44 The only signiﬁcant exception may be the election of the chairman: Throughout the arbitral proceedings, an arbitrator should avoid any unilateral communications regarding the case with any party, or its representatives. If such communication should occur, the arbitrator should inform the other party or parties and arbitrators of its substance.45

(ii) Should the above, for no good reason or for a reason not have been complied with, the arbitrator shall fully disclose the communication to the other arbitrators and the parties without any delay and the reason for deviating from the above practice.46 The failure to disclose will cast a “dark cloud” of bias on the arbitrator and, professionally, on the counsel or party in question. In addition, it may constitute a violation of due process with such consequences as this may warrant including setting the award aside. Swiss Rules Article 15 (4) provides: All documents or information supplied to the arbitral tribunal by one party shall at the same time be communicated by that party to the other party.

The reason for such a bypassing of the panel may be to have an arbitrator’s “private” guidance as to the relevance and sufﬁciency of evidence, burden of education, etc. However, all these issues should be discussed in consultations with all parties present and under guidance of the chairman of the panel to avoid any appearance of partiality or undue inﬂuence. In institutional arbitration or if the panel has a secretary, all the communications may be channeled via an ofﬁcer or the secretariat.47 Another problem is that in this age of dynamically developing ADR, the participation or activity of the panel in promoting a settlement may be raised as a potential bias. This may indeed be problematic in particular in the light of the audi alteram partem principle as provided in IBA Ethics: Where the parties have so requested, or consented to a suggestion to this effect by the arbitral tribunal, the tribunal as a whole (or the presiding arbitrator where appropriate), may make proposals for settlement to both parties simultaneously, and preferably in the presence of each other. Although any procedure is possible with the agreement of the parties, the arbitral tribunal should point out to the parties that 44

Japan Act § 32(4), supra note 9: A party who supplied written statements, documentary evidence or any other records to the arbitral tribunal shall take necessary measures to ensure that the other party will be aware of their contents.

45 46

See IBA Ethics 5.2 and 5.4. IBA Ethics 5.3. Japan Act § 32(5), supra note 9: The arbitral tribunal shall take necessary measures to ensure that all parties will be aware of the contents of any expert report or other evidence on which the arbitral tribunal may rely in making an arbitral award or other rulings.

47

LCIA Rules Art. 13 (see Appendices, pp. 435–36).

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it is undesirable that any arbitrator should discuss settlement terms with a party in the absence of the other parties since this will normally have the result that any arbitrator involved in such discussions will become disqualiﬁed from any future participation in the arbitration.48

5.7 ROLE OF THE SECRETARY The secretary is a necessary ofﬁcer in many both ad hoc and institutional arbitration cases. The presence of the secretary and his person should be consented to by the parties. It is also proper to require that the secretary be impartial as if she were an arbitrator although decision making, deliberations, and the conduct of the proceedings are not within the secretary’s functions. The exact scope of the rights and duties of a secretary have not been deﬁned and depend on the circumstances of the case, and in particular, on the number of arbitrators. Besides managing and organizing submissions, evidence, and hearings, the secretary may be valuable as the exclusive channel of communications between hearings to avoid any impression of attempts of undue inﬂuence or improper communications. Sometimes the permanent secretariat carries out some of the tasks of the secretary.49 For example, Swiss Rules Article 15(5) provides: The arbitral tribunal may, after consulting with the parties, appoint a secretary. Article 9 of these Rules shall apply by analogy to the secretary.

5.8 FEES AND COSTS As we move from the primarily procedural questions to the more contractual and liability part of the relationship between arbitrators and the parties, the fees and costs of arbitration is an ever-occurring issue. Arbitration has a reputation of being an expensive and exclusive method of dispute resolution. This is probably often due to the need to pay fees to arbitrators unlike in court proceedings, as well parties in arbitration often choosing those with the best expertise both as arbitrators and counsel. The costs may be justiﬁed because of the beneﬁts of arbitration. There are always some obvious savings as in general, there is no appeal. The proceedings may in other ways be less time-consuming than court proceedings. Awards have been given in less than six months or a year even in some of the most complex cases. However, some 48 49

IBA Ethics 8. About Chinese law, see Tang Houzhi and Wang Shengchang, supra note 8, at 23: Exchanges of arbitration documents between the parties and between the parties and the arbitrators must be done through the secretariat of the arbitral institution. The respondent shall submit his written defense within 45 days and counterclaim, if any within 60 days, after receipt of the arbitration notice from the secretariat of the arbitral institution. The parties may authorize attorneys to act on their behalf in arbitration proceedings. Such attorneys may be Chinese or non-Chinese persons.

See also ICC Rules Art. 3. 130

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arbitral proceedings may take years to be completed. Recently the focus has been on managing the proceedings more efﬁciently. A competent panel—and in particular, a dynamic chairperson—may make the difference, but even the most sophisticated panel cannot always prevail over litigious or dilatory parties or extensive facts and testimony. Sometimes respect of due process simply requires lengthy proceedings. Comparing arbitration to proceedings in courts of law in general is unproductive. National legal systems vary to such an extent along with the ﬁnancial and human resources available to them that there is no one single truth to be discovered. In international disagreements, certain things speak in any case strongly for arbitration: international enforceability of the award, possibility of having a panel with the required expertise, and potential to gain time and save money. Conﬁdentiality is often mentioned as a major advantage, but this is very relative whereas privacy is undoubtedly often an advantage but one that cannot be always fully guaranteed. The arbitrators naturally have a right to a fee for the work they do for the parties. These fees are often primarily based on the time used, the individual arbitrator’s expertise, and the amount of the monetary or other interests at stake. The fees may appear high when the arbitrator is a professor who has very little costs and no overhead to carry. However, for a practicing lawyer, arbitrator fees divided by the hours of work required may be considerably less attractive as falling below the attorney’s normal hourly rates. Besides the time spent and the expertise required, a particularly tight time schedule or other such special circumstances are in general factors to be taken into account in setting the fees. Arbitrator fees are to be openly disclosed to the parties and the institution involved if not set by the institution itself.50 The fees and costs of the arbitration must be set by the panel and be borne by the parties.51 In institutional arbitration, it is usually the institution that sets the amounts, often based on a ﬂexible table.52 In ICC proceedings, the Court does that. The fees and costs of the parties and the extent they are recoverable are to be ﬁxed by the panel.53 In ad hoc arbitration, decisions as to the costs of the parties are to be made by a court or the panel itself unless otherwise provided by the applicable rules. There are various systems as to the ﬁxing of the fees of the arbitrators. Swiss Rules Article 38 provides: The arbitral tribunal shall determine the costs of arbitration in its award. The term “costs” includes only: (a) The fees of the arbitral tribunal to be stated separately as to each arbitrator and to be determined by the tribunal itself in accordance with Article 39; (b) The travel and other expenses incurred by the arbitrators; (c) The costs of expert advice and of other assistance required by the arbitral tribunal; 50 51 52 53

IBA Ethics 5.5 and 6 (see Appendices, p. 366). See Micha Bühler, Awarding Costs in International Commercial Arbitration: An Overview, 22 ASA BULLETIN (2004). ICC Rules Art. 31(1) and (2). ICC Rules Art. 31(2) and (3).

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(d) The travel and other expenses of witnesses to the extent such expenses are approved by the arbitral tribunal; (e) The costs for legal representation and assistance of the successful party if such costs were claimed during the arbitral proceedings, and only to the extent that the arbitral tribunal determines that the amount of such costs is reasonable; (f) The costs for the administration of the arbitration payable to the Chambers in accordance with Appendix B (Schedule of the Costs of Arbitration).

In addition, Swiss Rules Article 40(1)–(3) provides: 1. Except as provided in paragraph 2, the costs of arbitration shall in principle be borne by the unsuccessful party. However, the arbitral tribunal may apportion each of such costs between the parties if it determines that apportionment is reasonable, taking into account the circumstances of the case. 2. With respect to the costs of legal representation and assistance referred to in Article 38, paragraph (e), the arbitral tribunal, taking into account the circumstances of the case, shall be free to determine which party shall bear such costs or may apportion such costs between the parties if it determines that apportionment is reasonable. 3. When the arbitral tribunal issues an order for the termination of the arbitral proceedings or makes an award on agreed terms, it shall determine the costs of arbitration referred to in Article 38 and Article 39, paragraph 1, in the text of that order or award.

The discussion concerning the fees might sometimes seem a bit apologetic in tone. Sometimes arbitration really is expensive, and the experts taking part really look after their ﬁnancial interests. At least as far the parties agree, there is no reason to moralize about this. From a legal point of view, high costs might hinder access to justice in some cases and thus be relevant in decisions concerning arbitration clauses and jurisdiction. However, arbitration as a dispute resolution method does not always have to be expensive. Arbitrators do not always have to be professors or business law attorneys if the dispute in question does not require that and the parties do not want it. Arbitration as a procedure is ﬂexible, and its ﬂexibility can be used to provide affordability. Arbitration as a dispute resolution method has a huge potential in small claims procedures and as a competitor to such things as complaint boards or other attempts to lower the process threshold. This especially true in countries where access to courts is getting more and more expensive and exclusive due to complicated court procedures and increasing costs of legal services.

5.9 LIABILITY The mission of an arbitrator or arbitral panel is sui generis and has numerous dimensions. The panel is at the same time acting within the mandates in abstracto and in concreto. The mandate in abstracto is the power vested in the panel by the government. In this respect, the panel’s function resembles that of a judge. The scope of this power and authority and the consequences of its abuse are key issues of due process. The mandate in concreto is likewise an authority vested in the panel, but one done by the parties in casu. The scope of this mandate is deﬁned by the parties within their 132

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freedom of contract, and in the absence of their express agreement, by applicable laws and other rules. In institutional arbitration, the power is vested in the panel by the institution when it is acting as the appointing authority. The mandate in concreto resembles to some extent retention of an expert or a professional with the exception that a nominating party will not have any (or at least very little) control over the arbitrator except when the parties agree unanimously. Even then there is an area where an arbitrator and a panel remain totally independent, with this independence being protected by the mandate in abstracto. The powers (i.e., the mandate in concreto) may likewise be abused or violated, which may result in the award being unenforceable or other legal consequences. The task or mission of arbitrator resembles that of a director in a company. Both directors and arbitrators need to abide by certain procedural and ethical rules—and failure to do so may lead to liability. In neither case should this liability be extended to matters of judgment or discretion if the procedure and ethical standards applied in the decision-making process have been impeccable. The liability of an arbitrator may arise in theory from violation of due process as described in this book. These may include violations of fundamental procedural rules such as audi alteram partem, failure to disclose conﬂict of interest or bias, negligence, gross negligence or even deliberate wrongdoing. In this area, common standards are emerging from a large variety of national traditions and professional and institutional interests. Anyway, liability should be more likely to follow from not taking the procedural standards into account than faults in the substantive law application. The mission (i.e., the mandate in abstracto of the arbitrators) has been deﬁned in IBA Ethics as follows: All arbitrators should devote such time and attention as the parties may reasonably require having regard to all the circumstances of the case, and shall do their best to conduct the arbitration in such a manner that costs do not rise to an unreasonable proportion of the interests at stake.

It is also deﬁned by the Arbitration Act 1996 (of England) § 33 as follows: (1) The tribunal shall (a) act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent, and (b) adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay or expense, so as to provide a fair means for the resolution of the matters falling to be determined. (2) The tribunal shall comply with that general duty in conducting the arbitral proceedings, in its decisions on matters of procedure and evidence and in the exercise of all other powers conferred on it.

The task (i.e., the mandate in concreto) is deﬁned by the parties in the arbitration agreement or in the submissions.54 The liability is quasi-contractual, including the 54

Argentina Act (supra note 7) Art. 745, 748, and 756 provide: Art. 745 Acceptance by arbitrators of their appointment as such shall entitle the parties to compel them to carry out their functions and to hold them liable for costs and damages derived from the non-performance of arbitral functions.

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giving of an extensive and irrevocable power and authority subject to unanimous veto only.55 In addition, IBA Ethics impose the following standards on a person accepting appointment as an arbitrator: A prospective arbitrator shall accept an appointment only if he is fully satisﬁed that he is able to discharge his duties without bias. A prospective arbitrator shall accept an appointment only if he is fully satisﬁed that he is competent to determine the issues in dispute, and has an adequate knowledge of the language of the arbitration. A prospective arbitrator should accept an appointment only if he is able to give to the arbitration the time and attention which the parties are reasonably entitled to expect.

The liability of arbitrators has been debated, with some voices advocating that arbitrators should enjoy immunity from liability.56 Such an extreme position is difﬁcult to defend, and the trend in thinking seems to be toward treating the arbitrator as a professional, taking into account arbitration’s very special features.57 For some practitioners, arbitration has become their only profession and business. Also as arbitration institutes have been sued, they attempt to limit their liability.58

Art. 748: The terms of reference shall become ineffective: 1. By unanimous decision of those who concluded them; 2. By expiration of the term ﬁxed in the terms of reference or, failing this, the legal term, irrespective of any liability of the arbitrators for interests and damages because the term unfruitfully expired on account of their fault and notwithstanding the payment of any penalty under Article 740, sect. 4, if any of the parties were at fault; 3. If during three months the parties or the arbitrators did not take any action aimed at giving impetus to the arbitral proceedings. Art. 756 Arbitrators who without justiﬁcation do not render their award within the stated term will lose all right to their fees and will be, furthermore, held liable for costs and damages. 55

See Ottoarndt Glossner, INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION 10 (Supp. 17, Jan. 1994), describing the position of German law as follows: According to German law there exists between the parties, on the one hand, and the arbitrator, on the other, a contract to arbitrate (Schiedsrichtersvertrang). By virtue of this contract the arbitrator must faithfully fulﬁl the functions he has assumed. Although the contract to arbitrate is governed by the provisions applicable to contracts in general, the courts have held that the liability of the arbitrator is the same as that of a judge. Accordingly, he will not be held liable for errors made in good faith.

56

This seems to be the case in the United States as Holtzmann reports: The general rule in the United States is that an arbitrator, like a judge, is immune from civil liability for acts related to his or her decision-making function, even if the arbitrator was careless and made a wrong award. This principle is not found in the arbitration statutes, but it is established in court decision. Courts have extended this immunity to arbitral institutions, such as the AAA.

57 58

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Howard M. Holtzmann, Report on U.S. Arbitration Law, in INTERNATIONAL HANDBOOK COMMERCIAL ARBITRATION 18 (Supp. 13, Sept. 1992). Arbitration Act 1996 of England § 29 (see Appendices, p. 267). ICC Rules Art. 34 (see Appendices, p. 416).

ON

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Arbitrators cannot disclaim their liability for gross negligence or deliberate violations of the arbitration agreement or the applicable laws.59 Perhaps in most cases, their liability should be limited to these areas. However, in the absence of such express limitations, the standards of professional or commercial liability may apply.60 It may be unclear what the appropriate substantive source is for these standards. In the absence of bad faith or gross negligence, liability can hardly be extended beyond the direct costs incurred.61 Swiss Rules Article 44 provides: 1. None of the Chambers or their staff, arbitrators, tribunal-appointed experts or the secretary of the arbitral tribunal shall be liable for any act or omission in connection with an arbitration conducted under these Rules, save where the act or omission is shown to constitute deliberate wrongdoing or extremely serious negligence.

59

UNIDROIT Art. 7.1.6: A clause which limits or excludes one party’s liability for non-performance or which permits one party to render performance substantially different from what the other party reasonably expected may not be invoked if it would be grossly unfair to do so, having regard to the purpose of the contract.

60

See also IBA Ethics Introductory Note (see Appendices, pp. 363–64). See Yves Derains, “France”, in INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION. Kluwer Law International (1998), commenting on French Arbitration law: The Paris Court of Appeal has recently afﬁrmed that the liability of the arbitrator is of a contractual nature, and arbitrators can only be held liable for negligence in their duty in acting as a judge (Paris, March 24, 1977, Rev. Arb. 1978.31). Therefore the grounds for the liability of arbitrators are the same as those which may justify the liability of judges (Art. 505 of the C.C.P.). It means, in practice, that arbitrators might be held liable in the case of denial of justice, for instance, if the arbitrators fail to render a decision within the time limit provided, or withdraw without a valid reason. However, the party acting against the arbitrator will have to prove the prejudice suffered (see Req. November 4, 1903, D.P. 1904.1.185). This seems difﬁcult, unless parties have not provided for a method of replacement and the introduction of a new arbitration is barred by a time limit.

A Mexican arbitrator’s liability exposure is addressed in Mexico Law: The Commercial Code is silent in regard to the liability of arbitrators towards the parties. Nevertheless, Art. 636 CCP establishes that the courts ‘shall compel the arbitrators to comply with their obligations’ and Art. 269 of the Lay Orgánica de los Tribunales del Fuero Comun provides that when the arbitrator(s) do not render their award on time, they will not be entitled to receive their fees. Although this hypothesis seems never to have come up in practice, it is to be assumed that arbitrators are liable for costs and damages derived from the nonperformance of their arbitral function, and that such liability would be enforceable by civil actions when the arbitrator acted illegally or against good customs causing damages to the parties (Art. 1910 Civil Code).

61

(Mexican arbitration law as reported by Prof. José Luis Siqueiros & Alexander C. Hoagland in INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION 10 (Supp. 19, Aug. 1995)). An arbitral award had been set aside earlier because the chairman had failed to disclose signiﬁcant consultations given to the parties prior to and during the proceedings. A party sought damages from the chairman on this ground. The Finnish Supreme Court reversed the decision of the Circuit Court and the Court of Appeals and held that in the absence of proof to the contrary, the arbitrator is liable. It remanded the matter to the court of ﬁrst instance for the issue of amount of damages. Finnish Supreme Court decision S2003/993, 31.1.2005.

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2. After the award has been made and the possibilities of correction, interpretation and additional awards referred to in Articles 35 to 37 have lapsed or been exhausted, neither the Chambers nor the arbitrators, the tribunal-appointed experts or the secretary of the arbitral tribunal shall be under an obligation to make statements to any person about any matter concerning the arbitration, nor shall a party seek to make any of these persons a witness in any legal or other proceedings arising out of the arbitration.

The Swiss Rules tackle the issues in line with the most current trend establishing liability for gross negligence or deliberate wrongdoing only. They provide further that there is no duty to give testimony after corrective and other such measures have been exhausted and establish a bar to a party action to compel those involved to testify.

5.10 CONFIDENTIALITY The duty of conﬁdentiality covers the arbitrators even in the absence of statutory law to back it up.62 It is an implicit condition and covenant of the arbitration agreement, and sometimes even an express one. IBA Ethics provide: The deliberations of the arbitral tribunal, and the contents of the award itself, remain conﬁdential in perpetuity unless the parties release the arbitrators from this obligation. An arbitrator should not participate in, or give any information for the purpose of assistance in, any proceedings to consider the award unless, exceptionally, he considers it his duty to disclose any material misconduct or fraud on the part of his fellow arbitrators.63

CIETAC Rules Article 33 provides: 1. Hearings shall be held in camera. Where both parties request an open hearing, the arbitral tribunal shall make a decision. 2. For cases heard in camera, the parties, their representatives, witnesses, interpreters, arbitrators, experts consulted by the arbitral tribunal and appraisers appointed by the arbitral tribunal and the relevant staff-members of the Secretariat of the CIETAC shall not disclose to any outsiders any substantive or procedural matters of the case.64

Conﬁdentiality may relate to many things and be understood in a number of ways. First, it may be understood as privacy as opposed to a public hearing: the proceedings

62

63 64

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In general, see ALAN REDFERN & MARTIN HUNTER, LAW AND PRACTICE OF INTERNATIONAL COMMERCIAL ARBITRATION 27–43 (3rd ed. 1999). For institutional arbitration, see London Court of International Arbitration (LCIA) Rules Art. 30 (see Appendices, p. 446). See also World Intellectual Property Organization (WIPO) Rules Art. 52. IBA Ethics Art. 9. China International Economic and Trade Arbitration Commission (CIETAC).

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are not open to anybody except the parties and arbitrators. For someone to be admitted, a third party needs to have the consent of the parties, and perhaps also that of the panel, depending on the circumstances and the third party in question. For example, the panel may deny entry to the media, but not to a party’s advisers. If warranted, in some cases, the panel may limit the right of a party’s representative to be present or even that of a party itself.65 A third party may be permitted to participate or be present with the consent of the parties and the panel. A third party may have such a right even in the absence of consent by all the parties if the panel allows this in accordance with the applicable procedural rules. Swiss Rules Article 4(2) provides: Where a third party requests to participate in arbitral proceedings already pending under these Rules or where a party to arbitral proceedings under these Rules intends to cause a third party to participate in the arbitration, the arbitral tribunal shall decide on such request, after consulting with all parties, taking into account all circumstances it deems relevant and applicable.

But does this conﬁdentiality extend to the parties? Are documents or information submitted under legal protection? In general, this is not the case although it may be a very common belief even among practitioners that a duty of conﬁdentiality is imposed on the parties. There are very few statutes to award legal protection or appropriate remedies to enforce such a duty in the absence of an agreement. There is thus a risk of a party disclosing documents, information, or testimony to third parties or to the media. If there is an agreement in place establishing such a duty or if the rules applicable to the arbitration agreement provide for a contractual duty of good faith, the arbitral panel may act within its power and jurisdiction to enforce such a duty by procedural orders or interim awards. Various authorities may need or request the information and documents submitted or be simply interested in reviewing them for reasons either disclosed or concealed. These authorities may be antitrust enforcement agencies, tax ofﬁcials, the police, securities trading or banking supervision agencies, and even courts of law hearing cases between third parties in which documents submitted or statements made in the arbitral proceedings may be deemed relevant. Such requests or orders may be directed to the panel or its members or to the parties or their counsel jointly or separately. Depending on the applicable rules, a request by such a third party may be enforceable and may require compliance. However, it is the duty of the panel and the parties to establish that there are sufﬁcient legal grounds for such a request and that there is a duty to comply with it if directed to by the panel. Undoubtedly, if necessary the issue could be submitted to a court of law for declaratory relief. If the request has either been made by a court of the seat of arbitration or endorsed by it, this should at least establish its prima facie lawfulness provided that the duties of conﬁdentiality prevailing in the

65

HEUMAN, supra note 1, at 30–40.

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arbitral proceedings were already heard or tried by the court in conﬂict with the duty to disclose, establishing res judicata. Swiss Rules Article 43 eliminates most of this controversy by establishing a clear rule: 1. Unless the parties expressly agree in writing to the contrary, the parties undertake as a general principle to keep conﬁdential all awards and orders as well as all materials submitted by another party in the framework of the arbitral proceedings not otherwise in the public domain, save and to the extent that a disclosure may be required of a party by a legal duty, to protect or pursue a legal right or to enforce or challenge an award in legal proceedings before a judicial authority. This undertaking also applies to the arbitrators, the tribunal-appointed experts, the secretary of the arbitral tribunal and the Chambers. 2. The deliberations of the arbitral tribunal are conﬁdential.

The third issue of some importance to the international arbitration community and for the development of law and research in arbitration practice is the conﬁdentiality of the award itself. The issue is unclear in the absence of speciﬁc rules. Swiss Rules Article 43 tackles the issue with impeccable accuracy and style: 3. An award may be published, whether in its entirety or in the form of excerpts or a summary, only under the following conditions: (a) A request for publication is addressed to the Chambers; (b) All references to the parties’ names are deleted; and (c) No party objects to such publication within the time-limit ﬁxed for that purpose by the Chambers.

Disclosing the award in its entirety is often inevitable in enforcement proceedings. Many awards are, however, enforced voluntarily, which in itself is honorable but may as a side effect hinder the development of international arbitration law and practice.

5.11 SUMMARY The key procedural question related to the panel in arbitration is that of impartiality. Impartiality of an arbitrator is also a key factor among due process requirements. It in a way symbolizes the questions raised by the status of arbitration on one hand as an ADR method and on the other as a privatized court procedure. Impartiality also raises theoretically challenging questions, as more-or-less similar standards are imposed on arbitrators and judges even though their institutional settings and natural attachments to the parties and the parties’ circles of life are far more extensive. The objective test of impartiality is decisive, but it might be that the standard of impartiality is in some cases at least de facto a bit lower. Also, the waiver doctrine is often be used to bypass the problem. For example, the IBA guidelines are useful in deciding what facts actually have to be disclosed and what facts do cause bias. However, even these guidelines have to be

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read in the context of each case, including the particular parties and panel. The situation as a whole might have relevance for the assessment of facts concerning impartiality. When resolving problems concerning impartiality, we have to remember that the primary goal is to guarantee the fairness of the procedure, not the practicality of proceedings or the ﬁnality of the award.

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Chapter 6

Due Process Related to Facts and Evidence

6.1 THE STRUCTURE OF A LEGAL DECISION: FACTS AND DUE PROCESS Arbitration, just like basically any legal decision making, is a combination of three elements: (a) facts, (b) law, and (c) application of the law to the facts. This chapter focuses on questions related to facts in arbitration. Just as in court proceedings, there are many: Which facts are important? Whose task is it to include the facts in the process? Which of the parties has to incorporate which facts? Are only the parties or also the tribunal responsible for having a sound factual basis for the proceedings? How can a party bring facts into the proceeding? What kind of evidence can be presented and collected? Finally, what are the criteria by which facts are accepted or rejected as a basis of an award? The second element in adjudication and in arbitration is the law or laws.1 The question of law and question of facts cannot really be separated. First, as disputes are decided on legal grounds, the law deﬁnes the legally relevant facts. Also, the conception of factual reality that lies behind the legislation and substantive law formulates what is relevant for the legal proceeding in question. Second, many of the facts are not brute in such a way that they can be understood without the speciﬁc language and meaning attributed to them in the relevant community. Thus, the law also deﬁnes facts, 1

Based on the UNCITRAL Model Law, Russian Law Art. 28 provides: 1. The arbitral tribunal shall decide the dispute in accordance with such rules of law as are chosen by the parties as applicable to the substance of the dispute. Any designation of the law or legal system of a given State shall be construed as directly referring to the substantive law of that State and not to its conﬂict of laws rules. 2. Failing any designation by the parties, the arbitral tribunal shall apply the law determined by the conﬂict of laws rules which it considers applicable. 3. In all cases, the arbitral tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction.

(Russian arbitration law as reported by Prof. Sergei Lebedev, Law of the Russian Federation on International Commercial Arbitration (in force Aug. 14, 1993), in INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION (Supp. 17, Jan. 1994)). 141

and therefore is not just an external scale imposed on them. For example, what is a reasonable time for a claim on faulty delivery? What is a faulty delivery? Facts and law work together. The third element is application of the law to the facts. For example, the actual application could be called intelligence, referring to the intellectual exercise of reconstructing the past on the grounds of established facts and then applying the relevant laws to those facts. As stated above, in a procedural context facts and law cannot really be discussed separately. They are separate entities both of which get their meaning partly from one another in the proceedings. Even though facts are often seen as empirical reality, it is evident they have a strong due process dimension. We cannot enforce substantive law in proceedings without facts, and thus establishing them is a prerequisite of legal protection of substantive rights. However, establishment of facts is a procedural activity governed by procedural law and ultimately by due process rights and requirements. First, procedural rules and orders have be such that the arbitral procedure can be seen to be an alternative access to justice as compared to general court procedures. If the rules of evidence in arbitration would de facto make it impossible for a party to receive legal protection for substantive rights, the waiver of right of access to a court would not be valid. More positively formulated, to be a valid waiver of access to courts, arbitration has to provide a reasonable possibility of legal protection. Second, the arbitration procedure has to be fair. The parties have to be able to present their cases and have the opportunity to be heard. These rights include the presenting evidence and examining witnesses as well as challenging the evidence presented by the other party.

6.2 FACTS IN LEGAL DECISION: RELEVANCE, SUFFICIENCY AND TRUTH The primary objective of the proceedings is to resolve the conﬂict between the parties and give legal protection to the rights of the parties. At a secondary level, this requires determining the issues raised by the parties and claims made on the basis of the established relevant facts and applicable law. Usually this involves the tribunal deciding questions of facts and evidence as only rarely do the parties agree on all the facts. The interest of the parties in establishing facts is naturally limited to the extent such facts serve their own interests by supporting their claims or defenses. The strategy of a party as to bringing evidence is often the function of a number of considerations: (i) a subjective assessment of what is relevant (legal analysis); (ii) a subjective assessment of the weight of evidence in support of the facts asserted but denied by the adversary (“sufﬁciency”). Each party may have a different strategy, which overlaps to a greater or lesser extent with that of his adversary. Establishing the facts describes in generic terms something that is easy to comprehend in abstracto, but if we move to the real world and a disagreement of some 142

DUE PROCESS RELATED TO FACTS AND EVIDENCE

complexity, the exercise often becomes complicated. Which facts are we to establish? Leaving aside the issue of burden of proof, we may look to a simple rule of thumb: a party must establish the facts that are alleged by him but denied by his adversary (and thus disputed), and that would support his legal position and the theory on which his claims are based (i.e., those that are as such simply favorable to him). Only relevant facts need to be established. In general, these are the facts that support the position, theory, and claims of a party, and the arbitral tribunal may refuse to admit irrelevant evidence.2 However, the concept of relevance may change due to lack of evidence or unexpected evidence or to an action of a party that modiﬁes the claims during the proceedings. Relevance may also be difﬁcult or even impossible to judge before other evidence (e.g., witness testimony) has been admitted. For a party and his counsel, one of the most difﬁcult things to do in legal proceedings is to judge when the evidence submitted has been sufﬁcient to prove the facts and to convince the panel. Was the similar or identical testimony of three persons sufﬁcient—or should still other witnesses be called? Was the testimony even deemed to be similar? What if the evidence is sufﬁcient at this stage, but what if in light of evidence brought in at a later stage of the proceedings by the other side, it will no longer be convincing? There is no objective way to measure the persuasiveness of the evidence. Therefore, in the interests of doing justice, when the circumstances warrant the panel should consider holding one or more status review hearings. To do so or not is wholly in the panel’s discretion, but if no such reviews or consultations are held, the risks of giving “wrong” awards based on partial truths and facts not accurately established will increase and the economies of the proceedings may suffer. Sufﬁciency may also be seen from another perspective. Reconstruction of the past is similar to putting together a jigsaw puzzle. In order to “see” the picture, we do not have to put all the pieces in their places (except perhaps in some criminal law cases). It may well be sufﬁcient to have a piece here and another there. If these pieces are in critical positions, we will be able to imagine or ﬁgure out the rest by experience and by way of logic. The same applies to evidence: if we see a person in a New York airport, and the same person is seen in Chicago a few hours later, we know he must have taken a plane. If we see two competitors in a secret meeting, we do not necessarily know what they are talking about, but we may suspect that a merger is on the way or that pricing or competition is being discussed or perhaps being restrained. If we thereafter notice a parallel price increase in the market or an increase in their quoted share prices at the stock exchange, we may be closer to a hit, but we may not be quite there yet—or are we? There is a risk in drawing conclusions: our intelligence may misguide us and our logic may fail. The person in Chicago may not be the same after all, or the missing

2

Hascher writes: Le recours à la preuve testimoniale n’est jamais obligatoire pour l’arbitre qui peut donc l’écarter si un témoignage est sans pertinence ou si les faits sont sufﬁsamment établis par d’autres modes de preuve.

Dominique Hascher, La Révision en Arbitrage International, LIBER AMICORUM CLAUDE REYMOND 115 (2004). Irrelevance may be established by agreement of the parties. The most common agreement to this effect is the “entire agreement” clause. FACTS IN LEGAL DECISION: RELEVANCE, SUFFICIENCY AND TRUTH

143

pieces of the puzzle when found and put in their places reveal something very different from what we were convinced they would. Once the proceedings have started and evidentiary hearings have been held, the strategy may change. New issues may arise or the sufﬁciency of evidence already submitted may have to be reconsidered.3 The parties generate “the movement” in the proceedings. This movement may be misdirected on purpose or due to subjectivity or erroneous analysis. The parties may focus their actions and bring evidence on issues lacking relevance and omit evidence on other issues. The parties may have different understandings as to (1) what is relevant, (2) what needs to be proved; and (3) what evidence is sufﬁcient to establish a disputed fact. Although the “power” is generated by the parties, and the relevance of the issues determined in light of their legal theories and the facts to be established by their assertions and denials, the parties do not know to what extent their assessment, analysis, and strategy is in accordance with the analysis of the panel at any given time. In addition, both the party analyses and that of the panel may and are likely to change when the evidentiary hearings proceed. As noted above, all the relevant facts need to be established. The parties are expected to present their subjective views on what the facts mean and their legal consequences as this may allow the panel to guide the parties toward a settlement. The arbitral tribunal is left with the difﬁcult mission of conducting the proceedings and the evidentiary hearings in a manner that is most likely to lead to the establishment of the relevant facts. To accomplish this task, the panel may have to take measures on its own initiative: [T]he Arbitral Tribunal may request any person to give oral or written evidence on any issue that the Arbitral Tribunal considers to be relevant and material. Any witness called and questioned by the Arbitral Tribunal may also be questioned by the Parties.4

The role and duties of the panel in bringing the necessary evidence to establish the facts is debated and remains somewhat unclear. However, the panel needs to maintain impartiality and the appearance of impartiality. This is a crucial due process aspect of managing the proceedings, especially when taking an activge role in collecting evidence or trying to encourage parties to settle. On the other hand it sould be clear that 3

Mexico Law Art. 1439 provides in line with UNCITRAL: 1. Within the period of time agreed by the parties or determined by the arbitral tribunal, the claimant shall state the facts supporting his claim, the points at issue and the relief or remedy sought and the respondent shall state his defence in respect of these particulars, unless the parties have otherwise agreed as to the required elements of such statements. The parties may submit with their statements all documents they consider to be relevant or may add a reference to the documents or other evidence they will submit. Unless otherwise agreed by the parties, either party may amend or supplement his claim or defence during the course of the arbitral proceedings, unless the arbitral tribunal considers it inappropriate to allow such amendment having regard to the delay in making it.

4

144

(Mexican arbitration law as reported by Prof. José Luis Siqueiros & Alexander C. Hoagland in INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION (Supp. 19, Aug. 1995)). IBA Rules on Taking of Evidence in International Commercial Arbitration of Ethics for International Arbitrators (1987) (“IBA Rules”) Art. 4(4). DUE PROCESS RELATED TO FACTS AND EVIDENCE

trying to protect the parties’ substantive rights cannot per se be in contradiction with due process requirements. Another issue exists regarding truthfulness in the presentation of evidence. To what extent are the parties under an obligation or a duty to disclose facts? The issue is of some complexity. In the ideal world, legal proceedings would be concentrated on application of the law to clear and true facts. In reality, the facts or the patterns established by the facts cannot be fully veriﬁed, and even good faith assessments of facts by neutral third parties may differ. On the one hand, we have the orthodox ideal of “truth and nothing but the truth,” and on the other a diversity of understandings or recollections of what really transpired. There may be as many truths as there are persons to report on it. However, as to the facts, the parties should refrain from even innocent misrepresentations and concealment.5 The borderline between subjectivity and misrepresentation is unclear, and misrepresentation is constituted on the basis of a person’s knowledge. The truth and the relationship of the parties to it can be analyzed by dividing the issue into two different classes: (1) the active duty to bring out or disclose the “whole” truth, and (2) the passive duty to ensure that all statements or submissions made are truthful although not necessarily disclosing the whole. This is somewhat in line with the contractual duties of the parties in commercial transactions. Even though the good faith understanding of facts by the parties may dramatically differ, due (e.g., to a lack of knowledge of all the facts, poor communications, or misunderstandings), the parties must be deemed to be under a duty to ensure (“in good faith”) that the statements made by them and their submissions reﬂect the truth. However, they may not have to reﬂect the truth in the sense that they could not omit to state something needed for the statement not to be misleading, as such a standard may be too sophisticated. The proceedings must allow subjectivity, and a party is not in any position to know what in the ﬁnal analysis is “the overall scenario” in which all the evidence, submissions, and facts are being analyzed as to their relevance and evidentiary weight. What may appear to be an outright lie is not necessarily anything but a subjective belief in the light of incomplete knowledge or an emotional analysis. Fraudulent misrepresentation may constitute fraud and expose a party to criminal sanctions, but concealing the truth is not necessarily as apparent a violation as fraudulent statements. However, in some circumstances concealing something may be equal to fraudulent misrepresentation. A party can hardly be under a duty to bring evidence or give statements detrimental to his position (at least not on his own initiative), but may be under a duty to do so at the request of his adversary or under an order or ruling of the panel. The failure to comply with a procedural order of the panel may have serious legal consequences to the position of a party.

5

BLACK’S LAW DICTIONARY (Bryan A. Gardner ed., 9th ed., 2009) deﬁnes misrepresentation as: 1. the act of making a false or misleading statement . . . with the intent to deceive. 2. . . . an assertion which does not accord with the facts . . . innocent misrepresentation, a false statement not known to be false; a misrepresentation that, though false, was not made fraudulently.

See also BLACK’S deﬁnition of negligent misrepresentation and fraudulent misrepresentation. FACTS IN LEGAL DECISION: RELEVANCE, SUFFICIENCY AND TRUTH

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In any case, a party is deemed to be in breach of his procedural duties if he misrepresents or malrepresents the facts.6 Express and deliberate misrepresentation or the concealing of facts may constitute fraud.7 If misrepresentation (or malrepresentation) amounts to fraudulent methods, perjury, or forgery, it is a breach of international due process.8 It may lead, among other things, to the award being set aside (if not discovered until the award is given), or the award being declared null and void or becoming unenforceable.9 If discovered or exposed during the proceedings, it may undermine the credibility of all the theories of the party in breach tainting perhaps even those parts of his action that are based on truth and constitute plausible causes of action. In any case, such breaches of duty should be taken into consideration when awarding legal costs. A considerably more difﬁcult issue is the existence or nonexistence in an individual case of a duty to actively disclose the truth even when it may be detrimental as opposed to simply ensuring that what is stated is true. Even when there is no such duty, the issue arises if the other party or the panel submits a question to that effect or if a party is requested to produce documents or other testimony or to allow discovery. Refusal to comply with such an order or to answer truthfully may lead to the inference that facts detrimental to the party are being deliberately concealed. The consequences may thus be more detrimental than disclosing the truth. Under the IBA Rules Article 9(4): If a Party fails without satisfactory explanation to produce any document requested in a Request to Produce to which it has not objected in due time or fails to produce any document ordered to be produced by the Arbitral Tribunal, the Arbitral Tribunal may infer that such document would be adverse to the interests of that Party.

Article 9(5) further provides: If a Party fails without satisfactory explanation to make available any other relevant evidence, including testimony, sought by one Party to which the Party to whom the request was addressed has not objected in due time or fails to make available any evidence, including testimony, ordered by the Arbitral Tribunal to be produced, the Arbitral Tribunal may infer that such evidence would be adverse to the interests of that Party.

6 7 8

9

Arbitration Act 1996 of England § 68(2)(g) (see Appendices, pp. 283–84). IBA Rules Art. 9 (4–5); Arbitration Act 1996 of England § 40(7). See e.g., Marianne Roth, Consequences and Prevention of False Evidence Under the English Arbitration Act 1996: A Comparative Perspective, 13 ARB. INT’L (1997); Vincent Heuzé, La morale, l’arbitre et le juge, 2 REVUE DE L’ARBITRAGE (1993); “ICC: Extortion and Bribery in Business Transactions,” Report adopted by the 131st Session of the Council of the ICC, Nov. 29, 1977. Reprinted in June 1993. Hascher, supra note 2, at 124: La fraude procédurale, si elle est de nature à rendre exceptionnellement possible la rétractation d’une sentence arbitrale qui en est affectée, est aussi une violation de l’ordre public international comme l’a admis la Cour de cassation dans l’affaire Westman, qui ouvre le recours en annulation.

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6.3 ON THE BURDEN OF PROOF The burden of proof, of course, deﬁnes who has to bear the risk of a fact not being proven in the proceedings. De facto, it also allocates the duty to act to prove a fact to support the claim or defense. In the end, decisions about burden of proof are often critical for the result of the proceedings and the ﬁndings in the award and securing access to justice especially if the evidence is scarce, and thus they have a due process connection. The role of burden of proof in establishing the facts of the case also underlines the importance of procedural aspects for the decision on the facts of the case in legal decision. In general, a party seeking a change or conﬁrmation bears the burden of proof to establish the relevant facts that will cause the panel to accept his position and award him the relief he seeks (or alternatively to accept his defense and reject a claim made against him). At the outset, this looks very simple. However, a party on whom the burden of proof would rest solely on the basis of this principle may not be in a position to bring the evidence himself or it may be considerably more accessible to his adversary or a third party. The burden of proof may shift or be shifted to the party for whom it is easier to prove the matter or to whom the evidence is more easily accessible. The rules of burden of proof are interrelated with those of the production or means of evidence.10 The rules on the division of burden of proof in international commercial arbitration are unclear.11 They are also neither clear nor uniform in national codes of procedure although very much in line in principle.12 Sometimes parties have agreed on how the burden of proof is to be divided between them in case of a dispute (such as whether the goods delivered were defective or conforming at the time of delivery). Sometimes the agreement restrains the bringing of evidence or provides that for the purposes of the proceedings, certain evidence submitted will be irrebuttable (i.e., it cannot be challenged).13

10 11

12

Refusal to bring evidence or produce documents may de facto amount to proof of the existence of a fact negative or detrimental to the party refusing to comply with a request for production. Allan Philip, The Standards and Burden of Proof in International Arbitration, 10 ARB. INT’L Vol 10 (1994). How the burden of proof is divided in casu is primarily in the discretion of a party but ultimately in the discretion of the panel. Consultations may be held when issues are complicated and evidence is being brought in sequence. Merkin writes: The Arbitration Act 1996: any residual possibility that the weight attached to evidence by the arbitrators can be challenged has, it would seem, been all but removed by the Arbitration Act 1996. Subject to the right of the parties to agree otherwise, and provided that the procedure for the presentation of evidence is fair and does not give rise to serious irregularity, s 34(2)(f) of the 1996 Act confers upon the arbitrators a more or less complete discretion to decide the relevance or weight of any evidence, oral, written or other, sought to be tendered on any matters of fact or opinion.

13

Robert Merkin, ARBITRATION LAW 607 (2004). ICC Uniform Customs and Practice for Documentary Credits, 1993 Revision in force as of Jan. 1, 1994 (“UCP 500”) Art. 3 and 4 provide: 3. a) Credits, by their nature, are separate transactions from the sales or other contract(s) on which they may be based and banks are in no way concerned with or bound by such

ON THE BURDEN OF PROOF

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In complex cases with numerous facts, the burden of proof regarding a fact may depend on whether another fact has or has not been established, such as: (i) was there a defect (e.g., was the prefabricated concrete cast reinforced by speciﬁed steel structures as provided in the contract)?; (ii) was the defect visible, and if so, when was it visible prior to having been concealed during construction under other structures of the building?; (iii) was the employer’s representative in a position or under a duty to inspect the concrete and the steel structure at any stage, and if so, did he inspect it?; (iv) if visible and to be inspected, was the defect of such a nature that he should or could have understood that it was defective, and if so; (v) did he accept, protest, or reject this part of the construction? Sometimes a single fact, when fully established, renders most or even all other testimony moot or worthless (e.g., in the example cited above, a witness, supported by notes in writing that he made at the time the employer’s representative noticed the alleged defect, told the contractor to remove the defective parts and deliver new ones at no additional cost). On the basis of this testimony, all the other evidence relating to issues (ii–iv) above seems to become irrelevant except (i), which may remain relevant if the existence of a defect is still disputed. What about the existence of a defect? Was it established or is further evidence necessary? The problem is whether the parties could or should know this in advance or during the proceedings. What has been established and what has not been established is within the exclusive powers of the arbitrators. If they consider the witness testimony to be fully creditworthy, should the arbitrators not advise the parties of their conclusions at necessary intervals to expedite the proceedings, save costs, and allow the parties to focus on the facts not yet established? This is perhaps uncommon but by no means prohibited or impossible. Such measures and reviews by the arbitrators would seem to improve the chances of having the relevant facts fully established in a

contract(s), even if any reference whatsoever to such contract(s) is included in the Credit. Consequently, the undertaking of a bank to pay, accept and pay Draft(s) or negotiate and/ or to fulﬁl any other obligation under the Credit, is not subject to claims or defences by the Applicant resulting from his relationships with the Issuing Bank or the Beneﬁciary; b) A Beneﬁciary can in no case avail himself of the contractual relationships existing between the banks or between the Applicant and the Issuing Bank. 4. In credit operations all parties concerned deal with documents, and not with goods, services and/or other performances to which the documents may relate. Uniform Rules for

Demand Guarantees (ICC Publication No. 458), Art. 2(b) provides: Guarantees by their nature are separate transactions from the contract(s) or tender conditions on which they may be based, and Guarantors are in no way concerned with or bound by such contract(s), or tender conditions, despite the inclusion of a reference to them in the Guarantee. The duty of a Guarantor under a Guarantee is to pay the sum or sums therein stated on the presentation of a written demand for payment and other documents speciﬁed in the Guarantee which appear on their face to be in accordance with the terms of the Guarantee. 148

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cost-effective manner and help them in conducting the proceedings as expeditiously as possible.14

6.4 ROLE OF ARBITRAL PANEL IN ESTABLISHING THE FACTS 6.4.1 Conﬂicts of Traditions and Culture The panel may adopt either a very passive or active role with respect to all the above factors: relevance, sufﬁciency, and burden of proof.15 The reason for being passive may be based on law, arbitration, tradition, fear of appearing to be partial or subjective, or perhaps the desire to avoid the appearance of “advocating” rather than “arbitrating.”16 We may further defend this passivity by referring to the character of the matter as dispositive and to the fact the parties are at full liberty to settle the matter and/or to organize the procedures for its settlement in any manner they deem ﬁt. But are not all matters in arbitration of such a dispositive character? Should the parties and the panel have a lesser duty to establish the facts than does a witness? Different legal traditions exist in these respects, which may be reﬂected in international arbitration.17 Sometimes arbitrators are expected to act in line with the rules applicable in court proceedings, and if they do not act accordingly, it may shock or puzzle the parties. On the other hand, business communities and legal traditions may expect the arbitrator to conduct the proceedings in a manner closer to business behavior and culture than the formal traditions of the “old” judiciary. Arbitrators are often expected to handle the proceedings in a ﬂexible and gentleman-like manner, and even (at least when expressly authorized) to adjudicate ex aequo et bono or bear the

14 15

IBA Rules Preamble (3) (see Appendices, p. 391). Acording to Tang Houzhi and Wang Shengchang in INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION 24 (Supp. 11, Jan. 1990) “No “discovery,” no “terms of reference” and no “crossexamination” are used in arbitration in China. Normally CIETAC arbitrators play a very active role in the course of oral hearings. Strongly inﬂuenced by inquisitorial tradition, CIETAC arbitration allows the arbitrators to raise any question vis-à-vis the parties provided that the arbitrators do not extend bias to either of the parties.”

16

17

In a dispute there is always a winning and a losing party. This may cause an arbitrator not to act as any action may be interpreted as hostile or partial. The same may apply to adjudicating strictly by the book or encouraging parties to look for a compromise. This moral hazard is present when arbitration becomes a quasi-profession in a limited market. Nudrat Majeed in Good Faith and Due Process: Lessons from the Shari’ah, 20 ARB. INT’L. (2004): 112 concludes: This is particularly relevant in the context of international dispute resolution where the essence of successfully resolving disputes lies in a mutual respect and understanding of the various laws and practices indigenous to each culture. If international dispute resolution is, as is forever advertised, ﬂexible with a great degree of party autonomy in choosing the law or international legal principles to govern a dispute, then there is no better time than the present to adopt a truly international and comparative approach.

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earmarks of a mediator. It seems that there is great ﬂexibility (souplesse) in arbitration in the way proceedings are conducted.18 This “vacuum” may well be the most valuable feature of international arbitration allowing the panel and the parties to adjust procedural measures and mix in other ingredients in a manner most suitable for the case at hand.19 It does not, however, mean that “anything goes”. The problem is exacerbated when one or more parties are not fully professional or have a vision of the relevance and sufﬁciency of the facts and the division of the burden of proof that differs from the panel’s. Although this might be painfully obvious to the panel, the arbitrators may refrain from intervening or guiding the parties, instead leaving them to bear their own risks, including their choice of the right counsel. In an international context when parties and their counsels come from very different cultural and legal backgrounds, this may not always be appropriate, amounting at the extreme to injustice although not necessarily to any speciﬁc violation of due process. There is at least one factor the arbitrators should use their best efforts to actively manage the proceedings if the parties cannot agree on it: time. Considerably less controversy or conﬂicts arise from setting the time schedule than as to many other issues, provided the parties are given a reasonable opportunity to present their cases. There seems to be a wide consensus that the objective of arbitration is to have the dispute solved expeditiously. If the proceedings are not managed actively, there is a risk of unnecessary delays and adjournments and the outcome may be not come until after several years of ordeal, expense, and related frustration. However, there are instances where even under the best process management the proceedings take years rather than months to complete.

6.4.2 Guidance via Consultations The panel must use its autonomy and procedural powers20 to conduct the proceedings cost-effectively and expeditiously while still establishing the relevant facts. This is 18

IBA Rules Preamble (2) states: IBA Rules are not intended to limit the ﬂexibility that is inherent in, and an advantage of international arbitration, and the Parties and Arbitral Tribunals are free to adapt them to the particular circumstances of each arbitration.

19

20

A cynical lawyer with wide experience in arbitration opines that arbitrators avoid intervening and manage proceedings based on pure laziness and convenience; according to him, this passivity is “the most powerful of all forces within any legal system”. There is undoubtedly some truth to this. Craig, Paul, and Paulsson write: The result in practice is that the arbitrators tend to be deferential to each others’ notions of fair procedure. Accordingly, procedural questions arising in the arbitration are resolved pragmatically rather than dogmatically. One may participate in many ICC arbitrations before hearing a reference to a single article of a national code of civil procedure. The prevailing rule is that of professional common sense, and good sense in this context tends to reﬂect an amalgam of three jurists’ legal culture. It may confound theoreticians, but rarely causes a hitch in practice.

Laurence W. Craig et al., INTERNATIONAL COMMERCIAL ARBITRATION: INTERNATIONAL CHAMBER OF COMMERCE ARBITRATION (1984). See also Act 1996 § 34(2)(f) (see Appendices, pp. 269–70). 150

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conveniently done by status review hearings to be held to guide the parties to focus on essential matters. IBA Rules provide in Preamble (3): Each Arbitral Tribunal is encouraged to identify to the Parties, as soon as it considers it to be appropriate, the issues that it may regard as relevant and material to the outcome of the case, including issues where a preliminary determination may be appropriate. (emphasis added)

The word may is well-chosen in this provision in lieu of will or regards. Thus when the circumstances are ripe and warrant such an intervention, the parties and their counsel should be given an opportunity to hear, review, and comment on a nonbinding status review (“consultations” or hearings) by the panel as to what has been established and which facts may still need to be shown. Such reviews could be held one or more times and touch on the other aspects of bringing in the evidence necessary to reconstruct the past. Subject to developments and modiﬁcations later on, these reviews conducted in an informal hearing or in connection with other hearings may cover: (i) what may or may not be relevant evidence in light of the prayers for relief and claims made or the modiﬁcations thereof; (ii) sufﬁciency of the evidence submitted; and (iii) division of burden of proof on open issues. Such interventions could bring in an element of true intelligence, and when properly conducted, would not jeopardize the panel’s impartiality and neutrality. However, the problem with an active role of the panel is that the parties might get an impression on partiality or an impression that the arbitrator has already chosen a point of view in the case and is no longer neutral towards new evidence. The activity of the panel should be understood in the context and not per se interpreted to imply partiality. However, the arbitrators have to be careful not to give ground to false impressions. The same concerns also i.e. the role of the panel in collecting evidence and not just the consultations.

6.4.3 Direct Intervention by the Panel In addition to such “guidance” given to the parties, the panel may wish to intervene directly on “its own account” in the interests of being able to fully understand the case. Before taking direct action, the panel should hear the parties on the action contemplated and on the reasons for it (“consultation” or hearing). If the guidance has not produced the desired facts, the direct action may include the following: (i) (ii) (iii) (iv)

questions to the parties; orders to submit documentary evidence; orders to hear witnesses; and hearing of experts appointed by the parties or chosen by the panel itself.21

21

Arbitration Act 1996 of England §§ 33 and 34.

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The approach to direct intervention should be somewhat more conservative than as to mere guidance. It should also be resorted to only when the fundamental or otherwise apparently relevant facts have not been established at all or have been insufﬁciently established, in particular if the evidence could be made easily accessible. Although possible, direct intervention should in general not be against a unanimous objection of all the parties (“right to veto”). However, such unanimity may cause the panel to consider dismissing the case or parts of it or resigning if the unanimity appears to be inspired by collusive acts or collusive objectives or by violations of law or ordre public that all the parties wish to conceal.

6.5 ENFORCEMENT OF EVIDENTIARY MEASURES 6.5.1 “Toolbox” of Measures for Bringing Evidence into Proceedings In general, the parties call witnesses or experts and submit documents in their possession. However, sometimes persons identiﬁed as witnesses are reluctant to appear in the proceedings or simply refuse.22 Relevant documents or other evidence may be in the possession of persons reluctant to surrender them to the parties or to the panel. A party may also refuse to produce documents or other evidence, answer questions, or disclose other facts (e.g., allow on-site inspections). If difﬁculties are encountered in bringing evidence, there is a “toolbox” of measures available depending on the procedural rules applicable to the proceedings, the parties, and the reluctant or hostile third parties.23 Clearly, this tool-box is needed to provide the parties a possibility to defend and concretize their rights effectively.

22 23

Id. at §§ 43 and 44 (1–3) (see Appendices, pp. 273–74). These include enforcing by courts, drawing adverse inferences, and shifting the burden of proof; see Gabrielle Kaufmann-Kohler & Philippe Bärtsch, Discovery in International Arbitration: How Much is Too Much? ZEITSCHRIFT FÜR SCHIEDSVERFAHREN [German Arbitration Journal] 21, Part 1 (2004). Act 1996 § 41 (5–7) (see Appendices, pp. 272–73). Japan Act § 33 (1–2): (1) If the claimant violates the provisions of article 31, paragraph (1), the arbitral tribunal shall make a ruling to terminate the arbitral proceedings. Provided, this shall not apply in the case where there is sufﬁcient cause for the violation. (2) If the respondent violates the provisions of article 31, paragraph (2), the arbitral tribunal shall continue the arbitral proceedings without treating such violation in itself as an admission of the claimant’s allegations.

(Japanese Arbitration Law, No. 138 of 2003, in force 1 March 2004, as reported in JAN PAULSSON (ED), INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION, (Kluwer Law International 1984 Last updated: March 2005 Supplement No. 43) pp. Annex I-1–Annex I-20).

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6.5.2 “Internal” Orders If a party to the arbitral proceedings refuses to produce a document or bring other evidence or allow a measure requested by the other party, the arbitral tribunal may endorse the request by a procedural order. Article 3(6) of the IBA Rules addresses this “internal issue” as follows: The Arbitral Tribunal shall, in consultation with the Parties and in timely fashion, consider the Request to Produce and the objections.24 The Arbitral Tribunal may order the Party to whom such Request is addressed to produce to the Arbitral Tribunal and to the other Parties those requested documents in its possession, custody or control as to which the Arbitral Tribunal determines that (i) the issues that the requesting Party wishes to prove are relevant and material to the outcome of the case, and (ii) none of the reasons for objection set forth in Article 9.2 apply.

The rule describes the steps in the process: (i) (ii) (iii) (iv) (v) (vi)

Request by a party to the other; Refusal by the other party; Same request by the party to the Arbitral Tribunal; Consultations with the parties; Analysis of relevance and materiality by the Arbitral Tribunal; Order to produce/No order.

If the order is given but not respected by the party against whom it was issued, there are further alternatives for action: (i) Enforcement of the arbitral tribunal order as such or as an “award;” (ii) Enforcement of the order of the arbitral tribunal by way of obtaining a decision of a court of law to the same effect by a party or by a party with the endorsement of the arbitral tribunal.25 To what extent the above measures are available depends on the procedural laws applicable, primarily those of the seat of arbitration (lex arbitri) or secondarily of another having jurisdiction over the party or the person in possession of the documents.26 Sometimes no enforcement is done due to the costs and time required, with 24

25 26

Request to produce is a term deﬁned in the IBA Rules as meaning a request by a party for a procedural order by which the arbitral tribunal would direct another party to produce documents. Arbitration Act 1996 of England § 42 (see Appendices, p. 273). Hascher writes: Les arbitres ne peuvent ordonner l’ecécution forcée de leurs décisions en matière de discovery comme d’ailleurs de production de pièces, s’ils ne disposent de l’assistance d’un juge étatique. Il convient de rappeler que l’application directe des conventions internationales d’entraide judiciaire est réservée aux tribunaux ordinaires. Dans ces conditions, l’unique solution pour le tribunal arbitral serait de demander le concours du juge, dans la mesure tout

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the party requesting the production and the arbitral tribunal perhaps being satisﬁed by the negative or adverse inference to be made from the refusal.27 Another possible sanction or consequence may be shifting the burden of proof.28

6.5.3 “External” Orders If the documents and other evidence are in the possession of third parties and these third parties refuse to produce or submit them, a party may (1) submit a request to this effect to the arbitral tribunal, or (2) be entitled under other procedural rules to take other measures to force the production or submission of such evidence.29 Sometimes

au moins où la loi du siège prévoit une telle faculté. Il faut remarquer que le recours au juge pour ordonner la discovery en ralation avec un arbitrage a été supprimé en droit anglais, ou est le plus souvent refusé comme aux Etats-Unis. En pratique, le problème de la production forcée des documents ne se pose guère. La sanction consiste à tirer toutes conséquences sue le plan de la preuve d’une abstention ou d’un refus après en avoir averti les parties, ainsi que l’établissent de très nombreuses decisions parmi lesquelles on citera la sentence CCI8520 de 1997 dont il a été parlé plus haut (section I, paragraphe 2); l’ordonnance rendue le 7 octobre 1993 dans l’affaire CCI7078: ‘if the opposing party bound to produce documents . . . fails to produce the documents within the established period of time without showing sufﬁcient cause for such failure, the Arbitral Tribunal decide what consequences would follow from such failure and may, inter alia, rely on inferences it can make from the known circumstances.’ ou encore la sentence no 426-276-3, Arthur J. Fritz and Co. v. STTS, prononcée le 30 juin 1989 par le Tribunal irano-américain de La Haye.

27 28

Dominique Hascher, Principles et Pratiques de Procédure dans l’arbitrage Commercial International, in RECUEIL DES COURS: COLLECTED COURSES OF THE HAGUE ACADEMY OF INTERNATIONAL LAW 92–93, Tome 279 de la Collection (1999). IBA Rules Art. 9(4) and (5). Arbitration Act 1996 of England § 41(7) provides: If a party fails to comply with any other kind of peremptory order, then, without prejudice to section 42 (enforcement by court of tribunal’s peremptory orders), the tribunal may do any of the following: (a) direct that the party in default shall not be entitled to rely upon any allegation or material which was the subject matter of the order; (b) draw such adverse inferences from the act of non-compliance as the circumstances justify; (c) proceed to an award on the basis of such materials as have been properly provided to it; (d) make such order as it thinks ﬁt as to the payment of costs of the arbitration incurred in consequence of the non-compliance.

29

Rhys Davies et al. conclude in Third Party Discovery in Arbitration Proceedings, 7 INT’L ARB. L. R. 164 (Oct. 2004): Although third party discovery may be available in the United States, England and Wales and Germany, the conditions under which it may be ordered vary signiﬁcantly. There are also signiﬁcant differences within the United States. If third party discovery is likely to be necessary, a party negotiating an arbitration agreement needs carefully to choose the situs of the arbitration, so as to maximise the chances of obtaining the discovery sought. By contrast, if third party discovery is likely to be unhelpful, this may involve negotiating a location like Germany, where its availability is very limited.

154

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there may not be other measures available or a party may prefer to proceed via the arbitral proceedings, in which case a request is submitted to the panel. The IBA Rules describe this step in Article 3(8): If a Party wishes to obtain the production of documents from a person or organization who is not a Party to the arbitration and from whom the Party cannot obtain the documents on its own, the Party may, within the time ordered by the Arbitral Tribunal, ask it to take whatever steps are legally available to obtain the requested documents. The Party shall identify the documents in sufﬁcient detail and state why such documents are relevant and material to the outcome of the case. The Arbitral Tribunal shall decide on this request and shall take the necessary steps if in its discretion it determines that the documents would be relevant and material.

We should in particular note the words “within the time ordered by the Arbitral Tribunal” while reﬂecting on: (i) the conduct and management by the panel; (ii) what constitutes reasonable opportunity under the audi alteram partem rule and due process as to the closing of admission of evidence; (iii) the risk of constitution of waiver in the event of failure to comply. The sequence of steps is: (i) (ii) (iii) (iv) (v)

failure to obtain the documents;30 request to the panel; consultation with the parties; analysis of relevance and materiality by the panel; “necessary steps” by the panel if it deems the document relevant and material. What the necessary steps may be depends on the applicable procedural rules, including recourse to courts of law in the seat of arbitration or in other places.

The above IBA Rule covered the production of documents. The same procedure applies to other evidence as provided in Article 4(10): If a Party wishes to present evidence from a person who will not appear voluntarily at its request, the Party may, within the time ordered by the Arbitral Tribunal, ask it to take whatever steps are legally available to obtain the testimony of that person. The Party shall identify the intended witness, shall describe the subjects on which the witness’s testimony is sought and shall state why such subjects are relevant and material to the outcome of the case. The Arbitral Tribunal shall decide on this

30

See Model Law Decisions: Vibroﬂotation A.G. v. Express Builders Co. Ltd. High Court of Hong Kong (Kaplan J.), 15 August 1994, Original in English, Unpublished: CLOUT, “Subpoenas duces tecum can be granted under Model Law Article 27, if requested by the arbitral tribunal or by a party with the approval of the arbitral tribunal.” This can hardly be interpreted to mean objective failure (i.e., unavailability of any legal measure or action or an exhaustion of the same but failure to voluntarily obtain such evidence).

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request and shall take the necessary steps if in its discretion it determines that the testimony of that witness would be relevant and material.

6.5.4 Fact-Finding by the Arbitrators The arbitrators “sitting in the driver’s seat” are in ultimate control of the relevance of evidence and its sufﬁciency, but only secondarily under a duty to cause the relevant facts to be established.31 Should the parties either on their own initiative or under the guidance of the panel fail to bring essential evidence that is available or accessible, the panel may, in its discretion, take its own initiative and order documents to be produced or other testimony or evidence to be submitted. This applies to evidence presumably in possession either of a party or a nonparty to the arbitration. The tribunal may consider that respecting and protecting the parties’s substantive rights requires taking action concerning evidence, even when balanced against other relevant arguments, such as party autonomy, timeliness and impartiality. Article 3(9) of the IBA Rules provides: The Arbitral Tribunal, at any time before the arbitration is concluded, may request a Party to produce to the Arbitral Tribunal and to the other Parties any documents that it believes to be relevant and material to the outcome of the case.

Article 9(11) further provides: The Arbitral Tribunal may, at any time before the arbitration is concluded, order any Party to provide, or to use its best efforts to provide, the appearance for testimony at an Evidentiary Hearing of any witness, including one whose testimony has not yet been offered.

In addition, the arbitral tribunal may, after due consultations with the parties, appoint one or more experts to report on issues speciﬁed by the panel in addition to those appointed and presented by the parties.32 Such tribunal-appointed experts have the same power and authority to request information and to have access to documents and facts as the panel itself.33 The same principles are codiﬁed in the ICC Rules. The main principle does not leave much room for interpretation as to who is in charge of conducting the proceedings: The Arbitral Tribunal shall proceed within as short a time as possible to establish the facts of the case by all appropriate means.34

The requirements of (1) “as short a time as possible” and (2) “by all appropriate means” do not, however, impose the primary burden on the panel as to establishing the

31 32 33 34

156

Arbitration Act 1996 of England § 34(2) (g) (see Appendices, p. 270). IBA Rules Art. 5 and 6. Id. Art. 6(3). ICC Rules Art. 20(3).

DUE PROCESS RELATED TO FACTS AND EVIDENCE

facts but instead the responsibility of introducing the time schedule and the procedural framework for this to happen.35 Should the parties not produce satisfactory evidence as to the relevant facts, the arbitral tribunal may, in line with the IBA Rules: (i) decide to hear witnesses, experts or any other person; (ii) appoint one or several experts;36 (iii) summon any party to provide additional evidence.37

6.5.5 Organizing the Evidentiary Hearings In exceptional cases no evidentiary or other hearings may be necessary or all the communications as submissions may be organized via telecommunications or videoconferences. Despite organizational meetings (including the drafting of terms of reference) there may be hearings for argumentation and submission of pleadings and for taking evidence. The latter may prove to be unnecessary: (i) if there are no facts in dispute; (ii) if the parties allow the witness statements and other “oral” evidence to be submitted in writing as such without examination of the witnesses or experts before the tribunal; or (iii) if the parties so agree for whatever reason. As to (ii)), ICC Rules Article 20(6) provides: The Arbitral Tribunal may decide the case solely on the documents submitted by the parties unless any of the parties requests a hearing. (emphasis added)

The panel may in (ii) and (iii) organize an evidentiary hearing if deemed necessary in its sole discretion to fully establish the facts or for any other due process purpose. For instance, the risk of indirect erga omnes effects or enforcement of unlawful or collusive agreements or conduct may warrant such activity against the will of the parties. Such discretion is part of the autonomous procedural powers and freedom of the arbitral tribunal. However, only in exceptional circumstances and for material grounds should the panel refuse to hold a hearing if one is requested by a party. Major fact-ﬁnding missions against the unanimous will of the parties also should be carefully considered as the proceedings are based on the agreement of the parties and are conducted at their expense; thus, the parties may at their convenience cause the proceedings to be closed and the panel to resign.

35 36 37

ICC Rules Art. 18(4) and 20 provide for a separate documented timetable for the conducting of the proceedings. Id. Art. 20(4). Id. Art. 20(5).

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The ICC Rules, as a universal code, leave the organizing of the hearings very open: The Arbitral Tribunal shall be in full charge of the hearings, at which all the parties shall be entitled to be present.38

This guarantees great ﬂexibility for the parties, or in the absence of their agreement, to the panel to tailor-make the procedural “costume.” The IBA Rules give more guidance as provided in Article 8(2): (1) The Claimant shall ordinarily ﬁrst present the testimony of its witnesses; (2) followed by the Respondent presenting testimony of its witnesses, and then; (3) by the presentation by Claimant of rebuttal witnesses, if any. (4) Following direct testimony, any other Party may question such witness, in an order to be determined by the Arbitral Tribunal. (5) The Party who initially presented the witness shall subsequently have the opportunity to ask additional questions on the matters raised in the other Parties’ questioning. (original text modiﬁed)

Finally, the IBA Rules make it clear that the above is in the discretion of the panel and may be adjusted on the panel’s own motion or on that of a party. Witnesses may also be questioned (i) simultaneously (both or all present at the same time); or (ii) in confrontation with each other. Such special arrangements may prove to be necessary or beneﬁcial should witness testimony be contradictory or fail to form a consistent and logical sequence of events. Such special measures may refresh memories, help the panel to distinguish from facts produced by failing memory or subjectivity without roots in reality, or in the worst case scenario, expose false or misleading testimony and eliminate its perhaps fatal consequences.

6.5.6 “Entire Agreement Clauses” and Other Agreements on Admissibility of Evidence An entire agreement clause, which is very common in commercial practice and belongs to almost any collection of standard “boilerplate” language, provides in essence that everything agreed upon is expressed in the contract document itself and that no evidence of any other agreements, terms or conditions, intentions, purpose, or meaning is necessary or even permissible.39 It does not require much to raise the counterargument that

38 39

Id. Art. 21(3). UNIDROIT Art. 2.1.17: A contract in writing which contains a clause indicating that the writing completely embodies the terms on which the parties have agreed cannot be contradicted or supplemented by evidence of prior statements or agreements. However, such statements or agreements may be used to interpret the writing.

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there are no exhaustive agreements where anything would be implicit or left open. This is certainly true. Sometimes this self-evident conclusion is deemed to justify a de facto disregard of the entire agreement clause. However, it is equally true that the clause originally and often speciﬁcally was incorporated for the very purpose of limiting or excluding irrelevant evidence in the interpretation of the agreement by the parties before courts or an arbitral panel.40 Imperfect as it may be deemed to remain even in its most sophisticated form, the clause attempts to enforce the legitimate purpose of the parties by: (i) forcing all the parties to the agreement in negotiation at the precontractual stage to openly express their expectations and intentions and understandings in the agreement itself; (ii) facilitating the reading and interpretation of the agreement at a post-signing stage speciﬁcally by those who were not personally involved in the process; (iii) ensuring cost-effective proceedings in case of a dispute or need to enforce the agreement; and (iv) eliminating attempts to introduce new contents to the agreement by way of false or misleading evidence. All these interests are fully legitimate, and even though it is impossible to reach perfection, this does not entitle the panel or parties to disregard the entire agreement clause as meaningless. The ideology of the entire agreement clause is closely in line with the tradition and mechanism of the prevention of fraud in court proceedings and deeply rooted in common law. The objective is to prevent fraud and a loss of rights by forcing the parties to express their bargain clearly including all its terms and conditions. The entire agreement clause is an important or may even be a fundamental element in the panel’s assessment of relevance and admissibility of evidence or testimony tendered by the parties and it cannot be overlooked as insigniﬁcant. The entire agreement clause is part of the agreement of the parties and it is to be respected and enforced by them. However, we have to make certain entire agreement clauses do not limit a party’s access to justice in a way that would conﬂict with fair trial principles. In fact, in many

The Comment Section adds: This Article indirectly conﬁrms the principle set out in Art. 1.2 in the sense that, in the absence of a merger clause, extrinsic evidence supplementing or contradicting a written contract is admissible.

(International Institute for the Uniﬁcation of Private Law (UNIDROIT) Principles of International Commercial Contracts 2004, Rome 2004). 40

Compare UCC § 1-206: (1) Except in the cases described in subsection (2) of this section a contract for the sale of personal property is not enforceable by way of action or defense beyond ﬁve thousand dollars in amount or value of remedy unless there is some writing which indicates that a contract for sale has been made between the parties at a deﬁned or stated price, reasonably identiﬁes the subject matter, and is signed by the party against whom enforcement is sought or by his authorized agent. (2) Subsection (1) of this section does not apply to contracts for the sale of goods (Section 2-201) nor of securities (Section 8-319) nor to security agreement (Section 9-203).

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cases the agreement means there would be no legal protection available for some claims either directly for jurisdictional reasons or factually for evidentiary ones. Even though agreements with the purposes listed above might seem to be as such legitimate at least ex ante, it might be that ex post they would not be fair. For example, it might be that one of the parties has the better possibilities to present evidence for a claim that originally would have been less legitimate than the claim of the opposite party. It might be that an entire agreement clause limits this possibility to present his case in a way that would infringe on due process requirements. Also, we have to consider whether an ex ante waiver of the right to present evidence in support of a claims would in fact constitute a waiver of opportunity to be heard and such infringe on the fundamental procedural rights of a party. At least the meaning of such a clause in relation to procedural due process rights has to be evaluated in casu, bearing in mind that legitimate purposes can and should be protected in terms of fundamental procedural rights and due process in arbitration.

6.6 QUESTIONS AND ANSWERS The submissions of the parties may leave room for many questions41 relating to legal theories or facts. Also, the parties may wish to ask questions and should be allowed and encouraged to do so if it serves the interest of establishing the facts. The admission of facts streamlines the proceedings while a denial helps to identify the facts in dispute and to determine the relevance of the available evidence. The effectiveness of questions and answers as a vehicle in reconstructing the past depends on a number of factors: (i) The attitudes of the parties as to the material truth; (ii) The silent or express endorsement of the questions by the panel. If the panel is actively involved in the process, the parties and the proceedings may beneﬁt because the questions (and in particular the answers) have a higher proﬁle and may be taken more seriously, resulting in a more complete picture as to what has transpired and what remains in dispute; (iii) The refusal to answer satisfactorily or the giving of misleading or false information may, if exposed later on, in many ways reﬂect both on the assessment of evidence and the evaluation of legal theories. By asking questions, the panel may expedite the establishment of the relevant facts. The right timing of such an intervention may be at the end of the ﬁrst rounds of submissions in connection with the drafting of the terms of reference (if the rules provide for such a document) or at a comparable stage of the proceedings.42

41 42

160

Arbitration Act 1996 of England § 34(2)(e) (see Appendices, pp. 269–70). ICC Rules Art. 18. DUE PROCESS RELATED TO FACTS AND EVIDENCE

6.7 DISCOVERY Discovery is the process of learning about facts not yet known. It means obtaining access to information, most often to the ﬁles of the adversary.43 Discovery serves the objectives of arbitration: establishment of the facts and avoidance of surprises.44 In addition, it is related with the right to present one’s case and opportunity to be heard as well as access to justice and protection of substantive rights. There are some considerable differences in legal tradition relating to the time and extent of discovery. Discovery, including pretrial discovery, is extensive in American litigation, but the culture in international arbitration remains very reserved.45 Holtzmann describes U.S. practices: Rules requiring submission of documents on the proper demand of a party (i.e. “document discovery”), which are a typical feature of court litigation in the United States, are not included in the FAA or the UAA. Most arbitration rules permit arbitrators to order a party to submit documents. If a party, or other person having the documents, refuses to submit them, the party seeking discovery may request a court having jurisdiction to order submission of the documents; generally, however, courts are reluctant to become involved in arbitral proceedings and will order discovery only in exceptional circumstances.46

43 44 45

Arbitration Act 1996 of England § 34(2)(d) (see Appendices, p. 270). IBA Rules Preamble (4) (see Appendices, p. 391). Hascher, supra note 2, at 90 writes: Les arbitres ne pourront donc pas présumer la connaissance par les conseils des parties des règles judiciaires de la discovery en raison de la vraisemblable absence d’homogénéité entre leurs conceptions juridiques. Aussi aﬁn de ne pas créer des malentendus et surprendre les parties ou leurs conseils, il faut souhaiter que le tribunal arbitral déﬁnisse clairement ce qu’il entend imposer comme obligations dans le cadre du recours à la discovery.

Gabrielle Kaufmann-Kohler, Globalization of Arbitral Procedure, 36 VANDERBILT J. TRANSNAT’L L. 127–28 (Oct. 2003), deﬁnes the status of compromise: To bridge the gap between these different traditions international arbitration has developed a practice embracing elements drawn from both camps. The primary elements of this practice, as restated in the IBA Rules of Evidence as well as in some other institutional rules, are the following: There is no broad U.S.-style discovery in international arbitration. Incidentally, neither is there any right to court-like discovery procedures in U.S. arbitrations, as the extent of discovery is entirely within the control of the arbitrators. It is now well-accepted, even among civil-law arbitrators, that the tribunal may grant some level of discovery. It is now well-accepted, even among civil-law arbitrators, that the tribunal may grant some level of discovery. The scope of discovery is within the discretion of the tribunal. Unless the parties expressly agreed to it, and subject to cases where the refusal to order production may constitute a breach of due process, the parties are not entitled to documents production. A tribunal will allow production of documents, provided the party requesting it makes a prima facie showing of the following requirements: (1) the documents sought are identiﬁed with reasonable speciﬁcity, (2) they relate to facts relevant and material to the outcome of the dispute; (3) they are not protected by some privilege, for instance, attorney-client privilege, conﬁdentiality of business secrets, or protection of sensitive governmental information. 46

Howard M. Holtzmann, Report on U.S. Arbitration Law, in INTERNATIONAL HANDBOOK COMMERCIAL ARBITRATION 21 (Supp. 13, Sept. 1992).

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Besides access to relevant ﬁles, discovery may mean hearing in advance the persons who are likely to give testimony in the proceedings, in particular those called by the adversary. Discovery means in practice an opportunity hear a person nominated as a witness or expert often on the basis of his written statement by way of cross-examination prior to the evidentiary hearing before the tribunal. The written statement, which may or may not have been given under oath, serves as an introduction to what the person knows and intends to testify and as such forms a sound basis for cross-examination in advance. Although perhaps expensive, all this eliminates the risk of surprise, puts both parties on an equal footing, may help the parties to settle, fulﬁlls the criterion of audi alteram partem, and presumably allows the actual hearing before the tribunal to run more smoothly and be less time-consuming. There will be no (or at least less) need to narrow down or identify the area of a person’s knowledge by asking questions about matters the person has no knowledge about in the actual hearing before the tribunal. The ethics of interviewing witnesses in advance is questioned or even rejected in some legal systems. However, under the IBA Rules, interviews are endorsed: It shall not be improper for a Party, its ofﬁcers, employees, legal advisors or other representatives to interview its witnesses or potential witnesses.47

If such interviews are conducted properly and professionally, the risk of abuse, inappropriate behavior, or undue inﬂuence can be avoided. In particular, if witnesses give their statements in writing in advance and the other party is given the opportunity to cross-examine the witnesses in advance, this would seem to improve the chances of accurately establishing the relevant facts.

6.8 WITNESSES 6.8.1 Prior to Hearings To evaluate the merits of a potential case, it is often necessary for a party to hear witnesses and interview other persons.48 Such an investigation, particularly if its results are recorded in writing, may encourage the parties to settle out of court and will in any case expedite the proceedings by allowing the parties and the panel to focus on what is relevant. However, doing this may raise legal and ethical concerns. Is undue inﬂuence being exercised? What access, if any, does the adversary have to this testimony? How should the testimony be recorded for future purposes if it should no longer be available at a later stage? The pros of such advance hearings seem stronger than the cons. This also seems to be the prevailing tradition.

47 48

162

IBA Rules Art. 4(2). See Georg Von Segesser, Witness Preparation in International Commercial Arbitration, 20 ASA BULLETIN (2002). Hascher, supra note 2, at 93–99, discusses when a person is a witness, when a person is a party representative, and when a person is to be heard as an expert or an expert witness. DUE PROCESS RELATED TO FACTS AND EVIDENCE

Article 25(6) of the Swiss Rules provides: It shall not be improper for a party, its ofﬁcers, employees, legal advisors or counsel to interview witnesses, potential witnesses or expert witnesses.

The cons can be eliminated by professional behavior and legal safeguards. If and when possible, these should include the following: (i) Explaining to the witness his rights and his duties (perhaps also in writing in his or native language to make sure that any suspicion of undue inﬂuence is eliminated). This applies in particular to ofﬁcers and employees whose position may be sensitive and who may tend to believe that the testimony should be in favor of the employer or the company. If this suspicion is eliminated, the results are better. (ii) The testimony should preferably be recorded in writing to be submitted in advance for a number of reasons.49 First, when reduced to writing, accuracy will increase, and during the drafting exercise the witness may verify dates and matters from her notebooks, documents, etc. improving and completing the substance thereof. Second, such a record allows the testimony to be made available to other parties and to the panel, which serves both due process purposes and improves the efﬁciency of the proceedings. (iii) The witness statement may also serve as secondary evidence should the witness be prevented from appearing at a later stage due to illness, death or for another such reason. The preparation for the evidentiary hearing generally includes the measures necessary to avoid surprises, such as listing the evidence of the parties or even informing the tribunal and the opposite party of the content of the witnesses contribution. According to the IBA Rules: The taking of evidence shall be conducted on the principle that each Party shall be entitled to know, reasonably in advance of any Evidentiary Hearing, the evidence on which the other Party relies.50

Further: The Arbitral Tribunal may order each Party to submit within a speciﬁed time to the Arbitral Tribunal and to the other parties a written witness statement by each witness on whose testimony it relies, . . .51

49

AAA Rules 32 (see Appendices, p. 238); Swiss Rules Art. 25(5) and (6) (see Appendices, p. 467). Holtzmann, supra note 46, at 20 reports on U.S. practices: Parties may choose to present a witness’ sworn written statement, called an “afﬁdavit,” and the arbitral tribunal gives such written statements the weight it considers appropriate in the circumstances.

50 51

IBA Rules Preamble (3). Id. Art. 4(4).

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Witness statements are not meant to replace or be a substitute fora hearing of the witness in person before the panel. The main rule still is that the witness should testify before the tribunal and be cross-examined, as provided in the IBA Rules: Each witness who has submitted a Witness Statement shall appear for testimony at an Evidentiary Hearing, unless the Parties agree otherwise.52

The IBA Rules also provide: If the Parties agree that a witness who has submitted a Witness Statement does not need to appear for testimony at an Evidentiary Hearing, such an agreement shall not be considered to reﬂect an agreement as to the correctness of the content of the Witness Statement.53

The testimony of the witness before the panel may be organized by way of a videoconference or by phone as the parties may agree or the panel may decide.

6.8.2 Language In principle, the witness should testify in his native language unless he gives his consent to doing so in another language. In the former case, interpretation may become necessary but in the latter, the risk of misunderstanding increases and the reliability and accuracy of the testimony may suffer to the extent that in the interest of establishing the truth, the panel may need to order the hearing to be conducted in witness’s native language.54 If a witness testiﬁes and the hearing is conducted in a language other than that of the proceedings, interpretation of the testimony into the language of the hearing may be needed to allow the panel and the parties to follow, understand, and ask questions.55

6.8.3 “Nothing but the Truth” There are diverse traditions in legal systems as to witness testimony including methods ensuring the witness understands the importance of telling the truth. In the courts, witnesses are often required to testify under oath or a corresponding assurance. Administration of an oath may not always be within the authority of the panel, which means other methods may be in place.56 In the context of international arbitration, all involved should show respect and understanding as to the background and culture of the witnesses in particular as giving testimony often has deeply rooted religious or 52 53 54 55 56

164

IBA Rules Art. 4(7). Id. Art. 4(9). AAA Rules 27 (see Appendices, p. 237). Swiss Rules Art. 25(3) (see Appendices, p. 467). Arbitration Act 1996 of England § 38(5) (see Appendices, p. 271). See also Hascher, supra note 2, at 99. DUE PROCESS RELATED TO FACTS AND EVIDENCE

ethical dimensions. This is where the ﬂexibility of the arbitration proceedings may demonstrate its effectiveness while still showing its sensitivity to different cultures and persons. The IBA Rules allow this to be organized “as the case may be”: Any witness providing testimony shall ﬁrst afﬁrm, in a manner determined appropriate by the Arbitral Tribunal, that he or she is telling the truth. If the witness has submitted a Witness Statement or an Expert Report, the witness shall conﬁrm it.57 (emphasis added)

The applicable procedural rules may allow a rehearing of the witness under oath before a court of law should this prove to be beneﬁcial or necessary. It may be advisable to inform the witness in advance if the counsel in charge has not done so.

6.8.4 Hostility, Evasiveness or Psychological or Emotional Ties Even at its best, witness testimony is always subjective. Very often witnesses have such ties to the parties or to the matter in the dispute that subjectivity or bias cannot be eliminated despite good faith attempts by counsel, the panel, and the witness himself. Such a bias may be based on: (i) employment or other such relationship creating an economic tie or dependency; (ii) emotional or family ties; (iii) fear of losing a position in a company; (iv) fear of being exposed for unlawful acts or violations of the law or business codes of ethics; (v) hostility based on disrespect or hatred; (vi) fear of violence or coercion; (vii) misdirected will to please, protect, or help someone; (viii) evasiveness based on frustration and disinterest in the proceedings and the establishment of facts, etc. These emotions are part of human nature, but they raise two important legal issues: (1) how can the correctness of witness statements be evaluated?, and (2) when may the witness refrain from answering?. The ﬁrst issue is tackled in the IBA Rules with elegance by leaving the panel with sufﬁcient room to be ﬂexible: The Arbitral Tribunal shall determine the admissibility, relevance, materiality and weight of evidence.58

The latter issue is addressed with equal quality: The Arbitral Tribunal may limit or exclude any question to, answer by or appearance of a witness . . . if it considers such question, answer or appearance to be 57 58

IBA Rules Art. 8(3). Id. Art. 9(1).

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irrelevant, immaterial, burdensome, duplicative or covered by a reason for objection.59 (emphasis added)

Reasons for objection include legal impediments or privileges under the applicable legal or ethical rules.60 These may include the laws of the place of residence of the witness or his ethical or religious convictions. The panel may take the necessary action on its initiative as well as on a motion by a party.61 Article 25(2) of the Swiss Rules indicates a ﬂexible approach: Any person may be a witness or an expert witness. If witnesses or expert witnesses are to be heard, at least ﬁfteen days before the hearing each party shall communicate to the arbitral tribunal and to the other party the names and addresses of the witnesses or expert witnesses it intends to present, the subject upon and the languages in which such witnesses or expert witnesses will give their testimony.

6.8.5 Questioning Assuming witness statements have been submitted prior to the examination of the witness, the panel needs to determine the order of questioning. In general, the party who nominated the witness and primarily relies on his testimony shall start (i.e., the claimant will examine her witness ﬁrst and the respondent his). The Claimant shall ordinarily ﬁrst present the testimony of its witnesses, followed by the Respondent presenting testimony of its witnesses, and then by the presentation by Claimant of rebuttal witnesses.62

If all parties have nominated the same witness or if there are claims by all parties or for other reasons, the above order may be amended mutatis mutandis by the panel in its discretion: The Arbitral Tribunal, upon request of a Party or on its own motion, may vary this order of proceeding.. . .63 59 60

Id. at Art. 8(1). Id. at Art. 9(2)(b). See also Arbitration Act 1996 of England § 43(4). On the law applicable to privilege, see also Kaufmann-Kohler, supra note 23, at 19: Where the privilege at issue has not achieved the status of a general principle, or where the issue turns upon a controversial aspect of an otherwise well settled principle, it will become inevitable to choose the applicable law. For that purpose, it will be necessary to decide whether privileges are matters of procedure or of substance. Although different national laws adopt different characterization of privileges, it appears reasonable to say that privileges do not ﬁt neatly into either category; they carry elements from both. A procedural characterization leads to the law governing the arbitration (but not to the civil procedure rules applicable in court at the place of arbitration), and a substantive characterization to the law with the closest relationship to the privileged communication or information. In order to take into consideration the dual nature of privileges, one may think of submitting them both to the law of the arbitration and to the law of the closest relationship to the evidence. In the event of conﬂict, the most protective would apply.

61 62 63 166

IBA Rules Art. 9(2). IBA Rules Art. 8(2). Id. Art. 8(2); Swiss Rules Art. 25(4) (see Appendices, p. 467). DUE PROCESS RELATED TO FACTS AND EVIDENCE

The questioning should be in the effective control of the panel. In addition to orthodox questioning (who? when? why? what? how? etc.), which leaves all the facts to be reported by the witness, some ﬂexibility may be allowed. The panel should intervene if the questions: (i) (ii) (iii) (iv)

are leading or misleading; leave the witness only the choice of responding yes or no; are irrelevant, immaterial, or duplicative.64 are worded so the witness has no duty to answer or has the right to refrain from answering;65 or (v) allow the witness to be unduly harassed, offended, intimidated or unduly interrupted or do not permit him to continue his statement.66

The panel may allow or encourage counsel to assist in establishing the proper discipline by raising objections if any of the above is infringed on by a party. The panel should also intervene and take appropriate action to make certain that (vi) the witness answers the questions accurately; (vii) undue factors of inﬂuence or pressure on the witness are eliminated; (viii) the witness is reminded of her duty to tell the truth if the witness refuses to answer for no good reason or avoids giving an accurate answer. The arbitral tribunal may at its discretion wholly assume the role of questioning and examination, at least at the ﬁrst stage, and even exclude direct examination or direct cross-examination by the parties.67 In order not to violate due process, the parties should be allowed to submit their questions to the panel, and the panel will then ask those questions unless they ﬁnd them irrelevant or otherwise objectionable.

Hascher, supra note 2, at 99 writes: L’ordre de passage des témoins, en alternant ou non les témoins de l’une et de l’autre partie, ou l’ordre de leur interrogatoire, par la partie qui les a cités en premier, ou par l’adversaire, n’est pas décisif. Ce qui est constant dans la pratique arbitrale est l’interrogatoire des témoins par les parties et leurs conseils, puis par les arbitres qui chercheront à éclaircir les points restés obscurs ou jugés par eux pertinents, sans avoir inﬂuencé immédiatement les interrogatoires, avec cette précision qu’un témoin répondra plus volontiers au tribunal arbitral qu’à un conseil qui aurait fait montre d’aggressivité à son encontre. 64 65 66

IBA Rules Art. 8(1). Id. Art. 8(2) and 9(2). Holtzmann, supra note 46, at p. 21: Arbitrators are expected to control the cross-examination, so that it is not used to harass or intimidate witnesses. In practice, most examination and cross-examination of witnesses is conducted by the parties or their lawyers, but the arbitrators may also ask questions that they feel are necessary to an understanding and determination of the dispute.

67

Gabrielle Kaufmann-Kohler, Beyond Gadgetry—Substantive New Concepts to Improve Arbitral Efﬁciency, 5 J. WORLD INVESTMENT & TRADE 71 (Feb. 2004) writes: You can also provide that the arbitrators will start examining the witnesses before giving the ﬂoor to counsel; some attorneys will think that is natural and others will think it is outrageous. So, here again, you would have to take their expectations into consideration.

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6.8.6 Cross-Examination and Special Arrangements The opposite party has to have a real possibility to test, question and challenge the evidence presented by the other party, and provide alternative evidence. This way, the right to cross-examine a witness is in principle a part of due process. The examination may be direct in the sense that a party, usually through his counsel, directly asks the witness the questions, or it may be indirect, in which case the questions are asked by the members of the panel (e.g., from lists of questions submitted by counsel). In principle, the organization of the examination should be consistent allowing direct examination to all or no parties. This is another principle of due process expressed in the IBA Rules as being based on: [C]onsiderations of fairness or equality of the Parties that the Arbitral Tribunal determines to be compelling.68

The same principles apply if the panel decides not to admit certain testimony.69 Witnesses may be heard simultaneously or in confrontation on a motion of a party or in the panel’s discretion.70 Special arrangements may be called for to protect conﬁdentiality.71 Hearings by telecommunication or videoconferences can hardly be regarded as innovative any more.72 A witness may be allowed to have documents or personal notes with him in support of his memory as giving testimony is not an exercise in memorization.

68 69 70

IBA Rules Art. (2)(g). Id. Art. 9(2). Holtzmann, supra note 46, at 21 reports: Witnesses usually are ﬁrst questioned by the party or lawyer who introduced them. The questions are designed to elicit relevant facts from the witness’ personal knowledge. The extent to which so-called “leading questions” are allowed is left to the discretion of the arbitrators, since formal court procedures governing the examination of witnesses do not apply. During the questioning of a witness, the opposing side has the opportunity to object to questions on various grounds, such as that they are not relevant, they are not clearly stated, or they call for the witness to testify as to facts he or she does not know ﬁrsthand (e.g. “hearsay”). After the party or lawyer who introduced the witness has ﬁnished his or her questions, the witness usually then submits to questions by the opposing side. This process is what is known as “crossexamination.” Cross-examination is considered to be the best method for testing the credibility of a witness. The right to cross-examine witnesses is speciﬁcally provided in many state arbitration statutes (UAA Sect. 5) and, though not expressly mentioned in the FAA, is nevertheless considered to be an essential element of a fair hearing. In practice, the party that presented the witness is usually permitted to ask further questions after the cross-examination (i.e. “re-direct examination”), but the extent of any re-direct or re-cross-examination is within the discretion of the arbitrators.

71 72

168

IBA Rules Art. 8(2). IBA Rules Art. 9(3) and ICC Rules Art. 20(7). In sports arbitration, this is very common to reach the speed required for resolution. DUE PROCESS RELATED TO FACTS AND EVIDENCE

6.8.7 Timing In arbitration the parties, their witnesses, and any experts are assumed to adjust their time schedules to that of the proceedings. The same applies to arbitrators as well. Effective management of the proceedings often requires agreement on a time schedule for the submissions, pleadings, evidentiary hearings, and other measures that may be necessary to accomplish the mission.73 The time schedule should allow a reasonable opportunity for parties to cause the witnesses to appear and to give them sufﬁcient advance notice. If a witness is prevented from giving testimony, this does not amount to violation of due process if a reasonable opportunity for this was given by the panel. However, modern communications in combination with written witness statements make it always possible for the panel to consider a person’s testimony although the person is not able to be physically present.

6.8.8 Compensation for Witnesses Witnesses usually have the right to be compensated for their work and time lost. The speciﬁcs of such a right may depend on lex arbitri or other procedural rules. If a witness has been appointed by his employer, the compensation may be a part of the remuneration paid under the employment relationship. In practice, these issues are usually settled in advance between the parties and the witness, but they may become problematic in the event of a reluctant witness being compelled to testify or demanding unreasonable fees for doing so.

6.9 EXPERTS The purpose of hearing from experts is to elucidate issues of a technical, legal, medical, biological, or other discipline of some sophistication to better understand the relevant facts and their signiﬁcance. Expert testimony does not in general relate to the direct reconstruction of past facts although it may offer explanations and establish causes and effects, but it may be used for pure fact-ﬁnding or fact-establishing purposes. In most cases, technical experts are looked to for establishing compatibility with a standard or speciﬁcation (or a deviation therefrom) and elucidating underlying reasons for this to be true.74 UNCITRAL Model Law Article 26 provides: (1) Unless otherwise agreed by the parties, the arbitral tribunal (a) may appoint one or more experts to report to it on speciﬁc issues to be determined by the arbitral tribunal;

73 74

ICC Rules Art. 18(4). Arbitration Act 1996 of England § 37 (see Appendices, p. 270).

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169

(b) may require a party to give the expert any relevant information or to produce, or to provide access to, any relevant documents, goods or other property for his inspection. (2) Unless otherwise agreed by the parties, if a party so requests or if the arbitral tribunal considers it necessary, the expert shall, after delivery of his written or oral report, participate in a hearing where the parties have the opportunity to put questions to him and to present expert witnesses in order to testify on the points at issue.

Experts are most often party-appointed. An expert’s role in arbitral hearings is very close to that of a witness75 except experts are expected to submit a report in writing. IBA Rules Article 5(2) provides that the Expert Report should contain at least the following: (a) the full name and address of the Party-Appointed Expert, his or her present and past relationship (if any) with any of the Parties, and a description of his or her background, qualiﬁcations, training and experience; (b) a statement of the facts on which he or she is basing his or her expert opinions and conclusions; (c) his or her expert opinions and conclusions, including a description of the method, evidence and information used in arriving at the conclusions; (d) an afﬁrmation of the truth of the Expert Report; and (e) the signature of the Party-Appointed Expert and its date and place.

Experience in legal practice has proved the statements, conclusions, and opinions of experts vary and tend to favor the position of the party who appointed them. There are many natural reasons for this, but at the same time, contradictory or inconsistent statements create a need to strike a balance. Clarity may be obtained by organizing a “tête-a-tête” conference between the experts. IBA Rules Article 5(3) provide: The Arbitral Tribunal in its discretion may order that any Party-Appointed Experts who have submitted Expert Reports on the same or related issues meet and confer on such issues. At such meeting, the Party-Appointed Experts shall attempt to reach agreement on those issues as to which they had differences of opinion in their Expert Reports, and they shall record in writing any such issues on which they reach agreement.

