The Freshfields Guide to Arbitration Clauses in International Contracts [3 ed.] 9041142649, 9789041142641

Table of contents :
Title Page
Copyright Page
Contents
About the authors
Preface to the first edition
Preface to the second edition
Preface to the third edition
Chapter 1: Choosing the method
Chapter 2: Choosing the applicable law
Chapter 3: Choosing the place of arbitration
Chapter 4: Choosing the language of the arbitration
Chapter 5: Choosing the rules
Chapter 6: Choosing the arbitrators
Chapter 7: Choosing mechanisms to deal with specific situations
Chapter 8: Choosing ADR/tiered dispute resolution methods
Chapter 9: Drafting the arbitration clause
Appendix 1: Model clauses for institutional arbitration
Appendix 2: Key features of selected arbitration rules
Appendix 3: Sample clause for ad hoc arbitration
Appendix 4: Sample tiered dispute resolution clause
Appendix 5: Sample multi-party “umbrella” agreement
Appendix 6: New York Convention and UNCITRAL Model Law countries and the top 20 places of ICC arbitration (2000-2009)
Appendix 7: Contact details of selected arbitral institutions and other organisations

Citation preview

KLUWER LAW INTERNATIONAL The Freshelds Guide to Arbitration Clauses in International Contracts Third edition

Jan Paulsson Nigel Rawding Lucy Reed

Published by Kluwer Law International, P.O. Box 316, 2400 AH Alphen aan den Rijn, The Netherlands [email protected] http://www.kluwerlaw.com Sold and distributed in North, Central and South America by Aspen Publishers, Inc., 7201 McKinney Circle, Frederick, MD 21704, USA Sold and distributed in all other countries by Turpin Distribution Services Ltd., Stratton Business Park, Pegasus Drive, Biggleswade, Bedfordshire SG18 8TQ, United Kingdom

© 2010 Kluwer Law International eISBN 978-90-411-4264-1 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, mechanical, photocopying, recording or otherwise, without prior written permission of the publishers. Permission to use this content must be obtained from the copyright owner. Please apply to Permissions Department, Wolters Kluwer Legal, 111 Eighth Avenue, 7th Floor, New York, NY 10011-5201, United States of America. E-mail: [email protected]

Table of Contents About the authors Preface to the first edition Preface to the second edition Preface to the third edition Chapter 1: Choosing the method Chapter 2: Choosing the applicable law Chapter 3: Choosing the place of arbitration Chapter 4: Choosing the language of the arbitration Chapter 5: Choosing the rules Chapter 6: Choosing the arbitrators Chapter 7: Choosing mechanisms to deal with specific situations Chapter 8: Choosing ADR/tiered dispute resolution methods Chapter 9: Drafting the arbitration clause Appendix 1: Model clauses for institutional arbitration Appendix 2: Key features of selected arbitration rules Appendix 3: Sample clause for ad hoc arbitration Appendix 4: Sample tiered dispute resolution clause Appendix 5: Sample multi-party “umbrella” agreement Appendix 6: New York Convention and UNCITRAL Model Law countries and the top 20 places of ICC arbitration (2000-2009) Appendix 7: Contact details of selected arbitral institutions and other

organisations

About the authors The first edition of this Guide was the creation of Martin Hunter, Jan Paulsson, Nigel Rawding and Alan Redfern at a time when they were all partners in Freshfields and members of the firm’s international arbitration group. Since retiring from the firm, Martin Hunter and Alan Redfern continue to feature prominently in the practice of international dispute resolution, sitting frequently as arbitrators as well as writing and speaking on the subject. Eric Schwartz, a former Secretary-General of the ICC, contributed to the second revised edition whilst he was a partner in the firm, as did Lucy Reed. Jan, Nigel and Lucy continue as leading members of the firm’s international arbitration group and as co-authors of this third edition.