Such a situation may call for a nomination of an expert by the panel itself: The Arbitral Tribunal, after having consulted with the Parties, may appoint one or more independent Tribunal-Appointed Experts to report to it on speciﬁc issues designated by the Arbitral Tribunal. The Arbitral Tribunal shall establish the terms of reference for any Tribunal-Appointed Expert report after having consulted with the Parties. A copy of the ﬁnal terms of reference shall be sent by the Arbitral Tribunal to the Parties.76 75 76

170

IBA Rules Art. 5 and 6. Id. Art. 6(1). See also Swiss Rules Art. 27: DUE PROCESS RELATED TO FACTS AND EVIDENCE

An exchange of opinions between a Party-Appointed Expert and a TribunalAppointed Expert may also be organized. IBA Rules Article 6(5) provides: The Arbitral Tribunal shall send a copy of such Expert Report to the Parties. The Parties may examine any document that the Tribunal-Appointed Expert has examined and any correspondence between the Arbitral Tribunal and the Tribunal-Appointed Expert. Within the time ordered by the Arbitral Tribunal, any Party shall have the opportunity to respond to the report in a submission by the Party or through an Expert Report by a Party-Appointed Expert. The Arbitral Tribunal shall send the submission or Expert Report to the Tribunal-Appointed Expert and to the other Parties.

The experts should in principle be heard in person before the tribunal just like a witness.77 A Tribunal-Appointed Expert may be questioned by a party in the same manner as Party-Appointed Experts.78

6.10 OTHER EVIDENCE The tribunal may order or conduct a site inspection or take action to preserve assets or evidence.79 This may relate to property in the possession of a party or of a third party.80 AAA Rule 33 provides: An arbitrator ﬁnding it necessary to make an inspection or investigation in connection with the arbitration shall direct the AAA to so advise the parties. The arbitrator shall set the date and time and the AAA shall notify the parties. Any party who so desires may be present at such an inspection or investigation. In the event that one or all parties are not present at the inspection or investigation, the arbitrator shall

1. The arbitral tribunal, after consulting with the parties, may appoint one or more experts to report to it, in writing, on speciﬁc issues to be determined by the tribunal. A copy of the expert’s terms of reference, established by the arbitral tribunal, shall be communicated to the parties. 2. The parties shall give the expert any relevant information or produce for his inspection any relevant documents or goods that he may require of them. Any dispute between a party and such expert as to the relevance of the required information or production shall be referred to the arbitral tribunal for decision. 3. Upon receipt of the expert’s report, the arbitral tribunal shall communicate a copy of the report to the parties who shall be given the opportunity to express, in writing, their opinion on the report. A party shall be entitled to examine any document on which the expert has relied in his report. 4. At the request of either party the expert, after delivery of the report, may be heard at a hearing where the parties shall have the opportunity to be present and to interrogate the expert. At this hearing either party may present expert witnesses in order to testify on the points at issue. The provisions of Article 25 shall be applicable to such proceedings. 5. The provisions of Article 9 shall apply by analogy to any expert appointed by the arbitral tribunal. 77 78 79 80

IBA Rules Art. 5(4)–(6). Id. Art. 6(6). World Intellectual Property Organization (”WIPO”) Rules Art. 49 and 50 (see Appendices, p. 528). Arbitration Act 1996 of England § 38(4) and 38(6) (see Appendices, p. 271).

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make a verbal or written report to the parties and afford them an opportunity to comment.

6.11 SUMMARY Experienced litigators often say that cases are won or lost on facts. Getting the facts right is a necessary element to getting legal protection for substantive rights. The facts are right if they are a result of a correct procedure, where the parties present their claims, theories, and evidence and the tribunal uses its authority to get the best possible raw material for the award. The key is that the procedure in formulating the factual premises be fair and efﬁcient. First, procedural rules have be such that the arbitral procedure is an adequate substitute to general court procedure from an access to justice perspective. The arbitral law of evidence will have to support and allow legal protection for substantive rights to make the (implied) waiver of access to court valid. Second, the arbitration procedure has to be fair. Parties have to be able to present their cases and to have an opportunity to be heard. These rights include presenting evidence and examining witnesses as well as challenging the evidence presented by the other party. When trying to support the parties in protecting their substantive rights in the proceedings, the arbitrators sometimes have to balance between procedural and substantive fairness. Trying to support one of the parties in protecting substantive rights might easily make the arbitrator look partial or in fact even be partial. However, a certain care might be necessary to balance the unequal position of the parties and to protect their substantive rights. This dilemma can never be completely resolved as the arbitrator will always have to balance between the two important goals.

172

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Chapter 7

The Role of the Panel in the Proceedings

7.1 MANAGING THE PROCEEDINGS The panel is in many ways in control of and responsible for the proceedings. Control and responsibility refer to two dimensions of steering the procedure. First, there is the question of who takes the initiative, manages the procedure, and has an active role in the proceedings. Second, there is the question of who eventually decides on procedural matters. Roles in arbitration vary a lot according to who the arbitrator is and who the parties are. Both the arbitrators and the parties might come from procedurally different cultural backgrounds and have different personalities. However, in comparison to court procedure, it is obvious that arbitration is much more communicative in nature, with the arbitrators not necessarily having the passive role judges might have in the many different procedural cultures. In most cases, the arbitrators have more discretion in organizing the procedure compared to courts, but the parties can sometimes even override the decisions of the tribunal, which does not often happen in the courts. In managing the procedure, the key element is the equal treatment of the parties, which is a due process requirement and part of lex proceduralia. The tribunal has to make certain that it does not act in a way that would result in an objective impression of bias whether or not the tribunal was actually biased. In addition, all the parties have to be given an equal and sufﬁcient opportunity to present their case. Finally, the tribunal should work toward a correct result. The power of the panel to manage the proceedings may be divided into its sole powers and powers it holds in common with the parties as follows: (1) Power and authority in common with the parties (i.e., if the parties agree on the issue, the arbitrators shall conduct the proceedings in accordance with the agreement).1 This power and authority belongs sometimes completely to the panel

1

Arbitration Act 1996 of England § 34 (see Appendices, pp. 269–70). 173

(i.e., all decision making in substantive or procedural issues to the extent procedural or substantive matters are not covered by such an agreement of the parties); ICC Rules Article 15(1) provides: The proceedings before the Arbitral Tribunal shall be governed by these Rules and, where these Rules are silent, by any rules which the parties or, failing them, the Arbitral Tribunal may settle on, whether or not reference is thereby made to the rules of procedure of a national law to be applied to the arbitration.

(2) Power and authority that belongs solely to the arbitrators (i) beyond the powers of the parties to agree on it fully or (ii) that at least requires the panel’s consent; (3) Power and authority that belongs to an institution or a third party under the applicable rules (e.g., ICC Court of Arbitration); (4) Power and authority that belongs to the parties only (e.g., amending the arbitration agreement);2 (5) Power and authority that belongs to the courts (i.e., elements of control, support, and enforcement); (6) Powers that both the panel and the courts have (interim and protective measures). Finally, in some areas covered by hard core due process neither the parties nor the arbitrators have power to manage the proceedings in the way they want.

7.2 THE PANEL AND THE FACTS OF THE CASE To achieve a just result in the dispute, the tribunal must establish the relevant facts.3 Prior to doing so, it needs to determine what is relevant as these two questions are interrelated. Relevance is primarily determined by the relief sought and the theories invoked, but this does not necessarily identify all the facts that may be relevant. The lack or insufﬁciency of evidence or emerging new facts may change the theories

2 3

Id. § 35 (see Appendices, p. 270). Tang Houzhi and Wang Shengchang report on the Chinese law in INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION 39 (Supp. 11, Jan. 1990): According to Art. 58 of the new Arbitration Law, a party may apply for setting aside an arbitration award to the intermediate People’s Court in the place where the domestic arbitration commission is located if he can produce evidence which proves that the arbitration award involves one of the following circumstances: (1) there is no arbitration agreement; (2) the matters decided in the award exceed the scope of the arbitration agreement or are beyond the arbitral authority of the arbitration commission; (3) the formation of the arbitral tribunal or the arbitration procedure was not in conformity with statutory procedure; (4) the evidence on which the award is based was forged; (5) the other party withheld evidence sufﬁcient to affect the impartiality of the arbitration; or (6) while arbitrating the case, the arbitrators committed embezzlement, accepted bribes, practiced graft or made an award that perverted the law.

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invoked by the parties and the remedies available to them—and consequently also change what is deemed to be relevant and what relief they pray for. In principle, the panel: (i) may determine with certainty that speciﬁc facts and information is (when submitted) or would be (when not yet submitted) relevant to support the relief sought or the defense invoked; (ii) cannot always exclude with certainty the relevance of evidence or facts tendered by the parties or which might be available but not tendered by the parties. Not admitting evidence may therefore be risky and even amount to a violation of due process. There is very little doubt that the parties are primarily responsible for establishing the facts (i.e., for “reconstructing the past”).4 It is debatable to what extent (if at all) the arbitral panel has a duty to participate in this exercise should the parties fail to do it properly by not presenting all available evidence (or even refusing to do so when requested by the adversary or ordered by the panel),5 even though there is not much doubt as to the panel’s right to do so.6

4

CIETAC Arbitration Rules Art. 36 provides: 1. Each party shall have the burden of proving the facts relied on to support its claim, defense or counterclaim. 2. The arbitral tribunal may specify a time period for the parties to produce evidence and the parties shall produce evidence within the speciﬁed time period. The arbitral tribunal may refuse to admit any evidence produced beyond the period. If a party has difﬁculties to produce evidence within the speciﬁed time period, it may apply for an extension before the expiration of the period. The arbitral tribunal shall decide whether or not to extend the time period. 3. If a party having the burden of proof fails to produce evidence within the speciﬁed time period, or the produced evidence is not sufﬁcient to support its claim or counterclaim, it shall bear the consequences thereof. See also article 37 (1): 1. The arbitral tribunal may, on its own initiative, undertake investigations and collect evidence as it considers necessary.

5

6

(China International Economic and Trade Arbitration Commission (CIETAC), Ethical Rules for Arbitrators, as Effective May 1, 2005). Christer Söderlund, A Comparative Overview of Arbitration Laws, 20 LCIA ARB. INT’L 80 (2004) writes: The Swedish and Russian Acts do not give any speciﬁc clue as to the approach to be chosen by the arbitrators. The tendency toward one or other alternative is certainly an outﬂow of the legal background and the arbitration culture of the arbitrators involved in the speciﬁc case. In this respect it is fair to say that, as a broad generalization, Scandinavian arbitrators tend to be of the adversarial inclination (although in practice an orthodox approach is not pursued.) However, a more active stance on the part of the arbitrators is certainly accommodated within the discretion of the arbitrators to shape the proceedings as long as standards of impartiality, equal treatment and due process are maintained. AAA Rules 31 (see Appendices, p. 238). Dominique Hascher, Principles et Pratiques de

Procédure dans l’arbitrage Commercial International, in RECUEIL

THE PANEL AND THE FACTS OF THE CASE

DES

COURS: COLLECTED

175

Berdardini writes: The issue is to determine whether and to what extent the arbitrator’s role is to be conceived as limited to watching, as a neutral observer, a game played by other subjects, the disputing parties, to then proclaim the victory of one of them when the game is over or, rather, if the arbitrator may (or should) enter into the gameﬁeld in order not only to guarantee the full respect of the rules of the game but also, and mainly, to ensure that its conviction as to the solution of the dispute be founded on factual and legal elements which it has contributed to identify as determinant for its decision. This, by assuming an active role in the conduct of the arbitral proceeding, particularly in the evidence acquisition process, making sure that the same be conducted in a fair and expeditious manner.7

Clearly the purpose of the procedure is not to be an obstacle to justiﬁed claims or a labyrinth a party needs to go through to enforce its substantive rights. Rather, the purpose is to make arbitral proceedings as effective a vehicle as possible to get to and enforce substantive rights. However, as already noted above, this has to be done while respecting the procedural rights of the parties—which, of course, makes the issue more problematical. If a party innocently misrepresents the facts, it is primarily up to his adversary to correct or complete the picture. However, fraudulent misrepresentation (“malrepresentation”) is reproachable as a breach of the duty of good faith imposed by the arbitration agreement. In the worst case, fraudulent misrepresentation may amount to fraud and injustice, if not revealed. If it is in the end revealed, it may, in criminal action and the annulment of any award already given. Thus, misrepresentation is forgivable only when it is innocent. The duty to tell the truth and disclose the facts is even stricter when it comes to witnesses. The establishment of the facts is of paramount importance. As proper adjudication of disputes indispensably requires establishing of the facts, the arbitrators have at least a secondary duty: (i) (ii) (iii) (iv)

to establish what may be relevant; to determine how the relevant facts will be established; to give the necessary guidance and orders to the parties to accomplish the same; or to take action if necessary to accomplish this on its own initiative and action.8 COURSES OF THE HAGUE ACADEMY OF INTERNATIONAL LAW 114, Tome 279 de la Collection (1999) writes: Le tribunal arbitral est souverain pour décider des divers actes de la procédure selon un principe généralement admis en droit processuel, et qui trouve sa justiﬁcation dans les fonctions juridictionnelles mêmes des arbitres lors de la conduite de l’instance. Sauf accord contraire des parties, il est acquis que l’arbitre est libre d’user des mesures d’instruction de son choix et n’a pas à mettre en œuvre tout ce qui est demandé par une partie.

7 8

Piero Bernardini, The Role of the International Arbitrator, LIBER AMICORUM CLAUDE REYMOND 2 (2004). Gabrielle Kaufmann-Kohler, Globalization of Arbitral Procedure, 36 VANDERBILT J. TRANSNAT’L L. 1331 (Oct. 2003) writes: The common-law system is often described as adversarial in that the court has a passive role and the presentation of the evidence is left to the parties. By contrast, civil-law systems are

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Article 24 of the Swiss Rules provides: 1. Each party shall have the burden of proving the facts relied on to support its claim or defence. 2. The arbitral tribunal may, if it considers it appropriate, require a party to deliver to the tribunal and to the other party, within such a period of time as the arbitral tribunal shall decide, a summary of the documents and other evidence which that party intends to present in support of the facts in issue set out in its Statement of Claim or Statement of Defence. 3. At any time during the arbitral proceedings the arbitral tribunal may require the parties to produce documents, exhibits or other evidence within such a period of time as the tribunal shall determine.

It is always in the discretion of the panel to request further evidence or pursue fact-ﬁnding when necessary. However, before embarking on fact-ﬁnding on its own initiative, the panel should give the parties an opportunity to comment on the panel’s review of the status of the evidence and the need for fact-ﬁnding (i.e., consultation). If the parties in such a consultation unanimously object to further fact-ﬁnding by the panel, the panel should in general not proceed on any sua sponte fact-ﬁnding mission. Should the panel nonetheless decide to continue, the parties may de jure terminate the mandate.9 If sufﬁcient justiﬁcation exists, the panel’s other alternative is to resign.10 If a party or parties (as the case may be) after due consultation deliberately choose not to bring further evidence and express this clearly or demonstrate it by conduct, this might be deemed to be a material or procedural waiver of rights that a party is fully entitled to even if the omission is against his interests.11 Such a choice by a party should perhaps not be deemed to have been made without proper consultation of the parties as, no matter how obvious it may appear to be, the omission may be based on a false analysis of evidence, its sufﬁciency, and/or relevance rather than a deliberate and conscious choice (false meaning different from that of the panel view as to the status). Therefore, a consultation is most appropriate before any “waiver” conclusions are made. Further, normally a party not presenting evidence should not be considered having waived his substantive claims, although de facto the waiver of procedural right to present one’s case might lead to losing the substantive right as well.

regarded as inquisitorial with the judge assuming an active rule in the taking of evidence, sometimes specifying the facts upon which evidence is required, and directing the parties to produce speciﬁc proof. However, this clear-cut divide between inquisitorial and adversarial concepts is an oversimpliﬁcation. Important differences exist within the civil-law system. For instance, a German judge’s approach would be truly inquisitorial, while French civil procedure is actually much closer to an adversarial system. 9 10 11

Arbitration Act 1996 of England § 23 (see Appendices, pp. 264–65). Id. § 25(1–3) (see Appendices, pp. 265–66). Id. § 4(4) (see Appendices, p. 257).

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The active role of the tribunal is also visible in receiving the evidence. IBA Rules Article 8(1) further provides: The Arbitral Tribunal shall at all times have complete control over the Evidentiary Hearing. The Arbitral Tribunal may limit or exclude any question to, answer by or appearance of a witness (which term includes, for the purposes of this Article, witnesses of fact and any Experts), if it considers such question, answer or appearance to be irrelevant, immaterial, burdensome, duplicative or covered by a reason for objection set forth in Article 9.2.

The panel is in control of the evidentiary proceedings and may limit or bar evidence from the proceedings in its discretion or based on an agreement of the parties or the character of an instrument.12 However, as noted above, to do so may expose the award to a challenge based on the violation of due process and the party’s right to present its case if reasonable opportunity to do so is denied by the panel.

7.3 JURA NOVIT ARBITER AND THE “BURDEN OF EDUCATION” The mission of arbitrators in the great majority of cases is to settle the dispute in lieu of a court in accordance with the applicable law. This mission also deﬁnes the scope of their authority. Only rarely do arbitrators have wider powers to settle the dispute ex aequo et bono or according to some other standard. Their decision making is thus tied to the applicable substantive law.13 The rules as to the “burden of education” attempt to answer how the arbitrators are to gain the necessary expertise in the applicable material law to fulﬁll their mission to resolve the dispute in accordance with it.14 An arbitrator may at the outset already have 12 13

E.g., the entire agreement or merger clauses and on demand bonds. Tang Houzhi and Wang Shengchang, supra note 3, at 18, report on legal education requirements for domestic arbitrators: The basic qualiﬁcations for an arbitrator in China are impartiality, justice and fairness. Under Art. 13 of the new Arbitration Law, a Chinese arbitrator must meet one of the conditions set forth below: 1. have been engaged in arbitration work for eight years; 2. have worked as a lawyer for eight years; 3. have served as a judge for eight years; 4. have been engaged in legal research work or legal education work and have a senior title; or 5. have acquired knowledge of the law, have engaged in professional work in the ﬁeld of economy and trade, etc. and possessed a senior title or attained an equivalent professional level.

14

The arbitration law allows China’s foreign-related arbitration bodies to invite foreign nationals as their arbitrators. Foreign arbitrators are not subject to the rigid qualiﬁcation requirements as mentioned above but rather a quite ﬂexible requirement (i.e., that they have special knowledge and practical experience in law, economy, trade, science, technology or other professions. Charles Jarrosson, L’expertise Juridique, LIBER AMICORUM CLAUDE REYMOND 130 (2004) writes: L’expertise juridique peut apparaître comme la negation de l’adage jura novit curia. En effet, le juge connaît le droit (c’est d’ailleurs notamment pour celaqu’il a été fait juge): c’est lui

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sufﬁcient expertise having been educated in the law or even in the particular national law to be applied. However, this is not always the case. The arbitrator may not be a lawyer by education or he may have a legal education but in another legal system. How should we measure which level of expertise in that law is sufﬁcient? Who then bears the burden of education: the parties or the arbitrators—or both? When the recourse to a court as to material issues is nonexistent or very limited, an understanding of the legal issue is of great importance to the parties, who have based their choice of arbitration on the expectation of having the disagreement settled in accordance with the applicable law. We could say the scope of the substantive mandate is deﬁned thereby. The answer to the question of who bears the risk and burden of education may depend on the laws and rules applicable to the arbitration.15 We could presume that in general, the burden lies primarily on the parties and secondarily on the arbitrators, who ultimately have the duty to ensure the proper substantive law is known and applied to the dispute before them. In many cases, this is done by way of a party- or tribunalappointed expert.16 However, the responsibility of the arbitrator to manage the proceedings as regarding to legal information is bigger than as to factual questions.

l’expert du droit. Les parties n’ont pas le devoir de prouver la règle de droit: elles se contentent de lui donner les faits et, quelles que soient les explications juridiques qu’elles avancent à cet égard, il « peut et doit d’ofﬁce examiner la situation sous tous ses aspects juridiques ». Il garde lamaîtrise du choix des règles de droit comme celle de leur interpretation. Dès lors, il ne peut ni ne doit avoir besoin de s’adresser à un tiers pour ce faire. Le Code franòais de procedure civile l’afﬁrme en deux temps: l’article 232 énonce d’abord que « Le juge peut commettre toute personne de son choix pour l’éclairer [. . .] sur une question de fait qui requiert les lumières d’un technician », puis tire la conclusion qui s’impose à l’article 238 al. 3 en précisant que ce dernier « ne doit jamais porter d’appréciations d’ordre juridique ». En droit Suisse, la loi de procédure civile genevoise dispose en son article 255 que le juge peut « s’éclairer sur une question de fait », et la loi de procedure civile vaudoise (art.220) admet également l’expertise pour « certiﬁer une circonstance ou un état de fait » (comp. La loi de procédure civile fédérale qui prévoit en son article 57 l’assistance de l’expert « lorsque le juge doit être éclairé sur des circonstances de la cause qui exigent des connaissances spéciales »). 15

Gabrielle Kaufmann-Kohler, supra note 8, at 1331: The status of the substantive law in international arbitration is an issue on which no consensus has yet emerged. The main question is whether the parties must prove the law in the same fashion as they prove the facts, or whether the arbitral tribunal is free to establish and assess the contents of the law. In court, this question only arises with respect to foreign law. In international arbitration, it arises with respect to any law. An arbitral tribunal has no lex fori and hence no “foreign” law. Or differently put, it has only foreign law. Whatever the perspective, the issue is the same.

16

Id. at 1332: In international arbitration, there appears to be no uniform practice. There may be a trend to produce the evidence of legal experts, at least when none of the members of the arbitral tribunal is familiar with the applicable law. Beyond this trend the conceptions vary.

Gabrielle Kaufmann-Kohler, Iura Novit Arbiter—est-ce bien raisonnable? Réﬂections sur le statut du droit de fond devant l’arbitre international, DE LEGEL FERENDA, RÉFLECTIONS SUR LE DROIT DÉSIRABLE EN L’HONNEUR DU PROFESSEUR ALAIN HIRSH 142 (2004) writes: Pour dissiper le ﬂou, la formule suivante semble apte à répondre aux besoins, tout en intégrant les traditions procedurals opposées qui sont en présence: les parties allèguent et établissent le droit de fond; l’arbitre a la faculté, mais non l’obligation de faire ses propres recherches; s’il fait usage de cette faculté, l’arbitre donne aux parties l’occasion de s’exprimer (que l’absence JURA NOVIT ARBITER AND THE “BURDEN OF EDUCATION”

179

To apply and adopt the jura novit arbiter principle requires the panel to take an active role in consulting the parties to meet the due process requirement of audi alteram partem and to avoid ruling ultra petita.17

7.4 ADMINISTRATION OF REMEDIES AND CONSULTATIONS The powers of the arbitrators to administer and grant relief are to be determined based on a number of grounds. Primarily, the powers are deﬁned by the mandate in abstracto and limited to the freedom of contract: the arbitrators may not go beyond what the parties could have agreed on to settle the dispute. The powers are not limited to what a court could do or could have done any more than to the formalities of court proceedings.18 These powers are reﬂected in the jura novit arbiter powers and the mission and the duty of arbitrators to work toward establishing the facts in accordance with the mandate in abstracto. An international arbitration agreement as such is often supranational in its character, and as such generally is not subject to any rules other than international due process and the due process of the seat of arbitration that lies beyond the agreement of the parties. Secondarily, the powers of the panel are limited by the mandate in concreto (i.e., the arbitration agreement and any underlying agreement). They deﬁne how the proceedings are to be conducted and what are the substantive remedies and the available relief.19 The mandate in concreto is protected by due process as provided in the Convention and, as such, within the mandate in abstracto and a part thereof. The mandate in concreto is subject to ordre public in substance and due process as to procedural issues. Thirdly, the powers of the arbitral panel are limited by the relief sought as reﬂected in the ultra petita doctrine. The possible collusion between the jura novit arbiter and ultra petita doctrines are to be solved by consultations. In order to grant relief (i.e., “give justice”), the arbitral panel must know the law and establish the facts. Knowledge

d’une telle occasion donne lieu à recours ou non); si le droit normalement applicable n’est pas établi sur un point déterminé, l’arbitre applique (sur ce point seulement) un droit proche du droit normalement applicable ou une règle transnationale. Cette formule peut évidemment être adaptée et précisée en fonction de l’accessibilité du droit de fond dans un arbitrage donné. Certains me diront peut-être qu’elle reﬂète d’ores et déjà la pratique. C’est possible; n’empêche que si elle est effectivement utilisée, elle est rarement exprimée en toutes letters. Une articulation plus nette et une diffusion plus large permettront à la formule de s’ancrer dans les esprits. Une fois établie, elle viendra completer le corps de règles transnationales du droit de l’arbitrage. 17

18 19

180

See Model Law Decisions: Trustees of Rotoaira Forest Trust v. Attorney-General, High Court of New Zealand, Auckland Registry (Fisher, J), 30 Nov. 1998, Original in English, unpublished. If this is not accepted, we should ask what restraints may be imposed on these powers by the courts or statutory law of a country. E.g., entire agreement clauses limiting the admissibility of evidence and “sole and exclusive remedy” clauses limiting the relief available. THE ROLE OF THE PANEL IN THE PROCEEDINGS

is to be established in accordance with the burden of education rules and the facts in accordance with the burden of proof rules. The parties determine in their own right the remedy or relief they seek. The panel has wide powers to administer remedies or grant relief in deciding interim protection.20 In contractual matters, usually no one other than the parties themselves have any interest in the outcome or remedy sought unless the decision would be in violation of ordre public (e.g., condoning criminal or unlawful activity).21 In the event of bankruptcy or reorganization, other interested parties may emerge. As the legal effects of the award are limited to inter partes, there is, in general, no direct interest by third parties to intervene or be heard. The right of third parties to intervene or participate as parties or in any other capacity is very limited on several grounds, including conﬁdentiality. However, there may be a strong indirect interest by the public or by third parties. These situations may relate to corruption, tax evasion, violations of antitrust laws, perjury, infringement of industrial rights, industrial espionage, title to property, or trade secrets. In such instances, the rules relating to conﬁdentiality may be threatened, and the rules concerning discovery, production of documents, or third party intervention may collide with the interests of the parties to the arbitral proceedings resulting in the panel being caught in a “cross-ﬁre.” Although the relief sought is within the “monopoly powers” of the parties, there may be situations that require active administration by the panel. For instance, a panel may conclude that speciﬁc performance is not an appropriate remedy, but damages

20

Howard M. Holtzmann, Report on U.S. Arbitration Law, in INTERNATIONAL HANDBOOK COMMERCIAL ARBITRATION 22 (Supp. 13, Sept. 1992) reports for the United States:

ON

Arbitrators have broad power to order interim measures that they consider necessary with respect to the subject matter of the arbitration, although the federal and state arbitration statutes generally are silent on this subject. For example, all of the Rules under which the AAA conducts commercial domestic or international arbitrations provide that arbitrators may issue orders, inter alia, (i) to conserve goods by ordering their deposit with a third person; (ii) to sell perishable goods; (iii) to provide due attachment of the defendant’s property to assure that there will be a source from which damages can be paid if awarded; or (iv) to take other measures that they consider appropriate in the circumstances of the case. If the arbitral tribunal issues an order for interim measures in the form of an interim award, a party may seek court enforcement in the same manner as enforcement of other arbitral awards (see Chap. V.10 below). In connection with the general subject of interim measures of relief, several judicial decisions relate to the power of courts in international cases to order attachments of a defendant’s property while the parties await the outcome of an arbitration. The highest court of the State of New York has ruled that in an international case where the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) applied, the court should not grant an attachment because the spirit of the Convention “precludes the courts from acting in any capacity except to order arbitration.” (Cooper v. Ateliers de la Motobecane, S.A., 57 N.Y. 2d. 408, Ct. of Appeals, 1982, summarized in Yearbook Commercial Arbitration, Vol. IX (1984) pp. 482–486.) Some federal courts have reached the same conclusion, but others have permitted judicial attachments in such cases, viewing attachment as an aid to assuring an effective award and therefore as consistent with the New York Convention. 21

An exception might be collusive proceedings where the parties to the dispute seek to mislead or defraud third parties (e.g., creditors or competitors).

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would be available (or vice versa).22 What action, if any, should the panel take if the claimant has sought only speciﬁc performance? If the panel awards damages sua sponte in lieu of speciﬁc performance, would this constitute ultra petita and constitute a ground for setting aside the award?23 In another situation, if the claim is justiﬁed per se, but found to be premature, is the panel authorized to give a declaratory award in lieu of the damages prayed for? If the claim for speciﬁc performance is simply rejected, the claimant must then ﬁle a new claim in a new arbitration to seek damages. Would this serve anybody’s interests? Perhaps the interests of the defendant, but even that might be superﬁcial. Should the panel not instead present a review of the status of the proceedings (consultation or “a milestone meeting”) as to the relief sought and the remedies available, and allow the parties to comment?24 This might be a procedural measure to be considered, in particular in complex arbitrations where the facts alleged at the initial stage of ﬁling the statement of claims do not necessarily fully conform to those established in the proceedings. New facts may also have emerged in the discovery and other evidence. The parties may well be very confused as to what is deemed to have been established and have no reliable way to determine it. This may lead to unfounded optimism or unnecessary pessimism with obvious consequences as to the continuing proceedings. Changes and developments between the facts alleged and those established may or may not reﬂect the legal theories on which the claims are based and relief sought. Often modiﬁcations and adjustments need to be made. In sum, when necessary or at least beneﬁcial, in the interests of accomplishing its mission the arbitral tribunal may arrange a status hearing to give the parties an opportunity to argue and comment, for example on: (i) the applicable procedural rules; (ii) the status of applicable material rules and the division of the burden of education and the issues under the material laws not clariﬁed to the full satisfaction of the panel; (iii) prior to the submission of evidence, an indication what the relevant facts are to be established in the proceedings, the means and methods to be used by the parties to establish those in dispute, and the division of the burden of proof; (iv) after the submission of evidence, the status of relevant facts as established and the facts and circumstances not established to the satisfaction of the panel; (v) after the submission of evidence and after closing of the submission thereof, the status of the remedies and relief sought and their adequacy and accuracy in the light of the established facts.

22 23 24

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Arbitration Act 1996 of England § 48 (see Appendices, p. 276). New York Convention (“the Convention”) Art. V(1)(c)). The terms of reference in the ICC rules serve a somewhat analogical purpose: establishing the scope of disputes and relevance of the remedies sought, then helping the parties and arbitrators to manage the proceedings. THE ROLE OF THE PANEL IN THE PROCEEDINGS

7.5 SUMMARY The role of the panel is usually relatively active due to the nature of arbitration as a dispute resolution mechanism. The panel usually has a great margin of discretion in choosing the way the procedure will be conducted. However, the panel also has to work towards achieving a fair and just result in the proceedings while remaining impartial and keeping up the image of objectivity. Finally, while being active and effectively managing the procedure, the panel has to remember to reserve to the parties a fair opportunity to be heard.

SUMMARY

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Chapter 8

Fair Arbitration—Opportunity to Present One’s Case

8.1 FAIR ARBITRATION Fair trial is a classical concept. It can be classiﬁed as a transnational principal that all people are entitled to a fair trial in determination of their civil rights and obligations. Arbitration is a substitute for a court trial in state court, but there is no exception to the application of some transnational procedural safeguards. Thus due process requirements (or lex proceduralia as named above) can also be placed under the concept of fair arbitration. Fair arbitration includes the idea that the process should be accessible. The question of accessibility has been discussed in context of jurisdiction and more speciﬁcally with regards to the arbitration agreement. The idea is that to be valid and enforceable, an arbitration agreement has to also de facto allow if not guarantee access to arbitration. Access is the starting point, as it means it is possible for a party to both initiate and go through the proceedings to enforce its substantive rights in arbitration. The core of fair arbitration is the fairness of the procedure itself, including equality of arms (i.e., no party should be at a disadvantage vis-à-vis the other(s)), reasonable opportunity to present one’s case, and the principle and rule of audiatur altera pars. This means that access to arbitration is not enough, as the procedure itself has to also be fair. The fairness of the procedure is an intrinsic value, but it also has an instrumental dimension. If the procedure is fair, substantive rights are more likely to be enforced. What kind of arbitration is fair then? It is clear a party has to be able to effectively participate in the proceedings. This general idea has plenty of practical derivatives in the way proceedings have to be conducted. Both of the parties have to have equal opportunities to participate. It is a good question, however, in what extent this means plain equality or actual factual equality. In addition, it is clear that independence and impartiality of the tribunal are a part of the fairness requirement. The meaning of these requirements in arbitration has been discussed above. 185

8.2 EQUALITY OF ARMS AND REASONABLE OPPORTUNITY TO PRESENT ONE’S CASE First, the right to be heard and the opportunity to present one’s case provide for the parties to be informed of the proceedings. Besides the formal and direct parties to the arbitration agreement, there may be others in such a position with respect either to the parties or the dispute that they should be heard or given an opportunity to participate in some a capacity or at a minimum given notice such proceedings are pending. Such an action may be compulsory or may require consent by the parties to the dispute. The following are examples of such situations: (i) if a contracting party ﬁles a claim against a guarantor or indemnitor for the failure or breach of the principal debtor prior to the initiation of any proceedings against the principal debtor (or the ﬁnal decision in such proceedings initiated), the principal debtor may have to be heard; (ii) if a guarantor or indemnitor raises a defense or counterclaim for setoff that the principal debtor would have been entitled to raise or claim, but such a defense or counterclaim has not yet been raised by the debtor or decided by any court or arbitral tribunal, the principal debtor may have to be heard; (iii) if a debtor raises defenses or counterclaims against an assignee of rights, which defenses or counterclaims relate to the assignor’s failures or breaches under the assigned agreement prior to the effective date of the assignment or thereafter, the assignor may have to be heard;1 1

UNIDROIT Art. 9.1.13: (1) The obligor may assert against the assignee all defences that the obligor could assert against the assignor. (2) The obligor may exercise against the assignee any right of set-off available to the obligor against the assignor up to the time notice of assignment was received.

and UNIDROIT Art. 9.3.5: (1) The other party may discharge the assignor. (2) The other party may also retain the assignor as an obligor in case the assignee does not perform properly. (3) Otherwise the assignor and the assignee are jointly and severally liable.

(International Institute for the Uniﬁcation of Private Law (UNIDROIT) Principles of International Commercial Contracts 2004, Rome 2004). Argentina Act Art. 749: 1. All arbitral proceedings shall be held in the presence of a secretary who is to be a person having full legal capacity and exercise of his civil rights and qualiﬁed for this position. 2. He shall be appointed by the parties or by the judge as appropriate, unless under the terms of reference his appointment has been entrusted to the arbitrators. He shall be sworn in or give promise of faithful and proper fulﬁlment of his functions before the arbitral tribunal.

(Argentinian National Code of Civil and Commercial Procedure Law 17.454 of September 19 1967, as reformed by Law 22.434 of March 16 1981, text consolidated according to Decree 1.042 of 1981, as reported in JAN PAULSSON (ED), INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION, (Kluwer Law International 1984 Last updated: January 1985 Supplement No. 3) pp. 3–7.). 186

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(iv) if a party to the arbitration agreement and pending arbitration proceedings is declared bankrupt, put under a reorganization, or becomes a party in any other such composition with its creditors or is split into two or several new companies, the trustees or new corporate or administrative bodies may have to be heard or they may replace the original party. Fair arbitration also sets standards on the way parties should be able to participate. The basic rule is the requirement of equality and full opportunity to participate. As Article 18 of UNCITRAL Model Law on international arbitrations states: The parties shall be treated with equality and each party shall be given a full opportunity of presenting his case.2

This provision has been called the “Magna Carta of arbitral procedure.”3 It means inter alia: 1) right to all information in submissions; proper notice of the initiation of the proceedings must be given. Proper notice implies reasonable time to prepare the case and full disclosure of the parties and the claims made and reference to the rules applicable, if any;4 2 3

UNCITRAL Model Law on International Commercial Arbitration 1985 (with amendments as adopted in 2006). Peter Binder, An International Comparison of the UNCITRAL Model Law on International Commercial Arbitration, in INTERNATIONAL COMMERCIAL ARBITRATION IN UNCITRAL MODEL LAW JURISDICTIONS 124–25: (1st ed. 2000): A violation of one of the above-mentioned principles will enable an award to be set aside under Article 34(2)(a)(ii) or (iv). According to these provisions, an arbitral award may either be set aside if “the party making the application was . . . unable to present his case” (which refers to the second alternative in Article 18), or the court may set aside the award because the composition of the arbitral tribunal is not in accordance with the parties’ agreement or is “in conﬂict with a provision of this Law from which the parties cannot derogate,” (which refers to the ﬁrst case in Article 18—that of party equality). Although it is to be expected that the above-described fundamental principles belong to every State’s constitution or other fundamental law, a restatement of these principles for arbitration in the Model Law does no harm. Given that these principles apply for the entire Model Law, their placement in the ﬁrst Chapter of the Model Law, “General Provisions,” would perhaps have been more appropriate in order to avoid possible confusion.

4

Model Law Decisions: Guandong Overseas Shenzhen Co. Ltd. v. Yao Shun Group International Ltd., High Court of the Hong Kong Special Administrative Region, Court of First Instance (Findlay, J.) 16 February 1998, published in English: 13(3) International Arbitration Report H-1 (Mar. 1998): A court may set aside an award where a party has been unable to present its case on the merits at the arbitration hearing. There was sufﬁcient evidence of procedural irregularity to justify setting award aside where the tribunal’s award was issued on the same day as the party submitted its case on the merits.

Howard M. Holtzmann, Report on U.S. Arbitration Law, in INTERNATIONAL HANDBOOK COMMERCIAL ARBITRATION 23 (Supp. 13, Sept. 1992):

ON

The FAA does not address the subject of the failure of a party to the arbitration to attend after due notice, but it is generally recognized that if the party has received sufﬁcient and timely

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2) full and simultaneous access with other parties and the panel to all communications, pleadings, arguments, and testimony; 3) right to be present at all physical hearings and at hearings via Internet or by means of tele- or video conferencing; 4) full access to all written documents, evidence, and reports submitted in the proceedings by the parties, witnesses, experts, or other third parties without undue delay; 5) right to submit claims and argue in support of them, to raise material and procedural defenses and objections, and to bring new claims and raise new defenses;5 6) right to submit relevant documentary evidence in either defense or support of claims; 7) right to cross-examine witnesses and experts and other parties heard in the proceedings (including reasonable time to prepare); 8) right to comment on any and all statements made, comments given, and communications and a reasonable time to elaborate on an answer to any of them;6 9) right to bring further evidence and testimony as may be necessary to fully elucidate and defend the party’s position should new facts emerge or new claims be made;7

notice of the time and place of the arbitration hearing, but nevertheless fails to be present, the arbitrator may proceed with the hearing in the party’s absence. Most state statutes contain express provisions on default. The UAA, for example, states that “the arbitrators may hear and determine the controversy upon the evidence produced notwithstanding the failure of a party duly notiﬁed to appear” (Sect. 5). 5 6

7

Swiss Rules Art. 20 (see Appendices, pp. 465–66). See Model Law Decisions: Paklito Investments Ltd. v. Klockner East Asia Ltd., High Court of Hong Kong, 15 January 1993, published in English: [1993] 2 HKLR 39; ICCA Yearbook, 1994 Hong Kong No. 6. “The enforcement of award may be refused where party has not been given a fair opportunity to present its case.” The Helsinki Court of Appeals did just this in its decision on 26.6.2003 (S 02/3757) when it set aside an arbitral award because of the arbitrator’s failure to give a party a reasonable opportunity to answer to a plea of prescription (10-year statute of limitation) on which the arbitrator based his award. The right to discovery or production of documents is, however, limited in the discretion of the panel. Gabrielle Kaufmann-Kohler & Philippe Bärtsch, Discovery in International Arbitration: How Much is Too Much? ZEITSCHRIFT FÜR SCHIEDSVERFAHREN 17 [German Arbitration Journal], Part 1 (2004) write: However, one can see two situations in which an award would run a risk of annulment or non-enforcement for the reason that the arbitrator did not allow discovery. This is so, ﬁrst, if the parties have agreed on discovery. Under some national laws an award may be annulled because the arbitral tribunal did not follow the procedure agreed by the parties. The same is true with respect to non-enforcement of awards under Article V(d) New York Convention. Second, one cannot rule out that the refusal to order production of documents may in certain circumstances be a breach of a party’s opportunity or right to be heard. Such right includes the right to present evidence in support of one’s case. If a party lacks documents indispensable to establish relevant facts for which it bears the burden of proof and such documents are demonstrably within the control of its opponent, one could reasonably argue that a refusal to grant a production request may deprive the party seeking discovery from its opportunity to be heard.

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10) adequate notice of closing of the proceedings given in advance to allow the parties to fully develop their pleadings and exhaust their testimony.8 The requirement of equality and full opportunity to participate is perhaps the most fundamental rule of due process and ordre public. A natural comparison to the model law is the European Human Rights Convention (ECHR) Article 6(1): In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law. Judgment shall be pronounced publicly but the press and public may be excluded from all or part of the trial in the interests of morals, public order or national security in a democratic society, where the interests of juveniles or the protection of the private life of the parties so require, or to the extent strictly necessary in the opinion of the court in special circumstances where publicity would prejudice the interests of justice.

Some of the requirements set in Article 6(1) are irrelevant for arbitration and waived when a party enters into an arbitration agreement, but the hard core of the opportunity to participate is the same. It is deeply rooted in the tradition of various systems of justice. The content of the most fundamental procedural principles is further explained in ECHR Article 6(3) concerning criminal charges: Everyone charged with a criminal offence has the following minimum rights: a. to be informed promptly, in a language which he understands and in detail, of the nature and cause of the accusation against him; b. to have adequate time and facilities for the preparation of his defence; c. to defend himself in person or through legal assistance of his own choosing or, if he has not sufﬁcient means to pay for legal assistance, to be given it free when the interests of justice so require; d. to examine or have examined witnesses against him and to obtain the attendance and examination of witnesses on his behalf under the same conditions as witnesses against him; e. to have the free assistance of an interpreter if he cannot understand or speak the language used in court.

Even though it is obvious that criminal matters are not resolved in international commercial arbitration, the article opens the idea of participation as a procedural principle.

8

Holtzmann, supra note 4, at 19 reports: The FAA contains no requirements as to arbitral procedures, except for the procedural standard to be implied from the provision that an award may be set aside if the arbitrators refused to postpone a hearing when sufﬁcient cause was shown, or refused to hear evidence “pertinent and material” to the controversy (FAA Sect. 10). Although the opportunity for a fair hearing is not mentioned elsewhere in the FAA, it is generally recognized to be a fundamental right which should not be denied. The parties may waive their right to a hearing, and when this occurs, the arbitrators can decide on the basis of evidence and argument presented in writing.

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189

The Civil Rights Covenant Article 14(3) sets relatively similar international minimum requirements for criminal matters.9 It is of course clear that equality does not and cannot mean that rights and duties would be identical or even similar. Hascher writes: L’égalité des parties est en arbitrage international le principe le plus fécond parmi les droits naturels de procédure. Dans un contexte où différentes cultures juridiques sont en présence, l’équilibre de la justice arbitrale, qui est un sentiment particulièrement fort, se traduit sur le plan procédural par le traitement équitable des parties.10

The very nature of arbitration as a procedure to settle disputes means that there is a conﬂict between the parties and that their interests are adverse: the claimant is in principle praying for a change or declaration and the respondent is opposing it. There may naturally be claims and counterclaims by both or all parties. There must ﬁrst be a claim and then an answer. It is an exception when the issue is already known in advance by every party (e.g., the price of a security). There must be evidence to support the claims and an opportunity to bring rebuttal evidence. There is no way to put the parties in an identical procedural situation—and no need to do so, either.11 It is sufﬁcient that a party is given a reasonable opportunity to argue and bring evidence. However, the actions of the tribunal might balance any relative weakness of the other party in procedural skills. The activity of the panel in managing the case is a debated theme, but to

9

3. In the determination of any criminal charge against him, everyone shall be entitled to the following minimum guarantees, in full equality: (a) To be informed promptly and in detail in a language which he understands of the nature and cause of the charge against him; (b) To have adequate time and facilities for the preparation of his defence and to communicate with counsel of his own choosing; (c) To be tried without undue delay; (d) To be tried in his presence, and to defend himself in person or through legal assistance of his own choosing; to be informed, if he does not have legal assistance, of this right; and to have legal assistance assigned to him, in any case where the interests of justice so require, and without payment by him in any such case if he does not have sufﬁcient means to pay for it; (e) To examine, or have examined, the witnesses against him and to obtain the attendance and examination of witnesses on his behalf under the same conditions as witnesses against him; (f) To have the free assistance of an interpreter if he cannot understand or speak the language used in court; (g) Not to be compelled to testify against himself or to confess guilt.

10

11

International Covenant on Civil and Political Rights, Adopted and opened for signature, ratiﬁcation and accession by U.N. General Assembly Resolution 2200A (XXI) of 16 Dec. 1966, entry into force 23 Mar. 1976, in accordance with Article 49. See Dominique Hascher, Principles et Pratiques de Procédure dans l’arbitrage Commercial International, in RECUEIL DES COURS: COLLECTED COURSES OF THE HAGUE ACADEMY OF INTERNATIONAL LAW 108, Tome 279 de la Collection 126 (1999). Hascher writes, supra note 10, at 129: L’égalité procédurale entre les parties n’exige en rien d’étendre à l’une la mesure prise à l’égard de l’autre. L’insonomie procédurale n’a pas de sens, sinon de contrarier l’efﬁcience de la procédure.

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some extent the communicative nature of the arbitral proceedings quite naturally leads to balancing the position of the parties.

8.3 RIGHT TO A COUNSEL OF ONE’S CHOICE It appears to be well-established that a party should have a virtually unlimited choice as to who represents it as its counsel in international arbitration.12 Swiss Rules, Article 3(13) provides: The parties may be represented or assisted by persons of their choice. The names and addresses of such persons must be communicated in writing to the other party and the Chambers; such communication must specify whether the appointment is being made for purposes of representation or assistance.13

Also in China the choice of an “agent” is wide: 1. the parties may appear in person or may be represented by agents; 2. there are no special requirements for the representation of a party before the arbitral tribunal in China; 3. a power of attorney is required in case a party is represented by his agent; 4. an arbitration agent is not necessarily a lawyer; 5. if the arbitration agent is a lawyer, she is not obliged to be a member of the local bar in China or a member of the bar of her own country; 6. Chinese and foreign (lawyers and nonlawyers) may act as arbitration agents; 7. the parties may bring legal counsel to the hearing for oral pleadings.

12

Arbitration Act 1996 of England § 36 (see Appendices, p. 270). Holtzmann, supra note 4, at 23 reports: Although the right to be represented by a lawyer is not expressly mentioned in the FAA, it is considered to be a fundamental right. Many state arbitration statutes contain speciﬁc provisions that a party has a right to be represented by a lawyer and that this right cannot be waived in advance (UAA, Sect. 6). Reﬂecting this same principle, all of the rules under which the AAA conducts commercial domestic or international arbitration expressly provide that any party may be represented by a lawyer.

13

Arbitration practice contains instances where counsel has in casu been denied the right to be present unless certain misbehavior was corrected as a disciplinary measure. Nane Oganesyan writes in Law Firms Again Admitted Before the Russian Arbitrazh Courts to Enforce Arbitral Awards, 9 IBA ARB.& ADR NEWSLETTER 77 (International BAR Association Section on Business Law) (Oct. 2004): On 16 July the Russian Constitutional Court recognised as unconstitutional the provisions of these laws in respect of the exclusive rights of advocates to appear in court and these provisions were struck out. The Constitutional Court held that the constitutional principle of equal rights is violated by placing advocates and their associations in a privileged position with regard to other organizations providing legal services.

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Legal assistants may help the parties but may not represent them, unless the parties authorize them to do so with a power of attorney.14

A party being able to choose its own counsel is important in two ways. First, it allows the party to effectively enforce its substantive and procedural rights to the extent it decides to do so and in a manner that it wants. Second, there is an intrinsic value in having the right to choose legal help as trust is important, and the procedure may only be fair if a party can trust the counsel conducting it on the party’s behalf.

8.4 CONFLICT BETWEEN TIMELINESS AND OPPORTUNITY TO PRESENT ONE’S CASE The conﬂict between the right to present one’s case and the timeliness of the proceedings is probably one of the most difﬁcult problems in many proceedings. In many cases it is natural to assume the parties know how much time is needed to prepare their presentations in the various phases of the proceedings so as to participate efﬁciently. However, in many cases one of the parties (normally the respondent) is not so eager to get to the award in the case. There might be attempts to abuse procedural rights in order to stall the proceedings. Even though the tribunal has to allow the parties the opportunity to present their case so as to work toward a correct resolution, the tribunal cannot always allow the parties to have all the time they claim necessary for preparation. Timeliness is also one of the criteria of fair trial, and the tribunal has to control the proceedings to guarantee it. However, if the tribunal sets strict time limits for participation or excludes certain claims, facts, or evidence after the deadline, a party may at least claim later that it was not given a reasonable opportunity to present its case. Expediency has at least two important dimensions. First, getting an award in a reasonable time is an important prerequisite, or better, a part of the effective enforcement of substantive rights. One of the beneﬁts of arbitration is deﬁnitely timeliness, and other procedural rights cannot lead to this beneﬁt being lost. Timeliness can be seen not only as a part of the mandate in concreto, but also a part of the mandate in abstracto. However, the limits set in the practice of the ECHR for state courts are probably not a reasonable comparison for arbitral proceedings. Thus, the standard of timeliness has to be taken from other arbitral proceedings. The paradox is that setting limits that are too strict could put the enforceability of the award at risk. Second, the longer the process is, the more expensive it generally becomes. This is another good reason to manage the proceedings effectively. As the IBA Ethics state: All arbitrators should devote such time and attention as the parties may reasonably require having regard to all the circumstances of the case, and shall do their best to

14

192

Tang Houzhi and Wang Shengchang in INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION 26 (Supp. 11, Jan. 1990).

FAIR ARBITRATION—OPPORTUNITY TO PRESENT ONE’S CASE

conduct the arbitration in such a manner that costs do not rise to an unreasonable proportion of the interests at stake.15

However, if the parties are unanimous, they have the right to extend the proceedings or agree on adjournments or postponements within the limits of reason. At some stage, if the right is abused, the panel may interfere and impose a deadline for the submission of evidence or for the proceedings altogether. Thus, the power of the parties is not unlimited, and the panel may, in its discretion, expedite the proceedings by appropriate methods (or alternatively put them on hold until further notice unless this may cause considerable inconvenience or harm to third parties).16 In whatever it does, the panel has to make certain that the time limit for its jurisdiction is not exceeded. Hascher writes: L’arbitrage doit se dérouler dans des conditions de sécurité juridique et de célérité aﬁn d’assurer la validité de la sentence et de diminuer les coûts que les parties doivent assumer. Les arbitres font fréquemment référence à ces exigences quand il leur faut décider de l’opportunité de se prononcer par voie de sentence partielle ou organiser l’administration de la preuve.17

15

IBA Rules of Ethics for International Arbitrators 7 (1987) (“IBA Rules”); Gabrielle KaufmannKohler. Qui contrôle l’arbitrage? Autonomie des parties pouvoirs des arbitres at principe d’efﬁcacité, in LIBER AMICORUM CLAUDE REYMOND 164 (2004) writes: En résumé, tant la mission juridictionelle de l’arbitre que le contrat d’arbitre, compris comme l’investiture donnant à l’arbitre les moyens de juger, peuvent justiﬁer des pouvoirs accrus de l’arbitre au service de l’efﬁcacité du processus arbitral. Ces deux fondements se rejoignent pour donner à l’arbitre un statut renforcé.

16

Gabrielle Kaufmann-Kohler, Beyond Gadgetry—Substantive New Concepts to Improve Arbitral Efﬁciency, 5 J. WORLD INVESTMENT & TRADE 70 (Feb. 2004) writes: The calendar must be realistic. “Le mieux est l’ennemi du bien.” If the calendar is too tight, if the time limits are too short, if you have no “ﬂoat time,” as construction people would say, then it will not work. You will not keep your calendar. If there is just one delay on the critical path, then it will disrupt the entire course, since you have covered the entire arbitration. The calendar should be non-extendable. As a rule, no extension. Remember, the calendar is realistic, so this should not be a problem. In any event, no postponement of the hearings dates. Obviously, force majeure is always expected. Obviously, it would have to be spelled out in advance very clearly that there will be no extensions, and then people will take the dates seriously and work accordingly. Efﬁciency can be gained not only through an all-inclusive, ﬁrm schedule but also through a well-managed hearing. That is my second point. Hearing management starts at the very outset of the arbitration, at the initial procedural hearing, when you discuss how the evidentiary hearing will proceed. It then continues with a pre-hearing conference where you clear the way, you resolve all outstanding organizational and procedural issues in advance. This will save time at the hearing, avoid last-minute surprises and make sure that everybody prepares with the correct focus.

17

Dominique Hascher, Principles et Pratiques de Procédure dans l’arbitrage Commercial International, in RECUEIL DES COURS: COLLECTED COURSES OF THE HAGUE ACADEMY OF INTERNATIONAL LAW 108, Tome 279 de la Collection (1999).

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Article 23 of the Swiss Rules provide: The periods of time set by the arbitral tribunal for the communication of written statements (including the Statement of Claim and Statement of Defence) should not exceed forty-ﬁve days. However, the arbitral tribunal may extend the time-limits if it concludes that an extension is justiﬁed.

Expediency relates to the duty of good faith, and it is a close relative to the duty to mitigate under contract law.18 A party is under a duty to mitigate the time and expense of the arbitral proceedings in good faith. The failure of this duty to mitigate should at least be reﬂected in the legal costs awarded.19 Even when the parties do not try and stall the proceedings, an arbitration proceeding is a dynamic process in that the facts established may differ from what the parties originally contemplated and alleged. This change may occur in sequence during the proceedings, and the facts ultimately established may differ dramatically from those originally alleged. This means theories and claims may have to be modiﬁed on one or both sides, and the parties may wish to offer new evidence. What if the ﬁrst stage of the proceedings already took many months to complete? Should the new evidence be admitted? To what extent should the parties be allowed to modify their claims—and for how long should or may such changes be permitted? Should a ﬁnal deadline or closing of the proceedings be set and declared?20 It seems inevitable that at some point of the proceedings, an exact date needs to be set and the proceedings closed so that new claims can no longer be made or new evidence admitted.21 It may be advisable to agree or set such a deadline at the very

20

For an example of an arbitrator’s failure to render an award expeditiously (over 10 years), see Hong Huat Development Co. (Pte) Ltd. v. Hiap Hong & Co. (Pte) Ltd. [2000] 2 SLR 609. Swiss Rules Art. 40(2) (see Appendices, p. 473). ICC Rules Art. 19 (see Appendices, p. 411).

21

Japan Act § 31:

18 19

(1) Within the period of time determined by the arbitral tribunal, the claimant (which hereinafter means the party that carried out the act to commence the arbitral proceedings) shall state the relief or remedy sought, the facts supporting its claim and the points at issue. In such case, the claimant may submit all documentary evidence it considers to be relevant or may add a reference to the documentary evidence or other evidence it will submit. (2) Within the period of time determined by the arbitral tribunal, the respondent (which hereinafter means any party to the arbitral proceedings other than the claimant) shall state its defense in respect of the particulars stated according to the provisions of the preceding paragraph. In such case, the provisions of the latter part of the same paragraph shall apply. (3) Any party may amend or supplement its statement during the course of the arbitral proceedings. Provided, the arbitral tribunal may refuse to allow such amendment or supplementation if made in delay. (4) The preceding three paragraphs shall not apply when otherwise agreed by the parties.

(Arbitration Law No 138 of 2003 of Japan as reported and translated into English by the Japan Commercial Arbitration Association and by Professor Yoshimitsu Aoyama et alia). See also ICC Rules Art. 22(1) (see Appendices, pp. 364–65). See also Dominique Hascher, La Révision en Arbitrage International, LIBER AMICORUM CLAUDE REYMOND 127 (2004): La notion de clôture de l’instruction revêt une grande importance puisque, sauf circonstances exeptionnelles, aucune pièce ne devrait être communiquée au tribunal arbitral après la date

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initial stages of the proceedings. The parties may reach such an agreement, but in the absence of such, it is often within the powers and authority (mandate) of the arbitrator to set such a deadline, although not perhaps against the will of all the parties.22 Setting such a deadline helps the arbitration proceedings run expeditiously and reduces the risks of dilatory tactics. The critical aspects of setting the deadline are: (i) it should not violate due process in the sense of preventing a party from presenting his case and thereby putting the enforceability of the award at risk. This can often be avoided by (a) giving sufﬁcient advance notice of the deadline and its legal consequences (“threats”) and by (b) reserving the panel the right to extend the deadline if and when the circumstances may warrant, and/or (c) by agreement of all parties to this effect and perhaps including the panel. The Swiss Rules have codiﬁed the same in Article 29: 1. The arbitral tribunal may inquire of the parties if they have any further proof to offer or witnesses to be heard or submissions to make and, if there are none, it may declare the proceedings closed. 2. The arbitral tribunal may, if it considers it necessary owing to exceptional circumstances, decide, in its own motion or upon application of a party, to reopen the proceedings at any time before the award is made.

(ii) It should not bar or prevent the establishing of the originally alleged relevant facts in the interests of justice (a) unless sufﬁcient opportunity has been given to the parties to bring evidence, but they have failed to do so for no good reason; or (b) unless a party refuses to bring evidence or is otherwise using dilatory practices and the deadline set is directed against the interest of such a party in breach of his duty to present his case in good faith under the arbitration agreement; or (c) unless in light of the claims made and the relief sought, the closing of the proceedings does not constitute res judicata, which would bar a party or parties from bringing other claims or seeking other relief based on the facts and evidence offered at a later stage but not admitted. If partial or interlocutory awards are given during the proceedings, they may have res judicata effects within the very same proceedings at later stages. The deadline may be set on lesser grounds and motivations to bar “subsequent” evidence and facts if they were not originally alleged but gained relevance as a consequence of the dynamics of the proceedings and the change of positions of the parties in the light of the new facts.23

Finally, there may and perhaps should be separate deadlines for closing the taking of evidence and for closing the pleadings.

de clôture ﬁxée pour les échanges ou les débats aﬁn de respecter l’égalité des droits entre les parties ainsi qu’un minimum de loyauté. 22 23

Arbitration Act 1996 of England § 34(3) (see Appendices, pp. 269–70). AAA Rules 35 and 36 (American Arbitration Association, Commercial Arbitration Rules and Mediation Procedures (Including Procedures for Large, Complex Commercial Disputes), as Amended and Effective on June 1, 2009) (see Appendices, p. 239).

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8.5 AWARD Both court procedures and arbitration end in a decision by the tribunal. Without such a decision being reached, the procedure does not perform the task of providing a way to enforce the substantive rights of the parties. However, the publicity requirements of court procedures regarding judgments that are fundamental rights of the parties are not applicable in arbitration. In arbitration, the proceedings are usually terminated by an award, although some exceptions may occur that result in there not being a ﬁnal award. This may be due to settlement or agreement of the parties or their “veto.”24 UNCITRAL Model Law Article 32 provides: (1) The arbitral proceedings are terminated by the ﬁnal award or by an order of the arbitral tribunal in accordance with paragraph (2) of this article. (2) The arbitral tribunal shall issue an order for the termination of the arbitral proceedings when: (a) the claimant withdraws his claim, unless the respondent objects thereto and the arbitral tribunal recognizes a legitimate interest on his part in obtaining a ﬁnal settlement of the dispute; (b) the parties agree on the termination of the proceedings; (c) the arbitral tribunal ﬁnds that the continuation of the proceedings has for any other reason become unnecessary or impossible. (3) The mandate of the arbitral tribunal terminates with the termination of the arbitral proceedings, subject to the provisions of articles 33 and 34(4).

The award is given after deliberation of the tribunal. The discretion of the panel and its deliberations belong to the exclusive powers of the arbitrators and there should be no outside involvement or intervention in this process.25 The mandate and jurisdiction are given to a speciﬁc panel of arbitrators, and they are the ones who have to make the decision. Outside involvement might seriously hurt the appearance of independence and impartiality of the tribunal. It might also confuse the relationship of evidence and decision making in the procedure. The tribunals’s consultation with the parties may, 24

France Act Art. 1464: Unless the parties have speciﬁcally agreed otherwise the arbitral procedure shall end: 1) upon an arbitrator’s removal, death, incapacity or loss of civil rights; 2) upon the withdrawal or challenge of an arbitrator; 3) upon expiration of the time limit for the arbitral procedure.

25

(French Code of Civil Procedure—Book IV—Arbitration, as reported in JAN PAULSSON (ED), INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION, (Kluwer Law International 1984 Last updated: February 1998 Supplement No. 26) pp. 26 – 12). UNCITRAL Model Law Art. 5 (United Nations Commission on International Trade Law (UNCITRAL) UNCITRAL Model Law on International Commercial Arbitration UN Resolution on the UNCITRAL Model Law, Dec. 18, 2006) (see Appendices, p. 487); IBA Rules Art. 9; Hascher, supra note 10, at 155 writes: Le principe de collégialité que chaque arbitre ait la faculté de débattre de toute décision avec ses collègues. Il est possible de distinguer la discussion entre arbitres d’une part, le vote d’autre part et, enﬁn, la rédaction de la sentence.

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however, be necessary or at least beneﬁcial. Identiﬁcation of the material and evidentiary issues and their characterization or classiﬁcation belong to this exercise.26 The results of exercising the discretion and deliberations are often reported as motivations to the award.27 However, it is not clear to what extent (if any) the various decisions or awards rendered need to have motivations. Under the ICC Rules, such a duty exists as to awards as provided in Article 25(2): The Award shall state the reasons upon which it is based.28

There are impressive spokesmen both for and against the tribunal delineating motivations. Motivations are said to reduce the risk a party will attempt to set the award aside, but some argue that the risk grows with the length and sophistication of the motivations. However, the question whether motivations increase or decrease the risk the award will be challenged should not be determinative as motivations may increase the acceptance and understanding of the outcome. They also help the arbitrators to sum up the case and possibly increase the quality of the decision. Also, if they reveal something that leads to the need to set the award aside, it is only good that the reason is revealed. However, sometimes it is agreed in advance that motivations are not needed, which is also acceptable.29 UNCITRAL Model Law Article 31 provides: (1) The award shall be made in writing and shall be signed by the arbitrator or arbitrators. In arbitral proceedings with more than one arbitrator, the signatures of the majority of all members of the arbitral tribunal shall sufﬁce, provided that the reason for any omitted signature is stated. (2) The award shall state the reasons upon which it is based, unless the parties have agreed that no reasons are to be given or the award is an award on agreed terms under article 30. (3) The award shall state its date and the place of arbitration as determined in accordance with article 20(1). The award shall be deemed to have been made at that place. (4) After the award is made, a copy signed by the arbitrators in accordance with paragraph (1) of this article shall be delivered to each party.

26 27

Mattihieu De Boisséson, L’arbitre International et le Problème de la Qualiﬁcation, LIBER AMICORUM CLAUDE REYMOND 29. France Act, supra note 24, Art. 1471 provides: The arbitral award shall summarize the parties’ respective claims and the arguments on which they are based. The decision of the arbitrators shall give the reasons for which it is given.

28 29

Under ICC Rules, the award is scrutinized in the interests of the parties and to ensure quality and enforceability. (See Art. 27 in the Appendices, p. 414.) See Model Law Decisions: Navigation Sonamar Inc. v. Algoma Streamships Limited, Superior Court of Quebec (Gonthier, J.) 16 April 1987, Published in French: [1987] R.J.Q. 1346. “Reasons for an award must be appropriate, relevant, and comprehensible, but need not be expressed in legal terms.”

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The award should be clear and speciﬁc so as to allow enforcement.30 Should this not be the case, the award may need to be interpreted or explained by the panel or alternatively by a court.31 UNCITRAL Model Law provides in Article 33: (1) Within thirty days of receipt of the award, unless another period of time has been agreed upon by the parties: (a) a party, with notice to the other party, may request the arbitral tribunal to correct in the award any errors in computation, any clerical or typographical errors or any errors of similar nature; (b) if so agreed by the parties, a party, with notice to the other party, may request the arbitral tribunal to give an interpretation of a speciﬁc point or part of the award. If the arbitral tribunal considers the request to be justiﬁed, it shall make the correction or give the interpretation within thirty days of receipt of the request. The interpretation shall form part of the award. (2) The arbitral tribunal may correct any error of the type referred to in paragraph (1)(a) of this article on its own initiative within thirty days of the date of the award. (3) Unless otherwise agreed by the parties, a party, with notice to the other party, may request, within thirty days of receipt of the award, the arbitral tribunal to make an additional award as to claims presented in the arbitral proceedings but omitted from the award. If the arbitral tribunal considers the request to be justiﬁed, it shall make the additional award within sixty days. (4) The arbitral tribunal may extend, if necessary, the period of time within which it shall make a correction, interpretation or an additional award under paragraph (1) or (3) of this article. (5) The provisions of article 31 shall apply to a correction or interpretation of the award or to an additional award.

In complex arbitration proceedings there may be numerous rulings, orders, decisions, and awards in sequence as opposed to a proceeding where only a single ﬁnal award is required. If the panel issues interim or partial awards, time may be gained and costs saved, but the panel may become tied to something that it wishes to amend in light of facts emerging later in the proceedings. The earlier award may, however, constitute res judicata and bar such a remedy. Traditionally interim awards are perhaps

30 31

ICC Rules Art. 35 (see Appendices, p. 416). See also Martin Platte, An Arbitrator’s Duty to Render Enforceable Awards, 20 J. INT’L ARB. (June 2003). See Section 6.7(a) Control by the Parties. Holtzmann, supra note 4, at 29 reports: The FAA provides that, upon application of a party, the federal court in the district where the award was made may make an order modifying or correcting the award (i) where there was a miscalculation of ﬁgures or mistake in the description of a person or thing referred to in the award; (ii) where the arbitrators have awarded upon a matter not submitted to them; or (iii) where the award is imperfect in a matter of form not affecting the merits of the controversy (Sect. 11). Similar provisions are contained in many state arbitration statutes (UAA Sect. 13). The limited circumstances in which courts are permitted to modify awards in certain cases involving patents are discussed in Chap.II.3.a.i above.

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best suited for determining the existence of a ground for relief or violation leaving the amount of damages to be decided at a second stage if necessary. The powers of arbitrators to grant relief in various stages of the proceedings and in the ﬁnal award are often broader or at least there is more ﬂexibility than in proceedings before courts of law. An interim or partial award should preferably be independent from the issues remaining to be decided. Even when this is the case, as indicated above there may be new facts emerging from various sources demonstrating that the interim or partial award, although perhaps fully correct in light of the facts known at the time, is dubious, erroneous, or even grossly unjust in light of new facts. The interim or partial award apparatus is thus an instrument requiring great sophistication and caution in order not to create more problems while solving them. The emphasis should always be on giving a ﬁnal “single” award in exhaustive and expeditious proceedings. In ideal circumstances, there is no or very little need for any other types of awards than the ﬁnal. Different traditions exist as to the right or duty of the panel to interpret or explain the award if a party so requests. Some legal cultures have been very hostile to this, but a more modern approach is more common as demonstrated by the ICC Rules Article 29(2): Any application of a party for the correction of an error of the kind referred to in Article 29(1), or for the interpretation of an Award, must be made to the Secretariat within 30 days of the receipt of the Award by such party, in a number of copies as stated in Article 3(1). After transmittal of the application to the Arbitral Tribunal, the latter shall grant the other party a short time limit, normally not exceeding 30 days, from the receipt of the application by that party, to submit any comments thereon. If the Arbitral Tribunal decides to correct or interpret the Award, it shall submit its decision in draft form to the Court not later than 30 days following the expiration of the time limit for the receipt of any comments from the other party or within such other period as the Court may decide.

If the lack of clarity or ambiguity cannot be remedied, the award cannot be enforced, and in the worst case, even a voluntary enforcement thereof may be problematic or even impossible. If the parties cannot settle their conﬂict in the light of an ambiguous award, the award may be set aside, in which case the original issues either partly or wholly remain to be resolved. An ambiguous award cannot constitute a res judicata bar to a new action.

8.6 SUMMARY Fair arbitration is a fair trial with a twist of ADR. The concepts of fair trial and fair hearing are deeply rooted in the legal and procedural traditions of various countries. Despite arbitration being different, it still shares the same deep-level structures as court procedures. Of all the ADR methods, arbitration is the closest to ordinary procedure, so sometimes it is not even counted as an alternative method. Essential is the idea that one or more neutral third persons resolves the dispute. That is why the parties have to be guaranteed inter alia a right to inform the dispute resolvers properly, take part in the SUMMARY

199

procedure effectively, and make certain the dispute resolvers are impartial. The structure of arbitration as a dispute resolution method leads to the need for legal protection at the deepest level being basically the same as in court procedures, and partly maybe being even more effective to address some arbitration-speciﬁc problems. A strong tradition of fair trial in many legal cultures makes the fair arbitration requirements a strong set of norms. It is in part difﬁcult to construct a transnational due process of law in areas which are very arbitration-speciﬁc and in some cases even technical. But leaning on the shared basic ideology of what a fair procedure in a court, whether private or state run, should be like ought to provide good guidance even with the most difﬁcult problems. Fair arbitration means that parties need to have access to the tribunal, and the procedure itself has to follow the fundamental ideas of fairness, equality of arms, reasonable opportunity to present one’s case and the principle and rule of audiatur alteram pars. Fairness of the procedure is an intrinsic value, but it also has an instrumental dimension. If the procedure is fair, substantive rights are more likely to be enforced.

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Chapter 9

Due Process, Lex Proceduralia, Fair Arbitration—Procedural Foundation of Arbitration

9.1 THE THREE FACETS: DUE PROCESS, FAIR ARBITRATION AND LEX PROCEDURALIA Arbitration as a dispute resolution method is basically very similar to procedure in State courts. In arbitration, one neutral third person or a group of neutral third persons resolves legal disputes between parties. The key difference from court procedure is that arbitration is private dispute resolution based on agreement of the parties. The parties have very much control over the procedure, and they can agree on many procedural questions as well. However, arbitration is not entirely private. Arbitral awards are ﬁnal and binding determinations of parties’ rights and obligations that are widely enforceable, including internationally. Thus, States delegate jurisdictional power to arbitral tribunals (mandate in abstracto), with this delegation of power resulting in a trade-off in the form of quality standards applicable to arbitration. If the arbitral tribunal wants to issue an enforceable award, the process has to meet certain quality standards. In addition to the delegation of power argument in justiﬁcation of due process requirements, a second reason exists requiring minimum quality standards in arbitration. An arbitration agreement not only entitles the parties to initiate arbitral procedures according to the agreement and relevant laws, but normally also prevents a party from starting a procedure in a general court. In this way, an arbitration agreement limits access to court and thus access to justice, and arbitration as a substitute way of access has to justify limiting a right that is constitutional in many countries. The procedural quality standards are called due process requirements, just like the minimum standards in ordinary court procedure. They can also be seen as derivatives of the principle of fair arbitration and called lex proceduralia as a comparison to lex mercatoria in international commercial law. All of these terms refer to the same phenomenon, but they might have a bit different approach or perspective.

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Due process requirements can be seen to refer especially to all the more or less black letter law minimum requirements in arbitration, perhaps more speciﬁcally the international minimum requirements. The analysis focuses on the requirements explicitly relevant for enforcement, speciﬁcally using the Convention as a starting point (as occurs in Chapter 2 of this book). We might also pay attention to the possibly applicable human rights conventions, especially the European Convention on Human Rights (ECHR). In the analysis, we would discover that an arbitration agreement may validly limit access to courts and the right to a court hearing may be waived. However, the quality standards of a fair trial are still applicable indirectly unless waived, as the States have to provide for protection of the rights guaranteed in the ECHR. So, human right conventions and their related interpretations could be a second source for minimum rules concerning arbitration procedure. Clear rules such as minimum requirements can also be found in the international soft law regarding arbitration (e.g., guidelines). The principle of fair arbitration basically refers to the same set of norms and requirements as due process. However, a minor difference in the approach might be constructed into the terminology. Fair arbitration might be seen more as a principle referring to quality standards in the procedure. This way, the idea of fair arbitration would not refer to just the utter minimum limits for the procedure, but to the maximum of fairness in the proceedings. Thus, the term would refer more to the idea that procedural standards have to be taken seriously and that ignoring the procedural standards might lead to problems as opposed to being concerned with the exact content of the minimum requirements. As principles, fairness requirements would penetrate basically all the decisions in the proceedings. Lex proceduralia, on the other hand, would refer more to the legal theoretical nature of due process requirements and fair arbitration. The international procedural requirements discussed in this book share the nature of lex mercatoria in that they are a set of norms that ﬂoats above national jurisdictions and various systems of soft law. The binding force of the lex proceduralia is not based on its formal authority, but rather on its effect as an interpretive framework for other norms and the ﬁlling in of gaps in the law, along with the more directly binding force of other legal institutions. Also, lex proceduralia refers to the international and customary nature of the body of law in question instead of being just a part of the national formally valid system of norms. All three of these concepts are facets of the same phenomena: transnational law on good procedure. They all illustrate the idea that in arbitral proceedings as well, the parties have procedural rights that have to be taken seriously, even if it might seem at ﬁrst glance that arbitral tribunals and the agreements of the parties are very independent. A natural comparison to arbitration in many ways is also the wide ﬁeld of ADR (alternative dispute resolution). However, in arbitration it is not the parties but the arbitrator who resolves the dispute. This means the parties need to be able to have reasonable input into the proceedings. They also need to be able to trust the panel to be fair and the award to be legitimate. Procedural aspects are important for the same reasons as in ordinary procedure, which go beyond enhancing the substantive correctness of the decision. The better the opportunities the parties have to provide a basis for the decision are, the more 202

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correct the substantive outcome is likely to be. Also, a good procedure legitimizes the result: the award. If the procedure is good, the parties are more likely to accept the result. Finally, a fair procedure has intrinsic value, in commercial arbitration as well. The arbitral proceedings need to fair for no other reason beyond the parties having a right to have their disputes decided in a fair proceeding. Even a good and correct result does not compensate for a bad and unfair procedure.

9.2 HOW TO FORMULATE A DUE PROCESS ARGUMENT It is essential from both a practical and theoretical perspective to consider what due process requirements mean and what kind of legal arguments they inspire. The above analysis of three facets of due process already partly explains the models of argumentation or at least opens the discussion. How should the fundamental procedural requirements be constructed and applied as norms? In this book, the core of procedural minimum standards was ﬁrst approached by studying the New York Convention on the Recognition and Enforcement of Foreign Arbitration Awards (“the Convention”). The meaning of due process was seen to be bound with the international unenforceability of the award. Later on, national legislation and different kinds of international soft law as well as human rights conventions were used in deﬁning the content of due process in commercial arbitration. Application of the law in arbitration is sufﬁciently difﬁcult without having to explain how to use lex proceduralia (or norms of due process and/or fair arbitration) in argumentation. First, we have to determine the applicable law, which may be quite complicated indeed. Second, and at least theoretically more importantly, we have to deal with different kinds of sets of soft law. Neither the national arbitration laws nor the agreements of the parties normally provide very speciﬁc rules of how to conduct the proceedings, although different sets of institutional rules, guidelines, and model laws are available to ﬁll in the gaps. Accordingly, the application of law in arbitral proceedings is not very simple unless we believe the margin of discretion granted to the decision makers is not only free of exact rules but of any normative impulses. Lex proceduralia arguments in a way form a third layer of applicable norms. They partly share the normative character of soft law by not being (at least directly) formally binding, or better, formally applicable (at least when it comes to using them as principles of fair arbitration). But they also share an authoritative and institutional basis similar to fundamental rights in national legislation. Naturally, their normative nature has consequences on how the arguments function. Some norms in the body of law regarding fair arbitration are very much rule-like and thus in fact easily formulated as due process minimum requirements. For example, a party cannot act as an arbitrator in his own case. That is an absolute rule, even if a national arbitration law of some country would accept it. The rule is also easily deﬁnable. However, much more often this is not the case, but principles of fair arbitration are still relevant for deciding about the procedure and interpreting the different kinds of norms and rules applicable. For example, whether an arbitrator is considered impartial despite a minor business contact years before the proceedings depends very much of the HOW TO FORMULATE A DUE PROCESS ARGUMENT

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entire setting of the procedure. If the method of selecting the arbitrators is balanced and there is no other objective reason to suspect partiality, these factors might have relevance in the evaluation. Also, we might have to compare the weight of procedural fairness against other values such as timeliness. Basically, everybody has a reasonable right to present his case. However, when considering when it is possible to declare procedural preclusion and deny a party the right to present new evidence, the right to present one’s case might have to balanced against the need for a timely decision. For example, the right to present new evidence might be more limited if a party’s substantive right is about to lose its relevance because of the passage of time, like when a company is about to go into bankruptcy due to a ﬁnancing-related dispute. Because of these reasons (namely the contextuality and relative importance of fairness-based arguments), due process norms can seldom (or at least not always) be rule-like. This is also true even if enforceability is the starting point in deﬁning due process criteria. Even enforceability often depends on the relative importance of the procedural aspect in the context of the speciﬁc case, and the balancing of different kinds of procedural principles. This means it is difﬁcult to deﬁne exact and rule-like limits set by international due process requirements. Perhaps that is not even necessary, as they are not directly enforceable anyway, but only indirectly though the incentive and duty set by the norms that order the tribunal to give an enforceable award. However, the normative foundation of enforceability is wide including national laws, arbitral conventions, human rights conventions, and ﬁnally the interpretative material. This “intermediate” structure also supports a certain fuzziness in the imperative structure of the norms. In addition, the relative openness of the normative foundation (i.e., opportunity to present one’s case) leads to case-by-case interpretation and application being the key factor. However, due process requirements would have a quite limited meaning if they were only discussed when deciding on the enforceability of an award. The threshold of unenforceability is relatively high, and the procedure often has to be truly terrible before it leads to the award being unenforceable. Thus, due process and principles of fair arbitration should always be given an interpretative function as well. The fairness of the proceedings should be maximized (optimized) as to the limits of other criteria. Thus the maxims of fair arbitration would be useful in interpreting the national law and ﬁlling the normative gaps in arbitration. Also, in the principle-oriented way of understanding due process norms, the question of the applicability of human rights conventions (especially ECHR) in arbitration diminishes in relevance as compared to the rule-oriented approach. Human rights would have relevance even if they were not formally applicable in a direct way.

9.3 FAIRNESS OR FINALITY? CONFLICTS OF PRINCIPLES AND GOALS Fairness and ﬁnality could easily be set in conﬂict with each other. As the procedural rights of the parties can be enforced mostly only after the proceedings by challenging the arbitral award, enforcing procedural rights means compromising the ﬁnality of 204

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the award. Such a conﬂict has also been constructed between substantive correctness (justness) and ﬁnality.1 It is probably fair to say that ﬁnality has been used as a rather dominating argument in international arbitration, as of course it is one of the competitive edges of arbitration as a dispute resolution method. However, fairness should not be seen as a threat, but rather as a potential. The perceived conﬂict between fairness and ﬁnality is partly false. If approached ex ante, fairness of the proceeding enhances also the ﬁnality of the award. At least theoretically, fairness of the procedure legitimates the award and makes the party trust the tribunal’s discretion and application of the law in substantive issues as well. A party is more likely to accept a negative decision if it feels it had a proper chance to present its case and the tribunal has been impartial. Also, a fair procedure might enhance the possibilities of future business relations among the parties. Of course, in commercial dispute resolution the case might often be that trying to lengthen the procedure and challenging the award is only strategic behavior that would not be diminished by trying to make the procedure more fair. However, if this is the case, taking procedural rights seriously and trying to maximize fairness of the proceedings would also enhance ﬁnality, as it would be more likely that the award would not and could not be set aside. Increasing fairness does not mean diminishing ﬂexibility of the proceedings as a ﬂexible procedure can be just as fair as an inﬂexible one. Flexibility does not necessarily exclude foreseeability or opportunity to be heard or to present one’s case. Also, ﬂexible procedures are often affordable and thus increase access to justice. Procedural fairness might also be seen in conﬂict with efﬁciency. Does an arbitrator need to be impartial if substantive expertise is more important might very well be the question. Sometimes it may at ﬁrst seem efﬁcient to “forget the formalities” and focus on the substance. However, separating the procedural from the substantive is not all that easy, and often the quality of the procedure may reﬂect on the quality of the award. In addition, the efﬁciency beneﬁts achieved via a compromised procedure might be unreal. For example, even if the arbitrator would be a recognized expert in the ﬁeld in question and thus able to give an educated opinion of the case, the possible partiality might also make it more difﬁcult to manage the proceedings and result in extra work for the parties (e.g., on the evidentiary side of the case). Costs are important to all the parties in all kinds of dispute resolution methods. Does fairness increase costs? Possibly sometimes. In addition, increasing costs limits access to arbitration and to justice and thus reduces the fairness of the proceedings. Just as the above examples show, if and when conﬂicts between fairness on the one hand and ﬁnality, efﬁciency, ﬂexibility, efﬁciency, or timeliness on the other exist, they really cannot be discussed at a general level, but should rather be dealt with case by case when a need for balancing appears.

1

See inter alia, Sarosh Zaiwalla, Challenging Arbitral Awards: Finality is Good but Justice is Better, J. INT’L ARB. 199 (2004).

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9.4 ACCESS TO ARBITRATION AND FAIR HEARING With a bit of effort, due process requirements could be divided into two groups. First, there are requirements related to the jurisdiction of the tribunal, the arbitration agreement, and the guarantee of adequate access to justice. This means that in interpreting normative material and applying it to a case in arbitration, we have to remember that as a usually exclusive method of dispute resolution, arbitration has to be available (access to arbitration). Arbitration also has to be of such nature that it de facto makes it possible for a party to enforce his substantive rights. In addition, it has to be a reasonable substitute for normally available court proceedings. As arbitration limits access to ordinary courts, it is important the limitation be lawful. The requirements related to arbitration agreement and jurisdiction, as well as in part the requirements related to the composition of the tribunal, are control of the limitations of access to courts. The more inexpensive, certain, timely, and fair the proceedings are, the better they guarantee access to justice. Second, there are more direct procedural requirements. The core of fair arbitration is the fairness of the procedure itself, equality of arms, reasonable opportunity to present one’s case, and the principle and rule of audiatur altera pars. This means that access to arbitration is not enough—the procedure itself has to be fair as well. Fairness of the procedure has to be respected as an intrinsic value, but it also has an instrumental dimension. If the procedure is fair, substantive rights are often more likely enforced in the procedure. Also, fairness means that a party has to be able to effectively and equally participate in the proceedings. Basically, fairness requirements in arbitration are very similar to those in general court procedure, and a lot could be learned about fair arbitration by further analysis of fair trial. The two relatively separate disciplines should be brought closer together. However arbitration naturally sets the norms in quite a different context compared to state courts. Yet, fair arbitration should not be seen as a poor man’s version of fair procedure. The ﬂexibility of arbitration should not be understood as resulting in there being no restraints on using the margin of discretion on procedural decisions. Due process principles should be seen as guidelines of interpretation to ﬁll in the gaps and direct the application of procedural norms. In this scenario, ﬂexibility of arbitration could result in a procedure that could actually guarantee access and fairness better than its well-established comparison: the court procedure.

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Platto, Charles Pre-Trial and Pre-Hearing Procedures Worldwide. London: International Bar Association, 1990. Trial and Court Procedures Worldwide. London: International Bar Association, 1991. Rau, Alan Scott “On Integrity in Private Judging,” Arbitration International, Vol. 14 (1998). Redfern, Alan, and Martin Hunter Law and Practice of International Commercial Arbitration, Third Edition. London: Sweet & Maxwell, 1999. Rhys Davies, Andrew, Michelle De Kluyver, and Sandra Link “Third Party Discovery in Arbitration Proceedings,” International Arbitration Law Review, Vol. 7, Issue 5 (October 2004). Ricci, Edoardo F. “Recent Case Law Concerning International Effects of an Italian Arbitral Award: Is the Italian Supreme Court Poisoning Italian Arbitration?” ASA Bulletin, Vol. 22, No. 4 (2004). Rinquist, Fredrik “Do Procedural Human Rights Requirements Apply to Arbitration—a Study of Article 6(1) of the European Convention on Human Rights and its Bearing upon Arbitration,” in Affarsjuridiska uppsatser, Uppsala 2006. Rivkin, David W and Suzanne M.Grosso “Forum Non Conveniens: a Doctrine on the Move,” Business Law International, Vol. 5, No. 1, (January 2004). Rogers, Stephen C. “Can Tripartite Arbitration Panels Reach Fair Results?” Dispute Resolution Magazine, Vol. 8 (2001). Rosell, José, and Harvey Prager “Illicit Commissions and International Arbitration: The Question of Proof,” LCIA Arbitration International, Vol. 15, No. 4 (1999). Roth, Marianne “Consequences and Prevention of False Evidence under the English Arbitration Act 1996: A Comparative Perspective,” LCIA Arbitration International, Vol. 13, No. 4 (1997). Samuel, Adam “Fomento—A Tale of “Litispendance,” in Arbitration and Private International Law. Paris: Liber Amicorum Claude Reymond; Autour de l’arbitrage, 2004. Sandy, David “Independence, Impartiality, Arbitration and the Human Rights Act in England,” LCIA Arbitration International, Vol. 20, No. 3 (2004). LIST OF REFERENCES

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Santoro, Dimitri “Forum Non Conveniens: A Valid Defense under the New York Convention?” ASA Bulletin, Vol. 21, No. 4 (2003). Scherer, Matthias “Circumstantial Evidence in Corruption Cases before International Arbitral Tribunals,” International Arbitration Law Review, Issue 2, Sweet & Maxwell (2002). “The Place of ‘Seat’ of Arbitration (Possibility, and/or Sometimes Necessity of its Transfer?)—Some Remarks on the Award in ICC Arbitration no 10’623,” ASA Bulletin, Vol. 21, No. 1 (March 2003). Schlosser, Peter “Die Unparteilichkeit des Schiedsrichteramtes,” Zeitschrift für Zivilprozess, (1980). Sentner, James R. Jr “Who is Bound by Arbitration Agreements? Enforcement by and against Non-Signatories,” Business Law International, Vol. 6, No. 1 (January 2005). Sheppard, Audley “Interim ILA Report on Public Policy as a Bar to Enforcement of International Arbitral Awards,” LCIA Arbitration International, Vol. 19, No. 2 (2003). Shore, Laurence “Disclosure and Impartiality: an Arbitrator’s Responsibility vis-à-vis Legal Standards,” Dispute Resolution Journal, (February 2002). Siqueiros, José Luis, and Alexander C. Hoagland “Mexico Law,” in International Handbook on Commercial Arbitration, Supplement 19. Kluwer Law International, August 1995. Smit, Hans “Proper Choice of Law and the Lex Mercatoria Arbitralis,” in Thomas E. Carbonneau (ed.), Lex Mercatoria and Arbitration, Juris Publishing, 1999. Söderlund, Christer “A Comparative Overview of Arbitration Laws,” LCIA Arbitration International, Vol. 20, No. 1 (2004). “Lis Pendens, Res Judicata and the Issue of Parallel Judicial Proceedings,” in The Swedish Arbitration Act, 1999, Five Years On: A Critical Review of Strength and Weaknesses, Session IV: The Proceedings, Journal of International Arbitration, Vol. 22, No. 4, Kluwer Law International (August 2005). Transnational Rules in International Commercial Arbitration, International Chamber of Commerce Publication No. 180/4, edited by Emmanuel Gaillard. Paris: International Chamber of Commerce, 1993.

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Spiegelberger, William R. “The Enforcement Rate of Foreign Arbitral Awards in Russia (Recent Developments in International Dispute Resolution Around the World),” The White & Case International Dispute Resolution Newsletter, Vol. 17, No. 4 (December 2004) http://www.whitecase.com/ ﬁles/tbl_s47Details/FileUpload265/794/newsletter_dispute_resolution_12_2004.pdf Stampa, Gonzalo “The 2003 Spanish Arbitration Act,” ASA Bulletin, Vol. 22, No. 4 (2004). Tang, Houzhi, and Wang Shengchang “PR China,” in International Handbook on Commercial Arbitration, in International Handbook on Commercial Arbitration, Last updated January 1998 Supplement No. 25. pp. 25–46, Kluwer Law International, 1984. Trittmann, Rolf “When Should Arbitrators Issue Interim or Partial Awards and/or Procedural Orders?” Journal of International Arbitration, Vol. 20, No. 3 (June 2003). Van Houtte, Hans “Ten Reasons against a Proposal for Ex Parte Interim Measures of Protection in Arbitration,” LCIA Arbitration International, Vol. 20, No. 1 (2004). Von Mehren, Robert B. “The Eco-Swiss Case and International Arbitration,” LCIA Arbitration International, Vol. 19, No. 4 (2003). Von Segesser, Georg “Witness Preparation in International Commercial Arbitration,” ASA Bulletin, Vol. 20, No. 2 (2002). Vulliemin, Jean-Marie “Litispendance et compétence internationale indirecte du juge étranger (Note sous ATF 127 III 279),” ASA Bulletin, Vol. 19, No. 3 (September 2001). Webster, Thomas H. “Party Control in International Arbitration,” LCIA Arbitration International, Vol. 19, No. 2 (2003). Williams, Des “Setting Aside of International Award,” IBA Newsletter: Arbitration and ADR; International Bar Association Section on Business Law, Vol. 9, No. 2 (October 2004). Woolhouse, Sarita Patil “The Effect of an Arbitration Award on Subsequent Arbitration between Different Parties— an English Law Perspective,” International Arbitration Law Review, Vol. 7, Issue 5 (October 2004).

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Appendices

AAA Rules

Act 1996 of England CIETAC Arbitration Rules

COMI Rules FCCC Expedited Rules

IBA Ethics IBA Guidelines IBA Rules ICC Rules

LCIA Rules ILA Recommendations Swiss Rules UNCITRAL Model Law

WIPO Rules

American Arbitration Association, Commercial Arbitration Rules and Mediation Procedures (Including Procedures for Large, Complex Commercial Disputes), as Amended and Effective on June 1, 2009 Arbitration Act 1996 of England China International Economic and Trade Arbitration Commission (CIETAC), Ethical Rules for Arbitrators, as Effective on May 1, 2005 University of Helsinki Conﬂict Management Institute— Rules Central Chamber of Commerce of Finland Arbitration Rules and Rules and Rules for Expedited Arbitration of the Arbitration Institute of the Central Chamber of Commerce of Finland, as Effective on June 1, 2004 IBA Rules of Ethics for International Arbitrators (1987) IBA Guidelines on Conﬂicts of Interest in International Arbitration (May 2004) IBA Rules on Taking of Evidence in International Commercial Arbitration ICC Rules of Arbitration in force as from January 1, 1998 (ICC Publication No 808), as Amended January 1, 2008 London Court of International Arbitration (LCIA) Rules ILA Resolution on Public Policy as a Bar to Enforcement of International Awards, 2002 Swiss Rules of International Arbitration (2006) United Nations Commission on International Trade Law (UNCITRAL) UNCITRAL Model Law on International Commercial Arbitration UN Resolution on the UNCITRAL Model Law, December 18, 2006 WIPO Arbitration Rules (see, e.g., www.arbiter.wipo.int)

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AAA Rules

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American Arbitration Association COMMERCIAL ARBITRATION RULES AND MEDIATION As Amended and Effective June 1, 2009 IMPORTANT NOTICE These rules and any amendment of them shall apply in the form in effect at the time the administrative ﬁling requirements are met for a demand for arbitration or submission agreement received by the AAA. To ensure that you have the most current information, see our Web Site at www.adr.org.

INTRODUCTION Each year, many millions of business transactions take place. Occasionally, disagreements develop over these business transactions. Many of these disputes are resolved by arbitration, the voluntary submission of a dispute to an impartial person or persons for ﬁnal and binding determination. Arbitration has proven to be an effective way to resolve these disputes privately, promptly, and economically. The American Arbitration Association (AAA), a not-for-proﬁt, public service organization, offers a broad range of dispute resolution services to business executives, attorneys, individuals, trade associations, unions, management, consumers, families, communities, and all levels of government. Services are available through AAA headquarters in New York and through ofﬁces located in major cities throughout the United States. Hearings may be held at locations convenient for the parties and are not limited

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© 2009 American Arbitration Association, Inc. All rights reserved. These Rules are the copyrighted property of the American Arbitration Association (AAA) and are intended to be used in conjunction with the AAA’s administrative services. Any unauthorized use or modiﬁcation of these Rules may violate copyright laws and other applicable laws. Please contact 800.778.7879 or [email protected] for additional information. 221

to cities with AAA ofﬁces. In addition, the AAA serves as a center for education and training, issues specialized publications, and conducts research on all forms of out-of-court dispute settlement.

STANDARD ARBITRATION CLAUSE The parties can provide for arbitration of future disputes by inserting the following clause into their contracts: Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.

Arbitration of existing disputes may be accomplished by use of the following: We, the undersigned parties, hereby agree to submit to arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules the following controversy: (describe brieﬂy) We further agree that the above controversy be submitted to (one) (three) arbitrator(s). We further agree that we will faithfully observe this agreement and the rules, that we will abide by and perform any award rendered by the arbitrator(s), and that a judgment of any court having jurisdiction may be entered on the award.

In transactions likely to require emergency interim relief, the parties may wish to add to their clause the following language: The parties also agree that the AAA Optional Rules for Emergency Measures of Protection shall apply to the proceedings.

These Optional Rules may be found below. The services of the AAA are generally concluded with the transmittal of the award. Although there is voluntary compliance with the majority of awards, judgment on the award can be entered in a court having appropriate jurisdiction if necessary.

ADMINISTRATIVE FEES The AAA charges a ﬁling fee based on the amount of the claim or counterclaim. This fee information, which is included with these rules, allows the parties to exercise control over their administrative fees. The fees cover AAA administrative services; they do not cover arbitrator compensation or expenses, if any, reporting services, or any post-award charges incurred by the parties in enforcing the award.

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MEDIATION The parties might wish to submit their dispute to mediation prior to arbitration. In mediation, the neutral mediator assists the parties in reaching a settlement but does not have the authority to make a binding decision or award. Mediation is administered by the AAA in accordance with its Commercial Mediation Procedures. There is no additional administrative fee where parties to a pending arbitration attempt to mediate their dispute under the AAA’s auspices. If the parties want to adopt mediation as a part of their contractual dispute settlement procedure, they can insert the following mediation clause into their contract in conjunction with a standard arbitration provision: If a dispute arises out of or relates to this contract, or the breach thereof, and if the dispute cannot be settled through negotiation, the parties agree ﬁrst to try in good faith to settle the dispute by mediation administered by the American Arbitration Association under its Commercial Mediation Procedures before resorting to arbitration, litigation, or some other dispute resolution procedure.

If the parties want to use a mediator to resolve an existing dispute, they can enter into the following submission: The parties hereby submit the following dispute to mediation administered by the American Arbitration Association under its Commercial Mediation Procedures. (The clause may also provide for the qualiﬁcations of the mediator(s), method of payment, locale of meetings, and any other item of concern to the parties.)

LARGE, COMPLEX CASES Unless the parties agree otherwise, the procedures for Large, Complex Commercial Disputes, which appear in this pamphlet, will be applied to all cases administered by the AAA under the Commercial Arbitration Rules in which the disclosed claim or counterclaim of any party is at least $500,000 exclusive of claimed interest, arbitration fees and costs. The key features of these procedures include: • a highly qualiﬁed, trained Roster of Neutrals; • a mandatory preliminary hearing with the arbitrators, which may be conducted by teleconference; • broad arbitrator authority to order and control discovery, including depositions; • presumption that hearings will proceed on a consecutive or block basis.

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COMMERCIAL MEDIATION PROCEDURES M-1. AGREEMENT OF PARTIES Whenever, by stipulation or in their contract, the parties have provided for mediation or conciliation of existing or future disputes under the auspices of the American Arbitration Association (AAA) or under these procedures, the parties and their representatives, unless agreed otherwise in writing, shall be deemed to have made these procedural guidelines, as amended and in effect as of the date of ﬁling of a request for mediation, a part of their agreement and designate the AAA as the administrator of their mediation. The parties by mutual agreement may vary any part of these procedures including, but not limited to, agreeing to conduct the mediation via telephone or other electronic or technical means.

M-2. INITIATION OF MEDIATION Any party or parties to a dispute may initiate mediation under the AAA’s auspices by making a request for mediation to any of the AAA’s regional ofﬁces or case management centers via telephone, email, regular mail or fax. Requests for mediation may also be ﬁled online via WebFile at www.adr.org. The party initiating the mediation shall simultaneously notify the other party or parties of the request. The initiating party shall provide the following information to the AAA and the other party or parties as applicable: i. A copy of the mediation provision of the parties’ contract or the parties’ stipulation to mediate. ii. The names, regular mail addresses, email addresses, and telephone numbers of all parties to the dispute and representatives, if any, in the mediation. iii. A brief statement of the nature of the dispute and the relief requested. iv. Any speciﬁc qualiﬁcations the mediator should possess. Where there is no preexisting stipulation or contract by which the parties have provided for mediation of existing or future disputes under the auspices of the AAA, a party may request the AAA to invite another party to participate in “mediation by voluntary submission”. Upon receipt of such a request, the AAA will contact the other party or parties involved in the dispute and attempt to obtain a submission to mediation.

M-3. REPRESENTATION Subject to any applicable law, any party may be represented by persons of the party’s choice. The names and addresses of such persons shall be communicated in writing to all parties and to the AAA.

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M-4. APPOINTMENT OF THE MEDIATOR Parties may search the online proﬁles of the AAA’s Panel of Mediators at www.aaamediation.com in an effort to agree on a mediator. If the parties have not agreed to the appointment of a mediator and have not provided any other method of appointment, the mediator shall be appointed in the following manner: • Upon receipt of a request for mediation, the AAA will send to each party a list of mediators from the AAA’s Panel of Mediators. The parties are encouraged to agree to a mediator from the submitted list and to advise the AAA of their agreement. • If the parties are unable to agree upon a mediator, each party shall strike unacceptable names from the list, number the remaining names in order of preference, and return the list to the AAA. If a party does not return the list within the time speciﬁed, all mediators on the list shall be deemed acceptable. From among the mediators who have been mutually approved by the parties, and in accordance with the designated order of mutual preference, the AAA shall invite a mediator to serve. • If the parties fail to agree on any of the mediators listed, or if acceptable mediators are unable to serve, or if for any other reason the appointment cannot be made from the submitted list, the AAA shall have the authority to make the appointment from among other members of the Panel of Mediators without the submission of additional lists.

M-5. MEDIATOR’S IMPARTIALITY AND DUTY TO DISCLOSE AAA mediators are required to abide by the Model Standards of Conduct for Mediators in effect at the time a mediator is appointed to a case. Where there is a conﬂict between the Model Standards and any provision of these Mediation Procedures, these Mediation Procedures shall govern. The Standards require mediators to (i) decline a mediation if the mediator cannot conduct it in an impartial manner, and (ii) disclose, as soon as practicable, all actual and potential conﬂicts of interest that are reasonably known to the mediator and could reasonably be seen as raising a question about the mediator’s impartiality. Prior to accepting an appointment, AAA mediators are required to make a reasonable inquiry to determine whether there are any facts that a reasonable individual would consider likely to create a potential or actual conﬂict of interest for the mediator. AAA mediators are required to disclose any circumstance likely to create a presumption of bias or prevent a resolution of the parties’ dispute within the time-frame desired by the parties. Upon receipt of such disclosures, the AAA shall immediately communicate the disclosures to the parties for their comments. The parties may, upon receiving disclosure of actual or potential conﬂicts of interest of the mediator, waive such conﬂicts and proceed with the mediation. In the event that a

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party disagrees as to whether the mediator shall serve, or in the event that the mediator’s conﬂict of interest might reasonably be viewed as undermining the integrity of the mediation, the mediator shall be replaced.

M-6. VACANCIES If any mediator shall become unwilling or unable to serve, the AAA will appoint another mediator, unless the parties agree otherwise, in accordance with section M-4.

M-7. DUTIES AND RESPONSIBILITIES OF THE MEDIATOR • The mediator shall conduct the mediation based on the principle of

party self-determination. Self-determination is the act of coming to a voluntary, uncoerced decision in which each party makes free and informed choices as to process and outcome. • The mediator is authorized to conduct separate or ex parte meetings and other communications with the parties and/or their representatives, before, during, and after any scheduled mediation conference. Such communications may be conducted via telephone, in writing, via email, online, in person or otherwise. • The parties are encouraged to exchange all documents pertinent to the relief requested. The mediator may request the exchange of memoranda on issues, including the underlying interests and the history of the parties’ negotiations. Information that a party wishes to keep conﬁdential may be sent to the mediator, as necessary, in a separate communication with the mediator. • The mediator does not have the authority to impose a settlement on the parties but will attempt to help them reach a satisfactory resolution of their dispute. Subject to the discretion of the mediator, the mediator may make oral or written recommendations for settlement to a party privately or, if the parties agree, to all parties jointly. • In the event a complete settlement of all or some issues in dispute is not achieved within the scheduled mediation session(s), the mediator may continue to communicate with the parties, for a period of time, in an ongoing effort to facilitate a complete settlement. • The mediator is not a legal representative of any party and has no ﬁduciary duty to any party.

M-8. RESPONSIBILITIES OF THE PARTIES The parties shall ensure that appropriate representatives of each party, having authority to consummate a settlement, attend the mediation conference.

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Prior to and during the scheduled mediation conference session(s) the parties and their representatives shall, as appropriate to each party’s circumstances, exercise their best efforts to prepare for and engage in a meaningful and productive mediation.

M-9. PRIVACY Mediation sessions and related mediation communications are private proceedings. The parties and their representatives may attend mediation sessions. Other persons may attend only with the permission of the parties and with the consent of the mediator.

M-10. CONFIDENTIALITY Subject to applicable law or the parties’ agreement, conﬁdential information disclosed to a mediator by the parties or by other participants (witnesses) in the course of the mediation shall not be divulged by the mediator. The mediator shall maintain the conﬁdentiality of all information obtained in the mediation, and all records, reports, or other documents received by a mediator while serving in that capacity shall be conﬁdential. The mediator shall not be compelled to divulge such records or to testify in regard to the mediation in any adversary proceeding or judicial forum. The parties shall maintain the conﬁdentiality of the mediation and shall not rely on, or introduce as evidence in any arbitral, judicial, or other proceeding the following, unless agreed to by the parties or required by applicable law: • Views expressed or suggestions made by a party or other participant with respect to a possible settlement of the dispute; • Admissions made by a party or other participant in the course of the mediation proceedings; • Proposals made or views expressed by the mediator; or • The fact that a party had or had not indicated willingness to accept a proposal for settlement made by the mediator.

M-11. NO STENOGRAPHIC RECORD There shall be no stenographic record of the mediation process.

M-12. TERMINATION OF MEDIATION The mediation shall be terminated: • By the execution of a settlement agreement by the parties; or • By a written or verbal declaration of the mediator to the effect that further efforts at mediation would not contribute to a resolution of the parties’ dispute; or

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• By a written or verbal declaration of all parties to the effect that the mediation proceedings are terminated; or • When there has been no communication between the mediator and any party or party’s representative for 21 days following the conclusion of the mediation conference.

M-13. EXCLUSION OF LIABILITY Neither the AAA nor any mediator is a necessary party in judicial proceedings relating to the mediation. Neither the AAA nor any mediator shall be liable to any party for any error, act or omission in connection with any mediation conducted under these procedures.

M-14. INTERPRETATION AND APPLICATION OF PROCEDURES The mediator shall interpret and apply these procedures insofar as they relate to the mediator’s duties and responsibilities. All other procedures shall be interpreted and applied by the AAA.

M-15. DEPOSITS Unless otherwise directed by the mediator, the AAA will require the parties to deposit in advance of the mediation conference such sums of money as it, in consultation with the mediator, deems necessary to cover the costs and expenses of the mediation and shall render an accounting to the parties and return any unexpended balance at the conclusion of the mediation.

M-16. EXPENSES All expenses of the mediation, including required traveling and other expenses or charges of the mediator, shall be borne equally by the parties unless they agree otherwise. The expenses of participants for either side shall be paid by the party requesting the attendance of such participants.

M-17. COST OF THE MEDIATION There is no ﬁling fee to initiate a mediation or a fee to request the AAA to invite parties to mediate. The cost of mediation is based on the hourly mediation rate published on the mediator’s AAA proﬁle. This rate covers both mediator compensation and an allocated portion for the AAA’s services. There is a four-hour minimum charge for a mediation conference. Expenses referenced in Section M-16 may also apply. If a matter submitted for mediation is withdrawn or cancelled or results in a settlement after the agreement to mediate is ﬁled but prior to the mediation conference the cost is $250 plus any mediator time and charges incurred. 228

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The parties will be billed equally for all costs unless they agree otherwise. If you have questions about mediation costs or services visit our website at www.adr. org or contact your local AAA ofﬁce. • Conference Room Rental The costs described above do not include the use of AAA conference rooms. Conference rooms are available on a rental basis. Please contact your local AAA ofﬁce for availability and rates.

COMMERCIAL ARBITRATION RULES R-1. AGREEMENT OF PARTIES2,3 (a) The parties shall be deemed to have made these rules a part of their arbitration agreement whenever they have provided for arbitration by the American Arbitration Association (hereinafter AAA) under its Commercial Arbitration Rules or for arbitration by the AAA of a domestic commercial dispute without specifying particular rules. These rules and any amendment of them shall apply in the form in effect at the time the administrative requirements are met for a demand for arbitration or submission agreement received by the AAA. The parties, by written agreement, may vary the procedures set forth in these rules. After appointment of the arbitrator, such modiﬁcations may be made only with the consent of the arbitrator. (b) Unless the parties or the AAA determines otherwise, the Expedited Procedures shall apply in any case in which no disclosed claim or counterclaim exceeds $75,000, exclusive of interest and arbitration fees and costs. Parties may also agree to use these procedures in larger cases. Unless the parties agree otherwise, these procedures will not apply in cases involving more than two parties. The Expedited Procedures shall be applied as described in Sections E-1 through E-10 of these rules, in addition to any other portion of these rules that is not in conﬂict with the Expedited Procedures. (c) Unless the parties agree otherwise, the Procedures for Large, Complex Commercial Disputes shall apply to all cases in which the disclosed claim or counterclaim of any

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3

The AAA applies the Supplementary Procedures for Consumer-Related Disputes to arbitration clauses in agreements between individual consumers and businesses where the business has a standardized, systematic application of arbitration clauses with customers and where the terms and conditions of the purchase of standardized, consumable goods or services are nonnegotiable or primarily non-negotiable in most or all of its terms, conditions, features, or choices. The product or service must be for personal or household use. The AAA will have the discretion to apply or not to apply the Supplementary Procedures and the parties will be able to bring any disputes concerning the application or non-application to the attention of the arbitrator. Consumers are not prohibited from seeking relief in a small claims court for disputes or claims within the scope of its jurisdiction, even in consumer arbitration cases ﬁled by the business. A dispute arising out of an employer promulgated plan will be administered under the AAA’s National Rules for the Resolution of Employment Disputes.

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party is at least $500,000, exclusive of claimed interest, arbitration fees and costs. Parties may also agree to use the Procedures in cases involving claims or counterclaims under $500,000, or in nonmonetary cases. The Procedures for Large, Complex Commercial Disputes shall be applied as described in Sections L-1 through L-4 of these rules, in addition to any other portion of these rules that is not in conﬂict with the Procedures for Large, Complex Commercial Disputes. (d) All other cases shall be administered in accordance with Sections R-1 through R-54 of these rules.

R-2. AAA AND DELEGATION OF DUTIES When parties agree to arbitrate under these rules, or when they provide for arbitration by the AAA and an arbitration is initiated under these rules, they thereby authorize the AAA to administer the arbitration. The authority and duties of the AAA are prescribed in the agreement of the parties and in these rules, and may be carried out through such of the AAA’s representatives as it may direct. The AAA may, in its discretion, assign the administration of an arbitration to any of its ofﬁces.

R-3. NATIONAL ROSTER OF ARBITRATORS The AAA shall establish and maintain a National Roster of Commercial Arbitrators (“National Roster”) and shall appoint arbitrators as provided in these rules. The term “arbitrator” in these rules refers to the arbitration panel, constituted for a particular case, whether composed of one or more arbitrators, or to an individual arbitrator, as the context requires.

R-4. INITIATION UNDER AN ARBITRATION PROVISION IN A CONTRACT (a) Arbitration under an arbitration provision in a contract shall be initiated in the following manner: (i) The initiating party (the “claimant”) shall, within the time period, if any, speciﬁed in the contract(s), give to the other party (the “respondent”) written notice of its intention to arbitrate (the “demand”), which demand shall contain a statement setting forth the nature of the dispute, the names and addresses of all other parties, the amount involved, if any, the remedy sought, and the hearing locale requested. (ii) The claimant shall ﬁle at any ofﬁce of the AAA two copies of the demand and two copies of the arbitration provisions of the contract, together with the appropriate ﬁling fee as provided in the schedule included with these rules. (iii) The AAA shall conﬁrm notice of such ﬁling to the parties.

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(b) A respondent may ﬁle an answering statement in duplicate with the AAA within 15 days after conﬁrmation of notice of ﬁling of the demand is sent by the AAA. The respondent shall, at the time of any such ﬁling, send a copy of the answering statement to the claimant. If a counterclaim is asserted, it shall contain a statement setting forth the nature of the counterclaim, the amount involved, if any, and the remedy sought. If a counterclaim is made, the party making the counterclaim shall forward to the AAA with the answering statement the appropriate fee provided in the schedule included with these rules. (c) If no answering statement is ﬁled within the stated time, respondent will be deemed to deny the claim. Failure to ﬁle an answering statement shall not operate to delay the arbitration. (d) When ﬁling any statement pursuant to this section, the parties are encouraged to provide descriptions of their claims in sufﬁcient detail to make the circumstances of the dispute clear to the arbitrator.

R-5. INITIATION UNDER A SUBMISSION Parties to any existing dispute may commence an arbitration under these rules by ﬁling at any ofﬁce of the AAA two copies of a written submission to arbitrate under these rules, signed by the parties. It shall contain a statement of the nature of the dispute, the names and addresses of all parties, any claims and counterclaims, the amount involved, if any, the remedy sought, and the hearing locale requested, together with the appropriate ﬁling fee as provided in the schedule included with these rules. Unless the parties state otherwise in the submission, all claims and counterclaims will be deemed to be denied by the other party.

R-6. CHANGES OF CLAIM After ﬁling of a claim, if either party desires to make any new or different claim or counterclaim, it shall be made in writing and ﬁled with the AAA. The party asserting such a claim or counterclaim shall provide a copy to the other party, who shall have 15 days from the date of such transmission within which to ﬁle an answering statement with the AAA. After the arbitrator is appointed, however, no new or different claim may be submitted except with the arbitrator’s consent.

R-7. JURISDICTION (a) The arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope or validity of the arbitration agreement. (b) The arbitrator shall have the power to determine the existence or validity of a contract of which an arbitration clause forms a part. Such an arbitration clause shall be treated as an agreement independent of the other terms of the contract. A decision by

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the arbitrator that the contract is null and void shall not for that reason alone render invalid the arbitration clause. (c) A party must object to the jurisdiction of the arbitrator or to the arbitrability of a claim or counterclaim no later than the ﬁling of the answering statement to the claim or counterclaim that gives rise to the objection. The arbitrator may rule on such objections as a preliminary matter or as part of the ﬁnal award.

R-8. MEDIATION At any stage of the proceedings, the parties may agree to conduct a mediation conference under the Commercial Mediation Procedures in order to facilitate settlement. The mediator shall not be an arbitrator appointed to the case. Where the parties to a pending arbitration agree to mediate under the AAA’s rules, no additional administrative fee is required to initiate the mediation.

R-9. ADMINISTRATIVE CONFERENCE At the request of any party or upon the AAA’s own initiative, the AAA may conduct an administrative conference, in person or by telephone, with the parties and/or their representatives. The conference may address such issues as arbitrator selection, potential mediation of the dispute, potential exchange of information, a timetable for hearings and any other administrative matters.

R-10. FIXING OF LOCALE The parties may mutually agree on the locale where the arbitration is to be held. If any party requests that the hearing be held in a speciﬁc locale and the other party ﬁles no objection thereto within 15 days after notice of the request has been sent to it by the AAA, the locale shall be the one requested. If a party objects to the locale requested by the other party, the AAA shall have the power to determine the locale, and its decision shall be ﬁnal and binding.

R-11. APPOINTMENT FROM NATIONAL ROSTER (a) If the parties have not appointed an arbitrator and have not provided any other method of appointment, the arbitrator shall be appointed in the following manner: The AAA shall send simultaneously to each party to the dispute an identical list of 10 (unless the AAA decides that a different number is appropriate) names of persons chosen from the National Roster. The parties are encouraged to agree to an arbitrator from the submitted list and to advise the AAA of their agreement. (b) If the parties are unable to agree upon an arbitrator, each party to the dispute shall have 15 days from the transmittal date in which to strike names objected to, number the remaining names in order of preference, and return the list to the AAA. If a party

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does not return the list within the time speciﬁed, all persons named therein shall be deemed acceptable. From among the persons who have been approved on both lists, and in accordance with the designated order of mutual preference, the AAA shall invite the acceptance of an arbitrator to serve. If the parties fail to agree on any of the persons named, or if acceptable arbitrators are unable to act, or if for any other reason the appointment cannot be made from the submitted lists, the AAA shall have the power to make the appointment from among other members of the National Roster without the submission of additional lists. (c) Unless the parties agree otherwise when there are two or more claimants or two or more respondents, the AAA may appoint all the arbitrators.

R-12. DIRECT APPOINTMENT BY A PARTY (a) If the agreement of the parties names an arbitrator or speciﬁes a method of appointing an arbitrator, that designation or method shall be followed. The notice of appointment, with the name and address of the arbitrator, shall be ﬁled with the AAA by the appointing party. Upon the request of any appointing party, the AAA shall submit a list of members of the National Roster from which the party may, if it so desires, make the appointment. (b) Where the parties have agreed that each party is to name one arbitrator, the arbitrators so named must meet the standards of Section R-17 with respect to impartiality and independence unless the parties have speciﬁcally agreed pursuant to Section R-17(a) that the party-appointed arbitrators are to be non-neutral and need not meet those standards. (c) If the agreement speciﬁes a period of time within which an arbitrator shall be appointed and any party fails to make the appointment within that period, the AAA shall make the appointment. (d) If no period of time is speciﬁed in the agreement, the AAA shall notify the party to make the appointment. If within 15 days after such notice has been sent, an arbitrator has not been appointed by a party, the AAA shall make the appointment.

R-13. APPOINTMENT OF CHAIRPERSON BY PARTY-APPOINTED ARBITRATORS OR PARTIES (a) If, pursuant to Section R-12, either the parties have directly appointed arbitrators, or the arbitrators have been appointed by the AAA, and the parties have authorized them to appoint a chairperson within a speciﬁed time and no appointment is made within that time or any agreed extension, the AAA may appoint the chairperson. (b) If no period of time is speciﬁed for appointment of the chairperson and the partyappointed arbitrators or the parties do not make the appointment within 15 days from the date of the appointment of the last party-appointed arbitrator, the AAA may appoint the chairperson.

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(c) If the parties have agreed that their party-appointed arbitrators shall appoint the chairperson from the National Roster, the AAA shall furnish to the party-appointed arbitrators, in the manner provided in Section R-11, a list selected from the National Roster, and the appointment of the chairperson shall be made as provided in that Section.

R-14. NATIONALITY OF ARBITRATOR Where the parties are nationals of different countries, the AAA, at the request of any party or on its own initiative, may appoint as arbitrator a national of a country other than that of any of the parties. The request must be made before the time set for the appointment of the arbitrator as agreed by the parties or set by these rules.

R-15. NUMBER OF ARBITRATORS If the arbitration agreement does not specify the number of arbitrators, the dispute shall be heard and determined by one arbitrator, unless the AAA, in its discretion, directs that three arbitrators be appointed. A party may request three arbitrators in the demand or answer, which request the AAA will consider in exercising its discretion regarding the number of arbitrators appointed to the dispute.

R-16. DISCLOSURE (a) Any person appointed or to be appointed as an arbitrator shall disclose to the AAA any circumstance likely to give rise to justiﬁable doubt as to the arbitrator’s impartiality or independence, including any bias or any ﬁnancial or personal interest in the result of the arbitration or any past or present relationship with the parties or their representatives. Such obligation shall remain in effect throughout the arbitration. (b) Upon receipt of such information from the arbitrator or another source, the AAA shall communicate the information to the parties and, if it deems it appropriate to do so, to the arbitrator and others. (c) In order to encourage disclosure by arbitrators, disclosure of information pursuant to this Section R-16 is not to be construed as an indication that the arbitrator considers that the disclosed circumstance is likely to affect impartiality or independence.

R-17. DISQUALIFICATION OF ARBITRATOR (a) Any arbitrator shall be impartial and independent and shall perform his or her duties with diligence and in good faith, and shall be subject to disqualiﬁcation for (i) partiality or lack of independence, (ii) inability or refusal to perform his or her duties with diligence and in good faith, and

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(iii) any grounds for disqualiﬁcation provided by applicable law. The parties may agree in writing, however, that arbitrators directly appointed by a party pursuant to Section R-12 shall be nonneutral, in which case such arbitrators need not be impartial or independent and shall not be subject to disqualiﬁcation for partiality or lack of independence. (b) Upon objection of a party to the continued service of an arbitrator, or on its own initiative, the AAA shall determine whether the arbitrator should be disqualiﬁed under the grounds set out above, and shall inform the parties of its decision, which decision shall be conclusive.

R-18. COMMUNICATION WITH ARBITRATOR (a) No party and no one acting on behalf of any party shall communicate ex parte with an arbitrator or a candidate for arbitrator concerning the arbitration, except that a party, or someone acting on behalf of a party, may communicate ex parte with a candidate for direct appointment pursuant to Section R-12 in order to advise the candidate of the general nature of the controversy and of the anticipated proceedings and to discuss the candidate’s qualiﬁcations, availability, or independence in relation to the parties or to discuss the suitability of candidates for selection as a third arbitrator where the parties or party-designated arbitrators are to participate in that selection. (b) Section R-18(a) does not apply to arbitrators directly appointed by the parties who, pursuant to Section R-17(a), the parties have agreed in writing are non-neutral. Where the parties have so agreed under Section R-17(a), the AAA shall as an administrative practice suggest to the parties that they agree further that Section R-18(a) should nonetheless apply prospectively.

R-19. VACANCIES (a) If for any reason an arbitrator is unable to perform the duties of the ofﬁce, the AAA may, on proof satisfactory to it, declare the ofﬁce vacant. Vacancies shall be ﬁlled in accordance with the applicable provisions of these rules. (b) In the event of a vacancy in a panel of neutral arbitrators after the hearings have commenced, the remaining arbitrator or arbitrators may continue with the hearing and determination of the controversy, unless the parties agree otherwise. (c) In the event of the appointment of a substitute arbitrator, the panel of arbitrators shall determine in its sole discretion whether it is necessary to repeat all or part of any prior hearings.

R-20. PRELIMINARY HEARING (a) At the request of any party or at the discretion of the arbitrator or the AAA, the arbitrator may schedule as soon as practicable a preliminary hearing with the parties

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and/or their representatives. The preliminary hearing may be conducted by telephone at the arbitrator’s discretion. (b) During the preliminary hearing, the parties and the arbitrator should discuss the future conduct of the case, including clariﬁcation of the issues and claims, a schedule for the hearings and any other preliminary matters.

R-21. EXCHANGE OF INFORMATION (a) At the request of any party or at the discretion of the arbitrator, consistent with the expedited nature of arbitration, the arbitrator may direct i) the production of documents and other information, and ii) the identiﬁcation of any witnesses to be called. (b) At least ﬁve business days prior to the hearing, the parties shall exchange copies of all exhibits they intend to submit at the hearing. (c) The arbitrator is authorized to resolve any disputes concerning the exchange of information.

R-22. DATE, TIME, AND PLACE OF HEARING The arbitrator shall set the date, time, and place for each hearing. The parties shall respond to requests for hearing dates in a timely manner, be cooperative in scheduling the earliest practicable date, and adhere to the established hearing schedule. The AAA shall send a notice of hearing to the parties at least 10 days in advance of the hearing date, unless otherwise agreed by the parties.

R-23. ATTENDANCE AT HEARINGS The arbitrator and the AAA shall maintain the privacy of the hearings unless the law provides to the contrary. Any person having a direct interest in the arbitration is entitled to attend hearings. The arbitrator shall otherwise have the power to require the exclusion of any witness, other than a party or other essential person, during the testimony of any other witness. It shall be discretionary with the arbitrator to determine the propriety of the attendance of any other person other than a party and its representatives.

R-24. REPRESENTATION Any party may be represented by counsel or other authorized representative. A party intending to be so represented shall notify the other party and the AAA of the name and address of the representative at least three days prior to the date set for the hearing at which that person is ﬁrst to appear. When such a representative initiates an arbitration or responds for a party, notice is deemed to have been given.

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R-25. OATHS Before proceeding with the ﬁrst hearing, each arbitrator may take an oath of ofﬁce and, if required by law, shall do so. The arbitrator may require witnesses to testify under oath administered by any duly qualiﬁed person and, if it is required by law or requested by any party, shall do so.

R-26. STENOGRAPHIC RECORD Any party desiring a stenographic record shall make arrangements directly with a stenographer and shall notify the other parties of these arrangements at least three days in advance of the hearing. The requesting party or parties shall pay the cost of the record. If the transcript is agreed by the parties, or determined by the arbitrator to be the ofﬁcial record of the proceeding, it must be provided to the arbitrator and made available to the other parties for inspection, at a date, time, and place determined by the arbitrator.

R-27. INTERPRETERS Any party wishing an interpreter shall make all arrangements directly with the interpreter and shall assume the costs of the service.

R-28. POSTPONEMENTS The arbitrator may postpone any hearing upon agreement of the parties, upon request of a party for good cause shown, or upon the arbitrator’s own initiative.

R-29. ARBITRATION IN THE ABSENCE OF A PARTY OR REPRESENTATIVE Unless the law provides to the contrary, the arbitration may proceed in the absence of any party or representative who, after due notice, fails to be present or fails to obtain a postponement. An award shall not be made solely on the default of a party. The arbitrator shall require the party who is present to submit such evidence as the arbitrator may require for the making of an award.

R-30. CONDUCT OF PROCEEDINGS (a) The claimant shall present evidence to support its claim. The respondent shall then present evidence to support its defense. Witnesses for each party shall also submit to questions from the arbitrator and the adverse party. The arbitrator has the discretion to vary this procedure, provided that the parties are treated with equality and that each party has the right to be heard and is given a fair opportunity to present its case.

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(b) The arbitrator, exercising his or her discretion, shall conduct the proceedings with a view to expediting the resolution of the dispute and may direct the order of proof, bifurcate proceedings and direct the parties to focus their presentations on issues the decision of which could dispose of all or part of the case. (c) The parties may agree to waive oral hearings in any case.

R-31. EVIDENCE (a) The parties may offer such evidence as is relevant and material to the dispute and shall produce such evidence as the arbitrator may deem necessary to an understanding and determination of the dispute. Conformity to legal rules of evidence shall not be necessary. All evidence shall be taken in the presence of all of the arbitrators and all of the parties, except where any of the parties is absent, in default or has waived the right to be present. (b) The arbitrator shall determine the admissibility, relevance, and materiality of the evidence offered and may exclude evidence deemed by the arbitrator to be cumulative or irrelevant. (c) The arbitrator shall take into account applicable principles of legal privilege, such as those involving the conﬁdentiality of communications between a lawyer and client. (d) An arbitrator or other person authorized by law to subpoena witnesses or documents may do so upon the request of any party or independently.

R-32. EVIDENCE BY AFFIDAVIT AND POST-HEARING FILING OF DOCUMENTS OR OTHER EVIDENCE (a) The arbitrator may receive and consider the evidence of witnesses by declaration or afﬁdavit, but shall give it only such weight as the arbitrator deems it entitled to after consideration of any objection made to its admission. (b) If the parties agree or the arbitrator directs that documents or other evidence be submitted to the arbitrator after the hearing, the documents or other evidence shall be ﬁled with the AAA for transmission to the arbitrator. All parties shall be afforded an opportunity to examine and respond to such documents or other evidence.

R-33. INSPECTION OR INVESTIGATION An arbitrator ﬁnding it necessary to make an inspection or investigation in connection with the arbitration shall direct the AAA to so advise the parties. The arbitrator shall set the date and time and the AAA shall notify the parties. Any party who so desires may be present at such an inspection or investigation. In the event that one or all parties are not present at the inspection or investigation, the arbitrator shall make an oral or written report to the parties and afford them an opportunity to comment.

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R-34. INTERIM MEASURES4 (a) The arbitrator may take whatever interim measures he or she deems necessary, including injunctive relief and measures for the protection or conservation of property and disposition of perishable goods. (b) Such interim measures may take the form of an interim award, and the arbitrator may require security for the costs of such measures. (c) A request for interim measures addressed by a party to a judicial authority shall not be deemed incompatible with the agreement to arbitrate or a waiver of the right to arbitrate.

R-35. CLOSING OF HEARING The arbitrator shall speciﬁcally inquire of all parties whether they have any further proofs to offer or witnesses to be heard. Upon receiving negative replies or if satisﬁed that the record is complete, the arbitrator shall declare the hearing closed. If briefs are to be ﬁled, the hearing shall b e declared closed as of the ﬁnal date set by the arbitrator for the receipt of briefs. If documents are to be ﬁled as provided in Section R-32 and the date set for their receipt is later than that set for the receipt of briefs, the later date shall be the closing date of the hearing. The time limit within which the arbitrator is required to make the award shall commence, in the absence of other agreements by the parties, upon the closing of the hearing.

R-36. REOPENING OF HEARING The hearing may be reopened on the arbitrator’s initiative, or upon application of a party, at any time before the award is made. If reopening the hearing would prevent the making of the award within the speciﬁc time agreed on by the parties in the contract(s) out of which the controversy has arisen, the matter may not be reopened unless the parties agree on an extension of time. When no speciﬁc date is ﬁxed in the contract, the arbitrator may reopen the hearing and shall have 30 days from the closing of the reopened hearing within which to make an award.

R-37. WAIVER OF RULES Any party who proceeds with the arbitration after knowledge that any provision or requirement of these rules has not been complied with and who fails to state an objection in writing shall be deemed to have waived the right to object.

R-38. EXTENSIONS OF TIME The parties may modify any period of time by mutual agreement. The AAA or the arbitrator may for good cause extend any period of time established by these 4

The Optional Rules may be found below

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rules, except the time for making the award. The AAA shall notify the parties of any extension.

R-39. SERVING OF NOTICE (a) Any papers, notices, or process necessary or proper for the initiation or continuation of an arbitration under these rules, for any court action in connection therewith, or for the entry of judgment on any award made under these rules may be served on a party by mail addressed to the party, or its representative at the last known address or by personal service, in or outside the state where the arbitration is to be held, provided that reasonable opportunity to be heard with regard to the dispute is or has been granted to the party. (b) The AAA, the arbitrator and the parties may also use overnight delivery or electronic facsimile transmission (fax), to give the notices required by these rules. Where all parties and the arbitrator agree, notices may be transmitted by electronic mail (E-mail), or other methods of communication. (c) Unless otherwise instructed by the AAA or by the arbitrator, any documents submitted by any party to the AAA or to the arbitrator shall simultaneously be provided to the other party or parties to the arbitration.

R-40. MAJORITY DECISION When the panel consists of more than one arbitrator, unless required by law or by the arbitration agreement, a majority of the arbitrators must make all decisions.

R-41. TIME OF AWARD The award shall be made promptly by the arbitrator and, unless otherwise agreed by the parties or speciﬁed by law, no later than 30 days from the date of closing the hearing, or, if oral hearings have been waived, from the date of the AAA’s transmittal of the ﬁnal statements and proofs to the arbitrator.

R-42. FORM OF AWARD (a) Any award shall be in writing and signed by a majority of the arbitrators. It shall be executed in the manner required by law. (b) The arbitrator need not render a reasoned award unless the parties request such an award in writing prior to appointment of the arbitrator or unless the arbitrator determines that a reasoned award is appropriate.

R-43. SCOPE OF AWARD (a) The arbitrator may grant any remedy or relief that the arbitrator deems just and equitable and within the scope of the agreement of the parties, including, but not limited to, speciﬁc performance of a contract. 240

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(b) In addition to a ﬁnal award, the arbitrator may make other decisions, including interim, interlocutory, or partial rulings, orders, and awards. In any interim, interlocutory, or partial award, the arbitrator may assess and apportion the fees, expenses, and compensation related to such award as the arbitrator determines is appropriate. (c) In the ﬁnal award, the arbitrator shall assess the fees, expenses, and compensation provided in Sections R-49, R-50, and R-51. The arbitrator may apportion such fees, expenses, and compensation among the parties in such amounts as the arbitrator determines is appropriate. (d) The award of the arbitrator(s) may include: (i) interest at such rate and from such date as the arbitrator(s) may deem appropriate; and (ii) an award of attorneys’ fees if all parties have requested such an award or it is authorized by law or their arbitration agreement.

R-44. AWARD UPON SETTLEMENT If the parties settle their dispute during the course of the arbitration and if the parties so request, the arbitrator may set forth the terms of the settlement in a “consent award.” A consent award must include an allocation of arbitration costs, including administrative fees and expenses as well as arbitrator fees and expenses.

R-45. DELIVERY OF AWARD TO PARTIES Parties shall accept as notice and delivery of the award the placing of the award or a true copy thereof in the mail addressed to the parties or their representatives at the last known addresses, personal or electronic service of the award, or the ﬁling of the award in any other manner that is permitted by law.

R-46. MODIFICATION OF AWARD Within 20 days after the transmittal of an award, any party, upon notice to the other parties, may request the arbitrator, through the AAA, to correct any clerical, typographical, or computational errors in the award. The arbitrator is not empowered to redetermine the merits of any claim already decided. The other parties shall be given 10 days to respond to the request. The arbitrator shall dispose of the request within 20 days after transmittal by the AAA to the arbitrator of the request and any response thereto.

R-47. RELEASE OF DOCUMENTS FOR JUDICIAL PROCEEDINGS The AAA shall, upon the written request of a party, furnish to the party, at the party’s expense, certiﬁed copies of any papers in the AAA’s possession that may be required in judicial proceedings relating to the arbitration.

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R-48. APPLICATIONS TO COURT AND EXCLUSION OF LIABILITY (a) No judicial proceeding by a party relating to the subject matter of the arbitration shall be deemed a waiver of the party’s right to arbitrate. (b) Neither the AAA nor any arbitrator in a proceeding under these rules is a necessary or proper party in judicial proceedings relating to the arbitration. (c) Parties to an arbitration under these rules shall be deemed to have consented that judgment upon the arbitration award may be entered in any federal or state court having jurisdiction thereof. (d) Parties to an arbitration under these rules shall be deemed to have consented that neither the AAA nor any arbitrator shall be liable to any party in any action for damages or injunctive relief for any act or omission in connection with any arbitration under these rules.

R-49. ADMINISTRATIVE FEES As a not-for-proﬁt organization, the AAA shall prescribe an initial ﬁling fee and a case service fee to compensate it for the cost of providing administrative services. The fees in effect when the fee or charge is incurred shall be applicable. The ﬁling fee shall be advanced by the party or parties making a claim or counterclaim, subject to ﬁnal apportionment by the arbitrator in the award. The AAA may, in the event of extreme hardship on the part of any party, defer or reduce the administrative fees.

R-50. EXPENSES The expenses of witnesses for either side shall be paid by the party producing such witnesses. All other expenses of the arbitration, including required travel and other expenses of the arbitrator, AAA representatives, and any witness and the cost of any proof produced at the direct request of the arbitrator, shall be borne equally by the parties, unless they agree otherwise or unless the arbitrator in the award assesses such expenses or any part thereof against any speciﬁed party or parties.

R-51. NEUTRAL ARBITRATOR’S COMPENSATION (a) Arbitrators shall be compensated at a rate consistent with the arbitrator’s stated rate of compensation. (b) If there is disagreement concerning the terms of compensation, an appropriate rate shall be established with the arbitrator by the AAA and conﬁrmed to the parties. (c) Any arrangement for the compensation of a neutral arbitrator shall be made through the AAA and not directly between the parties and the arbitrator.

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R-52. DEPOSITS The AAA may require the parties to deposit in advance of any hearings such sums of money as it deems necessary to cover the expense of the arbitration, including the arbitrator’s fee, if any, and shall render an accounting to the parties and return any unexpended balance at the conclusion of the case.

R-53. INTERPRETATION AND APPLICATION OF RULES The arbitrator shall interpret and apply these rules insofar as they relate to the arbitrator’s powers and duties. When there is more than one arbitrator and a difference arises among them concerning the meaning or application of these rules, it shall be decided by a majority vote. If that is not possible, either an arbitrator or a party may refer the question to the AAA for ﬁnal decision. All other rules shall be interpreted and applied by the AAA.

R-54. SUSPENSION FOR NONPAYMENT If arbitrator compensation or administrative charges have not been paid in full, the AAA may so inform the parties in order that one of them may advance the required payment. If such payments are not made, the arbitrator may order the suspension or termination of the proceedings. If no arbitrator has yet been appointed, the AAA may suspend the proceedings.

EXPEDITED PROCEDURES E-1. LIMITATION ON EXTENSIONS Except in extraordinary circumstances, the AAA or the arbitrator may grant a party no more than one seven-day extension of time to respond to the demand for arbitration or counterclaim as provided in Section R-4.

E-2. CHANGES OF CLAIM OR COUNTERCLAIM A claim or counterclaim may be increased in amount, or a new or different claim or counterclaim added, upon the agreement of the other party, or the consent of the arbitrator. After the arbitrator is appointed, however, no new or different claim or counterclaim may be submitted except with the arbitrator’s consent. If an increased claim or counterclaim exceeds $75,000, the case will be administered under the regular procedures unless all parties and the arbitrator agree that the case may continue to be processed under the Expedited Procedures.

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E-3. SERVING OF NOTICES In addition to notice provided by Section R-39(b), the parties shall also accept notice by telephone. Telephonic notices by the AAA shall subsequently be conﬁrmed in writing to the parties. Should there be a failure to conﬁrm in writing any such oral notice, the proceeding shall nevertheless be valid if notice has, in fact, been given by telephone.

E-4. APPOINTMENT AND QUALIFICATIONS OF ARBITRATOR (a) The AAA shall simultaneously submit to each party an identical list of ﬁve proposed arbitrators drawn from its National Roster from which one arbitrator shall be appointed. (b) The parties are encouraged to agree to an arbitrator from this list and to advise the AAA of their agreement. If the parties are unable to agree upon an arbitrator, each party may strike two names from the list and return it to the AAA within seven days from the date of the AAA’s mailing to the parties. If for any reason the appointment of an arbitrator cannot be made from the list, the AAA may make the appointment from other members of the panel without the submission of additional lists. (c) The parties will be given notice by the AAA of the appointment of the arbitrator, who shall be subject to disqualiﬁcation for the reasons speciﬁed in Section R-17. The parties shall notify the AAA within seven days of any objection to the arbitrator appointed. Any such objection shall be for cause and shall be conﬁrmed in writing to the AAA with a copy to the other party or parties.

E-5. EXCHANGE OF EXHIBITS At least two business days prior to the hearing, the parties shall exchange copies of all exhibits they intend to submit at the hearing. The arbitrator shall resolve disputes concerning the exchange of exhibits.

E-6. PROCEEDINGS ON DOCUMENTS Where no party’s claim exceeds $10,000, exclusive of interest and arbitration costs, and other cases in which the parties agree, the dispute shall be resolved by submission of documents, unless any party requests an oral hearing, or the arbitrator determines that an oral hearing is necessary. The arbitrator shall establish a fair and equitable procedure for the submission of documents.

E-7. DATE, TIME, AND PLACE OF HEARING In cases in which a hearing is to be held, the arbitrator shall set the date, time, and place of the hearing, to be scheduled to take place within 30 days of conﬁrmation of the arbitrator’s appointment. The AAA will notify the parties in advance of the hearing date. 244

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E-8. THE HEARING (a) Generally, the hearing shall not exceed one day. Each party shall have equal opportunity to submit its proofs and complete its case. The arbitrator shall determine the order of the hearing, and may require further submission of documents within two days after the hearing. For good cause shown, the arbitrator may schedule additional hearings within seven business days after the initial day of hearings. (b) Generally, there will be no stenographic record. Any party desiring a stenographic record may arrange for one pursuant to the provisions of Section R-26.

E-9. TIME OF AWARD Unless otherwise agreed by the parties, the award shall be rendered not later than 14 days from the date of the closing of the hearing or, if oral hearings have been waived, from the date of the AAA’s transmittal of the ﬁnal statements and proofs to the arbitrator.

E-10. ARBITRATOR’S COMPENSATION Arbitrators will receive compensation at a rate to be suggested by the AAA regional ofﬁce.

PROCEDURES FOR LARGE, COMPLEX COMMERCIAL DISPUTES L-1. ADMINISTRATIVE CONFERENCE Prior to the dissemination of a list of potential arbitrators, the AAA shall, unless the parties agree otherwise, conduct an administrative conference with the parties and/or their attorneys or other representatives by conference call. The conference will take place within 14 days after the commencement of the arbitration. In the event the parties are unable to agree on a mutually acceptable time for the conference, the AAA may contact the parties individually to discuss the issues contemplated herein. Such administrative conference shall be conducted for the following purposes and for such additional purposes as the parties or the AAA may deem appropriate: (a) to obtain additional information about the nature and magnitude of the dispute and the anticipated length of hearing and scheduling; (b) to discuss the views of the parties about the technical and other qualiﬁcations of the arbitrators; (c) to obtain conﬂicts statements from the parties; and (d) to consider, with the parties, whether mediation or other non-adjudicative methods of dispute resolution might be appropriate.

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L-2. ARBITRATORS (a) Large, Complex Commercial Cases shall be heard and determined by either one or three arbitrators, as may be agreed upon by the parties. If the parties are unable to agree upon the number of arbitrators and a claim or counterclaim involves at least $1,000,000, then three arbitrator(s) shall hear and determine the case. If the parties are unable to agree on the number of arbitrators and each claim and counterclaim is less than $1,000,000, then one arbitrator shall hear and determine the case. (b) The AAA shall appoint arbitrator(s) as agreed by the parties. If they are unable to agree on a method of appointment, the AAA shall appoint arbitrators from the Large, Complex Commercial Case Panel, in the manner provided in the Regular Commercial Arbitration Rules. Absent agreement of the parties, the arbitrator(s) shall not have served as the mediator in the mediation phase of the instant proceeding.

L-3. PRELIMINARY HEARING As promptly as practicable after the selection of the arbitrator(s), a preliminary hearing shall be held among the parties and/or their attorneys or other representatives and the arbitrator(s). Unless the parties agree otherwise, the preliminary hearing will be conducted by telephone conference call rather than in person. At the preliminary hearing the matters to be considered shall include, without limitation: (a) service of a detailed statement of claims, damages and defenses, a statement of the issues asserted by each party and positions with respect thereto, and any legal authorities the parties may wish to bring to the attention of the arbitrator(s); (b) stipulations to uncontested facts; (c) the extent to which discovery shall be conducted; (d) exchange and premarking of those documents which each party believes may be offered at the hearing; (e) the identiﬁcation and availability of witnesses, including experts, and such matters with respect to witnesses including their biographies and expected testimony as may be appropriate; (f) whether, and the extent to which, any sworn statements and/or depositions may be introduced; (g) the extent to which hearings will proceed on consecutive days; (h) whether a stenographic or other ofﬁcial record of the proceedings shall be maintained; (i) the possibility of utilizing mediation or other non-adjudicative methods of dispute resolution; and (j) the procedure for the issuance of subpoenas. By agreement of the parties and/or order of the arbitrator(s), the pre-hearing activities and the hearing procedures that will govern the arbitration will be memorialized in a Scheduling and Procedure Order. 246

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L-4. MANAGEMENT OF PROCEEDINGS (a) Arbitrator(s) shall take such steps as they may deem necessary or desirable to avoid delay and to achieve a just, speedy and cost-effective resolution of Large, Complex Commercial Cases. (b) Parties shall cooperate in the exchange of documents, exhibits and information within such party’s control if the arbitrator(s) consider such production to be consistent with the goal of achieving a just, speedy and cost-effective resolution of a Large, Complex Commercial Case. (c) The parties may conduct such discovery as may be agreed to by all the parties provided, however, that the arbitrator(s) may place such limitations on the conduct of such discovery as the arbitrator(s) shall deem appropriate. If the parties cannot agree on production of documents and other information, the arbitrator(s), consistent with the expedited nature of arbitration, may establish the extent of the discovery. (d) At the discretion of the arbitrator(s), upon good cause shown and consistent with the expedited nature of arbitration, the arbitrator(s) may order depositions of, or the propounding of interrogatories to, such persons who may possess information determined by the arbitrator(s) to be necessary to determination of the matter. (e) The parties shall exchange copies of all exhibits they intend to submit at the hearing 10 business days prior to the hearing unless the arbitrator(s) determine otherwise. (f) The exchange of information pursuant to this rule, as agreed by the parties and/or directed by the arbitrator(s), shall be included within the Scheduling and Procedure Order. (g) The arbitrator is authorized to resolve any disputes concerning the exchange of information. (h) Generally hearings will be scheduled on consecutive days or in blocks of consecutive days in order to maximize efﬁciency and minimize costs.

OPTIONAL RULES FOR EMERGENCY MEASURES OF PROTECTION O-1. APPLICABILITY Where parties by special agreement or in their arbitration clause have adopted these rules for emergency measures of protection, a party in need of emergency relief prior to the constitution of the panel shall notify the AAA and all other parties in writing of the nature of the relief sought and the reasons why such relief is required on an emergency basis. The application shall also set forth the reasons why the party is entitled to such relief. Such notice may be given by facsimile transmission, or other reliable means, but must include a statement certifying that all other parties have been notiﬁed or an explanation of the steps taken in good faith to notify other parties.

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O-2. APPOINTMENT OF EMERGENCY ARBITRATOR Within one business day of receipt of notice as provided in Section O-1, the AAA shall appoint a single emergency arbitrator from a special AAA panel of emergency arbitrators designated to rule on emergency applications. The emergency arbitrator shall immediately disclose any circumstance likely, on the basis of the facts disclosed in the application, to affect such arbitrator’s impartiality or independence. Any challenge to the appointment of the emergency arbitrator must be made within one business day of the communication by the AAA to the parties of the appointment of the emergency arbitrator and the circumstances disclosed.

O-3. SCHEDULE The emergency arbitrator shall as soon as possible, but in any event within two business days of appointment, establish a schedule for consideration of the application for emergency relief. Such schedule shall provide a reasonable opportunity to all parties to be heard, but may provide for proceeding by telephone conference or on written submissions as alternatives to a formal hearing.

O-4. INTERIM AWARD If after consideration the emergency arbitrator is satisﬁed that the party seeking the emergency relief has shown that immediate and irreparable loss or damage will result in the absence of emergency relief, and that such party is entitled to such relief, the emergency arbitrator may enter an interim award granting the relief and stating the reasons therefore.

O-5. CONSTITUTION OF THE PANEL Any application to modify an interim award of emergency relief must be based on changed circumstances and may be made to the emergency arbitrator until the panel is constituted; thereafter such a request shall be addressed to the panel. The emergency arbitrator shall have no further power to act after the panel is constituted unless the parties agree that the emergency arbitrator is named as a member of the panel.

O-6. SECURITY Any interim award of emergency relief may be conditioned on provision by the party seeking such relief of appropriate security.

O-7. SPECIAL MASTER A request for interim measures addressed by a party to a judicial authority shall not be deemed incompatible with the agreement to arbitrate or a waiver of the right to arbitrate. If the AAA is directed by a judicial authority to nominate a special master to 248

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consider and report on an application for emergency relief, the AAA shall proceed as provided in Section O-1 of this article and the references to the emergency arbitrator shall be read to mean the special master, except that the special master shall issue a report rather than an interim award.

O-8. COSTS The costs associated with applications for emergency relief shall initially be apportioned by the emergency arbitrator or special master, subject to the power of the panel to determine ﬁnally the apportionment of such costs.

ADMINISTRATIVE FEES The administrative fees of the AAA are based on the amount of the claim or counterclaim. Arbitrator compensation is not included in this schedule. Unless the parties agree otherwise, arbitrator compensation and administrative fees are subject to allocation by the arbitrator in the award. In an effort to make arbitration costs reasonable for consumers, the AAA has a separate fee schedule for consumer-related disputes. Please refer to Section C-8 of the Supplementary Procedures for Consumer-Related Disputes when ﬁling a consumerrelated claim. The AAA applies the Supplementary Procedures for Consumer-Related Disputes to arbitration clauses in agreements between individual consumers and businesses where the business has a standardized, systematic application of arbitration clauses with customers and where the terms and conditions of the purchase of standardized, consumable goods or services are non-negotiable or primarily non-negotiable in most or all of its terms, conditions, features, or choices. The product or service must be for personal or household use. The AAA will have the discretion to apply or not to apply the Supplementary Procedures and the parties will be able to bring any disputes concerning the application or non-application to the attention of the arbitrator. Consumers are not prohibited from seeking relief in a small claims court for disputes or claims within the scope of its jurisdiction, even in consumer arbitration cases ﬁled by the business.

PILOT FLEXIBLE FEE SCHEDULE Recognizing the continued fragility of the business environment and wishing to provide cost-saving alternatives to parties ﬁling an arbitration case, the American Arbitration Association is offering an optional fee payment schedule that parties may choose instead of the Standard Fee Schedule. It is a pilot that will be available on cases ﬁled through May 30, 2010,5 and is intended to give parties added ﬂexibility in both 5

The Pilot Flexible Fee Schedule is subject to change or cancellation at any time prior to the date of May 30, 2010.

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ﬁling and in selection of arbitrators. Please call 1-800-778-7879 or your nearest ofﬁce if you have questions. A non-refundable Initial Filing Fee is payable in full by a ﬁling party when a claim, counterclaim, or additional claim is ﬁled. Upon receipt of the Demand for Arbitration, the AAA will promptly initiate the case and notify all parties as well as establish the due date for ﬁling of an Answer, which may include a Counterclaim. In order to proceed with the further administration of the arbitration and appointment of the arbitrator(s), the appropriate, non-refundable Proceed Fee outlined below must be paid. If a Proceed Fee is not submitted within ninety (90) days of the ﬁling of the Claimant’s Demand for Arbitration, the Association will administratively close the ﬁle and notify all parties. No refunds or refund schedule will apply to the Filing or Proceed Fees once received. Savings for Mutual Arbitrator Appointment by Parties: Proceed Fees may be reduced by ﬁfty (50) percent where parties mutually select and appoint their arbitrator(s) without the AAA providing a list of arbitrators and an appointment process. Parties must provide the Case Manager with the appropriate stipulations and information pertaining to arbitrator(s) that have been mutually selected and have accepted their appointment(s). Forms for conﬁrmation of arbitrators mutually selected and appointed by the parties are available through the Case Manager or AAA regional ofﬁce. The Flexible Fee Schedule below also may be utilized for the ﬁling of counterclaims. However, as with the Claimant’s claim, the counterclaim will not be presented to the arbitrator until the Proceed Fee is paid. A Final Fee will be incurred for all claims and/or counterclaims that proceed to their ﬁrst hearing. This fee will be payable in advance when the ﬁrst hearing is scheduled, but will be refunded at the conclusion of the case if no hearings have occurred. However, if the Association is not notiﬁed of a cancellation at least 24 hours before the time of the scheduled hearing, the Final Fee will remain due and will not be refunded. All fees will be billed in accordance with the following schedule: All fees are subject to increase if the amount of a claim or counterclaim is modiﬁed after the initial ﬁling date. Fees are subject to decrease if the amount of a claim or counterclaim is modiﬁed before the ﬁrst hearing. The minimum fees for any case having three or more arbitrators are $1,000 for the Initial Filing Fee; $3,750 for the Proceed Fee; and $1,750 for the Final Fee. Under the Flexible Fee Schedule, a party’s obligation to pay the Proceed Fee shall remain in effect regardless of any agreement of the parties to stay, postpone or otherwise modify the arbitration proceedings. Parties that, through mutual agreement, have held their case in abeyance for one year will be assessed an annual abeyance fee of $300. If a party refuses to pay the assessed fee, the other party or parties may pay the entire fee on behalf of all parties, otherwise the matter will be closed.

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Amount of Claim Above $0 to $10,000

Initial Filing Fee $300

Proceed Fee $550*

Final Fee $200

Above $10,000 to $75,000

$500

$600*

$300

Above $75,000 to $150,000

$500

$1,500*

$750

Above $150,000 to $300,000

$500

$2,525*

$1,250

Above $300,000 to $500,000

$1,000

$3,750*

$1,750

Above $500,000 to $1,000,000

$1,000

$5,600*

$2,500

Above $1,000,000 to $5,000,000

$1,000

$7,800*

$3,250

Above $5,000,000 to $10,000,000

$2,000

$9,000*

$4,000

Above $10,000,000

$2,500

$11,500* plus. 01% of claim amount over $10,000,000 up to $65,000

$6,000

Non-Monetary**

$1,000

$2,750*

$1,250

Consent Award*** *Where an arbitrator has been pre-selected and appointed by the parties, the Proceed Fee will be reduced by ﬁfty percent (50%). **This fee is applicable only when a claim or counterclaim is not for a monetary amount. Where a monetary claim amount is not known, parties will be required to state a range of claims or be subject to the highest possible ﬁling fee (see fee range for claims above $10,000,000.00). ***The AAA may assist the parties with the appointment of an arbitrator for the sole purpose of having their Consent Award signed. For more information, please contact your local AAA ofﬁce, case management center, or our Customer Service desk at 1-800-778-7879.

Note: The date of receipt by the AAA of the demand/notice for arbitration will be used to calculate the ninety(90)-day time limit for payment of the Proceed Fee.

STANDARD FEE SCHEDULE An initial ﬁling fee is payable in full by a ﬁling party when a claim, counterclaim, or additional claim is ﬁled. A case service fee will be incurred for all cases that proceed

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to their ﬁrst hearing. This fee will be payable in advance at the time that the ﬁrst hearing is scheduled. This fee will be refunded at the conclusion of the case if no hearings have occurred. However, if the Association is not notiﬁed at least 24 hours before the time of the scheduled hearing, the case service fee will remain due and will not be refunded. These fees will be billed in accordance with the following schedule: Amount of Claim Above $0 to $10,000

Initial Filing Fee $750

Case Service Fee $200

Above $10,000 to $75,000

$950

$300

Above $75,000 to $150,000

$1,800

$750

Above $150,000 to $300,000

$2,750

$1,250

Above $300,000 to $500,000

$4,250

$1,750

Above $500,000 to $1,000,000

$6,000

$2,500

Above $1,000,000 to $5,000,000

$8,000

$3,250

Above $5,000,000 to $10,000,000

$10,000

$4,000

Above $10,000,000

*

*

Nonmonetary Claims**

$3,250

$1,250

*For information regarding the fee schedule for claims in excess of $10 million, see below. **This fee is applicable when a claim or counterclaim is not for a monetary amount. Where a monetary claim amount is not known, parties will be required to state a range of claims or be subject to the highest possible ﬁling fee.

STANDARD FEE SCHEDULE FOR CLAIMS IN EXCESS OF $10 MILLION. The following is the fee schedule for use in disputes involving claims in excess of $10 million. If you have any questions, please consult your local AAA ofﬁce or case management center. Claim Size $10 million and above

Fee Base fee of $ 12,500 plus. 01% of the amount of claim above $ 10 million.

Case Service Fee $6,000

Filing fees capped at $65,000

Fees are subject to increase if the amount of a claim or counterclaim is modiﬁed after the initial ﬁling date. Fees are subject to decrease if the amount of a claim or counterclaim is modiﬁed before the ﬁrst hearing.

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The minimum fees for any case having three or more arbitrators are $2,750 for the ﬁling fee, plus a $1,250 case service fee. Expedited Procedures are applied in any case where no disclosed claim or counterclaim exceeds $75,000, exclusive of interest and arbitration costs. Parties on cases ﬁled under either the Pilot Flexible Fee Schedule or the Standard Fee Schedule that are held in abeyance for one year will be assessed an annual abeyance fee of $300. If a party refuses to pay the assessed fee, the other party or parties may pay the entire fee on behalf of all parties, otherwise the matter will be administratively closed.

REFUND SCHEDULE The AAA offers a refund schedule on ﬁling fees connected with the Standard Fee Schedule. For cases with claims up to $75,000, a minimum ﬁling fee of $300 will not be refunded. For all other cases, a minimum fee of $500 will not be refunded. Subject to the minimum fee requirements, refunds will be calculated as follows: • 100% of the ﬁling fee, above the minimum fee, will be refunded if the case is settled or withdrawn within ﬁve calendar days of ﬁling. • 50% of the ﬁling fee will be refunded if the case is settled or withdrawn between six and 30 calendar days of ﬁling. • 25% of the ﬁling fee will be refunded if the case is settled or withdrawn between 31 and 60 calendar days of ﬁling. No refund will be made once an arbitrator has been appointed (this includes one arbitrator on a three-arbitrator panel). No refunds will be granted on awarded cases. Note: The date of receipt of the demand for arbitration with the AAA will be used to calculate refunds of ﬁling fees for both claims and counterclaims.

HEARING ROOM RENTAL The fees described above do not cover the cost of hearing rooms, which are available on a rental basis. Check with the AAA for availability and rates.

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Arbitration Act 1996 of England

Arbitration Act 1996 of England An Act to restate and improve the law relating to arbitration pursuant to an arbitration agreement; to make other provision relating to arbitration and arbitration awards; and for connected purposes. [17th June 1996] BE IT ENACTED by the Queen’s most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:

PART I ARBITRATION PURSUANT TO AN ARBITRATION AGREEMENT Introductory General principles. 1. The provisions of this Part are founded on the following principles, and shall be construed accordingly— (a) the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense; (b) the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest; (c) in matters governed by this Part the court should not intervene except as provided by this Part.

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Scope of application of provisions. 2. (1) The provisions of this Part apply where the seat of the arbitration is in England and Wales or Northern Ireland. (2) The following sections apply even if the seat of the arbitration is outside England and Wales or Northern Ireland or no seat has been designated or determined— (a) sections 9 to 11 (stay of legal proceedings, &c.), and (b) section 66 (enforcement of arbitral awards). (3) The powers conferred by the following sections apply even if the seat of the arbitration is outside England and Wales or Northern Ireland or no seat has been designated or determined— (a) section 43 (securing the attendance of witnesses), and (b) section 44 (court powers exercisable in support of arbitral proceedings); but the court may refuse to exercise any such power if, in the opinion of the court, the fact that the seat of the arbitration is outside England and Wales or Northern Ireland, or that when designated or determined the seat is likely to be outside England and Wales or Northern Ireland, makes it inappropriate to do so. (4) The court may exercise a power conferred by any provision of this Part not mentioned in subsection (2) or (3) for the purpose of supporting the arbitral process where— (a) no seat of the arbitration has been designated or determined, and (b) by reason of a connection with England and Wales or Northern Ireland the court is satisﬁed that it is appropriate to do so. (5) Section 7 (separability of arbitration agreement) and section 8 (death of a party) apply where the law applicable to the arbitration agreement is the law of England and Wales or Northern Ireland even if the seat of the arbitration is outside England and Wales or Northern Ireland or has not been designated or determined.

The seat of the arbitration. 3. In this Part “the seat of the arbitration” means the juridical seat of the arbitration designated— (a) by the parties to the arbitration agreement, or (b) by any arbitral or other institution or person vested by the parties with powers in that regard, or (c) by the arbitral tribunal if so authorised by the parties, or determined, in the absence of any such designation, having regard to the parties’ agreement and all the relevant circumstances.

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Mandatory and non-mandatory provisions. 4. (1) The mandatory provisions of this Part are listed in Schedule 1 and have effect notwithstanding any agreement to the contrary. (2) The other provisions of this Part (the “non-mandatory provisions”) allow the parties to make their own arrangements by agreement but provide rules which apply in the absence of such agreement. (3) The parties may make such arrangements by agreeing to the application of institutional rules or providing any other means by which a matter may be decided. (4) It is immaterial whether or not the law applicable to the parties’ agreement is the law of England and Wales or, as the case may be, Northern Ireland. (5) The choice of a law other than the law of England and Wales or Northern Ireland as the applicable law in respect of a matter provided for by a non-mandatory provision of this Part is equivalent to an agreement making provision about that matter. For this purpose an applicable law determined in accordance with the parties’ agreement, or which is objectively determined in the absence of any express or implied choice, shall be treated as chosen by the parties.

Agreements to be in writing. 5. (1) The provisions of this Part apply only where the arbitration agreement is in writing, and any other agreement between the parties as to any matter is effective for the purposes of this Part only if in writing. The expressions “agreement,” “agree” and “agreed” shall be construed accordingly. (2) There is an agreement in writing— (a) if the agreement is made in writing (whether or not it is signed by the parties), (b) if the agreement is made by exchange of communications in writing, or (c) if the agreement is evidenced in writing. (3) Where parties agree otherwise than in writing by reference to terms which are in writing, they make an agreement in writing. (4) An agreement is evidenced in writing if an agreement made otherwise than in writing is recorded by one of the parties, or by a third party, with the authority of the parties to the agreement. (5) An exchange of written submissions in arbitral or legal proceedings in which the existence of an agreement otherwise than in writing is alleged by one party against another party and not denied by the other party in his response constitutes as between those parties an agreement in writing to the effect alleged. (6) References in this Part to anything being written or in writing include its being recorded by any means.

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The arbitration agreement Deﬁnition of arbitration agreement. 6. (1) In this Part an “arbitration agreement” means an agreement to submit to arbitration present or future disputes (whether they are contractual or not). (2) The reference in an agreement to a written form of arbitration clause or to a document containing an arbitration clause constitutes an arbitration agreement if the reference is such as to make that clause part of the agreement.

Separability of arbitration agreement. 7. Unless otherwise agreed by the parties, an arbitration agreement which forms or was intended to form part of another agreement (whether or not in writing) shall not be regarded as invalid, non-existent or ineffective because that other agreement is invalid, or did not come into existence or has become ineffective, and it shall for that purpose be treated as a distinct agreement.

Whether agreement discharged by death of a party. 8. (1) Unless otherwise agreed by the parties, an arbitration agreement is not discharged by the death of a party and may be enforced by or against the personal representatives of that party. (2) Subsection (1) does not affect the operation of any enactment or rule of law by virtue of which a substantive right or obligation is extinguished by death.

Stay of legal proceedings Stay of legal proceedings. 9. (1) A party to an arbitration agreement against whom legal proceedings are brought (whether by way of claim or counterclaim) in respect of a matter which under the agreement is to be referred to arbitration may (upon notice to the other parties to the proceedings) apply to the court in which the proceedings have been brought to stay the proceedings so far as they concern that matter. (2) An application may be made notwithstanding that the matter is to be referred to arbitration only after the exhaustion of other dispute resolution procedures. (3) An application may not be made by a person before taking the appropriate procedural step (if any) to acknowledge the legal proceedings against him or after he has taken any step in those proceedings to answer the substantive claim. (4) On an application under this section the court shall grant a stay unless satisﬁed that the arbitration agreement is null and void, inoperative, or incapable of being performed. 258

ARBITRATION ACT 1996 OF ENGLAND

(5) If the court refuses to stay the legal proceedings, any provision that an award is a condition precedent to the bringing of legal proceedings in respect of any matter is of no effect in relation to those proceedings.

Reference of interpleader issue to arbitration. 10. (1) Where in legal proceedings relief by way of interpleader is granted and any issue between the claimants is one in respect of which there is an arbitration agreement between them, the court granting the relief shall direct that the issue be determined in accordance with the agreement unless the circumstances are such that proceedings brought by a claimant in respect of the matter would not be stayed. (2) Where subsection (1) applies but the court does not direct that the issue be determined in accordance with the arbitration agreement, any provision that an award is a condition precedent to the bringing of legal proceedings in respect of any matter shall not affect the determination of that issue by the court.

Retention of security where Admiralty proceedings stayed. 11. (1) Where Admiralty proceedings are stayed on the ground that the dispute in question should be submitted to arbitration, the court granting the stay may, if in those proceedings property has been arrested or bail or other security has been given to prevent or obtain release from arrest— (a) order that the property arrested be retained as security for the satisfaction of any award given in the arbitration in respect of that dispute, or (b) order that the stay of those proceedings be conditional on the provision of equivalent security for the satisfaction of any such award. (2) Subject to any provision made by rules of court and to any necessary modiﬁcations, the same law and practice shall apply in relation to property retained in pursuance of an order as would apply if it were held for the purposes of proceedings in the court making the order.

Commencement of arbitral proceedings Power of court to extend time for beginning arbitral proceedings, &c. 12. (1) Where an arbitration agreement to refer future disputes to arbitration provides that a claim shall be barred, or the claimant’s right extinguished, unless the claimant takes within a time ﬁxed by the agreement some step— (a) to begin arbitral proceedings, or (b) to begin other dispute resolution procedures which must be exhausted before arbitral proceedings can be begun, the court may by order extend the time for taking that step.

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(2) Any party to the arbitration agreement may apply for such an order (upon notice to the other parties), but only after a claim has arisen and after exhausting any available arbitral process for obtaining an extension of time. (3) The court shall make an order only if satisﬁed— (a) that the circumstances are such as were outside the reasonable contemplation of the parties when they agreed the provision in question, and that it would be just to extend the time, or (b) that the conduct of one party makes it unjust to hold the other party to the strict terms of the provision in question. (4) The court may extend the time for such period and on such terms as it thinks ﬁt, and may do so whether or not the time previously ﬁxed (by agreement or by a previous order) has expired. (5) An order under this section does not affect the operation of the Limitation Acts (see section 13). (6) The leave of the court is required for any appeal from a decision of the court under this section.

Application of Limitation Acts. 13. (1) The Limitation Acts apply to arbitral proceedings as they apply to legal proceedings. (2) The court may order that in computing the time prescribed by the Limitation Acts for the commencement of proceedings (including arbitral proceedings) in respect of a dispute which was the subject matter— (a) of an award which the court orders to be set aside or declares to be of no effect, or (b) of the affected part of an award which the court orders to be set aside in part, or declares to be in part of no effect, the period between the commencement of the arbitration and the date of the order referred to in paragraph (a) or (b) shall be excluded. (3) In determining for the purposes of the Limitation Acts when a cause of action accrued, any provision that an award is a condition precedent to the bringing of legal proceedings in respect of a matter to which an arbitration agreement applies shall be disregarded. (4) In this Part “the Limitation Acts” means— (a) in England and Wales, the Limitation Act 1980, the Foreign Limitation Periods Act 1984 and any other enactment (whenever passed) relating to the limitation of actions;

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(b) in Northern Ireland, the Limitation (Northern Ireland) Order 1989, the Foreign Limitation Periods (Northern Ireland) Order 1985 and any other enactment (whenever passed) relating to the limitation of actions.

Commencement of arbitral proceedings. 14. (1) The parties are free to agree when arbitral proceedings are to be regarded as commenced for the purposes of this Part and for the purposes of the Limitation Acts. (2) If there is no such agreement the following provisions apply. (3) Where the arbitrator is named or designated in the arbitration agreement, arbitral proceedings are commenced in respect of a matter when one party serves on the other party or parties a notice in writing requiring him or them to submit that matter to the person so named or designated. (4) Where the arbitrator or arbitrators are to be appointed by the parties, arbitral proceedings are commenced in respect of a matter when one party serves on the other party or parties notice in writing requiring him or them to appoint an arbitrator or to agree to the appointment of an arbitrator in respect of that matter. (5) Where the arbitrator or arbitrators are to be appointed by a person other than a party to the proceedings, arbitral proceedings are commenced in respect of a matter when one party gives notice in writing to that person requesting him to make the appointment in respect of that matter.

The arbitral tribunal The arbitral tribunal. 15. (1) The parties are free to agree on the number of arbitrators to form the tribunal and whether there is to be a chairman or umpire. (2) Unless otherwise agreed by the parties, an agreement that the number of arbitrators shall be two or any other even number shall be understood as requiring the appointment of an additional arbitrator as chairman of the tribunal. (3) If there is no agreement as to the number of arbitrators, the tribunal shall consist of a sole arbitrator.

Procedure for appointment of arbitrators. 16. (1) The parties are free to agree on the procedure for appointing the arbitrator or arbitrators, including the procedure for appointing any chairman or umpire. (2) If or to the extent that there is no such agreement, the following provisions apply.

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(3) If the tribunal is to consist of a sole arbitrator, the parties shall jointly appoint the arbitrator not later than 28 days after service of a request in writing by either party to do so. (4) If the tribunal is to consist of two arbitrators, each party shall appoint one arbitrator not later than 14 days after service of a request in writing by either party to do so. (5) If the tribunal is to consist of three arbitrators— (a) each party shall appoint one arbitrator not later than 14 days after service of a request in writing by either party to do so, and (b) the two so appointed shall forthwith appoint a third arbitrator as the chairman of the tribunal. (6) If the tribunal is to consist of two arbitrators and an umpire— (a) each party shall appoint one arbitrator not later than 14 days after service of a request in writing by either party to do so, and (b) the two so appointed may appoint an umpire at any time after they themselves are appointed and shall do so before any substantive hearing or forthwith if they cannot agree on a matter relating to the arbitration. (7) In any other case (in particular, if there are more than two parties) section 18 applies as in the case of a failure of the agreed appointment procedure.

Power in case of default to appoint sole arbitrator. 17. (1) Unless the parties otherwise agree, where each of two parties to an arbitration agreement is to appoint an arbitrator and one party (“the party in default”) refuses to do so, or fails to do so within the time speciﬁed, the other party, having duly appointed his arbitrator, may give notice in writing to the party in default that he proposes to appoint his arbitrator to act as sole arbitrator. (2) If the party in default does not within 7 clear days of that notice being given— (a) make the required appointment, and (b) notify the other party that he has done so, the other party may appoint his arbitrator as sole arbitrator whose award shall be binding on both parties as if he had been so appointed by agreement. (3) Where a sole arbitrator has been appointed under subsection (2), the party in default may (upon notice to the appointing party) apply to the court which may set aside the appointment. (4) The leave of the court is required for any appeal from a decision of the court under this section.

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Failure of appointment procedure. 18. (1) The parties are free to agree what is to happen in the event of a failure of the procedure for the appointment of the arbitral tribunal. There is no failure if an appointment is duly made under section 17 (power in case of default to appoint sole arbitrator), unless that appointment is set aside. (2) If or to the extent that there is no such agreement any party to the arbitration agreement may (upon notice to the other parties) apply to the court to exercise its powers under this section. (3) Those powers are— (a) to give directions as to the making of any necessary appointments; (b) to direct that the tribunal shall be constituted by such appointments (or any one or more of them) as have been made; (c) to revoke any appointments already made; (d) to make any necessary appointments itself. (4) An appointment made by the court under this section has effect as if made with the agreement of the parties. (5) The leave of the court is required for any appeal from a decision of the court under this section.

Court to have regard to agreed qualiﬁcations. 19. In deciding whether to exercise, and in considering how to exercise, any of its powers under section 16 (procedure for appointment of arbitrators) or section 18 (failure of appointment procedure), the court shall have due regard to any agreement of the parties as to the qualiﬁcations required of the arbitrators.

Chairman. 20. (1) Where the parties have agreed that there is to be a chairman, they are free to agree what the functions of the chairman are to be in relation to the making of decisions, orders and awards. (2) If or to the extent that there is no such agreement, the following provisions apply. (3) Decisions, orders and awards shall be made by all or a majority of the arbitrators (including the chairman). (4) The view of the chairman shall prevail in relation to a decision, order or award in respect of which there is neither unanimity nor a majority under subsection (3).

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Umpire. 21. (1) Where the parties have agreed that there is to be an umpire, they are free to agree what the functions of the umpire are to be, and in particular— (a) whether he is to attend the proceedings, and (b) when he is to replace the other arbitrators as the tribunal with power to make decisions, orders and awards. (2) If or to the extent that there is no such agreement, the following provisions apply. (3) The umpire shall attend the proceedings and be supplied with the same documents and other materials as are supplied to the other arbitrators. (4) Decisions, orders and awards shall be made by the other arbitrators unless and until they cannot agree on a matter relating to the arbitration. In that event they shall forthwith give notice in writing to the parties and the umpire, whereupon the umpire shall replace them as the tribunal with power to make decisions, orders and awards as if he were sole arbitrator. (5) If the arbitrators cannot agree but fail to give notice of that fact, or if any of them fails to join in the giving of notice, any party to the arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court which may order that the umpire shall replace the other arbitrators as the tribunal with power to make decisions, orders and awards as if he were sole arbitrator. (6) The leave of the court is required for any appeal from a decision of the court under this section.

Decision-making where no chairman or umpire. 22. (1) Where the parties agree that there shall be two or more arbitrators with no chairman or umpire, the parties are free to agree how the tribunal is to make decisions, orders and awards. (2) If there is no such agreement, decisions, orders and awards shall be made by all or a majority of the arbitrators.

Revocation of arbitrator’s authority. 23. (1) The parties are free to agree in what circumstances the authority of an arbitrator may be revoked. (2) If or to the extent that there is no such agreement the following provisions apply. (3) The authority of an arbitrator may not be revoked except— (a) by the parties acting jointly, or (b) by an arbitral or other institution or person vested by the parties with powers in that regard. 264

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(4) Revocation of the authority of an arbitrator by the parties acting jointly must be agreed in writing unless the parties also agree (whether or not in writing) to terminate the arbitration agreement. (5) Nothing in this section affects the power of the court— (a) to revoke an appointment under section 18 (powers exercisable in case of failure of appointment procedure), or (b) to remove an arbitrator on the grounds speciﬁed in section 24.

Power of court to remove arbitrator. 24. (1) A party to arbitral proceedings may (upon notice to the other parties, to the arbitrator concerned and to any other arbitrator) apply to the court to remove an arbitrator on any of the following grounds— (a) that circumstances exist that give rise to justiﬁable doubts as to his impartiality; (b) that he does not possess the qualiﬁcations required by the arbitration agreement; (c) that he is physically or mentally incapable of conducting the proceedings or there are justiﬁable doubts as to his capacity to do so; (d) that he has refused or failed (i) properly to conduct the proceedings, or (ii) to use all reasonable despatch in conducting the proceedings or making an award, and that substantial injustice has been or will be caused to the applicant. (2) If there is an arbitral or other institution or person vested by the parties with power to remove an arbitrator, the court shall not exercise its power of removal unless satisﬁed that the applicant has ﬁrst exhausted any available recourse to that institution or person. (3) The arbitral tribunal may continue the arbitral proceedings and make an award while an application to the court under this section is pending. (4) Where the court removes an arbitrator, it may make such order as it thinks ﬁt with respect to his entitlement (if any) to fees or expenses, or the repayment of any fees or expenses already paid. (5) The arbitrator concerned is entitled to appear and be heard by the court before it makes any order under this section. (6) The leave of the court is required for any appeal from a decision of the court under this section.

Resignation of arbitrator. 25. (1) The parties are free to agree with an arbitrator as to the consequences of his resignation as regards— (a) his entitlement (if any) to fees or expenses, and ARBITRATION ACT 1996 OF ENGLAND

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(b) any liability thereby incurred by him. (2) If or to the extent that there is no such agreement the following provisions apply. (3) An arbitrator who resigns his appointment may (upon notice to the parties) apply to the court— (a) to grant him relief from any liability thereby incurred by him, and (b) to make such order as it thinks ﬁt with respect to his entitlement (if any) to fees or expenses or the repayment of any fees or expenses already paid. (4) If the court is satisﬁed that in all the circumstances it was reasonable for the arbitrator to resign, it may grant such relief as is mentioned in subsection (3)(a) on such terms as it thinks ﬁt. (5) The leave of the court is required for any appeal from a decision of the court under this section.

Death of arbitrator or person appointing him. 26. (1) The authority of an arbitrator is personal and ceases on his death. (2) Unless otherwise agreed by the parties, the death of the person by whom an arbitrator was appointed does not revoke the arbitrator’s authority.

Filling of vacancy, &c. 27. (1) Where an arbitrator ceases to hold ofﬁce, the parties are free to agree— (a) whether and if so how the vacancy is to be ﬁlled, (b) whether and if so to what extent the previous proceedings should stand, and (c) what effect (if any) his ceasing to hold ofﬁce has on any appointment made by him (alone or jointly). (2) If or to the extent that there is no such agreement, the following provisions apply. (3) The provisions of sections 16 (procedure for appointment of arbitrators) and 18 (failure of appointment procedure) apply in relation to the ﬁlling of the vacancy as in relation to an original appointment. (4) The tribunal (when reconstituted) shall determine whether and if so to what extent the previous proceedings should stand. This does not affect any right of a party to challenge those proceedings on any ground which had arisen before the arbitrator ceased to hold ofﬁce. (5) His ceasing to hold ofﬁce does not affect any appointment by him (alone or jointly) of another arbitrator, in particular any appointment of a chairman or umpire.

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Joint and several liability of parties to arbitrators for fees and expenses. 28. (1) The parties are jointly and severally liable to pay to the arbitrators such reasonable fees and expenses (if any) as are appropriate in the circumstances. (2) Any party may apply to the court (upon notice to the other parties and to the arbitrators) which may order that the amount of the arbitrators’ fees and expenses shall be considered and adjusted by such means and upon such terms as it may direct. (3) If the application is made after any amount has been paid to the arbitrators by way of fees or expenses, the court may order the repayment of such amount (if any) as is shown to be excessive, but shall not do so unless it is shown that it is reasonable in the circumstances to order repayment. (4) The above provisions have effect subject to any order of the court under section 24(4) or 25(3)(b) (order as to entitlement to fees or expenses in case of removal or resignation of arbitrator). (5) Nothing in this section affects any liability of a party to any other party to pay all or any of the costs of the arbitration (see sections 59 to 65) or any contractual right of an arbitrator to payment of his fees and expenses. (6) In this section references to arbitrators include an arbitrator who has ceased to act and an umpire who has not replaced the other arbitrators.

Immunity of arbitrator. 29. (1) An arbitrator is not liable for anything done or omitted in the discharge or purported discharge of his functions as arbitrator unless the act or omission is shown to have been in bad faith. (2) Subsection (1) applies to an employee or agent of an arbitrator as it applies to the arbitrator himself. (3) This section does not affect any liability incurred by an arbitrator by reason of his resigning (but see section 25).

Jurisdiction of the arbitral tribunal Competence of tribunal to rule on its own jurisdiction. 30. (1) Unless otherwise agreed by the parties, the arbitral tribunal may rule on its own substantive jurisdiction, that is, as to— (a) whether there is a valid arbitration agreement, (b) whether the tribunal is properly constituted, and (c) what matters have been submitted to arbitration in accordance with the arbitration agreement. ARBITRATION ACT 1996 OF ENGLAND

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(2) Any such ruling may be challenged by any available arbitral process of appeal or review or in accordance with the provisions of this Part.

Objection to substantive jurisdiction of tribunal. 31. (1) An objection that the arbitral tribunal lacks substantive jurisdiction at the outset of the proceedings must be raised by a party not later than the time he takes the ﬁrst step in the proceedings to contest the merits of any matter in relation to which he challenges the tribunal’s jurisdiction. A party is not precluded from raising such an objection by the fact that he has appointed or participated in the appointment of an arbitrator. (2) Any objection during the course of the arbitral proceedings that the arbitral tribunal is exceeding its substantive jurisdiction must be made as soon as possible after the matter alleged to be beyond its jurisdiction is raised. (3) The arbitral tribunal may admit an objection later than the time speciﬁed in subsection (1) or (2) if it considers the delay justiﬁed. (4) Where an objection is duly taken to the tribunal’s substantive jurisdiction and the tribunal has power to rule on its own jurisdiction, it may— (a) rule on the matter in an award as to jurisdiction, or (b) deal with the objection in its award on the merits. If the parties agree which of these courses the tribunal should take, the tribunal shall proceed accordingly. (5) The tribunal may in any case, and shall if the parties so agree, stay proceedings whilst an application is made to the court under section 32 (determination of preliminary point of jurisdiction).

Determination of preliminary point of jurisdiction. 32. (1) The court may, on the application of a party to arbitral proceedings (upon notice to the other parties), determine any question as to the substantive jurisdiction of the tribunal. A party may lose the right to object (see section 73). (2) An application under this section shall not be considered unless— (a) it is made with the agreement in writing of all the other parties to the proceedings, or (b) it is made with the permission of the tribunal and the court is satisﬁed (i) that the determination of the question is likely to produce substantial savings in costs, (ii) that the application was made without delay, and (iii) that there is good reason why the matter should be decided by the court.

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(3) An application under this section, unless made with the agreement of all the other parties to the proceedings, shall state the grounds on which it is said that the matter should be decided by the court. (4) Unless otherwise agreed by the parties, the arbitral tribunal may continue the arbitral proceedings and make an award while an application to the court under this section is pending. (5) Unless the court gives leave, no appeal lies from a decision of the court whether the conditions speciﬁed in subsection (2) are met. (6) The decision of the court on the question of jurisdiction shall be treated as a judgment of the court for the purposes of an appeal. But no appeal lies without the leave of the court which shall not be given unless the court considers that the question involves a point of law which is one of general importance or is one which for some other special reason should be considered by the Court of Appeal.

General duty of the tribunal. 33. (1) The tribunal shall— (a) act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent, and (b) adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay or expense, so as to provide a fair means for the resolution of the matters falling to be determined. (2) The tribunal shall comply with that general duty in conducting the arbitral proceedings, in its decisions on matters of procedure and evidence and in the exercise of all other powers conferred on it.

Procedural and evidential matters. 34. (1) It shall be for the tribunal to decide all procedural and evidential matters, subject to the right of the parties to agree any matter. (2) Procedural and evidential matters include— (a) when and where any part of the proceedings is to be held; (b) the language or languages to be used in the proceedings and whether translations of any relevant documents are to be supplied; (c) whether any and if so what form of written statements of claim and defence are to be used, when these should be supplied and the extent to which such statements can be later amended; (d) whether any and if so which documents or classes of documents should be disclosed between and produced by the parties and at what stage;

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(e) whether any and if so what questions should be put to and answered by the respective parties and when and in what form this should be done; (f) whether to apply strict rules of evidence (or any other rules) as to the admissibility, relevance or weight of any material (oral, written or other) sought to be tendered on any matters of fact or opinion, and the time, manner and form in which such material should be exchanged and presented; (g) whether and to what extent the tribunal should itself take the initiative in ascertaining the facts and the law; (h) whether and to what extent there should be oral or written evidence or submissions. (3) The tribunal may ﬁx the time within which any directions given by it are to be complied with, and may if it thinks ﬁt extend the time so ﬁxed (whether or not it has expired).

Consolidation of proceedings and concurrent hearings. 35. (1) The parties are free to agree— (a) that the arbitral proceedings shall be consolidated with other arbitral proceedings, or (b) that concurrent hearings shall be held, on such terms as may be agreed. (2) Unless the parties agree to confer such power on the tribunal, the tribunal has no power to order consolidation of proceedings or concurrent hearings.

Legal or other representation. 36. Unless otherwise agreed by the parties, a party to arbitral proceedings may be represented in the proceedings by a lawyer or other person chosen by him.

Power to appoint experts, legal advisers or assessors. 37. (1) Unless otherwise agreed by the parties— (a) the tribunal may— (i) appoint experts or legal advisers to report to it and the parties, or (ii) appoint assessors to assist it on technical matters, and may allow any such expert, legal adviser or assessor to attend the proceedings; and (b) the parties shall be given a reasonable opportunity to comment on any information, opinion or advice offered by any such person. (2) The fees and expenses of an expert, legal adviser or assessor appointed by the tribunal for which the arbitrators are liable are expenses of the arbitrators for the purposes of this Part.

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General powers exercisable by the tribunal. 38. (1) The parties are free to agree on the powers exercisable by the arbitral tribunal for the purposes of and in relation to the proceedings. (2) Unless otherwise agreed by the parties the tribunal has the following powers. (3) The tribunal may order a claimant to provide security for the costs of the arbitration. This power shall not be exercised on the ground that the claimant is— (a) an individual ordinarily resident outside the United Kingdom, or (b) a corporation or association incorporated or formed under the law of a country outside the United Kingdom, or whose central management and control is exercised outside the United Kingdom. (4) The tribunal may give directions in relation to any property which is the subject of the proceedings or as to which any question arises in the proceedings, and which is owned by or is in the possession of a party to the proceedings— (a) for the inspection, photographing, preservation, custody or detention of the property by the tribunal, an expert or a party, or (b) ordering that samples be taken from, or any observation be made of or experiment conducted upon, the property. (5) The tribunal may direct that a party or witness shall be examined on oath or afﬁrmation, and may for that purpose administer any necessary oath or take any necessary afﬁrmation. (6) The tribunal may give directions to a party for the preservation for the purposes of the proceedings of any evidence in his custody or control.

Power to make provisional awards. 39. (1) The parties are free to agree that the tribunal shall have power to order on a provisional basis any relief which it would have power to grant in a ﬁnal award. (2) This includes, for instance, making— (a) a provisional order for the payment of money or the disposition of property as between the parties, or (b) an order to make an interim payment on account of the costs of the arbitration. (3) Any such order shall be subject to the tribunal’s ﬁnal adjudication; and the tribunal’s ﬁnal award, on the merits or as to costs, shall take account of any such order. (4) Unless the parties agree to confer such power on the tribunal, the tribunal has no such power. This does not affect its powers under section 47 (awards on different issues, &c.).

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General duty of parties. 40. (1) The parties shall do all things necessary for the proper and expeditious conduct of the arbitral proceedings. (2) This includes— (a) complying without delay with any determination of the tribunal as to procedural or evidential matters, or with any order or directions of the tribunal, and (b) where appropriate, taking without delay any necessary steps to obtain a decision of the court on a preliminary question of jurisdiction or law (see sections 32 and 45).

Powers of tribunal in case of party’s default. 41. (1) The parties are free to agree on the powers of the tribunal in case of a party’s failure to do something necessary for the proper and expeditious conduct of the arbitration. (2) Unless otherwise agreed by the parties, the following provisions apply. (3) If the tribunal is satisﬁed that there has been inordinate and inexcusable delay on the part of the claimant in pursuing his claim and that the delay— (a) gives rise, or is likely to give rise, to a substantial risk that it is not possible to have a fair resolution of the issues in that claim, or (b) has caused, or is likely to cause, serious prejudice to the respondent, the tribunal may make an award dismissing the claim. (4) If without showing sufﬁcient cause a party— (a) fails to attend or be represented at an oral hearing of which due notice was given, or (b) where matters are to be dealt with in writing, fails after due notice to submit written evidence or make written submissions, the tribunal may continue the proceedings in the absence of that party or, as the case may be, without any written evidence or submissions on his behalf, and may make an award on the basis of the evidence before it. (5) If without showing sufﬁcient cause a party fails to comply with any order or directions of the tribunal, the tribunal may make a peremptory order to the same effect, prescribing such time for compliance with it as the tribunal considers appropriate. (6) If a claimant fails to comply with a peremptory order of the tribunal to provide security for costs, the tribunal may make an award dismissing his claim. (7) If a party fails to comply with any other kind of peremptory order, then, without prejudice to section 42 (enforcement by court of tribunal’s peremptory orders), the tribunal may do any of the following— (a) direct that the party in default shall not be entitled to rely upon any allegation or material which was the subject matter of the order; 272

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(b) draw such adverse inferences from the act of non-compliance as the circumstances justify; (c) proceed to an award on the basis of such materials as have been properly provided to it; (d) make such order as it thinks ﬁt as to the payment of costs of the arbitration incurred in consequence of the non-compliance.

Powers of court in relation to arbitral proceedings Enforcement of peremptory orders of tribunal. 42. (1) Unless otherwise agreed by the parties, the court may make an order requiring a party to comply with a peremptory order made by the tribunal. (2) An application for an order under this section may be made— (a) by the tribunal (upon notice to the parties), (b) by a party to the arbitral proceedings with the permission of the tribunal (and upon notice to the other parties), or (c) where the parties have agreed that the powers of the court under this section shall be available. (3) The court shall not act unless it is satisﬁed that the applicant has exhausted any available arbitral process in respect of failure to comply with the tribunal’s order. (4) No order shall be made under this section unless the court is satisﬁed that the person to whom the tribunal’s order was directed has failed to comply with it within the time prescribed in the order or, if no time was prescribed, within a reasonable time. (5) The leave of the court is required for any appeal from a decision of the court under this section.

Securing the attendance of witnesses. 43. (1) A party to arbitral proceedings may use the same court procedures as are available in relation to legal proceedings to secure the attendance before the tribunal of a witness in order to give oral testimony or to produce documents or other material evidence. (2) This may only be done with the permission of the tribunal or the agreement of the other parties. (3) The court procedures may only be used if— (a) the witness is in the United Kingdom, and (b) the arbitral proceedings are being conducted in England and Wales or, as the case may be, Northern Ireland. ARBITRATION ACT 1996 OF ENGLAND

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(4) A person shall not be compelled by virtue of this section to produce any document or other material evidence which he could not be compelled to produce in legal proceedings.

Court powers exercisable in support of arbitral proceedings. 44. (1) Unless otherwise agreed by the parties, the court has for the purposes of and in relation to arbitral proceedings the same power of making orders about the matters listed below as it has for the purposes of and in relation to legal proceedings. (2) Those matters are— (a) the taking of the evidence of witnesses; (b) the preservation of evidence; (c) making orders relating to property which is the subject of the proceedings or as to which any question arises in the proceedings— (i) for the inspection, photographing, preservation, custody or detention of the property, or (ii) ordering that samples be taken from, or any observation be made of or experiment conducted upon, the property; and for that purpose authorising any person to enter any premises in the possession or control of a party to the arbitration; (d) the sale of any goods the subject of the proceedings; (e) the granting of an interim injunction or the appointment of a receiver. (3) If the case is one of urgency, the court may, on the application of a party or proposed party to the arbitral proceedings, make such orders as it thinks necessary for the purpose of preserving evidence or assets. (4) If the case is not one of urgency, the court shall act only on the application of a party to the arbitral proceedings (upon notice to the other parties and to the tribunal) made with the permission of the tribunal or the agreement in writing of the other parties. (5) In any case the court shall act only if or to the extent that the arbitral tribunal, and any arbitral or other institution or person vested by the parties with power in that regard, has no power or is unable for the time being to act effectively. (6) If the court so orders, an order made by it under this section shall cease to have effect in whole or in part on the order of the tribunal or of any such arbitral or other institution or person having power to act in relation to the subject-matter of the order. (7) The leave of the court is required for any appeal from a decision of the court under this section.

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Determination of preliminary point of law. 45. (1) Unless otherwise agreed by the parties, the court may on the application of a party to arbitral proceedings (upon notice to the other parties) determine any question of law arising in the course of the proceedings which the court is satisﬁed substantially affects the rights of one or more of the parties. An agreement to dispense with reasons for the tribunal’s award shall be considered an agreement to exclude the court’s jurisdiction under this section. (2) An application under this section shall not be considered unless— (a) it is made with the agreement of all the other parties to the proceedings, or (b) it is made with the permission of the tribunal and the court is satisﬁed— (i) that the determination of the question is likely to produce substantial savings in costs, and (ii) that the application was made without delay. (3) The application shall identify the question of law to be determined and, unless made with the agreement of all the other parties to the proceedings, shall state the grounds on which it is said that the question should be decided by the court. (4) Unless otherwise agreed by the parties, the arbitral tribunal may continue the arbitral proceedings and make an award while an application to the court under this section is pending. (5) Unless the court gives leave, no appeal lies from a decision of the court whether the conditions speciﬁed in subsection (2) are met. (6) The decision of the court on the question of law shall be treated as a judgment of the court for the purposes of an appeal. But no appeal lies without the leave of the court which shall not be given unless the court considers that the question is one of general importance, or is one which for some other special reason should be considered by the Court of Appeal.

The award Rules applicable to substance of dispute. 46. (1) The arbitral tribunal shall decide the dispute— (a) in accordance with the law chosen by the parties as applicable to the substance of the dispute, or (b) if the parties so agree, in accordance with such other considerations as are agreed by them or determined by the tribunal. (2) For this purpose the choice of the laws of a country shall be understood to refer to the substantive laws of that country and not its conﬂict of laws rules.

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(3) If or to the extent that there is no such choice or agreement, the tribunal shall apply the law determined by the conﬂict of laws rules which it considers applicable.

Awards on different issues, &c. 47. (1) Unless otherwise agreed by the parties, the tribunal may make more than one award at different times on different aspects of the matters to be determined. (2) The tribunal may, in particular, make an award relating— (a) to an issue affecting the whole claim, or (b) to a part only of the claims or cross-claims submitted to it for decision. (3) If the tribunal does so, it shall specify in its award the issue, or the claim or part of a claim, which is the subject matter of the award.

Remedies. 48. (1) The parties are free to agree on the powers exercisable by the arbitral tribunal as regards remedies. (2) Unless otherwise agreed by the parties, the tribunal has the following powers. (3) The tribunal may make a declaration as to any matter to be determined in the proceedings. (4) The tribunal may order the payment of a sum of money, in any currency. (5) The tribunal has the same powers as the court— (a) to order a party to do or refrain from doing anything; (b) to order speciﬁc performance of a contract (other than a contract relating to land); (c) to order the rectiﬁcation, setting aside or cancellation of a deed or other document.

Interest. 49. (1) The parties are free to agree on the powers of the tribunal as regards the award of interest. (2) Unless otherwise agreed by the parties the following provisions apply. (3) The tribunal may award simple or compound interest from such dates, at such rates and with such rests as it considers meets the justice of the case— (a) on the whole or part of any amount awarded by the tribunal, in respect of any period up to the date of the award; (b) on the whole or part of any amount claimed in the arbitration and outstanding at the commencement of the arbitral proceedings but paid before the award was made, in respect of any period up to the date of payment. 276

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(4) The tribunal may award simple or compound interest from the date of the award (or any later date) until payment, at such rates and with such rests as it considers meets the justice of the case, on the outstanding amount of any award (including any award of interest under subsection (3) and any award as to costs). (5) References in this section to an amount awarded by the tribunal include an amount payable in consequence of a declaratory award by the tribunal. (6) The above provisions do not affect any other power of the tribunal to award interest.

Extension of time for making award. 50. (1) Where the time for making an award is limited by or in pursuance of the arbitration agreement, then, unless otherwise agreed by the parties, the court may in accordance with the following provisions by order extend that time. (2) An application for an order under this section may be made— (a) by the tribunal (upon notice to the parties), or (b) by any party to the proceedings (upon notice to the tribunal and the other parties), but only after exhausting any available arbitral process for obtaining an extension of time. (3) The court shall only make an order if satisﬁed that a substantial injustice would otherwise be done. (4) The court may extend the time for such period and on such terms as it thinks ﬁt, and may do so whether or not the time previously ﬁxed (by or under the agreement or by a previous order) has expired. (5) The leave of the court is required for any appeal from a decision of the court under this section.

Settlement. 51. (1) If during arbitral proceedings the parties settle the dispute, the following provisions apply unless otherwise agreed by the parties. (2) The tribunal shall terminate the substantive proceedings and, if so requested by the parties and not objected to by the tribunal, shall record the settlement in the form of an agreed award. (3) An agreed award shall state that it is an award of the tribunal and shall have the same status and effect as any other award on the merits of the case. (4) The following provisions of this Part relating to awards (sections 52 to 58) apply to an agreed award. (5) Unless the parties have also settled the matter of the payment of the costs of the arbitration, the provisions of this Part relating to costs (sections 59 to 65) continue to apply. ARBITRATION ACT 1996 OF ENGLAND

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Form of award. 52. (1) The parties are free to agree on the form of an award. (2) If or to the extent that there is no such agreement, the following provisions apply. (3) The award shall be in writing signed by all the arbitrators or all those assenting to the award. (4) The award shall contain the reasons for the award unless it is an agreed award or the parties have agreed to dispense with reasons. (5) The award shall state the seat of the arbitration and the date when the award is made.

Place where award treated as made. 53. Unless otherwise agreed by the parties, where the seat of the arbitration is in England and Wales or Northern Ireland, any award in the proceedings shall be treated as made there, regardless of where it was signed, despatched or delivered to any of the parties.

Date of award. 54. (1) Unless otherwise agreed by the parties, the tribunal may decide what is to be taken to be the date on which the award was made. (2) In the absence of any such decision, the date of the award shall be taken to be the date on which it is signed by the arbitrator or, where more than one arbitrator signs the award, by the last of them.

Notiﬁcation of award. 55. (1) The parties are free to agree on the requirements as to notiﬁcation of the award to the parties. (2) If there is no such agreement, the award shall be notiﬁed to the parties by service on them of copies of the award, which shall be done without delay after the award is made. (3) Nothing in this section affects section 56 (power to withhold award in case of nonpayment).

Power to withhold award in case of non-payment. 56. (1) The tribunal may refuse to deliver an award to the parties except upon full payment of the fees and expenses of the arbitrators.

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(2) If the tribunal refuses on that ground to deliver an award, a party to the arbitral proceedings may (upon notice to the other parties and the tribunal) apply to the court, which may order that— (a) the tribunal shall deliver the award on the payment into court by the applicant of the fees and expenses demanded, or such lesser amount as the court may specify, (b) the amount of the fees and expenses properly payable shall be determined by such means and upon such terms as the court may direct, and (c) out of the money paid into court there shall be paid out such fees and expenses as may be found to be properly payable and the balance of the money (if any) shall be paid out to the applicant. (3) For this purpose the amount of fees and expenses properly payable is the amount the applicant is liable to pay under section 28 or any agreement relating to the payment of the arbitrators. (4) No application to the court may be made where there is any available arbitral process for appeal or review of the amount of the fees or expenses demanded. (5) References in this section to arbitrators include an arbitrator who has ceased to act and an umpire who has not replaced the other arbitrators. (6) The above provisions of this section also apply in relation to any arbitral or other institution or person vested by the parties with powers in relation to the delivery of the tribunal’s award. As they so apply, the references to the fees and expenses of the arbitrators shall be construed as including the fees and expenses of that institution or person. (7) The leave of the court is required for any appeal from a decision of the court under this section. (8) Nothing in this section shall be construed as excluding an application under section 28 where payment has been made to the arbitrators in order to obtain the award.

Correction of award or additional award. 57. (1) The parties are free to agree on the powers of the tribunal to correct an award or make an additional award. (2) If or to the extent there is no such agreement, the following provisions apply. (3) The tribunal may on its own initiative or on the application of a party— (a) correct an award so as to remove any clerical mistake or error arising from an accidental slip or omission or clarify or remove any ambiguity in the award, or (b) make an additional award in respect of any claim (including a claim for interest or costs) which was presented to the tribunal but was not dealt with in the award. These powers shall not be exercised without ﬁrst affording the other parties a reasonable opportunity to make representations to the tribunal.

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(4) Any application for the exercise of those powers must be made within 28 days of the date of the award or such longer period as the parties may agree. (5) Any correction of an award shall be made within 28 days of the date the application was received by the tribunal or, where the correction is made by the tribunal on its own initiative, within 28 days of the date of the award or, in either case, such longer period as the parties may agree. (6) Any additional award shall be made within 56 days of the date of the original award or such longer period as the parties may agree. (7) Any correction of an award shall form part of the award.

Effect of award. 58. (1) Unless otherwise agreed by the parties, an award made by the tribunal pursuant to an arbitration agreement is ﬁnal and binding both on the parties and on any persons claiming through or under them. (2) This does not affect the right of a person to challenge the award by any available arbitral process of appeal or review or in accordance with the provisions of this Part.

Costs of the arbitration Costs of the arbitration. 59. (1) References in this Part to the costs of the arbitration are to— (a) the arbitrators’ fees and expenses, (b) the fees and expenses of any arbitral institution concerned, and (c) the legal or other costs of the parties. (2) Any such reference includes the costs of or incidental to any proceedings to determine the amount of the recoverable costs of the arbitration (see section 63).

Agreement to pay costs in any event. 60. An agreement which has the effect that a party is to pay the whole or part of the costs of the arbitration in any event is only valid if made after the dispute in question has arisen.

Award of costs. 61. (1) The tribunal may make an award allocating the costs of the arbitration as between the parties, subject to any agreement of the parties.

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(2) Unless the parties otherwise agree, the tribunal shall award costs on the general principle that costs should follow the event except where it appears to the tribunal that in the circumstances this is not appropriate in relation to the whole or part of the costs.

Effect of agreement or award about costs. 62. Unless the parties otherwise agree, any obligation under an agreement between them as to how the costs of the arbitration are to be borne, or under an award allocating the costs of the arbitration, extends only to such costs as are recoverable.

The recoverable costs of the arbitration. 63. (1) The parties are free to agree what costs of the arbitration are recoverable. (2) If or to the extent there is no such agreement, the following provisions apply. (3) The tribunal may determine by award the recoverable costs of the arbitration on such basis as it thinks ﬁt. If it does so, it shall specify— (a) the basis on which it has acted, and (b) the items of recoverable costs and the amount referable to each. (4) If the tribunal does not determine the recoverable costs of the arbitration, any party to the arbitral proceedings may apply to the court (upon notice to the other parties) which may— (a) determine the recoverable costs of the arbitration on such basis as it thinks ﬁt, or (b) order that they shall be determined by such means and upon such terms as it may specify. (5) Unless the tribunal or the court determines otherwise— (a) the recoverable costs of the arbitration shall be determined on the basis that there shall be allowed a reasonable amount in respect of all costs reasonably incurred, and (b) any doubt as to whether costs were reasonably incurred or were reasonable in amount shall be resolved in favour of the paying party. (6) The above provisions have effect subject to section 64 (recoverable fees and expenses of arbitrators). (7) Nothing in this section affects any right of the arbitrators, any expert, legal adviser or assessor appointed by the tribunal, or any arbitral institution, to payment of their fees and expenses.

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Recoverable fees and expenses of arbitrators. 64. (1) Unless otherwise agreed by the parties, the recoverable costs of the arbitration shall include in respect of the fees and expenses of the arbitrators only such reasonable fees and expenses as are appropriate in the circumstances. (2) If there is any question as to what reasonable fees and expenses are appropriate in the circumstances, and the matter is not already before the court on an application under section 63(4), the court may on the application of any party (upon notice to the other parties)— (a) determine the matter, or (b) order that it be determined by such means and upon such terms as the court may specify. (3) Subsection (1) has effect subject to any order of the court under section 24(4) or 25(3)(b) (order as to entitlement to fees or expenses in case of removal or resignation of arbitrator). (4) Nothing in this section affects any right of the arbitrator to payment of his fees and expenses.

Power to limit recoverable costs. 65. (1) Unless otherwise agreed by the parties, the tribunal may direct that the recoverable costs of the arbitration, or of any part of the arbitral proceedings, shall be limited to a speciﬁed amount. (2) Any direction may be made or varied at any stage, but this must be done sufﬁciently in advance of the incurring of costs to which it relates, or the taking of any steps in the proceedings which may be affected by it, for the limit to be taken into account.

Powers of the court in relation to award Enforcement of the award. 66. (1) An award made by the tribunal pursuant to an arbitration agreement may, by leave of the court, be enforced in the same manner as a judgment or order of the court to the same effect. (2) Where leave is so given, judgment may be entered in terms of the award. (3) Leave to enforce an award shall not be given where, or to the extent that, the person against whom it is sought to be enforced shows that the tribunal lacked substantive jurisdiction to make the award. The right to raise such an objection may have been lost (see section 73). (4) Nothing in this section affects the recognition or enforcement of an award under any other enactment or rule of law, in particular under Part II of the Arbitration Act 282

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1950 (enforcement of awards under Geneva Convention) or the provisions of Part III of this Act relating to the recognition and enforcement of awards under the New York Convention or by an action on the award.

Challenging the award: substantive jurisdiction 67. (1) A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court— (a) challenging any award of the arbitral tribunal as to its substantive jurisdiction; or (b) for an order declaring an award made by the tribunal on the merits to be of no effect, in whole or in part, because the tribunal did not have substantive jurisdiction. A party may lose the right to object (see section 73) and the right to apply is subject to the restrictions in section 70(2) and (3). (2) The arbitral tribunal may continue the arbitral proceedings and make a further award while an application to the court under this section is pending in relation to an award as to jurisdiction. (3) On an application under this section challenging an award of the arbitral tribunal as to its substantive jurisdiction, the court may by order— (a) conﬁrm the award, (b) vary the award, or (c) set aside the award in whole or in part. (4) The leave of the court is required for any appeal from a decision of the court under this section.

Challenging the award: serious irregularity. 68. (1) A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court challenging an award in the proceedings on the ground of serious irregularity affecting the tribunal, the proceedings or the award. A party may lose the right to object (see section 73) and the right to apply is subject to the restrictions in section 70(2) and (3). (2) Serious irregularity means an irregularity of one or more of the following kinds which the court considers has caused or will cause substantial injustice to the applicant— (a) failure by the tribunal to comply with section 33 (general duty of tribunal); (b) the tribunal exceeding its powers (otherwise than by exceeding its substantive jurisdiction: see section 67); (c) failure by the tribunal to conduct the proceedings in accordance with the procedure agreed by the parties; (d) failure by the tribunal to deal with all the issues that were put to it; ARBITRATION ACT 1996 OF ENGLAND

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(e) any arbitral or other institution or person vested by the parties with powers in relation to the proceedings or the award exceeding its powers; (f) uncertainty or ambiguity as to the effect of the award; (g) the award being obtained by fraud or the award or the way in which it was procured being contrary to public policy; (h) failure to comply with the requirements as to the form of the award; or (i) any irregularity in the conduct of the proceedings or in the award which is admitted by the tribunal or by any arbitral or other institution or person vested by the parties with powers in relation to the proceedings or the award. (3) If there is shown to be serious irregularity affecting the tribunal, the proceedings or the award, the court may— (a) remit the award to the tribunal, in whole or in part, for reconsideration, (b) set the award aside in whole or in part, or (c) declare the award to be of no effect, in whole or in part. The court shall not exercise its power to set aside or to declare an award to be of no effect, in whole or in part, unless it is satisﬁed that it would be inappropriate to remit the matters in question to the tribunal for reconsideration. (4) The leave of the court is required for any appeal from a decision of the court under this section.

Appeal on point of law. 69. (1) Unless otherwise agreed by the parties, a party to arbitral proceedings may (upon notice to the other parties and to the tribunal) appeal to the court on a question of law arising out of an award made in the proceedings. An agreement to dispense with reasons for the tribunal’s award shall be considered an agreement to exclude the court’s jurisdiction under this section. (2) An appeal shall not be brought under this section except— (a) with the agreement of all the other parties to the proceedings, or (b) with the leave of the court. The right to appeal is also subject to the restrictions in section 70(2) and (3). (3) Leave to appeal shall be given only if the court is satisﬁed— (a) that the determination of the question will substantially affect the rights of one or more of the parties, (b) that the question is one which the tribunal was asked to determine, (c) that, on the basis of the ﬁndings of fact in the award— (i) the decision of the tribunal on the question is obviously wrong, or

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(ii) the question is one of general public importance and the decision of the tribunal is at least open to serious doubt, and (d) that, despite the agreement of the parties to resolve the matter by arbitration, it is just and proper in all the circumstances for the court to determine the question. (4) An application for leave to appeal under this section shall identify the question of law to be determined and state the grounds on which it is alleged that leave to appeal should be granted. (5) The court shall determine an application for leave to appeal under this section without a hearing unless it appears to the court that a hearing is required. (6) The leave of the court is required for any appeal from a decision of the court under this section to grant or refuse leave to appeal. (7) On an appeal under this section the court may by order— (a) conﬁrm the award, (b) vary the award, (c) remit the award to the tribunal, in whole or in part, for reconsideration in the light of the court’s determination, or (d) set aside the award in whole or in part. The court shall not exercise its power to set aside an award, in whole or in part, unless it is satisﬁed that it would be inappropriate to remit the matters in question to the tribunal for reconsideration. (8) The decision of the court on an appeal under this section shall be treated as a judgment of the court for the purposes of a further appeal. But no such appeal lies without the leave of the court which shall not be given unless the court considers that the question is one of general importance or is one which for some other special reason should be considered by the Court of Appeal.

Challenge or appeal: supplementary provisions. 70. (1) The following provisions apply to an application or appeal under section 67, 68 or 69. (2) An application or appeal may not be brought if the applicant or appellant has not ﬁrst exhausted— (a) any available arbitral process of appeal or review, and (b) any available recourse under section 57 (correction of award or additional award). (3) Any application or appeal must be brought within 28 days of the date of the award or, if there has been any arbitral process of appeal or review, of the date when the applicant or appellant was notiﬁed of the result of that process.

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(4) If on an application or appeal it appears to the court that the award— (a) does not contain the tribunal’s reasons, or (b) does not set out the tribunal’s reasons in sufﬁcient detail to enable the court properly to consider the application or appeal, the court may order the tribunal to state the reasons for its award in sufﬁcient detail for that purpose. (5) Where the court makes an order under subsection (4), it may make such further order as it thinks ﬁt with respect to any additional costs of the arbitration resulting from its order. (6) The court may order the applicant or appellant to provide security for the costs of the application or appeal, and may direct that the application or appeal be dismissed if the order is not complied with. The power to order security for costs shall not be exercised on the ground that the applicant or appellant is— (a) an individual ordinarily resident outside the United Kingdom, or (b) a corporation or association incorporated or formed under the law of a country outside the United Kingdom, or whose central management and control is exercised outside the United Kingdom. (7) The court may order that any money payable under the award shall be brought into court or otherwise secured pending the determination of the application or appeal, and may direct that the application or appeal be dismissed if the order is not complied with. (8) The court may grant leave to appeal subject to conditions to the same or similar effect as an order under subsection (6) or (7). This does not affect the general discretion of the court to grant leave subject to conditions.

Challenge or appeal: effect of order of court. 71. (1) The following provisions have effect where the court makes an order under section 67, 68 or 69 with respect to an award. (2) Where the award is varied, the variation has effect as part of the tribunal’s award. (3) Where the award is remitted to the tribunal, in whole or in part, for reconsideration, the tribunal shall make a fresh award in respect of the matters remitted within three months of the date of the order for remission or such longer or shorter period as the court may direct. (4) Where the award is set aside or declared to be of no effect, in whole or in part, the court may also order that any provision that an award is a condition precedent to the bringing of legal proceedings in respect of a matter to which the arbitration agreement applies, is of no effect as regards the subject matter of the award or, as the case may be, the relevant part of the award.

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Miscellaneous Saving for rights of person who takes no part in proceedings. 72. (1) A person alleged to be a party to arbitral proceedings but who takes no part in the proceedings may question— (a) whether there is a valid arbitration agreement, (b) whether the tribunal is properly constituted, or (c) what matters have been submitted to arbitration in accordance with the arbitration agreement, by proceedings in the court for a declaration or injunction or other appropriate relief. (2) He also has the same right as a party to the arbitral proceedings to challenge an award— (a) by an application under section 67 on the ground of lack of substantive jurisdiction in relation to him, or (b) by an application under section 68 on the ground of serious irregularity (within the meaning of that section) affecting him; and section 70(2) (duty to exhaust arbitral procedures) does not apply in his case.

Loss of right to object. 73. (1) If a party to arbitral proceedings takes part, or continues to take part, in the proceedings without making, either forthwith or within such time as is allowed by the arbitration agreement or the tribunal or by any provision of this Part, any objection— (a) that the tribunal lacks substantive jurisdiction, (b) that the proceedings have been improperly conducted, (c) that there has been a failure to comply with the arbitration agreement or with any provision of this Part, or (d) that there has been any other irregularity affecting the tribunal or the proceedings, he may not raise that objection later, before the tribunal or the court, unless he shows that, at the time he took part or continued to take part in the proceedings, he did not know and could not with reasonable diligence have discovered the grounds for the objection. (2) Where the arbitral tribunal rules that it has substantive jurisdiction and a party to arbitral proceedings who could have questioned that ruling— (a) by any available arbitral process of appeal or review, or (b) by challenging the award, does not do so, or does not do so within the time allowed by the arbitration agreement or any provision of this Part, he may not object later to the tribunal’s substantive jurisdiction on any ground which was the subject of that ruling.

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Immunity of arbitral institutions, &c. 74. (1) An arbitral or other institution or person designated or requested by the parties to appoint or nominate an arbitrator is not liable for anything done or omitted in the discharge or purported discharge of that function unless the act or omission is shown to have been in bad faith. (2) An arbitral or other institution or person by whom an arbitrator is appointed or nominated is not liable, by reason of having appointed or nominated him, for anything done or omitted by the arbitrator (or his employees or agents) in the discharge or purported discharge of his functions as arbitrator. (3) The above provisions apply to an employee or agent of an arbitral or other institution or person as they apply to the institution or person himself.

Charge to secure payment of solicitors’ costs. 75. The powers of the court to make declarations and orders under section 73 of the Solicitors Act 1974 or Article 71H of the Solicitors (Northern Ireland) Order 1976 (power to charge property recovered in the proceedings with the payment of solicitors’ costs) may be exercised in relation to arbitral proceedings as if those proceedings were proceedings in the court.

Supplementary Service of notices, &c. 76. (1) The parties are free to agree on the manner of service of any notice or other document required or authorised to be given or served in pursuance of the arbitration agreement or for the purposes of the arbitral proceedings. (2) If or to the extent that there is no such agreement the following provisions apply. (3) A notice or other document may be served on a person by any effective means. (4) If a notice or other document is addressed, pre-paid and delivered by post— (a) to the addressee’s last known principal residence or, if he is or has been carrying on a trade, profession or business, his last known principal business address, or (b) where the addressee is a body corporate, to the body’s registered or principal ofﬁce, it shall be treated as effectively served. (5) This section does not apply to the service of documents for the purposes of legal proceedings, for which provision is made by rules of court. (6) References in this Part to a notice or other document include any form of communication in writing and references to giving or serving a notice or other document shall be construed accordingly.

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Powers of court in relation to service of documents. 77. (1) This section applies where service of a document on a person in the manner agreed by the parties, or in accordance with provisions of section 76 having effect in default of agreement, is not reasonably practicable. (2) Unless otherwise agreed by the parties, the court may make such order as it thinks ﬁt— (a) for service in such manner as the court may direct, or (b) dispensing with service of the document. (3) Any party to the arbitration agreement may apply for an order, but only after exhausting any available arbitral process for resolving the matter. (4) The leave of the court is required for any appeal from a decision of the court under this section.

Reckoning periods of time. 78. (1) The parties are free to agree on the method of reckoning periods of time for the purposes of any provision agreed by them or any provision of this Part having effect in default of such agreement. (2) If or to the extent there is no such agreement, periods of time shall be reckoned in accordance with the following provisions. (3) Where the act is required to be done within a speciﬁed period after or from a speciﬁed date, the period begins immediately after that date. (4) Where the act is required to be done a speciﬁed number of clear days after a speciﬁed date, at least that number of days must intervene between the day on which the act is done and that date. (5) Where the period is a period of seven days or less which would include a Saturday, Sunday or a public holiday in the place where anything which has to be done within the period falls to be done, that day shall be excluded. In relation to England and Wales or Northern Ireland, a “public holiday” means Christmas Day, Good Friday or a day which under the Banking and Financial Dealings Act 1971 is a bank holiday.

Power of court to extend time limits relating to arbitral proceedings. 79. (1) Unless the parties otherwise agree, the court may by order extend any time limit agreed by them in relation to any matter relating to the arbitral proceedings or speciﬁed in any provision of this Part having effect in default of such agreement. This section does not apply to a time limit to which section 12 applies (power of court to extend time for beginning arbitral proceedings, &c.).

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(2) An application for an order may be made— (a) by any party to the arbitral proceedings (upon notice to the other parties and to the tribunal), or (b) by the arbitral tribunal (upon notice to the parties). (3) The court shall not exercise its power to extend a time limit unless it is satisﬁed— (a) that any available recourse to the tribunal, or to any arbitral or other institution or person vested by the parties with power in that regard, has ﬁrst been exhausted, and (b) that a substantial injustice would otherwise be done. (4) The court’s power under this section may be exercised whether or not the time has already expired. (5) An order under this section may be made on such terms as the court thinks ﬁt. (6) The leave of the court is required for any appeal from a decision of the court under this section.

Notice and other requirements in connection with legal proceedings. 80. (1) References in this Part to an application, appeal or other step in relation to legal proceedings being taken “upon notice” to the other parties to the arbitral proceedings, or to the tribunal, are to such notice of the originating process as is required by rules of court and do not impose any separate requirement. (2) Rules of court shall be made— (a) requiring such notice to be given as indicated by any provision of this Part, and (b) as to the manner, form and content of any such notice. (3) Subject to any provision made by rules of court, a requirement to give notice to the tribunal of legal proceedings shall be construed— (a) if there is more than one arbitrator, as a requirement to give notice to each of them; and (b) if the tribunal is not fully constituted, as a requirement to give notice to any arbitrator who has been appointed. (4) References in this Part to making an application or appeal to the court within a speciﬁed period are to the issue within that period of the appropriate originating process in accordance with rules of court. (5) Where any provision of this Part requires an application or appeal to be made to the court within a speciﬁed time, the rules of court relating to the reckoning of periods, the extending or abridging of periods, and the consequences of not taking a step within the period prescribed by the rules, apply in relation to that requirement. 290

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(6) Provision may be made by rules of court amending the provisions of this Part— (a) with respect to the time within which any application or appeal to the court must be made, (b) so as to keep any provision made by this Part in relation to arbitral proceedings in step with the corresponding provision of rules of court applying in relation to proceedings in the court, or (c) so as to keep any provision made by this Part in relation to legal proceedings in step with the corresponding provision of rules of court applying generally in relation to proceedings in the court. (7) Nothing in this section affects the generality of the power to make rules of court.

Saving for certain matters governed by common law. 81. (1) Nothing in this Part shall be construed as excluding the operation of any rule of law consistent with the provisions of this Part, in particular, any rule of law as to— (a) matters which are not capable of settlement by arbitration; (b) the effect of an oral arbitration agreement; or (c) the refusal of recognition or enforcement of an arbitral award on grounds of public policy. (2) Nothing in this Act shall be construed as reviving any jurisdiction of the court to set aside or remit an award on the ground of errors of fact or law on the face of the award.

Minor deﬁnitions. 82. (1) In this Part “arbitrator,” unless the context otherwise requires, includes an umpire; “available arbitral process,” in relation to any matter, includes any process of appeal to or review by an arbitral or other institution or person vested by the parties with powers in relation to that matter; “claimant,” unless the context otherwise requires, includes a counterclaimant, and related expressions shall be construed accordingly; “dispute” includes any difference; “enactment” includes an enactment contained in Northern Ireland legislation; “legal proceedings” means civil proceedings in the High Court or a county court; “peremptory order” means an order made under section 41(5) or made in exercise of any corresponding power conferred by the parties; “premises” includes land, buildings, moveable structures, vehicles, vessels, aircraft and hovercraft; “question of law” means (a) for a court in England and Wales, a question of the law of England and Wales, and (b) for a court in Northern Ireland, a question of the law of Northern Ireland; “substantive jurisdiction,” in relation to an arbitral tribunal, refers to the matters speciﬁed in section 30(1)(a) to (c), and references to the tribunal exceeding its substantive jurisdiction shall be construed accordingly. (2) References in this Part to a party to an arbitration agreement include any person claiming under or through a party to the agreement.

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Index of deﬁned expressions: Part I. 83. In this Part the expressions listed below are deﬁned or otherwise explained by the provisions indicated agreement, agree and agreed section 5(1) agreement in writing section 5(2) to (5) arbitration agreement sections 6 and 5(1) arbitrator section 82(1) available arbitral process section 82(1) claimant section 82(1) commencement (in relation to arbitral proceedings) section 14 costs of the arbitration section 59 the court section 105 dispute section 82(1) enactment section 82(1) legal proceedings section 82(1) Limitation Acts section 13(4) notice (or other document) section 76(6) party in relation to an arbitration agreement section 82(2) where section 106(2) or (3) applies section 106(4) peremptory order section 82(1) (and see section 41(5)) premises section 82(1) question of law section 82(1) recoverable costs sections 63 and 64 seat of the arbitration section 3 serve and service (of notice or other document) section 76(6) substantive jurisdiction (in relation to an arbitral tribunal) section 82(1) (and see section 30(1)(a) to (c)) upon notice (to the parties or the tribunal) section 80 written and in writing section 5(6).

Transitional provisions. 84. (1) The provisions of this Part do not apply to arbitral proceedings commenced before the date on which this Part comes into force. (2) They apply to arbitral proceedings commenced on or after that date under an arbitration agreement whenever made. (3) The above provisions have effect subject to any transitional provision made by an order under section 109(2) (power to include transitional provisions in commencement order).

PART II OTHER PROVISIONS RELATING TO ARBITRATION Domestic arbitration agreements Modiﬁcation of Part I in relation to domestic arbitration agreement. 85. (1) In the case of a domestic arbitration agreement the provisions of Part I are modiﬁed in accordance with the following sections. (2) For this purpose a “domestic arbitration agreement” means an arbitration agreement to which none of the parties is— (a) an individual who is a national of, or habitually resident in, a state other than the United Kingdom, or

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(b) a body corporate which is incorporated in, or whose central control and management is exercised in, a state other than the United Kingdom, and under which the seat of the arbitration (if the seat has been designated or determined) is in the United Kingdom. (3) In subsection (2) “arbitration agreement” and “seat of the arbitration” have the same meaning as in Part I (see sections 3, 5(1) and 6).

Staying of legal proceedings. 86. (1) In section 9 (stay of legal proceedings), subsection (4) (stay unless the arbitration agreement is null and void, inoperative, or incapable of being performed) does not apply to a domestic arbitration agreement. (2) On an application under that section in relation to a domestic arbitration agreement the court shall grant a stay unless satisﬁed— (a) that the arbitration agreement is null and void, inoperative, or incapable of being performed, or (b) that there are other sufﬁcient grounds for not requiring the parties to abide by the arbitration agreement. (3) The court may treat as a sufﬁcient ground under subsection (2)(b) the fact that the applicant is or was at any material time not ready and willing to do all things necessary for the proper conduct of the arbitration or of any other dispute resolution procedures required to be exhausted before resorting to arbitration. (4) For the purposes of this section the question whether an arbitration agreement is a domestic arbitration agreement shall be determined by reference to the facts at the time the legal proceedings are commenced.

Effectiveness of agreement to exclude court’s jurisdiction. 87. (1) In the case of a domestic arbitration agreement any agreement to exclude the jurisdiction of the court under— (a) section 45 (determination of preliminary point of law), or (b) section 69 (challenging the award: appeal on point of law), is not effective unless entered into after the commencement of the arbitral proceedings in which the question arises or the award is made. (2) For this purpose the commencement of the arbitral proceedings has the same meaning as in Part I (see section 14). (3) For the purposes of this section the question whether an arbitration agreement is a domestic arbitration agreement shall be determined by reference to the facts at the time the agreement is entered into.

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Power to repeal or amend sections 85 to 87. 88. (1) The Secretary of State may by order repeal or amend the provisions of sections 85 to 87. (2) An order under this section may contain such supplementary, incidental and transitional provisions as appear to the Secretary of State to be appropriate. (3) An order under this section shall be made by statutory instrument and no such order shall be made unless a draft of it has been laid before and approved by a resolution of each House of Parliament.

Consumer arbitration agreements Application of unfair terms regulations to consumer arbitration agreements. 89. (1) The following sections extend the application of the Unfair Terms in Consumer Contracts Regulations 1994 in relation to a term which constitutes an arbitration agreement. For this purpose “arbitration agreement” means an agreement to submit to arbitration present or future disputes or differences (whether or not contractual). (2) In those sections “the Regulations” means those regulations and includes any regulations amending or replacing those regulations. (3) Those sections apply whatever the law applicable to the arbitration agreement.

Regulations apply where consumer is a legal person. 90. The Regulations apply where the consumer is a legal person as they apply where the consumer is a natural person.

Arbitration agreement unfair where modest amount sought. 91. (1) A term which constitutes an arbitration agreement is unfair for the purposes of the Regulations so far as it relates to a claim for a pecuniary remedy which does not exceed the amount speciﬁed by order for the purposes of this section. (2) Orders under this section may make different provision for different cases and for different purposes. (3) The power to make orders under this section is exercisable— (a) for England and Wales, by the Secretary of State with the concurrence of the Lord Chancellor, (b) for Scotland, by the Secretary of State with the concurrence of the Lord Advocate, and

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(c) for Northern Ireland, by the Department of Economic Development for Northern Ireland with the concurrence of the Lord Chancellor. (4) Any such order for England and Wales or Scotland shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament. (5) Any such order for Northern Ireland shall be a statutory rule for the purposes of the Statutory Rules (Northern Ireland) Order 1979 and shall be subject to negative resolution, within the meaning of section 41(6) of the Interpretation Act (Northern Ireland) 1954.

Small claims arbitration in the county court Exclusion of Part I in relation to small claims arbitration in the county court. 92. Nothing in Part I of this Act applies to arbitration under section 64 of the County Courts Act 1984.

Appointment of judges as arbitrators Appointment of judges as arbitrators. 93. (1) A judge of the Commercial Court or an ofﬁcial referee may, if in all the circumstances he thinks ﬁt, accept appointment as a sole arbitrator or as umpire by or by virtue of an arbitration agreement. (2) A judge of the Commercial Court shall not do so unless the Lord Chief Justice has informed him that, having regard to the state of business in the High Court and the Crown Court, he can be made available. (3) An ofﬁcial referee shall not do so unless the Lord Chief Justice has informed him that, having regard to the state of ofﬁcial referees’ business, he can be made available. (4) The fees payable for the services of a judge of the Commercial Court or ofﬁcial referee as arbitrator or umpire shall be taken in the High Court. (5) In this section “arbitration agreement” has the same meaning as in Part I; and “ofﬁcial referee” means a person nominated under section 68(1)(a) of the Supreme Court Act 1981 to deal with ofﬁcial referees’ business. (6) The provisions of Part I of this Act apply to arbitration before a person appointed under this section with the modiﬁcations speciﬁed in Schedule 2.

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Statutory arbitrations Application of Part I to statutory arbitrations. 94. (1) The provisions of Part I apply to every arbitration under an enactment (a “statutory arbitration”), whether the enactment was passed or made before or after the commencement of this Act, subject to the adaptations and exclusions speciﬁed in sections 95 to 98. (2) The provisions of Part I do not apply to a statutory arbitration if or to the extent that their application— (a) is inconsistent with the provisions of the enactment concerned, with any rules or procedure authorised or recognised by it, or (b) is excluded by any other enactment. (3) In this section and the following provisions of this Part “enactment”— (a) in England and Wales, includes an enactment contained in subordinate legislation within the meaning of the Interpretation Act 1978; (b) in Northern Ireland, means a statutory provision within the meaning of section 1(f) of the Interpretation Act (Northern Ireland) 1954.

General adaptation of provisions in relation to statutory arbitrations. 95. (1) The provisions of Part I apply to a statutory arbitration— (a) as if the arbitration were pursuant to an arbitration agreement and as if the enactment were that agreement, and (b) as if the persons by and against whom a claim subject to arbitration in pursuance of the enactment may be or has been made were parties to that agreement. (2) Every statutory arbitration shall be taken to have its seat in England and Wales or, as the case may be, in Northern Ireland.

Speciﬁc adaptations of provisions in relation to statutory arbitrations. 96. (1) The following provisions of Part I apply to a statutory arbitration with the following adaptations. (2) In section 30(1) (competence of tribunal to rule on its own jurisdiction), the reference in paragraph (a) to whether there is a valid arbitration agreement shall be construed as a reference to whether the enactment applies to the dispute or difference in question. (3) Section 35 (consolidation of proceedings and concurrent hearings) applies only so as to authorise the consolidation of proceedings, or concurrent hearings in proceedings, under the same enactment. 296

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(4) Section 46 (rules applicable to substance of dispute) applies with the omission of subsection (1)(b) (determination in accordance with considerations agreed by parties).

Provisions excluded from applying to statutory arbitrations. 97. The following provisions of Part I do not apply in relation to a statutory arbitration— (a) section 8 (whether agreement discharged by death of a party); (b) section 12 (power of court to extend agreed time limits); (c) sections 9(5), 10(2) and 71(4) (restrictions on effect of provision that award condition precedent to right to bring legal proceedings).

Power to make further provision by regulations. 98. (1) The Secretary of State may make provision by regulations for adapting or excluding any provision of Part I in relation to statutory arbitrations in general or statutory arbitrations of any particular description. (2) The power is exercisable whether the enactment concerned is passed or made before or after the commencement of this Act. (3) Regulations under this section shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.

PART III RECOGNITION AND ENFORCEMENT OF CERTAIN FOREIGN AWARDS Enforcement of Geneva Convention awards Continuation of Part II of the Arbitration Act 1950. 99. Part II of the Arbitration Act 1950 (enforcement of certain foreign awards) continues to apply in relation to foreign awards within the meaning of that Part which are not also New York Convention awards.

Recognition and enforcement of New York Convention awards New York Convention awards. 100. (1) In this Part a “New York Convention award” means an award made, in pursuance of an arbitration agreement, in the territory of a state (other than the United Kingdom) which is a party to the New York Convention.

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(2) For the purposes of subsection (1) and of the provisions of this Part relating to such awards— (a) “arbitration agreement” means an arbitration agreement in writing, and (b) an award shall be treated as made at the seat of the arbitration, regardless of where it was signed, despatched or delivered to any of the parties. In this subsection “agreement in writing” and “seat of the arbitration” have the same meaning as in Part I. (3) If Her Majesty by Order in Council declares that a state speciﬁed in the Order is a party to the New York Convention, or is a party in respect of any territory so speciﬁed, the Order shall, while in force, be conclusive evidence of that fact. (4) In this section “the New York Convention” means the Convention on the Recognition and Enforcement of Foreign Arbitral Awards adopted by the United Nations Conference on International Commercial Arbitration on 10th June 1958.

Recognition and enforcement of awards. 101. (1) A New York Convention award shall be recognised as binding on the persons as between whom it was made, and may accordingly be relied on by those persons by way of defence, set-off or otherwise in any legal proceedings in England and Wales or Northern Ireland. (2) A New York Convention award may, by leave of the court, be enforced in the same manner as a judgment or order of the court to the same effect. As to the meaning of “the court” see section 105. (3) Where leave is so given, judgment may be entered in terms of the award.

Evidence to be produced by party seeking recognition or enforcement. 102. (1) A party seeking the recognition or enforcement of a New York Convention award must produce— (a) the duly authenticated original award or a duly certiﬁed copy of it, and (b) the original arbitration agreement or a duly certiﬁed copy of it. (2) If the award or agreement is in a foreign language, the party must also produce a translation of it certiﬁed by an ofﬁcial or sworn translator or by a diplomatic or consular agent.

Refusal of recognition or enforcement. 103. (1) Recognition or enforcement of a New York Convention award shall not be refused except in the following cases.

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(2) Recognition or enforcement of the award may be refused if the person against whom it is invoked proves— (a) that a party to the arbitration agreement was (under the law applicable to him) under some incapacity; (b) that the arbitration agreement was not valid under the law to which the parties subjected it or, failing any indication thereon, under the law of the country where the award was made; (c) that he was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case; (d) that the award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration or contains decisions on matters beyond the scope of the submission to arbitration (but see subsection (4)); (e) that the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or, failing such agreement, with the law of the country in which the arbitration took place; (f) that the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, it was made. (3) Recognition or enforcement of the award may also be refused if the award is in respect of a matter which is not capable of settlement by arbitration, or if it would be contrary to public policy to recognise or enforce the award. (4) An award which contains decisions on matters not submitted to arbitration may be recognised or enforced to the extent that it contains decisions on matters submitted to arbitration which can be separated from those on matters not so submitted. (5) Where an application for the setting aside or suspension of the award has been made to such a competent authority as is mentioned in subsection (2)(f), the court before which the award is sought to be relied upon may, if it considers it proper, adjourn the decision on the recognition or enforcement of the award. It may also on the application of the party claiming recognition or enforcement of the award order the other party to give suitable security.

Saving for other bases of recognition or enforcement. 104. Nothing in the preceding provisions of this Part affects any right to rely upon or enforce a New York Convention award at common law or under section 66.

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PART IV GENERAL PROVISIONS Meaning of “the court:” jurisdiction of High Court and county court. 105. (1) In this Act “the court” means the High Court or a county court, subject to the following provisions. (2) The Lord Chancellor may by order make provision— (a) allocating proceedings under this Act to the High Court or to county courts; or (b) specifying proceedings under this Act which may be commenced or taken only in the High Court or in a county court. (3) The Lord Chancellor may by order make provision requiring proceedings of any speciﬁed description under this Act in relation to which a county court has jurisdiction to be commenced or taken in one or more speciﬁed county courts. Any jurisdiction so exercisable by a speciﬁed county court is exercisable throughout England and Wales or, as the case may be, Northern Ireland. (4) An order under this section— (a) may differentiate between categories of proceedings by reference to such criteria as the Lord Chancellor sees ﬁt to specify, and (b) may make such incidental or transitional provision as the Lord Chancellor considers necessary or expedient. (5) An order under this section for England and Wales shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament. (6) An order under this section for Northern Ireland shall be a statutory rule for the purposes of the Statutory Rules (Northern Ireland) Order 1979 which shall be subject to annulment in pursuance of a resolution of either House of Parliament in like manner as a statutory instrument and section 5 of the Statutory Instruments Act 1946 shall apply accordingly.

Crown application. 106. (1) Part I of this Act applies to any arbitration agreement to which Her Majesty, either in right of the Crown or of the Duchy of Lancaster or otherwise, or the Duke of Cornwall, is a party. (2) Where Her Majesty is party to an arbitration agreement otherwise than in right of the Crown, Her Majesty shall be represented for the purposes of any arbitral proceedings— (a) where the agreement was entered into by Her Majesty in right of the Duchy of Lancaster, by the Chancellor of the Duchy or such person as he may appoint, and 300

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(b) in any other case, by such person as Her Majesty may appoint in writing under the Royal Sign Manual. (3) Where the Duke of Cornwall is party to an arbitration agreement, he shall be represented for the purposes of any arbitral proceedings by such person as he may appoint. (4) References in Part I to a party or the parties to the arbitration agreement or to arbitral proceedings shall be construed, where subsection (2) or (3) applies, as references to the person representing Her Majesty or the Duke of Cornwall.

Consequential amendments and repeals. 107. (1) The enactments speciﬁed in Schedule 3 are amended in accordance with that Schedule, the amendments being consequential on the provisions of this Act. (2) The enactments speciﬁed in Schedule 4 are repealed to the extent speciﬁed.

Extent. 108. (1) The provisions of this Act extend to England and Wales and, except as mentioned below, to Northern Ireland. (2) The following provisions of Part II do not extend to Northern Ireland section 92 (exclusion of Part I in relation to small claims arbitration in the county court), and section 93 and Schedule 2 (appointment of judges as arbitrators). (3) Sections 89, 90 and 91 (consumer arbitration agreements) extend to Scotland and the provisions of Schedules 3 and 4 (consequential amendments and repeals) extend to Scotland so far as they relate to enactments which so extend, subject as follows. (4) The repeal of the Arbitration Act 1975 extends only to England and Wales and Northern Ireland.

Commencement. 109. (1) The provisions of this Act come into force on such day as the Secretary of State may appoint by order made by statutory instrument, and different days may be appointed for different purposes. (2) An order under subsection (1) may contain such transitional provisions as appear to the Secretary of State to be appropriate.

Short title. 110. This Act may be cited as the Arbitration Act 1996.

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CIETAC Arbitration Rules

China International Economic and Trade Arbitration Commission CIETAC Arbitration Rules (Revised and Adopted by the China Council for the Promotion of International Trade/China Chamber of International Commerce on January 11, 2005. Effective as from May 1, 2005.)

Chapter I General Provisions Article 1 The Rules These Rules are formulated in accordance with the Arbitration Law of the People’s Republic of China and the provisions of other relevant laws, as well as the “Decision” of the former Administration Council of the Central People’s Government and the “Notice” and the “Ofﬁcial Reply” of the State Council.

Article 2 Name and Structure 1. The China International Economic and Trade Arbitration Commission (originally named the Foreign Trade Arbitration Commission of the China Council for the Promotion of International Trade, later renamed the Foreign Economic and Trade Arbitration Commission of the China Council for the Promotion of International Trade, and currently called the China International Economic and Trade Arbitration Commission, hereinafter referred to as the “CIETAC”) independently and impartially resolves, by means of arbitration, disputes arising from economic and trade transactions of a contractual or non-contractual nature. 2. The CIETAC concurrently uses the “Court of Arbitration of the China Chamber of International Commerce” as its name. 303

3. Where an arbitration agreement or an arbitration clause contained in a contract provides for arbitration by the CIETAC or one of its Sub-Commissions or by the CIETAC using one of its prior names, the parties shall be deemed to have unanimously agreed that the arbitration shall be administered by the CIETAC or by one of its Sub-Commissions. 4. Where an arbitration agreement or an arbitration clause contained in a contract provides for arbitration by the China Council for the Promotion of International Trade/ China Chamber of International Commerce or by the Arbitration Commission or the Court of Arbitration of the China Council for the Promotion of International Trade/ China Chamber of International Commerce, the parties shall be deemed to have unanimously agreed that the arbitration shall be administered by the CIETAC. 5. The Chairman of the CIETAC shall perform the functions and duties vested in him/ her by these Rules while a Vice-Chairman may perform the Chairman’s functions and duties with the Chairman’s authorization. 6. The CIETAC has a Secretariat, which handles its day-to-day work under the direction of its Secretary-General. 7. The CIETAC is based in Beijing, and has a South China Sub-Commission (formerly known as Shenzhen Sub-Commission) in Shenzhen Special Economic Zone and a Shanghai Sub-Commission in Shanghai. These Sub-Commissions are integral parts of the CIETAC. The Sub-Commissions have their respective secretariats, which handle their day-to-day work under the direction of the Secretaries-General of the respective Sub-Commissions. 8. The parties may agree to have their disputes arbitrated by the CIETAC in Beijing, the South China Sub-Commission in Shenzhen or the Shanghai Sub-Commission in Shanghai. In the absence of such an agreement, the Claimant shall have the option to submit the case for arbitration by the CIETAC in Beijing, the South China SubCommission in Shenzhen or the Shanghai Sub-Commission in Shanghai. When such option is exercised, the ﬁrst choice by the party shall prevail. In case of any dispute, the ﬁnal decision shall be made by the CIETAC. 9. The CIETAC may, in its discretion, establish arbitration centers for speciﬁc business sectors and issue arbitration rules therefor. 10. The CIETAC shall establish a Panel of Arbitrators, and may, in its discretion, establish Panels of Arbitrators for speciﬁc business sectors.

Article 3 Jurisdiction The CIETAC accepts cases involving: 1. international or foreign-related disputes; 2. disputes related to the Hong Kong Special Administrative Region or the Macao Special Administrative Region or the Taiwan region; and 3. domestic disputes. 304

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Article 4 Scope of Application 1. These Rules uniformly apply to the CIETAC and its Sub-Commissions. When arbitration proceedings are administered by a Sub-Commission, the functions and duties under these Rules allocated to the Chairman, the secretariat and the Secretary-General of the CIETAC shall be performed, respectively, by a Vice-Chairman authorized by the Chairman, a secretariat and a Secretary-General of the relevant Sub-Commission except for the power to make decisions on challenges to arbitrators. 2. The parties shall be deemed to have agreed to arbitrate in accordance with these Rules whenever they have provided for arbitration by the CIETAC. Where the parties have agreed on the application of other arbitration rules, or any modiﬁcation of these Rules, the parties’ agreement shall prevail except where such agreement is inoperative or in conﬂict with a mandatory provision of the law of the place of arbitration. 3. Where the parties agree to refer their disputes to arbitration under these Rules without providing the name of an arbitration institution, they shall be deemed to have agreed to refer the dispute to arbitration by the CIETAC. 4. Where the parties agree to refer their dispute to arbitration under the CIETAC’s arbitration rules for a speciﬁc business sector or profession and the dispute falls within the scope of such rules, the parties’ agreement shall prevail; otherwise, these Rules shall apply.

Article 5 Arbitration Agreement 1. The CIETAC shall, upon the written application of a party, accept a case in accordance with an arbitration agreement concluded between the parties, either before or after the occurrence of the dispute, in which it is provided that disputes are to be referred to arbitration by the CIETAC. 2. An arbitration agreement means an arbitration clause in a contract concluded between the parties or any other form of written agreement providing for the settlement of disputes by arbitration. 3. The arbitration agreement shall be in writing. An arbitration agreement is in writing if it is contained in a tangible form of a document such as a contract, letter, telegram, telex, facsimile, EDI, or Email. An arbitration agreement shall be deemed to exist where its existence is asserted by one party and not denied by the other during the exchange of the Request for Arbitration and the Statement of Defense. 4. An arbitration clause contained in a contract shall be treated as a clause independent and separate from all other clauses of the contract, and an arbitration agreement attached to a contract shall also be treated as independent and separate from all other clauses of the contract. The validity of an arbitration clause or an arbitration agreement shall not be affected by any modiﬁcation, rescission, termination, transfer, expiry, invalidity, ineffectiveness, revocation or non-existence of the contract.

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Article 6 Objection to an Arbitration Agreement and/or Jurisdiction 1. The CIETAC shall have the power to determine the existence and validity of an arbitration agreement and its jurisdiction over an arbitration case. The CIETAC may, if necessary, delegate such power to the arbitral tribunal. 2. Where the CIETAC is satisﬁed by prima facie evidence that an arbitration agreement providing for arbitration by the CIETAC exists, it may make a decision based on such evidence that it has jurisdiction over the arbitration case, and the arbitration shall proceed. Such a decision shall not prevent the CIETAC from making a new decision on jurisdiction based on facts and/or evidence found by the arbitral tribunal during the arbitration proceedings that are inconsistent with the prima facie evidence. 3. An objection to an arbitration agreement and/or jurisdiction over an arbitration case shall be raised in writing before the ﬁrst oral hearing is held by the arbitral tribunal. Where a case is to be decided on the basis of documents only, such an objection shall be raised before the submission of the ﬁrst substantive defense. 4. The arbitration shall proceed notwithstanding an objection to the arbitration agreement and/or jurisdiction over the arbitration case. 5. The aforesaid objections to and/or decisions on jurisdiction by the CIETAC shall include objections to and/or decisions on a party’s standing to participate in the arbitration.

Article 7 Bona Fide Cooperation The parties shall proceed with the arbitration in bona ﬁde cooperation.

Article 8 Waiver of Right to Object A party shall be deemed to have waived its right to object where it knows or should have known that any provision of, or requirement under, these Rules has not been complied with and yet participates in or proceeds with the arbitration proceedings without promptly and explicitly submitting its objection in writing to such noncompliance.

Chapter II Arbitral Proceedings Section 1 Request for Arbitration, Defense and Counterclaim Article 9 Commencement of Arbitration The arbitral proceedings shall commence on the date on which the CIETAC or one of its Sub-Commissions receives a Request for Arbitration.

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Article 10 Application for Arbitration A party applying for arbitration under these Rules shall: 1. Submit a Request for Arbitration in writing signed by and/or afﬁxed with the seal of the Claimant and/or its authorized representative(s), which shall, inter alia, include: (a) the names and addresses of the Claimant and the Respondent, including the zip code, telephone, telex, fax and telegraph numbers, Email addresses or any other means of electronic telecommunications; (b) a reference to the arbitration agreement that is invoked; (c) a statement of the facts of the case and the main issues in dispute; (d) the claim of the Claimant; and (e) the facts and grounds on which the claim is based. 2. Attach to the Request for Arbitration the relevant evidence supporting the facts on which the Claimant’s claim is based. 3. Make payment of the arbitration fee in advance to the CIETAC according to its Arbitration Fee Schedule.

Article 11 Acceptance of a Case 1. Upon receipt of the Request for Arbitration and its attachments, if the CIETAC after examination ﬁnds the formalities required for arbitration application to be incomplete, it may request the Claimant to complete them. Where the formalities are found to be complete, the CIETAC shall send a Notice of Arbitration to both parties together with one copy each of the CIETAC Arbitration Rules, the Panel of Arbitrators and the Arbitration Fee Schedule. The Request for Arbitration and its attachments submitted by the Claimant shall be sent to the Respondent under the same cover. 2. The CIETAC or its Sub-Commission shall, after accepting a case, appoint a staffmember of its secretariat to assist the arbitral tribunal in the procedural administration of the case.

Article 12 Statement of Defense 1. Within forty-ﬁve (45) days from the date of receipt of the Notice of Arbitration, the Respondent shall ﬁle a Statement of Defense in writing with the Secretariat of the CIETAC or its Sub-Commission. The arbitral tribunal may extend that time period if it believes that there are justiﬁed reasons. The Statement of Defense shall be signed by

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and/or afﬁxed with the seal of the Respondent and/or its authorized representative(s), and shall, inter alia, include: (a) the names and addresses of the Respondent, including the zip code, telephone, telex, fax and telegraph numbers, Email addresses or any other means of electronic telecommunications; (b) the defense to the Request for Arbitration setting forth the facts and grounds on which the defense is based; and (c) the relevant evidence supporting the defense.

2. The arbitral tribunal has the power to decide whether to accept a Statement of Defense submitted after expiration of the above time limit. 3. Failure of the Respondent to ﬁle a Statement of Defense shall not operate to affect the arbitral proceedings.

Article 13 Counterclaim 1. Within forty-ﬁve (45) days from the date of receipt of the Notice of Arbitration, the Respondent shall ﬁle with the CIETAC its counterclaim in writing, if any. The arbitral tribunal may extend that time period if it believes that there are justiﬁed reasons. 2. When ﬁling a counterclaim, the Respondent shall specify its counterclaim in its written Statement of Counterclaim and state the facts and grounds upon which its counterclaim is based with relevant evidence attached thereto. 3. When ﬁling a counterclaim, the Respondent shall pay an arbitration fee in advance according to the Arbitration Fee Schedule of the CIETAC within a speciﬁed time period. 4. Where the formalities required for ﬁling a counterclaim are found to be complete, the CIETAC shall send the Statement of Counterclaim and its attachments to the Claimant. The Claimant shall, within thirty (30) days from the date of receipt of the Statement of Counterclaim and the attachment, submit in writing its Statement of Defense to the Respondent’s counterclaim. 5. The arbitral tribunal has the power to decide whether to accept a Statement of Defense submitted after expiration of the above time limit. 6. Failure of the Claimant to ﬁle a Statement of Defense to the Respondent’s counterclaim shall not operate to affect the arbitral proceedings.

Article 14 Amendments to the Claim or Counterclaim The Claimant may amend its claim and the Respondent may amend its counterclaim. However, the arbitral tribunal may not permit any such amendment if it considers that the amendment is too late and may delay the arbitral proceedings. 308

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Article 15 Copies of Submissions When submitting the Request for Arbitration, the Statement of Defense, the Statement of Counterclaim, evidence and other documents, the parties shall make the submissions in quintuplicate. Where there are more than two parties, additional copies shall be provided accordingly. Where the arbitral tribunal is composed of a sole arbitrator, the number of copies submitted may be reduced by two. Where the preservation of property or protection of evidence is applied for, the party shall forward one additional copy accordingly.

Article 16 Representation 1. A party may be represented by its authorized representative(s) in handling matters relating to the arbitration. In such a case, a Power of Attorney shall be forwarded to the CIETAC by the party or its authorized representative(s). 2. Either Chinese or foreign citizens may be authorized by a party to act as its representative(s).

Article 17 Preservation of Property When any party applies for the preservation of property, the CIETAC shall forward the party’s application for a ruling to the competent court at the place where the domicile of the party against whom the preservation of property is sought is located or where the property of the said party is located.

Article 18 Protection of Evidence When a party applies for the protection of evidence, the CIETAC shall forward the party’s application for a ruling to the competent court at the place where the evidence is located.

Section 2 The Arbitral Tribunal Article 19 Duties of Arbitrator An arbitrator shall not represent either party and shall remain independent of the parties and treat them equally.

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Article 20 Number of Arbitrators 1. The arbitral tribunal shall be composed of one or three arbitrators. 2. Unless otherwise agreed by the parties or provided by these Rules, the arbitral tribunal shall be composed of three arbitrators.

Article 21 Panel of Arbitrators 1. The parties shall appoint arbitrators from the Panel of Arbitrators provided by the CIETAC. 2. Where the parties have agreed to appoint arbitrators from outside of the CIETAC’s Panel of Arbitrators, the arbitrators so appointed by the parties or nominated according to the agreement of the parties may act as co-arbitrator, presiding arbitrator or sole arbitrator after the appointment has been conﬁrmed by the Chairman of the CIETAC in accordance with the law.

Article 22 Three Arbitrators 1. Within ﬁfteen (15) days from the date of receipt of the Notice of Arbitration, the Claimant and the Respondent shall each appoint one arbitrator or entrust the Chairman of the CIETAC to make such appointment. Where a party fails to appoint or to entrust the Chairman of the CIETAC to appoint an arbitrator within the speciﬁed time period, the arbitrator shall be appointed by the Chairman of the CIETAC. 2. Within ﬁfteen (15) days from the date of the Respondent’s receipt of the Notice of Arbitration, the presiding arbitrator shall be jointly appointed by the parties or appointed by the Chairman of the CIETAC upon the parties’ joint authorization. 3. The parties may each recommend one to three arbitrators as candidates for the presiding arbitrator and shall submit the list of recommended candidates to the CIETAC within the time period speciﬁed in paragraph 2. Where there is only one common candidate in the lists, such candidate shall be the presiding arbitrator jointly appointed by the parties. Where there are more than one common candidate in the lists, the Chairman of the CIETAC shall choose a presiding arbitrator from among the common candidates based on the speciﬁc nature and circumstances of the case, who shall act as the presiding arbitrator jointly appointed by the parties. Where there is no common candidate in the lists, the presiding arbitrator shall be appointed by the Chairman of the CIETAC from outside of the lists of recommended candidates. 4. Where the parties have failed to jointly appoint the presiding arbitrator according to the above provisions, the presiding arbitrator shall be appointed by the Chairman of the CIETAC.

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Article 23 Sole Arbitrator Where the arbitral tribunal is composed of one arbitrator, the sole arbitrator shall be appointed pursuant to the procedure stipulated in Paragraphs 2, 3 and 4 of Article 22.

Article 24 Multi-Party 1. Where there are two or more Claimants and/or Respondents in an arbitration case, the Claimant side and/or the Respondent side each shall, through consultation, jointly appoint or jointly entrust the Chairman of the CIETAC to appoint one arbitrator from the CIETAC’s Panel of Arbitrators. 2. Where the Claimant side and/or the Respondent side fail to jointly appoint or jointly entrust the Chairman of the CIETAC to appoint one arbitrator within ﬁfteen (15) days from the date of receipt of the Notice of Arbitration, the arbitrator shall be appointed by the Chairman of the CIETAC. 3. The presiding arbitrator or the sole arbitrator shall be appointed in accordance with the procedure stipulated in Paragraphs 2, 3 and 4 of Article 22. When appointing the presiding arbitrator or the sole arbitrator pursuant to Paragraph 3 of Article 22, the Claimant side and/or the Respondent side each shall, through consultation, submit a list of their jointly agreed candidates to the CIETAC.

Article 25 Disclosure 1. An arbitrator appointed by the parties or by the Chairman of the CIETAC shall sign a Declaration and disclose to the CIETAC in writing any facts or circumstances likely to give rise to justiﬁable doubts as to his/her impartiality or independence. 2. If circumstances that need to be disclosed arise during the arbitral proceedings, the arbitrator shall promptly disclose such circumstances in writing to the CIETAC. 3. The CIETAC shall communicate the Declaration and/or the disclosure of the arbitrator to the parties.

Article 26 Challenge of Arbitrators 1. Upon receipt of the Declaration and/or written disclosure of an arbitrator communicated by the CIETAC, a party who intends to challenge the arbitrator on the grounds of the facts or circumstances disclosed by the arbitrator shall forward the challenge in writing to the CIETAC within ten (10) days from the date of such receipt. If a party fails to ﬁle a challenge within the above time limit, it shall not challenge an arbitrator later on the basis of matters disclosed by the arbitrator.

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2. A party who has justiﬁable doubts as to the impartiality or independence of an appointed arbitrator may make a request in writing to the CIETAC for that arbitrator’s withdrawal. In the request, the facts and reasons on which the request is based shall be stated with supporting evidence. 3. A party may challenge an arbitrator in writing within ﬁfteen (15) days from the date of its receipt of the Notice of Formation of the Arbitral Tribunal. Where a party becomes aware of the reasons for a challenge after the said receipt, the party may challenge the arbitrator in writing within ﬁfteen (15) days after such reasons become known, but no later than the conclusion of the last oral hearing. 4. The CIETAC shall promptly communicate the challenge to the other party, the arbitrator being challenged and the other members of the arbitral tribunal. 5. Where an arbitrator is challenged by one party and the other party agrees to the challenge, or the arbitrator being challenged withdraws from his/her ofﬁce, such arbitrator shall no longer be on the arbitral tribunal. Neither case implies that the challenge made by the party is sustainable. 6. In circumstances other than those speciﬁed in Paragraph 5, the Chairman of the CIETAC shall make a ﬁnal decision on the challenge with or without stating the reasons therefor. 7. An arbitrator who has been challenged shall continue to fulﬁll the functions of arbitrator until a decision on the challenge has been made by the Chairman of the CIETAC.

Article 27 Replacement of Arbitrator 1. In the event that an arbitrator is prevented de jure or de facto from fulﬁlling his/her functions, or he/she fails to fulﬁll his/her functions in accordance with the requirements of these Rules or within the time period speciﬁed in these Rules, the Chairman of the CIETAC shall have the power to decide whether the arbitrator shall be replaced. The arbitrator may also withdraw form his/her ofﬁce. 2. In the event that an arbitrator is unable to fulﬁll his/her functions owing to his/her demise, removal from the CIETAC’s Panel of Arbitrators, withdrawal, resignation or any other reasons, a substitute arbitrator shall be appointed within a time period speciﬁed by the CIETAC pursuant to the procedure applied to the appointment of the arbitrator being replaced. 3. After the replacement of the arbitrator, the arbitral tribunal shall decide whether the whole or a part of the previous proceedings of the case shall be repeated. 4. The Chairman of the CIETAC shall make a ﬁnal decision on whether an arbitrator should be replaced or not with or without stating the reasons therefor.

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Article 28 Majority to Continue Arbitration In the event that, after the conclusion of the last oral hearing, an arbitrator on a threemember arbitral tribunal is unable to participate in the deliberation and/or render the award owing to his/her demise or removal from the CIETAC’s Panel of Arbitrators, the other two arbitrators may request the Chairman of the CIETAC to replace the arbitrator pursuant to Article 27. After consulting with the parties and upon the approval of the Chairman of the CIETAC, the other two arbitrators may continue the arbitration and make decisions, rulings or the award. The Secretariat of the CIETAC shall notify the parties of the above circumstances.

SECTION 3 HEARING Article 29 Conduct of Hearing 1. The arbitral tribunal shall examine the case in any way that it deems appropriate unless otherwise agreed by the parties. Under any circumstance, the arbitral tribunal shall act impartially and fairly and shall afford reasonable opportunities to all parties for presentations and debates. 2. The arbitral tribunal shall hold oral hearings when examining the case. However, oral hearings may be omitted and the case shall be examined on the basis of documents only if the parties so request or agree and the arbitral tribunal also deems that oral hearings are unnecessary. 3. Unless otherwise agreed by the parties, the arbitral tribunal may adopt an inquisitorial or adversarial approach when examining the case, having regard to the circumstances of the case. 4. The arbitral tribunal may hold deliberation at any place or in any manner that it considers appropriate. 5. The arbitral tribunal may, if it considers it necessary, issue procedural directions and lists of questions, hold pre-hearing meetings and preliminary hearings, and produce terms of reference, etc., unless otherwise agreed by the parties.

Article 30 Notice of Oral Hearings 1. The date of the ﬁrst oral hearing shall be ﬁxed by the arbitral tribunal and notiﬁed to the parties by the Secretariat of the CIETAC at least twenty (20) days in advance of the oral hearing date. A party having justiﬁed reasons may request a postponement of the oral hearing. However, such request must be communicated to the arbitral tribunal at least ten (10) days in advance of the oral hearing date. The arbitral tribunal shall decide whether to postpone the oral hearing or not.

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2. A notice of oral hearing subsequent to the ﬁrst oral hearing and a notice of a postponed oral hearing shall not be subject to the twenty (20)-day time limit provided for in the foregoing paragraph.

Article 31 Place of Arbitration 1. Where the parties have agreed on the place of arbitration in writing, the parties’ agreement shall prevail. 2. Where the parties have not agreed on the place of arbitration, the place of arbitration shall be the domicile of the CIETAC or its Sub-Commission. 3. The arbitral award shall be deemed as being made at the place of arbitration.

Article 32 Place of Oral Hearing 1. Where the parties have agreed on the place of oral hearings, the case shall be heard at that agreed place except for circumstances stipulated in Paragraph 3 of Article 69 of these Rules. 2. Unless the parties agree otherwise, a case accepted by the CIETAC shall be heard in Beijing, or if the arbitral tribunal considers it necessary, at other places with the approval of the Secretary-General of the CIETAC. A case accepted by a SubCommission of the CIETAC shall be heard at the place where the Sub-Commission is located, or if the arbitral tribunal considers it necessary, at other places with the approval of the Secretary-General of the Sub-Commission.

Article 33 Conﬁdentiality 1. Hearings shall be held in camera. Where both parties request an open hearing, the arbitral tribunal shall make a decision. 2. For cases heard in camera, the parties, their representatives, witnesses, interpreters, arbitrators, experts consulted by the arbitral tribunal and appraisers appointed by the arbitral tribunal and the relevant staff-members of the Secretariat of the CIETAC shall not disclose to any outsiders any substantive or procedural matters of the case.

Article 34 Default 1. If the Claimant fails to appear at an oral hearing without showing sufﬁcient cause for such failure, or withdraws from an on-going oral hearing without the permission of the arbitral tribunal, the Claimant may be deemed to have withdrawn its Request for Arbitration. In such a case, if the Respondent has ﬁled a counterclaim, the arbitral tribunal shall proceed with the hearing of the counterclaim and make a default award. 314

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2. If the Respondent fails to appear at an oral hearing without showing sufﬁcient cause for such failure, or withdraws from an on-going oral hearing without the permission of the arbitral tribunal, the arbitral tribunal may proceed with the arbitration and make a default award. In such a case, if the Respondent has ﬁled a counterclaim, the Respondent may be deemed to have withdrawn its counterclaim.

Article 35 Record of Oral Hearing 1. During the oral hearing, the arbitral tribunal may arrange a stenographic and/or audio-visual record. The arbitral tribunal may, when it considers it necessary, take minutes stating the main points of the oral hearing and request the parties and/or their representatives, witnesses and/or other persons involved to sign and/or afﬁx their seals to the minutes. 2. The stenographic and/or audio-visual record of the oral hearing shall be available for the use and reference by the arbitral tribunal.

Article 36 Evidence 1. Each party shall have the burden of proving the facts relied on to support its claim, defense or counterclaim. 2. The arbitral tribunal may specify a time period for the parties to produce evidence and the parties shall produce evidence within the speciﬁed time period. The arbitral tribunal may refuse to admit any evidence produced beyond the period. If a party has difﬁculties to produce evidence within the speciﬁed time period, it may apply for an extension before the expiration of the period. The arbitral tribunal shall decide whether or not to extend the time period. 3. If a party having the burden of proof fails to produce evidence within the speciﬁed time period, or the produced evidence is not sufﬁcient to support its claim or counterclaim, it shall bear the consequences thereof.

Article 37 Investigation by the Arbitral Tribunal 1. The arbitral tribunal may, on its own initiative, undertake investigations and collect evidence as it considers necessary. 2. When investigating and collecting evidence by itself, the arbitral tribunal shall promptly notify the parties to be present at such investigation if it considers it necessary. In the event that one or both parties fail to be present, the investigation and collection shall proceed without being affected. 3. The arbitral tribunal shall, through the Secretariat of the CIETAC, transmit the evidence collected by itself to the parties and afford them an opportunity to comment. CIETAC ARBITRATION RULES

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Article 38 Expert’s Report and Appraiser’s Report 1. The arbitral tribunal may consult or appoint experts and appraisers for clariﬁcation on speciﬁc issues of a case. Such an expert or appraiser may either be a Chinese or foreign organization or citizen. 2. The arbitral tribunal has the power to request the parties to deliver or produce to the expert or appraiser any relevant materials, documents, or property and goods for checking, inspection and/or appraisal. The parties shall be obliged to comply. 3. Copies of the expert’s report and the appraiser’s report shall be communicated to the parties, who shall be given an opportunity to comment on the report. At the request of either party and with the approval of the arbitral tribunal, the expert and appraiser may be heard at an oral hearing where, if considered necessary and appropriate by the arbitral tribunal, they may give explanations on their reports.

Article 39 Examination of Evidence 1. All evidence submitted by a party shall be ﬁled with the Secretariat of the CIETAC for transmission to the other party. 2. Where a case is examined by way of an oral hearing, the evidence shall be exhibited at the hearing and examined by the parties. 3. In the event that evidence is submitted after the hearing and the arbitral tribunal decides to admit the evidence without holding further hearings, the arbitral tribunal may require the parties to submit their opinions thereon in writing within a speciﬁed time period.

Article 40 Combination of Conciliation with Arbitration 1. Where the parties have reached a settlement agreement by themselves through negotiation or conciliation without involving the CIETAC, either party may, based on an arbitration agreement concluded between them that provides for arbitration by the CIETAC and the settlement agreement, request the CIETAC to constitute an arbitral tribunal to render an arbitral award in accordance with the terms of the settlement agreement. Unless the parties agree otherwise, the Chairman of the CIETAC shall appoint a sole arbitrator to form such arbitral tribunal, which shall examine the case in the procedure it considers appropriate and render an award in due course. The speciﬁc procedure and the time limit for rendering the award shall not be subject to other provisions of these Rules. 2. Where both parties have the desire for conciliation or one party so desires and the other party agrees when approached by the arbitral tribunal, the arbitral tribunal may conciliate the case during the course of the arbitration proceedings.

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3. The arbitral tribunal may conciliate the case in the manner it considers appropriate. 4. The arbitral tribunal shall terminate the conciliation and continue the arbitration proceedings if one of the parties requests a termination of the conciliation or if the arbitral tribunal believes that further efforts to conciliate will be futile. 5. A settlement agreement reached between the parties during the course of conciliation by the arbitral tribunal but without the involvement of the arbitral tribunal shall be deemed as one reached through the conciliation by the arbitral tribunal. 6. Where settlement is reached through conciliation by the arbitral tribunal, the parties shall sign a written settlement agreement. Unless otherwise agreed by the parties, the arbitral tribunal will close the case and render an arbitral award in accordance with the terms of the settlement agreement. 7. Where conciliation fails, the arbitral tribunal shall proceed with the arbitration and render an arbitral award. 8. Where conciliation fails, any opinion, view or statement and any proposal or proposition expressing acceptance or opposition by either party or by the arbitral tribunal in the process of conciliation shall not be invoked as grounds for any claim, defense or counterclaim in the subsequent arbitration proceedings, judicial proceedings or any other proceedings.

Article 41 Withdrawal and Dismissal 1. A party may ﬁle a request with the CIETAC to withdraw its claim or counterclaim in its entirety. In the event that the Claimant withdraws its claim in its entirety, the arbitral tribunal shall proceed with its examination of the counterclaim and render an arbitral award thereon. In the event that the Respondent withdraws its counterclaim in its entirety, the arbitral tribunal shall proceed with the examination of the claim and render an arbitral award thereon. 2. Where a case is to be dismissed before the formation of the arbitral tribunal, the decision shall be made by the Secretary-General of the CIETAC. Where the case is to be dismissed after the formation of the arbitral tribunal, the decision shall be made by the arbitral tribunal. 3. Where a party ﬁles with the CIETAC a request for arbitration for a claim which has been withdrawn, the CIETAC shall decide whether or not to accept the request anew.

Chapter III Arbitral Award Article 42 Time Limits 1. The arbitral tribunal shall render an arbitral award within six (6) months as from the date on which the arbitral tribunal is formed.

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2. Upon the request of the arbitral tribunal, the Chairman of the CIETAC may extend said time period if he/she considers it truly necessary and the reasons for the extension truly justiﬁed.

Article 43 Making Award 1. The arbitral tribunal shall independently and impartially make its arbitral award on the basis of the facts, in accordance with the law and the terms of the contracts, with reference to international practices and in compliance with the principle of fairness and reasonableness. 2. The arbitral tribunal shall state in the award the claims, the facts of the dispute, the reasons on which the award is based, the result of the award, the allocation of the arbitration costs and the date on which and the place at which the award is made. The facts of the dispute and the reasons on which the award is based may not be stated in the award if the parties have agreed so, or if the award is made in accordance with the terms of a settlement agreement between the parties. The arbitral tribunal has the power to determine in the arbitral award the speciﬁc time period for the parties to execute the award and the liabilities to be borne by a party failing to execute the award within the speciﬁed time. 3. The CIETAC’s stamp shall be afﬁxed to the award. 4. Where a case is examined by an arbitral tribunal composed of three arbitrators, the award shall be rendered by all three arbitrators or a majority of the arbitrators. A written dissenting opinion shall be docketed into the ﬁle and may be attached to the award, but it shall not form a part of the award. 5. Where the arbitral tribunal cannot reach a majority opinion, the award shall be rendered in accordance with the presiding arbitrator’s opinion. The written opinion of other arbitrators shall be docketed into the ﬁle and may be attached to the award, but it shall not form a part of the award. 6. Unless the award is made in accordance with the opinion of the presiding arbitrator or the sole arbitrator, the arbitral award shall be signed by a majority of arbitrators. An arbitrator who has a dissenting opinion may or may not sign his/her name on the award. 7. The date on which the award is made shall be the date on which the award comes into legal effect. 8. The arbitral award is ﬁnal and binding upon both parties. Neither party may bring a suit before a law court or make a request to any other organization for revising the award.

Article 44 Interlocutory Award and Partial Award An interlocutory arbitral award or partial award may be made by the arbitral tribunal on any issue of the case at any time during the arbitration before the ﬁnal award is 318

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made if considered necessary by the arbitral tribunal, or if the parties request and the arbitral tribunal accepts. Either party’s failure to perform the interlocutory award will not affect the continuation of the arbitration proceedings, nor will it prevent the arbitral tribunal from making a ﬁnal award.

Article 45 Scrutiny of Draft Award The arbitral tribunal shall submit its draft award to the CIETAC for scrutiny before signing the award. The CIETAC may remind the arbitral tribunal of issues in the award on condition that the arbitral tribunal’s independence in rendering the award is not affected.

Article 46 Fees 1. The arbitral tribunal has the power to determine in the arbitral award the arbitration fee and other expenses to be paid by the parties to the CIETAC. 2. The arbitral tribunal has the power to decide in the award, according to the speciﬁc circumstances of the case, that the losing party shall compensate the winning party for the expenses reasonably incurred by it in pursuing its case. In deciding whether the winning party’s expenses incurred in pursuing its case are reasonable, the arbitral tribunal shall consider such factors as the outcome and complexity of the case, the workload of the winning party and/or its representative(s), and the amount in dispute, etc.

Article 47 Correction of Award Within thirty (30) days from its receipt of the arbitral award, either party may request in writing for a correction of any clerical, typographical, or calculation errors or any errors of a similar nature contained in the award; if such an error does exist in the award, the arbitral tribunal shall make a correction in writing within thirty (30) days from the date of receipt of the written request for the correction. The arbitral tribunal may likewise correct any such errors in writing on its own initiative within a reasonable time after the award is issued. Such correction in writing shall form a part of the arbitral award.

Article 48 Additional Award Within thirty (30) days from the date on which the arbitral award is received, either party may request the arbitral tribunal in writing for an additional award on any claim or counterclaim which was advanced in the arbitration proceedings but was omitted from the award. If such omission does exist, the arbitral tribunal shall make an additional award within thirty (30) days from the date of receipt of the written request. CIETAC ARBITRATION RULES

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The arbitral tribunal may also make an additional award on its own initiative within a reasonable period of time after the arbitral award is issued. Such additional award shall form a part of the arbitral award previously rendered.

Article 49 Execution of Award 1. The parties must automatically execute the arbitral award within the time period speciﬁed in the award. If no time limit is speciﬁed in the award, the parties shall execute the arbitral award immediately. 2. Where one party fails to execute the award, the other party may apply to a competent Chinese court for enforcement of the award pursuant to Chinese laws, or apply to a competent court for enforcement of the award according to the 1958 United Nations Convention on Recognition and Enforcement of Foreign Arbitral Awards or other international treaties that China has concluded or acceded to.

Chapter IV Summary Procedure Article 50 Application 1. Unless otherwise agreed by the parties, this Summary Procedure shall apply to any case where the amount in dispute does not exceed RMB 500, 000 yuan, or to any case where the amount in dispute exceeds RMB 500, 000 yuan, yet one party applies for arbitration under this Summary Procedure and the other party agrees in writing. 2. Where no monetary claim is speciﬁed or the amount in dispute is not clear, the CIETAC shall determine whether or not to apply the Summary Procedure after a full consideration of such factors as the complexity of the case and the interests involved, etc.

Article 51 Notice of Arbitration Where a Request for Arbitration is submitted to the CIETAC and is found to be acceptable for arbitration under the Summary Procedure, the Secretariat of the CIETAC or its Sub-Commission shall send a Notice of Arbitration to the parties.

Article 52 Formation of Arbitral Tribunal An arbitral tribunal of a sole arbitrator shall be formed in accordance with Article 23 of these Rules to hear a case under the Summary Procedure.

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Article 53 Statement of Defense and Counterclaim 1. Within twenty (20) days from the date of receipt of the Notice of Arbitration, the Respondent shall submit its Statement of Defense and relevant evidence to the Secretariat of the CIETAC; counterclaims, if any, shall also be ﬁled with supporting evidence within the said time period. The arbitral tribunal may extend this time period if it considers it justiﬁed. 2. Within twenty (20) days from the date of receipt of the counterclaim and its attachments, the Claimant shall ﬁle its Statement of Defense to the Respondent’s counterclaim.

Article 54 Conduct of Hearing The arbitral tribunal may examine the case in the manner it considers appropriate. The arbitral tribunal may in its full discretion decide to examine the case only on the basis of the written materials and evidence submitted by the parties or to hold oral hearings.

Article 55 Oral Hearing 1. For a case examined by way of an oral hearing, the Secretariat of the CIETAC shall, after the arbitral tribunal has ﬁxed a date for the oral hearing, notify the parties of the date at least ﬁfteen (15) days in advance of the oral hearing date. A party having justiﬁed reasons may request the arbitral tribunal for a postponement of the oral hearing. However, such request must be communicated to the arbitral tribunal at least seven (7) days in advance of the oral hearing date. The arbitral tribunal shall decide whether to postpone the oral hearing or not. 2. Where the arbitral tribunal decides to hear the case orally, only one oral hearing shall be held unless it is otherwise truly necessary. 3. A notice of oral hearing subsequent to the ﬁrst oral hearing and a notice of a postponed oral hearing shall not be subject to the ﬁfteen (15)-day time limit provided for in the foregoing Paragraph 1.

Article 56 Time Limits for Rendering Award 1. The arbitral tribunal shall render an arbitral award within three (3) months from the date on which the arbitral tribunal is formed. 2. Upon the request of the arbitral tribunal, the Chairman of the CIETAC may extend the time period if he/she considers it truly necessary and the reasons for the extension truly justiﬁed.

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Article 57 Change of Procedure The application of the Summary Procedure shall not be affected by any amendment to the claim or by the ﬁling of a counterclaim. Where the amount in dispute of the amended claim or that of the counterclaim exceeds RMB 500,000 Yuan, the procedure of the case shall be changed from the Summary Procedure to the general procedure unless the parties have agreed to the continuous application of the Summary Procedure.

Article 58 Context Reference As to matters not covered in this Chapter, the relevant provisions in the other Chapters of these Rules shall apply.

Chapter V Special Provisions for Domestic Arbitration Article 59 Application 1. The provisions of this Chapter shall apply to domestic arbitration cases accepted by the CIEATC. 2. The provisions of the Summary Procedure of Chapter IV shall apply if a domestic arbitration case falls within the scope of Article 50 of these Rules.

Article 60 Acceptance 1. Where a Request for Arbitration is found to meet the formality requirements speciﬁed in Article 10 of these Rules, the CIETAC shall accept the Request and notify the parties accordingly within ﬁve (5) days from its receipt of the Request or immediately upon its receipt of the Request. Where a Request for Arbitration is found not in conformity with the formality requirements, the CIETAC shall notify the party in writing of its refusal of the Request with reasons stated. 2. Upon receipt of a Request for Arbitration, the CIETAC may request the party to make corrections within a speciﬁed time period if it ﬁnds the Request is not in conformity with the provisions of Article 10 of these Rules.

Article 61 Formation of Arbitral Tribunal The arbitral tribunal shall be formed in accordance with the provisions of Articles 21, 22, 23 and 24 of these Rules.

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Article 62 Statement of Defense and Counterclaim 1. Within twenty (20) days from the date of receipt of the Notice of Arbitration, the Respondent shall submit its Statement of Defense and relevant evidence to the CIETAC; counterclaims, if any, shall also be ﬁled with supporting evidence within the said time period. The arbitral tribunal may extend this time period if it considers it justiﬁed. 2. Within twenty (20) days from the date of receipt of the counterclaim and its attachments, the Claimant shall ﬁle its Statement of Defense to the Respondent’s counterclaim.

Article 63 Notice of Oral Hearing 1. For a case examined by way of an oral hearing, the Secretariat of the CIETAC or its Sub-Commission shall notify the parties of the date of oral hearing at least ﬁfteen (15) days in advance of the oral hearing date. The arbitral tribunal may hold the oral hearing ahead of the schedule with consent from both parties. A party having justiﬁed reasons may request the arbitral tribunal for a postponement of the oral hearing. However, such request must be communicated to the arbitral tribunal seven (7) days in advance of the oral hearing date. The arbitral tribunal shall decide whether to postpone the oral hearing or not. 2. A notice of oral hearing subsequent to the ﬁrst oral hearing and a notice of a postponed oral hearing shall not be subject to the ﬁfteen (15)-day time limit provided in the foregoing Paragraph 1.

Article 64 Record of Oral Hearing 1. The arbitral tribunal shall make a brief written record of the oral hearing. Any party or participant in the arbitration may apply for a correction of the record if any omission or mistake is found in the record regarding its own statement. If the application is refused by the arbitral tribunal, it shall nevertheless be recorded into the ﬁle. 2. The written record shall be signed or sealed by the arbitrator(s), the recorder, the parties, and other participants in the arbitration, if any.

Article 65 Time Limits for Rendering Award 1. The arbitral tribunal shall render an award within four (4) months from the date on which the arbitral tribunal is formed. 2. Upon the request of the arbitral tribunal, the Chairman of the CIETAC may extend this time period if he/she considers it truly necessary and the reasons truly justiﬁed. CIETAC ARBITRATION RULES

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Article 66 Context Reference As to matters not covered in this Chapter, the relevant provisions in the other Chapters of these Rules shall apply.

Chapter IV Supplementary Provisions Article 67 Language 1. Where the parties have agreed on the arbitration language, their agreement shall prevail. Absent such agreement, the Chinese language shall be the ofﬁcial language to be used in the arbitration proceedings. 2. At an oral hearing, if a party or its representative(s) or witness requires language interpretation, the Secretariat of the CIETAC or its Sub-Commission may provide an interpreter, or the party may bring its own interpreter. 3. The arbitral tribunal and/or the Secretariat of the CIETAC or its Sub-Commission may, if it considers necessary, request the parties to submit a corresponding version of the documents and evidence by the parties in Chinese or in other languages.

Article 68 Service of Documents 1. All documents, notices and written materials in relation to the arbitration may be sent to the parties and/or their representatives in person, or by registered mail or express mail, facsimile, telex, cable, or by any other means considered proper by the Secretariat of the CIETAC or its Sub-Commission. 2. Any written correspondence to a party and/or its representative(s) shall be deemed to have been properly served on the party if delivered to the addressee or delivered at his place of business, registration, domicile, habitual residence or mailing address, or where, after reasonable inquiries by the other party, none of the aforesaid addresses can be found, the written correspondence is sent by the Secretariat of the CIETAC or its Sub-Commission to the addressee’s last known place of business, registered address, domicile, habitual residence or mailing address by registered mail or by any other means that provides a record of the attempt of delivery.

Article 69 Arbitration Fees and Actual Expenses 1. Apart from charging arbitration fees to the parties according to the Fee Schedule of the CIETAC, the CIETAC may collect from the parties other extra, reasonable and actual expenses including arbitrators’ special remuneration and their travel and accommodation expenses incurred in dealing with the case, as well as the costs and expenses of experts, appraisers and interpreters appointed by the arbitral tribunal, etc. 324

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2. Where a party has appointed an arbitrator who will incur extra expenses, such as travel and accommodation expenses, and fails to pay in advance as a deposit within a time period speciﬁed by the CIETAC, the party shall be deemed not to have appointed the arbitrator. In such event, the Chairman of the CIETAC may appoint an arbitrator for the party pursuant to Article 22 or Article 23 of these Rules. 3. Where the parties have agreed to hold an oral hearing at a place other than the CIETAC’s domicile, extra expenses including travel and accommodation expenses incurred thereby shall be paid in advance as a deposit by the parties. In the event that the parties fail to do so, the oral hearing shall be held at the domicile of the CIETAC.

Article 70 Interpretation 1. The headings of the articles in these Rules shall not serve as interpretations of the contents of the provisions contained herein. 2. These Rules shall be interpreted by the CIETAC.

Article 71 Coming into Force These Rules shall be effective as from May 1st, 2005. For cases accepted by the CIETAC or by its Sub-Commissions before these Rules become effective, the Arbitration Rules effective at the time of acceptance shall apply, or these Rules shall apply where both parties agree.

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Comi Rules

COMI RULES OF ARBITRATION University of Helsinki Conﬂict Management Institute INTRODUCTION COMI arbitration rules are designed for disputes, which do not require extensive presentation of evidence and where ﬁnancial interests are not substantial. When evaluating the applicability of small claims arbitration to an actual dispute, deciding the exact procedure and interpreting these rules, the following objectives should be taken into consideration: (i) timeliness and fairness of the procedure; (ii) enforceability of the arbitration award; (iii) minimisation of costs.

COMI is governed by the board. The members of the board shall receive no compensation for their work. The board shall appoint a responsible arbitrator and a secretary for each arbitration assignment.

ARTICLE 1. INSTITUTION OF PROCEEDINGS 1.1 Two or more parties may submit their judicial dispute to be settled in arbitration proceedings in accordance with these rules. A sole party may submit a dispute to be settled in these proceedings, if the parties have so agreed in writing (for example in correspondence) or if other parties notify in writing that they agree on the proceedings. The board has the right to decide that the dispute will not be heard in these proceedings, if it considers that these proceedings are not suitable for the dispute.

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1.2 The proceedings shall become pending, when a party or the parties have transmitted a written request to COMI in a way described above for commencing the proceedings, and when the processing charge, referred to in article 1.3, has been paid. 1.3 The processing charge is 5 000 € including a 1 500 € administration fee and a 3 500 € fee of the arbitrator. With the consent of the parties the board may decide to raise the fee of the arbitrator before the commencement of the proceedings due to, inter alia, the workload estimated to be unusually high (over 60 hours), an exceptionally high interest relating to the dispute or both of the aforementioned. The fee of the arbitrator may be increased by 2 000 € maximum. 1.4 The written request on commencing the proceedings shall include: (i) The names of the parties and of possible representatives, powers of attorneys and contact information; (ii) A preliminary description of the dispute; (iii) A preliminary notice of the claims of the claimant; (iv) The copies of the documents upon which the claims are based; and (v) A copy of the arbitration agreement.

ARTICLE 2. APPOINTMENT OF THE ARBITRATOR AND COMMENCEMENT OF THE PROCEEDINGS 2.1 After receiving the written request, COMI appoints an arbitrator, a secretary and a supervisor without delay. The appointment shall take place no later than within 14 days after the receipt of the written request. COMI shall then inform the parties and their representatives in such manner, as it considers appropriate. The secretary is responsible for all the practicalities such as the correspondence and the arrangements for the oral hearings as well as inquiries and other tasks assigned to him or her by the arbitrator. The secretary may not participate in the decision-making. The secretary shall principally be a lawyer. Nevertheless, the board may decide to appoint a law student in advanced studies to act as a secretary. The supervisor shall revise the draft award of the arbitrator before it be given but he or she does not have any decision-making power. The supervisor shall decide the amount of particular compensation of expenses, which may be charged by an exception. The supervisor shall be a lawyer who has achieved a doctoral degree. 2.2 An arbitrator shall be an impartial and independent lawyer who has full legal capacity. 2.3 Before the appointment COMI requests a prospective arbitrator to disclose whether he or she is, in his or her discretion, disqualiﬁed as described in the Act on Arbitration. The prospective arbitrator shall also disclose any circumstances, which might give rise to justiﬁable doubt as to the arbitrator’s impartiality and independence.

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A party shall provide his or her comments on the appointment and disqualiﬁcation of the arbitrator within 7 days after being notiﬁed of the appointment of the arbitrator and the aforementioned disclosed circumstances. At any stage of the arbitration, the arbitrator is obliged to disclose to the parties all the circumstances, which are likely to compromise his or her impartiality or independence or to raise justiﬁable doubts as to them. A party may, at any time during the proceedings, challenge the arbitrator on the grounds of circumstances he or she becomes aware of. The challenge shall be made within 7 days after becoming aware of the grounds on which the challenge is based. If the challenge is not made within 7 days as described above, the party shall lose his or her right to make a claim as to the disqualiﬁcation of the arbitrator. Within 7 days of the challenge made, the board shall give a decision on the challenge after having heard the arbitrator and appoint a new arbitrator if necessary. 2.4 The proceedings shall take place in Helsinki but oral hearings, for example, may be arranged elsewhere if so agreed upon. The language of the proceedings shall be Finnish if all the parties are domiciled in Finland. The proceedings may be conducted in Swedish if the parties so collectively request. Otherwise the language of the proceedings shall be English. The parties may, with the consent of the arbitrator, agree on any other language to be used in the proceedings. 2.5 Once the arbitrator has been appointed, he or she shall give the parties written instructions on the stages and the timetable of the proceedings. The arbitrator may, if necessary, amend or supplement his or her instructions. In addition to the time limits for the statement of claim and the statement of defence the instructions may include orders on the following issues: (i) The applicable procedural and material provisions; (ii) The oral hearings and their locations, technical arrangements and timetables; (iii) The presentation of evidence; (iv) The closing date, after which no new claims may be presented or new facts or evidence referred to (preclusion).

2.6 Unless all the parties have received the application (written request) and the appendices, the arbitrator or the secretary shall provide them with the said documents.

ARTICLE 3. STATEMENT OF CLAIM AND STATEMENT OF DEFENCE 3.1 As soon as the arbitrator is appointed, he or she shall set the time limit, by which the claimant shall communicate the statement of claim and the respondent the statement of defence to the arbitrator. This time limit shall generally be 21 days from the appointment of the arbitrator if he or she does not decide otherwise. A potential challenge of the arbitrator does not affect the time limit.

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3.2 The statement of claim shall contain: (i) The comprehensive claim of the claimant; (ii) The facts supporting the claim; (iii) The evidence upon which the claimant relies and the notiﬁcation of what shall be proved by the evidence

3.3 The statement of defence shall disclose: (i) To what extent the respondent will contradict and to what extent admit the claim in the written request; (ii) On which grounds the claim is objected; (iii) The counter claim of the respondent, which shall contain the claims, their grounds and the evidence in the same way and to the same extent as in an independent claim; (iv) The evidence upon which the claimant relies and the notiﬁcation of what shall be proved by the evidence.

3.4 The claim and the defence shall be submitted to the secretary who shall immediately forward them to the arbitrator and the parties. The parties may, in their discretion, respond to the claim or to the defence within 14 days after the secretary has forwarded the claim and the defence.

ARTICLE 4. HEARING 4.1 After the statements referred to in article 3.4 have been submitted to the parties, new claims, grounds and evidence may be presented only with the consent of the arbitrator and provided that there are important reasons of procedural economy or other important reasons. The arbitrator may, after receiving the statements referred to above, request the parties to further clarify or supplement their statements. 4.2 An oral hearing is conducted only if the arbitrator considers it necessary in order to take the evidence or to establish the judicial facts or at the request of at least one of the parties. 4.3 The oral hearing will be organised in 4 to 6 weeks from the time limit referred to in article 3.4, at a date decided by the arbitrator. 4.4 If necessary, the arbitrator may reserve the parties an opportunity to present written closing arguments within 7 days after the end of the oral hearing and an opportunity to respond to the closing arguments of other parties within 7 days after the time limit set for the closing arguments. 4.5 The proceedings shall be declared closed when the closing arguments have been made and responded to, or if an oral hearing has not been conducted, after the written statements referred to in article 3.4 have been submitted. The arbitrator may re-open the proceedings he or she declared to be closed owing to important reasons of procedural economy.

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4.6 The parties have burden of claim and burden of proof as to the facts of the dispute and the relevant norms. 4.7 The arbitrator may on his or her own motion examine both the questions of fact and the questions of norms, if the information given by the parties has not been sufﬁcient or completely satisfactory. Before the award is given, each party shall be reserved an opportunity to comment on the issues introduced by the arbitrator. 4.8 Overdue statements are not taken into account in the decision-making unless the arbitrator decides otherwise owing to an important reason. 4.9 Excepting the oral hearing, all the contacts, communications and material between the parties and the arbitrator shall be submitted to the secretary, who is responsible for informing other parties. Written material shall be submitted to all parties simultaneously. 4.10 The arbitrator shall determine the details of the proceedings and the deviations from the default procedure of these rules. The arbitrator may on his or her own motion take into account, speciﬁcally as to presenting evidence and to disqualiﬁcation, the International Bar Association Guidelines on Conﬂict of Interest in Commercial Arbitration 2004 and International Bar Association Rules of the Taking of Evidence in Commercial Arbitration 1999 or the arbitration rules of the United Nations Commission on International Trade Law (UNCITRAL Arbitration Rules).

ARTICLE 5. WITNESSES, EXPERTS AND OTHER EVIDENCE 5.1 Witness and expert statements shall be submitted in writing unless an oral hearing is conducted. 5.2 In an oral hearing each party shall give a short statement after which the evidence is presented. The oral hearing shall conclude with the closing arguments. 5.3 The arbitrator has the authority to restrict the presenting of the evidence, if the evidence is irrelevant, if the evidence could be obtained more inexpensively or with less effort otherwise or if the presenting of the evidence would be against the arbitrator’s procedural instruction. The arbitrator may ask questions and order the parties to provide additional evidence. Witnesses may be heard by telephone or using other technical means. 5.4 If necessary, a witness may be heard outside the hearing in the court of ﬁrst instance in accordance with the law. 5.5 Failure to answer the arbitrators’ questions or responding to his or her requests of information may be considered as a detriment to the defaulter in evaluating the evidence. The proceedings may be continued and the dispute settled despite the passivity or the absence of a party. Failure to comply with the procedural instruction or timetables shall be taken into account in deciding on the allocation of the liability for the expenses between parties.

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5.6 The arbitrator may, with the consent and expense of the parties, order an expert to give a statement on a speciﬁc issue, which is signiﬁcant as to the decision-making and requires special expertise.

ARTICLE 6. THE AWARD 6.1 The award or the ruling shall be given within 4 weeks after the closure of the proceedings. The board or the supervisor appointed by the board shall revise the draft award before it be given. The award shall be reasoned only at the parties’ request presented in the written statements referred to in article 3.4 or if the arbitrator considers it to be otherwise justiﬁable and reasonable. If necessary, the arbitrator may supplement or clarify the award. 6.2 At the request of the parties, the arbitrator may record the settlement between parties in the form of an arbitral award. 6.3 At the request of the parties, the arbitrator may also give a partial award.

ARTICLE 7. COSTS 7.1 The parties are collectively liable for the processing charge, which includes the administration fee and the fee of the arbitrator, provided to initiate the proceedings. Compensation for expenses is generally not charged. By the decision of the board or the supervisor, the parties may be obliged to compensate collectively the unusually high expenses arising in the course of the proceedings. Certain expenses, such as travel expenses and unusually high costs for the arrangements of the oral hearing shall be compensated. The processing charge shall be conﬁrmed in the arbitral award. It shall be charged even if the dispute is settled in the course of the proceedings. 7.2 The arbitrator shall order the unsuccessful party to bear the processing charge. The fee may be apportioned between parties owing to a particular reason such as ambiguity of the issue. 7.3 The parties shall bear their own legal expenses unless the arbitrator orders, owing to a particular reason, one party to bear the expenses of the other party entirely or in part.

ARTICLE 8. OTHER PROVISIONS 8.1 COMI, the supervisor, the arbitrator or the secretary are not liable towards the parties for the damage or loss resulting from the proceedings referred to in these rules unless the damage or loss is caused deliberately or by gross negligence. 8.2 The party shall lose his or her right to claim that the procedural error has taken place unless he or she makes such a claim without undue delay.

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ARTICLE 9. VALIDITY OF THE RULES 9.1 These rules are in force until the board approves new rules and declares the date of their entry into force. If the rules are amended during the proceedings, it shall be conducted according to the rules that were in force when the proceedings were initiated.

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ARBITRATION INSTITUTE

Finland RULES OF THE ARBITRATION INSTITUTE OF THE CENTRAL CHAMBER OF COMMERCE OF FINLAND ARBITRATION RULES The Arbitration Institute of the Central Chamber of Commerce of Finland Adopted by the Central Chamber of Commerce of Finland on 16 December 1992 and in force as of 1 January 1993. RECOMMENDED ARBITRATION CLAUSE: Any dispute, controversy or claim arising out of or relating to this contract, or the breach, termination or validity thereof shall be ﬁnally settled by arbitration in accordance with the Arbitration Rules of the Finnish Central Chamber of Commerce. The Arbitration Institute of the Central Chamber of Commerce of Finland Aleksanterinkatu 17 P.O. Box 1000 FI-00101 Helsinki Finland tel +358 9 4242 6200 fax+358 9 4242 6257 www.arbitration.ﬁ

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ARBITRATION RULES The Arbitration Institute of the Central Chamber of Commerce of Finland TABLE OF CONTENTS I DUTIES AND COMPOSITION OF THE ARBITRATION INSTITUTE § 1 Duties of the Institute § 2 Composition of the Board of the Institute § 3 Working Committee of the Board § 4 Secretariat of the Institute § 5 Quorum and Voting Procedure II COMPOSITION OF AN ARBITRAL TRIBUNAL § 6 Number of Arbitrators and the Appointment Procedure § 7 Replacement of an Arbitrator § 8 Qualiﬁcations of an Arbitrator § 9 Challenge of an Arbitrator § 10 Discharge of an Arbitrator III COMMENCEMENT OF THE ARBITRATION § 11 Request for Arbitration § 12 Dismissal of a Claim § 13 Commencement of the Arbitral Proceedings § 14 Hearing of the Respondent § 15 Respondent’s Answer § 16 Respondent’s Claims § 17 Supplementing the Claim or the Answer § 18 Security for Costs § 19 Appointment of the Arbitral Tribunal IV ARBITRAL PROCEEDINGS § 20 Procedure § 21 Language of Arbitration § 22 Place of Arbitration § 23 Claim § 24 Defence § 25 Alteration and Amendment of Claim § 26 Oral Hearing § 27 Production of Evidence § 28 Use of an Expert § 29 Failure of a Party to Appear

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§ 30 Objecting to Procedural Deviations § 30 a Interim measures § 31 Termination of Arbitration V ARBITRAL AWARD § 32 Rules Applicable to the Substance of the Dispute § 33 Voting § 34 Settlement § 35 Partial Award § 36 Interim Award § 37 Form and Place of Rendering the Award § 38 Rendering the Award § 39 Correction of the Award § 40 Additional Award VI COSTS OF ARBITRATION AND OTHER PROVISIONS § 41 Arbitrators’ Fees and Other Costs of Arbitration § 42 Charges Due to the Central Chamber of Commerce § 43 Deposition of Documents and Secrecy § 43 a Exclusion of Liability VII ENTRY INTO FORCE AND TRANSITION

I DUTIES AND COMPOSITION OF THE ARBITRATION INSTITUTE § 1 Duties of the Institute The Arbitration Institute of the Central Chamber of Commerce of Finland is an impartial body the purpose of which is: 1) to provide for the settlement by arbitration of business disputes of an international or domestic character in accordance with these Rules in cases where their application is provided for in an arbitration clause or agreement, articles of association or otherwise; 2) to provide for the settlement by arbitration of business disputes of an international or domestic character in cases where duties related to the arbitration, such as the appointment of arbitrators, are provided for in an arbitration clause or agreement, articles of association or otherwise1; 3) to act as the Arbitration Institute of a Chamber of Commerce in Finland when the rules of the Chamber of Commerce in question thus provide; 4) to provide information concerning arbitration matters; and 1

Pursuant to this subparagraph, the Institute can act as the appointing authority pursuant to, among others, the UNCITRAL Arbitration Rules.

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5) to appoint impartial persons to conciliate disputes arisen in the conduct of business when the parties have so agreed. (New subsection 27.4.2005)

The provisions of Chapter III of these Rules must be complied with, where applicable, when arbitrators are to be appointed pursuant to subparagraph 2) hereto and when appointing conciliators. (Amended 27.4.2005)

§ 2 Composition of the Board of the Institute The Board shall be composed of no less than 7 and no more than 9 members. The Central Chamber of Commerce shall elect the members for a period of three years and shall appoint one member to be the Chairman of the Board and another member to be the Vice-Chairman of the Board. The members shall be persons of good repute who are familiar with the business community. The Chairman, the Vice-Chairman and at least two other members shall be lawyers two of whom shall be qualiﬁed to serve as a judge. In arbitral proceedings governed by these Rules, a member of the Board may not act as an arbitrator or be appointed as arbitrator by the Board. However, a member of the Board may act and be appointed as a sole arbitrator or chairman of an arbitral tribunal where so requested by the parties or by the arbitrators appointed by the parties. (Amended 29.11.2000)

§ 3 Working Committee of the Board The Board may appoint a Working Committee and a Chairman of such committee.

§ 4 Secretariat of the Institute The Central Chamber of Commerce shall appoint the Secretary of the Institute in charge of the Secretariat of the Institute. The Secretary shall be a lawyer who is sufﬁciently experienced and versed in languages.

§ 5 Quorum and Voting Procedure Three members in addition to either the Chairman or the Vice-Chairman shall form a quorum of the Board. In the event both the Chairman and the Vice-Chairman of the Board are unable to attend or to act in a case, the Board will have a quorum when at least four members of the Board are present. These members shall appoint a member who is a lawyer to be the Chairman of the meeting. The Board will make its decisions on a simple majority. In the case of a tie-vote, the Chairman shall cast the deciding vote. 338

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II COMPOSITION OF AN ARBITRAL TRIBUNAL § 6 Number of Arbitrators and the Appointment Procedure If the parties have not agreed on the number of arbitrators, there shall be three arbitrators, unless the Institute considers it to be appropriate to appoint a sole arbitrator taking into account the nature of the dispute, the amount in dispute or other circumstances. If a sole arbitrator is to be appointed, the appointment shall be made by the Institute. In other cases, each party shall appoint an equal number of arbitrators and the Institute shall appoint the Chairman of the arbitral tribunal unless the parties have agreed otherwise. If a party does not comply with his duty of appointment, the Institute may require him to do so within a ﬁxed period of time of no less than 30 days. If a party fails to notify the Institute of the appointment of the arbitrator within such time limit, then the Institute shall make the appointment. If there are more than two parties involved in the arbitration, the Institute, notwithstanding the provisions of subsection 1, may appoint all arbitrators. (New subsection 29.11.2000)

§ 7 Replacement of an Arbitrator In the event of death of a party-appointed arbitrator or an arbitrator appointed by the Institute, a substitute arbitrator shall be appointed by such party or by the Institute, respectively. In the event of the resignation or discharge of an arbitrator, the Institute shall appoint a substitute arbitrator to replace him. A party is, however, once entitled to appoint a substitute arbitrator to replace a resigned or discharged arbitrator who was appointed by such party.

§ 8 Qualiﬁcations of an Arbitrator An arbitrator appointed by the Institute must be independent and impartial and possess full legal capacity and sufﬁcient knowledge in the ﬁeld at issue in the arbitration. Only a lawyer is qualiﬁed to be appointed as the Chairman of the arbitral tribunal or as the sole arbitrator, unless the Institute decides otherwise due to special reasons.

§ 9 Challenge of an Arbitrator A prospective arbitrator shall immediately disclose to the party approaching him in connection with his possible appointment, unless he refuses to accept the appointment, any circumstances likely to give rise to justiﬁable doubts as to his impartiality or independence. FCCC RULES

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An arbitrator is obliged to disclose to the parties, until the end of the arbitral proceedings all such circumstances referred to above unless they have already been informed of these circumstances. If a party wishes to challenge an arbitrator, the challenge shall be made to the Institute in writing. The challenge shall state the grounds therefor and must be made within 30 days from the date these grounds became known to the party making the challenge, failing which such party shall be deemed to have waived his right to make such a challenge.

§ 10 Discharge of an Arbitrator At the request of a party, the Institute shall discharge an arbitrator found to be unqualiﬁed to his position by the Institute. The Institute shall also discharge an arbitrator who fails to fulﬁll his duties or, without valid reasons, delays the proceedings. Before a decision on the discharge of an arbitrator is made, the Institute shall whenever possible provide an opportunity for the parties and the arbitrators to be heard on this issue.

III COMMENCEMENT OF THE ARBITRATION § 11 Request for Arbitration The claimant initiating the arbitration proceedings shall ﬁle with the Institute a request for arbitration in duplicate, including enclosures. The request shall, inter alia, include the following: 1) the names, profession, postal address, telephone number, facsimile number and e-mail address of the parties and the counsel; (Amended 29.11.2000) 2) an account of the dispute; 3) a preliminary statement of the claimant’s claim; 4) the arbitrator appointed by the claimant; 5) a copy of any documents on which the claim is based and, unless incorporated in the former, a copy of the arbitration agreement; and 6) an appropriate power of attorney.

§ 12 Dismissal of a Claim If it is obvious that the Institute lacks jurisdiction over the dispute, the request for arbitration shall be dismissed by the Institute.

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§ 13 Commencement of the Arbitral Proceedings The arbitral proceedings shall be deemed to be commenced when the request mentioned in § 11 or a copy thereof has been served on the respondent in the matter.

§ 14 Hearing of the Respondent In response to the request for arbitration, the Institute shall hear the respondent and request the respondent to submit a written reply. Where necessary, the claimant may be required to ensure the communication to the respondent by veriﬁable means of the documents necessary for such hearing.

§ 15 Respondent’s Answer The respondent’s answer with regard to the request for arbitration shall include: 1) a response to the statements included in the request for arbitration as well as on the number of arbitrators; 2) the arbitrator appointed by the respondent; and 3) an appropriate power of attorney.

If the respondent desires to raise any objection concerning the validity of the arbitration agreement or its applicability to the dispute speciﬁed in the request, such objection and the grounds therefor shall be included in the answer.

§ 16 Respondent’s Claims If the respondent wishes to make a counterclaim or demand a set-off, he shall present the grounds therefor and a preliminary notice of his claims in the answer. A counterclaim can be made and a set-off demanded only in the event that the arbitration agreement covers such counterclaim or demand for set-off.

§ 17 Supplementing the Claim or the Answer The Institute may require the parties to supplement the request or the answer, as the case may be. In the event a party fails to comply with such a requirement, the case may be wholly or partly dismissed. The failure of a respondent to supplement his answer as required above shall not, however, prevent the arbitral tribunal from proceeding in respect of the claimant’s claims.

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§ 18 Security for Costs The Institute may ﬁx a sum which shall be paid by the parties into an account designated by the Central Chamber of Commerce, which, together with interest accrued thereon, shall constitute a security for the fees and costs of the proceedings including the fees of the arbitrators. If the arbitration is of an international character, such sum shall be ﬁxed, unless the Institute based upon special reasons shall deem it appropriate to leave the ﬁxing of the amount of such security to the discretion of the arbitral tribunal. Security other than a cash deposit may also be accepted. If the Institute has not required the parties to provide a security for costs, the arbitral tribunal shall have a similar right. Each party shall pay half of the amount of the security, but the parties shall be jointly and severally liable for the entire amount. If a party fails to pay his share of the security, the other party shall be afforded an opportunity to pay the unpaid share. If the unpaid amount shall still remain unpaid, the case shall be wholly or partly dismissed, stayed or suspended.

§ 19 Appointment of the Arbitral Tribunal When the respondent has submitted his answer or the time limit ﬁxed for this purpose has expired, the Institute shall: a) appoint, in accordance with § 6, the Chairman of the arbitral tribunal, the sole arbitrator or the arbitrators, as the case may be; b) determine, at the request of a party, the place of arbitration, unless the parties have agreed on the place; and c) where necessary, ﬁx the amount of the security mentioned in § 18 and the time limit within which it shall be paid.

Any Board member who under the provisions of the Finnish Arbitration Act (967/92) could be disqualiﬁed to act as an arbitrator in the case, must refrain from participating in the decision and in the discussions of the Board concerning the appointment. (Amended 29.11.2000) As soon as the arbitral tribunal has been appointed, and, where applicable, the security has been provided, the Institute shall transmit the ﬁle to the arbitral tribunal.

IV ARBITRAL PROCEEDINGS § 20 Procedure Each party shall be given a sufﬁcient opportunity of presenting his case. In other respects, the provisions in the arbitration agreement regarding the arbitration procedure shall be complied with.

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To the extent the parties have not agreed on procedural matters in the arbitration agreement, the arbitral tribunal shall determine the manner in which the proceedings will be conducted in accordance with these Rules having regard to the requirements of impartiality and promptness. Where possible, the wishes of the parties shall be complied with. The arbitral tribunal may, when necessary, employ a secretary. The arbitral tribunal may authorize the Chairman decide questions of procedure.

§ 21 Language of Arbitration Unless the parties have agreed on the language or languages to be used in the proceedings, such language or languages shall be determined by the arbitral tribunal. The arbitral tribunal may request that each document presented in a case must be accompanied with a translation into a language of the arbitration.

§ 22 Place of Arbitration If requested by a party, the Institute may, at the time it appoints the arbitrators, determine the place of arbitration if the parties have not agreed on such place. Otherwise the place of arbitration shall be determined by the arbitral tribunal.

§ 23 Claim The arbitral tribunal shall request the claimant to submit within a speciﬁed time a statement of claim, which shall include: a) a description of the speciﬁed claim in the dispute; b) a statement of facts supporting the claim; and c) to the extent possible, the evidence the claimant intends to adduce in the matter.

§ 24 Defence The respondent shall, within a time speciﬁed by the arbitral tribunal, submit a defence, which shall include: a) a statement as to whether and to what extent the respondent accepts or contests the claim; b) grounds for the contesting the claim; c) where applicable, a counterclaim or demand for a set-off and the grounds therefor; and

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d) to the extent possible, the evidence the respondent intends to adduce in the matter.

§ 25 Alteration and Amendment of Claim During the course of the arbitral proceedings, a party may amend or supplement his claims or grounds therefor and also make a counterclaim or demand for a set-off, unless this would cause undue delay of the proceedings.

§ 26 Oral Hearing As a rule, an oral hearing shall be held during the arbitral proceedings in a manner determined by the arbitral tribunal and taking into consideration the reasonable wishes of the parties. If an arbitrator is replaced during the course of the arbitral proceedings, the newly composed arbitral tribunal shall decide whether and to what extent a prior oral hearing shall be repeated.

§ 27 Production of Evidence At the request of the arbitral tribunal, the parties shall state the evidence on which they wish to rely, specifying what they wish to prove with each item of evidence. The arbitral tribunal shall determine to what extent written afﬁdavits may be submitted as evidence. The arbitral tribunal may refuse to accept evidence that relates to a fact that is irrelevant or that has already been established or if the evidence can be produced by other means in a considerably less burdensome fashion or at a considerably lesser expense. After having conscientiously scrutinized and evaluated all evidence produced during the proceedings, the arbitral tribunal shall determine what shall be deemed proven in the matter.

§ 28 Use of an Expert Unless the parties have otherwise agreed, after hearing the parties, the arbitral tribunal may appoint an expert to investigate and to give an opinion on a material fact relevant to the determination of the case, if special professional knowledge is needed to evaluate such fact. The arbitral tribunal may also require a party to give the expert any information necessary for him in the performance of his task and to give the expert an opportunity to inspect documents, goods or other property. 344

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§ 29 Failure of a Party to Appear If a party, without a sufﬁcient cause, fails to appear at a hearing or to comply otherwise with an order of the arbitral tribunal, such failure will not prevent the arbitral tribunal from proceeding with and deciding the case.

§ 30 Objecting to Procedural Deviations If a party, after attaining knowledge that the rules applicable to arbitral proceedings have not been complied with, fails to promptly state his objection with regard thereto, he shall be deemed to have waived his right to object.

§ 30 a Interim measures (29.11.2000) At the request of either party the arbitral tribunal may during the course of the arbitral proceedings issue an injunction or order any other interim measure it deems necessary in respect of the subject matter of the dispute. The arbitral tribunal may order the requesting party to provide security for damage in such form as the arbitral tribunal considers appropriate for any costs and damages caused by the measure to the party against whom it is directed. A court or another competent authority may, however, before or during the course of arbitral proceedings, despite the arbitration agreement grant such interim measure, which the authority has the power to grant.

§ 31 Termination of Arbitration If the parties agree that the proceedings will be discontinued, or if the arbitral tribunal comes to a conclusion that the proceedings cannot be continued, the arbitral tribunal shall issue an order for the termination of the arbitral proceedings. A copy of this order shall be submitted to the Institute. If the claimant withdraws his claim, the arbitral tribunal shall issue an order for the termination of the proceedings. If, however, the respondent demands that an arbitral award be issued, and the arbitral tribunal determines that the respondent has a sufﬁcient reason to have the dispute ﬁnally settled, the proceedings can be continued in order to settle the dispute through the issuance of an arbitral award.

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V ARBITRAL AWARD § 32 Rules Applicable to the Substance of the Dispute The arbitral tribunal shall decide the dispute in accordance with the rules of law applicable to the substance of the dispute. If the parties have designated the law of a given state as applicable to the substance of the dispute, the arbitral tribunal shall apply that law. Failing such designation by the parties and if the dispute is international, the arbitral tribunal shall apply the rules of law which it deems to be appropriate. (Amended 29.11.2000) The arbitral tribunal may, however, decide the dispute ex aequo et bono only if the parties have expressly authorised it to do so.

§ 33 Voting Any decisions of the arbitral tribunal shall be made by a majority of all its members. If such a majority is not attained, the opinion of the Chairman shall prevail.

§ 34 Settlement If during the arbitral proceeding the parties settle the dispute, the arbitral tribunal may record the settlement in the form of an arbitral award on agreed terms.

§ 35 Partial Award The arbitral tribunal may, at the request of a party, render a partial arbitral award on an independent claim in a dispute where several claims have been made. The arbitral tribunal may also, at the request of a party, render a partial award on that part of the claim that has been admitted by the respondent. A claim and a demand for a set-off with regard thereto shall, however, be determined jointly.

§ 36 Interim Award The arbitral tribunal may, if the parties have so agreed, decide by an interim arbitral award a separate issue in dispute, if rendering an award on other matters in dispute is dependent on rendering such an interim award.

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§ 37 Form and Place of Rendering the Award The award shall be made in writing and shall be signed by the arbitrators. If an arbitrator’s signature is missing, the award shall state the reason for the absence of the signature. A dissenting opinion of an arbitrator, if any, shall be attached to the award. The award shall state the date on which and the place where the award was made. The award shall be deemed to be made at the place which has been agreed or determined to be the place of arbitration.

§ 38 Rendering the Award The arbitral award shall be rendered no later than one year after the Institute has sent the ﬁle in the case to the arbitral tribunal. The Board may, due to special reasons, grant an extension to such period set out in subsection 1 as a result of an application by the arbitral tribunal or the Chairman of the arbitral tribunal. The Secretary of the Institute may grant an extension to the period until the next Board meeting. A duly signed copy of the award shall be given to each party at a session of the arbitral tribunal or it shall be delivered to the parties by other veriﬁable means. (Amended 22.11.2001)

§ 39 Correction of the Award A party may request the arbitral tribunal to correct in the award any errors in computation or any clerical or typographical errors, or any other errors of a similar nature. A party must, after notiﬁcation to the other party, request for such correction within 30 days from his receipt of a copy of the award. If the arbitral tribunal considers the request to be justiﬁed, the arbitral tribunal shall make the requested correction without delay and, if possible, within 30 days after the receipt of the request by the Chairman of the arbitral tribunal. The arbitral tribunal may, at their own initiative, within 30 days after the rendering of the award, correct any error of the type referred to in paragraph 1 of this section. Before such correction is made, the parties shall, when necessary, be provided an opportunity to be heard with regard to the correction to be made.

§ 40 Additional Award Either party, with notice to the other party, may request the arbitral tribunal to make an additional award as to claims presented in the arbitral proceedings but omitted from the award. If the arbitral tribunal considers the request for an additional award to be justiﬁed, they shall complete the award as soon as possible. Before rendering the additional award, the parties shall be heard. FCCC RULES

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VI COSTS OF ARBITRATION AND OTHER PROVISIONS § 41 Arbitrators’ Fees and Other Costs of Arbitration The parties are jointly and severally liable for compensating the arbitrators for their work and expenses. The arbitral tribunal may in the award ﬁx and order to be paid the remuneration due to the arbitrators. When deciding on the fees of the arbitrators the time required to resolve the dispute, the complexity of the subject matter, the amount in dispute and other relevant circumstances shall be taken into account. The losing party in the matter shall be ordered to pay the costs of the arbitration as well as the costs of the arbitration of the winning party, unless there is a justiﬁable reason to decide otherwise. If the parties settle the dispute or if the dispute is dismissed for some other reason before arbitral proceedings in respect of the dispute shall have commenced, the Institute shall decide on the fees to compensate the Central Chamber of Commerce for its costs and on the possible fees and compensation for expenses payable to the arbitrators. If the settlement or the dismissal of a dispute takes place after the arbitral proceedings shall have commenced, the arbitral tribunal may ﬁx and order to be paid the arbitrators’ fees and compensation for expenses. The Central Chamber of Commerce of Finland may establish a schedule for the proposed arbitrators’ fees. (Amended 13.12.1994)

§ 42 Charges Due to the Central Chamber of Commerce The claimant shall pay a registration fee when ﬁling a request, and the respondent shall pay a fee when presenting any counterclaim. The amount of the registration fee shall be determined by the Central Chamber of Commerce. An arbitral award shall include an order concerning any costs and charges of the arbitration payable to the Central Chamber of Commerce.

§ 43 Deposition of Documents and Secrecy The documents presented to the Institute and any award or ﬁnal order issued in order to terminate the proceedings shall, after issuance, be ﬁled in the archives of the Institute. No information concerning the documents or the award referred to above may be disclosed to anyone other than the parties, the arbitrators involved in the proceedings and the members of the Board, unless all parties concerned explicitly consent to such a disclosure.

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§ 43 a Exclusion of Liability (29.11.2000) The Central Chamber of Commerce or any member of the Board of the Institute or the Secretary of the Institute shall not be liable for any loss incurred by the parties in any arbitration under the Rules of the Institute, save for loss resulting from their wilful misconduct or gross negligence. An arbitrator shall not be liable for any loss incurred by the parties in such arbitral proceedings, save for loss resulting from wilful misconduct or gross negligence.

VII ENTRY INTO FORCE AND TRANSITION These rules shall enter into force on January 1, 1993 and will replace the Rules of the Institute conﬁrmed on May 16, 1979. These rules are to be applied to any arbitral proceedings which are commenced after the effective date of these rules. (Some linguistic corrections have been made on January 12, 2004.)

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FCCC Expedited Rules

RULES FOR EXPEDITED ARBITRATION OF THE ARBITRATION INSTITUTE OF THE CENTRAL CHAMBER OF COMMERCE OF FINLAND (Adopted by the Central Chamber of Commerce of Finland on 28 April 2004 and in force as of 1 June 2004.) RECOMMENDED ARBITRATION CLAUSE: Any dispute, controversy or claim arising out of or relating to this contract, or the breach, termination or validity thereof, shall be ﬁnally settled by arbitration in accordance with the Rules for Expedited Arbitration of the Arbitration Institute of the Central Chamber of Commerce of Finland. The Arbitration Institute of the Central Chamber of Commerce of Finland Aleksanterinkatu 17 P.O. Box 1000 FI-00101 Helsinki Finland tel +358 9 4242 6200 fax+358 9 4242 6257 www.arbitration.ﬁ

I Commencement of the Arbitration § 1 Request for Arbitration The claimant initiating the arbitration proceedings shall ﬁle with the Institute a request for arbitration in duplicate, including enclosures. The request shall, inter alia, include the following: 1) the names, profession, postal address, telephone number, facsimile number and e-mail address of the parties and the counsel; 2) an account of the dispute;

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3) a preliminary statement of the claimant’s claim; 4) a copy of any documents on which the claim is based and, unless incorporated in the former, a copy of the arbitration agreement; and 5) an appropriate power of attorney.

§ 2 Registration Fee The claimant shall pay a registration fee when ﬁling a request, and the respondent shall pay a fee when presenting any counterclaim. The amount of the registration fee shall be determined by the Central Chamber of Commerce. An arbitral award shall include an order concerning any costs and charges of the arbitration payable to the Central Chamber of Commerce.

§ 3 Dismissal of a Claim If it is obvious that the Institute lacks jurisdiction over the dispute, the request for arbitration shall be dismissed by the Institute.

§ 4 Commencement of the Arbitral Proceedings The arbitral proceedings shall be deemed to be commenced when the request mentioned in § 1 or a copy thereof has been served on the respondent in the matter.

§ 5 Hearing of the Respondent In response to the request for arbitration, the Institute shall hear the respondent and request the respondent to submit a written reply. Where necessary, the claimant may be required to ensure the communication to the respondent by veriﬁable means of the documents necessary for such hearing.

§ 6 Respondent’s Answer The respondent’s answer with regard to the request for arbitration shall include: 1) a response to the statements included in the request for arbitration; and 2) an appropriate power of attorney.

If the respondent desires to raise any objection concerning the validity of the arbitration agreement or its applicability to the dispute speciﬁed in the request, such objection and the grounds therefor shall be included in the answer.

§ 7 Respondent’s Claims If the respondent wishes to make a counterclaim or demand a set-off, he shall present the grounds therefor and a preliminary notice of his claims in the answer. 352

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A counterclaim may be made or a set-off demanded only in the event that the arbitration agreement covers such counterclaim or demand for set-off.

§ 8 Supplementing the Claim or the Answer The Institute may require the parties to supplement the request or the answer, as the case may be. In the event that a party fails to comply with such a requirement, the case may be wholly or partly dismissed. The failure of a respondent to supplement his answer as required above shall not, however, prevent the arbitrator from proceeding in respect of the claimant’s claims.

§ 9 Security for Costs The Institute may ﬁx a sum which shall be paid by the parties into an account designated by the Central Chamber of Commerce, which, together with interest accrued thereon, shall constitute a security for the fees and costs of the proceedings including the fee of the arbitrator. If the arbitration is of an international character, such sum shall be ﬁxed, unless the Institute based upon special reasons shall deem it appropriate to leave the ﬁxing of the amount of such security to the discretion of the arbitrator. Security other than a cash deposit may also be accepted. If the Institute has not required the parties to provide a security for costs, the arbitrator shall have a similar right. Each party shall pay half of the amount of the security, but the parties shall be jointly and severally liable for the entire amount. If a party fails to pay his share of the security, the other party shall be afforded the opportunity to pay the unpaid share. If the unpaid amount shall still remain unpaid, the case shall be wholly or partly dismissed, stayed or suspended.

§ 10 Appointment of the Arbitrator and Related Provisions When the respondent has submitted the answer or the time limit ﬁxed for this purpose has expired, the Institute shall: a) appoint the arbitrator; b) determine, at the request of a party, the place of arbitration, unless the parties have agreed on the place; and c) where necessary, ﬁx the amount of the security referred to in § 9 and the time limit within which it shall be paid.

Any Board member who under the provisions of the Finnish Arbitration Act (967/1992) could be disqualiﬁed to act as an arbitrator in the case, must refrain from participating in the decision and in the discussions of the Board concerning the appointment. A member of the Institute may be appointed as the arbitrator under these rules only if the parties so request.

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As soon as the arbitrator has been appointed and, where applicable, the security has been provided, the Institute shall transmit the ﬁle to the arbitrator.

II ARBITRATOR § 11 Arbitrator If the parties have agreed on arbitration under these rules, the dispute shall be resolved by one arbitrator appointed by the Arbitration Institute of the Central Chamber of Commerce of Finland.

§ 12 Replacement of the Arbitrator In the event of the resignation, discharge or death of the arbitrator, the Institute shall appoint a substitute arbitrator to replace him.

§ 13 Qualiﬁcations of the Arbitrator An arbitrator appointed by the Institute must be independent and impartial and possess full legal capacity and sufﬁcient knowledge in the ﬁeld at issue in the arbitration. Only a lawyer is qualiﬁed to be appointed as the arbitrator, unless the Institute decides otherwise due to special reasons.

§ 14 Challenge of the Arbitrator When a person is approached in connection with his possible appointment as an arbitrator, he shall immediately disclose any circumstances likely to give rise to justiﬁable doubts as to his impartiality or independence, unless he refuses to accept the appointment. The arbitrator is obliged to disclose to the parties, until the end of the arbitral proceedings all such circumstances referred to above unless they have already been informed of these circumstances. If a party wishes to challenge the arbitrator, the challenge shall be made to the Institute in writing. The challenge shall state the grounds therefor and must be made within 30 days from the date these grounds became known to the party making the challenge, failing which such party shall be deemed to have waived his right to make such a challenge.

§ 15 Discharge of the Arbitrator At the request of a party, the Institute shall discharge the arbitrator found to be unqualiﬁed to his position by the Institute. The Institute shall discharge the arbitrator who fails to fulﬁl his duties or, without valid reasons, delays the proceedings. 354

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Before a decision on the discharge of the arbitrator is made, the Institute shall whenever possible provide an opportunity for the parties and the arbitrator to be heard on this issue.

ILL ARBITRAL PROCEEDINGS § 16 Procedure Each party shall be given a sufﬁcient opportunity to present his case. The arbitrator shall prepare a provisional schedule for the arbitral proceedings and send it to the parties. Unless the arbitrator for a special reason decides otherwise, the following rules apply to the proceedings: a) besides the claim and a counterclaim, each party is entitled to submit at most one statement in the case; b) the statements shall be brief; and c) the time limit for the submission of a statement is at most fourteen days from the date when a party has been exhorted to submit a statement. Also a party’s statement of evidence and speciﬁcation of what is to be proven with the evidence shall be considered a statement as referred to in paragraph 3, subparagraph (a) above. The arbitrator may require a party to make a ﬁnal statement of his claim and of the facts and evidence on which the party wishes to rely. Once the time limit for the submission of such a statement has expired, the party cannot alter the claim nor invoke a new fact or new evidence, unless the arbitrator for a special reasons allows the same. The arbitrator may, where necessary, employ a secretary.

§ 17 Claim The arbitrator shall request the claimant to submit within a speciﬁed time a statement of claim, which shall include: a) a description of the speciﬁed claim in the dispute; b) a statement of facts supporting the claim; and c) the evidence the claimant intends to adduce in the matter.

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§ 18 Defence The respondent shall, within a time speciﬁed by the arbitrator, submit a defence, which shall include: a) a statement as to whether and to what extent the respondent accepts or contests the claim; b) grounds for contesting the claim; c) where applicable, a counterclaim or demand for a set-off and the grounds therefor; and d) the evidence the respondent intends to adduce in the matter.

§ 19 Language of Arbitration Unless the parties have agreed on the language or languages to be used in the proceedings, such language or languages shall be determined by the arbitrator. The arbitrator may request that each document presented in the case must be accompanied with a translation into the language of the arbitration.

§ 20 Place of Arbitration If requested by a party, the Institute may, at the time it appoints the arbitrator, determine the place of arbitration if the parties have not agreed on such place. Otherwise the place of arbitration shall be determined by the arbitrator.

§ 21 Oral Hearing An oral hearing shall be held only if a party so requests and the arbitrator deems this necessary. The arbitrator shall take note of the wishes of the parties when setting the time, duration and form of the oral hearing, the manner of its arrangement and the procedure for accepting evidence.

§ 22 Production of Evidence At the request of the arbitrator, the parties shall state the evidence, and produce the written evidence, on which they wish to rely, specifying what they wish to prove with each item of evidence. The arbitrator shall determine to what extent written afﬁdavits may be submitted as evidence. The arbitrator may refuse to accept evidence that relates to a fact that is irrelevant or that has already been established or if the evidence can be produced by other means in a considerably less burdensome fashion or at a considerably lesser expense.

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After having conscientiously scrutinized and evaluated all evidence produced during the proceedings, the arbitrator shall determine what shall be deemed proven in the matter.

§ 23 Use of an Expert Unless the parties have otherwise agreed, after hearing the parties, the arbitrator may appoint an expert to investigate and to give an opinion on a material fact relevant to the determination of the case, if special professional knowledge is needed to evaluate such fact. The arbitrator may also require a party to give the expert any information necessary for him in the performance of his task and to give the expert an opportunity to inspect documents, goods or other property.

§ 24 Failure of a Party to Appear If a party, without sufﬁcient cause, fails to appear at a hearing or to comply otherwise with an order of the arbitrator, such failure will not prevent the arbitrator from proceeding with and deciding the case.

§ 25 Objecting to Procedural Deviations If a party, after attaining knowledge that the rules applicable to arbitral proceedings have not been complied with, fails to promptly state his objection with regard thereto, he shall be deemed to have waived his right to object.

§ 26 Interim Measures At the request of either party the arbitrator may during the course of the arbitral proceedings issue an injunction or order any other interim measure it deems necessary in respect of the subject matter of the dispute. The arbitrator may order the requesting party to provide security for damage in such form as the arbitrator considers appropriate for any costs and damages caused by the measure to the party against whom it is directed. A court or other competent authority may, however, before or during the course of arbitral proceedings, despite the arbitration agreement grant such interim measure, which the authority has the power to grant.

§ 27 Termination of Arbitration If the parties agree that the proceedings will be discontinued, or if the arbitrator comes to a conclusion that the proceedings cannot be continued, the arbitrator shall issue an

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order for the termination of the arbitral proceedings. A copy of this order shall be submitted to the Institute. If the claimant withdraws his claim, the arbitrator shall issue an order for the termination of the proceedings. If, however, the respondent demands that an arbitral award be issued, and the arbitrator determines that the respondent has a sufﬁcient reason to have the dispute ﬁnally settled, the proceedings can be continued in order to settle the dispute through the issuance of an arbitral award.

IV ARBITRAL AWARD § 28 Rules Applicable to the Substance of the Dispute The arbitrator shall decide the dispute in accordance with the rules of law applicable to the substance of the dispute. If the parties have designated the law of a given state as applicable to the substance of the dispute, the arbitrator shall apply that law. Failing such designation by the parties and if the dispute is international, the arbitrator shall apply the rules of law which he deems to be appropriate. The arbitrator may, however, decide the dispute ex aequo et bono only if the parties have expressly authorised him to do so.

§ 29 Settlement If during the arbitral proceedings the parties settle the dispute, the arbitrator may record the settlement in the form of an arbitral award on agreed terms.

§ 30 Partial Award The arbitrator may, at the request of a party, render a partial arbitral award on an independent claim in a dispute where several claims have been made. The arbitrator may also, at the request of a party, render a partial award on that part of the claim that has been admitted by the respondent. A claim and a demand for a set-off with regard thereto shall, however, be determined jointly.

§ 31 Interim Award The arbitrator may, if the parties have so agreed, decide by an interim arbitral award a separate issue in dispute, if rendering an award on other matters in dispute is dependent on rendering such an interim award.

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§ 32 Form and Place of Rendering the Award The award shall be made in writing and shall be signed by the arbitrator. The award shall state the date on which and the place where the award was made. The award shall be deemed to be made at the place which has been agreed or determined to be the place of arbitration. The arbitral award shall not contain reasons, unless a party has no later than in his closing statement requested a statement of reasons.

§ 33 Rendering the Award The arbitral award shall be rendered no later than three months after the Institute has sent the ﬁle in the case to the arbitrator. The Board, or in urgent cases the secretary of the Institute, may grant an extension of at most three months to the period referred to in paragraph 1. A duly signed copy of the award shall be given to each party at a session of the arbitral tribunal or it shall be delivered to the parties by other veriﬁable means.

§ 34 Correction of the Award A party may request the arbitrator to correct in the award any errors in computation or any clerical or typographical errors, or any other errors of a similar nature. A party must, after notiﬁcation to the other party, request for such correction within 30 days from his receipt of a copy of the award. If the arbitrator considers the request to be justiﬁed, the arbitrator shall make the requested correction without delay and, if possible, within 30 days after the receipt of the request by the arbitrator. The arbitrator may, at his own initiative, within 30 days after the rendering of the award, correct any error of the type referred to in paragraph 1 of this section. Before such correction is made, the parties shall, where necessary, be provided an opportunity to be heard with regard to the correction to be made.

§ 35 Additional Award Either party, with notice to the other party, may request the arbitrator to make an additional award as to claims presented in the arbitral proceedings but omitted from the award. If the arbitrator considers the request for an additional award to be justiﬁed, he shall complete the award as soon as possible. Before rendering the additional award, the parties shall be heard.

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V COSTS OF ARBITRATION AND OTHER PROVISIONS § 36 Arbitrator’s Fee and Other Costs of Arbitration The parties are jointly and severally liable for compensating the arbitrator for his work and expenses. The arbitrator may in the award ﬁx and order to be paid the remuneration due to the arbitrator. When deciding on the fee of the arbitrator the time required to resolve the dispute, the complexity of the subject matter, the amount in dispute and other relevant circumstances shall be taken into account. The losing party in the matter shall be ordered to pay the costs of the arbitration as well as the costs of the arbitration of the winning party, unless there is a justiﬁable reason to decide otherwise. If the parties settle the dispute before the arbitral tribunal has taken any measures in the proceedings or if the dispute is dismissed for some other reason before the arbitral tribunal has taken any measures in the proceedings, the Institute shall decide on the fees to compensate the Central Chamber of Commerce for its costs and on the possible fee and compensation for expenses payable to the arbitrator. If the settlement or the dismissal of the dispute takes place after the arbitral tribunal has taken any measures in the proceedings, the arbitrator may ﬁx and order to be paid the arbitrator’s fee and compensation for expenses. The Central Chamber of Commerce of Finland may establish a schedule for the proposed arbitrator’s fees.

§ 37 Charges Due to the Central Chamber of Commerce An arbitral award shall include an order concerning any costs and charges of the arbitration payable to the Central Chamber of Commerce.

§ 38 Deposition of Documents and Secrecy The documents presented to the Institute and any award or ﬁnal order issued in order to terminate the proceedings shall, after issuance, be ﬁled in the archives of the Institute. No information concerning the documents or the award referred to above may be disclosed to anyone other than the parties, the arbitrator involved in the proceedings and the members of the Board, unless all parties concerned explicitly consent to such a disclosure.

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§ 39 Exclusion of Liability The Central Chamber of Commerce or any member of the Board of the Institute or the Secretary of the Institute shall not be liable for any loss incurred by the parties in any arbitration under these rules, save for loss resulting from their wilful misconduct or gross negligence. The arbitrator shall not be liable for any loss incurred by the parties in the arbitral proceedings, save for loss resulting from wilful misconduct or gross negligence.

VI ENTRY INTO FORCE These rules shall enter into force on June 1, 2004. These rules are applied to any arbitral proceedings in respect of which the request for arbitration has been received by the Institute after the effective date of these rules.

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IBA Ethics

IBA RULES OF ETHICS FOR INTERNATIONAL ARBITRATORS11 Introductory Note International arbitrators should be impartial, independent, competent, diligent and discreet. These rules seek to establish the manner in which these abstract qualities may be assessed in practice. Rather than rigid rules, they reﬂect internationally acceptable guidelines developed by practising lawyers from all continents. They will attain their objectives only if they are applied in good faith. The rules cannot be directly binding either on arbitrators, or on the parties themselves, unless they are adopted by agreement. Whilst the International Bar Association hopes that they will be taken into account in the context of challenges to arbitrators, it is emphasised that these guidelines are not intended to create grounds for the setting aside of awards by national courts. If parties wish to adopt the rules they may add the following to their arbitration clause or arbitration agreement: The parties agree that the Rules of Ethics for International Arbitrators established by the International Bar Association, in force at the date of the commencement of any arbitration under this clause, shall be applicable to the arbitrators appointed in respect of such arbitration.

The International Bar Association takes the position that (whatever may be the case in domestic arbitration) international arbitrators should in principle be granted immunity from suit under national laws, except in extreme cases of wilful or reckless disregard of their legal obligations. Accordingly, the International Bar Association wishes to make it clear that it is not the intention of these rules to create opportunities for aggrieved parties to sue international arbitrators in national courts. The normal sanction for breach of an ethical duty is removal from ofﬁce, with consequent loss of

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entitlement to remuneration. The International Bar Association also emphasises that these rules do not affect, and are intended to be consistent with, the International Code of Ethics for lawyers, adopted at Oslo on 25 July 1956, and amended by the General Meeting of the International Bar Association at Mexico City on 24 July 1964.

1 Fundamental Rule Arbitrators shall proceed diligently and efﬁciently to provide the parties with a just and effective resolution of their disputes, and shall be and shall remain free from bias.

2 Acceptance of Appointment 2.1 A prospective arbitrator shall accept an appointment only if he is fully satisﬁed that he is able to discharge his duties without bias. 2.2 A prospective arbitrator shall accept an appointment only if he is fully satisﬁed that he is competent to determine the issues in dispute, and has an adequate knowledge of the language of the arbitration. 2.3 A prospective arbitrator should accept an appointment only if he is able to give to the arbitration the time and attention which the parties are reasonably entitled to expect. 2.4 It is inappropriate to contact parties in order to solicit appointment as arbitrator.

3 Elements of Bias 3.1 The criteria for assessing questions relating to bias are impartiality and independence. Partiality arises when an arbitrator favours one of the parties, or where he is prejudiced in relation to the subject-matter of the dispute. Dependence arises from relationships between an arbitrator and one of the parties, or with someone closely connected with one of the parties. 3.2 Facts which might lead a reasonable person, not knowing the arbitrator’s true state of mind, to consider that he is dependent on a party create an appearance of bias. The same is true if an arbitrator has a material interest in the outcome of the dispute, or if he has already taken a position in relation to it. The appearance of bias is best overcome by full disclosure as described in Article 4 below. 3:3 Any current direct or indirect business relationship between an arbitrator and a party, or with a person who is known to be a potentially important witness, will normally give rise to justiﬁable doubts as to a prospective arbitrator’s impartiality or independence. He should decline to accept an appointment in such circumstances unless the parties agree in writing that he may proceed. Examples of indirect relationships are where a member of the prospective arbitrator’s family, his ﬁrm, or any business partner has a business relationship with one of the parties. 3.4 Past business relationships will not operate as an absolute bar to acceptance of appointment, unless they are of such magnitude or nature as to be likely to affect a prospective arbitrator’s judgment. 364

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3.5 Continuous and substantial social or professional relationships between a prospective arbitrator and a party, or with a person who is known to be a potentially important witness in the arbitration, will normally give rise to justiﬁable doubts as to the impartiality or independence of a prospective arbitrator.

4 Duty of Disclosure 4.1 A prospective arbitrator should disclose all facts or circumstances that may give rise to justiﬁable doubts as to his impartiality or independence. Failure to make such disclosure creates an appearance of bias, and may of itself be a ground for disqualiﬁcation even though he non-disclosed facts or circumstances would not of themselves justify disqualiﬁcation. 4.2 A prospective arbitrator should disclose: (a) any past or present business relationship, whether direct or indirect as illustrated in Article 3.3, including prior appointment as arbitrator, with any party to the dispute, or any representative of a party, or any person known to be a potentially important witness in the arbitration. With regard to present relationships, the duty of disclosure applies irrespective of their magnitude, but with regard to past relationships only if they were of more than a trivial nature in relation to the arbitrator’s professional or business affairs. Non-disclosure of an indirect relationship unknown to a prospective arbitrator will not be a ground for disqualiﬁcation unless it could have been ascertained by making reasonable enquiries; (b) the nature and duration of any substantial social relationships with any party or any person known to be likely to be an important witness in the arbitration; (c) the nature of any previous relationship with any fellow arbitrator (including prior joint service as an arbitrator); (d) the extent of any prior knowledge he may have of the dispute; (e) the extent of any commitments which may affect his availability to perform his duties as arbitrator as may be reasonably anticipated. 4.3 The duty of disclosure continues throughout the arbitral proceedings as regards new facts or circumstances. 4.4 Disclosure should be made in writing and communicated to all parties and arbitrators. When an arbitrator has been appointed, any previous disclosure made to the parties should be communicated to the other arbitrators.

5 Communications with Parties 5.1 When approached with a view to appointment, a prospective arbitrator should make sufﬁcient enquiries in order to inform himself whether there may be any justiﬁable doubts regarding his impartiality or independence; whether he is competent to determine the issues in dispute; and whether he is able to give the arbitration the time and attention required. He may also respond to enquiries from those approaching him, IBA ETHICS

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provided that such enquiries are designed to determine his suitability and availability for the appointment and provided that the merits of the case are not discussed. In the event that a prospective sole arbitrator or presiding arbitrator is approached by one party alone, or by one arbitrator chosen unilaterally by a party (a ‘party, nominated ‘arbitrator), he should ascertain that the other party or parties, or the other arbitrator, has consented to the manner in which he has been approached. In such circumstances he should, in writing or orally, inform the other party or parties, or the other arbitrator, of the substance of the initial conversation. 5.2 If a party-nominated arbitrator is required to participate in the selection of a third or presiding arbitrator, it is acceptable for him (although he is not so required) to obtain the views of the party who nominated him as to the acceptability of candidates being considered. 5.3 Throughout the arbitral proceedings, an arbitrator should avoid any unilateral communications regarding the case with any party, or its representatives. If such communication should occur, the arbitrator should inform the other party or parties and arbitrators of its substance. 5.4 If an arbitrator becomes aware that a fellow arbitrator has been in improper communication with a party, he may inform the remaining arbitrators and they should together determine what action should be taken. Normally, the appropriate initial course of action is for the offending arbitrator to be requested to refrain from making any further improper communications with the party. Where the offending arbitrator fails or refuses to refrain from improper communications, the remaining arbitrators may inform the innocent party in order that he may consider what action he should take. An arbitrator may act unilaterally to inform a party of the conduct of another arbitrator in order to allow the said party to consider a challenge of the offending arbitrator only in extreme circumstances, and after communicating his intention to his fellow arbitrators in writing. 5.5 No arbitrator should accept any gift or substantial. hospitality, directly or indirectly, from any party to the arbitration. Sole arbitrators and presiding arbitrators should be particularly meticulous in avoiding signiﬁcant social or professional contacts with any party to the arbitration other than in the presence of the other parties.

6 Fees Unless the parties agree otherwise or a party defaults, an arbitrator shall make no unilateral arrangements for fees or expenses.

7 Duty of Diligence All arbitrators should devote such time and attention as the parties may reasonably require having regard to all the circumstances of the case, and shall do their best to conduct the arbitration in such a manner that costs do not rise to an unreasonable proportion of the interests at stake.

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8 Involvement in Settlement Proposals Where the parties have so requested, or consented to a suggestion to this effect by the arbitral tribunal, the tribunal as a whole (or the presiding arbitrator where appropriate), may make proposals for settlement to both parties simultaneously, and preferably in the presence of each other. Although any procedure is possible with the agreement of the parties, the arbitral tribunal should point out to the parties that it is undesirable that any arbitrator should discuss settlement terms with a party in the absence of the other parties since this will normally have the result that any arbitrator involved in such discussions will become disqualiﬁed from any future participation in the arbitration.

9 Conﬁdentiality of the Deliberations The deliberations of the arbitral tribunal, and the contents of the award itself, remain conﬁdential in perpetuity unless the parties release the arbitrators from this obligation. An arbitrator should not participate in, or give any information for the purpose of assistance in, any proceedings to consider the award unless, exceptionally, he considers it his duty to disclose any material misconduct or fraud on the part of his fellow arbitrators.

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IBA Guidelines

On Conﬂicts Of Interest In International Arbitrations* 22 May 2004 Introduction 1. Problems of conﬂicts of interest increasingly challenge international arbitration. Arbitrators are often unsure about what facts need to be disclosed, and they may make different choices about disclosures than other arbitrators in the same situation. The growth of international business and the manner in which it is conducted, including interlocking corporate relationships and larger international law ﬁrms, have caused more disclosures and have created more difﬁcult conﬂict of interest issues to determine. Reluctant parties have more opportunities to use challenges of arbitrators to delay arbitrations or to deny the opposing party the arbitrator of its choice. Disclosure of any relationship, no matter how minor or serious, has too often led to objections, challenge and withdrawal or removal of the arbitrator. 2. Thus, parties, arbitrators, institutions and courts face complex decisions about what to disclose and what standards to apply. In addition, institutions and courts face difﬁcult decisions if an objection or a challenge is made after a disclosure. There is a tension between, on the one hand, the parties’ right to disclosure of situations that may reasonably call into question an arbitrator’s impartiality or independence and their right to a fair hearing and, on the other hand, the parties’ right to select arbitrators of their choosing. Even though laws and arbitration rules provide some standards, there is a lack of detail in their guidance and of uniformity in their application. As a result, quite often members of the international arbitration community apply different standards in making decisions concerning disclosure, objections and challenges. 3. It is in the interest of everyone in the international arbitration community that international arbitration proceedings not be hindered by these growing conﬂicts of interest

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issues. The Committee on Arbitration and ADR of the International Bar Association appointed a Working Group of 19 experts1 in international arbitration from 14 countries to study, with the intent of helping this decision-making process, national laws, judicial decisions, arbitration rules and practical considerations and applications regarding impartiality and independence and disclosure in international arbitration. The Working Group has determined that existing standards lack sufﬁcient clarity and uniformity in their application. It has therefore prepared these Guidelines, which set forth some General Standards and Explanatory Notes on the Standards. Moreover, the Working Group believes that greater consistency and fewer unnecessary challenges and arbitrator withdrawals and removals could be achieved by providing lists of speciﬁc situations that, in the view of the Working Group, do or do not warrant disclosure or disqualiﬁcation of an arbitrator. Such lists—designated Red, Orange and Green (the ‘Application Lists’)—appear at the end of these Guidelines.2 4. The Guidelines reﬂect the Working Group’s understanding of the best current international practice ﬁrmly rooted in the principles expressed in the General Standards. The Working Group has based the General Standards and the Application Lists upon statutes and case law in jurisdictions and upon the judgment and experience of members of the Working Group and others involved in international commercial arbitration. The Working Group has attempted to balance the various interests of parties, representatives, arbitrators and arbitration institutions, all of whom have a responsibility for ensuring the integrity, reputation and efﬁciency of international commercial arbitration. In particular, the Working Group has sought and considered the views of many leading arbitration institutions, as well as corporate counsel and other persons involved in international arbitration. The Working Group also published drafts of the Guidelines and sought comments at two annual meetings of the International Bar Association and other meetings of arbitrators. While the comments received by the Working Group varied, and included some points of criticisms, the arbitration community generally supported and encouraged these efforts to help reduce the growing problems of conﬂicts of interests. The Working Group has studied all the comments received and has adopted many of the proposals that it has received. The Working Group is very grateful indeed for the serious considerations given to its proposals by so many institutions and individuals all over the globe and for the comments and proposals received.

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The members of the Working Group are: (1) Henri Alvarez, Canada; (2) John Beechey, England; (3) Jim Carter, United States; (4) Emmanuel Gaillard, France, (5) Emilio Gonzales de Castilla, Mexico; (6) Bernard Hanotiau, Belgium; (7) Michael Hwang, Singapore; (8) Albert Jan van den Berg, Belgium; (9) Doug Jones, Australia; (10) Gabrielle Kaufmann-Kohler, Switzerland; (11) Arthur Marriott, England; (12) Tore Wiwen Nilsson, Sweden; (13) Hilmar Raeschke-Kessler, Germany; (14) David W. Rivkin, United States; (15) Klaus Sachs, Germany; (16) Nathalie Voser, Switzerland (Rapporteur); (17) David Williams, New Zealand; (18) Des Williams, South Africa; (19); Otto de Witt Wijnen, The Netherlands (Chair). Detailed Background Information to the Guidelines has been published in Business Law International at BLI Vol 5, No 3, September 2004, pp 433-458 and is available at the IBA website www.ibanet.org IBA GUIDELINES

5. Originally, the Working Group developed the Guidelines for international commercial arbitration. However, in the light of comments received, it realized that the Guidelines should equally apply to other types of arbitration, such as investment arbitrations (insofar as these may not be considered as commercial arbitrations).3 6. These Guidelines are not legal provisions and do not override any applicable national law or arbitral rules chosen by the parties. However, the Working Group hopes that these Guidelines will ﬁnd general acceptance within the international arbitration community (as was the case with the IBA Rules on the Taking of Evidence in International Commercial Arbitration) and that they thus will help parties, practitioners, arbitrators, institutions and the courts in their decision-making process on these very important questions of impartiality, independence, disclosure, objections and challenges made in that connection. The Working Group trusts that the Guidelines will be applied with robust common sense and without pedantic and unduly formalistic interpretation. The Working Group is also publishing a Background and History, which describes the studies made by the Working Group and may be helpful in interpreting the Guidelines. 7. The IBA and the Working Group view these Guidelines as a beginning, rather than an end, of the process. The Application Lists cover many of the varied situations that commonly arise in practice, but they do not purport to be comprehensive, nor could they be. Nevertheless, the Working Group is conﬁdent that the Application Lists provide better concrete guidance than the General Standards (and certainly more than existing standards). The IBA and the Working Group seek comments on the actual use of the Guidelines, and they plan to supplement, revise and reﬁne the Guidelines based on that practical experience. 8. In 1987, the IBA published Rules of Ethics for International Arbitrators. Those Rules cover more topics than these Guidelines, and they remain in effect as to subjects that are not discussed in the Guidelines. The Guidelines supersede the Rules of Ethics as to the matters treated here.

Part I: General Standards Regarding Impartiality, Independence and Disclosure (1) General Principle Every arbitrator shall be impartial and independent of the parties at the time of accepting an appointment to serve and shall remain so during the entire arbitration proceeding until the ﬁnal award has been rendered or the proceeding has otherwise ﬁnally terminated. 3

Similarly, the Working Group is of the opinion that these Guidelines should apply by analogy to civil servants and government ofﬁcers who are appointed as arbitrators by States or State entities that are parties to arbitration proceedings.

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Explanation to General Standard 1: The Working Group is guided by the fundamental principle in international arbitration that each arbitrator must be impartial and independent of the parties at the time he or she accepts an appointment to act as arbitrator and must remain so during the entire course of the arbitration proceedings. The Working Group considered whether this obligation should extend even during the period that the award may be challenged but has decided against this. The Working Group takes the view that the arbitrator’s duty ends when the Arbitral Tribunal has rendered the ﬁnal award or the proceedings have otherwise been ﬁnally terminated (eg, because of a settlement). If, after setting aside or other proceedings, the dispute is referred back to the same arbitrator, a fresh round of disclosure may be necessary.

(2) Conﬂicts of Interest (a) An arbitrator shall decline to accept an appointment or, if the arbitration has already been commenced, refuse to continue to act as an arbitrator if he or she has any doubts as to his or her ability to be impartial or independent. (b) The same principle applies if facts or circumstances exist, or have arisen since the appointment, that, from a reasonable third person’s point of view having knowledge of the relevant facts, give rise to justiﬁable doubts as to the arbitrator’s impartiality or independence, unless the parties have accepted the arbitrator in accordance with the requirements set out in General Standard (4). (c) Doubts are justiﬁable if a reasonable and informed third party would reach the conclusion that there was a likelihood that the arbitrator may be inﬂuenced by factors other than the merits of the case as presented by the parties in reaching his or her decision. (d) Justiﬁable doubts necessarily exist as to the arbitrator’s impartiality or independence if there is an identity between a party and the arbitrator, if the arbitrator is a legal representative of a legal entity that is a party in the arbitration, or if the arbitrator has a signiﬁcant ﬁnancial or personal interest in the matter at stake.

Explanation to General Standard 2: (a) It is the main ethical guiding principle of every arbitrator that actual bias from the arbitrator’s own point of view must lead to that arbitrator declining his or her appointment. This standard should apply regardless of the stage of the proceedings. This principle is so self-evident that many national laws do not explicitly say so. See eg Article 12, UNCITRAL Model Law. The Working Group, however, has included it in the General Standards because explicit expression in these Guidelines helps to avoid confusion and to create conﬁdence in procedures before arbitral tribunals. In addition, the Working Group believes that the broad standard of ‘any doubts as to an ability to be impartial and independent’ should lead to the arbitrator declining the appointment.

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(b) In order for standards to be applied as consistently as possible, the Working Group believes that the test for disqualiﬁcation should be an objective one. The Working Group uses the wording ‘impartiality or independence’ derived from the broadly adopted Article 12 of the UNCITRAL Model Law, and the use of an appearance test, based on justiﬁable doubts as to the impartiality or independence of the arbitrator, as provided in Article 12(2) of the UNCITRAL Model Law, to be applied objectively (a ‘reasonable third person test’). As described in the Explanation to General Standard 3(d), this standard should apply regardless of the stage of the proceedings. (c) Most laws and rules that apply the standard of justiﬁable doubts do not further deﬁne that standard. The Working Group believes that this General Standard provides some context for making this determination. (d) The Working Group supports the view that no one is allowed to be his or her own judge; ie, there cannot be identity between an arbitrator and a party. The Working Group believes that this situation cannot be waived by the parties. The same principle should apply to persons who are legal representatives of a legal entity that is a party in the arbitration, like board members, or who have a signiﬁcant economic interest in the matter at stake. Because of the importance of this principle, this nonwaivable situation is made a General Standard, and examples are provided in the non-waivable Red List. The General Standard purposely uses the terms ‘identity’ and ‘legal representatives.’ In the light of comments received, the Working Group considered whether these terms should be extended or further deﬁned, but decided against doing so. It realizes that there are situations in which an employee of a party or a civil servant can be in a position similar, if not identical, to the position of an ofﬁcial legal representative. The Working Group decided that it should sufﬁce to state the principle.

(3) Disclosure by the Arbitrator (a) If facts or circumstances exist that may, in the eyes of the parties, give rise to doubts as to the arbitrator’s impartiality or independence, the arbitrator shall disclose such facts or circumstances to the parties, the arbitration institution or other appointing authority (if any, and if so required by the applicable institutional rules) and to the co-arbitrators, if any, prior to accepting his or her appointment or, if thereafter, as soon as he or she learns about them. (b) It follows from General Standards 1 and 2(a) that an arbitrator who has made a disclosure considers himself or herself to be impartial and independent of the parties despite the disclosed facts and therefore capable of performing his or her duties as arbitrator. Otherwise, he or she would have declined the nomination or appointment at the outset or resigned. (c) Any doubt as to whether an arbitrator should disclose certain facts or circumstances should be resolved in favour of disclosure.

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(d) When considering whether or not facts or circumstances exist that should be disclosed, the arbitrator shall not take into account whether the arbitration proceeding is at the beginning or at a later stage.

Explanation to General Standard 3: (a) General Standard 2(b) above sets out an objective test for disqualiﬁcation of an arbitrator. However, because of varying considerations with respect to disclosure, the proper standard for disclosure may be different. A purely objective test for disclosure exists in the majority of the jurisdictions analyzed and in the UNCITRAL Model Law. Nevertheless, the Working Group recognizes that the parties have an interest in being fully informed about any circumstances that may be relevant in their view. Because of the strongly held views of many arbitration institutions (as reﬂected in their rules and as stated to the Working Group) that the disclosure test should reﬂect the perspectives of the parties, the Working Group in principle accepted, after much debate, a subjective approach for disclosure. The Working Group has adapted the language of Article 7(2) of the ICC Rules for this standard. However, the Working Group believes that this principle should not be applied without limitations. Because some situations should never lead to disqualiﬁcation under the objective test, such situations need not be disclosed, regardless of the parties’ perspective. These limitations to the subjective test are reﬂected in the Green List, which lists some situations in which disclosure is not required. Similarly, the Working Group emphasizes that the two tests (objective test for disqualiﬁcation and subjective test for disclosure) are clearly distinct from each other, and that a disclosure shall not automatically lead to disqualiﬁcation, as reﬂected in General Standard 3(b). In determining what facts should be disclosed, an arbitrator should take into account all circumstances known to him or her, including to the extent known the culture and the customs of the country of which the parties are domiciled or nationals. (b) Disclosure is not an admission of a conﬂict of interest. An arbitrator who has made a disclosure to the parties considers himself or herself to be impartial and independent of the parties, despite the disclosed facts, or else he or she would have declined the nomination or resigned. An arbitrator making disclosure thus feels capable of performing his or her duties. It is the purpose of disclosure to allow the parties to judge whether or not they agree with the evaluation of the arbitrator and, if they so wish, to explore the situation further. The Working Group hopes that the promulgation of this General Standard will eliminate the misunderstanding that disclosure demonstrates doubts sufﬁcient to disqualify the arbitrator. Instead, any challenge should be successful only if an objective test, as set forth above, is met. (c) Unnecessary disclosure sometimes raises an incorrect implication in the minds of the parties that the disclosed circumstances would affect his or her impartiality or independence. Excessive disclosures thus unnecessarily undermine the parties’ conﬁdence in the process. Nevertheless, after some debate, the Working Group believes it important to provide expressly in the General Standards that in case of doubt the arbitrator

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should disclose. If the arbitrator feels that he or she should disclose but that professional secrecy rules or other rules of practice prevent such disclosure, he or she should not accept the appointment or should resign. (d) The Working Group has concluded that disclosure or disqualiﬁcation (as set out in General Standard 2) should not depend on the particular stage of the arbitration. In order to determine whether the arbitrator should disclose, decline the appointment or refuse to continue to act or whether a challenge by a party should be successful, the facts and circumstances alone are relevant and not the current stage of the procedure or the consequences of the withdrawal. As a practical matter, institutions make a distinction between the commencement of an arbitration proceeding and a later stage. Also, courts tend to apply different standards. Nevertheless, the Working Group believes it important to clarify that no distinction should be made regarding the stage of the arbitral procedure. While there are practical concerns if an arbitrator must withdraw after an arbitration has commenced, a distinction based on the stage of arbitration would be inconsistent with the General Standards.

(4) Waiver by the Parties (a) If, within 30 days after the receipt of any disclosure by the arbitrator or after a party learns of facts or circumstances that could constitute a potential conﬂict of interest for an arbitrator, a party does not raise an express objection with regard to that arbitrator, subject to paragraphs (b) and (c) of this General Standard, the party is deemed to have waived any potential conﬂict of interest by the arbitrator based on such facts or circumstances and may not raise any objection to such facts or circumstances at a later stage. (b) However, if facts or circumstances exist as described in General Standard 2(d), any waiver by a party or any agreement by the parties to have such a person serve as arbitrator shall be regarded as invalid. (c) A person should not serve as an arbitrator when a conﬂict of interest, such as those exempliﬁed in the waivable Red List, exists. Nevertheless, such a person may accept appointment as arbitrator or continue to act as an arbitrator, if the following conditions are met: (i) All parties, all arbitrators and the arbitration institution or other appointing authority (if any) must have full knowledge of the conﬂict of interest; and (ii) All parties must expressly agree that such person may serve as arbitrator despite the conﬂict of interest. (d) An arbitrator may assist the parties in reaching a settlement of the dispute at any stage of the proceedings. However, before doing so, the arbitrator should receive an express agreement by the parties that acting in such a manner shall not disqualify the arbitrator from continuing to serve as arbitrator. Such express agreement shall be considered to be an effective waiver of any potential conﬂict of interest that may arise from the arbitrator’s participation in such process or from information that the

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arbitrator may learn in the process. If the assistance by the arbitrator does not lead to ﬁnal settlement of the case, the parties remain bound by their waiver. However, consistent with General Standard 2(a) and notwithstanding such agreement, the arbitrator shall resign if, as a consequence of his or her involvement in the settlement process, the arbitrator develops doubts as to his or her ability to remain impartial or independent in the future course of the arbitration proceedings.

Explanation to General Standard 4: (a) The Working Group suggests a requirement of an explicit objection by the parties within a certain time limit. In the view of the Working Group, this time limit should also apply to a party who refuses to be involved. (b) This General Standard is included to make General Standard 4(a) consistent with the non-waivable provisions of General Standard 2(d). Examples of such circumstances are described in the non-waivable Red List. (c) In a serious conﬂict of interest, such as those that are described by way of example in the waivable Red List, the parties may nevertheless wish to use such a person as an arbitrator. Here, party autonomy and the desire to have only impartial and independent arbitrators must be balanced. The Working Group believes persons with such a serious conﬂict of interests may serve as arbitrators only if the parties make fully informed, explicit waivers. (d) The concept of the Arbitral Tribunal assisting the parties in reaching a settlement of their dispute in the course of the arbitration proceedings is well established in some jurisdictions but not in others. Informed consent by the parties to such a process prior to its beginning should be regarded as effective waiver of a potential conﬂict of interest. Express consent is generally sufﬁcient, as opposed to a consent made in writing which in certain jurisdictions requires signature. In practice, the requirement of an express waiver allows such consent to be made in the minutes or transcript of a hearing. In addition, in order to avoid parties using an arbitrator as mediator as a means of disqualifying the arbitrator, the General Standard makes clear that the waiver should remain effective if the mediation is unsuccessful. Thus, parties assume the risk of what the arbitrator may learn in the settlement process. In giving their express consent, the parties should realize the consequences of the arbitrator assisting the parties in a settlement process and agree on regulating this special position further where appropriate.

(5) Scope These Guidelines apply equally to tribunal chairs, sole arbitrators and party-appointed arbitrators. These Guidelines do not apply to non-neutral arbitrators, who do not have an obligation to be independent and impartial, as may be permitted by some arbitration rules or national laws.

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Explanation to General Standard 5: Because each member of an Arbitral Tribunal has an obligation to be impartial and independent, the General Standards should not distinguish among sole arbitrators, party-appointed arbitrators and tribunal chairs. With regard to secretaries of Arbitral Tribunals, the Working Group takes the view that it is the responsibility of the arbitrator to ensure that the secretary is and remains impartial and independent. Some arbitration rules and domestic laws permit party-appointed arbitrators to be non-neutral. When an arbitrator is serving in such a role, these Guidelines should not apply to him or her, since their purpose is to protect impartiality and independence.

(6) Relationships (a) When considering the relevance of facts or circumstances to determine whether a potential conﬂict of interest exists or whether disclosure should be made, the activities of an arbitrator’s law ﬁrm, if any, should be reasonably considered in each individual case. Therefore, the fact that the activities of the arbitrator’s ﬁrm involve one of the parties shall not automatically constitute a source of such conﬂict or a reason for disclosure. (b) Similarly, if one of the parties is a legal entity which is a member of a group with which the arbitrator’s ﬁrm has an involvement, such facts or circumstances should be reasonably considered in each individual case. Therefore, this fact alone shall not automatically constitute a source of a conﬂict of interest or a reason for disclosure. (c) If one of the parties is a legal entity, the managers, directors and members of a supervisory board of such legal entity and any person having a similar controlling inﬂuence on the legal entity shall be considered to be the equivalent of the legal entity.

Explanation to General Standard 6: (a) The growing size of law ﬁrms should be taken into account as part of today’s reality in international arbitration. There is a need to balance the interests of a party to use the arbitrator of its choice and the importance of maintaining conﬁdence in the impartiality and independence of international arbitration. In the opinion of the Working Group, the arbitrator must in principle be considered as identical to his or her law ﬁrm, but nevertheless the activities of the arbitrator’s ﬁrm should not automatically constitute a conﬂict of interest. The relevance of such activities, such as the nature, timing and scope of the work by the law ﬁrm, should be reasonably considered in each individual case. The Working Group uses the term ‘involvement’ rather than ‘acting for’ because a law ﬁrm’s relevant connections with a party may include activities other than representation on a legal matter. (b) When a party to an arbitration is a member of a group of companies, special questions regarding conﬂict of interest arise. As in the prior paragraph, the Working Group

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believes that because individual corporate structure arrangements vary so widely an automatic rule is not appropriate. Instead, the particular circumstances of an afﬁliation with another entity within the same group of companies should be reasonably considered in each individual case. (c) The party in international arbitration is usually a legal entity. Therefore, this General Standard clariﬁes which individuals should be considered effectively to be that party.

(7) Duty of Arbitrator and Parties (a) A party shall inform an arbitrator, the Arbitral Tribunal, the other parties and the arbitration institution or other appointing authority (if any) about any direct or indirect relationship between it (or another company of the same group of companies) and the arbitrator. The party shall do so on its own initiative before the beginning of the proceeding or as soon as it becomes aware of such relationship. (b) In order to comply with General Standard 7(a), a party shall provide any information already available to it and shall perform a reasonable search of publicly available information. (c) An arbitrator is under a duty to make reasonable enquiries to investigate any potential conﬂict of interest, as well as any facts or circumstances that may cause his or her impartiality or independence to be questioned. Failure to disclose a potential conﬂict is not excused by lack of knowledge if the arbitrator makes no reasonable attempt to investigate.

Explanation to General Standard 7: To reduce the risk of abuse by unmeritorious challenge of an arbitrator’s impartiality or independence, it is necessary that the parties disclose any relevant relationship with the arbitrator. In addition, any party or potential party to an arbitration is, at the outset, required to make a reasonable effort to ascertain and to disclose publicly available information that, applying the general standard, might affect the arbitrator’s impartiality and independence. It is the arbitrator or putative arbitrator’s obligation to make similar enquiries and to disclose any information that may cause his or her impartiality or independence to be called into question.

PART II: Practical Application of the General Standards 1. The Working Group believes that if the Guidelines are to have an important practical inﬂuence, they should reﬂect situations that are likely to occur in today’s arbitration practice. The Guidelines should provide speciﬁc guidance to arbitrators, parties, institutions and courts as to what situations do or do not constitute conﬂicts of interest or should be disclosed.

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For this purpose, the members of the Working Group analyzed their respective case law and categorized situations that can occur in the following Application Lists. These lists obviously cannot contain every situation, but they provide guidance in many circumstances, and the Working Group has sought to make them as comprehensive as possible. In all cases, the General Standards should control. 2. The Red List consists of two parts: ‘a non-waivable Red List’ (see General Standards 2(c) and 4(b)) and ‘a waivable Red List’ (see General Standard 4(c)). These lists are a non-exhaustive enumeration of speciﬁc situations which, depending on the facts of a given case, give rise to justiﬁable doubts as to the arbitrator’s impartiality and independence; ie, in these circumstances an objective conﬂict of interest exists from the point of view of a reasonable third person having knowledge of the relevant facts (see General Standard 2(b)). The nonwaivable Red List includes situations deriving from the overriding principle that no person can be his or her own judge. Therefore, disclosure of such a situation cannot cure the conﬂict. The waivable Red List encompasses situations that are serious but not as severe. Because of their seriousness, unlike circumstances described in the Orange List, these situations should be considered waivable only if and when the parties, being aware of the conﬂict of interest situation, nevertheless expressly state their willingness to have such a person act as arbitrator, as set forth in General Standard 4(c). 3. The Orange List is a non-exhaustive enumeration of speciﬁc situations which (depending on the facts of a given case) in the eyes of the parties may give rise to justiﬁable doubts as to the arbitrator’s impartiality or independence. The Orange List thus reﬂects situations that would fall under General Standard 3(a), so that the arbitrator has a duty to disclose such situations. In all these situations, the parties are deemed to have accepted the arbitrator if, after disclosure, no timely objection is made. (General Standard 4(a)). 4. It should be stressed that, as stated above, such disclosure should not automatically result in a disqualiﬁcation of the arbitrator; no presumption regarding disqualiﬁcation should arise from a disclosure. The purpose of the disclosure is to inform the parties of a situation that they may wish to explore further in order to determine whether objectively—ie, from a reasonable third person’s point of view having knowledge of the relevant facts—there is a justiﬁable doubt as to the arbitrator’s impartiality or independence. If the conclusion is that there is no justiﬁable doubt, the arbitrator can act. He or she can also act if there is no timely objection by the parties or, in situations covered by the waivable Red List, a speciﬁc acceptance by the parties in accordance with General Standard 4(c). Of course, if a party challenges the appointment of the arbitrator, he or she can nevertheless act if the authority that has to rule on the challenge decides that the challenge does not meet the objective test for disqualiﬁcation. 5. In addition, a later challenge based on the fact that an arbitrator did not disclose such facts or circumstances should not result automatically in either non-appointment, later disqualiﬁcation or a successful challenge to any award. In the view of the Working Group, non-disclosure cannot make an arbitrator partial or lacking independence; only the facts or circumstances that he or she did not disclose can do so.

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6. The Green List contains a non-exhaustive enumeration of speciﬁc situations where no appearance of, and no actual, conﬂict of interest exists from the relevant objective point of view. Thus, the arbitrator has no duty to disclose situations falling within the Green List. In the opinion of the Working Group, as already expressed in the Explanation to General Standard 3(a), there should be a limit to disclosure, based on reasonableness; in some situations, an objective test should prevail over the purely subjective test of ‘the eyes of the parties.’ 7. Situations falling outside the time limit used in some of the Orange List situations should generally be considered as falling in the Green List, even though they are not speciﬁcally stated. An arbitrator may nevertheless wish to make disclosure if, under the General Standards, he or she believes it to be appropriate. While there has been much debate with respect to the time limits used in the Lists, the Working Group has concluded that the limits indicated are appropriate and provide guidance where none exists now. For example, the three-year period in Orange List 3.1 may be too long in certain circumstances and too short in others, but the Working Group believes that the period is an appropriate general criterion, subject to the special circumstances of any case. 8. The borderline between the situations indicated is often thin. It can be debated whether a certain situation should be on one List instead of another. Also, the Lists contain, for various situations, open norms like ‘signiﬁcant’. The Working Group has extensively and repeatedly discussed both of these issues, in the light of comments received. It believes that the decisions reﬂected in the Lists reﬂect international principles to the best extent possible and that further deﬁnition of the norms, which should be interpreted reasonably in light of the facts and circumstances in each case, would be counter-productive. 9. There has been much debate as to whether there should be a Green List at all and also, with respect to the Red List, whether the situations on the Non-Waivable Red List should be waivable in light of party autonomy. With respect to the ﬁrst question, the Working Group has maintained its decision that the subjective test for disclosure should not be the absolute criterion but that some objective thresholds should be added. With respect to the second question, the conclusion of the Working Group was that party autonomy, in this respect, has its limits.

1. Non-Waivable Red List 1.1. There is an identity between a party and the arbitrator, or the arbitrator is a legal representative of an entity that is a party in the arbitration. 1.2. The arbitrator is a manager, director or member of the supervisory board, or has a similar controlling inﬂuence in one of the parties. 1.3. The arbitrator has a signiﬁcant ﬁnancial interest in one of the parties or the outcome of the case.

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1.4. The arbitrator regularly advises the appointing party or an afﬁliate of the appointing party, and the arbitrator or his or her ﬁrm derives a signiﬁcant ﬁnancial income therefrom.

2. Waivable Red List 2.1. Relationship of the arbitrator to the dispute 2.1.1 The arbitrator has given legal advice or provided an expert opinion on the dispute to a party or an afﬁliate of one of the parties. 2.1.2 The arbitrator has previous involvement in the case. 2.2. Arbitrator’s direct or indirect interest in the dispute 2.2.1 The arbitrator holds shares, either directly or indirectly, in one of the parties or an afﬁliate of one of the parties that is privately held. 2.2.2 A close family member44 of the arbitrator has a signiﬁcant ﬁnancial interest in the outcome of the dispute. 2.2.3 The arbitrator or a close family member of the arbitrator has a close relationship with a third party who may be liable to recourse on the part of the unsuccessful party in the dispute. 2.3. Arbitrator’s relationship with the parties or counsel 2.3.1 The arbitrator currently represents or advises one of the parties or an afﬁliate of one of the parties. 2.3.2 The arbitrator currently represents the lawyer or law ﬁrm acting as counsel for one of the parties. 2.3.3 The arbitrator is a lawyer in the same law ﬁrm as the counsel to one of the parties. 2.3.4 The arbitrator is a manager, director or member of the supervisory board, or has a similar controlling inﬂuence, in an afﬁliate55 of one of the parties if the afﬁliate is directly involved in the matters in dispute in the arbitration. 2.3.5 The arbitrator’s law ﬁrm had a previous but terminated involvement in the case without the arbitrator being involved himself or herself. 2.3.6 The arbitrator’s law ﬁrm currently has a signiﬁcant commercial relationship with one of the parties or an afﬁliate of one of the parties. 2.3.7 The arbitrator regularly advises the appointing party or an afﬁliate of the appointing party, but neither the arbitrator nor his or her ﬁrm derives a signiﬁcant ﬁnancial income therefrom. 4 5

Throughout the Application Lists, the term ‘close family member’ refers to a spouse, sibling, child, parent or life partner. Throughout the Application Lists, the term ‘afﬁliate’ encompasses all companies in one group of companies including the parent company.

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2.3.8 The arbitrator has a close family relationship with one of the parties or with a manager, director or member of the supervisory board or any person having a similar controlling inﬂuence in one of the parties or an afﬁliate of one of the parties or with a counsel representing a party. 2.3.9 A close family member of the arbitrator has a signiﬁcant ﬁnancial interest in one of the parties or an afﬁliate of one of the parties.

3. Orange List 3.1. Previous services for one of the parties or other involvement in the case 3.1.1 The arbitrator has within the past three years served as counsel for one of the parties or an afﬁliate of one of the parties or has previously advised or been consulted by the party or an afﬁliate of the party making the appointment in an unrelated matter, but the arbitrator and the party or the afﬁliate of the party have no ongoing relationship. 3.1.2 The arbitrator has within the past three years served as counsel against one of the parties or an afﬁliate of one of the parties in an unrelated matter. 3.1.3 The arbitrator has within the past three years been appointed as arbitrator on two or more occasions by one of the parties or an afﬁliate of one of the parties.66 3.1.4 The arbitrator’s law ﬁrm has within the past three years acted for one of the parties or an afﬁliate of one of the parties in an unrelated matter without the involvement of the arbitrator. 3.1.5 The arbitrator currently serves, or has served within the past three years, as arbitrator in another arbitration on a related issue involving one of the parties or an afﬁliate of one of the parties. 3.2. Current services for one of the parties 3.2.1 The arbitrator’s law ﬁrm is currently rendering services to one of the parties or to an afﬁliate of one of the parties without creating a signiﬁcant commercial relationship and without the involvement of the arbitrator. 3.2.2 A law ﬁrm that shares revenues or fees with the arbitrator’s law ﬁrm renders services to one of the parties or an afﬁliate of one of the parties before the arbitral tribunal. 3.2.3 The arbitrator or his or her ﬁrm represents a party or an afﬁliate to the arbitration on a regular basis but is not involved in the current dispute. 3.3. Relationship between an arbitrator and another arbitrator or counsel. 6

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It may be the practice in certain speciﬁc kinds of arbitration, such as maritime or commodities arbitration, to draw arbitrators from a small, specialized pool. If in such ﬁelds it is the custom and practice for parties frequently to appoint the same arbitrator in different cases, no disclosure of this fact is required where all parties in the arbitration should be familiar with such custom and practice. IBA GUIDELINES

3.3.1 The arbitrator and another arbitrator are lawyers in the same law ﬁrm. 3.3.2 The arbitrator and another arbitrator or the counsel for one of the parties are members of the same barristers’ chambers.77 3.3.3 The arbitrator was within the past three years a partner of, or otherwise afﬁliated with, another arbitrator or any of the counsel in the same arbitration. 3.3.4 A lawyer in the arbitrator’s law ﬁrm is an arbitrator in another dispute involving the same party or parties or an afﬁliate of one of the parties. 3.3.5 A close family member of the arbitrator is a partner or employee of the law ﬁrm representing one of the parties, but is not assisting with the dispute. 3.3.6 A close personal friendship exists between an arbitrator and a counsel of one party, as demonstrated by the fact that the arbitrator and the counsel regularly spend considerable time together unrelated to professional work commitments or the activities of professional associations or social organizations. 3.3.7 The arbitrator has within the past three years received more than three appointments by the same counsel or the same law ﬁrm. 3.4. Relationship between arbitrator and party and others involved in the arbitration 3.4.1 The arbitrator’s law ﬁrm is currently acting adverse to one of the parties or an afﬁliate of one of the parties. 3.4.2 The arbitrator had been associated within the past three years with a party or an afﬁliate of one of the parties in a professional capacity, such as a former employee or partner. 3.4.3 A close personal friendship exists between an arbitrator and a manager or director or a member of the supervisory board or any person having a similar controlling inﬂuence in one of the parties or an afﬁliate of one of the parties or a witness or expert, as demonstrated by the fact that the arbitrator and such director, manager, other person, witness or expert regularly spend considerable time together unrelated to professional work commitments or the activities of professional associations or social organizations. 3.4.4 If the arbitrator is a former judge, he or she has within the past three years heard a signiﬁcant case involving one of the parties. 3.5. Other circumstances 3.5.1 The arbitrator holds shares, either directly or indirectly, which by reason of number or denomination constitute a material holding in one of the parties or an afﬁliate of one of the parties that is publicly listed. 3.5.2 The arbitrator has publicly advocated a speciﬁc position regarding the case that is being arbitrated, whether in a published paper or speech or otherwise.

7

Issues concerning special considerations involving barristers in England are discussed in the Background Information issued by the Working Group.

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3.5.3 The arbitrator holds a position in an arbitration institution with appointing authority over the dispute. 3.5.4 The arbitrator is a manager, director or member of the supervisory board, or has a similar controlling inﬂuence, in an afﬁliate of one of the parties, where the afﬁliate is not directly involved in the matters in dispute in the arbitration.

4. Green List 4.1. Previously expressed legal opinions 4.1.1 The arbitrator has previously published a general opinion (such as in a law review article or public lecture) concerning an issue which also arises in the arbitration (but this opinion is not focused on the case that is being arbitrated). 4.2. Previous services against one party 4.2.1 The arbitrator’s law ﬁrm has acted against one of the parties or an afﬁliate of one of the parties in an unrelated matter without the involvement of the arbitrator. 4.3. Current services for one of the parties 4.3.1 A ﬁrm in association or in alliance with the arbitrator’s law ﬁrm, but which does not share fees or other revenues with the arbitrator’s law ﬁrm, renders services to one of the parties or an afﬁliate of one of the parties in an unrelated matter. 4.4. Contacts with another arbitrator or with counsel for one of the parties 4.4.1 The arbitrator has a relationship with another arbitrator or with the counsel for one of the parties through membership in the same professional association or social organization. 4.4.2 The arbitrator and counsel for one of the parties or another arbitrator have previously served together as arbitrators or as co-counsel. 4.5. Contacts between the arbitrator and one of the parties 4.5.1 The arbitrator has had an initial contact with the appointing party or an afﬁliate of the appointing party (or the respective counsels) prior to appointment, if this contact is limited to the arbitrator’s availability and qualiﬁcations to serve or to the names of possible candidates for a chairperson and did not address the merits or procedural aspects of the dispute. 4.5.2 The arbitrator holds an insigniﬁcant amount of shares in one of the parties or an afﬁliate of one of the parties, which is publicly listed. 4.5.3 The arbitrator and a manager, director or member of the supervisory board, or any person having a similar controlling inﬂuence, in one of the parties or an afﬁliate of one of the parties, have worked together as joint experts or in another professional capacity, including as arbitrators in the same case. A ﬂow chart is attached to these Guidelines for easy reference to the application of the Lists. However, it should be stressed that this is only a schematic reﬂection of the very complex reality. Always, the speciﬁc circumstances of the case prevail. 384

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FLOW CHART IBA GUIDELINES ON CONFLICTS OF INTEREST IN INTERNATIONAL ARBITRATION any stage of arbitral proceedings

IF

IF

IF

has arbitrator doubts as to his/her ability to be impartial and independent? [GS (2)(a)]

circumstances according to GS (2)(d) and/or Non-Waivable Red List

facts or circumstances that from a reasonable third person’s or from the parties’ point of view give rise to justifiable doubts as to the arbitrator’s impartiality and independence [GS (2)(a) and GS (3)(a)]

IF

IF

IF

Waivable Red List

Orange List

Green List

If specific circumstances of the case do not require different treatment

decline to accept appointment/refuse to continue to act as arbitrator and disclose relevant facts and circumstances

do parties have full knowledge and have they expressly agreed that Arbitrator may act despite the conflict of interest [GS (4)(c)]

duty to disclose relevant facts and circumstances

did parties raise express objection within 30 days after receipt of disclosure?

no duty to disclose

No

[GS (4)(a)]

Yes

Yes

decline to accept appointment/refuse to continue to act as arbitrator

consider parties’ comments and objection

accept appointment/ continue to act

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IBA Rules

IBA Rules on the Taking of Evidence in International Commercial Arbitration1 Adopted by a resolution of the IBA Council 1 June 1999 International Bar Association 271 Regent Street London W1R 7PA England Tel: +44 171 629 1206 Fax: +44 171 409 0456 www.ibanet.org

Members of the Working Party David W Rivkin Chair, SBL Committee D (Arbitration and ADR); Debevoise & Plimpton, New York, USA Wolfgang Kühn Former Chair, SBL Committee D; Heuking Kühn Lüer Heussen Wojtek, Düsseldorf, Germany Giovanni M Ughi Chair, SBL Committee D Working Party; Studio Legale Ughi e Nunziante, Milan, Italy Hans Bagner Vinge, Stockholm, Sweden John Beechey Clifford Chance, London, England 1. This document is reproduced by kind permission of the International Bar Association, London. © International Bar Association.

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Jacques Buhart Coudert Frères, Paris, France Peter S Caldwell Hong Kong Bernardo M Cremades B Cremades y Asociados, Madrid, Spain Emmanuel Gaillard Shearman & Sterling, Paris, France Paul A Gelinas Paris, France Hans van Houtte Stibbe Simont Monahan Duhot, Brussels, Belgium Pierre A Karrer Pestalozzi Gmuer & Patry, Zurich, Switzerland Jan Paulsson Freshﬁelds, Paris, France Hilmar Raeschke-Kessler Rechtsanwaelte Beim Bundesgerichtshof, Karlsruhe- Ettlingen, Germany Van Vechten Veeder QC Essex Court Chambers, London, England O L O de Witt Wijnen Nauta Dutilh, Rotterdam, Netherlands

About the Arbitration and ADR Committee (D) Established as the Committee in the International Bar Association’s Section on Business Law (SBL) which contributes to the development of the law and practice of international arbitration and other forms of dispute resolution, the Committee currently has over 1,500 members in 115 countries, and membership is increasing steadily.

Links Relations are maintained with all of the prominent international Arbitration institutions worldwide.

Activities The Committee provides programmes at IBA and SBL Conferences. Conference programmes are discussed in advance with members, who are encouraged to suggest topics for discussion and debate. 388

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Members may be appointed to attend law-making sessions such as those which led to the UNCITRAL Model Law on International Commercial Arbitration. The Committee produces regular newsletters giving news of members and updates on topics in this ﬁeld of law. Contributions from members are essential for the continuing success of these newsletters. Any member of the Committee who wishes to pursue a line of private enquiry, or to encourage public debate of an issue within the Committee’s remit, should ask the Committee Ofﬁcers to circulate enquiries amongst the membership and to encourage cooperative endeavour.

Subcommittee on Recognition and Enforcement of Arbitral Awards (D1) The Convention on the Recognition and Enforcement of Foreign Arbitration Awards made in New York in 1958 to which more than 100 countries have acceded has demanded the establishment of a special Subcommittee. Practitioners attend the annual workshop of this Subcommittee in order to learn of the experience of various countries with this Convention.

Subcommittee on Alternative Dispute Resolution Systems (D2) This Subcommittee is devoted to the procedures and development of ADR. The subject has demanded far more attention from lawyers in recent years, and the Subcommittee provides a forum for studying and sharing experience of practitioners in various jurisdictions.

Foreword These IBA Rules on the Taking of Evidence in International Commercial Arbitration (‘IBA Rules of Evidence’) have been prepared by a Working Party of Committee D (Arbitration and ADR) of the Section on Business Law of the International Bar Association. The IBA has issued these Rules as a resource to parties and to arbitrators in order to enable them to conduct the evidence phase of international arbitration proceedings in an efﬁcient and economical manner. The Rules provide mechanisms for the presentation of documents, witnesses of fact, expert witnesses and inspections, as well as for the conduct of evidentiary hearings. The Rules are designed to be used in conjunction with, and adopted together with, institutional or ad hoc rules or procedures governing international commercial arbitrations. These IBA Rules of Evidence replace the IBA Supplementary Rules Governing the Presentation and Reception of Evidence in International Commercial Arbitration, originally issued in 1983. The IBA Rules of Evidence reﬂect procedures in use in many different legal systems, and they may be particularly useful when the parties come from different legal cultures. IBA RULES

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If the parties wish to adopt the IBA Rules of Evidence in their arbitration clause, it is recommended that they add the following additional language to the clause: ‘In addition to the [institutional or ad hoc rules chosen by the parties], the parties agree that the arbitration shall be conducted according to the IBA Rules of Evidence.’ In addition, parties and Arbitral Tribunals may adopt the IBA Rules of Evidence, in whole or in part, at the time in conduct of the arbitration, or they may vary them or use them as guidelines in developing their own procedures. The IBA Rules of Evidence were adopted by the resolution of the IBA Council on 1 June 1999. David W Rivkin Chair, Committee on Arbitration and ADR Section on Business Law August 1999

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The Rules Preamble 1. These IBA Rules on the Taking of Evidence in International Commercial Arbitration (the “IBA Rules of Evidence”) are intended to govern in an efﬁcient and economical manner the taking of evidence in international commercial arbitrations, particularly those between Parties from different legal traditions. They are designed to supplement the legal provisions and the institutional or ad hoc rules according to which the Parties are conducting their arbitration. 2. Parties and Arbitral Tribunals may adopt the IBA Rules of Evidence, in whole or in part, to govern arbitration proceedings, or they may vary them or use them as guidelines in developing their own procedures. The Rules are not intended to limit the ﬂexibility that is inherent in, and an advantage of, international arbitration, and Parties and Arbitral Tribunals are free to adapt them to the particular circumstances of each arbitration. 3. Each Arbitral Tribunal is encouraged to identify to the Parties, as soon as it considers it to be appropriate, the issues that it may regard as relevant and material to the outcome of the case, including issues where a preliminary determination may be appropriate. 4. The taking of evidence shall be conducted on the principle that each Party shall be entitled to know, reasonably in advance of any Evidentiary Hearing, the evidence on which the other Parties rely.

The Rules Article 1 Deﬁnitions In the IBA Rules of Evidence: “Arbitral Tribunal” means a sole arbitrator or a panel of arbitrators validly deciding by majority or otherwise; “Claimant” means the Party or Parties who commenced the arbitration and any Party who, through joinder or otherwise, becomes aligned with such Party or Parties; “Document” means a writing of any kind, whether recorded on paper, electronic means, audio or visual recordings or any other mechanical or electronic means of storing or recording information; “Evidentiary Hearing” means any hearing, whether or not held on consecutive days, at which the Arbitral Tribunal receives oral evidence; “Expert Report” means a written statement by a Tribunal-Appointed Expert or a PartyAppointed Expert submitted pursuant to the IBA Rules of Evidence; “General Rules” mean the institutional or ad hoc rules according to which the Parties are conducting their arbitration;

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“Party” means a party to the arbitration; “Party-Appointed Expert” means an expert witness presented by a Party; “Request to Produce” means a request by a Party for a procedural order by which the Arbitral Tribunal would direct another Party to produce documents; “Respondent” means the Party or Parties against whom the Claimant made its claim, and any Party who, through joinder or otherwise, becomes aligned with such Party or Parties, and includes a Respondent making a counter-claim; “Tribunal-Appointed Expert” means a person or organization appointed by the Arbitral Tribunal in order to report to it on speciﬁc issues determined by the Arbitral Tribunal.

Article 2 Scope of Application 1. Whenever the Parties have agreed or the Arbitral Tribunal has determined to apply the IBA Rules of Evidence, the Rules shall govern the taking of evidence, except to the extent that any speciﬁc provision of them may be found to be in conﬂict with any mandatory provision of law determined to be applicable to the case by the Parties or by the Arbitral Tribunal. 2. In case of conﬂict between any provisions of the IBA Rules of Evidence and the General Rules, the Arbitral Tribunal shall apply the IBA Rules of Evidence in the manner that it determines best in order to accomplish the purposes of both the General Rules and the IBA Rules of Evidence, unless the Parties agree to the contrary. 3. In the event of any dispute regarding the meaning of the IBA Rules of Evidence, the Arbitral Tribunal shall interpret them according to their purpose and in the manner most appropriate for the particular arbitration. 4. Insofar as the IBA Rules of Evidence and the General Rules are silent on any matter concerning the taking of evidence and the Parties have not agreed otherwise, the Arbitral Tribunal may conduct the taking of evidence as it deems appropriate, in accordance with the general principles of the IBA Rules of Evidence.

Article 3 Documents 1. Within the time ordered by the Arbitral Tribunal, each Party shall submit to the Arbitral Tribunal and to the other Parties all documents available to it on which it relies, including public documents and those in the public domain, except for any documents that have already been submitted by another Party. 2. Within the time ordered by the Arbitral Tribunal, any Party may submit to the Arbitral Tribunal a Request to Produce. 3. A Request to Produce shall contain: (a) (i) a description of a requested document sufﬁcient to identify it, or (ii) a description in sufﬁcient detail (including subject matter) of a narrow and speciﬁc requested category of documents that are reasonably believed to exist; 392

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(b) a description of how the documents requested are relevant and material to the outcome of the case; and (c) a statement that the documents requested are not in the possession, custody or control of the requesting Party, and of the reason why that Party assumes the documents requested to be in the possession, custody or control of the other Party. 4. Within the time ordered by the Arbitral Tribunal, the Party to whom the Request to Produce is addressed shall produce to the Arbitral Tribunal and to the other Parties all the documents requested in its possession, custody or control as to which no objection is made. 5. If the Party to whom the Request to Produce is addressed has objections to some or all of the documents requested, it shall state them in writing to the Arbitral Tribunal within the time ordered by the Arbitral Tribunal. The reasons for such objections shall be any of those set forth in Article 9.2. 6. The Arbitral Tribunal shall, in consultation with the Parties and in timely fashion, consider the Request to Produce and the objections. The Arbitral Tribunal may order the Party to whom such Request is addressed to produce to the Arbitral Tribunal and to the other Parties those requested documents in its possession, custody or control as to which the Arbitral Tribunal determines that (i) the issues that the requesting Party wishes to prove are relevant and material to the outcome of the case, and (ii) none of the reasons for objection set forth in Article 9.2 apply. 7. In exceptional circumstances, if the propriety of an objection can only be determined by review of the document, the Arbitral Tribunal may determine that it should not review the document. In that event, the Arbitral Tribunal may, after consultation with the Parties, appoint an independent and impartial expert, bound to conﬁdentiality, to review any such document and to report on the objection. To the extent that the objection is upheld by the Arbitral Tribunal, the expert shall not disclose to the Arbitral Tribunal and to the other Parties the contents of the document reviewed. 8. If a Party wishes to obtain the production of documents from a person or organization who is not a Party to the arbitration and from whom the Party cannot obtain the documents on its own, the Party may, within the time ordered by the Arbitral Tribunal, ask it to take whatever steps are legally available to obtain the requested documents. The Party shall identify the documents in sufﬁcient detail and state why such documents are relevant and material to the outcome of the case. The Arbitral Tribunal shall decide on this request and shall take the necessary steps if in its discretion it determines that the documents would be relevant and material. 9. The Arbitral Tribunal, at any time before the arbitration is concluded, may request a Party to produce to the Arbitral Tribunal and to the other Parties any documents that it believes to be relevant and material to the outcome of the case. A Party may object to such a request based on any of the reasons set forth in Article 9.2. If a Party raises such an objection, the Arbitral Tribunal shall decide whether to order the production of such documents based upon the considerations set forth in Article 3.6 and, if the Arbitral Tribunal considers it appropriate, through the use of the procedures set forth in Article 3.7. IBA RULES

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10. Within the time ordered by the Arbitral Tribunal, the Parties may submit to the Arbitral Tribunal and to the other Parties any additional documents which they believe have become relevant and material as a consequence of the issues raised in documents, Witness Statements or Expert Reports submitted or produced by another Party or in other submissions of the Parties. 11. If copies are submitted or produced, they must conform fully to the originals. At the request of the Arbitral Tribunal, any original must be presented for inspection. 12. All documents produced by a Party pursuant to the IBA Rules of Evidence (or by a non-Party pursuant to Article 3.8) shall be kept conﬁdential by the Arbitral Tribunal and by the other Parties, and they shall be used only in connection with the arbitration. The Arbitral Tribunal may issue orders to set forth the terms of this conﬁdentiality. This requirement is without prejudice to all other obligations of conﬁdentiality in arbitration.

Article 4 Witnesses of Fact 1. Within the time ordered by the Arbitral Tribunal, each Party shall identify the witnesses on whose testimony it relies and the subject matter of that testimony. 2. Any person may present evidence as a witness, including a Party or a Party’s ofﬁcer, employee or other representative. 3. It shall not be improper for a Party, its ofﬁcers, employees, legal advisors or other representatives to interview its witnesses or potential witnesses. 4. The Arbitral Tribunal may order each Party to submit within a speciﬁed time to the Arbitral Tribunal and to the other Parties a written statement by each witness on whose testimony it relies, except for those witnesses whose testimony is sought pursuant to Article 4.10 (the “Witness Statement”). If Evidentiary Hearings are organized on separate issues (such as liability and damages), the Arbitral Tribunal or the Parties by agreement may schedule the submission of Witness Statements separately for each Evidentiary Hearing. 5. Each Witness Statement shall contain: (a) the full name and address of the witness, his or her present and past relationship (if any) with any of the Parties, and a description of his or her background, qualiﬁcations, training and experience, if such a description may be relevant and material to the dispute or to the contents of the statement; (b) a full and detailed description of the facts, and the source of the witness’s information as to those facts, sufﬁcient to serve as that witness’s evidence in the matter in dispute; (c) an afﬁrmation of the truth of the statement; and (d) the signature of the witness and its date and place.

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6. If Witness Statements are submitted, any Party may, within the time ordered by the Arbitral Tribunal, submit to the Arbitral Tribunal and to the other Parties revised or additional Witness Statements, including statements from persons not previously named as witnesses, so long as any such revisions or additions only respond to matters contained in another Party’s Witness Statement or Expert Report and such matters have not been previously presented in the arbitration. 7. Each witness who has submitted a Witness Statement shall appear for testimony at an Evidentiary Hearing, unless the Parties agree otherwise. 8. If a witness who has submitted a Witness Statement does not appear without a valid reason for testimony at an Evidentiary Hearing, except by agreement of the Parties, the Arbitral Tribunal shall disregard that Witness Statement unless, in exceptional circumstances, the Arbitral Tribunal determines otherwise. 9. If the Parties agree that a witness who has submitted a Witness Statement does not need to appear for testimony at an Evidentiary Hearing, such an agreement shall not be considered to reﬂect an agreement as to the correctness of the content of the Witness Statement. 10. If a Party wishes to present evidence from a person who will not appear voluntarily at its request, the Party may, within the time ordered by the Arbitral Tribunal, ask it to take whatever steps are legally available to obtain the testimony of that person. The Party shall identify the intended witness, shall describe the subjects on which the witness’s testimony is sought and shall state why such subjects are relevant and material to the outcome of the case. The Arbitral Tribunal shall decide on this request and shall take the necessary steps if in its discretion it determines that the testimony of that witness would be relevant and material. 11. The Arbitral Tribunal may, at any time before the arbitration is concluded, order any Party to provide, or to use its best efforts to provide, the appearance for testimony at an Evidentiary Hearing of any person, including one whose testimony has not yet been offered.

Article 5 Party-Appointed Experts 1. A Party may rely on a Party-Appointed Expert as a means of evidence on speciﬁc issues. Within the time ordered by the Arbitral Tribunal, a Party-Appointed Expert shall submit an Expert Report. 2. The Expert Report shall contain: (a) the full name and address of the Party-Appointed Expert, his or her present and past relationship (if any) with any of the Parties, and a description of his or her background, qualiﬁcations, training and experience; (b) a statement of the facts on which he or she is basing his or her expert opinions and conclusions;

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(c) his or her expert opinions and conclusions, including a description of the method, evidence and information used in arriving at the conclusions; (d) an afﬁrmation of the truth of the Expert Report; and (e) the signature of the Party-Appointed Expert and its date and place. 3. The Arbitral Tribunal in its discretion may order that any Party-Appointed Experts who have submitted Expert Reports on the same or related issues meet and confer on such issues. At such meeting, the Party-Appointed Experts shall attempt to reach agreement on those issues as to which they had differences of opinion in their Expert Reports, and they shall record in writing any such issues on which they reach agreement. 4. Each Party-Appointed Expert shall appear for testimony at an Evidentiary Hearing, unless the Parties agree otherwise and the Arbitral Tribunal accepts this agreement. 5. If a Party-Appointed Expert does not appear without a valid reason for testimony at an Evidentiary Hearing, except by agreement of the Parties accepted by the Arbitral Tribunal, the Arbitral Tribunal shall disregard his or her Expert Report unless, in exceptional circumstances, the Arbitral Tribunal determines otherwise. 6. If the Parties agree that a Party-Appointed Expert does not need to appear for testimony at an Evidentiary Hearing, such an agreement shall not be considered to reﬂect an agreement as to the correctness of the content of the Expert Report.

Article 6 Tribunal-Appointed Experts 1. The Arbitral Tribunal, after having consulted with the Parties, may appoint one or more independent Tribunal-Appointed Experts to report to it on speciﬁc issues designated by the Arbitral Tribunal. The Arbitral Tribunal shall establish the terms of reference for any Tribunal-Appointed Expert report after having consulted with the Parties. A copy of the ﬁnal terms of reference shall be sent by the Arbitral Tribunal to the Parties. 2. The Tribunal-Appointed Expert shall, before accepting appointment, submit to the Arbitral Tribunal and to the Parties a statement of his or her independence from the Parties and the Arbitral Tribunal. Within the time ordered by the Arbitral Tribunal, the Parties shall inform the Arbitral Tribunal whether they have any objections to the Tribunal-Appointed Expert’s independence. The Arbitral Tribunal shall decide promptly whether to accept any such objection. 3. Subject to the provisions of Article 9.2, the Tribunal-Appointed Expert may request a Party to provide any relevant and material information or to provide access to any relevant documents, goods, samples, property or site for inspection. The authority of a Tribunal-Appointed Expert to request such information or access shall be the same as the authority of the Arbitral Tribunal. The Parties and their representatives shall have the right to receive any such information and to attend any such inspection. Any disagreement between a Tribunal-Appointed Expert and a Party as to the relevance, materiality or appropriateness of such a request shall be decided by the Arbitral Tribunal, in 396

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the manner provided in Articles 3.5 through 3.7. The Tribunal-Appointed Expert shall record in the report any non-compliance by a Party with an appropriate request or decision by the Arbitral Tribunal and shall describe its effects on the determination of the speciﬁc issue. 4. The Tribunal-Appointed Expert shall report in writing to the Arbitral Tribunal. The Tribunal-Appointed Expert shall describe in the report the method, evidence and information used in arriving at the conclusions. 5. The Arbitral Tribunal shall send a copy of such Expert Report to the Parties. The Parties may examine any document that the Tribunal-Appointed Expert has examined and any correspondence between the Arbitral Tribunal and the Tribunal-Appointed Expert. Within the time ordered by the Arbitral Tribunal, any Party shall have the opportunity to respond to the report in a submission by the Party or through an Expert Report by a Party-Appointed Expert. The Arbitral Tribunal shall send the submission or Expert Report to the Tribunal-Appointed Expert and to the other Parties. 6. At the request of a Party or of the Arbitral Tribunal, the Tribunal-Appointed Expert shall be present at an Evidentiary Hearing. The Arbitral Tribunal may question the Tribunal-Appointed Expert, and he or she may be questioned by the Parties or by any Party-Appointed Expert on issues raised in the Parties’ submissions or in the Expert Reports made by the Party-Appointed Experts pursuant to Article 6.5. 7. Any Expert Report made by a Tribunal-Appointed Expert and its conclusions shall be assessed by the Arbitral Tribunal with due regard to all circumstances of the case. 8. The fees and expenses of a Tribunal-Appointed Expert, to be funded in a manner determined by the Arbitral Tribunal, shall form part of the costs of the arbitration.

Article 7 On Site Inspection Subject to the provisions of Article 9.2, the Arbitral Tribunal may, at the request of a Party or on its own motion, inspect or require the inspection by a Tribunal-Appointed Expert of any site, property, machinery or any other goods or process, or documents, as it deems appropriate. The Arbitral Tribunal shall, in consultation with the Parties, determine the timing and arrangement for the inspection. The Parties and their representatives shall have the right to attend any such inspection.

Article 8 Evidentiary Hearing 1. The Arbitral Tribunal shall at all times have complete control over the Evidentiary Hearing. The Arbitral Tribunal may limit or exclude any question to, answer by or appearance of a witness (which term includes, for the purposes of this Article, witnesses of fact and any Experts), if it considers such question, answer or appearance to be irrelevant, immaterial, burdensome, duplicative or covered by a reason for objection set forth in Article 9.2. Questions to a witness during direct and redirect testimony may not be unreasonably leading.

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2. The Claimant shall ordinarily ﬁrst present the testimony of its witnesses, followed by the Respondent presenting testimony of its witnesses, and then by the presentation by Claimant of rebuttal witnesses, if any. Following direct testimony, any other Party may question such witness, in an order to be determined by the Arbitral Tribunal. The Party who initially presented the witness shall subsequently have the opportunity to ask additional questions on the matters raised in the other Parties’ questioning. The Arbitral Tribunal, upon request of a Party or on its own motion, may vary this order of proceeding, including the arrangement of testimony by particular issues or in such a manner that witnesses presented by different Parties be questioned at the same time and in confrontation with each other. The Arbitral Tribunal may ask questions to a witness at any time. 3. Any witness providing testimony shall ﬁrst afﬁrm, in a manner determined appropriate by the Arbitral Tribunal, that he or she is telling the truth. If the witness has submitted a Witness Statement or an Expert Report, the witness shall conﬁrm it. The Parties may agree or the Arbitral Tribunal may order that the Witness Statement or Expert Report shall serve as that witness’s direct testimony. 4. Subject to the provisions of Article 9.2, the Arbitral Tribunal may request any person to give oral or written evidence on any issue that the Arbitral Tribunal considers to be relevant and material. Any witness called and questioned by the Arbitral Tribunal may also be questioned by the Parties.

Article 9 Admissibility and Assessment of Evidence 1. The Arbitral Tribunal shall determine the admissibility, relevance, materiality and weight of evidence. 2. The Arbitral Tribunal shall, at the request of a Party or on its own motion, exclude from evidence or production any document, statement, oral testimony or inspection for any of the following reasons: (a) lack of sufﬁcient relevance or materiality; (b) legal impediment or privilege under the legal or ethical rules determined by the Arbitral Tribunal to be applicable; (c) unreasonable burden to produce the requested evidence; (d) loss or destruction of the document that has been reasonably shown to have occurred; (e) grounds of commercial or technical conﬁdentiality that the Arbitral Tribunal determines to be compelling; (f) grounds of special political or institutional sensitivity (including evidence that has been classiﬁed as secret by a government or a public international institution) that the Arbitral Tribunal determines to be compelling; or (g) considerations of fairness or equality of the Parties that the Arbitral Tribunal determines to be compelling. 398

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3. The Arbitral Tribunal may, where appropriate, make necessary arrangements to permit evidence to be considered subject to suitable conﬁdentiality protection. 4. If a Party fails without satisfactory explanation to produce any document requested in a Request to Produce to which it has not objected in due time or fails to produce any document ordered to be produced by the Arbitral Tribunal, the Arbitral Tribunal may infer that such document would be adverse to the interests of that Party. 5. If a Party fails without satisfactory explanation to make available any other relevant evidence, including testimony, sought by one Party to which the Party to whom the request was addressed has not objected in due time or fails to make available any evidence, including testimony, ordered by the Arbitral Tribunal to be produced, the Arbitral Tribunal may infer that such evidence would be adverse to the interests of that Party.

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ICC Rules

in force as from 1 January 1998 Cost scales effective as of 1 January 2008 International Chamber of Commerce Tel. +33 1 49 53 29 05 Fax +33 1 49 53 29 33 E-mail [email protected] Of the various languages in which the ICC Rules of Arbitration maybe published, the English and French versions are the only ofﬁcial texts. ICC, the ICC logo, CCI, the CCI logo, International Chamber of Commerce (including Spanish, French, Portuguese and Chinese translations), World Business Organization, International Court of Arbitration, ICC International Court of Arbitration (including Spanish, French, German, Arabic and Portuguese translations) are all trademarks of ICC, registered in several countries. © International Chamber of Commerce (ICC) All rights reserved. This collective work was initiated by ICC which holds all rights as deﬁned in the French Code of Intellectual Property. No part of this publication may be reproduced or copied in any form or by any means, or translated, without the prior permission in writing of ICC.

Standard Icc Arbitration Clause It is recommended that all parties wishing to make reference to ICC arbitration in their contracts use the following standard clause. Parties are reminded that it may be desirable for them to stipulate in the arbitration clause itself the law governing the contract, the number of arbitrators and the place and language of the arbitration. The parties’ free choice of the law governing the contract and of the place and language of the arbitration is not limited by the ICC Rules of Arbitration.

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Attention is called to the fact that the laws of certain countries require that parties to contracts expressly accept arbitration clauses, sometimes in a precise and particular manner. “All disputes arising out of or in connection with the present contract shall be ﬁnally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules.” For translations of the above clause, please consult the web site of the ICC International Court of Arbitration: www.iccarbitration.org

Standard Clause for an ICC Pre-arbitral Referee Procedure and ICC Arbitration Parties wishing to have recourse to both the ICC pre-arbitral referee procedure and ICC arbitration should make speciﬁc reference to both procedures in their contracts. The following standard clause is recommended: “Any party to this contract shall have the right to have recourse to and shall be bound by the pre-arbitral referee procedure of the International Chamber of Commerce in accordance with its Rules for a Pre-Arbitral Referee Procedure. All disputes arising out of or in connection with the present contract shall be ﬁnally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules of Arbitration.” For translations of the above clause, please consult the web site of the ICC International Court of Arbitration: www.iccarbitration.org

Rules of Arbitration INTRODUCTORY PROVISIONS Article 1 International Court of Arbitration 1 The International Court of Arbitration (the “Court”) of the International Chamber of Commerce (the “ICC”) is the arbitration body attached to the ICC. The statutes of the Court are set forth in Appendix I. Members of the Court are appointed by the World Council of the ICC. The function of the Court is to provide for the settlement by arbitration of business disputes of an international character in accordance with the Rules of Arbitration of the International Chamber of Commerce (the “Rules”). If so empowered by an arbitration agreement, the Court shall also provide for the settlement

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by arbitration in accordance with these Rules of business disputes not of an international character. 2 The Court does not itself settle disputes. It has the function of ensuring the application of these Rules. It draws up its own Internal Rules (Appendix II). 3 The Chairman of the Court or, in the Chairman’s absence or otherwise at his request, one of its Vice-Chairmen shall have the power to take urgent decisions on behalf of the Court, provided that any such decision is reported to the Court at its next session. 4 As provided for in its Internal Rules, the Court may delegate to one or more committees composed of its members the power to take certain decisions, provided that any such decision is reported to the Court at its next session. 5 The Secretariat of the Court (the “Secretariat”) under the direction of its Secretary General (the “Secretary General”) shall have its seat at the headquarters of the ICC.

Article 2 Deﬁnitions In these Rules: (i) “Arbitral Tribunal” includes one or more arbitrators. (ii) “Claimant” includes one or more claimants and “Respondent” includes one or more respondents. (iii) “Award” includes, inter alia, an interim, partial or ﬁnal Award.

Article 3 Written Notiﬁcations or Communications; Time Limits 1 All pleadings and other written communications submitted by any party, as well as all documents annexed thereto, shall be supplied in a number of copies sufﬁcient to provide one copy for each party, plus one for each arbitrator, and one for the Secretariat. A copy of any communication from the Arbitral Tribunal to the parties shall be sent to the Secretariat. 2 All notiﬁcations or communications from the Secretariat and the Arbitral Tribunal shall be made to the last address of the party or its representative for whom the same are intended, as notiﬁed either by the party in question or by the other party. Such notiﬁcation or communication may be made by delivery against receipt, registered post, courier, facsimile transmission, telex, telegram or any other means of telecommunication that provides a record of the sending thereof. 3 A notiﬁcation or communication shall be deemed to have been made on the day it was received by the party itself or by its representative, or would have been received if made in accordance with the preceding paragraph. 4 Periods of time speciﬁed in or ﬁxed under the present Rules shall start to run on the day following the date a notiﬁcation or communication is deemed to have been made in accordance with the preceding paragraph. When the day next following such date is ICC RULES

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an ofﬁcial holiday, or a non-business day in the country where the notiﬁcation or communication is deemed to have been made, the period of time shall commence on the ﬁrst following business day. Ofﬁcial holidays and non-business days are included in the calculation of the period of time. If the last day of the relevant period of time granted is an ofﬁcial holiday or a non-business day in the country where the notiﬁcation or communication is deemed to have been made, the period of time shall expire at the end of the ﬁrst following business day.

Commencing The Arbitration Article 4 Request for Arbitration 1 A party wishing to have recourse to arbitration under these Rules shall submit its Request for Arbitration (the “Request”) to the Secretariat, which shall notify the Claimant and Respondent of the receipt of the Request and the date of such receipt. 2 The date on which the Request is received by the Secretariat shall, for all purposes, be deemed to be the date of the commencement of the arbitral proceedings. 3 The Request shall, inter alia, contain the following information: a) the name in full, description and address of each of the parties; b) a description of the nature and circumstances of the dispute giving rise to the claim(s); c) a statement of the relief sought, including, to the extent possible, an indication of any amount(s) claimed; d) the relevant agreements and, in particular, the arbitration agreement; e) all relevant particulars concerning the number of arbitrators and their choice in accordance with the provisions of Articles 8, 9 and 10, and any nomination of an arbitrator required thereby; and f) any comments as to the place of arbitration, the applicable rules of law and the language of the arbitration. 4 Together with the Request, the Claimant shall submit the number of copies thereof required by Article 3(1) and shall make the advance payment on administrative expenses required by Appendix III (“Arbitration Costs and Fees”) in force on the date the Request is submitted. In the event that the Claimant fails to comply with either of these requirements, the Secretariat may ﬁx a time limit within which the Claimant must comply, failing which the ﬁle shall be closed without prejudice to the right of the Claimant to submit the same claims at a later date in another Request. 5 The Secretariat shall send a copy of the Request and the documents annexed thereto to the Respondent for its Answer to the Request once the Secretariat has sufﬁcient copies of the Request and the required advance payment.

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6 When a party submits a Request in connection with a legal relationship in respect of which arbitration proceedings between the same parties are already pending under these Rules, the Court may, at the request of a party, decide to include the claims contained in the Request in the pending proceedings provided that the Terms of Reference have not been signed or approved by the Court. Once the Terms of Reference have been signed or approved by the Court, claims may only be included in the pending proceedings subject to the provisions of Article 19.

Article 5 Answer to the Request; Counterclaims 1 Within 30 days from the receipt of the Request from the Secretariat, the Respondent shall ﬁle an Answer (the “Answer”) which shall, inter alia, contain the following information: a) its name in full, description and address; b) its comments as to the nature and circumstances of the dispute giving rise to the claim(s); c) its response to the relief sought; d) any comments concerning the number of arbitrators and their choice in light of the Claimant’s proposals and in accordance with the provisions of Articles 8, 9 and 10, and any nomination of an arbitrator required thereby; and e) any comments as to the place of arbitration, the applicable rules of law and the language of the arbitration. 2 The Secretariat may grant the Respondent an extension of the time for ﬁling the Answer, provided the application for such an extension contains the Respondent’s comments concerning the number of arbitrators and their choice and, where required by Articles 8, 9 and 10, the nomination of an arbitrator. If the Respondent fails to do so, the Court shall proceed in accordance with these Rules. 3 The Answer shall be supplied to the Secretariat in the number of copies speciﬁed by Article 3 (1). 4 A copy of the Answer and the documents annexed thereto shall be communicated by the Secretariat to the Claimant. 5 Any counterclaim(s) made by the Respondent shall be ﬁled with its Answer and shall provide: a) a description of the nature and circumstances of the dispute giving rise to the counterclaim(s); and b) a statement of the relief sought, including, to the extent possible, an indication of any amount(s) counterclaimed. 6 The Claimant shall ﬁle a reply to any counterclaim within 30 days from the date of receipt of the counterclaim(s) communicated by the Secretariat. The Secretariat may grant the Claimant an extension of time for ﬁling the reply. ICC RULES

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Article 6 Effect of the Arbitration Agreement 1 Where the parties have agreed to submit to arbitration under the Rules, they shall be deemed to have submitted ipso facto to the Rules in effect on the date of commencement of the arbitration proceedings, unless they have agreed to submit to the Rules in effect on the date of their arbitration agreement. 2 If the Respondent does not ﬁle an Answer, as provided by Article 5, or if any party raises one or more pleas concerning the existence, validity or scope of the arbitration agreement, the Court may decide, without prejudice to the admissibility or merits of the plea or pleas, that the arbitration shall proceed if it is prima facie satisﬁed that an arbitration agreement under the Rules may exist. In such a case, any decision as to the jurisdiction of the Arbitral Tribunal shall be taken by the Arbitral Tribunal itself. If the Court is not so satisﬁed, the parties shall be notiﬁed that the arbitration cannot proceed. In such a case, any party retains the right to ask any court having jurisdiction whether or not there is a binding arbitration agreement. 3 If any of the parties refuses or fails to take part in the arbitration or any stage thereof, the arbitration shall proceed notwithstanding such refusal or failure. 4 Unless otherwise agreed, the Arbitral Tribunal shall not cease to have jurisdiction by reason of any claim that the contract is null and void or allegation that it is nonexistent, provided that the Arbitral Tribunal upholds the validity of the arbitration agreement. The Arbitral Tribunal shall continue to have jurisdiction to determine the respective rights of the parties and to adjudicate their claims and pleas even though the contract itself may be non-existent or null and void.

The Arbitral Tribunal Article 7 General Provisions 1 Every arbitrator must be and remain independent of the parties involved in the arbitration. 2 Before appointment or conﬁrmation, a prospective arbitrator shall sign a statement of independence and disclose in writing to the Secretariat any facts or circumstances which might be of such a nature as to call into question the arbitrator’s independence in the eyes of the parties. The Secretariat shall provide such information to the parties in writing and ﬁx a time limit for any comments from them. 3 An arbitrator shall immediately disclose in writing to the Secretariat and to the parties any facts or circumstances of a similar nature which may arise during the arbitration. 4 The decisions of the Court as to the appointment, conﬁrmation, challenge or replacement of an arbitrator shall be ﬁnal and the reasons for such decisions shall not be communicated.

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5 By accepting to serve, every arbitrator undertakes to carry out his responsibilities in accordance with these Rules. 6 Insofar as the parties have not provided otherwise, the Arbitral Tribunal shall be constituted in accordance with the provisions of Articles 8, 9 and 10.

Article 8 Number of Arbitrators 1 The disputes shall be decided by a sole arbitrator or by three arbitrators. 2 Where the parties have not agreed upon the number of arbitrators, the Court shall appoint a sole arbitrator, save where it appears to the Court that the dispute is such as to warrant the appointment of three arbitrators. In such case, the Claimant shall nominate an arbitrator within a period of 15 days from the receipt of the notiﬁcation of the decision of the Court, and the Respondent shall nominate an arbitrator within a period of 15 days from the receipt of the notiﬁcation of the nomination made by the Claimant. 3 Where the parties have agreed that the dispute shall be settled by a sole arbitrator, they may, by agreement, nominate the sole arbitrator for conﬁrmation. If the parties fail to nominate a sole arbitrator within 30 days from the date when the Claimant’s Request for Arbitration has been received by the other party, or within such additional time as may be allowed by the Secretariat, the sole arbitrator shall be appointed by the Court. 4 Where the dispute is to be referred to three arbitrators, each party shall nominate in the Request and the Answer, respectively, one arbitrator for conﬁrmation. If a party fails to nominate an arbitrator, the appointment shall be made by the Court. The third arbitrator, who will act as chairman of the Arbitral Tribunal, shall be appointed by the Court, unless the parties have agreed upon another procedure for such appointment, in which case the nomination will be subject to conﬁrmation pursuant to Article 9. Should such procedure not result in a nomination within the time limit ﬁxed by the parties or the Court, the third arbitrator shall be appointed by the Court.

Article 9 Appointment and Conﬁrmation of the Arbitrators 1 In conﬁrming or appointing arbitrators, the Court shall consider the prospective arbitrator’s nationality, residence and other relationships with the countries of which the parties or the other arbitrators are nationals and the prospective arbitrator’s availability and ability to conduct the arbitration in accordance with these Rules. The same shall apply where the Secretary General conﬁrms arbitrators pursuant to Article 9(2). 2 The Secretary General may conﬁrm as co-arbitrators, sole arbitrators and chairmen of Arbitral Tribunals persons nominated by the parties or pursuant to their particular agreements, provided they have ﬁled a statement of independence without qualiﬁcation or a qualiﬁed statement of independence has not given rise to objections. Such conﬁrmation shall be reported to the Court at its next session. If the Secretary General

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considers that a co-arbitrator, sole arbitrator or chairman of an Arbitral Tribunal should not be conﬁrmed, the matter shall be submitted to the Court. 3 Where the Court is to appoint a sole arbitrator or the chairman of an Arbitral Tribunal, it shall make the appointment upon a proposal of a National Committee of the ICC that it considers to be appropriate. If the Court does not accept the proposal made, or if the National Committee fails to make the proposal requested within the time limit ﬁxed by the Court, the Court may repeat its request or may request a proposal from another National Committee that it considers to be appropriate. 4 Where the Court considers that the circumstances so demand, it may choose the sole arbitrator or the chairman of the Arbitral Tribunal from a country where there is no National Committee, provided that neither of the parties objects within the time limit ﬁxed by the Court. 5 The sole arbitrator or the chairman of the Arbitral Tribunal shall be of a nationality other than those of the parties. However, in suitable circumstances and provided that neither of the parties objects within the time limit ﬁxed by the Court, the sole arbitrator or the chairman of the Arbitral Tribunal may be chosen from a country of which any of the parties is a national. 6 Where the Court is to appoint an arbitrator on behalf of a party which has failed to nominate one, it shall make the appointment upon a proposal of the National Committee of the country of which that party is a national. If the Court does not accept the proposal made, or if the National Committee fails to make the proposal requested within the time limit ﬁxed by the Court, or if the country of which the said party is a national has no National Committee, the Court shall be at liberty to choose any person whom it regards as suitable. The Secretariat shall inform the National Committee, if one exists, of the country of which such person is a national.

Article 10 Multiple Parties 1 Where there are multiple parties, whether as Claimant or as Respondent, and where the dispute is to be referred to three arbitrators, the multiple Claimants, jointly, and the multiple Respondents, jointly, shall nominate an arbitrator for conﬁrmation pursuant to Article 9. 2 In the absence of such a joint nomination and where all parties are unable to agree to a method for the constitution of the Arbitral Tribunal, the Court may appoint each member of the Arbitral Tribunal and shall designate one of them to act as chairman. In such case, the Court shall be at liberty to choose any person it regards as suitable to act as arbitrator, applying Article 9 when it considers this appropriate.

Article 11 Challenge of Arbitrators 1 A challenge of an arbitrator, whether for an alleged lack of independence or otherwise, shall be made by the submission to the Secretariat of a written statement specifying the facts and circumstances on which the challenge is based. 408

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2 For a challenge to be admissible, it must be sent by a party either within 30 days from receipt by that party of the notiﬁcation of the appointment or conﬁrmation of the arbitrator, or within 30 days from the date when the party making the challenge was informed of the facts and circumstances on which the challenge is based if such date is subsequent to the receipt of such notiﬁcation. 3 The Court shall decide on the admissibility and, at the same time, if necessary, on the merits of a challenge after the Secretariat has afforded an opportunity for the arbitrator concerned, the other party or parties and any other members of the Arbitral Tribunal to comment in writing within a suitable period of time. Such comments shall be communicated to the parties and to the arbitrators.

Article 12 Replacement of Arbitrators 1 An arbitrator shall be replaced upon his death, upon the acceptance by the Court of the arbitrator’s resignation, upon acceptance by the Court of a challenge, or upon the request of all the parties. 2 An arbitrator shall also be replaced on the Court’s own initiative when it decides that he is prevented de jure or de facto from fulﬁlling his functions, or that he is not fulﬁlling his functions in accordance with the Rules or within the prescribed time limits. 3 When, on the basis of information that has come to its attention, the Court considers applying Article 12(2), it shall decide on the matter after the arbitrator concerned, the parties and any other members of the Arbitral Tribunal have had an opportunity to comment in writing within a suitable period of time. Such comments shall be communicated to the parties and to the arbitrators. 4 When an arbitrator is to be replaced, the Court has discretion to decide whether or not to follow the original nominating process. Once reconstituted, and after having invited the parties to comment, the Arbitral Tribunal shall determine if and to what extent prior proceedings shall be repeated before the reconstituted Arbitral Tribunal. 5 Subsequent to the closing of the proceedings, instead of replacing an arbitrator who has died or been removed by the Court pursuant to Articles 12(1) and 12(2), the Court may decide, when it considers it appropriate, that the remaining arbitrators shall continue the arbitration. In making such determination, the Court shall take into account the views of the remaining arbitrators and of the parties and such other matters that it considers appropriate in the circumstances.

The Arbitral Proceedings Article 13 Transmission of the File to the Arbitral Tribunal The Secretariat shall transmit the ﬁle to the Arbitral Tribunal as soon as it has been constituted, provided the advance on costs requested by the Secretariat at this stage has been paid. ICC RULES

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Article 14 Place of the Arbitration 1 The place of the arbitration shall be ﬁxed by the Court unless agreed upon by the parties. 2 The Arbitral Tribunal may, after consultation with the parties, conduct hearings and meetings at any location it considers appropriate unless otherwise agreed by the parties. 3 The Arbitral Tribunal may deliberate at any location it considers appropriate.

Article 15 Rules Governing the Proceedings 1 The proceedings before the Arbitral Tribunal shall be governed by these Rules and, where these Rules are silent, by any rules which the parties or, failing them, the Arbitral Tribunal may settle on, whether or not reference is thereby made to the rules of procedure of a national law to be applied to the arbitration. 2 In all cases, the Arbitral Tribunal shall act fairly and impartially and ensure that each party has a reasonable opportunity to present its case.

Article 16 Language of the Arbitration In the absence of an agreement by the parties, the Arbitral Tribunal shall determine the language or languages of the arbitration, due regard being given to all relevant circumstances, including the language of the contract.

Article 17 Applicable Rules of Law 1 The parties shall be free to agree upon the rules of law to be applied by the Arbitral Tribunal to the merits of the dispute. In the absence of any such agreement, the Arbitral Tribunal shall apply the rules of law which it determines to be appropriate. 2 In all cases the Arbitral Tribunal shall take account of the provisions of the contract and the relevant trade usages. 3 The Arbitral Tribunal shall assume the powers of an amiable compositeur or decide ex aequo et bono only if the parties have agreed to give it such powers.

Article 18 Terms of Reference; Procedural Timetable 1 As soon as it has received the ﬁle from the Secretariat, the Arbitral Tribunal shall draw up, on the basis of documents or in the presence of the parties and in the light of their most recent submissions, a document deﬁning its Terms of Reference. This document shall include the following particulars: a) the full names and descriptions of the parties; b) the addresses of the parties to which notiﬁcations and communications arising in the course of the arbitration may be made; 410

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c) a summary of the parties’ respective claims and of the relief sought by each party, with an indication to the extent possible of the amounts claimed or counterclaimed; d) unless the Arbitral Tribunal considers it inappropriate, a list of issues to be determined; e) the full names, descriptions and addresses of the arbitrators; f) the place of the arbitration; and g) particulars of the applicable procedural rules and, if such is the case, reference to the power conferred upon the Arbitral Tribunal to act as amiable compositeur or to decide ex aequo et bono. 2 The Terms of Reference shall be signed by the parties and the Arbitral Tribunal. Within two months of the date on which the ﬁle has been transmitted to it, the Arbitral Tribunal shall transmit to the Court the Terms of Reference signed by it and by the parties. The Court may extend this time limit pursuant to a reasoned request from the Arbitral Tribunal or on its own initiative if it decides it is necessary to do so. 3 If any of the parties refuses to take part in the drawing up of the Terms of Reference or to sign the same, they shall be submitted to the Court for approval. When the Terms of Reference have been signed in accordance with Article 18(2) or approved by the Court, the arbitration shall proceed. 4 When drawing up the Terms of Reference, or as soon as possible thereafter, the Arbitral Tribunal, after having consulted the parties, shall establish in a separate document a provisional timetable that it intends to follow for the conduct of the arbitration and shall communicate it to the Court and the parties. Any subsequent modiﬁcations of the provisional timetable shall be communicated to the Court and the parties.

Article 19 New Claims After the Terms of Reference have been signed or approved by the Court, no party shall make new claims or counterclaims which fall outside the limits of the Terms of Reference unless it has been authorized to do so by the Arbitral Tribunal, which shall consider the nature of such new claims or counterclaims, the stage of the arbitration and other relevant circumstances.

Article 20 Establishing the Facts of the Case 1 The Arbitral Tribunal shall proceed within as short a time as possible to establish the facts of the case by all appropriate means. 2 After studying the written submissions of the parties and all documents relied upon, the Arbitral Tribunal shall hear the parties together in person if any of them so requests or, failing such a request, it may of its own motion decide to hear them.

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3 The Arbitral Tribunal may decide to hear witnesses, experts appointed by the parties or any other person, in the presence of the parties, or in their absence provided they have been duly summoned. 4 The Arbitral Tribunal, after having consulted the parties, may appoint one or more experts, deﬁne their terms of reference and receive their reports. At the request of a party, the parties shall be given the opportunity to question at a hearing any such expert appointed by the Tribunal. 5 At any time during the proceedings, the Arbitral Tribunal may summon any party to provide additional evidence. 6 The Arbitral Tribunal may decide the case solely on the documents submitted by the parties unless any of the parties requests a hearing. 7 The Arbitral Tribunal may take measures for protecting trade secrets and conﬁdential information.

Article 21 Hearings 1 When a hearing is to be held, the Arbitral Tribunal, giving reasonable notice, shall summon the parties to appear before it on the day and at the place ﬁxed by it. 2 If any of the parties, although duly summoned, fails to appear without valid excuse, the Arbitral Tribunal shall have the power to proceed with the hearing. 3 The Arbitral Tribunal shall be in full charge of the hearings, at which all the parties shall be entitled to be present. Save with the approval of the Arbitral Tribunal and the parties, persons not involved in the proceedings shall not be admitted. 4 The parties may appear in person or through duly authorized representatives. In addition, they may be assisted by advisers.

Article 22 Closing of the Proceedings 1 When it is satisﬁed that the parties have had a reasonable opportunity to present their cases, the Arbitral Tribunal shall declare the proceedings closed. Thereafter, no further submission or argument may be made, or evidence produced, unless requested or authorized by the Arbitral Tribunal. 2 When the Arbitral Tribunal has declared the proceedings closed, it shall indicate to the Secretariat an approximate date by which the draft Award will be submitted to the Court for approval pursuant to Article 27. Any postponement of that date shall be communicated to the Secretariat by the Arbitral Tribunal.

Article 23 Conservatory and Interim Measures 1 Unless the parties have otherwise agreed, as soon as the ﬁle has been transmitted to it, the Arbitral Tribunal may, at the request of a party, order any interim or conservatory 412

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measure it deems appropriate. The Arbitral Tribunal may make the granting of any such measure subject to appropriate security being furnished by the requesting party. Any such measure shall take the form of an order, giving reasons, or of an Award, as the Arbitral Tribunal considers appropriate. 2 Before the ﬁle is transmitted to the Arbitral Tribunal, and in appropriate circumstances even thereafter, the parties may apply to any competent judicial authority for interim or conservatory measures. The application of a party to a judicial authority for such measures or for the implementation of any such measures ordered by an Arbitral Tribunal shall not be deemed to be an infringement or a waiver of the arbitration agreement and shall not affect the relevant powers reserved to the Arbitral Tribunal. Any such application and any measures taken by the judicial authority must be notiﬁed without delay to the Secretariat. The Secretariat shall inform the Arbitral Tribunal thereof.

Awards Article 24 Time Limit for the Award 1 The time limit within which the Arbitral Tribunal must render its ﬁnal Award is six months. Such time limit shall start to run from the date of the last signature by the Arbitral Tribunal or by the parties of the Terms of Reference or, in the case of application of Article 18(3), the date of the notiﬁcation to the Arbitral Tribunal by the Secretariat of the approval of the Terms of Reference by the Court. 2 The Court may extend this time limit pursuant to a reasoned request from the Arbitral Tribunal or on its own initiative if it decides it is necessary to do so.

Article 25 Making of the Award 1 When the Arbitral Tribunal is composed of more than one arbitrator, an Award is given by a majority decision. If there be no majority, the Award shall be made by the chairman of the Arbitral Tribunal alone. 2 The Award shall state the reasons upon which it is based. 3 The Award shall be deemed to be made at the place of the arbitration and on the date stated therein.

Article 26 Award by Consent If the parties reach a settlement after the ﬁle has been transmitted to the Arbitral Tribunal in accordance with Article 13, the settlement shall be recorded in the form of an Award made by consent of the parties if so requested by the parties and if the Arbitral Tribunal agrees to do so.

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Article 27 Scrutiny of the Award by the Court Before signing any Award, the Arbitral Tribunal shall submit it in draft form to the Court. The Court may lay down modiﬁcations as to the form of the Award and, without affecting the Arbitral Tribunal’s liberty of decision, may also draw its attention to points of substance. No Award shall be rendered by the Arbitral Tribunal until it has been approved by the Court as to its form.

Article 28 Notiﬁcation, Deposit and Enforceability of the Award 1 Once an Award has been made, the Secretariat shall notify to the parties the text signed by the Arbitral Tribunal, provided always that the costs of the arbitration have been fully paid to the ICC by the parties or by one of them. 2 Additional copies certiﬁed true by the Secretary General shall be made available on request and at any time to the parties, but to no one else. 3 By virtue of the notiﬁcation made in accordance with Paragraph 1 of this Article, the parties waive any other form of notiﬁcation or deposit on the part of the Arbitral Tribunal. 4 An original of each Award made in accordance with the present Rules shall be deposited with the Secretariat. 5 The Arbitral Tribunal and the Secretariat shall assist the parties in complying with whatever further formalities may be necessary. 6 Every Award shall be binding on the parties. By submitting the dispute to arbitration under these Rules, the parties undertake to carry out any Award without delay and shall be deemed to have waived their right to any form of recourse insofar as such waiver can validly be made.

Article 29 Correction and Interpretation of the Award 1 On its own initiative, the Arbitral Tribunal may correct a clerical, computational or typographical error, or any errors of similar nature contained in an Award, provided such correction is submitted for approval to the Court within 30 days of the date of such Award. 2 Any application of a party for the correction of an error of the kind referred to in Article 29(1), or for the interpretation of an Award, must be made to the Secretariat within 30 days of the receipt of the Award by such party, in a number of copies as stated in Article 3 (1). After transmittal of the application to the Arbitral Tribunal, the latter shall grant the other party a short time limit, normally not exceeding 30 days, from the receipt of the application by that party, to submit any comments thereon. If the Arbitral Tribunal decides to correct or interpret the Award, it shall submit its decision in draft form to the Court not later than 30 days following the expiration of the time limit for the receipt of any comments from the other party or within such other period as the Court may decide. 414

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3 The decision to correct or to interpret the Award shall take the form of an addendum and shall constitute part of the Award. The provisions of Articles 25, 27 and 28 shall apply mutatis mutandis.

Costs Article 30 Advance to Cover the Costs of the Arbitration 1 After receipt of the Request, the Secretary General may request the Claimant to pay a provisional advance in an amount intended to cover the costs of arbitration until the Terms of Reference have been drawn up. 2 As soon as practicable, the Court shall ﬁx the advance on costs in an amount likely to cover the fees and expenses of the arbitrators and the ICC administrative costs for the claims and counterclaims which have been referred to it by the parties. This amount may be subject to readjustment at any time during the arbitration. Where, apart from the claims, counterclaims are submitted, the Court may ﬁx separate advances on costs for the claims and the counterclaims. 3 The advance on costs ﬁxed by the Court shall be payable in equal shares by the Claimant and the Respondent. Any provisional advance paid on the basis of Article 30(1) will be considered as a partial payment thereof. However, any party shall be free to pay the whole of the advance on costs in respect of the principal claim or the counterclaim should the other party fail to pay its share. When the Court has set separate advances on costs in accordance with Article 30(2), each of the parties shall pay the advance on costs corresponding to its claims. 4 When a request for an advance on costs has not been complied with, and after consultation with the Arbitral Tribunal, the Secretary General may direct the Arbitral Tribunal to suspend its work and set a time limit, which must be not less than 15 days, on the expiry of which the relevant claims, or counterclaims, shall be considered as withdrawn. Should the party in question wish to object to this measure, it must make a request within the aforementioned period for the matter to be decided by the Court. Such party shall not be prevented, on the ground of such withdrawal, from reintroducing the same claims or counterclaims at a later date in another proceeding. 5 If one of the parties claims a right to a set-off with regard to either claims or counterclaims, such set-off shall be taken into account in determining the advance to cover the costs of arbitration in the same way as a separate claim insofar as it may require the Arbitral Tribunal to consider additional matters.

Article 31 Decision as to the Costs of the Arbitration 1 The costs of the arbitration shall include the fees and expenses of the arbitrators and the ICC administrative expenses ﬁxed by the Court, in accordance with the scale in force at the time of the commencement of the arbitral proceedings, as well as the fees ICC RULES

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and expenses of any experts appointed by the Arbitral Tribunal and the reasonable legal and other costs incurred by the parties for the arbitration. 2 The Court may ﬁx the fees of the arbitrators at a ﬁgure higher or lower than that which would result from the application of the relevant scale should this be deemed necessary due to the exceptional circumstances of the case. Decisions on costs other than those ﬁxed by the Court may be taken by the Arbitral Tribunal at any time during the proceedings. 3 The ﬁnal Award shall ﬁx the costs of the arbitration and decide which of the parties shall bear them or in what proportion they shall be borne by the parties.

Miscellaneous Article 32 Modiﬁed Time Limits 1 The parties may agree to shorten the various time limits set out in these Rules. Any such agreement entered into subsequent to the constitution of an Arbitral Tribunal shall become effective only upon the approval of the Arbitral Tribunal. 2 The Court, on its own initiative, may extend any time limit which has been modiﬁed pursuant to Article 32(1) if it decides that it is necessary to do so in order that the Arbitral Tribunal or the Court may fulﬁl their responsibilities in accordance with these Rules.

Article 33 Waiver A party which proceeds with the arbitration without raising its objection to a failure to comply with any provision of these Rules, or of any other rules applicable to the proceedings, any direction given by the Arbitral Tribunal, or any requirement under the arbitration agreement relating to the constitution of the Arbitral Tribunal, or to the conduct of the proceedings, shall be deemed to have waived its right to object.

Article 34 Exclusion of Liability Neither the arbitrators, nor the Court and its members, nor the ICC and its employees, nor the ICC National Committees shall be liable to any person for any act or omission in connection with the arbitration.

Article 35 General Rule In all matters not expressly provided for in these Rules, the Court and the Arbitral Tribunal shall act in the spirit of these Rules and shall make every effort to make sure that the Award is enforceable at law.

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APPENDIX I Statutes of The International Court of Arbitration Article 1 Function 1 The function of the International Court of Arbitration of the International Chamber of Commerce (the “Court”) is to ensure the application of the Rules of Arbitration of the International Chamber of Commerce, and it has all the necessary powers for that purpose. 2 As an autonomous body, it carries out these functions in complete independence from the ICC and its organs. 3 Its members are independent from the ICC National Committees.

Article 2 Composition of the Court The Court shall consist of a Chairman, Vice-Chairmen, and members and alternate members (collectively designated as members). In its work it is assisted by its Secretariat (Secretariat of the Court).

Article 3 Appointment 1 The Chairman is elected by the ICC World Council upon the recommendation of the Executive Board of the ICC. 2 The ICC World Council appoints the Vice-Chairmen of the Court from among the members of the Court or otherwise. 3 Its members are appointed by the ICC World Council on the proposal of National Committees, one member for each Committee. 4 On the proposal of the Chairman of the Court, the World Council may appoint alternate members. 5 The term of ofﬁce of all members, including, for the purposes of this paragraph, the Chairman, Vice-Chairmen and alternate members, is three years. If a member is no longer in a position to exercise his functions, his successor is appointed by the World Council for the remainder of the term. Upon the recommendation of the Executive Board, the duration of the term of ofﬁce of any member may be extended beyond three years if the World Council so decides.

Article 4 Plenary Session of the Court The Plenary Sessions of the Court are presided over by the Chairman or, in his absence, by one of the Vice-Chairmen designated by him. The deliberations shall be valid when ICC RULES

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at least six members are present. Decisions are taken by a majority vote, the Chairman having a casting vote in the event of a tie.

Article 5 Committees The Court may set up one or more Committees and establish the functions and organization of such Committees.

Article 6 Conﬁdentiality The work of the Court is of a conﬁdential nature which must be respected by everyone who participates in that work in whatever capacity. The Court lays down the rules regarding the persons who can attend the meetings of the Court and its Committees and who are entitled to have access to the materials submitted to the Court and its Secretariat.

Article 7 Modiﬁcation of the Rules of Arbitration Any proposal of the Court for a modiﬁcation of the Rules is laid before the Commission on Arbitration before submission to the Executive Board and the World Council of the ICC for approval.

APPENDIX II Internal Rules of the International Court of Arbitration Article 1 Conﬁdential Character of the Work of the International Court of Arbitration 1 The sessions of the Court, whether plenary or those of a Committee of the Court, are open only to its members and to the Secretariat. 2 However, in exceptional circumstances, the Chairman of the Court may invite other persons to attend. Such persons must respect the conﬁdential nature of the work of the Court. 3 The documents submitted to the Court, or drawn up by it in the course of its proceedings, are communicated only to the members of the Court and to the Secretariat and to persons authorized by the Chairman to attend Court sessions. 4 The Chairman or the Secretary General of the Court may authorize researchers undertaking work of a scientiﬁc nature on international trade law to acquaint themselves with Awards and other documents of general interest, with the exception of

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memoranda, notes, statements and documents remitted by the parties within the framework of arbitration proceedings. 5 Such authorization shall not be given unless the beneﬁciary has undertaken to respect the conﬁdential character of the documents made available and to refrain from any publication in their respect without having previously submitted the text for approval to the Secretary General of the Court. 6 The Secretariat will in each case submitted to arbitration under the Rules retain in the archives of the Court all Awards, Terms of Reference and decisions of the Court, as well as copies of the pertinent correspondence of the Secretariat. 7 Any documents, communications or correspondence submitted by the parties or the arbitrators may be destroyed unless a party or an arbitrator requests in writing within a period ﬁxed by the Secretariat the return of such documents. All related costs and expenses for the return of those documents shall be paid by such party or arbitrator.

Article 2 Participation of Members of the International Court of Arbitration in ICC Arbitration 1 The Chairman and the members of the Secretariat of the Court may not act as arbitrators or as counsel in cases submitted to ICC arbitration. 2 The Court shall not appoint Vice-Chairmen or members of the Court as arbitrators. They may, however, be proposed for such duties by one or more of the parties, or pursuant to any other procedure agreed upon by the parties, subject to conﬁrmation. 3 When the Chairman, a Vice-Chairman or a member of the Court or of the Secretariat is involved in any capacity whatsoever in proceedings pending before the Court, such person must inform the Secretary General of the Court upon becoming aware of such involvement. 4 Such person must refrain from participating in the discussions or in the decisions of the Court concerning the proceedings and must be absent from the courtroom whenever the matter is considered. 5 Such person will not receive any material documentation or information pertaining to such proceedings.

Article 3 Relations between the Members of the Court and the ICC National Committees 1 By virtue of their capacity, the members of the Court are independent of the ICC National Committees which proposed them for appointment by the ICC World Council. 2 Furthermore, they must regard as conﬁdential, vis-à-vis the said National Committees, any information concerning individual cases with which they have become acquainted

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in their capacity as members of the Court, except when they have been requested by the Chairman of the Court or by its Secretary General to communicate speciﬁc information to their respective National Committees.

Article 4 Committee of the Court 1 In accordance with the provisions of Article 1(4) of the Rules and Article 5 of its Statutes (Appendix I), the Court hereby establishes a Committee of the Court. 2 The members of the Committee consist of a Chairman and at least two other members. The Chairman of the Court acts as the Chairman of the Committee. If absent, the Chairman may designate a Vice-Chairman of the Court or, in exceptional circumstances, another member of the Court as Chairman of the Committee. 3 The other two members of the Committee are appointed by the Court from among the Vice-Chairmen or the other members of the Court. At each Plenary Session the Court appoints the members who are to attend the meetings of the Committee to be held before the next Plenary Session. 4 The Committee meets when convened by its Chairman. Two members constitute a quorum. 5 (a) The Court shall determine the decisions that may be taken by the Committee. (b) The decisions of the Committee are taken unanimously. (c) When the Committee cannot reach a decision or deems it preferable to abstain, it transfers the case to the next Plenary Session, making any suggestions it deems appropriate. (d) The Committee’s decisions are brought to the notice of the Court at its next Plenary Session.

Article 5 Court Secretariat 1 In case of absence, the Secretary General may delegate to the Deputy Secretary General and/or the General Counsel the authority to conﬁrm arbitrators, to certify true copies of Awards and to request the payment of a provisional advance, respectively provided for in Articles 9(2), 28(2) and 30(1) of the Rules. 2 The Secretariat may, with the approval of the Court, issue notes and other documents for the information of the parties and the arbitrators, or as necessary for the proper conduct of the arbitral proceedings. 3 Branches of the Secretariat may be established outside the headquarters of the ICC. The Secretariat shall keep a list of ofﬁces designated as branches by the Secretary General. Requests for Arbitration may be submitted to the Secretariat at its seat or at any of its branches, and the Secretariat’s functions under the Rules may be carried out

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from its seat or any of its branches, as instructed by the Secretary General, Deputy Secretary General or General Counsel.

Article 6 Scrutiny of Arbitral Awards When the Court scrutinizes draft Awards in accordance with Article 27 of the Rules, it considers, to the extent practicable, the requirements of mandatory law at the place of arbitration.

APPENDIX III Arbitration Costs and Fees Article 1 Advance on Costs 1 Each request to commence an arbitration pursuant to the Rules must be accompanied by an advance payment of US$ 2,500 on the administrative expenses. Such payment is non-refundable, and shall be credited to the Claimant’s portion of the advance on costs. 2 The provisional advance ﬁxed by the Secretary General according to Article 30(1) of the Rules shall normally not exceed the amount obtained by adding together the administrative expenses, the minimum of the fees (as set out in the scale hereinafter) based upon the amount of the claim and the expected reimbursable expenses of the Arbitral Tribunal incurred with respect to the drafting of the Terms of Reference. If such amount is not quantiﬁed, the provisional advance shall be ﬁxed at the discretion of the Secretary General. Payment by the Claimant shall be credited to its share of the advance on costs ﬁxed by the Court. 3 In general, after the Terms of Reference have been signed or approved by the Court and the provisional timetable has been established, the Arbitral Tribunal shall, in accordance with Article 30(4) of the Rules, proceed only with respect to those claims or counterclaims in regard to which the whole of the advance on costs has been paid. 4 The advance on costs ﬁxed by the Court according to Article 30(2) of the Rules comprises the fees of the arbitrator or arbitrators (hereinafter referred to as “arbitrator”), any arbitration-related expenses of the arbitrator and the administrative expenses. 5 Each party shall pay in cash its share of the total advance on costs. However, if its share exceeds an amount ﬁxed from time to time by the Court, a party may post a bank guarantee for this additional amount. 6 A party that has already paid in full its share of the advance on costs ﬁxed by the Court may, in accordance with Article 30(3) of the Rules, pay the unpaid portion of the advance owed by the defaulting party by posting a bank guarantee.

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7 When the Court has ﬁxed separate advances on costs pursuant to Article 30(2) of the Rules, the Secretariat shall invite each party to pay the amount of the advance corresponding to its respective claim(s). 8 When, as a result of the ﬁxing of separate advances on costs, the separate advance ﬁxed for the claim of either party exceeds one half of such global advance as was previously ﬁxed (in respect of the same claims and counterclaims that are the subject of separate advances), a bank guarantee may be posted to cover any such excess amount. In the event that the amount of the separate advance is subsequently increased, at least one half of the increase shall be paid in cash. 9 The Secretariat shall establish the terms governing all bank guarantees which the parties may post pursuant to the above provisions. 10 As provided in Article 30(2) of the Rules, the advance on costs may be subject to readjustment at any time during the arbitration, in particular to take into account ﬂuctuations in the amount in dispute, changes in the amount of the estimated expenses of the arbitrator, or the evolving difﬁculty or complexity of arbitration proceedings. 11 Before any expertise ordered by the Arbitral Tribunal can be commenced, the parties, or one of them, shall pay an advance on costs ﬁxed by the Arbitral Tribunal sufﬁcient to cover the expected fees and expenses of the expert as determined by the Arbitral Tribunal. The Arbitral Tribunal shall be responsible for ensuring the payment by the parties of such fees and expenses.

Article 2 Costs and Fees 1 Subject to Article 31(2) of the Rules, the Court shall ﬁx the fees of the arbitrator in accordance with the scale hereinafter set out or, where the sum in dispute is not stated, at its discretion. 2 In setting the arbitrator’s fees, the Court shall take into consideration the diligence of the arbitrator, the time spent, the rapidity of the proceedings, and the complexity of the dispute, so as to arrive at a ﬁgure within the limits speciﬁed or, in exceptional circumstances (Article 31(2) of the Rules), at a ﬁgure higher or lower than those limits. 3 When a case is submitted to more than one arbitrator, the Court, at its discretion, shall have the right to increase the total fees up to a maximum which shall normally not exceed three times the fees of one arbitrator. 4 The arbitrator’s fees and expenses shall be ﬁxed exclusively by the Court as required by the Rules. Separate fee arrangements between the parties and the arbitrator are contrary to the Rules. 5 The Court shall ﬁx the administrative expenses of each arbitration in accordance with the scale hereinafter set out or, where the sum in dispute is not stated, at its discretion. In exceptional circumstances, the Court may ﬁx the administrative expenses at a lower or higher ﬁgure than that which would result from the application of such scale, provided that

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such expenses shall normally not exceed the maximum amount of the scale. Further, the Court may require the payment of administrative expenses in addition to those provided in the scale of administrative expenses as a condition to holding an arbitration in abeyance at the request of the parties or of one of them with the acquiescence of the other. 6 If an arbitration terminates before the rendering of a ﬁnal Award, the Court shall ﬁx the costs of the arbitration at its discretion, taking into account the stage attained by the arbitral proceedings and any other relevant circumstances. 7 In the case of an application under Article 29(2) of the Rules, the Court may ﬁx an advance to cover additional fees and expenses of the Arbitral Tribunal and may make the transmission of such application to the Arbitral Tribunal subject to the prior cash payment in full to the ICC of such advance. The Court shall ﬁx at its discretion any possible fees of the arbitrator when approving the decision of the Arbitral Tribunal. 8 When an arbitration is preceded by an attempt at amicable resolution pursuant to the ICC ADR Rules, one half of the administrative expenses paid for such ADR proceedings shall be credited to the administrative expenses of the arbitration. 9 Amounts paid to the arbitrator do not include any possible value added taxes (VAT) or other taxes or charges and imposts applicable to the arbitrator’s fees. Parties have a duty to pay any such taxes or charges; however, the recovery of any such charges or taxes is a matter solely between the arbitrator and the parties.

Article 3 ICC as Appointing Authority Any request received for an authority of the ICC to act as appointing authority will be treated in accordance with the Rules of ICC as Appointing Authority in UNCITRAL or Other Ad Hoc Arbitration Proceedings and shall be accompanied by a non-refundable sum of US$ 2,500. No request shall be processed unless accompanied by the said sum. For additional services, ICC may at its discretion ﬁx administrative expenses, which shall be commensurate with the services provided and shall not exceed the maximum sum of US$ 10,000.

Article 4 Scales of Administrative Expenses and Arbitrator’s Fees 1 The Scales of Administrative Expenses and Arbitrator’s Fees set forth below shall be effective as of 1 January 2008 in respect of all arbitrations commenced on or after such date, irrespective of the version of the Rules applying to such arbitrations. 2 To calculate the administrative expenses and the arbitrator’s fees, the amounts calculated for each successive slice of the sum in dispute must be added together, except that where the sum in dispute is over US$ 80 million, a ﬂat amount of US$ 88,800 shall constitute the entirety of the administrative expenses.

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A. ADMINISTRATIVE EXPENSES Administrative expenses(*)

Sum in dispute (in US Dollars) up to

50 000

$2 500

from

50 001

to

100 000

4.30%

from

100 001

to

200 000

2.30%

from

200 001

to

500 000

1.90%

from

500 001

to

1 000 000

1.37%

from

1 000 001

to

2 000 000

0.86%

from

2 000 001

to

5 000 000

0.41%

from

5 000 001

to

10 000 000

0.22%

from

10 000 001

to

30 000 000

0.09%

from

30 000 001

to

50 000 000

0.08%

from

50 000 001

to

80 000 000

0.01%

over

80 000 000

$ 88 800

(*)

For illustrative purposes only, the table on the following page indicates the resulting administrative expenses in US$ when the proper calculations have been made.

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B. ARBITRATOR’S FEES Fees(**)

Sum in dispute (in US Dollars)

minimum up to

50 000

from

50 001

to

from

100 001

from

maximum

$2 500

17.00%

100 000

2.50%

12.80%

to

200 000

1.35%

7.25%

200 001

to

500 000

1.29%

6.45%

from

500 001

to

1 000 000

0.90%

3.80%

from

1 000 001

to

2 000 000

0.65%

3.40%

from

2 000 001

to

5 000 000

0.35%

1.30%

from

5 000 001

to

10 000 000

0.12%

0.85%

from

10 000 001

to

30 000 000

0.06%

0.225%

from

30 000 001

to

50 000 000

0.056%

0.215%

from

50 000 001

to

80 000 000

0.031%

0.152%

from

80 000 001

to

100 000 000

0.02%

0.112%

over

100 000 000

0.01%

0.056%

(**)

For illustrative purposes only, the table on the following page indicates the resulting administrative expenses in US$ when the proper calculations have been made.

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425

SUM in DISPUTE (in US Dollars)

up to

A. ADMINISTRATIVE EXPENSES (*)(in US Dollars) 50 000

2 500

from

50 001

to

100 000

2 500 +

4.30% of amt. over

50 000

from

100 001

to

200 000

4 650 +

2.30% of amt. over

100 000

from

200 001

to

500 000

6 950 +

1.90% of amt. over

200 000

from

500 001

to

1 000 000

12 650 +

1.37% of amt. over

500 000

from

1 000 001

to

2 000 000

19 500 +

0.86% of amt. over

1 000 000

from

2 000 001

to

5 000 000

28 100 +

0.41% of amt. over

2 000 000

from

5 000 001

to

10 000 000

40 400 +

0.22% of amt. over

5 000 000

from

10 000 001

to

30 000 000

51 400 +

0.09% of amt. over

10 000 000

from

30 000 001

to

50 000 000

69 400 +

0.08% of amt. over

30 000 000

from

50 000 001

to

80 000 000

85 400 +

0.01% of amt. over

50 000 000

from

80 000 001

to

100 000 000

over

100 000 000

88 800 88 800

(*) (**) See preceding page

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B. ARBITRATOR’S FEES (*) (in US Dollars) Minimum

Maximum

2 500

17,00%

of amount in dispute

2 500 +

2.50% of amt. over

50 000

8 500 +

12.80%

of amt. over

50 000

3 750 +

1.35% of amt. over

100 000

14 900 +

7.25%

of amt. over

100 000

5 100 +

1.29% of amt. over

200 000

22 150 +

6.45%

of amt. over

200 000

8 970 +

0.90% of amt. over

500 000

41 500 +

3.80%

of amt. over

500 000

13 470 +

0.65% of amt. over

1 000 000

10 000 +

3.40%

of amt. over

1 000 000

19 970 +

0.35% of amt. over

2 000 000

94 500 +

1.30%

of amt. over

2 000 000

30 470 +

0.12% of amt. over

5 000 000

133 500 +

0.85%

of amt. over

5 000 000

36 470 +

0.06% of amt. over

10 000 000

176 000 +

0.225%

of amt. over

10 000 000

48 470 +

0.056% of amt. over

30 000 000

221 000 +

0.215%

of amt. over

30 000 000

59 670 +

0.031% of amt. over

50 000 000

264 000 +

0.152%

of amt. over

50 000 000

68 970 +

0.02% of amt. over

80 000 000

309 600 +

0.112%

of amt. over

80 000 000

72 970 +

0.01% of amt. over

100 000 000

332 000 +

0.056%

of amt. over

100 000 000

ICC RULES

427

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LCIA Rules

LONDON COURT OF INTERNATIONAL ARBITRATION (LCIA) RULES1 (adopted to take effect for arbitrations commencing on or after 1 January 1998) Where any agreement, submission or reference provides in writing and in whatsoever manner for arbitration under the rules of the LCIA or by the Court of the LCIA (“the LCIA Court”), the parties shall be taken to have agreed in writing that the arbitration shall be conducted in accordance with the following rules (“the Rules”) or such amended rules as the LCIA may have adopted hereafter to take effect before the commencement of the arbitration. The Rules include the Schedule of Costs in effect at the commencement of the arbitration, as separately amended from time to time by the LCIA Court.

Article 1 The Request for Arbitration 1.1 Any party wishing to commence an arbitration under these Rules (“the Claimant”) shall send to the Registrar of the LCIA Court (“the Registrar”) a written request for arbitration (“the Request”), containing or accompanied by: (a) the names, addresses, telephone, facsimile, telex and e-mail numbers (if known) of the parties to the arbitration and of their legal representatives; (b) a copy of the written arbitration clause or separate written arbitration agreement invoked by the Claimant (“the Arbitration Agreement”), together with a copy of the contractual documentation in which the arbitration clause is contained or in respect of which the arbitration arises; (c) a brief statement describing the nature and circumstances of the dispute, and specifying the claims advanced by the Claimant against another party to the arbitration (“the Respondent”);

1

Reproduced with permission. 429

(d) a statement of any matters (such as the seat or language(s) of the arbitration, or the number of arbitrators, or their qualiﬁcations or identities) on which the parties have already agreed in writing for the arbitration or in respect of which the Claimant wishes to make a proposal; (e) if the Arbitration Agreement calls for party nomination of arbitrators, the name, address, telephone, facsimile, telex and e-mail numbers (if known) of the Claimant’s nominee; (f) the fee prescribed in the Schedule of Costs (without which the Request shall be treated as not having been received by the Registrar and the arbitration as not having been commenced); (g) conﬁrmation to the Registrar that copies of the Request (including all accompanying documents) have been or are being served simultaneously on all other parties to the arbitration by one or more means of service to be identiﬁed in such conﬁrmation. 1.2 The date of receipt by the Registrar of the Request shall be treated as the date on which the arbitration has commenced for all purposes. The Request (including all accompanying documents) should be submitted to the Registrar in two copies where a sole arbitrator should be appointed, or, if the parties have agreed or the Claimant considers that three arbitrators should be appointed, in four copies.

Article 2 The Response 2.1 Within 30 days of service of the Request on the Respondent, (or such lesser period ﬁxed by the LCIA Court), the Respondent shall send to the Registrar a written response to the Request (“the Response”), containing or accompanied by: (a) conﬁrmation or denial of all or part of the claims advanced by the Claimant in the Request; (b) a brief statement describing the nature and circumstances of any counterclaims advanced by the Respondent against the Claimant; (c) comment in response to any statements contained in the Request, as called for under Article 1.1(d), on matters relating to the conduct of the arbitration; (d) if the Arbitration Agreement calls for party nomination of arbitrators, the name, address, telephone, facsimile, telex and e-mail numbers (if known) of the Respondent’s nominee; and (e) conﬁrmation to the Registrar that copies of the Response (including all accompanying documents) have been or are being served simultaneously on all other parties to the arbitration by one or more means of service to be identiﬁed in such conﬁrmation. 2.2 The Response (including all accompanying documents) should be submitted to the Registrar in two copies, or if the parties have agreed or the Respondent considers that three arbitrators should be appointed, in four copies. 430

LCIA RULES

2.3 Failure to send a Response shall not preclude the Respondent from denying any claim or from advancing a counterclaim in the arbitration. However, if the Arbitration Agreement calls for party nomination of arbitrators, failure to send a Response or to nominate an arbitrator within time or at all shall constitute an irrevocable waiver of that party’s opportunity to nominate an arbitrator.

Article 3 The LCIA Court and Registrar 3.1 The functions of the LCIA Court under these Rules shall be performed in its name by the President or a Vice President of the LCIA Court or by a division of three or ﬁve members of the LCIA Court appointed by the President or a Vice President of the LCIA Court, as determined by the President. 3.2 The functions of the Registrar under these Rules shall be performed by the Registrar or any deputy Registrar of the LCIA Court under the supervision of the LCIA Court. 3.3 All communications from any party or arbitrator to the LCIA Court shall be addressed to the Registrar.

Article 4 Notices and Periods of Time 4.1 Any notice or other communication that may be or is required to be given by a party under these Rules shall be in writing and shall be delivered by registered postal or courier service or transmitted by facsimile, telex, email or any other means of telecommunication that provide a record of its transmission. 4.2 A party’s last-known residence or place of business during the arbitration shall be a valid address for the purpose of any notice or other communication in the absence of any notiﬁcation of a change to such address by that party to the other parties, the Arbitral Tribunal and the Registrar. 4.3 For the purpose of determining the date of commencement of a time limit, a notice or other communication shall be treated as having been received on the day it is delivered or, in the case of telecommunications, transmitted in accordance with Articles 4.1 and 4.2. 4.4 For the purpose of determining compliance with a time limit, a notice or other communication shall be treated as having been sent, made or transmitted if it is dispatched in accordance with Articles 4.1 and 4.2 prior to or on the date of the expiration of the time-limit. 4.5 Notwithstanding the above, any notice or communication by one party may be addressed to another party in the manner agreed in writing between them or, failing such agreement, according to the practice followed in the course of their previous dealings or in whatever manner ordered by the Arbitral Tribunal. 4.6 For the purpose of calculating a period of time under these Rules, such period shall begin to run on the day following the day when a notice or other communication

LCIA RULES

431

is received. If the last day of such period is an ofﬁcial holiday or a non-business day at the residence or place of business of the addressee, the period is extended until the ﬁrst business day which follows. Ofﬁcial holidays or non-business days occurring during the running of the period of time are included in calculating that period. 4.7 The Arbitral Tribunal may at any time extend (even where the period of time has expired) or abridge any period of time prescribed under these Rules or under the Arbitration Agreement for the conduct of the arbitration, including any notice or communication to be served by one party on any other party.

Article 5 Formation of the Arbitral Tribunal 5.1 The expression “the Arbitral Tribunal” in these Rules includes a sole arbitrator or all the arbitrators where more than one. All references to an arbitrator shall include the masculine and feminine. (References to the President, Vice President and members of the LCIA Court, the Registrar or deputy Registrar, expert, witness, party and legal representative shall be similarly understood). 5.2 All arbitrators conducting an arbitration under these Rules shall be and remain at all times impartial and independent of the parties; and none shall act in the arbitration as advocates for any party. No arbitrator, whether before or after appointment, shall advise any party on the merits or outcome of the dispute. 5.3 Before appointment by the LCIA Court, each arbitrator shall furnish to the Registrar a written sum of his past and present professional positions; he shall agree in writing upon fee rates conforming to the Schedule of Costs; and he shall sign a declaration to the effect that there are no circumstances known to him likely to give rise to any justiﬁed doubts as to his impartiality or independence, other than any circumstances disclosed by him in the declaration. Each arbitrator shall thereby also assume a continuing duty forthwith to disclose any such circumstances to the LCIA Court, to any other members of the Arbitral Tribunal and to all the parties if such circumstances should arise after the date of such declaration and before the arbitration is concluded. 5.4 The LCIA Court shall appoint the Arbitral Tribunal as soon as practicable after receipt by the Registrar of the Response or after the expiry of 30 days following service of the Request upon the Respondent if no Response is received by the Registrar (or such lesser period ﬁxed by the LCIA Court). The LCIA Court may proceed with the formation of the Arbitral Tribunal notwithstanding that the Request is incomplete or the Response is missing, late or incomplete. A sole arbitrator shall be appointed unless the parties have agreed in writing otherwise, or unless the LCIA Court determines that in view of all the circumstances of the case a three-member tribunal is appropriate. 5.5 The LCIA Court alone is empowered to appoint arbitrators. The LCIA Court will appoint arbitrators with due regard for any particular method or criteria of selection agreed in writing by the parties. In selecting arbitrators consideration will be given to the nature of the transaction, the nature and circumstances of the dispute, the nationality, location and languages of the parties and (if more than two) the number of parties. 432

LCIA RULES

5.6 In the case of a three-member Arbitral Tribunal, the chairman (who will not be a party-nominated arbitrator) shall be appointed by the LCIA Court.

Article 6 Nationality of Arbitrators 6.1 Where the parties are of different nationalities, a sole arbitrator or chairman of the Arbitral Tribunal shall not have the same nationality as any party unless the parties who are not of the same nationality as the proposed appointee all agree in writing otherwise. 6.2 The nationality of parties shall be understood to include that of controlling shareholders or interests. 6.3 For the purpose of this Article, a person who is a citizen of two or more states shall be treated as a national of each state; and citizens of the European Union shall be treated as nationals of its different Member States and shall not be treated as having the same nationality.

Article 7 Party and Other Nominations 7.1 If the parties have agreed that any arbitrator is to be appointed by one or more of them or by any third person, that agreement shall be treated as an agreement to nominate an arbitrator for all purposes. Such nominee may only be appointed by the LCIA Court as arbitrator subject to his prior compliance with Article 5.3. The LCIA Court may refuse to appoint any such nominee if it determines that he is not suitable or independent or impartial. 7.2 Where the parties have howsoever agreed that the Respondent or any third person is to nominate an arbitrator and such nomination is not made within time or at all, the LCIA Court may appoint an arbitrator notwithstanding the absence of the nomination and without regard to any late nomination. Likewise, if the Request for Arbitration does not contain a nomination by the Claimant where the parties have howsoever agreed that the Claimant or a third person is to nominate an arbitrator, the LCIA Court may appoint an arbitrator notwithstanding the absence of the nomination and without regard to any late nomination.

Article 8 Three or More Parties 8.1 Where the Arbitration Agreement entitles each party howsoever to nominate an arbitrator, the parties to the dispute number more than two and such parties have not all agreed in writing that the disputant parties represent two separate sides for the formation of the Arbitral Tribunal as Claimant and Respondent respectively, the LCIA Court shall appoint the Arbitral Tribunal without regard to any party’s nomination. 8.2 In such circumstances, the Arbitration Agreement shall be treated for all purposes as a written agreement by the parties for the appointment of the Arbitral Tribunal by the LCIA Court. LCIA RULES

433

Article 9 Expedited Formation 9.1 In exceptional urgency, on or after the commencement of the arbitration, any party may apply to the LCIA Court for the expedited formation of the Arbitral Tribunal, including the appointment of any replacement arbitrator under Articles 10 and 11 of these Rules. 9.2 Such an application shall be made in writing to the LCIA Court, copied to all other parties to the arbitration; and it shall set out the speciﬁc grounds for exceptional urgency in the formation of the Arbitral Tribunal. 9.3 The LCIA Court may, in its complete discretion, abridge or curtail any time-limit under these Rules for the formation of the Arbitral Tribunal, including service of the Response and of any matters or documents adjudged to be missing from the Request. The LCIA Court shall not be entitled to abridge or curtail any other time-limit.

Article 10 Revocation of Arbitrator’s Appointment 10.1 If either (a) any arbitrator gives written notice of his desire to resign as arbitrator to the LCIA Court, to be copied to the parties and the other arbitrators (if any) or (b) any arbitrator dies, falls seriously ill, refuses, or becomes unable or unﬁt to act, either upon challenge by a party or at the request of the remaining arbitrators, the LCIA Court may revoke that arbitrator’s appointment and appoint another arbitrator. The LCIA Court shall decide upon the amount of fees and expenses to be paid for the former arbitrator’s services (if any) as it may consider appropriate in all the circumstances. 10.2 If any arbitrator acts in deliberate violation of the Arbitration Agreement (including these Rules) or does not act fairly and impartially as between the parties or does not conduct or participate in the arbitration proceedings with reasonable diligence, avoiding unnecessary delay or expense, that arbitrator may be considered unﬁt in the opinion of the LCIA Court. 10.3 An arbitrator may also be challenged by any party if circumstances exist that give rise to justiﬁable doubts as to his impartiality or independence. A party may challenge an arbitrator it has nominated, or in whose appointment it has participated, only for reasons of which it becomes aware after the appointment has been made. 10.4 A party who intends to challenge an arbitrator shall, within 15 days of the formation of the Arbitral Tribunal or (if later) after becoming aware of any circumstances referred to in Article 10.1, 10.2 or 10.3, send a written statement of the reasons for its challenge to the LCIA Court, the Arbitral Tribunal and all other parties. Unless the challenged arbitrator withdraws or all other parties agree to the challenge within 15 days of receipt of the written statement, the LCIA Court shall decide on the challenge.

434

LCIA RULES

Article 11 Nomination and Replacement of Arbitrators 11.1 In the event that the LCIA Court determines that any nominee is not suitable or independent or impartial or if an appointed arbitrator is to be replaced for any reason, the LCIA Court shall have a complete discretion to decide whether or not to follow the original nominating process. 11.2 If the LCIA Court should so decide, any opportunity given to a party to make a re-nomination shall be waived if not exercised within 15 days (or such lesser time as the LCIA Court may ﬁx), after which the LCIA Court shall appoint the replacement arbitrator.

Article 12 Majority Power to Continue Proceedings 12.1 If any arbitrator on a three-member Arbitral Tribunal refuses or persistently fails to participate in its deliberations, the two other arbitrators shall have the power, upon their written notice of such refusal or failure to the LCIA Court, the parties and the third arbitrator, to continue the arbitration (including the making of any decision, ruling or award), notwithstanding the absence of the third arbitrator. 12.2 In determining whether to continue the arbitration, the two other arbitrators shall take into account the stage of the arbitration, any explanation made by the third arbitrator for his non-participation and such other matters as they consider appropriate in the circumstances of the case. The reasons for such determination shall be stated in any award, order or other decision made by the two arbitrators without the participation of the third arbitrator. 12.3 In the event that the two other arbitrators determine at any time not to continue the arbitration without the participation of the third arbitrator missing from their deliberations, the two arbitrators shall notify in writing the parties and the LCIA Court of such determination; and in that event, the two arbitrators or any party may refer the matter to the LCIA Court for the revocation of that third arbitrator’s appointment and his replacement under Article 10.

Article 13 Communications between Parties and the Arbitral Tribunal 13.1 Until the Arbitral Tribunal is formed, all communications between parties and arbitrators shall be made through the Registrar. 13.2 Thereafter, unless and until the Arbitral Tribunal directs that communications shall take place directly between the Arbitral Tribunal and the parties (with simultaneous copies to the Registrar), all written communications between the parties and the Arbitral Tribunal shall continue to be made through the Registrar. 13.3 Where the Registrar sends any written communication to one party on behalf of the Arbitral Tribunal, he shall send a copy to each of the other parties. Where any party LCIA RULES

435

sends to the Registrar any communication (including Written Statements and Documents under Article 15), it shall include a copy for each arbitrator; and it shall also send copies direct to all other parties and conﬁrm to the Registrar in writing that it has done or is doing so.

Article 14 Conduct of the Proceedings 14.1 The parties may agree on the conduct of their arbitral proceedings and they are encouraged to do so, consistent with the Arbitral Tribunal’s general duties at all times: (i) to act fairly and impartially as between all parties, giving each a reasonable opportunity of putting its case and dealing with that of its opponent; and (ii) to adopt procedures suitable to the circumstances of the arbitration, avoiding unnecessary delay or expense, so as to provide a fair and efﬁcient means for the ﬁnal resolution of the parties’ dispute. Such agreements shall be made by the parties in writing or recorded in writing by the Arbitral Tribunal at the request of and with the authority of the parties. 14.2 Unless otherwise agreed by the parties under Article 14.1, the Arbitral Tribunal shall have the widest discretion to discharge its duties allowed under such law(s) or rules of law as the Arbitral Tribunal may determine to be applicable; and at all times the parties shall do everything necessary for the fair, efﬁcient and expeditious conduct of the arbitration. 14.3 In the case of a three-member Arbitral Tribunal the chairman may, with the prior consent of the other two arbitrators, make procedural rulings alone.

Article 15 Submission of Written Statements and Documents 15.1 Unless the parties have agreed otherwise under Article 14.1 or the Arbitral Tribunal should determine differently, the written stage of the proceedings shall be as set out below. 15.2 Within 30 days of receipt of written notiﬁcation from the Registrar of the formation of the Arbitral Tribunal, the Claimant shall send to the Registrar a Statement of Case setting out in sufﬁcient detail the facts and any contentions of law on which it relies, together with the relief claimed against all other parties, save and insofar as such matters have not been set out in its Request. 15.3 Within 30 days of receipt of the Statement of Case or written notice from the Claimant that it elects to treat the Request as its Statement of Case, the Respondent shall send to the Registrar a Statement of Defence setting out in sufﬁcient detail which of the facts and contentions of law in the Statement of Case or Request (as the case may be) it admits or denies, on what grounds and on what other facts and contentions of law it relies. Any counterclaims shall be submitted with the Statement of Defence in the same manner as claims are to be set out in the Statement of Case. 436

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15.4 Within 30 days of receipt of the Statement of Defence, the Claimant shall send to the Registrar a Statement of Reply which, where there are any counterclaims, shall include a Defence to Counterclaim in the same manner as a defence is to be set out in the Statement of Defence. 15.5 If the Statement of Reply contains a Defence to Counterclaim, within 30 days of its receipt the Respondent shall send to the Registrar a Statement of Reply to Counterclaim. 15.6 All Statements referred to in this Article shall be accompanied by copies (or, if they are especially voluminous, lists) of all essential documents on which the party concerned relies and which have not previously been submitted by any party, and (where appropriate) by any relevant samples and exhibits. 15.7 As soon as practicable following receipt of the Statements speciﬁed in this Article, the Arbitral Tribunal shall proceed in such manner as has been agreed in writing by the parties or pursuant to its authority under these Rules. 15.8 If the Respondent fails to submit a Statement of Defence or the Claimant a Statement of Defence to Counterclaim, or if at any point any party fails to avail itself of the opportunity to present its case in the manner determined by Article 15.2 to 15.6 or directed by the Arbitral Tribunal, the Arbitral Tribunal may nevertheless proceed with the arbitration and make an award.

Article 16 Seat of Arbitration and Place of Hearings 16.1 The parties may agree in writing the seat (or legal place) of their arbitration. Failing such a choice, the seat of arbitration shall be London, unless and until the LCIA Court determines in view of all the circumstances, and after having given the parties an opportunity to make written comment, that another seat is more appropriate. 16.2 The Arbitral Tribunal may hold hearings, meetings and deliberations at any convenient geographical place in its discretion; and if elsewhere than the seat of the arbitration, the arbitration shall be treated as an arbitration conducted at the seat of the arbitration and any award as an award made at the seat of the arbitration for all purposes. 16.3 The law applicable to the arbitration (if any) shall be the arbitration law of the seat of arbitration, unless and to the extent that the parties have expressly agreed in writing on the application of another arbitration law and such agreement is not prohibited by the law of the arbitral seat.

Article 17 Language of Arbitration 17.1 The initial language of the arbitration shall be the language of the Arbitration Agreement, unless the parties have agreed in writing otherwise and providing always that a non-participating or defaulting party shall have no cause for complaint if

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communications to and from the Registrar and the arbitration proceedings are conducted in English. 17.2 In the event that the Arbitration Agreement is written in more than one language, the LCIA Court may, unless the Arbitration Agreement provides that the arbitration proceedings shall be conducted in more than one language, decide which of those languages shall be the initial language of the arbitration. 17.3 Upon the formation of the Arbitral Tribunal and unless the parties have agreed upon the language or languages of the arbitration, the Arbitration Tribunal shall decide upon the language(s) of the arbitration, after giving the parties an opportunity to make written comment and taking into account the initial language of the arbitration and any other matter it may consider appropriate in all the circumstances of the case. 17.4 If any document is expressed in a language other than the language(s) of the arbitration and no translation of such document is submitted by the party relying upon the document, the Arbitral Tribunal or (if the Arbitral Tribunal has not been formed) the LCIA Court may order that party to submit a translation in a form to be determined by the Arbitral Tribunal or the LCIA Court, as the case may be.

Article 18 Party Representation 18.1 Any party may be represented by legal practitioners or any other representatives. 18.2 At any time the Arbitral Tribunal may require from any party proof of authority granted to its representative(s) in such form as the Arbitral Tribunal may determine.

Article 19 Hearings 19.1 Any party which expresses a desire to that effect has the right to be heard orally before the Arbitral Tribunal on the merits of the dispute, unless the parties have agreed in writing on documents-only arbitration. 19.2 The Arbitral Tribunal shall ﬁx the date, time and physical place of any meetings and hearings in the arbitration, and shall give the parties reasonable notice thereof. 19.3 The Arbitral Tribunal may in advance of any hearing submit to the parties a list of questions which it wishes them to answer with special attention. 19.4 All meetings and hearings shall be in private unless the parties agree otherwise in writing or the Arbitral Tribunal directs otherwise. 19.5 The Arbitral Tribunal shall have the fullest authority to establish timelimits for meetings and hearings, or for any parts thereof.

Article 20 Witnesses 20.1 Before any hearing, the Arbitral Tribunal may require any party to give notice of the identity of each witness that party wishes to call (including rebuttal witnesses), as 438

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well as the subject matter of that witness’s testimony, its content and its relevance to the issues in the arbitration. 20.2 The Arbitral Tribunal may also determine the time, manner and form in which such materials should be exchanged between the parties and presented to the Arbitral Tribunal; and it has a discretion to allow, refuse, or limit the appearance of witnesses (whether witness of fact or expert witness). 20.3 Subject to any order otherwise by the Arbitral Tribunal, the testimony of a witness may be presented by a party in written form, either as a signed statement or as a sworn afﬁdavit. 20.4 Subject to Article 14.1 and 14.2, any party may request that a witness, on whose testimony another party seeks to rely, should attend for oral questioning at a hearing before the Arbitral Tribunal. If the Arbitral Tribunal orders that other party to produce the witness and the witness fails to attend the oral hearing without good cause, the Arbitral Tribunal may place such weight on the written testimony (or exclude the same altogether) as it considers appropriate in the circumstances of the case. 20.5 Any witness who gives oral evidence at a hearing before the Arbitral Tribunal may be questioned by each of the parties under the control of the Arbitral Tribunal. The Arbitral Tribunal may put questions at any stage of his evidence. 20.6 Subject to the mandatory provisions of any applicable law, it shall not be improper for any party or its legal representatives to interview any witness or potential witness for the purpose of presenting his testimony in written form or producing him as an oral witness. 20.7 Any individual intending to testify to the Arbitral Tribunal on any issue of fact or expertise shall be treated as a witness under these Rules notwithstanding that the individual is a party to the arbitration or was or is an ofﬁcer, employee or shareholder of any party.

Article 21 Experts to the Arbitral Tribunal 21.1 Unless otherwise agreed by the parties in writing, the Arbitral Tribunal: (a) may appoint one or more experts to report to the Arbitral Tribunal on speciﬁc issues, who shall be and remain impartial and independent of the parties throughout the arbitration proceedings; and (b) may require a party to give any such expert any relevant information or to provide access to any relevant documents, goods, samples, property or site for inspection by the expert. 21.2 Unless otherwise agreed by the parties in writing, if a party so requests or if the Arbitral Tribunal considers it necessary, the expert shall, after delivery of his written or oral report to the Arbitral Tribunal and the parties, participate in one or more hearings at which the parties shall have the opportunity to question the expert on his report and to present expert witnesses in order to testify on the points at issue. LCIA RULES

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21.3 The fees and expenses of any expert appointed by the Arbitral Tribunal under this Article shall be paid out of the deposits payable by the parties under Article 24 and shall form part of the costs of the arbitration.

Article 22 Additional Powers of the Arbitral Tribunal 22.1 Unless the parties at any time agree otherwise in writing, the Arbitral Tribunal shall have the power, on the application of any party or of its own motion, but in either case only after giving the parties a reasonable opportunity to state their views: (a) to allow any party, upon such terms (as to costs and otherwise) as it shall determine, to amend any claim, counterclaim, defence and reply; (b) to extend or abbreviate any time-limit provided by the Arbitration Agreement or these Rules for the conduct of the arbitration or by the Arbitral Tribunal’s own orders; (c) to conduct such enquiries as may appear to the Arbitral Tribunal to be necessary or expedient, including whether and to what extent the Arbitral Tribunal should itself take the initiative in identifying the issues and ascertaining the relevant facts and the law(s) or rules of law applicable to the arbitration, the merits of the parties’ dispute and the Arbitration Agreement; (d) to order any party to make any property, site or thing under its control and relating to the subject matter of the arbitration available for inspection by the Arbitral Tribunal, any other party, its expert or any expert to the Arbitral Tribunal; (e) to order any party to produce to the Arbitral Tribunal, and to the other parties for inspection, and to supply copies of, any documents or classes of documents in their possession, custody or power which the Arbitral Tribunal determines to be relevant; (f) to decide whether or not to apply any strict rules of evidence (or any other rules) as to the admissibility, relevance or weight of any material tendered by a party on any matter of fact or expert opinion; and to determine the time, manner and form in which such material should be exchanged between the parties and presented to the Arbitral Tribunal; (g) to order the correction of any contract between the parties or the Arbitration Agreement, but only to the extent required to rectify any mistake which the Arbitral Tribunal determines to be common to the parties and then only if and to the extent to which the law(s) or rules of law applicable to the contract or Arbitration Agreement permit such correction; and (h) to allow, only upon the application of a party, one or more third persons to be joined in the arbitration as a party provided any such third person and the applicant party have consented thereto in writing, and thereafter to make a single ﬁnal award, or separate awards, in respect of all parties so implicated in the arbitration;

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22.2 By agreeing to arbitration under these Rules, the parties shall be treated as having agreed not to apply to any state court or other judicial authority for any order available from the Arbitral Tribunal under Article 22.1, except with the agreement in writing of all parties. 22.3 The Arbitral Tribunal shall decide the parties’ dispute in accordance with the law(s) or rules of law chosen by the parties as applicable to the merits of their dispute. If and to the extent that the Arbitral Tribunal determines that the parties have made no such choice, the Arbitral Tribunal shall apply the law(s) or rules of law which it considers appropriate. 22.4 The Arbitral Tribunal shall only apply to the merits of the dispute principles deriving from “ex aequo et bono,” “amiable composition” or “honourable engagement” where the parties have so agreed expressly in writing.

Article 23 Jurisdiction of the Arbitral Tribunal 23.1 The Arbitral Tribunal shall have the power to rule on its own jurisdiction, including any objection to the initial or continuing existence, validity or effectiveness of the Arbitration Agreement. For that purpose, an arbitration clause which forms or was intended to form part of another agreement shall be treated as an arbitration agreement independent of that other agreement. A decision by the Arbitral Tribunal that such other agreement is non-existent, invalid or ineffective shall not entail ipso jure the nonexistence, invalidity or ineffectiveness of the arbitration clause. 23.2 A plea by a Respondent that the Arbitral Tribunal does not have jurisdiction shall be treated as having been irrevocably waived unless it is raised not later than the Statement of Defence; and a like plea by a Respondent to Counterclaim shall be similarly treated unless it is raised no later than the Statement of Defence to Counterclaim. A plea that the Arbitral Tribunal is exceeding the scope of its authority shall be raised promptly after the Arbitral Tribunal has indicated its intention to decide on the matter alleged by any party to be beyond the scope of its authority, failing which such plea shall also be treated as having been waived irrevocably. In any case, the Arbitral Tribunal may nevertheless admit an untimely plea if it considers the delay justiﬁed in the particular circumstances. 23.3 The Arbitral Tribunal may determine the plea to its jurisdiction or authority in an award as to jurisdiction or later in an award on the merits, as it considers appropriate in the circumstances. 23.4 By agreeing to arbitration under these Rules, the parties shall be treated as having agreed not to apply to any state court or other judicial authority for any relief regarding the Arbitral Tribunal’s jurisdiction or authority, except with the agreement in writing of all parties to the arbitration or the prior authorisation of the Arbitral Tribunal or following the latter’s award ruling on the objection to its jurisdiction or authority.

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Article 24 Deposits 24.1 The LCIA Court may direct the parties, in such proportions as it thinks appropriate, to make one or several interim or ﬁnal payments on account of the costs of the arbitration. Such deposits shall be made to and held by the LCIA and from time to time may be released by the LCIA Court to the arbitrator(s), any expert appointed by the Arbitral Tribunal and the LCIA itself as the arbitration progresses. 24.2 The Arbitral Tribunal shall not proceed with the arbitration without ascertaining at all times from the Registrar or any deputy Registrar that the LCIA is in requisite funds. 24.3 In the event that a party fails or refuses to provide any deposit as directed by the LCIA Court, the LCIA Court may direct the other party or parties to effect a substitute payment to allow the arbitration to proceed (subject to any award on costs). In such circumstances, the party paying the substitute payment shall be entitled to recover that amount as a debt immediately due from the defaulting party. 24.4 Failure by a claimant or counterclaiming party to provide promptly and in full the required deposit may be treated by the LCIA Court and the Arbitral Tribunal as a withdrawal of the claim or counterclaim respectively.

Article 25 Interim and Conservatory Measures 25.1 The Arbitral Tribunal shall have the power, unless otherwise agreed by the parties in writing, on the application of any party: (a) to order any respondent party to a claim or counterclaim to provide security for all or part of the amount in dispute, by way of deposit or bank guarantee or in any other manner and upon such terms as the Arbitral Tribunal considers appropriate. Such terms may include the provision by the claiming or counterclaiming party of a cross-indemnity, itself secured in such manner as the Arbitral Tribunal considers appropriate, for any costs or losses incurred by such respondent in providing security. The amount of any costs and losses payable under such crossindemnity may be determined by the Arbitral Tribunal in one or more awards; (b) to order the preservation, storage, sale or other disposal of any property or thing under the control of any party and relating to the subject matter of the arbitration; and (c) to order on a provisional basis, subject to ﬁnal determination in an award, any relief which the Arbitral Tribunal would have power to grant in an award, including a provisional order for the payment of money or the disposition of property as between any parties. 25.2 The Arbitral Tribunal shall have the power, upon the application of a party, to order any claiming or counterclaiming party to provide security for the legal or other costs of any other party by way of deposit or bank guarantee or in any other manner and upon such terms as the Arbitral Tribunal considers appropriate. Such terms may 442

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include the provision by that other party of a cross-indemnity, itself secured in such manner as the Arbitral Tribunal considers appropriate, for any costs and losses incurred by such claimant or counterclaimant in providing security. The amount of any costs and losses payable under such cross-indemnity may be determined by the Arbitral Tribunal in one or more awards. In the event that a claiming or counterclaiming party does not comply with any order to provide security, the Arbitral Tribunal may stay that party’s claims or counterclaims or dismiss them in an award. 25.3 The power of the Arbitral Tribunal under Article 25.1 shall not prejudice howsoever any party’s right to apply to any state court or other judicial authority for interim or conservatory measures before the formation of the Arbitral Tribunal and, in exceptional cases, thereafter. Any application and any order for such measures after the formation of the Arbitral Tribunal shall be promptly communicated by the applicant to the Arbitral Tribunal and all other parties. However, by agreeing to arbitration under these Rules, the parties shall be taken to have agreed not to apply to any state court or other judicial authority for any order for security for its legal or other costs available from the Arbitral Tribunal under Article 25.2.

Article 26 The Award 26.1 The Arbitral Tribunal shall make its award in writing and, unless all parties agree in writing otherwise, shall state the reasons upon which its award is based. The award shall also state the date when the award is made and the seat of the arbitration; and it shall be signed by the Arbitral Tribunal or those of its members assenting to it. 26.2 If any arbitrator fails to comply with the mandatory provisions of any applicable law relating to the making of the award, having been given a reasonable opportunity to do so, the remaining arbitrators may proceed in his absence and state in their award the circumstances of the other arbitrator’s failure to participate in the making of the award. 26.3 Where there are three arbitrators and the Arbitral Tribunal fails to agree on any issue, the arbitrators shall decide that issue by a majority. Failing a majority decision on any issue, the chairman of the Arbitral Tribunal shall decide that issue. 26.4 If any arbitrator refuses or fails to sign the award, the signatures of the majority or (failing a majority) of the chairman shall be sufﬁcient, provided that the reason for the omitted signature is stated in the award by the majority or chairman. 26.5 The sole arbitrator or chairman shall be responsible for delivering the award to the LCIA Court, which shall transmit certiﬁed copies to the parties provided that the costs of arbitration have been paid to the LCIA in accordance with Article 28. 26.6 An award may be expressed in any currency. The Arbitral Tribunal may order that simple or compound interest shall be paid by any party on any sum awarded at such rates as the Arbitral Tribunal determines to be appropriate, without being bound by legal rates of interest imposed by any state court, in respect of any period which the Arbitral Tribunal determines to be appropriate ending not later than the date upon which the award is complied with. LCIA RULES

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26.7 The Arbitral Tribunal may make separate awards on different issues at different times. Such awards shall have the same status and effect as any other award made by the Arbitral Tribunal. 26.8 In the event of a settlement of the parties’ dispute, the Arbitral Tribunal may render an award recording the settlement if the parties so request in writing (a “Consent Award”), provided always that such award contains an express statement that it is an award made by the parties’ consent. A Consent Award need not contain reasons. If the parties do not require a consent award, then on written conﬁrmation by the parties to the LCIA Court that a settlement has been reached, the Arbitral Tribunal shall be discharged and the arbitration proceedings concluded, subject to payment by the parties of any outstanding costs of the arbitration under Article 28. 26.9 All awards shall be ﬁnal and binding on the parties. By agreeing to arbitration under these Rules, the parties undertake to carry out any award immediately and without any delay (subject only to Article 27); and the parties also waive irrevocably their right to any form of appeal, review or recourse to any state court or other judicial authority, insofar as such waiver may be validly made.

Article 27 Correction of Awards and Additional Awards 27.1 Within 30 days of receipt of any award, or such lesser period as may be agreed in writing by the parties, a party may by written notice to the Registrar (copied to all other parties) request the Arbitral Tribunal to correct in the award any errors in computation, clerical or typographical errors or any errors of a similar nature. If the Arbitral Tribunal considers the request to be justiﬁed, it shall make the corrections within 30 days of receipt of the request. Any correction shall take the form of separate memorandum dated and signed by the Arbitral Tribunal or (if three arbitrators) those of its members assenting to it; and such memorandum shall become part of the award for all purposes. 27.2 The Arbitral Tribunal may likewise correct any error of the nature described in Article 27.1 on its own initiative within 30 days of the date of the award, to the same effect. 27.3 Within 30 days of receipt of the ﬁnal award, a party may by written notice to the Registrar (copied to all other parties), request the Arbitral Tribunal to make an additional award as to claims or counterclaims presented in the arbitration but not determined in any award. If the Arbitral Tribunal considers the request to be justiﬁed, it shall make the additional award within 60 days of receipt of the request. The provisions of Article 26 shall apply to any additional award.

Article 28 Arbitration and Legal Costs 28.1 The costs of the arbitration (other than the legal or other costs incurred by the parties themselves) shall be determined by the LCIA Court in accordance with the

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Schedule of Costs. The parties shall be jointly and severally liable to the Arbitral Tribunal and the LCIA for such arbitration costs. 28.2 The Arbitral Tribunal shall specify in the award the total amount of the costs of the arbitration as determined by the LCIA Court. Unless the parties agree otherwise in writing, the Arbitral Tribunal shall determine the proportions in which the parties shall bear all or part of such arbitration costs. If the Arbitral Tribunal has determined that all or any part of the arbitration costs shall be borne by a party other than a party which has already paid them to the LCIA, the latter party shall have the right to recover the appropriate amount from the former party. 28.3 The Arbitral Tribunal shall also have the power to order in its award that all or part of the legal or other costs incurred by a party be paid by another party, unless the parties agree otherwise in writing. The Arbitral Tribunal shall determine and ﬁx the amount of each item comprising such costs on such reasonable basis as it thinks ﬁt. 28.4 Unless the parties otherwise agree in writing, the Arbitral Tribunal shall make its orders on both arbitration and legal costs on the general principle that costs should reﬂect the parties’ relative success and failure in the award or arbitration, except where it appears to the Arbitral Tribunal that in the particular circumstances this general approach is inappropriate. Any order for costs shall be made with reasons in the award containing such order. 28.5 If the arbitration is abandoned, suspended or concluded, by agreement or otherwise, before the ﬁnal award is made, the parties shall remain jointly and severally liable to pay to the LCIA and the Arbitral Tribunal the costs of the arbitration as determined by the LCIA Court in accordance with the Schedule of Costs. In the event that such arbitration costs are less than the deposits made by the parties, there shall be a refund by the LCIA in such proportion as the parties may agree in writing, or failing such agreement, in the same proportions as the deposits were made by the parties to the LCIA.

Article 29 Decisions by the LCIA Court 29.1 The decisions of the LCIA Court with respect to all matters relating to the arbitration shall be conclusive and binding upon the parties and the Arbitral Tribunal. Such decisions are to be treated as administrative in nature and the LCIA Court shall not be required to give any reasons. 29.2 To the extent permitted by the law of the seat of the arbitration, the parties shall be taken to have waived any right of appeal or review in respect of any such decisions of the LCIA Court to any state court or other judicial authority. If such appeals or review remain possible due to mandatory provisions of any applicable law, the LCIA Court shall, subject to the provisions of that applicable law, decide whether the arbitral proceedings are to continue, notwithstanding an appeal or review.

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Article 30 Conﬁdentiality 30.1 Unless the parties expressly agree in writing to the contrary, the parties undertake as a general principle to keep conﬁdential all awards in their arbitration, together with all materials in the proceedings created for the purpose of the arbitration and all other documents produced by another party in the proceedings not otherwise in the public domain—save and to the extent that disclosure may be required of a party by legal duty, to protect or pursue a legal right or to enforce or challenge an award in bona ﬁde legal proceedings before a state court or other judicial authority. 30.2 The deliberations of the Arbitral Tribunal are likewise conﬁdential to its members, save and to the extent that disclosure of an arbitrator’s refusal to participate in the arbitration is required of the other members of the Arbitral Tribunal under Articles 10, 12 and 26. 30.3 The LCIA Court does not publish any award or any part of an award without the prior written consent of all parties and the Arbitral Tribunal.

Article 31 Exclusion of Liability 31.1 None of the LCIA, the LCIA Court (including its President, Vice Presidents and individual members), the Registrar, any deputy Registrar, any arbitrator and any expert to the Arbitral Tribunal shall be liable to any party howsoever for any act or omission in connection with any arbitration conducted by reference to these Rules, save where the act or omission is shown by that party to constitute conscious and deliberate wrongdoing committed by the body or person alleged to be liable to that party. 31.2 After the award has been made and the possibilities of correction and additional awards referred to in Article 27 have lapsed or been exhausted, neither the LCIA, the LCIA Court (including its President, Vice Presidents and individual members), the Registrar, any deputy Registrar, any arbitrator or expert to the Arbitral Tribunal shall be under any legal obligation to make any statement to any person about any matter concerning the arbitration, nor shall any party seek to make any of these persons a witness in any legal or other proceedings arising out of the arbitration.

Article 32 General Rules 32.1 A party who knows that any provision of the Arbitration Agreement (including these Rules) has not been complied with and yet proceeds with the arbitration without promptly stating its objection to such noncompliance, shall be treated as having irrevocably waived its right to object. 32.2 In all matters not expressly provided for in these Rules, the LCIA Court, the Arbitral Tribunal and the parties shall act in the spirit of these Rules and shall make every reasonable effort to ensure that an award is legally enforceable.

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Schedule of Arbitration Fees and Costs (effective 1 June 2003) for arbitrations under the LCIA Rules; under UNCITRAL Rules when administered by the LCIA; when the LCIA acts as Appointing Authority only; and when the LCIA is appointed to decide challenges.

1. Administrative charges under LCIA and UNCITRAL Rules*2 1(a) Registration Fee (payable in advance with Request for Arbitration non-refundable). £1,500 1(b) Time spent**3 by the Registrar and his/her deputy, and by the Secretariat of the LCIA in the administration of the arbitration.***4 Registrar and his/her deputy

£200 per hour

Secretariat

£100 per hour

1(c) A sum equivalent to 5% of the fees of the Tribunal (excluding expenses) in respect of the LCIA’s general overhead.*** 1(d) Expenses incurred by the Secretariat in connection with the arbitration (such as postage, telephone, facsimile, travel etc.), and additional arbitration support services, whether provided by the Secretariat from its own resources or otherwise.*** at applicable hourly rates or at cost 1(e) The LCIA’s fees and expenses will be invoiced in sterling, but may be paid in other convertible currencies, at rates prevailing at the time of payment, provided that any transfer and/or currency exchange charges shall be borne by the payer.

2. Request to act as Appointing Authority only* 2(a) Appointment Fee (payable in advance with request—nonrefundable). £1,000 2(b) As for 1(b) and 1(d), above.

3. Request to act in deciding challenges to arbitrators in non-LCIA arbitrations 3(a) As for 2(a) and 2(b), above; plus 3(b) Time spent by members of the LCIA Court in carrying out their functions in deciding the challenges. at hourly rates advised by members of the LCIA Court

2 3 4

Charges may be subject to Value Added Tax at the prevailing rate. Minimum unit of time in all cases: 15 minutes. Items 1(b), 1(c), and 1(d) above, are payable on interim invoice; with the award, or as directed by the LCIA Court under Article 24.1 of the Rules.

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4. Fees and expenses of the Tribunal* 4(a) The Tribunal’s fees will be calculated by reference to work done by its members in connection with the arbitration and will be charged at rates appropriate to the particular circumstances of the case, including its complexity and the special qualiﬁcations of the arbitrators. The Tribunal shall agree in writing upon fee rates conforming to this Schedule of Fees and Costs prior to its appointment by the LCIA Court. The rates will be advised by the Registrar to the parties at the time of the appointment of the Tribunal, but may be reviewed annually if the duration of the arbitration requires. The fee rates shall be within the following range:

£150 to £350 per hour

However, in exceptional cases, the rate may be higher or lower, provided that, in such cases, (a) the fees of the Tribunal shall be ﬁxed by the LCIA Court on the recommendation of the Registrar, following consultations with the arbitrator(s), and (b) the fees shall be agreed expressly by all parties. 4(b) The Tribunal’s fees may include a charge for time spent travelling. 4(c) The Tribunal’s fees may also include a charge for time reserved but not used as a result of late postponement or cancellation, provided that the basis for such charge shall be advised in writing to, and approved by, the LCIA Court. 4(d) The Tribunal may also recover such expenses as are reasonably incurred in connection with the arbitration, and as are in a reasonable amount, provided that claims for expenses should be supported by invoices or receipts. 4(e) The Tribunal’s fees may be invoiced either in the currency of account between the Tribunal and the parties, or in sterling. The Tribunal’s expenses may be invoiced in the currency in which they were incurred, or in sterling. 4(f) In the event of the revocation of the appointment of any arbitrator, pursuant to the provisions of Article 10 of the LCIA Rules, the LCIA Court shall decide upon the amount of fees and expenses to be paid for the former arbitrator’s services (if any) as it may consider appropriate in all the circumstances.

5. Deposits 5(a) The LCIA Court may direct the parties, in such proportions as it thinks appropriate, to make one or several interim or ﬁnal payments on account of the costs of the arbitration. The LCIA Court may limit such payments to a sum sufﬁcient to cover fees, expenses and costs for the next stage of the arbitration. 5(b) The Tribunal shall not proceed with the arbitration without ascertaining at all times from the Registrar or any deputy Registrar that the LCIA is in requisite funds. 5(c) In the event that a party fails or refuses to provide any deposit as directed by the LCIA Court, the LCIA Court may direct the other party or parties to effect a substitute payment to allow the arbitration to proceed (subject to any award on costs). In such

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circumstances, the party paying the substitute payment shall be entitled to recover that amount as a debt immediately due from the defaulting party. 5(d) Failure by a claimant or counterclaiming party to provide promptly and in full the required deposit may be treated by the LCIA Court and the Arbitral Tribunal as a withdrawal of the claim or counterclaim, respectively. 5(e) Funds lodged by the parties on account of the fees and expenses of the Tribunal and of the LCIA are held on trust in client bank accounts which are controlled by reference to each individual case and are disbursed by the LCIA, in accordance with the LCIA Rules and with this Schedule of Arbitration Fees and Costs. In the event that funds lodged by the parties exceed the costs of the arbitration at the conclusion of the arbitration, surplus monies will be returned to the parties as the ultimate default beneﬁciaries under the trust.

6. Interest on deposits Interest on sums deposited shall be credited to the account of each party depositing them, at the rate applicable to an amount equal to the amount so credited.

7. Interim payments 7(a) When interim payments are required to cover the LCIA’s administrative costs or the Tribunal’s fees or expenses, including the fees or expenses of any expert appointed by the Tribunal, such payments may be made out of deposits held, upon the approval of the LCIA Court. 7(b) The LCIA may, in any event, submit interim invoices in respect of all current arbitrations, in March, June, September and December of each year, for payment direct by the parties or from funds held on deposit.

8. Registrar’s authority 8(a) For the purposes of sections 5(a) and 5(c) above, and of Articles 24.1 and 24.3 of the LCIA Rules, the Registrar has the authority of the LCIA Court to make the directions referred to, under the supervision of the Court. 8(b) For the purposes of section 7(a) above, and of Article 24.1 of the LCIA Rules, the Registrar has the authority of the LCIA Court to approve the payments referred to. 8(c) Any request by an arbitrator for payment on account of his fees shall be supported by a fee note, which shall include, or be accompanied by, details of the time spent at the rates that have been advised to the parties by the LCIA. 8(d) Any dispute regarding administration costs or the fees and expenses of the Tribunal shall be determined by the LCIA Court.

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9. Arbitration costs 9(a) The parties shall be jointly and severally liable to the Arbitral Tribunal and the LCIA for the arbitration costs (other than the legal or other costs incurred by the parties themselves). 9(b) The Tribunal’s Award(s) shall be transmitted to the parties by the LCIA Court provided that the costs of the arbitration have been paid in accordance with Article 28 of the LCIA Rules.

LCIA 70 Fleet Street London, EC4Y 1EU England Tel:+ 44 (0) 20 7936 7007 Fax:+ 44 (0) 20 7936 7008 www.lcia-arbitration.com

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ILA Recommendations

INTERNATIONAL LAW ASSOCIATION RECOMMENDATIONS ON THE APPLICATION OF PUBLIC POLICY AS A GROUND FOR REFUSING RECOGNITION OR ENFORCEMENT OF INTERNATIONAL ARBITRAL AWARDS1 [Adopted by the 70th Conference of the International Law Association held in New Delhi, India, 2–6 April 2002]

1. General 1(a) The ﬁnality of awards rendered in the context of international commercial arbitration should be respected save in exceptional circumstances. 1(b) Such exceptional circumstances may in particular be found to exist if recognition or enforcement of the international arbitral award would be against international public policy. 1(c) The expression “international public policy” is used in these Recommendations to designate the body of principles and rules recognised by a State, which, by their nature, may bar the recognition or enforcement of an arbitral award rendered in the context of international commercial arbitration when recognition or enforcement of said award would entail their violation on account either of the procedure pursuant to which it was rendered (procedural international public policy) or of its contents (substantive international public policy). 1(d) The international public policy of any State includes: (i) fundamental principles, pertaining to justice or morality, that the State wishes to protect even when it is not directly concerned (ii) rules designed to serve the essential political, social or economic interests of the State, these being known as “lois de police” or “public policy rules” and

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(iii) the duty of the State to respect its obligations towards other States or international organisations. 1(e) An example of a substantive fundamental principle is prohibition of abuse of rights. An example of a procedural fundamental principle is the requirement that tribunals be impartial. An example of a public policy rule is anti-trust law. An example of an international obligation is a United Nations resolution imposing sanctions. Some rules, such as those prohibiting corruption, may fall into more than one category. 1(f) Whether the seat of the arbitration was located within the territory of the forum or abroad is not a consideration which should be taken into account by a court when assessing an award’s conformity with international public policy. 1(g) If the court refuses recognition or enforcement of the arbitral award, it should not limit itself to a mere reference to Article V.2 (b) of the New York Convention 1958 or to its own statute or case law. Setting out in detail the method of its reasoning and the grounds for refusing recognition or enforcement will help to promote a more coherent practice and the development of a consensus on principles and rules which may be deemed to belong to international public policy. 1(h) If any part of the award which violates international public policy can be separated from any part which does not, that part which does not violate international public policy may be recognised or enforced.

2. Fundamental Principles 2(a) A court verifying an arbitral award’s conformity with fundamental principles, whether procedural or substantive, should do so by reference to those principles considered fundamental within its own legal system rather than in the context of the law governing the contract, the law of the place of performance of the contract or the law of the seat of the arbitration. 2(b) Nevertheless, in order to determine whether a principle forming part of its legal system must be considered sufﬁciently fundamental to justify a refusal to recognise or enforce an award, a court should take into account, on the one hand, the international nature of the case and its connection with the legal system of the forum, and, on the other hand, the existence or otherwise of a consensus within the international community as regards the principle under consideration (international conventions may evidence the existence of such a consensus). When said consensus exists, the term “transnational public policy” may be used to describe such norms. 2(c) Where a party could have relied on a fundamental principle before the tribunal but failed to do so, it should not be entitled to raise said fundamental principle as a ground for refusing recognition or enforcement of the award.

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3. Public policy rules 3(a) An award’s violation of a mere “mandatory rule” (i.e. a rule that is mandatory but does not form part of the State’s international public policy so as to compel its application in the case under consideration) should not bar its recognition or enforcement, even when said rule forms part of the law of the forum, the law governing the contract, the law of the place of performance of the contract or the law of the seat of the arbitration. 3(b) A court should only refuse recognition or enforcement of an award giving effect to a solution prohibited by a rule of public policy forming part of its own legal system when: (i) the scope of the said rule is intended to encompass the situation under consideration; and (ii) recognition or enforcement of the award would manifestly disrupt the essential political, social or economic interests protected by the rule. 3(c) When the violation of a public policy rule of the forum alleged by a party cannot be established from a mere review of the award and could only become apparent upon a scrutiny of the facts of the case, the court should be allowed to undertake such reassessment of the facts. 3(d) When a public policy rule of the forum enacted after the rendering of the award prohibits the solution implemented by said award, a court should only refuse the award’s recognition or enforcement if it is plain that the legislator intended the said rule to have effect as regards awards rendered prior to its enactment.

4. International obligations A court may refuse recognition or enforcement of an award where such recognition or enforcement would constitute a manifest infringement by the forum State of its obligations towards other States or international organisations.

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Swiss Rules of International Arbitration (Swiss Rules)

MODEL ARBITRATION CLAUSE Any dispute, controversy or claim arising out of or in relation to this contract, including the validity, invalidity, breach or termination thereof, shall be resolved by arbitration in accordance with the Swiss Rules of International Arbitration of the Swiss Chambers of Commerce in force on the date when the Notice of Arbitration is submitted in accordance with these Rules. The number of arbitrators1 shall be . . . (one or three); The seat of the arbitration shall be . . . (name of city in Switzerland, unless the parties agree on a city abroad); The arbitral proceedings shall be conducted in . . . (insert desired language).

INTRODUCTION (a) In the past, six Chambers of Commerce and Industry in Switzerland had their own different rules of arbitration for the resolution of international commercial disputes. (b) In order to promote institutional arbitration in Switzerland and to harmonise the existing rules of arbitration, the Chambers of Commerce and Industry of Basel, Bern, Geneva, Ticino, Vaud and Zurich, joined by Neuchâtel in 2008, (hereinafter collectively “the Chambers”) have adopted the present uniform rules, the Swiss Rules of International Arbitration (hereinafter the “Rules”), which replace the Chambers’ former rules of international arbitration. These Rules are based on the UNCITRAL Arbitration Rules, to which two types of changes and additions have been made: i. Changes and additions required to adapt the UNCITRAL Arbitration Rules to institutional arbitration; 1.

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ii. Changes and additions reﬂecting modern practice and comparative law in the ﬁeld of international arbitration. These changes and additions have been deliberately kept to a minimum. A comparative version of these Rules, in which the modiﬁcations to the UNCITRAL Arbitration Rules are italicised, is available on the website of the Chambers: www.sccam.org. (c) When a Notice of Arbitration is submitted to one of the Chambers listed in Appendix A, an arbitral tribunal shall be constituted in accordance with these Rules. (d) In order to ensure the administration of arbitrations under these Rules, the Chambers have appointed an Arbitration Committee (hereinafter the “Arbitration Committee”), which shall exercise the powers vested in the Chambers under these Rules, so that any reference to the Chambers in these Rules shall be deemed to refer to the Arbitration Committee. (e) The Arbitration Committee is comprised of experienced practitioners of international arbitration. The Arbitration Committee shall designate from among its members the person or persons who will assist the Chambers in the administration and monitoring of the arbitral proceedings. In addition, the Arbitration Committee has designated from among its members a Special Committee (hereinafter the “Special Committee”), which shall render decisions under Articles 11 and 12 on the challenge and revocation of arbitrators and under Article 16 on the seat of arbitration, and advise the Chambers on other procedural matters that may arise in relation to the application of these Rules.

Section I. Introductory rules SCOPE OF APPLICATION Article 1 1. These Rules shall govern international arbitrations, where an agreement to arbitrate refers to these Rules, or to the arbitration rules of the Chambers of Commerce and Industry of Basel, Bern, Geneva, Ticino, Vaud, Zurich and any further Chamber of Commerce and Industry that may adhere to these Rules. 2. The parties are free to designate the seat of the arbitration in Switzerland or elsewhere. 3. These Rules shall come into force on January 1st, 2004 and, unless the parties have agreed otherwise, shall apply to all arbitral proceedings in which the Notice of Arbitration is submitted on or after that date.

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NOTICE, CALCULATION OF PERIODS OF TIME Article 2 1. For the purposes of these Rules, any notice, including a notiﬁcation, communication or proposal, is deemed to have been received if it is physically delivered to the addressee or if it is delivered to its habitual residence, place of business or mailing address, or, if none of these can be found after making reasonable inquiry, then at the addressee’s last-known residence or place of business. Notice shall be deemed to have been received on the day it is so delivered. 2. For the purposes of calculating a period of time under these Rules, such period shall begin to run on the day following the day when a notice, notiﬁcation, communication or proposal is received. If the last day of such period is an ofﬁcial holiday or a nonbusiness day at the residence or place of business of the addressee, the period is extended until the ﬁrst business day which follows. Ofﬁcial holidays or non-business days occurring during the running of the period of time are included in calculating the period. 3. If the circumstances so justify, the Chambers may extend the time-limits provided in Section I (Introductory Rules) and Section II (Composition of the arbitral tribunal), as well as any time-limits that they have set.

NOTICE OF ARBITRATION AND ANSWER TO THE NOTICE OF ARBITRATION Article 3 1. The party initiating recourse to arbitration (hereinafter called the “Claimant” or, where applicable, “Claimants”) shall submit a Notice of Arbitration to the Chambers at any of the addresses listed in Appendix A. 2. Arbitral proceedings shall be deemed to commence on the date on which the Notice of Arbitration is received by the Chambers. 3. The Notice of Arbitration shall be submitted in as many copies as there are other parties (hereinafter called the “Respondent” or, where applicable, “Respondents”), together with an additional copy for each arbitrator and one copy for the Chambers, and shall include the following: (a) A demand that the dispute be referred to arbitration; (b) The names, addresses, telephone and fax numbers and e-mail addresses (if any) of the parties and of their counsel; (c) A copy of the arbitration clause or the separate arbitration agreement that is invoked;

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(d) A reference to the contract or other legal instrument(s) out of or in relation to which the dispute arises; (e) The general nature of the claim and an indication of the amount involved, if any; (f) The relief or remedy sought; (g) A proposal as to the number of arbitrators (i.e. one or three), if the parties have not previously agreed thereon; (h) The payment, by check or transfer to the account of the Chamber to which the Notice of Arbitration is submitted as listed in Appendix A, of the Registration Fee as required by Appendix B (Schedule of the Costs of Arbitration) in force on the date when the Notice of Arbitration is submitted. 4. The Notice of Arbitration may also include: (a) The Claimant’s proposals for the appointment of a sole arbitrator referred to in Article 7; (b) The Claimant’s designation of an arbitrator, for the purpose of constituting a three-member arbitral tribunal referred to in Article 8; (c) The Statement of Claim referred to in Article 18. 5. If the Notice of Arbitration is incomplete or if the copies or attachments are not submitted in the required number, or if the Registration Fee is not paid, the Chambers may request the Claimant to remedy the defect within an appropriate period of time. The Chambers may also request within such time-limit a translation of the Notice of Arbitration if it is not submitted in English, German, French or Italian. If the Claimant complies with such directions within the applicable time-limit, the Notice of Arbitration shall be deemed to have been validly ﬁled on the date when the initial version was received by the Chambers. 6. The Chambers shall provide without delay a copy of the Notice of Arbitration and of any exhibits included therewith to the Respondent, unless the Chambers decide, after consultation with the Special Committee, that there is manifestly no agreement to arbitrate referring to these Rules. 7. Within thirty days from receipt of the Notice of Arbitration, the Respondent shall submit to the Chambers an Answer to the Notice of Arbitration. This Answer to the Notice of Arbitration shall be submitted in as many copies as there are other parties, together with an additional copy for each arbitrator and one copy for the Chambers, and shall, to the extent possible, include the following: (a) The name, address, telephone and fax numbers and e-mail address (if any) of the Respondent and of its counsel (if different from the description contained in the Notice of Arbitration); (b) Any plea that an arbitral tribunal constituted under these Rules lacks jurisdiction;

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(c) The Respondent’s comments on the particulars set forth in the Notice of Arbitration, pursuant to Article 3, paragraph 3(e); (d) The Respondent’s answer to the relief or remedy sought in the Notice of Arbitration, pursuant to Article 3, paragraph 3(f); (e) The Respondent’s proposal as to the number of arbitrators (i.e. one or three), if the parties have not previously agreed thereon, pursuant to Article 3, paragraph 3(g). 8. The Answer to the Notice of Arbitration may also include: (a) The Respondent’s proposals for the appointment of a sole arbitrator referred to in Article 7; (b) The Respondent’s designation of an arbitrator for the purpose of constituting a three-member arbitral tribunal referred to in Article 8; (c) The Statement of Defence referred to in Article 19. 9. Any counterclaim or set-off defence shall in principle be raised with the Respondent’s Answer to the Notice of Arbitration. The provisions of Article 3, paragraph 3 are applicable to the counterclaim or set-off defence. 10. If no counterclaim or set-off defence is raised with the Respondent’s Answer to the Notice of Arbitration, or if there is no indication of the amount of the counterclaim or set-off defence, the Chambers may rely exclusively on paragraph 3 (e) of the present Article 3 in order to determine the possible application of Article 42, paragraph 2 (Expedited Procedure). 11. The Chambers shall provide without delay a copy of the Answer to the Notice of Arbitration and of any exhibits included therewith to the Claimant. 12. Once the Registration Fee has been paid and all arbitrators have been conﬁrmed, the Chambers shall transmit without delay the ﬁle to the sole arbitrator or to the arbitral tribunal. 13. The parties may be represented or assisted by persons of their choice. The names and addresses of such persons must be communicated in writing to the other party and the Chambers; such communication must specify whether the appointment is being made for purposes of representation or assistance.

CONSOLIDATION OF ARBITRAL PROCEEDINGS (JOINDER), PARTICIPATION OF THIRD PARTIES Article 4 1. Where a Notice of Arbitration is submitted between parties already involved in other arbitral proceedings pending under these Rules, the Chambers may decide, after consulting with the parties to all proceedings and the Special Committee, that the new case shall be referred to the arbitral tribunal already constituted for the existing

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proceedings. The Chambers may proceed likewise where a Notice of Arbitration is submitted between parties that are not identical to the parties in the existing arbitral proceedings. When rendering their decision, the Chambers shall take into account all circumstances, including the links between the two cases and the progress already made in the existing proceedings. Where the Chambers decide to refer the new case to the existing arbitral tribunal, the parties to the new case shall be deemed to have waived their right to designate an arbitrator. 2. Where a third party requests to participate in arbitral proceedings already pending under these Rules or where a party to arbitral proceedings under these Rules intends to cause a third party to participate in the arbitration, the arbitral tribunal shall decide on such request, after consulting with all parties, taking into account all circumstances it deems relevant and applicable.

Section II. Composition of the arbitral tribunal CONFIRMATION OF ARBITRATORS Article 5 1. All designations of a sole arbitrator or of the arbitrators composing a three-member arbitral tribunal, made by the parties or the arbitrators, are subject to conﬁrmation by the Chambers, upon which the appointments shall become effective. The Chambers have no obligation to give reasons when they do not conﬁrm an arbitrator. 2. Where a designation is not conﬁrmed, the Chambers may (a) either invite the party or parties concerned, or the arbitrators, as the case may be, to make a new designation within a reasonable time-limit; or (b) proceed directly with the appointment.

NUMBER OF ARBITRATORS Article 6 1. If the parties have not agreed upon the number of arbitrators, the Chambers shall decide whether the case shall be referred to a sole arbitrator or to a three-member arbitral tribunal, taking into account all relevant circumstances. 2. As a rule, the Chambers shall refer the case to a sole arbitrator, unless the complexity of the subject matter and/or the amount in dispute justify that the case be referred to a three-member arbitral tribunal. 3. If the arbitration agreement provides for a three-member arbitral tribunal and if this appears inappropriate in view of the amount in dispute or of other circumstances, the

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Chambers shall advise the parties that they may wish to agree to refer the dispute to a sole arbitrator. 4. Where the amount in dispute does not exceed CHF 1’000’000 (one million Swiss francs), the provisions of Article 42, paragraph 2 (Expedited Procedure), shall apply.

APPOINTMENT OF A SOLE ARBITRATOR Article 7 1. Where two or more parties have agreed that the dispute shall be referred to a sole arbitrator, they shall jointly designate the sole arbitrator within thirty days from the date when the Notice of Arbitration was received by the Respondent(s) unless the parties’ agreement provides otherwise. 2. Where the parties have not agreed upon the number of arbitrators, they shall jointly designate the sole arbitrator within thirty days from the date when the Chambers’ decision that the dispute shall be referred to a sole arbitrator was received by them. 3. If the parties fail to designate the sole arbitrator within the applicable time-limit, the Chambers shall proceed with the appointment.

APPOINTMENT OF ARBITRATORS IN BI-PARTY OR MULTI-PARTY PROCEEDINGS Article 8 1. Where a dispute between two adverse parties is referred to a three-member arbitral tribunal, each party shall designate one arbitrator, unless the parties have agreed otherwise. 2. If a party fails to designate an arbitrator within the time-limit set by the Chambers or resulting from the arbitration agreement, the Chambers shall appoint the arbitrator. Unless the parties’ agreement provides otherwise, the two arbitrators so appointed shall designate, within thirty days from the conﬁrmation of the second arbitrator, a third arbitrator who shall act as the presiding arbitrator of the arbitral tribunal. Failing such designation, the Chambers shall appoint the presiding arbitrator. 3. In multi-party proceedings, the arbitral tribunal shall be constituted in accordance with the parties’ agreement. 4. If the parties have not agreed upon a procedure for the constitution of the arbitral tribunal in multi-party proceedings, the Chambers shall set an initial thirty-day timelimit for the Claimant or group of Claimants to designate an arbitrator and set a subsequent thirty-day time-limit for the Respondent or group of Respondents to designate an arbitrator. If the group or groups of parties have each designated an arbitrator, SWISS RULES OF INTERNATIONAL ARBITRATION (SWISS RULES)

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Article 8, paragraph 2 shall apply by analogy to the designation of the presiding arbitrator. 5. Where a party or group of parties fail(s) to designate an arbitrator in multiparty proceedings, the Chambers may appoint all three arbitrators and shall specify the presiding arbitrator.

INDEPENDENCE AND CHALLENGE OF ARBITRATORS (ARTICLES 9 TO 12) Article 9 1. All arbitrators conducting an arbitration under these Rules shall be and remain at all times impartial and independent of the parties. 2. A prospective arbitrator shall disclose to those who approach him in connection with his possible appointment any circumstances likely to give rise to justiﬁable doubts as to his impartiality or independence. An arbitrator, once appointed or chosen, shall disclose such circumstances to the parties unless they have already been informed by him of these circumstances.

Article 10 1. Any arbitrator may be challenged if circumstances exist that give rise to justiﬁable doubts as to the arbitrator’s impartiality or independence. 2. A party may challenge the arbitrator appointed by it only for reasons of which it becomes aware after the appointment has been made.

Article 11 1. If the arbitrator being challenged does not withdraw, the Special Committee shall decide on the challenge. 2. The decision of the Special Committee is ﬁnal. The Special Committee has no obligation to give reasons.

Article 12 1. If an arbitrator fails to perform his functions despite a written warning from the other arbitrators or from the Chambers, the Special Committee may revoke the appointment of that arbitrator. 2. The arbitrator shall have an opportunity to present his position to the Special Committee. The decision of the Special Committee is ﬁnal. The Special Committee has no obligation to give reasons.

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REPLACEMENT OF AN ARBITRATOR Article 13 1. If an arbitrator designated by a party deceases or becomes unable to perform his functions due to any reasons beyond his control, the Chambers shall set a time-limit for the party having designated that arbitrator to designate a replacement arbitrator. This rule also applies if an arbitrator has been successfully challenged, has been otherwise removed or has resigned. 2. If the party concerned fails to designate a replacement arbitrator within the applicable time-limit, the Chambers shall appoint a replacement arbitrator.

CONSEQUENCES OF THE REPLACEMENT OF AN ARBITRATOR Article 14 If an arbitrator is replaced, the proceedings shall as a rule resume at the stage where the arbitrator who was replaced ceased to perform his functions, unless the arbitral tribunal decides otherwise.

Section III. Arbitral proceedings GENERAL PROVISIONS Article 15 1. Subject to these Rules, the arbitral tribunal may conduct the arbitration in such manner as it considers appropriate, provided that it ensures equal treatment of the parties and their right to be heard. 2. At any stage of the proceedings, the arbitral tribunal may hold hearings for the presentation of evidence by witnesses, including expert witnesses, or for oral argument. After consulting with the parties, the arbitral tribunal may also decide to conduct the proceedings on the basis of documents and other materials. 3. At an early stage of the arbitral proceedings and in consultation with the parties, the arbitral tribunal shall prepare a provisional time-table for the arbitral proceedings, which shall be provided to the parties and, for information, to the Chambers. 4. All documents or information supplied to the arbitral tribunal by one party shall at the same time be communicated by that party to the other party. 5. The arbitral tribunal may, after consulting with the parties, appoint a secretary. Article 9 of these Rules shall apply by analogy to the secretary.

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6. All participants in the arbitral proceedings shall act in accordance with the requirements of good faith.

SEAT OF THE ARBITRATION Article 16 1. If the parties have not determined the seat of the arbitration, or if such designation is unclear or incomplete, the Special Committee shall determine the seat of the arbitration taking into account all relevant circumstances, or shall request the arbitral tribunal to determine the seat. 2. Without prejudice to the determination of the seat of the arbitration, the arbitral tribunal may decide where the proceedings shall be conducted. In particular, it may hear witnesses and hold meetings for consultation among its members at any place it deems appropriate, having regard to the circumstances of the arbitration. 3. The arbitral tribunal may meet at any place it deems appropriate for the inspection of goods, other property or documents. The parties shall be given sufﬁcient notice to enable them to be present at such inspection. 4. The award shall be deemed to be made at the seat of the arbitration.

LANGUAGE Article 17 1. Subject to an agreement by the parties, the arbitral tribunal shall, promptly after its appointment, determine the language or languages to be used in the proceedings. This determination shall apply to the Statement of Claim, the Statement of Defence, and any further written statements and, if oral hearings take place, to the language or languages to be used in such hearings. 2. The arbitral tribunal may order that any documents annexed to the Statement of Claim or Statement of Defence, and any supplementary documents or exhibits submitted in the course of the proceedings, delivered in their original language, shall be accompanied by a translation into the language or languages agreed upon by the parties or determined by the arbitral tribunal.

STATEMENT OF CLAIM Article 18 1. Unless the Statement of Claim was contained in the Notice of Arbitration, within a period of time to be determined by the arbitral tribunal, the Claimant shall communicate 464

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its Statement of Claim in writing to the Respondent and to each of the arbitrators. A copy of the contract, and of the arbitration agreement if not contained in the contract, shall be annexed thereto. 2. The Statement of Claim shall include the following particulars: (a) The names and addresses of the parties; (b) A statement of the facts supporting the claim; (c) The points at issue; (d) The relief or remedy sought. 3. As a rule, the Claimant shall annex to its Statement of Claim all documents it deems relevant.

STATEMENT OF DEFENCE Article 19 1. Within a period of time to be determined by the arbitral tribunal and unless the Statement of Defence was contained in the Answer to the Notice of Arbitration, the Respondent shall communicate its Statement of Defence in writing to the Claimant and to each of the arbitrators. 2. The Statement of Defence shall reply to the particulars (b), (c) and (d) of the Statement of Claim (Article 18, paragraph 2). If the Respondent has raised an objection to the jurisdiction or to the proper constitution of the arbitral tribunal, the Statement of Defence shall contain the factual and legal basis of such objection. As a rule, the Respondent shall annex to its Statement of Defence all documents on which it relies for its defence. 3. The provisions of Article 18, paragraphs 2 (b) - (d), shall apply to a counterclaim and a claim relied on for the purpose of a set-off.

AMENDMENTS TO THE CLAIM OR DEFENCE Article 20 1. During the course of the arbitral proceedings either party may amend or supplement its claim or defence unless the arbitral tribunal considers it inappropriate to allow such amendment having regard to the delay in making it or prejudice to the other party or any other circumstances. However, a claim may not be amended in such a manner that the amended claim falls outside the scope of the arbitration clause or separate arbitration agreement.

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2. The arbitral tribunal may adjust the costs of the arbitration if a party amends or supplements its claims, counterclaims or defences.

PLEAS AS TO THE JURISDICTION OF THE ARBITRAL TRIBUNAL Article 21 1. The arbitral tribunal shall have the power to rule on objections that it has no jurisdiction, including any objections with respect to the existence or validity of the arbitration clause or of the separate arbitration agreement. 2. The arbitral tribunal shall have the power to determine the existence or the validity of the contract of which an arbitration clause forms a part. For the purposes of Article 21, an arbitration clause which forms part of a contract and which provides for arbitration under these Rules shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause. 3. As a rule, a plea that the arbitral tribunal does not have jurisdiction shall be raised in the Answer to the Notice of Arbitration, but in no event later than in the Statement of Defence referred to in Article 19, or, with respect to a counterclaim, in the reply to the counterclaim. 4. In general, the arbitral tribunal should rule on a plea concerning its jurisdiction as a preliminary question. However, the arbitral tribunal may proceed with the arbitration and rule on such a plea in its ﬁnal award. 5. The arbitral tribunal shall have jurisdiction to hear a set-off defence even when the relationship out of which this defence is said to arise is not within the scope of the arbitration clause or is the object of another arbitration agreement or forum-selection clause.

FURTHER WRITTEN STATEMENTS Article 22 The arbitral tribunal shall decide which further written statements, in addition to the Statement of Claim and the Statement of Defence, shall be required from the parties or may be presented by them and shall set the periods of time for communicating such statements.

PERIODS OF TIME Article 23 The periods of time set by the arbitral tribunal for the communication of written statements (including the Statement of Claim and Statement of Defence) should not exceed 466

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forty-ﬁve days. However, the arbitral tribunal may extend the time-limits if it concludes that an extension is justiﬁed.

EVIDENCE AND HEARINGS (ARTICLES 24 AND 25) Article 24 1. Each party shall have the burden of proving the facts relied on to support its claim or defence. 2. The arbitral tribunal may, if it considers it appropriate, require a party to deliver to the tribunal and to the other party, within such a period of time as the arbitral tribunal shall decide, a summary of the documents and other evidence which that party intends to present in support of the facts in issue set out in its Statement of Claim or Statement of Defence. 3. At any time during the arbitral proceedings the arbitral tribunal may require the parties to produce documents, exhibits or other evidence within such a period of time as the tribunal shall determine.

Article 25 1. In the event of an oral hearing, the arbitral tribunal shall give the parties adequate advance notice of the date, time and place thereof. 2. Any person may be a witness or an expert witness. If witnesses or expert witnesses are to be heard, at least ﬁfteen days before the hearing each party shall communicate to the arbitral tribunal and to the other party the names and addresses of the witnesses or expert witnesses it intends to present, the subject upon and the languages in which such witnesses or expert witnesses will give their testimony. 3. The arbitral tribunal shall make arrangements for the translation of oral statements made at a hearing and for a record of the hearing if either is deemed necessary by the tribunal under the circumstances of the case, or if the parties have agreed thereto and have communicated such agreement to the tribunal at least ﬁfteen days before the hearing. 4. Hearings shall be held in camera unless the parties agree otherwise. The arbitral tribunal may require the retirement of any witness or witnesses or expert witnesses during the testimony of other witnesses or expert witnesses. The arbitral tribunal is free to determine the manner in which witnesses or expert witnesses are examined. 5. Evidence of witnesses or expert witnesses may also be presented in the form of written statements or reports signed by them. 6. It shall not be improper for a party, its ofﬁcers, employees, legal advisors or counsel to interview witnesses, potential witnesses or expert witnesses.

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7. The arbitral tribunal shall determine the admissibility, relevance, materiality and weight of the evidence offered.

INTERIM MEASURES OF PROTECTION Article 26 1. At the request of either party, the arbitral tribunal may take any interim measures it deems necessary or appropriate. 2. Such interim measures may be established in the form of an interim award. The arbitral tribunal shall be entitled to order the provision of appropriate security. 3. A request for interim measures addressed by any party to a judicial authority shall not be deemed incompatible with the agreement to arbitrate, or as a waiver of that agreement. 4. The arbitral tribunal shall have discretion to apportion the costs relating to a request for interim measures in the interim award or in the ﬁnal award.

TRIBUNAL-APPOINTED EXPERTS Article 27 1. The arbitral tribunal, after consulting with the parties, may appoint one or more experts to report to it, in writing, on speciﬁc issues to be determined by the tribunal. A copy of the expert’s terms of reference, established by the arbitral tribunal, shall be communicated to the parties. 2. The parties shall give the expert any relevant information or produce for his inspection any relevant documents or goods that he may require of them. Any dispute between a party and such expert as to the relevance of the required information or production shall be referred to the arbitral tribunal for decision. 3. Upon receipt of the expert’s report, the arbitral tribunal shall communicate a copy of the report to the parties who shall be given the opportunity to express, in writing, their opinion on the report. A party shall be entitled to examine any document on which the expert has relied in his report. 4. At the request of either party the expert, after delivery of the report, may be heard at a hearing where the parties shall have the opportunity to be present and to interrogate the expert. At this hearing either party may present expert witnesses in order to testify on the points at issue. The provisions of Article 25 shall be applicable to such proceedings.

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5. The provisions of Article 9 shall apply by analogy to any expert appointed by the arbitral tribunal.

DEFAULT Article 28 1. If, within the period of time set by the arbitral tribunal, the Claimant has failed to communicate its claim without showing sufﬁcient cause for such failure, the arbitral tribunal shall issue an order for the termination of the arbitral proceedings. If, within the period of time set by the arbitral tribunal, the Respondent has failed to communicate its Statement of Defence without showing sufﬁcient cause for such failure, the arbitral tribunal shall order that the proceedings continue. 2. If one of the parties, duly notiﬁed under these Rules, fails to appear at a hearing, without showing sufﬁcient cause for such failure, the arbitral tribunal may proceed with the arbitration. 3. If one of the parties, duly invited to produce documentary evidence, fails to do so within the established period of time, without showing sufﬁcient cause for such failure, the arbitral tribunal may make the award on the evidence before it.

CLOSURE OF PROCEEDINGS Article 29 1. The arbitral tribunal may inquire of the parties if they have any further proof to offer or witnesses to be heard or submissions to make and, if there are none, it may declare the proceedings closed. 2. The arbitral tribunal may, if it considers it necessary owing to exceptional circumstances, decide, on its own motion or upon application of a party, to reopen the proceedings at any time before the award is made.

WAIVER OF RULES Article 30 A party who knows that any provision of, or requirement under, these Rules has not been complied with and yet proceeds with the arbitration without promptly stating its objection to such non-compliance, shall be deemed to have waived its right to object.

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Section IV. The Award DECISIONS Article 31 1. When there are three arbitrators, any award or other decision of the arbitral tribunal shall be made by a majority of the arbitrators. If there is no majority, the award shall be made by the presiding arbitrator alone. 2. In the case of questions of procedure, when the arbitral tribunal so authorises, the presiding arbitrator may decide on his own, subject to revision, if any, by the arbitral tribunal.

FORM AND EFFECT OF THE AWARD Article 32 1. In addition to making a ﬁnal award, the arbitral tribunal shall be entitled to make interim, interlocutory, or partial awards. If appropriate, the arbitral tribunal may also award costs in awards that are not ﬁnal. 2. The award shall be made in writing and shall be ﬁnal and binding on the parties. The parties undertake to carry out the award without delay. 3. The arbitral tribunal shall state the reasons upon which the award is based, unless the parties have agreed that no reasons are to be given. 4. An award shall be signed by the arbitrators and it shall contain the date on which and the place where the award was made. Where there are three arbitrators and one or two of them fail(s) to sign, the award shall state the reason for the absence of the signature(s). 5. Publication of the award is governed by Article 43. 6. Originals of the award signed by the arbitrators shall be communicated to the parties and to the Chambers by the arbitral tribunal. The Chambers shall retain a copy of the award.

APPLICABLE LAW, AMIABLE COMPOSITEUR Article 33 1. The arbitral tribunal shall decide the case in accordance with the rules of law agreed upon by the parties or, in the absence of a choice of law, by applying the rules of law with which the dispute has the closest connection. 470

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2. The arbitral tribunal shall decide as amiable compositeur or ex aequo et bono only if the parties have expressly authorised the arbitral tribunal to do so. 3. In all cases, the arbitral tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction.

SETTLEMENT OR OTHER GROUNDS FOR TERMINATION Article 34 1. If, before the award is made, the parties agree on a settlement of the dispute, the arbitral tribunal shall either issue an order for the termination of the arbitral proceedings or, if requested by both parties and accepted by the tribunal, record the settlement in the form of an arbitral award on agreed terms. The arbitral tribunal is not obliged to give reasons for such an award. 2. If, before the award is made, the continuation of the arbitral proceedings becomes unnecessary or impossible for any reason not mentioned in paragraph 1, the arbitral tribunal shall inform the parties of its intention to issue an order for the termination of the proceedings. The arbitral tribunal shall have the power to issue such an order unless a party raises justiﬁable grounds for objection. 3. Copies of the order for termination of the arbitral proceedings or of the arbitral award on agreed terms, signed by the arbitrators, shall be communicated by the arbitral tribunal to the parties and to the Chambers. Where an arbitral award on agreed terms is made, the provisions of Article 32, paragraphs 2 and 4 to 6, shall apply.

INTERPRETATION OF THE AWARD Article 35 1. Within thirty days after the receipt of the award, either party, with notice to the other party, may request that the arbitral tribunal give an interpretation of the award. The arbitral tribunal may set a time-limit, normally not exceeding thirty days, for the other party to comment on such request. 2. The interpretation shall be given in writing within forty-ﬁve days after the receipt of the request. The interpretation shall form part of the award and the provisions of Article 32, paragraphs 2 to 6, shall apply.

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CORRECTION OF THE A WARD Article 36 1. Within thirty days after the receipt of the award, either party, with notice to the other party, may request the arbitral tribunal to correct in the award any errors in computation, any clerical or typographical errors, or any errors of similar nature. The arbitral tribunal may set a time-limit, normally not exceeding thirty days, for the other party to comment on such request. 2. The arbitral tribunal may within thirty days after the communication of the award make such corrections on its own initiative. 3. Such corrections shall be in writing, and the provisions of Article 32, paragraphs 2 to 6, shall apply.

ADDITIONAL A WARD Article 37 1. Within thirty days after the receipt of the award, either party, with notice to the other party, may request the arbitral tribunal to make an additional award as to claims presented in the arbitral proceedings but omitted from the award. The arbitral tribunal may set a time-limit, normally not exceeding thirty days, for the other party to comment on such request. 2. If the arbitral tribunal considers the request for an additional award to be justiﬁed and considers that the omission can be rectiﬁed without any further hearings or evidence, it shall complete its award within sixty days after the receipt of the request. 3. When an additional award is made, the provisions of Article 32, paragraphs 2 to 6, shall apply.

COSTS (ARTICLES 38 TO 40) Article 38 The arbitral tribunal shall determine the costs of arbitration in its award. The term “costs” includes only: (a) The fees of the arbitral tribunal to be stated separately as to each arbitrator and to be determined by the tribunal itself in accordance with Article 39; (b) The travel and other expenses incurred by the arbitrators; (c) The costs of expert advice and of other assistance required by the arbitral tribunal; 472

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(d) The travel and other expenses of witnesses to the extent such expenses are approved by the arbitral tribunal; (e) The costs for legal representation and assistance of the successful party if such costs were claimed during the arbitral proceedings, and only to the extent that the arbitral tribunal determines that the amount of such costs is reasonable; (f) The costs for the administration of the arbitration payable to the Chambers in accordance with Appendix B (Schedule of the Costs of Arbitration).

Article 39 1. The fees of the arbitral tribunal shall be reasonable in amount, taking into account the amount in dispute, the complexity of the subject-matter, the time spent by the arbitrators and any other relevant circumstances of the case, including, but not limited to, the discontinuation of the arbitral proceedings in case of settlement or other reasons. In the event of such discontinuation, the fees of the arbitral tribunal may be less than the minimum amount resulting from Appendix B (Schedule of the Costs of Arbitration). 2. The fees of the arbitral tribunal shall be determined in conformity with Appendix B (Schedule of the Costs of Arbitration). 3. The arbitral tribunal shall decide on the allocation of the fees among its members. As a rule, the Chairman shall receive between 40 % and 50 % and each co-arbitrator between 25 % and 30 % of the total fees, in view of the time and efforts spent by each arbitrator.

Article 40 1. Except as provided in paragraph 2, the costs of arbitration shall in principle be borne by the unsuccessful party. However, the arbitral tribunal may apportion each of such costs between the parties if it determines that apportionment is reasonable, taking into account the circumstances of the case. 2. With respect to the costs of legal representation and assistance referred to in Article 38, paragraph (e), the arbitral tribunal, taking into account the circumstances of the case, shall be free to determine which party shall bear such costs or may apportion such costs between the parties if it determines that apportionment is reasonable. 3. When the arbitral tribunal issues an order for the termination of the arbitral proceedings or makes an award on agreed terms, it shall determine the costs of arbitration referred to in Article 38 and Article 39, paragraph 1, in the text of that order or award. 4. Before rendering the award, the arbitral tribunal shall submit its draft award to the Chambers for consultation on the decision as to the assessment and apportionment of the costs.

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5. No additional fees may be charged by an arbitral tribunal for interpretation or correction or completion of its award under Articles 35 to 37.

DEPOSIT OF COSTS Article 41 1. The arbitral tribunal, on its establishment, shall request each party to deposit an equal amount as an advance for the costs referred to in Article 38, paragraphs (a), (b), (c) and (f). The arbitral tribunal shall provide a copy of such request for information to the Chambers. 2. Where a Respondent submits a counterclaim, or it otherwise appears appropriate in the circumstances, the arbitral tribunal may in its discretion establish separate deposits. 3. During the course of the arbitral proceedings the arbitral tribunal may request supplementary deposits from the parties. The arbitral tribunal shall provide a copy of such request for information to the Chambers. 4. If the required deposits are not paid in full within thirty days after the receipt of the request, the arbitral tribunal shall so inform the parties in order that one or another of them may make the required payment. If such payment is not made, the arbitral tribunal may order the suspension or termination of the arbitral proceedings. 5. In its ﬁnal award, the arbitral tribunal shall render an accounting to the parties of the deposits received. Any unexpended balance shall be returned to the parties.

Section V. Expedited Procedure Article 42 1. If the parties so agree, or if the provisions of Article 42, paragraph 2 are applicable, the arbitral proceedings shall be conducted in accordance with an Expedited Procedure based upon the foregoing provisions of these Rules, subject to the following changes: (a) The Chambers may shorten the time-limits for the appointment of arbitrators; (b) After the submission of the Answer to the Notice of Arbitration, the parties shall in principle be entitled to submit one Statement of Claim and one Statement of Defence (and Counterclaim) and, where applicable, one Statement of Defence in reply to the Counterclaim; (c) Unless the parties agree that the dispute shall be decided on the basis of documentary evidence only, the arbitral tribunal shall hold a single hearing for

474

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the examination of the witnesses and expert witnesses as well as for oral argument; (d) The award shall be made within six months from the date when the Chambers transmitted the ﬁle to the arbitral tribunal. In exceptional circumstances, the Chambers may extend this time-limit; (e) The arbitral tribunal shall state the reasons upon which the award is based in summary form, unless the parties have agreed that no reasons are to be given. 2. The following provisions shall apply to all cases in which the amount in dispute representing the aggregate of the claim and the counterclaim (or any set-off defence) does not exceed CHF 1’000’000 (one million Swiss francs), unless the Chambers decide otherwise taking into account all relevant circumstances: (a) The arbitral proceedings shall be conducted in accordance with the Expedited Procedure set forth in Article 42, paragraph 1; (b) The case shall be referred to a sole arbitrator, unless the arbitration agreement provides for a three-member arbitral tribunal; (c) If the arbitration agreement provides for a three-member arbitral tribunal, the Chambers shall invite the parties to agree to refer the case to a sole arbitrator. If the parties do not agree to refer the case to a sole arbitrator, the fees of the three arbitrators shall be determined in accordance with Appendix B (Schedule of the Costs of Arbitration), but shall in no event be less than the fees resulting from the hourly rate of Section 2.8 of Appendix B.

Section VI. Conﬁdentiality and exclusion of liability Article 43 1. Unless the parties expressly agree in writing to the contrary, the parties undertake as a general principle to keep conﬁdential all awards and orders as well as all materials submitted by another party in the framework of the arbitral proceedings not otherwise in the public domain, save and to the extent that a disclosure may be required of a party by a legal duty, to protect or pursue a legal right or to enforce or challenge an award in legal proceedings before a judicial authority. This undertaking also applies to the arbitrators, the tribunal-appointed experts, the secretary of the arbitral tribunal and the Chambers. 2. The deliberations of the arbitral tribunal are conﬁdential. 3 An award may be published, whether in its entirety or in the form of excerpts or a summary, only under the following conditions: (a) A request for publication is addressed to the Chambers; (b) All references to the parties’ names are deleted; and

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(c) No party objects to such publication within the time-limit ﬁxed for that purpose by the Chambers.

Article 44 1. None of the Chambers or their staff, arbitrators, tribunal-appointed experts or the secretary of the arbitral tribunal shall be liable for any act or omission in connection with an arbitration conducted under these Rules, save where the act or omission is shown to constitute deliberate wrongdoing or extremely serious negligence. 2. After the award has been made and the possibilities of correction, interpretation and additional awards referred to in Articles 35 to 37 have lapsed or been exhausted, neither the Chambers nor the arbitrators, the tribunal-appointed experts or the secretary of the arbitral tribunal shall be under an obligation to make statements to any person about any matter concerning the arbitration, nor shall a party seek to make any of these persons a witness in any legal or other proceedings arising out of the arbitration.

APPENDIX A: Addresses of the Chambers of Commerce Basel Chamber of Commerce Aeschenvorstadt 67 P.O. Box CH-4010 Basel Telephone: +4161 270 60 50 Fax: +4161 270 60 05 E-mail: [email protected] Bank details: UBS AG, CH-4002 Basel Account No: 292 - 10157720.0 Clearing No: 292 Swift Code: UBSWCHZH80A Iban: CH98 0029 2292 10157720 0 Chamber of Commerce and Industry of Bern Gutenbergstrasse 1 P.O. Box 5464 CH-3001 Bern Telephone:+41 31 388 87 87 Fax:+41 31 388 87 88 E-mail: [email protected] Bank details: BEKB Account No: KK 16 166.151.0.44 HIV Kanton Bern Clearing No: 790 Swift Code: KBBECH22 Iban: CH35 0079 0016 1661 5104 4

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Chamber of Commerce and Industry of Geneva 4, Boulevard du Théâtre P.O. Box 5039 CH-1211 Geneva 11 Telephone:+41 22 819 91 11 Fax:+41 22 819 91 36 E-mail: [email protected] Bank details: UBS SA, Rue du Rhône 8, 1204 Genève Account No: 279-HU108533.1 Clearing No: 279 Swift code: UBSWCHZH12A Iban: CH13 0027 9279 HU1085331 Chamber of Commerce and Industry of Neuchâtel 4, rue de la Serre P.O. Box 2012 CH-2001 Neuchâtel Telephone:+41 32 722 15 15 Fax:+41 32 722 15 20 E-mail: [email protected] Bank: BCN, Neuchâtel Account No.: C0029.20.09 Clearing Nr: 766 Swift code: BCNNCH22 Iban: CH69 0076 6000 C002 9200 9 Chamber of Commerce and Industry of Ticino Corso Elvezia 16 P.O. Box 2378 CH-6901 Lugano Telephone:+41 91 911 51 11 Fax:+41 91 911 51 12 E-mail: [email protected] Bank details: Banca della Svizzera Italiana (BSI), Via Magatti 2, CH-6901 Lugano Account No: A201021A 8465 Clearing No: 8475 Iban: CH64 0846 5000 0A20 1021 A Chamber of Commerce and Industry of Vaud Avenue d’Ouchy 47 P.O. Box 315 CH-1001 Lausanne Telephone: +41 21 613 35 35 Fax: +41 21 613 35 05 E-mail: [email protected] Bank details: Banque Cantonale Vaudoise, 1001 Lausanne

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Account No: C. 308.53.47 Clearing No: 767 Swift Code: BCVLCH2 L Iban: CH96 0076 7001 U030 8534 7 Zurich Chamber of Commerce Bleicherweg 5 P.O. Box 3058 CH-8022 Zurich Telephone: +41 44 217 40 50 Fax:+41 44 217 40 51 E-mail: [email protected] Bank details: Credit Suisse, CH-8070 Zurich Account No: 497380-01 Clearing No: 4835 Swift Code: CRES CH ZZ 80A Iban: CH62 0483 5049 7380 0100 0

APPENDIX B: Schedule of the Costs of Arbitration (All amounts in this Appendix B are in Swiss francs, hereinafter “CHF”)

1. Registration Fee 1.1 When submitting a Notice of Arbitration, the Claimant shall pay a Registration Fee of • CHF 4’500 for arbitrations where the amount in dispute does not exceed CHF 2’000’000; • CHF 6’000 for arbitrations where the amount in dispute is between CHF 2’000’001 and CHF 10’000’000; • CHF 8’000 for arbitrations where the amount in dispute exceeds CHF 10’000’000. 1.2 If the amount in dispute is not quantiﬁed, the Claimant shall pay a Registration Fee of CHF 6’000. 1.3 If the Claimant fails to pay the Registration Fee, the Chambers shall not proceed with the arbitration. 1.4 The Registration Fee is not refundable. 1.5 The above provisions shall apply to any counterclaim.

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2. Arbitrators’ fees and the Chambers’ Administrative Costs 2.1 The arbitrators’ fees (Article 38, paragraph a) shall cover the activities of the arbitral tribunal from the moment the ﬁle is transmitted until the last award. 2.2 Where the amount in dispute exceeds the threshold speciﬁed in Section 2.3 of this Appendix B, Administrative Costs shall be payable to the Chambers, in addition to the Registration Fee. 2.3 As a rule, the arbitrators’ fees and the Chambers’ Administrative Costs shall be computed on the basis of the following scale, taking into account the criteria of Article 39, paragraph 1: Amount in dispute (in Swiss francs)

2 3

Fee of Sole Arbitrator2

Fee of three-member arbitral tribunal

Administrative Costs3 fixed by the Chambers

min.

max.

min.

max.

up to CHF 300’000

4%

12%

10%

30%

—

CHF 300’001 to CHF 600’000

2%

8%

5%

20%

—

CHF 600’001 to CHF 1’000’000

1.5%

6%

3.75%

15%

—

CHF 1’000’001 to CHF 2’000’000

0.6%

3.6%

1.5%

9%

—

CHF 2’000’001 to CHF 10’000’000

0.38%

1.5%

0.95%

3.75%

CHF 4’000 +0.2%

CHF 10’000’001 to CHF 20’000’000

0.3%

0.6%

0.75%

1.5%

0.1%

CHF 20’000’001 to CHF 50’000’000

0.1%

0.2%

0.25%

0.5%

0.05%

CHF 50’000’001 to CHF 100’000’000

0.06%

0.18%

0.15%

0.45%

0.01%

CHF 100’000’001 to CHF 250’000’000

0.02%

0.1%

0.05%

0.25%

CHF 50’000

over CHF 250’000’000

0.01%

0.06%

0.025%

0.15%

CHF 250’000

The fees for a sole arbitrator represent 40% of the fees for a three-member arbitral tribunal. This is a contribution, in the maximum amount of CHF 50’000, to the administrative costs of the Chambers, in addition to the Registration Fee. In the event of discontinuation of the arbitral proceedings (Article 39, paragraph 1), the Chambers may, in their discretion, reimburse all or part of the Administrative Costs.

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The fees and administrative costs payable for each successive range in this chart are added together. The arbitrators’ fees and the Chambers’ Administrative Costs may exceed the amounts set out in the scale above only in exceptional circumstances and with prior approval by the Chambers. 2.4 Claims and counterclaims are added for the determination of the amount in dispute. The same rule applies to set-off defences, unless the arbitral tribunal, after consulting with the parties, concludes that such set-off claims will not require signiﬁcant additional work. 2.5 Interest claims shall not be taken into account for the calculation of the amount in dispute. However, when the interest claims exceed the amounts claimed in principal, the interest claims alone shall be considered in calculating the amount in dispute. 2.6 Currencies other than the Swiss franc shall be converted into Swiss francs at the average rate of exchange between the date when the Notice of Arbitration is received by the Chambers and the date when the ﬁnal award is made. For the purpose of determining the Registration Fee under Section 1 of this Appendix B, the rate of exchange shall be that of the date when the Notice of Arbitration is received by the Chambers. 2.7 If the amount in dispute is not quantiﬁed, the Arbitrators’ fees and the Chambers’ Administrative costs shall be ﬁxed by the arbitral tribunal, taking into account all relevant circumstances. 2.8 Where the parties do not agree to refer the case to a Sole arbitrator as provided for by Article 42, paragraph 2 (Expedited Procedure), the fees of the three arbitrators shall be determined in accordance with the above Schedule of the Costs of Arbitration but shall in no event be less than the fees resulting from the application of an hourly rate of CHF 350 (three hundred ﬁfty Swiss francs).

3. Arbitrators’ expenses The expenses of the arbitrators shall relate to the actual disbursements for the arbitration, such as expenses relating to: travel (ﬁrst class airfare accepted only for distances exceeding 4000 kilometres), accommodation, meals (if in home city, only meals among arbitrators are taken into account), taxi, communications costs, and any other costs related to the conduct of the proceedings (such as rental of hearing rooms, court reporting services, interpreters, etc.). The Chambers may issue general guidelines to the arbitrators for the accounting of their expenses.

4. Income earned on deposits made by the parties In consultation with the parties, the arbitral tribunal may invest the deposits made by the parties, taking into account market conditions and criteria of prudent and secure investment. When deciding whether to make such investments, the arbitral tribunal shall also have due regard to the possible need to make the deposited funds available 480

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immediately. Any income earned shall be included in the ﬁnal computation of the costs of the arbitration in favour of the party or parties having made the deposit or deposits so invested.

APPENDIX C: Arbitrators’ fees Sole Arbitrator Amount in dispute (in Swiss francs)

Administrative costs

Sole Arbitrator

Minimum

Maximum

0 - 300’000

-

4% of amount

12% of amount

300’001 - 600’000

-

12’000 + 2% of amount over 300’000

36’000 + 8% of amount over 300’000

600’001 1’000’000

-

18’000 + 1.5% of amount over 600’000

60’000 + 6% of amount over 600’000

1’000’001 2’000’000

-

24’000 + 0.6% of amount over 1’000’000

84’000 + 3.6% of amount over 1’000’000

2’000’001 10’000’000

4’000 + 0.2% of amount over 2’000’000

30’000 + 0.38% of amount over 2’000’000

120’000 + 1.5% of amount over 2’000’000

10’000’001 - 20’000’000

20’000 + 0.1% of amount over 10’000’000

60’400 + 0.3% of amount over 10’000’000

240’000 + 0.6% of amount over 10’000’000

20’000’001 - 50’000’000

30’000 + 0.05% of amount over 20’000’000

90’400 + 0.1% of amount over 20’000’000

300’000 + 0.2% of amount over 20’000’000

50’000’001 - 100’000’000

45’000 + 0.01% of amount over 50’000’000

120’400 + 0.06% of 360’000 + 0.18% of amount over amount over 50’000’000 50’000’000

100’000’001 - 250’000’000

50’000

150’400 + 0.02% of 450’000 + 0.1% of amount over amount over 100’000’000 100’000’000

>250’000’000

50’000

180’400 + 0.01% of 600’000 + 0.06% of amount over amount over 250’000’000 250’000’000

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481

APPENDIX C: Arbitrators’ fees Three Arbitrators Amount in dispute(in Swiss francs)

Administrative costs

Three-member arbitral tribunal

Minimum

Maximum

0 - 300’000

-

10% of amount

30% of amount

300’001 - 600’000

-

30’000 + 5% of amount over 300’000

90’000 + 20% of amount over 300’000

600’001 1’000’000

-

45’000 + 3.75% of amount over 600’000

150’000 + 15% of amount over 600’000

1’000’001 2’000’000

-

60’000 + 1.5% of amount over 1’000’000

210’000 + 9% of amount over 1’000’000

2’000’001 10’000’000

4’000 + 0.2% of amount over 2’000’000

75’000 + 0.95% of amount over 2’000’000

300’000 + 3.75% of amount over 2’000’000

10’000’001 - 20’000’000

20’000 + 0.1% of amount over 10’000’000

151’000 + 0.75% of 600’000 + 1.5% of amount over amount over 10’000’000 10’000’000

20’000’001 - 50’000’000

30’000 + 0.05% of amount over 20’000’000

226’000 + 0.25% of 750’000 + 0.5% of amount over amount over 20’000’000 20’000’000

50’000’001 - 100’000’000

45’000 + 0.01% of amount over 50’000’000

301’000 + 0.15% of 900’000 + 0.45% of amount over amount over 50’000’000 50’000’000

100’000’001 - 250’000’000

50’000

376’000 + 0.05% of 1’125’000 + 0.25% of amount over amount over 100’000’000 100’000’000

>250’000’000

50’000

451’000 + 0.025% of amount over 250’000’000

482

1’500’000 + 0.15% of amount over 250’000’000

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UNCITRAL Model Law

UNITED NATIONS COMMISSION ON INTERNATIONAL TRADE LAW (UNCITRAL) UNCITRAL Model Law on International Commercial Arbitration1 CONTENTS Chapter I. General provisions Article 1. Scope of application Article 2. Deﬁnitions and rules of interpretation Article 3. Receipt of written communications Article 4. Waiver of right to object Article 5. Extent of court intervention Article 6. Court or other authority for certain functions of arbitration assistance and supervision Chapter II. Arbitration agreement Article 7. Deﬁnition and form of arbitration agreement Article 8 Arbitration and substantive claim before court Article 9. Arbitration agreement and interim measures by court Chapter III. Composition of arbitral tribunal Article 10. Number of arbitrators Article 11. Appointment of arbitrators Article 12. Grounds for challenge Article 13. Challenge procedure Article 14. Failure or impossibility to act Article 15. Appointment of substitute arbitrator Chapter IV. Jurisdiction of arbitral tribunal Article 16. Competence of arbitral tribunal to rule on its jurisdiction Article 17. Power of arbitral tribunal to order interim measures

1

Reproduced with permission. 483

Chapter V. Conduct of arbitral proceedings Article 18. Equal treatment of parties Article 19. Determination of rules of procedure Article 20. Place of arbitration Article 21. Commencement of arbitral proceedings Article 22. Language Article 23. Statements of claim and defence Article 24. Hearings and written proceedings Article 25. Default of a party Article 26. Expert appointed by arbitral tribunal Article 27. Court assistance in taking evidence Chapter VI. Making of award and termination of proceedings Article 28. Rules applicable to substance of dispute Article 29. Decision making by panel of arbitrators Article 30. Settlement Article 31. Form and contents of award Article 32. Termination of proceedings Article 33. Correction and interpretation of award; additional award Chapter VII. Recourse against award Article 34. Application for setting aside as exclusive recourse against arbitral award Chapter VIII. Recognition and enforcement of awards Article 35. Recognition and enforcement Article 36. Grounds for refusing recognition or enforcement EXPLANATORY NOTE BY THE UNCITRAL SECRETARIAT ON THE MODEL LAW ON INTERNATIONAL COMMERCIAL ARBITRATION A. Background to the Model Law 1. Inadequacy of domestic laws 2. Disparity between national laws B. Salient features of the Model Law 1. Special procedural regime for international commercial arbitration 2. Arbitration agreement 3. Composition of arbitral tribunal 4. Jurisdiction of arbitral tribunal 5. Conduct of arbitral proceedings 6. Making of award and termination of proceedings 7. Recourse against award 8. Recognition and enforcement of awards

484

UNCITRAL MODEL LAW

UNCITRAL MODEL LAW ON INTERNATIONAL COMMERCIAL ARBITRATION (United Nations document A/40/17, Annex I) (As adopted by the United Nations Commission on International Trade Law on 21 June 1985) CHAPTER I. GENERAL PROVISIONS Article 1. Scope of application2 (1) This Law applies to international commercial3 arbitration, subject to any agreement in force between this State and any other State or States. (2) The provisions of this Law, except articles 8, 9, 35 and 36, apply only if the place of arbitration is in the territory of this State. (3) An arbitration is international if: (a) the parties to an arbitration agreement have, at the time of the conclusion of that agreement, their places of business in different States; or (b) one of the following places is situated outside the State in which the parties have their places of business: (i) the place of arbitration if determined in, or pursuant to, the arbitration agreement; (ii) any place where a substantial part of the obligations of the commercial relationship is to be performed or the place with which the subject-matter of the dispute is most closely connected; or (c) the parties have expressly agreed that the subject-matter of the arbitration agreement relates to more than one country. (4) For the purposes of paragraph (3) of this article: (a) if a party has more than one place of business, the place of business is that which has the closest relationship to the arbitration agreement; 2 3

Article headings are for reference purposes only and are not to be used for purposes of interpretation. The term “commercial” should be given a wide interpretation so as to cover matters arising from all relationships of a commercial nature, whether contractual or not. Relationships of a commercial nature include, but are not limited to, the following transactions: any trade transaction for the supply or exchange of goods or services; distribution agreement; commercial representation or agency; factoring; leasing; construction of works; consulting; engineering; licensing; investment; ﬁnancing; banking; insurance; exploitation agreement or concession; joint venture and other forms of industrial or business co-operation; carriage of goods or passengers by air, sea, rail or road.

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(b) if a party does not have a place of business, reference is to be made to his habitual residence. (5) This Law shall not affect any other law of this State by virtue of which certain disputes may not be submitted to arbitration or may be submitted to arbitration only according to provisions other than those of this Law.

Article 2. Deﬁnitions and rules of interpretation For the purposes of this Law: (a) “arbitration” means any arbitration whether or not administered by a permanent arbitral institution; (b) “arbitral tribunal” means a sole arbitrator or a panel of arbitrators; (c) “court” means a body or organ of the judicial system of a State; (d) where a provision of this Law, except article 28, leaves the parties free to determine a certain issue, such freedom includes the right of the parties to authorize a third party, including an institution, to make that determination; (e) where a provision of this Law refers to the fact that the parties have agreed or that they may agree or in any other way refers to an agreement of the parties, such agreement includes any arbitration rules referred to in that agreement; (f) where a provision of this Law, other than in articles 25(a) and 32(2)(a), refers to a claim, it also applies to a counter-claim, and where it refers to a defence, it also applies to a defence to such counter-claim.

Article 3. Receipt of written communications (1) Unless otherwise agreed by the parties: (a) any written communication is deemed to have been received if it is delivered to the addressee personally or if it is delivered at his place of business, habitual residence or mailing address; if none of these can be found after making a reasonable inquiry, a written communication is deemed to have been received if it is sent to the addressee’s last-known place of business, habitual residence or mailing address by registered letter or any other means which provides a record of the attempt to deliver it; (b) the communication is deemed to have been received on the day it is so delivered. (2) The provisions of this article do not apply to communications in court proceedings.

Article 4. Waiver of right to object A party who knows that any provision of this Law from which the parties may derogate or any requirement under the arbitration agreement has not been complied with and yet proceeds with the arbitration without stating his objection to such noncompliance without undue delay or, if a time-limit is provided therefor, within such period of time, shall be deemed to have waived his right to object. 486

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Article 5. Extent of court intervention In matters governed by this Law, no court shall intervene except where so provided in this Law.

Article 6. Court or other authority for certain functions of arbitration assistance and supervision The functions referred to in articles 11(3), 11(4), 13(3), 14, 16(3) and 34(2) shall be performed by . . . [Each State enacting this model law speciﬁes the court, courts or, where referred to therein, other authority competent to perform these functions.]

CHAPTER II. ARBITRATION AGREEMENT Article 7. Deﬁnition and form of arbitration agreement (1) “Arbitration agreement” is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a deﬁned legal relationship, whether contractual or not. An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. (2) The arbitration agreement shall be in writing. An agreement is in writing if it is contained in a document signed by the parties or in an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement, or in an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by another. The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement provided that the contract is in writing and the reference is such as to make that clause part of the contract.

Article 8. Arbitration agreement and substantive claim before court (1) A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his ﬁrst statement on the substance of the dispute, refer the parties to arbitration unless it ﬁnds that the agreement is null and void, inoperative or incapable of being performed. (2) Where an action referred to in paragraph (1) of this article has been brought, arbitral proceedings may nevertheless be commenced or continued, and an award may be made, while the issue is pending before the court.

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Article 9. Arbitration agreement and interim measures by court It is not incompatible with an arbitration agreement for a party to request, before or during arbitral proceedings, from a court an interim measure of protection and for a court to grant such measure.

CHAPTER III. COMPOSITION OF ARBITRAL TRIBUNAL Article 10. Number of arbitrators (1) The parties are free to determine the number of arbitrators. (2) Failing such determination, the number of arbitrators shall be three.

Article 11. Appointment of arbitrators (1) No person shall be precluded by reason of his nationality from acting as an arbitrator, unless otherwise agreed by the parties. (2) The parties are free to agree on a procedure of appointing the arbitrator or arbitrators, subject to the provisions of paragraphs (4) and (5) of this article. (3) Failing such agreement, (a) in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two arbitrators thus appointed shall appoint the third arbitrator; if a party fails to appoint the arbitrator within thirty days of receipt of a request to do so from the other party, or if the two arbitrators fail to agree on the third arbitrator within thirty days of their appointment, the appointment shall be made, upon request of a party, by the court or other authority speciﬁed in article 6; (b) in an arbitration with a sole arbitrator, if the parties are unable to agree on the arbitrator, he shall be appointed, upon request of a party, by the court or other authority speciﬁed in article 6. (4) Where, under an appointment procedure agreed upon by the parties, (a) a party fails to act as required under such procedure, or (b) the parties, or two arbitrators, are unable to reach an agreement expected of them under such procedure, or (c) a third party, including an institution, fails to perform any function entrusted to it under such procedure, any party may request the court or other authority speciﬁed in article 6 to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.

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(5) A decision on a matter entrusted by paragraph (3) or (4) of this article to the court or other authority speciﬁed in article 6 shall be subject to no appeal. The court or other authority, in appointing an arbitrator, shall have due regard to any qualiﬁcations required of the arbitrator by the agreement of the parties and to such considerations as are likely to secure the appointment of an independent and impartial arbitrator and, in the case of a sole or third arbitrator, shall take into account as well the advisability of appointing an arbitrator of a nationality other than those of the parties.

Article 12. Grounds for challenge (1) When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose any circumstances likely to give rise to justiﬁable doubts as to his impartiality or independence. An arbitrator, from the time of his appointment and throughout the arbitral proceedings, shall without delay disclose any such circumstances to the parties unless they have already been informed of them by him. (2) An arbitrator may be challenged only if circumstances exist that give rise to justiﬁable doubts as to his impartiality or independence, or if he does not possess qualiﬁcations agreed to by the parties. A party may challenge an arbitrator appointed by him, or in whose appointment he has participated, only for reasons of which he becomes aware after the appointment has been made.

Article 13. Challenge procedure (1) The parties are free to agree on a procedure for challenging an arbitrator, subject to the provisions of paragraph (3) of this article. (2) Failing such agreement, a party who intends to challenge an arbitrator shall, within ﬁfteen days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstance referred to in article 12(2), send a written statement of the reasons for the challenge to the arbitral tribunal. Unless the challenged arbitrator withdraws from his ofﬁce or the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge. (3) If a challenge under any procedure agreed upon by the parties or under the procedure of paragraph (2) of this article is not successful, the challenging party may request, within thirty days after having received notice of the decision rejecting the challenge, the court or other authority speciﬁed in article 6 to decide on the challenge, which decision shall be subject to no appeal; while such a request is pending, the arbitral tribunal, including the challenged arbitrator, may continue the arbitral proceedings and make an award.

Article 14. Failure or impossibility to act (1) If an arbitrator becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay, his mandate terminates if he withdraws from his ofﬁce or if the parties agree on the termination. Otherwise, if a controversy UNCITRAL MODEL LAW

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remains concerning any of these grounds, any party may request the court or other authority speciﬁed in article 6 to decide on the termination of the mandate, which decision shall be subject to no appeal. (2) If, under this article or article 13(2), an arbitrator withdraws from his ofﬁce or a party agrees to the termination of the mandate of an arbitrator, this does not imply acceptance of the validity of any ground referred to in this article or article 12(2).

Article 15. Appointment of substitute arbitrator Where the mandate of an arbitrator terminates under article 13 or 14 or because of his withdrawal from ofﬁce for any other reason or because of the revocation of his mandate by agreement of the parties or in any other case of termination of his mandate, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced.

CHAPTER IV. JURISDICTION OF ARBITRAL TRIBUNAL Article 16. Competence of arbitral tribunal to rule on its jurisdiction (1) 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 which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause. (2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence. A party is not precluded from raising such a plea by the fact that he has appointed, or participated in the appointment of, an arbitrator. A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings. The arbitral tribunal may, in either case, admit a later plea if it considers the delay justiﬁed. (3) The arbitral tribunal may rule on a plea referred to in paragraph (2) of this article either as a preliminary question or in an award on the merits. If the arbitral tribunal rules as a preliminary question that it has jurisdiction, any party may request, within thirty days after having received notice of that ruling, the court speciﬁed in article 6 to decide the matter, which decision shall be subject to no appeal; while such a request is pending, the arbitral tribunal may continue the arbitral proceedings and make an award.

Article 17. Power of arbitral tribunal to order interim measures Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, order any party to take such interim measure of protection as the arbitral tribunal 490

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may consider necessary in respect of the subject-matter of the dispute. The arbitral tribunal may require any party to provide appropriate security in connection with such measure.

CHAPTER V. CONDUCT OF ARBITRAL PROCEEDINGS Article 18. Equal treatment of parties The parties shall be treated with equality and each party shall be given a full opportunity of presenting his case.

Article 19. Determination of rules of procedure (1) Subject to the provisions of this Law, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting the proceedings. (2) Failing such agreement, the arbitral tribunal may, subject to the provisions of this Law, conduct the arbitration in such 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.

Article 20. Place of arbitration (1) The parties are free to agree on the place of arbitration. Failing such agreement, the place of arbitration shall be determined by the arbitral tribunal having regard to the circumstances of the case, including the convenience of the parties. (2) Notwithstanding the provisions of paragraph (1) of this article, the arbitral tribunal may, unless otherwise agreed by the parties, meet at any place it considers appropriate for consultation among its members, for hearing witnesses, experts or the parties, or for inspection of goods, other property or documents.

Article 21. Commencement of arbitral proceedings Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent.

Article 22. Language (1) The parties are free to agree on the language or languages to be used in the arbitral proceedings. Failing such agreement, the arbitral tribunal shall determine the language or languages to be used in the proceedings. This agreement or determination, unless otherwise speciﬁed therein, shall apply to any written statement by a party, any hearing and any award, decision or other communication by the arbitral tribunal. UNCITRAL MODEL LAW

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(2) The arbitral tribunal may order that any documentary evidence shall be accompanied by a translation into the language or languages agreed upon by the parties or determined by the arbitral tribunal.

Article 23. Statements of claim and defence (1) Within the period of time agreed by the parties or determined by the arbitral tribunal, the claimant shall state the facts supporting his claim, the points at issue and the relief or remedy sought, and the respondent shall state his defence in respect of these particulars, unless the parties have otherwise agreed as to the required elements of such statements. The parties may submit with their statements all documents they consider to be relevant or may add a reference to the documents or other evidence they will submit. (2) Unless otherwise agreed by the parties, either party may amend or supplement his claim or defence during the course of the arbitral proceedings, unless the arbitral tribunal considers it inappropriate to allow such amendment having regard to the delay in making it.

Article 24. Hearings and written proceedings (1) Subject to any contrary agreement by the parties, the arbitral tribunal shall decide whether to hold oral hearings for the presentation of evidence or for oral argument, or whether the proceedings shall be conducted on the basis of documents and other materials. However, unless the parties have agreed that no hearings shall be held, the arbitral tribunal shall hold such hearings at an appropriate stage of the proceedings, if so requested by a party. (2) The parties shall be given sufﬁcient advance notice of any hearing and of any meeting of the arbitral tribunal for the purposes of inspection of goods, other property or documents. (3) All statements, documents or other information supplied to the arbitral tribunal by one party shall be communicated to the other party. Also any expert report or evidentiary document on which the arbitral tribunal may rely in making its decision shall be communicated to the parties.

Article 25. Default of a party Unless otherwise agreed by the parties, if, without showing sufﬁcient cause, (a) the claimant fails to communicate his statement of claim in accordance with article 23(1), the arbitral tribunal shall terminate the proceedings; (b) the respondent fails to communicate his statement of defence in accordance with article 23(1), the arbitral tribunal shall continue the proceedings without treating such failure in itself as an admission of the claimant’s allegations;

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(c) any party fails to appear at a hearing or to produce documentary evidence, the arbitral tribunal may continue the proceedings and make the award on the evidence before it.

Article 26. Expert appointed by arbitral tribunal (1) Unless otherwise agreed by the parties, the arbitral tribunal (a) may appoint one or more experts to report to it on speciﬁc issues to be determined by the arbitral tribunal; (b) may require a party to give the expert any relevant information or to produce, or to provide access to, any relevant documents, goods or other property for his inspection. (2) Unless otherwise agreed by the parties, if a party so requests or if the arbitral tribunal considers it necessary, the expert shall, after delivery of his written or oral report, participate in a hearing where the parties have the opportunity to put questions to him and to present expert witnesses in order to testify on the points at issue.

Article 27. Court assistance in taking evidence The arbitral tribunal or a party with the approval of the arbitral tribunal may request from a competent court of this State assistance in taking evidence. The court may execute the request within its competence and according to its rules on taking evidence.

CHAPTER VI. MAKING OF AWARD AND TERMINATION OF PROCEEDINGS Article 28. Rules applicable to substance of dispute (1) The arbitral tribunal shall decide the dispute in accordance with such rules of law as are chosen by the parties as applicable to the substance of the dispute. Any designation of the law or legal system of a given State shall be construed, unless otherwise expressed, as directly referring to the substantive law of that State and not to its conﬂict of laws rules. (2) Failing any designation by the parties, the arbitral tribunal shall apply the law determined by the conﬂict of laws rules which it considers applicable. (3) The arbitral tribunal shall decide ex aequo et bono or as amiable compositeur only if the parties have expressly authorized it to do so. (4) In all cases, the arbitral tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction.

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Article 29. Decision making by panel of arbitrators In arbitral proceedings with more than one arbitrator, any decision of the arbitral tribunal shall be made, unless otherwise agreed by the parties, by a majority of all its members. However, questions of procedure may be decided by a presiding arbitrator, if so authorized by the parties or all members of the arbitral tribunal.

Article 30. Settlement (1) If, during arbitral proceedings, the parties settle the dispute, the arbitral tribunal shall terminate the proceedings and, if requested by the parties and not objected to by the arbitral tribunal, record the settlement in the form of an arbitral award on agreed terms. (2) An award on agreed terms shall be made in accordance with the provisions of article 31 and shall state that it is an award. Such an award has the same status and effect as any other award on the merits of the case.

Article 31. Form and contents of award (1) The award shall be made in writing and shall be signed by the arbitrator or arbitrators. In arbitral proceedings with more than one arbitrator, the signatures of the majority of all members of the arbitral tribunal shall sufﬁce, provided that the reason for any omitted signature is stated. (2) The award shall state the reasons upon which it is based, unless the parties have agreed that no reasons are to be given or the award is an award on agreed terms under article 30. (3) The award shall state its date and the place of arbitration as determined in accordance with article 20(1). The award shall be deemed to have been made at that place. (4) After the award is made, a copy signed by the arbitrators in accordance with paragraph (1) of this article shall be delivered to each party.

Article 32. Termination of proceedings (1) The arbitral proceedings are terminated by the ﬁnal award or by an order of the arbitral tribunal in accordance with paragraph (2) of this article. (2) The arbitral tribunal shall issue an order for the termination of the arbitral proceedings when: (a) the claimant withdraws his claim, unless the respondent objects thereto and the arbitral tribunal recognizes a legitimate interest on his part in obtaining a ﬁnal settlement of the dispute; (b) the parties agree on the termination of the proceedings;

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(c) the arbitral tribunal ﬁnds that the continuation of the proceedings has for any other reason become unnecessary or impossible. (3) The mandate of the arbitral tribunal terminates with the termination of the arbitral proceedings, subject to the provisions of articles 33 and 34(4).

Article 33. Correction and interpretation of award; additional award (1) Within thirty days of receipt of the award, unless another period of time has been agreed upon by the parties: (a) a party, with notice to the other party, may request the arbitral tribunal to correct in the award any errors in computation, any clerical or typographical errors or any errors of similar nature; (b) if so agreed by the parties, a party, with notice to the other party, may request the arbitral tribunal to give an interpretation of a speciﬁc point or part of the award. If the arbitral tribunal considers the request to be justiﬁed, it shall make the correction or give the interpretation within thirty days of receipt of the request. The interpretation shall form part of the award. (2) The arbitral tribunal may correct any error of the type referred to in paragraph (1) (a) of this article on its own initiative within thirty days of the date of the award. (3) Unless otherwise agreed by the parties, a party, with notice to the other party, may request, within thirty days of receipt of the award, the arbitral tribunal to make an additional award as to claims presented in the arbitral proceedings but omitted from the award. If the arbitral tribunal considers the request to be justiﬁed, it shall make the additional award within sixty days. (4) The arbitral tribunal may extend, if necessary, the period of time within which it shall make a correction, interpretation or an additional award under paragraph (1) or (3) of this article. (5) The provisions of article 31 shall apply to a correction or interpretation of the award or to an additional award.

CHAPTER VII. RECOURSE AGAINST AWARD Article 34. Application for setting aside as exclusive recourse against arbitral award (1) Recourse to a court against an arbitral award may be made only by an application for setting aside in accordance with paragraphs (2) and (3) of this article.

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(2) An arbitral award may be set aside by the court speciﬁed in article 6 only if: (a) the party making the application furnishes proof that: (i) a party to the arbitration agreement referred to in article 7 was under some incapacity; or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of this State; or (ii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (iii) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside; or (iv) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conﬂict with a provision of this Law from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Law; or (b) the court ﬁnds that: (i) the subject-matter of the dispute is not capable of settlement by arbitration under the law of this State; or (ii) the award is in conﬂict with the public policy of this State. (3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the award or, if a request had been made under article 33, from the date on which that request had been disposed of by the arbitral tribunal. (4) The court, when asked to set aside an award, may, where appropriate and so requested by a party, suspend the setting aside proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the arbitral tribunal’s opinion will eliminate the grounds for setting aside.

CHAPTER VIII. RECOGNITION AND ENFORCEMENT OF AWARDS Article 35. Recognition and enforcement (1) An arbitral award, irrespective of the country in which it was made, shall be recognized as binding and, upon application in writing to the competent court, shall be enforced subject to the provisions of this article and of article 36. 496

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(2) The party relying on an award or applying for its enforcement shall supply the duly authenticated original award or a duly certiﬁed copy thereof, and the original arbitration agreement referred to in article 7 or a duly certiﬁed copy thereof. If the award or agreement is not made in an ofﬁcial language of this State, the party shall supply a duly certiﬁed translation thereof into such language.4

Article 36. Grounds for refusing recognition or enforcement (1) Recognition or enforcement of an arbitral award, irrespective of the country in which it was made, may be refused only: (a) at the request of the party against whom it is invoked, if that party furnishes to the competent court where recognition or enforcement is sought proof that: (i) a party to the arbitration agreement referred to in article 7 was under some incapacity; or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or (ii) the party against whom the award is invoked was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (iii) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission toarbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced; or (iv) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or (v) the award has not yet become binding on the parties or has been set aside or suspended by a court of the country in which, or under the law of which, that award was made; or (b) if the court ﬁnds that: (i) the subject-matter of the dispute is not capable of settlement by arbitration under the law of this State; or (ii) the recognition or enforcement of the award would be contrary to the public policy of this State.

4

The conditions set forth in this paragraph are intended to set maximum standards. It would, thus, not be contrary to the harmonization to be achieved by the model law if a State retained even less onerous conditions.

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(2) If an application for setting aside or suspension of an award has been made to a court referred to in paragraph (1)(a)(v) of this article, the court where recognition or enforcement is sought may, if it considers it proper, adjourn its decision and may also, on the application of the party claiming recognition or enforcement of the award, order the other party to provide appropriate security.

Explanatory Note by the UNCITRAL Secretariat on the Model Law on International Commercial Arbitration5 1. The UNCITRAL Model Law on International Commercial Arbitration was adopted by the United Nations Commission on International Trade Law (UNCITRAL) on 21 June 1985, at the close of the Commission’s 18th annual session. The General Assembly, in its resolution 40/72 of 11 December 1985, recommended “that all States give due consideration to the Model Law on International Commercial Arbitration, in view of the desirability of uniformity of the law of arbitral procedures and the speciﬁc needs of international commercial arbitration practice.” 2. The Model Law constitutes a sound and promising basis for the desired harmonization and improvement of national laws. It covers all stages of the arbitral process from the arbitration agreement to the recognition and enforcement of the arbitral award and reﬂects a worldwide consensus on the principles and important issues of international arbitration practice. It is acceptable to States of all regions and the different legal or economic systems of the world. 3. The form of a model law was chosen as the vehicle for harmonization and improvement in view of the ﬂexibility it gives to States in preparing new arbitration laws. It is advisable to follow the model as closely as possible since that would be the best contribution to the desired harmonization and in the best interest of the users of international arbitration, who are primarily foreign parties and their lawyers.

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.

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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). UNCITRAL MODEL LAW

1. Inadequacy of domestic laws 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. 6. The expectations of the parties as expressed in a chosen set of arbitration rules or a “one-off” arbitration agreement may be frustrated, especially by a mandatory provision of the applicable law. Unexpected and undesired restrictions found in national laws relate, for example, to the parties’ ability effectively to submit future disputes to arbitration, to their power to select the arbitrator freely, or to their interest in having the arbitral proceedings conducted according to the agreed rules of procedure and with no more court involvement than is appropriate. Frustrations may also ensue from nonmandatory provisions which may impose undesired requirements on unwary parties who did not provide otherwise. Even the absence of non-mandatory provisions may cause difﬁculties by not providing answers to the many procedural issues relevant in an arbitration and not always settled in the arbitration agreement.

2. Disparity between national laws 7. Problems and undesired consequences, whether emanating from mandatory or nonmandatory 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. 8. Uncertainty about the local law with the inherent risk of frustration may adversely affect not only the functioning of the arbitral process but already the selection of the place of arbitration. A party may well for those reasons hesitate or refuse to agree to a place which otherwise, for practical reasons, would be appropriate in the case at hand. The choice of places of arbitration would thus be widened and the smooth functioning of the arbitral proceedings would be enhanced if States were to adopt the Model Law which is easily recognizable, meets the speciﬁc needs of international commercial arbitration and provides an international standard with solutions acceptable to parties from different States and legal systems.

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B. SALIENT FEATURES OF THE MODEL LAW 1. Special procedural regime for international commercial 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 subjectmatter 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.” 12. Another aspect of applicability is what one may call the territorial scope of application. According to article 1(2), the Model Law as enacted in a given State would apply only if the place of arbitration is in the territory of that State. However, there is an important and reasonable exception. Articles 8(1) and 9 which deal with recognition of arbitration agreements, including their compatibility with interim measures of protection, and articles 35 and 36 on recognition and enforcement of arbitral awards are given a global scope, i.e. they apply irrespective of whether the place of arbitration is in that State or in another State and, as regards articles 8 and 9, even if the place of arbitration is not yet determined. 13. The strict territorial criterion, governing the bulk of the provisions of the Model Law, was adopted for the sake of certainty and in view of the following facts. The place of arbitration is used as the exclusive criterion by the great majority of national laws and, where national laws allow parties to choose the procedural law of a State 500

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other than that where the arbitration takes place, experience shows that parties in practice rarely make use of that facility. The Model Law, by its liberal contents, further reduces the need for such choice of a “foreign” law in lieu of the (Model) Law of the place of arbitration, not the least because it grants parties wide freedom in shaping the rules of the arbitral proceedings. This includes the possibility of incorporating into the arbitration agreement procedural provisions of a “foreign” law, provided there is no conﬂict with the few mandatory provisions of the Model Law. Furthermore, the strict territorial criterion is of considerable practical beneﬁt in respect of articles 11, 13, 14, 16, 27 and 34, which entrust the courts of the respective State with functions of arbitration assistance and supervision.

b. Delimitation of court assistance and supervision 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. 15. In this spirit, the Model Law envisages court involvement in the following instances. A ﬁrst group comprises appointment, challenge and termination of the mandate of an arbitrator (articles 11, 13 and 14), jurisdiction of the arbitral tribunal (article 16) and setting aside of the arbitral award (article 34). These instances are listed in article 6 as functions which should be entrusted, for the sake of centralization, specialization and acceleration, to a specially designated court or, as regards articles 11, 13 and 14, possibly to another authority (e.g. arbitral institution, chamber of commerce). A second group comprises court assistance in taking evidence (article 27), recognition of the arbitration agreement, including its compatibility with court-ordered interim measures of protection (articles 8 and 9), and recognition and enforcement of arbitral awards (articles 35 and 36). 16. Beyond the instances in these two groups, “no court shall intervene, in matters governed by this Law.” This is stated in the innovative article 5, which by itself does not take a stand on what is the appropriate role of the courts but guarantees the reader and user that he will ﬁnd all instances of possible court intervention in this Law, except for matters not regulated by it (e.g., consolidation of arbitral proceedings, contractual relationship between arbitrators and parties or arbitral institutions, or ﬁxing of costs and fees, including deposits). Especially foreign readers and users, who constitute the majority of potential users and may be viewed as the primary addressees of any special law on international commercial arbitration, will appreciate that they do not have to search outside this Law.

2. Arbitration agreement 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 UNCITRAL MODEL LAW

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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.

a. Deﬁnition and form of arbitration agreement 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. 19. While oral arbitration agreements are found in practice and are recognized by some national laws, article 7(2) follows the 1958 New York Convention in requiring written form. It widens and clariﬁes the deﬁnition of written form of article II(2) of that Convention by adding “telex or other means of telecommunication which provide a record of the agreement,” by covering the submission-type situation of “an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by another,” and by providing that “the reference in a contract to a document” (e.g. general conditions) “containing an arbitration clause constitutes an arbitration agreement provided that the contract is in writing and the reference is such as to make that clause part of the contract.”

b. Arbitration agreement and the courts 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. 21. Article 9 expresses the principle that any interim measures of protection that may be obtained from courts under their procedural law (e.g. pre-award attachments) are compatible with an arbitration agreement. Like article 8, this provision is addressed to the courts of a given State, insofar as it determines their granting of interim measures as being compatible with an arbitration agreement, irrespective of the place of arbitration. Insofar as it declares it to be compatible with an arbitration agreement for a party to request such measure from a court, the provision would apply irrespective of whether the request is made to a court of the given State or of any other country. Wherever such request may be made, it may not be relied upon, under the Model Law, as an objection against the existence or effect of an arbitration agreement. 502

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3. Composition of arbitral tribunal 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. 23. Where under any procedure, agreed upon by the parties or based upon the suppletive rules of the Model Law, difﬁculties arise in the process of appointment, challenge or termination of the mandate of an arbitrator, Articles 11, 13 and 14 provide for assistance by courts or other authorities. In view of the urgency of the matter and in order to reduce the risk and effect of any dilatory tactics, instant resort may be had by a party within a short period of time and the decision is not appealable.

4. Jurisdiction of arbitral tribunal a. Competence to rule on own jurisdiction 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. 25. The arbitral tribunal’s competence to rule on its own jurisdiction, i.e. on the very foundation of its mandate and power, is, of course, subject to court control. Where the arbitral tribunal rules as a preliminary question that it has jurisdiction, article 16(3) provides for instant court control in order to avoid unnecessary waste of money and time. However, three procedural safeguards are added to reduce the risk and effect of dilatory tactics: short time-period for resort to court (30 days), court decision is not appealable, and discretion of the arbitral tribunal to continue the proceedings and make an award while the matter is pending with the court. In those less common cases where the arbitral tribunal combines its decision on jurisdiction with an award on the merits, judicial review on the question of jurisdiction is available in setting aside proceedings under article 34 or in enforcement proceedings under article 36.

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b. Power to order interim measures 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.

5. Conduct of arbitral proceedings 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. 29. Another fundamental right of a party of being heard and being able to present his case relates to evidence by an expert appointed by the arbitral tribunal. Article 26(2) obliges the expert, after having delivered his written or oral report, to participate in a hearing where the parties may put questions to him and present expert witnesses in order to testify on the points at issue, if such a hearing is requested by a party or deemed necessary by the arbitral tribunal. As another provision aimed at ensuring fairness, objectivity and impartiality, article 24(3) provides that all statements, documents and other information supplied to the arbitral tribunal by one party shall be communicated to the other party, and that any expert report or evidentiary document on which the arbitral tribunal may rely in making its decision shall be communicated to the parties. In order to enable the parties to be present at any hearing and at any meeting of the arbitral tribunal for inspection purposes, they shall be given sufﬁcient notice in advance (article 24(2)).

b. Determination of rules of procedure 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 504

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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. 31. Autonomy of the parties to determine the rules of procedure is of special importance in international cases since it allows the parties to select or tailor the rules according to their speciﬁc wishes and needs, unimpeded by traditional domestic concepts and without the earlier mentioned risk of frustration. The supplementary discretion of the arbitral tribunal is equally important in that it allows the tribunal to tailor the conduct of the proceedings to the speciﬁc features of the case without restraints of the traditional local law, including any domestic rules on evidence. Moreover, it provides a means for solving any procedural questions not regulated in the arbitration agreement or the Model Law. 32. In addition to the general provisions of article 19, there are some special provisions using the same approach of granting the parties autonomy and, failing agreement, empowering the arbitral tribunal to decide the matter. Examples of particular practical importance in international cases are article 20 on the place of arbitration and article 22 on the language of the proceedings.

c. Default of a party 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)). 34. Provisions which empower the arbitral tribunal to carry out its task even if one of the parties does not participate are of considerable practical importance since, as experience shows, it is not uncommon that one of the parties has little interest in co-operating and in expediting matters. They would, thus, give international commercial arbitration its necessary effectiveness, within the limits of fundamental requirements of procedural justice.

6. Making of award and termination of proceedings 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 UNCITRAL MODEL LAW

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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 considers applicable. 36. According to article 28(3), the parties may authorize the arbitral tribunal to decide the dispute ex aequo et bono or as amiables compositeurs. This type of arbitration is currently not known or used in all legal systems and there exists no uniform understanding as regards the precise scope of the power of the arbitral tribunal. When parties anticipate an uncertainty in this respect, they may wish to provide a clariﬁcation in the arbitration agreement by a more speciﬁc authorization to the arbitral tribunal. Paragraph (4) makes clear that in all cases, i.e including an arbitration ex aequo et bono, the arbitral tribunal must decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction.

b. Making of award and other decisions 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. 38. Article 31(3) provides that the award shall state the place of arbitration and that it shall be deemed to have been made at that place. As to this presumption, it may be noted that the ﬁnal making of the award constitutes a legal act, which in practice is not necessarily one factual act but may be done in deliberations at various places, by telephone conversation or correspondence; above all, the award need not be signed by the arbitrators at the same place. 39. The arbitral award must be in writing and state its date. It must also state the reasons on which it is based, unless the parties have agreed otherwise or the award is an award on agreed terms, i.e. an award which records the terms of an amicable settlement by the parties. It may be added that the Model Law neither requires nor prohibits “dissenting opinions.”

7. Recourse against award 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 506

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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 UNCITRAL MODEL LAW

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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.

8. Recognition and enforcement of awards 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)).

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c. Grounds for refusing recognition or enforcement 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. Further information on the Model Law may be obtained from: UNCITRAL Secretariat Vienna International Centre P.O. Box 500 A-1400 Vienna AustriaTelephone: (43)(1) 26060-4060 or 4061 Telefax: (43)(1) 26060-5813 E-mail: [email protected]

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Resolution adopted by the General Assembly

A/RES/61/33 [on the report of the Sixth Committee (A/61/453)] Sixty-ﬁrst session Agenda item 77 61/33. Revised articles of the Model Law on International Commercial Arbitration of the United Nations Commission on International Trade Law, and the recommendation regarding the interpretation of article II, paragraph 2, and article VII, paragraph 1, of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York, 10 June 1958 18 December 2006 The General Assembly, Recognizing the value of arbitration as a method of settling disputes arising in the context of international commercial relations, Recalling its resolution 40/72 of 11 December 1985 regarding the Model Law on International Commercial Arbitration,1 Recognizing the need for provisions in the Model Law to conform to current practices in international trade and modern means of contracting with regard to the form of the arbitration agreement and the granting of interim measures, Believing that revised articles of the Model Law on the form of the arbitration agreement and interim measures reﬂecting those current practices will signiﬁcantly enhance the operation of the Model Law,

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Noting that the preparation of the revised articles of the Model Law on the form of the arbitration agreement and interim measures was the subject of due deliberation and extensive consultations with Governments and interested circles and would contribute signiﬁcantly to the establishment of a harmonized legal framework for a fair and efﬁcient settlement of international commercial disputes, Believing that, in connection with the modernization of articles of the Model Law, the promotion of a uniform interpretation and application of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York, 10 June 1958,2 is particularly timely, 1. Expresses its appreciation to the United Nations Commission on International Trade Law for formulating and adopting the revised articles of its Model Law on International Commercial Arbitration on the form of the arbitration agreement and interim measures, the text of which is contained in annex I to the report of the United Nations Commission on International Trade Law on the work of its thirty-ninth session,3 and recommends that all States give favourable consideration to the enactment of the revised articles of the Model Law, or the revised Model Law on International Commercial Arbitration of the United Nations Commission on International Trade Law, when they enact or revise their laws, in view of the desirability of uniformity of the law of arbitral procedures and the speciﬁc needs of international commercial arbitration practice; 2. Also expresses its appreciation to the United Nations Commission on International Trade Law for formulating and adopting the recommendation regarding the interpretation of article II, paragraph 2, and article VII, paragraph 1, of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York, 10 June 1958, the text of which is contained in annex II to the report of the United Nations Commission on International Trade Law on the work of its thirty-ninth session;5 3. Requests the Secretary-General to make all efforts to ensure that the revised articles of the Model Law and the recommendation become generally known and available. 64th plenary meeting 4 December 2006

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WIPO RULES

WIPO ARBITRATION RULES1 Effective from October 1, 2002

I. GENERAL PROVISIONS Abbreviated Expressions Article 1 In these Rules: “Arbitration Agreement” means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them; an Arbitration Agreement may be in the form of an arbitration clause in a contract or in the form of a separate contract; “Claimant” means the party initiating an arbitration; “Respondent” means the party against which the arbitration is initiated, as named in the Request for Arbitration; “Tribunal” includes a sole arbitrator or all the arbitrators where more than one is appointed; “WIPO” means the World Intellectual Property Organization; “Center” means the WIPO Arbitration and Mediation Center, a unit of the International Bureau of WIPO; Words used in the singular include the plural and vice versa, as the context may require.

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Material originally provided by the World Intellectual Property Organization (WIPO), the owner of the copyright. The Secretariat of WIPO assumes no liability or responsibility with regard to the transformation or translation of this data. Reproduced with the permission of WIPO. 513

Scope of Application of Rules Article 2 Where an Arbitration Agreement provides for arbitration under the WIPO Arbitration Rules, these Rules shall be deemed to form part of that Arbitration Agreement and the dispute shall be settled in accordance with these Rules, as in effect on the date of the commencement of the arbitration, unless the parties have agreed otherwise.

Article 3 (a) These Rules shall govern the arbitration, except that, where any of these Rules is in conﬂict with a provision of the law applicable to the arbitration from which the parties cannot derogate, that provision shall prevail. (b) The law applicable to the arbitration shall be determined in accordance with Article 59(b).

Notices and Periods of Time Article 4 (a) Any notice or other communication that may or is required to be given under these Rules shall be in writing and shall be delivered by expedited postal or courier service, or transmitted by telefax, e-mail or other means of telecommunication that provide a record thereof. (b) A party’s last known residence or place of business shall be a valid address for the purpose of any notice or other communication in the absence of any notiﬁcation of a change by that party. Communications may in any event be addressed to a party in the manner stipulated or, failing such a stipulation, according to the practice followed in the course of the dealings between the parties. (c) For the purpose of determining the date of commencement of a time limit, a notice or other communication shall be deemed to have been received on the day it is delivered or, in the case of telecommunications, transmitted in accordance with paragraphs (a) and (b) of this Article. (d) For the purpose of determining compliance with a time limit, a notice or other communication shall be deemed to have been sent, made or transmitted if it is dispatched, in accordance with paragraphs (a) and (b) of this Article, prior to or on the day of the expiration of the time limit. (e) For the purpose of calculating a period of time under these Rules, such period shall begin to run on the day following the day when a notice or other communication is received. If the last day of such period is an ofﬁcial holiday or a non-business day at

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the residence or place of business of the addressee, the period is extended until the ﬁrst business day which follows. Ofﬁcial holidays or non-business days occurring during the running of the period of time are included in calculating the period. (f) The parties may agree to reduce or extend the periods of time referred to in Articles 11, 15(b), 16(b), 17(b), 17(c), 18(b), 19(b)(iii), 41(a) and 42(a). (g) The Center may, at the request of a party or on its own motion, extend the periods of time referred to in Articles 11, 15(b), 16(b), 17(b), 17(c), 18(b), 19(b)(iii), 67(d), 68(e) and 70(e).

Documents Required to be Submitted to the Center Article 5 (a) Until the notiﬁcation by the Center of the establishment of the Tribunal, any written statement, notice or other communication required or allowed under these rules shall be submitted by a party to the Center and a copy thereof shall at the same time be transmitted by that party to the other party. (b) Any written statement, notice or other communication so sent to the Center shall be sent in a number of copies equal to the number required to provide one copy for each envisaged arbitrator and one for the Center. (c) After the notiﬁcation by the Center of the establishment of the Tribunal, any written statements, notices or other communications shall be submitted by a party directly to the Tribunal and a copy thereof shall at the same time be supplied by that party to the other party. (d) The Tribunal shall send to the Center a copy of each order or other decision that it makes.

II. COMMENCEMENT OF THE ARBITRATION Request for Arbitration Article 6 The Claimant shall transmit the Request for Arbitration to the Center and to the Respondent.

Article 7 The date of commencement of the arbitration shall be the date on which the Request for Arbitration is received by the Center.

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Article 8 The Center shall inform the Claimant and the Respondent of the receipt by it of the Request for Arbitration and of the date of the commencement of the arbitration.

Article 9 The Request for Arbitration shall contain: (i) a demand that the dispute be referred to arbitration under the WIPO Arbitration Rules; (ii) the names, addresses and telephone, telefax, email or other communication references of the parties and of the representative of the Claimant; (iii) a copy of the Arbitration Agreement and, if applicable, any separate choiceof-law clause; (iv) a brief description of the nature and circumstances of the dispute, including an indication of the rights and property involved and the nature of any technology involved; (v) a statement of the relief sought and an indication, to the extent possible, of any amount claimed; and (vi) any appointment that is required by, or observations that the Claimant considers useful in connection with, Articles 14 to 20.

Article 10 The Request for Arbitration may also be accompanied by the Statement of Claim referred to in Article 41.

Answer to the Request Article 11 Within 30 days from the date on which the Respondent receives the Request for Arbitration from the Claimant, the Respondent shall address to the Center and to the Claimant an Answer to the Request which shall contain comments on any of the elements in the Request for Arbitration and may include indications of any counterclaim or set-off.

Article 12 If the Claimant has ﬁled a Statement of Claim with the Request for Arbitration pursuant to Article 10, the Answer to the Request may also be accompanied by the Statement of Defense referred to in Article 42. 516

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Representation Article 13 (a) The parties may be represented by persons of their choice, irrespective of, in particular, nationality or professional qualiﬁcation. The names, addresses and telephone, telefax, e-mail or other communication references of representatives shall be communicated to the Center, the other party and, after its establishment, the Tribunal. (b) Each party shall ensure that its representatives have sufﬁcient time available to enable the arbitration to proceed expeditiously. (c) The parties may also be assisted by persons of their choice.

III. COMPOSITION AND ESTABLISHMENT OF THE TRIBUNAL Number of Arbitrators Article 14 (a) The Tribunal shall consist of such number of arbitrators as has been agreed by the parties. (b) Where the parties have not agreed on the number of arbitrators, the Tribunal shall consist of a sole arbitrator, except where the Center in its discretion determines that, in view of all the circumstances of the case, a Tribunal composed of three members is appropriate.

Appointment Pursuant to Procedure Agreed upon by the Parties Article 15 (a) If the parties have agreed on a procedure for the appointment of the arbitrator or arbitrators other than as envisaged in Articles 16 to 20, that procedure shall be followed. (b) If the Tribunal has not been established pursuant to such procedure within the period of time agreed upon by the parties or, in the absence of such an agreed period of time, within 45 days after the commencement of the arbitration, the Tribunal shall be established or completed, as the case may be, in accordance with Article 19.

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Appointment of a Sole Arbitrator Article 16 (a) Where a sole arbitrator is to be appointed and the parties have not agreed on an appointment procedure, the sole arbitrator shall be appointed jointly by the parties. (b) If the appointment of the sole arbitrator is not made within the period of time agreed upon by the parties or, in the absence of such an agreed period of time, within 30 days after the commencement of the arbitration, the sole arbitrator shall be appointed in accordance with Article 19.

Appointment of Three Arbitrators Article 17 (a) Where three arbitrators are to be appointed and the parties have not agreed upon an appointment procedure, the arbitrators shall be appointed in accordance with this Article. (b) The Claimant shall appoint an arbitrator in its Request for Arbitration. The Respondent shall appoint an arbitrator within 30 days from the date on which it receives the Request for Arbitration. The two arbitrators thus appointed shall, within 20 days after the appointment of the second arbitrator, appoint a third arbitrator, who shall be the presiding arbitrator. (c) Notwithstanding paragraph (b), where three arbitrators are to be appointed as a result of the exercise of the discretion of the Center under Article 14(b), the Claimant shall, by notice to the Center and to the Respondent, appoint an arbitrator within 15 days after the receipt by it of notiﬁcation by the Center that the Tribunal is to be composed of three arbitrators. The Respondent shall appoint an arbitrator within 30 days after the receipt by it of the said notiﬁcation. The two arbitrators thus appointed shall, within 20 days after the appointment of the second arbitrator, appoint a third arbitrator, who shall be the presiding arbitrator. (d) If the appointment of any arbitrator is not made within the applicable period of time referred to in the preceding paragraphs, that arbitrator shall be appointed in accordance with Article 19.

Appointment of Three Arbitrators in Case of Multiple Claimants or Respondents Article 18 (a) Where: (i) three arbitrators are to be appointed; 518

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(ii) the parties have not agreed on an appointment procedure; and (iii) the Request for Arbitration names more than one Claimant; the Claimants shall make a joint appointment of an arbitrator in their Request for Arbitration. The appointment of the second arbitrator and the presiding arbitrator shall, subject to paragraph (b) of this Article, take place in accordance with Article 17(b), (c) or (d), as the case may be. (b) Where: (i) three arbitrators are to be appointed; (ii) the parties have not agreed on an appointment procedure; and (iii) the Request for Arbitration names more than one Respondent; the Respondents shall jointly appoint an arbitrator. If, for whatever reason, the Respondents do not make a joint appointment of an arbitrator within 30 days after receiving the Request for Arbitration, any appointment of the arbitrator previously made by the Claimant or Claimants shall be considered void and two arbitrators shall be appointed by the Center. The two arbitrators thus appointed shall, within 30 days after the appointment of the second arbitrator, appoint a third arbitrator, who shall be the presiding arbitrator. (c) Where: (i) three arbitrators are to be appointed; (ii) the parties have agreed upon an appointment procedure; and (iii) the Request for Arbitration names more than one Claimant or more than one Respondent; paragraphs (a) and (b) of this Article shall, notwithstanding Article 15(a), apply irrespective of any contractual provisions in the Arbitration Agreement with respect to the appointment procedure, unless those provisions have expressly excluded the application of this Article.

Default Appointment Article 19 (a) If a party has failed to appoint an arbitrator as required under Articles 15, 17 or 18, the Center shall, in lieu of that party, forthwith make the appointment. (b) If the sole or presiding arbitrator has not been appointed as required under Articles 15, 16, 17 or 18, the appointment shall take place in accordance with the following procedure: (i) The Center shall send to each party an identical list of candidates. The list shall comprise the names of at least three candidates in alphabetical order. The list shall include or be accompanied by a brief statement of each candidate’s qualiﬁcations. If the parties have agreed on any particular qualiﬁcations, the list shall contain only the names of candidates that satisfy those qualiﬁcations. WIPO RULES

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(ii) Each party shall have the right to delete the name of any candidate or candidates to whose appointment it objects and shall number any remaining candidates in order of preference. (iii) Each party shall return the marked list to the Center within 20 days after the date on which the list is received by it. Any party failing to return a marked list within that period of time shall be deemed to have assented to all candidates appearing on the list. (iv) As soon as possible after receipt by it of the lists from the parties, or failing this, after the expiration of the period of time speciﬁed in the previous subparagraph, the Center shall, taking into account the preferences and objections expressed by the parties, invite a person from the list to be the sole or presiding arbitrator. (v) If the lists which have been returned do not show a person who is acceptable as arbitrator to both parties, the Center shall be authorized to appoint the sole or presiding arbitrator. The Center shall similarly be authorized to do so if a person is not able or does not wish to accept the Center’s invitation to be the sole or presiding arbitrator, or if there appear to be other reasons precluding that person from being the sole or presiding arbitrator, and there does not remain on the lists a person who is acceptable as arbitrator to both parties. (c) Notwithstanding the provisions of paragraph (b), the Center shall be authorized to appoint the sole or presiding arbitrator if it determines in its discretion that the procedure described in that paragraph is not appropriate for the case.

Nationality of Arbitrators Article 20 (a) An agreement of the parties concerning the nationality of arbitrators shall be respected. (b) If the parties have not agreed on the nationality of the sole or presiding arbitrator, such arbitrator shall, in the absence of special circumstances such as the need to appoint a person having particular qualiﬁcations, be a national of a country other than the countries of the parties.

Communication Between Parties and Candidates for Appointment as Arbitrator Article 21 No party or anyone acting on its behalf shall have any ex parte communication with any candidate for appointment as arbitrator except to discuss the candidate’s qualiﬁcations, availability or independence in relation to the parties. 520

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Impartiality and Independence Article 22 (a) Each arbitrator shall be impartial and independent. (b) Each prospective arbitrator shall, before accepting appointment, disclose to the parties, the Center and any other arbitrator who has already been appointed any circumstances that might give rise to justiﬁable doubt as to the arbitrator’s impartiality or independence, or conﬁrm in writing that no such circumstances exist. (c) If, at any stage during the arbitration, new circumstances arise that might give rise to justiﬁable doubt as to any arbitrator’s impartiality or independence, the arbitrator shall promptly disclose such circumstances to the parties, the Center and the other arbitrators.

Availability, Acceptance and Notiﬁcation Article 23 (a) Each arbitrator shall, by accepting appointment, be deemed to have undertaken to make available sufﬁcient time to enable the arbitration to be conducted and completed expeditiously. (b) Each prospective arbitrator shall accept appointment in writing and shall communicate such acceptance to the Center. (c) The Center shall notify the parties of the establishment of the Tribunal.

Challenge of Arbitrators Article 24 (a) Any arbitrator may be challenged by a party if circumstances exist that give rise to justiﬁable doubt as to the arbitrator’s impartiality or independence. (b) A party may challenge an arbitrator whom it has appointed or in whose appointment it concurred, only for reasons of which it becomes aware after the appointment has been made.

Article 25 A party challenging an arbitrator shall send notice to the Center, the Tribunal and the other party, stating the reasons for the challenge, within 15 days after being notiﬁed of that arbitrator’s appointment or after becoming aware of the circumstances that it considers give rise to justiﬁable doubt as to that arbitrator’s impartiality or independence. WIPO RULES

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Article 26 When an arbitrator has been challenged by a party, the other party shall have the right to respond to the challenge and shall, if it exercises this right, send, within 15 days after receipt of the notice referred to in Article 25, a copy of its response to the Center, the party making the challenge and the arbitrators.

Article 27 The Tribunal may, in its discretion, suspend or continue the arbitral proceedings during the pendency of the challenge.

Article 28 The other party may agree to the challenge or the arbitrator may voluntarily withdraw. In either case, the arbitrator shall be replaced without any implication that the grounds for the challenge are valid.

Article 29 If the other party does not agree to the challenge and the challenged arbitrator does not withdraw, the decision on the challenge shall be made by the Center in accordance with its internal procedures. Such a decision is of an administrative nature and shall be ﬁnal. The Center shall not be required to state reasons for its decision.

Release from Appointment Article 30 At the arbitrator’s own request, an arbitrator may be released from appointment as arbitrator either with the consent of the parties or by the Center.

Article 31 Irrespective of any request by the arbitrator, the parties may jointly release the arbitrator from appointment as arbitrator. The parties shall promptly notify the Center of such release.

Article 32 At the request of a party or on its own motion, the Center may release an arbitrator from appointment as arbitrator if the arbitrator has become de jure or de facto unable to fulﬁll, or fails to fulﬁll, the duties of an arbitrator. In such a case, the parties shall be

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offered the opportunity to express their views thereon and the provisions of Articles 26 to 29 shall apply mutatis mutandis.

Replacement of an Arbitrator Article 33 (a) Whenever necessary, a substitute arbitrator shall be appointed pursuant to the procedure provided for in Articles 15 to 19 that was applicable to the appointment of the arbitrator being replaced. (b) In the event that an arbitrator appointed by a party has either been successfully challenged on grounds which were known or should have been known to that party at the time of appointment, or has been released from appointment as arbitrator in accordance with Article 32, the Center shall have the discretion not to permit that party to make a new appointment. If it chooses to exercise this discretion, the Center shall make the substitute appointment. (c) Pending the replacement, the arbitral proceedings shall be suspended, unless otherwise agreed by the parties.

Article 34 Whenever a substitute arbitrator is appointed, the Tribunal shall, having regard to any observations of the parties, determine in its sole discretion whether all or part of any prior hearings are to be repeated.

Truncated Tribunal Article 35 (a) If an arbitrator on a three-person Tribunal, though duly notiﬁed and without good cause, fails to participate in the work of the Tribunal, the two other arbitrators shall, unless a party has made an application under Article 32, have the power in their sole discretion to continue the arbitration and to make any award, order or other decision, notwithstanding the failure of the third arbitrator to participate. In determining whether to continue the arbitration or to render any award, order or other decision without the participation of an arbitrator, the two other arbitrators shall take into account the stage of the arbitration, the reason, if any, expressed by the third arbitrator for such nonparticipation, and such other matters as they consider appropriate in the circumstances of the case. (b) In the event that the two other arbitrators determine not to continue the arbitration without the participation of a third arbitrator, the Center shall, on proof satisfactory to

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it of the failure of the arbitrator to participate in the work of the Tribunal, declare the ofﬁce vacant, and a substitute arbitrator shall be appointed by the Center in the exercise of the discretion deﬁned in Article 33, unless the parties agree otherwise.

Pleas as to the Jurisdiction of the Tribunal Article 36 (a) The Tribunal shall have the power to hear and determine objections to its own jurisdiction, including any objections with respect to form, existence, validity or scope of the Arbitration Agreement examined pursuant to Article 59(b). (b) The Tribunal shall have the power to determine the existence or validity of any contract of which the Arbitration Agreement forms part or to which it relates. (c) A plea that the Tribunal does not have jurisdiction shall be raised not later than in the Statement of Defense or, with respect to a counter-claim or a set-off, the Statement of Defense thereto, failing which any such plea shall be barred in the subsequent arbitral proceedings or before any court. A plea that the Tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings. The Tribunal may, in either case, admit a later plea if it considers the delay justiﬁed. (d) The Tribunal may rule on a plea referred to in paragraph (c) as a preliminary question or, in its sole discretion, decide on such a plea in the ﬁnal award. (e) A plea that the Tribunal lacks jurisdiction shall not preclude the Center from administering the arbitration.

IV. CONDUCT OF THE ARBITRATION Transmission of the File to the Tribunal Article 37 The Center shall transmit the ﬁle to each arbitrator as soon as the arbitrator is appointed.

General Powers of the Tribunal Article 38 (a) Subject to Article 3, the Tribunal may conduct the arbitration in such manner as it considers appropriate.

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(b) In all cases, the Tribunal shall ensure that the parties are treated with equality and that each party is given a fair opportunity to present its case. (c) The Tribunal shall ensure that the arbitral procedure takes place with due expedition. It may, at the request of a party or on its own motion, extend in exceptional cases a period of time ﬁxed by these Rules, by itself or agreed to by the parties. In urgent cases, such an extension may be granted by the presiding arbitrator alone.

Place of Arbitration Article 39 (a) Unless otherwise agreed by the parties, the place of arbitration shall be decided by the Center, taking into consideration any observations of the parties and the circumstances of the arbitration. (b) The Tribunal may, after consultation with the parties, conduct hearings at any place that it considers appropriate. It may deliberate wherever it deems appropriate. (c) The award shall be deemed to have been made at the place of arbitration.

Language of Arbitration Article 40 (a) Unless otherwise agreed by the parties, the language of the arbitration shall be the language of the Arbitration Agreement, subject to the power of the Tribunal to determine otherwise, having regard to any observations of the parties and the circumstances of the arbitration. (b) The Tribunal may order that any documents submitted in languages other than the language of the arbitration be accompanied by a translation in whole or in part into the language of the arbitration.

Statement of Claim Article 41 (a) Unless the Statement of Claim accompanied the Request for Arbitration, the Claimant shall, within 30 days after receipt of notiﬁcation from the Center of the establishment of the Tribunal, communicate its Statement of Claim to the Respondent and to the Tribunal. (b) The Statement of Claim shall contain a comprehensive statement of the facts and legal arguments supporting the claim, including a statement of the relief sought. WIPO RULES

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(c) The Statement of Claim shall, to as large an extent as possible, be accompanied by the documentary evidence upon which the Claimant relies, together with a schedule of such documents. Where the documentary evidence is especially voluminous, the Claimant may add a reference to further documents it is prepared to submit.

Statement of Defense Article 42 (a) The Respondent shall, within 30 days after receipt of the Statement of Claim or within 30 days after receipt of notiﬁcation from the Center of the establishment of the Tribunal, whichever occurs later, communicate its Statement of Defense to the Claimant and to the Tribunal. (b) The Statement of Defense shall reply to the particulars of the Statement of Claim required pursuant to Article 41(b). The Statement of Defense shall be accompanied by the corresponding documentary evidence described in Article 41(c). (c) Any counter-claim or set-off by the Respondent shall be made or asserted in the Statement of Defense or, in exceptional circumstances, at a later stage in the arbitral proceedings if so determined by the Tribunal. Any such counter-claim or set-off shall contain the same particulars as those speciﬁed in Article 41(b) and (c).

Further Written Statements Article 43 (a) In the event that a counter-claim or set-off has been made or asserted, the Claimant shall reply to the particulars thereof. Article 42(a) and (b) shall apply mutatis mutandis to such reply. (b) The Tribunal may, in its discretion, allow or require further written statements.

Amendments to Claims or Defense Article 44 Subject to any contrary agreement by the parties, a party may amend or supplement its claim, counter-claim, defense or set-off during the course of the arbitral proceedings, unless the Tribunal considers it inappropriate to allow such amendment having regard to its nature or the delay in making it and to the provisions of Article 38(b) and (c).

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Communication Between Parties and Tribunal Article 45 Except as otherwise provided in these Rules or permitted by the Tribunal, no party or anyone acting on its behalf may have any ex parte communication with any arbitrator with respect to any matter of substance relating to the arbitration, it being understood that nothing in this paragraph shall prohibit ex parte communications which concern matters of a purely organizational nature, such as the physical facilities, place, date or time of the hearings.

Interim Measures of Protection and Securityfor Claims and Costs Article 46 (a) At the request of a party, the Tribunal may issue any provisional orders or take other interim measures it deems necessary, including injunctions and measures for the conservation of goods which form part of the subject matter in dispute, such as an order for their deposit with a third person or for the sale of perishable goods. The Tribunal may make the granting of such measures subject to appropriate security being furnished by the requesting party. (b) At the request of a party, the Tribunal may, if it considers it to be required by exceptional circumstances, order the other party to provide security, in a form to be determined by the Tribunal, for the claim or counterclaim, as well as for costs referred to in Article 72. (c) Measures and orders contemplated under this Article may take the form of an interim award. (d) A request addressed by a party to a judicial authority for interim measures or for security for the claim or counterclaim, or for the implementation of any such measures or orders granted by the Tribunal, shall not be deemed incompatible with the Arbitration Agreement, or deemed to be a waiver of that Agreement.

Preparatory Conference Article 47 The Tribunal may, in general following the submission of the Statement of Defense, conduct a preparatory conference with the parties for the purpose of organizing and scheduling the subsequent proceedings.

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Evidence Article 48 (a) The Tribunal shall determine the admissibility, relevance, materiality and weight of evidence. (b) At any time during the arbitration, the Tribunal may, at the request of a party or on its own motion, order a party to produce such documents or other evidence as it considers necessary or appropriate and may order a party to make available to the Tribunal or to an expert appointed by it or to the other party any property in its possession or control for inspection or testing.

Experiments Article 49 (a) A party may give notice to the Tribunal and to the other party at any reasonable time before a hearing that speciﬁed experiments have been conducted on which it intends to rely. The notice shall specify the purpose of the experiment, a summary of the experiment, the method employed, the results and the conclusion. The other party may by notice to the Tribunal request that any or all such experiments be repeated in its presence. If the Tribunal considers such request justiﬁed, it shall determine the timetable for the repetition of the experiments. (b) For the purposes of this Article, “experiments” shall include tests or other processes of veriﬁcation.

Site Visits Article 50 The Tribunal may, at the request of a party or on its own motion, inspect or require the inspection of any site, property, machinery, facility, production line, model, ﬁlm, material, product or process as it deems appropriate. A party may request such an inspection at any reasonable time prior to any hearing, and the Tribunal, if it grants such a request, shall determine the timing and arrangements for the inspection.

Agreed Primers and Models Article 51 The Tribunal may, where the parties so agree, determine that they shall jointly provide: (i) a technical primer setting out the background of the scientiﬁc, technical or other specialized information necessary to fully understand the matters in issue; and 528

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(ii) models, drawings or other materials that the Tribunal or the parties require for reference purposes at any hearing.

Disclosure of Trade Secrets and Other Conﬁdential Information Article 52 (a) For the purposes of this Article, conﬁdential information shall mean any information, regardless of the medium in which it is expressed, which is: (i) in the possession of a party; (ii) not accessible to the public; (iii) of commercial, ﬁnancial or industrial signiﬁcance; and (iv) treated as conﬁdential by the party possessing it. (b) A party invoking the conﬁdentiality of any information it wishes or is required to submit in the arbitration, including to an expert appointed by the Tribunal, shall make an application to have the information classiﬁed as conﬁdential by notice to the Tribunal, with a copy to the other party. Without disclosing the substance of the information, the party shall give in the notice the reasons for which it considers the information conﬁdential. (c) The Tribunal shall determine whether the information is to be classiﬁed as conﬁdential and of such a nature that the absence of special measures of protection in the proceedings would be likely to cause serious harm to the party invoking its conﬁdentiality. If the Tribunal so determines, it shall decide under which conditions and to whom the conﬁdential information may in part or in whole be disclosed and shall require any person to whom the conﬁdential information is to be disclosed to sign an appropriate conﬁdentiality undertaking. (d) In exceptional circumstances, in lieu of itself determining whether the information is to be classiﬁed as conﬁdential and of such nature that the absence of special measures of protection in the proceedings would be likely to cause serious harm to the party invoking its conﬁdentiality, the Tribunal may, at the request of a party or on its own motion and after consultation with the parties, designate a conﬁdentiality advisor who will determine whether the information is to be so classiﬁed, and, if so, decide under which conditions and to whom it may in part or in whole be disclosed. Any such conﬁdentiality advisor shall be required to sign an appropriate conﬁdentiality undertaking. (e) The Tribunal may also, at the request of a party or on its own motion, appoint the conﬁdentiality advisor as an expert in accordance with Article 55 in order to report to it, on the basis of the conﬁdential information, on speciﬁc issues designated by the Tribunal without disclosing the conﬁdential information either to the party from whom the conﬁdential information does not originate or to the Tribunal.

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Hearings Article 53 (a) If either party so requests, the Tribunal shall hold a hearing for the presentation of evidence by witnesses, including expert witnesses, or for oral argument or for both. In the absence of a request, the Tribunal shall decide whether to hold such a hearing or hearings. If no hearings are held, the proceedings shall be conducted on the basis of documents and other materials alone. (b) In the event of a hearing, the Tribunal shall give the parties adequate advance notice of the date, time and place thereof. (c) Unless the parties agree otherwise, all hearings shall be in private. (d) The Tribunal shall determine whether and, if so, in what form a record shall be made of any hearing.

Witnesses Article 54 (a) Before any hearing, the Tribunal may require either party to give notice of the identity of witnesses it wishes to call, as well as of the subject matter of their testimony and its relevance to the issues. (b) The Tribunal has discretion, on the grounds of redundance and irrelevance, to limit or refuse the appearance of any witness, whether witness of fact or expert witness. (c) Any witness who gives oral evidence may be questioned, under the control of the Tribunal, by each of the parties. The Tribunal may put questions at any stage of the examination of the witnesses. (d) The testimony of witnesses may, either at the choice of a party or as directed by the Tribunal, be submitted in written form, whether by way of signed statements, sworn afﬁdavits or otherwise, in which case the Tribunal may make the admissibility of the testimony conditional upon the witnesses being made available for oral testimony. (e) A party shall be responsible for the practical arrangements, cost and availability of any witness it calls. (f) The Tribunal shall determine whether any witness shall retire during any part of the proceedings, particularly during the testimony of other witnesses.

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Experts Appointed by the Tribunal Article 55 (a) The Tribunal may, after consultation with the parties, appoint one or more independent experts to report to it on speciﬁc issues designated by the Tribunal. A copy of the expert’s terms of reference, established by the Tribunal, having regard to any observations of the parties, shall be communicated to the parties. Any such expert shall be required to sign an appropriate conﬁdentiality undertaking. (b) Subject to Article 52, upon receipt of the expert’s report, the Tribunal shall communicate a copy of the report to the parties, which shall be given the opportunity to express, in writing, their opinion on the report. A party may, subject to Article 52, examine any document on which the expert has relied in such a report. (c) At the request of a party, the parties shall be given the opportunity to question the expert at a hearing. At this hearing, the parties may present expert witnesses to testify on the points at issue. (d) The opinion of any expert on the issue or issues submitted to the expert shall be subject to the Tribunal’s power of assessment of those issues in the context of all the circumstances of the case, unless the parties have agreed that the expert’s determination shall be conclusive in respect of any speciﬁc issue.

Default Article 56 (a) If the Claimant, without showing good cause, fails to submit its Statement of Claim in accordance with Article 41, the Tribunal shall terminate the proceedings. (b) If the Respondent, without showing good cause, fails to submit its Statement of Defense in accordance with Article 42, the Tribunal may nevertheless proceed with the arbitration and make the award. (c) The Tribunal may also proceed with the arbitration and make the award if a party, without showing good cause, fails to avail itself of the opportunity to present its case within the period of time determined by the Tribunal. (d) If a party, without showing good cause, fails to comply with any provision of, or requirement under, these Rules or any direction given by the Tribunal, the Tribunal may draw the inferences therefrom that it considers appropriate.

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Closure of Proceedings Article 57 (a) The Tribunal shall declare the proceedings closed when it is satisﬁed that the parties have had adequate opportunity to present submissions and evidence. (b) The Tribunal may, if it considers it necessary owing to exceptional circumstances, decide, on its own motion or upon application of a party, to re-open the proceedings it declared to be closed at any time before the award is made.

Waiver Article 58 A party which knows that any provision of, or requirement under, these Rules, or any direction given by the Tribunal, has not been complied with, and yet proceeds with the arbitration without promptly recording an objection to such non-compliance, shall be deemed to have waived its right to object.

V. AWARDS AND OTHER DECISIONS Laws Applicable to the Substance of the Dispute, the Arbitration and the Arbitration Agreement Article 59 (a) The Tribunal shall decide the substance of the dispute in accordance with the law or rules of law chosen by the parties. Any designation of the law of a given State shall be construed, unless otherwise expressed, as directly referring to the substantive law of that State and not to its conﬂict of laws rules. Failing a choice by the parties, the Tribunal shall apply the law or rules of law that it determines to be appropriate. In all cases, the Tribunal shall decide having due regard to the terms of any relevant contract and taking into account applicable trade usages. The Tribunal may decide as amiable compositeur or ex aequo et bono only if the parties have expressly authorized it to do so. (b) The law applicable to the arbitration shall be the arbitration law of the place of arbitration, unless the parties have expressly agreed on the application of another arbitration law and such agreement is permitted by the law of the place of arbitration. (c) An Arbitration Agreement shall be regarded as effective if it conforms to the requirements concerning form, existence, validity and scope of either the law or rules

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of law applicable in accordance with paragraph (a), or the law applicable in accordance with paragraph (b).

Currency and Interest Article 60 (a) Monetary amounts in the award may be expressed in any currency. (b) The Tribunal may award simple or compound interest to be paid by a party on any sum awarded against that party. It shall be free to determine the interest at such rates as it considers to be appropriate, without being bound by legal rates of interest, and shall be free to determine the period for which the interest shall be paid.

Decision-Making Article 61 Unless the parties have agreed otherwise, where there is more than one arbitrator, any award, order or other decision of the Tribunal shall be made by a majority. In the absence of a majority, the presiding arbitrator shall make the award, order or other decision as if acting as sole arbitrator.

Form and Notiﬁcation of Awards Article 62 (a) The Tribunal may make preliminary, interim, interlocutory, partial or ﬁnal awards. (b) The award shall be in writing and shall state the date on which it was made, as well as the place of arbitration in accordance with Article 39(a). (c) The award shall state the reasons on which it is based, unless the parties have agreed that no reasons should be stated and the law applicable to the arbitration does not require the statement of such reasons. (d) The award shall be signed by the arbitrator or arbitrators. The signature of the award by a majority of the arbitrators, or, in the case of Article 61, second sentence, by the presiding arbitrator, shall be sufﬁcient. Where an arbitrator fails to sign, the award shall state the reason for the absence of the signature. (e) The Tribunal may consult the Center with regard to matters of form, particularly to ensure the enforceability of the award.

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(f) The award shall be communicated by the Tribunal to the Center in a number of originals sufﬁcient to provide one for each party, the arbitrator or arbitrators and the Center. The Center shall formally communicate an original of the award to each party and the arbitrator or arbitrators. (g) At the request of a party, the Center shall provide it, at cost, with a copy of the award certiﬁed by the Center. A copy so certiﬁed shall be deemed to comply with the requirements of Article IV(1)(a) of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, New York, June 10, 1958.

Time Period for Delivery of the Final Award Article 63 (a) The arbitration should, wherever reasonably possible, be heard and the proceedings declared closed within not more than nine months after either the delivery of the Statement of Defense or the establishment of the Tribunal, whichever event occurs later. The ﬁnal award should, wherever reasonably possible, be made within three months thereafter. (b) If the proceedings are not declared closed within the period of time speciﬁed in paragraph (a), the Tribunal shall send the Center a status report on the arbitration, with a copy to each party. It shall send a further status report to the Center, and a copy to each party, at the end of each ensuing period of three months during which the proceedings have not been declared closed. (c) If the ﬁnal award is not made within three months after the closure of the proceedings, the Tribunal shall send the Center a written explanation for the delay, with a copy to each party. It shall send a further explanation, and a copy to each party, at the end of each ensuing period of one month until the ﬁnal award is made.

Effect of Award Article 64 (a) By agreeing to arbitration under these Rules, the parties undertake to carry out the award without delay, and waive their right to any form of appeal or recourse to a court of law or other judicial authority, insofar as such waiver may validly be made under the applicable law. (b) The award shall be effective and binding on the parties as from the date it is communicated by the Center pursuant to Article 62(f), second sentence.

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Settlement or Other Grounds for Termination Article 65 (a) The Tribunal may suggest that the parties explore settlement at such times as the Tribunal may deem appropriate. (b) If, before the award is made, the parties agree on a settlement of the dispute, the Tribunal shall terminate the arbitration and, if requested jointly by the parties, record the settlement in the form of a consent award. The Tribunal shall not be obliged to give reasons for such an award. (c) If, before the award is made, the continuation of the arbitration becomes unnecessary or impossible for any reason not mentioned in paragraph (b), the Tribunal shall inform the parties of its intention to terminate the arbitration. The Tribunal shall have the power to issue such an order terminating the arbitration, unless a party raises justiﬁable grounds for objection within a period of time to be determined by the Tribunal. (d) The consent award or the order for termination of the arbitration shall be signed by the arbitrator or arbitrators in accordance with Article 62(d) and shall be communicated by the Tribunal to the Center in a number of originals sufﬁcient to provide one for each party, the arbitrator or arbitrators and the Center. The Center shall formally communicate an original of the consent award or the order for termination to each party and the arbitrator or arbitrators.

Correction of the Award and Additional Award Article 66 (a) Within 30 days after receipt of the award, a party may, by notice to the Tribunal, with a copy to the Center and the other party, request the Tribunal to correct in the award any clerical, typographical or computational errors. If the Tribunal considers the request to be justiﬁed, it shall make the correction within 30 days after receipt of the request. Any correction, which shall take the form of a separate memorandum, signed by the Tribunal in accordance with Article 62(d), shall become part of the award. (b) The Tribunal may correct any error of the type referred to in paragraph (a) on its own initiative within 30 days after the date of the award. (c) A party may, within 30 days after receipt of the award, by notice to the Tribunal, with a copy to the Center and the other party, request the Tribunal to make an additional award as to claims presented in the arbitral proceedings but not dealt with in the award. Before deciding on the request, the Tribunal shall give the parties an opportunity to be heard. If the Tribunal considers the request to be justiﬁed, it shall, wherever reasonably possible, make the additional award within 60 days of receipt of the request. WIPO RULES

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VI. FEES AND COSTS Fees of the Center Article 67 (a) The Request for Arbitration shall be subject to the payment to the Center of a nonrefundable registration fee. The amount of the registration fee shall be ﬁxed in the Schedule of Fees applicable on the date on which the Request for Arbitration is received by the Center. (b) Any counter-claim by a Respondent shall be subject to the payment to the Center of a non-refundable registration fee. The amount of the registration fee shall be ﬁxed in the Schedule of Fees applicable on the date on which the Request for Arbitration is received by the Center. (c) No action shall be taken by the Center on a Request for Arbitration or counterclaim until the registration fee has been paid. (d) If a Claimant or Respondent fails, within 15 days after a second reminder in writing from the Center, to pay the registration fee, it shall be deemed to have withdrawn its Request for Arbitration or counter-claim, as the case may be.

Article 68 (a) An administration fee shall be payable by the Claimant to the Center within 30 days after the Claimant has received notiﬁcation from the Center of the amount to be paid. (b) In the case of a counter-claim, an administration fee shall also be payable by the Respondent to the Center within 30 days after the Respondent has received notiﬁcation from the Center of the amount to be paid. (c) The amount of the administration fee shall be calculated in accordance with the Schedule of Fees applicable on the date of commencement of the arbitration. (d) Where a claim or counter-claim is increased, the amount of the administration fee may be increased in accordance with the Schedule of Fees applicable under paragraph (c), and the increased amount shall be payable by the Claimant or the Respondent, as the case may be. (e) If a party fails, within 15 days after a second reminder in writing from the Center, to pay any administration fee due, it shall be deemed to have withdrawn its claim or counter-claim, or its increase in claim or counterclaim, as the case may be. (f) The Tribunal shall, in a timely manner, inform the Center of the amount of the claim and any counterclaim, as well as any increase thereof.

536

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Fees of the Arbitrators Article 69 The amount and currency of the fees of the arbitrators and the modalities and timing of their payment shall be ﬁxed by the Center, after consultation with the arbitrators and the parties, in accordance with the Schedule of Fees applicable on the date on which the Request for Arbitration is received by the Center.

Deposits Article 70 (a) Upon receipt of notiﬁcation from the Center of the establishment of the Tribunal, the Claimant and the Respondent shall each deposit an equal amount as an advance for the costs of the arbitration referred to in Article 71. The amount of the deposit shall be determined by the Center. (b) In the course of the arbitration, the Center may require that the parties make supplementary deposits. (c) If the required deposits are not paid in full within 30 days after receipt of the corresponding notiﬁcation, the Center shall so inform the parties in order that one or other of them may make the required payment. (d) Where the amount of the counter-claim greatly exceeds the amount of the claim or involves the examination of signiﬁcantly different matters, or where it otherwise appears appropriate in the circumstances, the Center in its discretion may establish two separate deposits on account of claim and counter-claim. If separate deposits are established, the totality of the deposit on account of claim shall be paid by the Claimant and the totality of the deposit on account of counter-claim shall be paid by the Respondent. (e) If a party fails, within 15 days after a second reminder in writing from the Center, to pay the required deposit, it shall be deemed to have withdrawn the relevant claim or counter-claim. (f) After the award has been made, the Center shall, in accordance with the award, render an accounting to the parties of the deposits received and return any unexpended balance to the parties or require the payment of any amount owing from the parties.

Award of Costs of Arbitration Article 71 (a) In its award, the Tribunal shall ﬁx the costs of the arbitration, which shall consist of: (i) the arbitrators’ fees; WIPO RULES

537

(ii) the properly incurred travel, communication and other expenses of the arbitrators; (iii) the costs of expert advice and such other assistance required by the Tribunal pursuant to these Rules; and (iv) such other expenses as are necessary for the conduct of the arbitration proceedings, such as the cost of meeting and hearing facilities. (b) The aforementioned costs shall, as far as possible, be debited from the deposits required under Article 70. (c) The Tribunal shall, subject to any agreement of the parties, apportion the costs of the arbitration and the registration and administration fees of the Center between the parties in the light of all the circumstances and the outcome of the arbitration.

Award of Costs Incurred by a Party Article 72 In its award, the Tribunal may, subject to any contrary agreement by the parties and in the light of all the circumstances and the outcome of the arbitration, order a party to pay the whole or part of reasonable expenses incurred by the other party in presenting its case, including those incurred for legal representatives and witnesses.

VII. CONFIDENTIALITY Conﬁdentiality of the Existence of the Arbitration Article 73 (a) Except to the extent necessary in connection with a court challenge to the arbitration or an action for enforcement of an award, no information concerning the existence of an arbitration may be unilaterally disclosed by a party to any third party unless it is required to do so by law or by a competent regulatory body, and then only: (i) by disclosing no more than what is legally required; and (ii) by furnishing to the Tribunal and to the other party, if the disclosure takes place during the arbitration, or to the other party alone, if the disclosure takes place after the termination of the arbitration, details of the disclosure and an explanation of the reason for it. (b) Notwithstanding paragraph (a), a party may disclose to a third party the names of the parties to the arbitration and the relief requested for the purpose of satisfying any obligation of good faith or candor owed to that third party.

538

WIPO RULES

Conﬁdentiality of Disclosures Made During the Arbitration Article 74 (a) In addition to any speciﬁc measures that may be available under Article 52, any documentary or other evidence given by a party or a witness in the arbitration shall be treated as conﬁdential and, to the extent that such evidence describes information that is not in the public domain, shall not be used or disclosed to any third party by a party whose access to that information arises exclusively as a result of its participation in the arbitration for any purpose without the consent of the parties or order of a court having jurisdiction. (b) For the purposes of this Article, a witness called by a party shall not be considered to be a third party. To the extent that a witness is given access to evidence or other information obtained in the arbitration in order to prepare the witness’s testimony, the party calling such witness shall be responsible for the maintenance by the witness of the same degree of conﬁdentiality as that required of the party.

Conﬁdentiality of the Award Article 75 The award shall be treated as conﬁdential by the parties and may only be disclosed to a third party if and to the extent that: (i) the parties consent; or (ii) it falls into the public domain as a result of an action before a national court or other competent authority; or (iii) it must be disclosed in order to comply with a legal requirement imposed on a party or in order to establish or protect a party’s legal rights against a third party.

Maintenance of Conﬁdentiality by the Center and Arbitrator Article 76 (a) Unless the parties agree otherwise, the Center and the arbitrator shall maintain the conﬁdentiality of the arbitration, the award and, to the extent that they describe information that is not in the public domain, any documentary or other evidence disclosed during the arbitration, except to the extent necessary in connection with a court action relating to the award, or as otherwise required by law. (b) Notwithstanding paragraph (a), the Center may include information concerning the arbitration in any aggregate statistical data that it publishes concerning its activities,

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provided that such information does not enable the parties or the particular circumstances of the dispute to be identiﬁed.

VIII. MISCELLANEOUS Exclusion of Liability Article 77 Except in respect of deliberate wrongdoing, the arbitrator or arbitrators, WIPO and the Center shall not be liable to a party for any act or omission in connection with the arbitration.

Waiver of Defamation Article 78 The parties and, by accepting appointment, the arbitrator agree that any statements or comments, whether written or oral, made or used by them or their representatives in preparation for or in the course of the arbitration shall not be relied upon to found or maintain any action for defamation, libel, slander or any related complaint, and this Article may be pleaded as a bar to any such action.

540

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Index

AAA Rules, xxiii afﬁdavit presenting, 163n49 arbitrator’s immunity, 134n56 asset preserving, 171–72 Rule 29, dealing with defaults, 66n45 Abusive actions, in arbitral proceedings, 97, 98 Accessibility aspect, and arbitration, 185 Act 1996. See Arbitration Act 1996 Action against enforcement, security requirement, 101 Action dismissal, grounds of, 89 Active duty, analysis of facts, 145, 149, 151 Ad hoc arbitration, 26, 45 arbitral panel’s power in, 27 and decision on costs, 131 secretary’ role in, 130 ADR methods, 138, 199 waiver in, 127 Advance fees and costs payment, ordering party for, 99 Advance hearings pros and cons of, 162–63 under IBA Rules, 163–264 under Swiss Rules, 163 Afﬁdavit, 163n49 Agreement amendments to, 48 conditions imposed by, 102–4 interpretation and errors in, 75 respect for, 66–67 under jurisdiction, 43–46 Agreement breach, ﬁling rights, 59 Agreement cancellation rights, 59, 69–70 in Finnish Arbitration Act, 69n54 Agreement in writing deﬁnition of, 46 UNCITRAL Article 7, 48

Agreements in interpretation issues regarding, 74 principles of exclusivity, debate on, 54, 55, 59 scope of, 53 Agreement’s invalidity as obstacles, New York Convention’ requirements, 16 Agreement’s validity, decision on, 52 Alternative dispute resolution (ADR), 107 in arbitration, 202 and waiver doctrine, 127 Ambiguous award, conﬂicts concerning, 199 American Arbitration Association (AAA) rules, xxiii, 57n28 Amiables compositeurs, under Argentina Act, 73n61 Appeal mechanism, 45 Appeal rights, ultra petita, 30 Appointment mechanism, in arbitral panel, 108 Arbitrability deﬁnition of, 83–84 dispute resolution, 104 restraining factors, 84 Arbitral agreeability, 28, 52 Arbitral authority, composition of, 26, 39, 66 Arbitral award, 1, 201 conclusive effects of, 88 enforcement of, 53n18 enforceability and recognition, 15, 17 inter partes effects, 24 refusal of, 24 Arbitral hearings, under IBA Rules, 170 Arbitral institution, 48, 130n49 and arbitral award, 74n62, immunity to, 134n56 Arbitral panel appointment mechanism of, 108 exclusive powers of, 71 and mandate in concreto, 132–33

541

Arbitral panel power, 41. See also Arbitral tribunal power in ability to present one’s case as fundamental general requirement, 38 in procedural agreement breach award, 26 in ultra petita award, 28 procedural actions under, 101 Arbitral panel’s role direct intervention, 151–52 guidance via consultations, 150–51 invalidity of agreement, 51 traditions and culture, conﬂicts of, 149–50 security for loss or damage, 100 Arbitral procedure non-accordance with, 66 substantive rights, 16 Arbitral proceedings application of law in, 203 key element of fairness in, 67 other party breach of agreement during, 70 quality of, 50 Arbitral process, 16 Arbitral tribunal and institution, security for, 98–99 power of, 28 Arbitration advance fee payment as security, 98 access to justice, 104 beneﬁts of, 130–31 conﬁdentiality of, 131 effective management of, 192 elements of, 12, 141 establishing facts in, 142–43 fundamental procedural requirement of, 203 international disagreements, 130 lis pendens doctrine, 90–91 material and evidentiary issues in, 197 meaning of, 1 minimum quality standards in, 201 modiﬁcation of 83 nonexistence of lis pendens, 90 nonexistence of res judicata, 85, 89 opinions regarding, 53 paying advance as security as, 98 procedural aspects of, 202–3 procedural foundation of, 201 procedural safeguards, 3–4 registration fee, 98n42 responsibility in 173 standard of impartiality in, 115–18 termination of, 196 Arbitration Act of 1996 (England), xxiii, 50n14, 147n12 applying for protective measures, 103 542

arbitral panel’s duty in multiparty agreement, 71 arbitrator mission, deﬁnition of, 133–34 burden of proof, shifting of, 152n23 noncompliance of party, 154n28 on registration fees criterion, 98n42 panes, duties of, 71 parties agreement on dispute, 6n12 parties’ representation by a lawyer, 191n21 representation by lawyer, 191n12 sole arbitrator appointment of, 29n22 waiving rights, 62n36 Arbitration agreement, and the Convention, 25–35 assignment of, 55–56 clauses in, 44 establishment of, 49, 50 invalidity of, 35–36 limitations to, 25 material breaches of, 72n60 modiﬁcations of, 98 parties agreement under, 25 and parties’ rights, 201 party and jurisdiction, 83 procedural agreement breach, 26–28 reach and applicability of, 54 requirement in, 33n29 ultra petita under, 28–31 waiver doctrine and procedural agreement breach under, 32–35 Arbitration agreement, existence of, 43, 46–52 competence, determining of, 48–51 jurisdiction on, 48–49 validity of, 51–52 written form, 46–48 Arbitration agreement, interpretation of. See also Contract interpretation arbitration clause, time limit, 58–59 for award, time limit, 56–58 methods of, 52–55 Arbitration agreement, unconscionability and unreasonability, 62–66 disregard of, 75n63 UNCITRAL Model Law, 75n64 Arbitration agreement. See also Arbitral agreement alternatives to, 45 and arbitration clause, 70 as basis of jurisdiction, 43 cancellation of, 59, 69–70 and due process, 78–79 enforceability of, 66 interpretation of, 52 interpretation, problems related to, 55 INDEX

jurisdictional effects of, 43, 78 material breaches of, 72n60 modiﬁcations in, 48 nature of, 78 need for speciﬁcity and exactness in, 46 one-sidedness in, 62 reach and applicability of, 54 restriction by, 43 unreasonableness on, reasons for, 65 validity, court ﬁndings on, 51 written form requirement of, 48 Arbitration agreement’ requirement, in New York Convention, 16 Arbitration agreement enforceability, in due process, 66–73 agreement deﬁning of, 66–67 disloyalty case, possible actions in, 69–70 parties’ good faith, 68–69 violation of, 70–73 Arbitration and dispute resolution, 190 Arbitration and fair hearing, access to, 206 Arbitration and fair procedure, 205 Arbitration and jurisdiction, debate on, 81 Arbitration as substitute for court trial, 185 Arbitration clause, 109 “all-catching” interpretation of, 53–54 and “arbitration agreement,” 70 components of, 25n18 future disagreements, 45 references to, 47 validity of, 63n39 Arbitration cost ICC Rules on, 99 security for, 101 Arbitration law of seat of arbitration, 26, 27, 40 Arbitration panel composition of, 108–9 in dispute resolution context, 107–8 importance of, 107 Arbitration practices, 16, 28 Arbitration procedure, impartiality in, 107 Arbitration proceeding and ﬂexibility, 165 Arbitration-speciﬁc law, contract interpretation, 53, 54 Arbitration structure, and legal protection, 200 Arbitrator appointment rules of, 109 and arbitrator, non-disclosure situation, 125 authority and power of, 174 deviation from limitations, 45 discretion of, 3 and dispute resolution, 130 disqualiﬁcation process of, 110 and duty of conﬁdentiality, 136

INDEX

duty to disclose facts, 120–22, 120n35 fees and costs of, 130–32 freedom in hearings, 45 goal of, 14 latent sympathies in, 117 liability of, 132–36 mission of, IBA Ethics on, 133 negligence of duty, 135 and nominating party, 115–16 partiality of, 116 powers of, 180–81, 199 purpose of, 122 rights and duties of, 108 standards of impartiality, application of, 115 Arbitrator’ deliberate wrongdoing, tackling of, Swiss Rules on, 136 Arbitrator and party, relationship between, 124–25 Arbitrators’ duty, and establishing relevant facts, 176 Arbitrators’ liability, standards on, 134 Arbitrator’s non-respect on agreement, 72 Arbitrators’ power in evidence assessment, 76 material limitations to, 45 Argentina Act, xxiii Article 740, on nullity, 46n6 Article 744, on nullity, 46n6 Article 745, arbitration agreement, 133n54 Article 749, arbitral proceedings, 186n1 Article 755, time of award, 57n28 Article 756, award rendering, 57n30 Article 760, on ex post waive, 34n32 Article 769, amiables compositeurs, 73n61, 111n7 Article 771, 73n61 Argentina Act Article 740, agreement in writing, 46n6 Arguments, right to claim submission and supporting, 188 Assignee, contract assignment, 56 Assignment and transfer, contract interpretation problems in, 55–56 Attorneys’ fees and parties’ legal costs, security for, 99–100 Audi alteram partem, 38, 41 and impartiality principles, 128–29 on panel’s participation, 129–30 violations of, 72, 133 Audiatur altera pars and fair arbitration, rules of, 200 principle and rule of, 206 Authorities’ request, for submitted information, 137

543

Authority and power of panel, ICC Rules Article 15(1) on, 174 Avoiding contract, under UNIDROIT, 128n43 Award barring recognition and enforcement, 24 clarity in, 198 enforceability of, 4 fair arbitration, 196–99 international unenforceability of, 203 interpretation, approach to, 199 lack of clarity in, 199 legal costs and breach in duty, 146 modiﬁcation or correction of, 198n31 and panel’s duty in, 199 under UNCITRAL Model Law, 198 Award enforceability, 45 case presenting ability, 38–39 on “condition subsequent,” enforcement of an award, 40 failure in performing duties, 69 grounds for refusal, 26 incapacity of party, 35 procedural agreement breach as, 26–28 ultra petita under, 29 Award of costs, rule in England, 100n47 Award refusal, and parties incapacity in proceedings, 82 Award regarding deadline extension of, 57 delay in, 57–58 disregard of, 76 material issues of, 44 reasons for failure, 58 Bad faith, of arbitrator, 72 Balancing parties’ position, arbitration, 190 Bankruptcy and other party’s involvement, 181 pending arbitration proceedings, 187 and right to present new evidence, 204 Barring recognition, of arbitral award, 24 Bearing risk and burden of education, 179 Bias constituents of, 118–20 determination of, 119 reasons for, 118–19 in witness testimony, reasons for, 165 Bilateral and multilateral treaties, 15 Black letter law approach, 3 “Bleeding to death,” in legal fees and costs, 97 Blessing I, xxiii “Burden of education” and mission of arbitrators, 178–80 Burden of proof, 147–49 544

and complex cases with numerous facts, 148 division of, 147 existence of, 148 and importance of procedural aspects, 147 and international commercial arbitration, 147 issue of, 143 under Swiss Rules, 177 “Carte blanche” prayer in international arbitration, 77n69 relief and due process, 77–78 Case law from national courts, arbitration practice concerning, 28 Case presentation and arbitral proceedings’ elements, 40 complexities, 38 inability of, 37 notice of appointment, 38 opportunity to, 173, 204 requirements of, 16, 38 timeliness, 39 Case presenting ability, 37–40 agreement and law of seat, 39–40 as a fundamental general requirement, 37–39 Central Chamber of Commerce of Finland (FCCC), xxiv Challenging arbitrators, 109–11 Convention’s provisions of, 110 rules applicable to, 109 Challenging evidence, 168 “Cherry picking,” agreement in writing, 47 China International Economic and Trade Arbitration Commission (CIETAC), xxiii China Law, xxiii, 83n5 Choice of counsel in China, 190 rights to, 191–92 CIETAC Arbitration Rules, xxiii Article 33, arbitrator’ duty of conﬁdentiality, 136 Article 33, hearing, recording of, 136 Article 36, establishing facts, 175n4 Civil Procedure Law, of China, 74 Civil Rights Covenant, xxiii, 190 Claims or award enforcement, security for, 101 Clarity in “tête-a-tête” witness conference, IBA Rules Article 5(3) on, 170 Classical procedural law, 107 research, 104 and waiver, 127 Closing pleadings, deadline for, 195 Code de procédure civile. See French Law Codiﬁed procedural principles, law of arbitration, 27 INDEX

Collecting evidence, arbitral panel’s role in, 144, 151 COMI Rules, xxiii Commercial agreement performance, limitations of, 67n46 Commercial dispute economic interests in, 111 resolution and fairness in arbitration, 205 Communication access to, 188 documentation of, 47 with parties, 47 of written statements, 194 Compensation for witnesses, 169 “Competence de competence,” UNCITRAL Model Law Article 16, 49 Competent authority, ground for refusal, 18, 19 Complex arbitration proceedings and ﬁnal award, 198 Composition of arbitral authority, Convention on, 128 Concealing facts, violation of law, 145, 146 Concealment of facts, 145 “Condition subsequent,” New York Convention’ requirements, 16 Conﬂicts in duties of conﬁdentiality, issues relating, 137–38 of interest IBA guidelines on, 110, 114n16 of multi-party arbitration, 82 Constitutional rights, in public hearing, 43 Constitutive norm, distinction, and lex mercatoria, 7 Consultation, by arbitral panel, 182 Contesting arbitrator’s jurisdiction, in U.S., 51n16 Contracting party arbitration assignment, 56 formation of, 25 against guarantor, 186 negotiation clauses in, 104 Contract interpretation case law concerning, 52 and dispute resolution context, 52, 55 problems of, 52–53 trends in, 53–54 Contract law, 52 Contract transfer of, assignment problems, 55–56 Contractual duties of parties, commercial transactions, 145 Contract unreasonableness of, evaluation criteria, 65 Contradictory principle, 14

INDEX

Contradictory witness testimony, measures for dealing with, 158 Core of law, 6 Correction of award, under UNCITRAL Model Law, 198 Cost of arbitration, problems related to, 64 of arbitration, under Swiss Rules, 132 and dispute resolution methods, 205 Cost-effectiveness and expeditiousness, of conducting proceedings, 150 prayer for relief, 77–78 Counsel, arbitrator relationship with, 126 Court convenience of, 95 Court decision, international enforceability, 88–89 Court procedure and arbitration, 201 Courts, authority and power of, 174 Courts objectivity, meaning of, 114 Cross-border approach, need for, 8 Cross-examination and special arrangements for witnesses, 168 witnesses, right to, 188 Cross-legal approach, need for, 8 Defense by indemnitor, 186 Demergers, veriﬁcation of legal identity in, 86 Denial, of case presentation, 191n13 Direct interest in dispute, non-disclosure situation, 126 Direct intervention by panel, approaches to, 151–51 Direct procedural requirements, of due process, 206 Discharging assignor, as obligor, 186n1 Discipline maintenance, witness testimony, 167 Disclosure and equitable contract, standards of, 127 of facts, in arbitration, 145 and waiver doctrine, 128 Discovery of documents, right to, 188n7 Disloyalty case, possible actions in, 69–70 Dismissal, seeking motion for, 97 Disposive rules, 6 Dispute and arbitrator, non-disclosure situation, 125 Dispute resolution, 15 arbitration panel in, 107–8, 132 costs of, 105 and enforcement procedures, 101 and mechanisms, agreement interpretation, 55 process of, other pending suit, 94 Doctrine of forum non conveniens, 95–96

545

Documents production of, IBA Rules on, 155 Documents submitted, under ICC Rules, 157–58 “Double” litigation, 50 “DR steps,” 103 D.S.T. v. Rakoil, 6n12 Due process, 53, 206 in arbitration, deﬁning of, 8–12 arbitration requirement of, 1–2 argument formulation of, 203–4 access to justice, 64, 78 in commercial arbitration of, 9 concept of, 1 under the Convention, 41 and entire agreement clause, 160 facets of, 203 and facts, 141–42 international norms concerning, 88 and jurisdiction, 81 lack of, in parallel proceedings, 95 law, ﬂoating nature of, 5–8 and ordre public, 189 as a principle of law, 12–14 and procedural rules, 4 and protection of substantive rights, 145 safeguards of, 50 standards of, 16 Due process, requirement of, 15, 16, 28, 108, 185, 201, 202, 204. See also Lex proceduralia categories of, 206 deﬁnition of, 3–5 objective impartiality, 107, 117 parties’ equal treatment, 173 substantive rights, protection of, 145, 172 Due process, violation of, 70–76 arbitrator’s failure to disclosure, 129 disregard of agreement and substantive law, 73–75 disregard of facts, 76 non-respect of agreement, 70–73 Duty negligence, by arbitrators, 135 Duty of conﬁdentiality, arbitrators, 136–38 Duty of guarantor, arbitration, 147–48n13 Duty on parties, invoking clause in arbitration, 44 Economic dependence, of bias, 118 Emotional ties of bias, 118, 119 and witness testimony, 165–66 Enforceability normative foundation of, 204 State courts’ decision, 15 546

Enforcement dimensions, 89–90 refusal of, 17n1 “Enforcement effects” test, 91–92 Enforcement of evidentiary measures, 152–60 entire agreement clause in, 158–60 “external” orders in, 154–56 fact-ﬁnding by arbitrators in, 156–57 “internal” orders in, 153–54 organizing evidentiary hearings in, 157–58 “toolbox” of measures for producing evidences, 152 Entire agreement clause and parties’ legal rights, 158–60, 158n39 purpose of, 159 Equality of arms and reasonable opportunity, presenting one’s case, 186–91 Erga omnes, effects, arbitral award, 81 Establishing relevant facts and dispute resolution, 174 importance of, 175 European Convention on Human Rights (ECHR), 2, 189, 202, 204 Evasiveness testimony, 165–66 Evidence exclusion of irrelevant, 159 refusal to bring 147n10 status of, 76 submission deadline for, 194, 195 Evidence in international commercial arbitration, IBA rules, 54n23 Evidence insufﬁciency, and party’s remedies, 174–75 Evidence producing difﬁculties encountered, 152 refusal to, 152 Evidences, risk in, 143 Evidentiary hearings, in legal proceedings, 144, 157–58 Evidentiary proceedings and panel’s role, 178 Ex ante approach, of proceeding, 205 Exercising discretion and deliberations in arbitration, 197 Expediency in arbitration, importance of, 192, 194 prayer for relief, 77–78 Expert testimony, under IBA Rules, 170 Expert testimony, under UNCITRAL Model Law, 169–70 Ex post waiver, 127 Fact-ﬁnding by arbitrators, 156–57 by panel, 177 INDEX

Facts deliberate misrepresentation of, 146 disregard of, 76 subjective views on parties’ presentation of, 144 Facts analysis, and legal traditions in, 149–50 Facts and evidence, due process related to, 141–42 Facts disclosure of, grounds for a claim, 87 Factual reality concept, arbitration, 141 Failure remedy, violation of due process, 72 Failure to disclose and effects on arbitrator, 129 and violations of fundamental procedural rules, 133 Failure to produce evidence, under CIETAC Arbitration Rules, 175 Fair arbitration, 185, 199, 201, 202, 203, 204, 206 accessibility aspect in, 185 due process requirement of, 79 principle of, 202 requirement of, 185 right to information submitted in, 187 and rule of audiatur alteram pars, 200 standards for party’s participation in, 187 and substantive rights enforcement, 200 summary of, 199–200 and timeliness, 192–95 Fairness in arbitration, 142 and ﬁnality in arbitration, conﬂicts of, 204–5, 206 in procedure, key element of, 66 of proceeding, 183, 205 Fair trial, 185 and fair hearing, 199 False arbitral award, 16 Faulty delivery, arbitration, 141 FCCC Expedited Rules, xxiv Fees and costs, in arbitrations, 130–32 FGG, xxiv Files of adversary, access to, 161n43, 162 Filing rights in agreement breach, 59 in case of disloyalty, 69 Final award in arbitration, UNCITRAL Model Law, 196 Finality, in arbitration, 205 Finland Arbitration Act, cancellation of arbitration agreement, 59n35 Fixing arbitrator’s fees, under Swiss Rules, 131–32

INDEX

Foreign arbitration awards, recognition and enforcement of, 15, 17n1 Foreign nationals as arbitrators, arbitration law of China, 178n13 Forum non conveniens motion, 95 deﬁnition of, 95 special considerations in arbitration, 97–98 Fouchard, Philippe, Emmanuel Gaillard, and Bethold Goldman (FGG), xxiv France Act Article 1456, award rendering deadline, 57n30 Fraudulent misrepresentation of facts, 145, 146, 176 Freedom of contract, mandate in concreto, 43 Freedom of parties, procedural matters’ agreement, 28 French Law, xxiv, 10 Fundamental principles, international public policy, 22, 23 Fundamental procedural principles, concerning criminal charges, 189 Fundamental procedural rights, 15 General procedural context, impartiality in, 114 Generic arbitration clause, 45 Generic waivers, 33, 44 German Law, xxiv and arbitral award, 9 about opportunity, to parties, 3n5 “Good faith,” in presenting facts, 145 Green list non-disclosure situation, 122–23 Guarantee instruments and commonality, 61 functioning methods, 60 Guarantor’s obligation, and arbitration agreement, 60–61 Hard-core rules, identiﬁcation of limits, 14 Hardships, in arbitration, 97n36 Hearing for taking evidence, 157 Holtzmann, xxiv Hostile third parties, producing evidence, 152 Hostility and witness testimony, 165–66 Human Convention, xxiv Human rights conventions arbitration agreement, 2 and due process, 203 in public hearing, 43 as source of transnational due process requirements, 11

547

IBA Ethics, xxv IBA Guidelines, non-disclosure situations, 122–26 green list, 122–23 orange list, 123–25 red list, 125–26 IBA Guidelines, xxv Article 1, about moral hazards of arbitration, 112 Article 3, arbitrator’s duty to disclose, 120–21 Article 4, on waiver doctrine, 34–35 Article 4, waiver of conﬂict under, 127 Article 6, disclosure of facts, 121, 138–39 Article 7, parties and arbitrators’ duty on disclosure, 122 on determination of, 119 IBA Rules, xxv ICC arbitration agreement, 47n8 ICC Rules, xxv Article 8(1) and (2) on arbitral panel, 108 Article 28(6), 33 Article 30, of security deposit and tribunal cost, 99 Article 33, 34 about moral hazards of arbitration, 112 provisional advance of, 98 ICC Uniform Customs and Practice for Documentary Credits (UCP), xxvi Identiﬁcation process, fundamental principles of, 22 Impartial arbitrators meaning of, 113–15 requirement of, 111–13 Impartial conduct, requirement of, 126–27 Impartiality, in arbitration and arbitration, standard of, 116 ICC Rules on, 126 meaning of, 113–15 resolving problems of, 139 separation of, 115 Impartiality, of arbitrators, 205 deﬁnitions of, 113–14 and due process, 138 and good arbitration practice, 117 waiver doctrine to, 118 Impartiality principles on, communication, 128–29 Impartial proceedings, 127 Inability to present case, 41. See also Audi alteram partem In concreto, waiver, 127 Incorrect interpretation of law, 74n62 Increased procedural cost, and access to justice, 205 548

Indemnitor’s right, invoking arbitration agreement, 60–61 Independency under arbitration context, 115 doctrine of, 45 and impartiality, in arbitration, 185 meaning of, 113–15 separation of, 115 India Law, xxv Indirect interest in dispute, non-disclosure situation, 126 Information submitted, right to, 187 Innocent misrepresentation, of facts, 145, 176 Institution, sole authority and power of, 174 Institutional arbitration, 26, 45 arbitral panel’s power in, 27 Institutional arbitration and mandate in concreto, 133 Institutional rules arbitration practice concerning, 28 award rendering time limit, 57 Intelligence, application of law in arbitration, 142, 143 Interim awards, 198, 199 “Internal” orders on producing evidence, of IBA Rules, 153–54 International arbitration agreements, characteristics of, 45 community and conﬁdentiality of award, 138 and evidence producing trends, 179n16 legal traditions in 149–50 right to counsel in, 191 International Bar Association (IBA), xxiv, 191n13 International Chamber of Commerce (ICC), xxv International collaboration, in arbitration, 15 International Commercial Arbitration and analysis of facts, legal traditions in, 149 burden of proof, 147 ﬂexibility in, 150n18 IBA Rules on evidence taking in, 144n4 incapacity of person, 35–36 parties incapacity in proceedings, 82 under UNCITRAL Model Law, 187n2 International Commercial Contracts, 6n11, 159n39 International contracts, arbitration clauses for, 26n21 International disagreements, and arbitration, 130 International due process, 15, 16 International enforceability, State courts’ decision, 15 International human rights, law of arbitration, 27 INDEX

International Institute for the Uniﬁcation of Private Law (UNIDROIT), xxvi, 186n1 International Law Association (ILA), xxv, 21 International Law Association (ILA) Recommendations criteria for award by, 87 fundamental principles of, 22–23 about lis pendens, 88 principles of waiver, 23 on res judicata, 87 International minimum requirements for criminal matters Civil Rights Covenant on, 190 International norms, of due process, 88 International ordre public, violation of, 104 International public policy deﬁnition of, 21 group of, 22 International soft law and due process, 203 as source of transnational due process requirements, 11 Inter partes effects, arbitral award, 81 Interpretation of agreement, 103 Interpretative function, principles of fair arbitration, 204 Interviewing witnesses ethics of, 162 reconstruction of past, 160 Invalidity of the arbitration agreement, material law applicable in, 36 Italy Act, xxv award rendering time limit, 56n27 Japan Act 2003, xxv honor and integration, 112 ideal procedure, unwillingness in contributing to, 68n50 Supplementary Provisions, for cancellation of arbitration, 63n37 Judges, standards of impartiality, application of, 115 Judicial authority’s delegation, mandate in concreto, 43 Jura novit arbiter principle application of, 178–80 prayer for relief, 77–78 same relief hearing, 87 Jurisdiction in arbitration agreement, 43 aspects of, other than agreement, 81 condition precedent to, 83 related problems in classical procedural law research, 104

INDEX

Justice and arbitration, access to, 201 Justiﬁable doubts and arbitrator’s impartiality, 120 Justness, in arbitration, 205 Language of witnesses, 164 Latent sympathies, arbitration, 117 Law dictionary, 96n37 “Law merchants,” 6 Law of arbitration, 52 procedural framework, 27 procedural agreement breach, 27 Law of enforcement, 42 Law of international arbitration, 41 Law of seat, 39 Laws in arbitration, 141 Law to facts, application of, 142 “Layers” of rules, 5–6 Legal analysis of evidence, 142 Legal assistants, arbitration, 191 Legal decision facts in, 142–46 structure of, 141–42 Legal identity, veriﬁcation of, 86 Legal issues and emotional ties of witness, 165–66 Legal literature, arbitration practice concerning, 28 Legal proceedings problems in, 143 time and effective management, 150, 169 under UNCITRAL Model Law, 169–70 Legal protection to parties’ rights, 142 Lex arbitri arbitration, 97 applicable procedural law, 36, 37 of arbitration law, 22, 23, 40 producing evidence, 153 Lex fori, on control on mandate in concreto, 40 Lex mercatoria analogy to, 5–8 Lex mercatoria arbitralis, 8n15 Lex mercatoria in international commercial law, 201, 202 Lex proceduralia, 8, 185 in arbitration, deﬁning of, 8–9 arguments and arbitration, 201, 202, 203 as interpretative tool, 12 parties’ equal treatment, 173 transnational due process standard, 27 Liability for non-performance, under UNIDROIT, 135n59 Liability issues, delay in award rendering, 58 Liber Amicorum Claude Reymond (LCAR), xxv

549

Lincoln v. Sun Life case, interdependent disputes, 89n22 Lis pendens doctrine, 90 Lois de police, 22. See also Public policy rules London Court of International Arbitration (LCIA), xxv Loss or damage, security for, 100–101 “Macro rules,” 72 Magna carta, of arbitral procedure, 187 Malrepresentation, of facts, 176. See also Fraudulent misrepresentation, of facts Managing proceedings, 173–74 Mandate in abstracto, lex fori, 40, 41 Mandate in abstracto and timeliness, 192 Mandate in concreto. See also Arbitration agreement basis of, 43 elements of, 40, 41 and limitation of arbitrator’s power, 180 and timeliness, 192 Mandatory procedural trade usage, core criterion of, 15 Mandatory rules, 6 Materiality of evidence, determination of, 76n68 Material law applicable for incapacity of person, 35–36 for invalidity of arbitration agreement, 36 remedies in, 78n71 Material requirements, prerequisites of jurisdiction, 16 Material waiver of rights, 177 Matters beyond scope, 28. See also Ultra petita award agreement interpretation of, 29, 30 decisions on matters, 29 differences in, 29, 31 Mediation mechanism, views on enforceability of, 102–4 Mergers, veriﬁcation of legal identity in, 86 Mexico Law, xxv, 135n60 Misrepresentation of facts, Black’s Law Dictionary deﬁnition of, 145n5 Mission, arbitral panel, 178 Mitsubishi and Scherk case, arbitrability, 84 Moral hazard, of arbitration, 111–12 “Motion to stay,” judicial resolution, 51n16 “Movement” in proceedings, 144 Multi-party arbitration, passivity in, 82 Multi-party arbitration agreement, participation rights in, 54 550

National arbitration law, standard of independence in, 115 National arbitration laws, 3 and arbitration standard, 3 National law invoking clause in arbitration, 44 and legal system, 8 provisions for fees’ security, 98 National legislation and due process, 203 National letter law approach, 3 National public policy, 18 enforcement proceedings, 19 National rules of interpretation, arbitration agreement, 52n17 Natural justice, breach of, 17, 17n1 Negotiation mechanism, views on enforceability of, 102–4 Neutrality, in arbitration terminology, 114 New arbitral proceedings, expiry of time limit, 58–59 New evidence, right to present, 204 New evidence submission in arbitral proceedings, 194n21 New York Convention, xxiii, 3, 15. See also Convention, the Article II(3), expiry of time limit, 59 Article II(3), validity of agreement, 51 Article V, conclusions on analysis of, 41–42 Article V1(a), incapacity of party, 35 Article V1(a), parties incapacity in proceedings, 82 Article v.1(b), 17n1 Article V1(b), case presenting ability, 38 Article V1(c), on ultra petita, 29 Article V1(d), arbitral appointment mechanism, 109 Article V1(d), case presenting ability, 39–40 Article V1(d), procedural agreement breach, 26 Article V1(e), “condition subsequent,” 40–41 Article V2(b), elements of, 18 for due process understanding, 15 core requirements of, 16 fundamental rules of due process in, 41 recognition and enforcement, of award, 17, 17n1 as source of transnational due process requirements, 10–11 New York Law, arbitration agreement, 30n23 Nominating party, and arbitrators, 116 Noncodiﬁed procedural principles, law of arbitration, 27 Non-compliance in producing evidence, under Arbitration Act 1996, 154n28 INDEX

Non conveniens doctrine, access to justice perspective of, 98 Non-disclosure situation current services, 124 dispute and arbitrator, 125 involvement in previous case, 123–24 other circumstances, 125 Non-neutral arbitrators, engagement of, 118n32 Non-respect of agreement, 70 Nordström-Janzon and Norström-Lehtinen v. the Netherlands, 11n17 Normative gaps in arbitration, 14, 204 Normative material and arbitration, interpretation of, 206 “Nothing but the truth,” administration of oath, 164–65 Notice of initiation, in proceedings, 82 Nullity of award award enforceability, 4 reasons for, 73 Oath, administration of, 164–65 Objecting party’ rights, ultra petita, 30–31 Objective opportunity, in case presenting ability, 37 Objective test, 114n17 Objective test of bias, and arbitrator, 114, 116, 119, 138 Off shore funds, 84n9 One-sidedness in arbitration agreement, reasons for, 63 Opportunity to hear, arbitration, 142, 151 Orange list, non-disclosure situation, 122, 123–25 Order of questioning, witness testimony, 166 “Ordinary” appeal, award, 44 Ordinary courts and arbitration, 206 Ordre public, 6 concept of, 20, 22 dimensions of, 83 generic waiver rights under, 33 violation of, 73, 75 Organizing evidentiary hearings, situations for, 157–58 Original agreement, requirement of written form in, 48 Original arbitration agreement, rules, 26–27 Other party breach of agreement, 70 Pacta sunt servanda, infringement of, 97 Panel composition of, 108 and courts, combined authority and power of, 174

INDEX

impartiality and arbitration’s credibility, 118 intervention in questioning sessions, situations for, 167 own motion of, under IBA Rules, 158 participation as potential bias, 129 power in common with parties, arbitration, 173–74 procedural autonomy of, 101, 102 sole powers of, 173 Panel and due process, 107 under arbitrator’s rights and duties, 108 disclosure of facts in, 113 under dispute resolution context, 107–8, 132 fees and costs of, 130–32 summary of, 138–39 Panel autonomy conditions imposed by, 101–2 limitations on, 102 Panel’s role, arbitration, 173 administration of remedies and consultations under, 180–82 in establishing facts, 174–78 and mandate in abstracto, 180 summary of, 183 Parallel proceedings effect of, 92–95 pending, lis pendens, 90 perspectives on, 91–92 Partial arbitrator, 127 Partial award, 199 Participation in arbitration, opportunity to, 186–89 idea of, criminal matters, 189 rights of, in arbitral proceedings, 54 Parties, in proceedings, 81–82 agreement’s invalidity, 35–36 arbitrator relationship with, 126 with criminal charges, rights to, 189 equal treatment of, 173 freedom of, and arbitration, 71–72 future business relations and fairness, 205 good faith, agreement of, 68 identiﬁcation of, 81–82 incapacity as obstacles, 16 incapacity of, 82 involvement in, 81–83 legal relationship, 81–82 limitations of, 144 passivity, objection to amendment, 48 rights, challenge on jurisdiction, 50 truth and the relationship to facts, analysis method, 145

551

Party-appointed arbitrators impartiality aspect in, 115 role of, 116 Party-appointed expert, under IBA Rules, 171 Passive duty, analysis of facts, 145, 149 Past evidences, reconstruction of, 142, 143 Pending suit, in enforcement effects, 94 “Per se” rule, in bias determination, 119–20 Personal friendship, arbitrator and counsel, 124 Place of arbitration, 26. See also Seat of arbitration Potential bias and challenging arbitrator’s impartiality, 120 Power delegation of, 1–2 Power of arbitral tribunal, validity of contract, 51–52 Preclusive effects, arbitral award, 88 Preparation for evidentiary hearing, under IBA Rules on, 163–64 Presenting case, opportunity of, 187–89 Preserving assets and site inspection, under AAA Rule, 171 Prevention of fraud and entire agreement clause ideology, 159 Principles of exclusivity, contract agreement, 54, 55, 59 Principles of law, from various national procedural laws, 11 Prior involvement of matter, as reason for bias, 118 Private international law, 54 Private International Law Act of Switzerland (PIL), xxv “Pro-arbitration” trends, in contract interpretation, 54 Procedural activity, in arbitration, 142 Procedural agreement violation, Japan Act, 70n55 Procedural breaches, in arbitration agreement, 67 Procedural due process, 16, 160 Procedural duties, breach by party, 145–46 Procedural fairness and cost, debate on, 205 Procedural framework, elements of, 26 Procedural international public policy, 21, 22, 24 Procedural issues, separation of, 16 Procedural law contract interpretation of, 52 problems of, 7 soft law norms, 7–8 theory, problems of, 86 Procedural matters decision, arbitration, 173 Procedural principle 552

arbitration, 102 and State rules, 21 Procedural public policy, 21 Procedural quality standards, 201 Procedural rights in arbitration, enforcement of, 204 Procedural rule and due process, 4 procedural agreement breach under, 27 types of, 4–5 violation of, 15 Procedural waiver of rights, 177 Procedure independence, meaning of, 115 Proceedings fairness and integrity of, 114 ﬂexibility and procedural fairness, 205, 206 initiation, notice of, 187 management of arbitral panel’s role in, 144, 148, 149, 150 problems in, 192 time limit, extension of, 193 Producing evidence in arbitration Mexico Law Article 1439 on, 144n3 refusal to, 147n10 right to, 172, 188 strategy of, 142 “toolbox” of measures for, 152 Producing rebuttal evidence, opportunity to, 190 Production of documents, right to, 188n7 Psychological testimony, 165–66 Psychological ties and witness testimony, 165–66 Public policy, grounds to refuse recognition and enforcement, 17–24 Public policy dimension of, 83 ILA on fundamental principles under, 22–23 and international arbitral awards, 17n1 procedural aspects in, 18–20 rules by ILA on, 24 vague category of, 17, 17n1 views on constitution of, 20–22 Public policy rules, 22. See also Lois de police ILA recommendations on, 24 international public policy, 22 and mandatory substantive law, 21 New York Convention’ requirements, 16 recognition and enforcement, grounds for refusing, 17 violation of, 18n2, 19 Publishing award, conditions for, 138 Receiving evidence, panel’s role in, 178 Recommendations, of ILA, xxv, 21, 23 INDEX

Reconstructing past, panel’s role in, 175 Recording in writing, investigations, 162 Red list, non-disclosure situation, 122, 125–26 Referred-to arbitration agreement, parties’ duty in, 48 Reﬂections, xxvi, 6–7n13 Refusing enforcement, reasons for, 74n62 perversity under, 76n66 Rehearing of witness, 165 Relevant evidence, arbitrators’ duty, 156 Relevant facts, establishment of and avoidance of surprises, 161 questions and answers approach in, 160 Relevant facts, in legal decision, 142–46 Renaissance of lex mercatoria, 6 Rendering award, reasons for motivation in, 197 Reorganization and other party’s involvement, 181 veriﬁcation of legal identity in, 86 Representation by lawyer, Arbitration Act 1996 of England Section 36 on, 191n12 Request by tribunal for documents, IBA Rules on, 156, 157 for viewing submitted information, 137 Residual time limit, in rendering award, 56n27 Res judicata deﬁning of, 85–89 nonexistence of, 85 Res judicata bar and ambiguous award, 199 Res judicata doctrine, 85, 86n12, 87 Resolution on Transnational Rules, 5n8 Rights to arbitration, waiving of, 44 to cross-examine a witness, 168 to hearing, situations for, 186–87 Risk of abuse, ethics of, 162 Rules of arbitral institute, 3 Russian Law, xxvi, 141 “Same ground” criterion in lis pendens, 91 in res judicata, 87 Sample clause, in arbitration agreement, 62n36 Sanctions on agreement non-respect, 67 Seat of arbitration, 23, 27, 36, 153. See also Place of arbitration Secretary, appointment of, 186n1 under Article 15(5), Swiss Rules, 130

INDEX

under Article 749, Argentina Act, 186n1 Secretary, institutional arbitration cases, 130 Security conditions, applicable rules, 98–101 arbitral tribunal and institution, fees and costs of, 98–99 attorneys’ fees of, 99–100 claims or award enforcement, 101 loss or damage, 100–101 parties, cost of, 99–100 Security deposit, 101 attorneys’ fees, 99 Security for enforcement, problem in, 101 Security of agreement, functioning methods, 60 Separability doctrine, international arbitration cases, 44n1 Set-off defense, ultra petita award, 31, 32 Setting deadline for new evidence submission, critical aspects of, 194–95 Settling disputes, arbitrators’ power in, 45 Signatory States the European Convention and arbitration, applicability of, 10–11 Single and speciﬁc rules, 13 Site inspection, preserving evidence, 171 Soft law, norms of, 7–8 Sovereign State, and jurisdiction function of, 4 Spanish Act, xxvi Special code, law of arbitration, 27 Special considerations, arbitration pacta sunt servanda, infringement of, 97 State’ duty, international public policy, 22 State courts’ decision, enforceability of, 15 States delegate jurisdictional power, arbitral tribunals, 201 Status hearing, in arbitration, 182 Status review hearings, 143 Statute of limitations arbitration clause’ time limit as, 58, 59 Subjective analysis test, in determination of bias, 119 Subjective assessment of, 142 Subjective test, 114n17 Subjectivity in witness testimony, reasons for, 165 Subject matter, arbitrability of, 16, 24–25 Submitted information, in arbitration, 137 Subsequent arbitration agreements, 26–27 Subsequent damage claim, grounds for, 100 Substantive and procedural issues, separation of, 81 Substantive correctness, in arbitration, 205 Substantive due process, requirements of, 16 Substantive international public policy, 21 Substantive law, 21, 104

553

Substantive rights enforcement and fair arbitration, 185, 200 hindrance to, 105 protection of, 104 Sufﬁciency, facts in legal decision, 142–46 Sufﬁciency evidence, 142 Suovaniemi and Others v. Finland, 11n17 “Supranational” due process, hard core of, 15 Suspension of time limit, rendering award, 56n27 Swiss Rules, xxvi Article 15(4), disclosure of facts, 129 Article 15(6), good faith of parties, 68 Article 21(1) and (2), arbitral tribunal’s power, 51 Article 21(3), loss of waiver rights, 50 Article 21(4), ﬁnal award on arbitration agreement validity, 49 Article 21(5), set-off defense under, 31 Article 43, on conﬂicts in duties of conﬁdentiality, 138 “Tailor-made” arbitration agreement, 53–54 Testimony hearing in advance, IBA Rules on, 162 Third parties refusal, for producing evidence, 154 Third party “objective doubt” test, in bias determination, 119 Third party interventions in arbitration, 181 Third party participation, in arbitral proceedings, 137 Time limit, in rendering award, 56–58, 56n27, 58n32 Timeline for evidence, under CIETAC Arbitration Rules, 175 Timeliness and fair trial, 192 and opportunity to presenting case, conﬂict between, 192–95 Time schedules in proceedings for witnesses, 169 Toolbox, measures for producing evidences, 152 Trading nation and lex mercatoria, 5 Traditions in ward interpretation, 199 Transnational due process of law, 200 sources of, 11 Transnational law, arbitration, 202 Transnational procedural safeguards, 185 Transnational public policy, 22, 23, 24 recommendations of, 21 Transnational Rules, xxvi 554

Tribunal-appointed expert, 156, 170, 171 Tribunal binding, to unfair procedure, 79 Tribunal jurisdiction, basis of, 43 Tribunals, of state courts, 107 Triple identity test, arbitral award, 88 Truth, facts in legal decision, 142–46 Ultra petita award. See also Matters beyond scope deﬁnition of, 28 set-off defense in, 31 Ultra petita consequences Convention Party Act, Article V(1(c)), 32 Ultra petita problem, prayer for relief, 77–78 UNCITRAL Model Arbitration Law, 44n1, 44n2 UNCITRAL Model Law Article 7, in arbitration agreement, 48 Article 8, parallel proceedings, 93 Article 10.6, time limit expiry in rendering award, 58n33 Article 12, duty to disclose facts, 120 Article 13(1) and (2), procedure for challenging arbitrator under, 110 Article 28, agreement interpretation, 73 principles of interpretation, arbitration agreement, 52n17 Unenforceability remedy of, 4 ipso jure of, 7 United Nations Commission on International Trade Law (UNCITRAL), xxvi United States Arbitration Act (FAA), xxiv and arbitral award, 9–10 University of Helsinki Conﬂict Management Institute (COMI), xxiii Unknown facts, discovery of, 161–62 Unsatisfactory arbitration, 16 U.S. Supreme Court view on arbitration, 53n18 Validity of arbitration agreement, arbitral tribunal on, 49 seeking clarity on, 51 Videoconferencing, in witness testimony, 164 Violation by arbitrators, agreement, 28 of ordre public, 181 of procedural rule, 15 of public policy rules, 18n2, 19 Voidability, and award enforceability, 4 Waiver after breach Waiver doctrine arbitration laws, 50 INDEX

breach of agreement, 33 conﬂict of interests, 34 in contract matters, 33 ex post public policy and rights, 33 general ex ante arbitration, 33 ILA recommendations in, 23 impartiality of arbitrators, 116, 118, 127–28 and procedural agreement breach, 32–35 relevancy of, 32 right to object, 34 on right to object non-compliance, 24 submission, of beyond scope matter, 31, 32 violation of a right, 33 Waiver of rights, not producing further evidence, 177 “Waivers to legal protection,” 104 Weight of evidence, Arbitration Act 1996 on, 147n12 Will, witnesses of, 13 Will order discovery, court’s involvement in, 161 WIPO Rules, xxvi

INDEX

Witnesses, arbitration, 162–69 compensation for, 169 cross-examination and special arrangements for, 168 language of, 164 “nothing but the truth,” testifying under oath, 164–65 prior to hearings, 162–64 questioning of, 166–67 time schedules in proceedings for, 169 Witness hearing, objections to Swiss Rules, 166 Witness statements, evaluation of, 165–66 Witness testimony, 165–66 World Intellectual Property Organization (WIPO), xxvi Written arbitration agreements criteria of, 46 ﬂexibility in constitution of, 47 Written documents, access to, 188 X v. Federal Republic of Germany 1962, 11n17

555