Preface to the first edition The dispute resolution clause is usually found near the end of a contract, alongside such innocuous items as addresses for serving notices. It may ultimately prove to be the most important provision of all. Rights and obligations carefully defined elsewhere in the contract are only as reliable as the courts or tribunals called upon to give effect to them. Yet with astonishing regularity international contracts contain defective dispute resolution clauses. Even lengthy and complex agreements, drafted by negotiators whose understanding of everything else is highly sophisticated, often reflect ignorance of the mechanisms of international dispute resolution. Hence this concise Guide, designed for contract negotiators. Other negotiating options are available in contemporary practice to those who are dissatisfied with traditional adjudicatory mechanisms. These options have in recent years been described by the acronym ADR (“alternative dispute resolution”). The Guide addresses some of the most important features of ADR and includes some suggested model ADR clauses. Naturally, the Guide cannot be relied upon as a substitute for specialist professional advice as to the appropriate method of dispute resolution in the particular circumstances of any individual transaction. The international scene is constantly changing. Today’s preferred solution will not necessarily be tomorrow’s. However, the types of pitfalls tend to remain the same and one of the aims of this Guide is to help steer the reader away from them. The focus of this Guide is Chapter 7: Drafting the arbitration clause. For the harried practitioner, it may be the first section to be consulted at the eleventh hour of a negotiation, together with the model clauses set out in Appendix 1. But with arbitration clauses, as with a balance sheet, to achieve a pre understanding requires more than looking at the bottom line.

Preface to the second edition In introducing this second edition of the Guide it is tempting to say something which is at least new, even if not profound. There have been significant developments in the law and practice of international arbitration since the publication of the first edition in 1993, notably in the promulgation of new arbitration laws and new or revised international arbitration rules. Yet the considerations which prompted us to prepare the Guide in the first place have not changed. It is still true that relatively little attention is paid to the dispute resolution clause in otherwise lengthy, complex and heavily negotiated agreements. The raison d’être for the Guide therefore remains the same, as does the advice – albeit updated in order to take account of recent developments – that follows.

Preface to the third edition In the decade since publication of the second revised edition of this Guide, the growth of international commercial arbitration has continued unabated. There has also been a notable increase in the number and variety of disputes referred to arbitration under investment treaties with state parties. Whilst that topic is, for the most part, beyond the scope of this Guide, we have drawn attention to some of the issues that may arise when contracting with a state party. During 2010 alone, the arbitration community witnessed the promulgation of revised UNCITRAL Arbitration Rules (effective from 15 August), revised SCC Rules (in force from 1 January), amended IBA Rules of Evidence (published on 29 May) and new or amended rules published by regional institutions such as LCIA India (effective from 17 April) and SIAC (in force from 1 July). Revisions to other institutional rules, such as those of the ICC and the LCIA, are planned. Legislative and judicial developments have continued to influence the many substantive and procedural issues that arise in the law and practice of international arbitration. Yet the more things change, the more they seem to stay the same. A further ten years of experience and observation reinforces the need for contract negotiators and their advisers to focus on the essential elements of the process. If well-informed choices in those key areas are made at the outset (for example as to the applicable law, the seat of arbitration and the procedural rules) the vagaries of the dispute resolution process can be much reduced, even if not eliminated altogether. We hope that users of this third edition will benefit from the lessons to be learned from the mistakes of others. The authors wish to acknowledge the invaluable contribution made by Ashmita Garrett, a senior knowledge management lawyer in our firm’s London office, assisted by trainees and paralegals, in compiling additional information and providing suggestions for inclusion in this revised text. We

have attempted to reflect the state of play in the arbitration world as at 31 August 2010. As usual, of course, any errors or omissions in the final product are the responsibility of the authors themselves.

Chapter 1

Choosing the method In broad terms, contract disputes may be resolved by: • direct negotiation, • one of the many forms of alternative dispute resolution, • litigation before national courts, or • arbitration. In contrast to domestic contracts (where all concerned expect the local national courts to have jurisdiction, even in the absence of a contractual provision to that effect), parties to international contracts need to agree on what will happen if a dispute cannot be resolved by negotiation or other means. This is best done at the time of negotiating the contract.

Direct negotiation Parties are always free to discuss issues or disputes which arise during the course of a contract. There does not have to be a clause allowing (or requiring) them to do this. However, in complex contracts, more than one method of resolving disputes will often be identified, in a so-called tiered or staged dispute resolution clause. The first stage of such a process can be direct negotiation at party level. For example, in long-term infrastructure projects, there may be a stipulation to the effect that the project managers of both parties must first attempt to diffuse the situation before it reaches more senior levels of management. If this fails then other dispute resolution methods will follow, as described below.

ADR Although arbitration itself is an alternative to recourse to the courts, it should be distinguished from methods of dispute resolution conventionally designated as alternative dispute resolution or “ADR”. Arbitration is intended to lead to a binding determination of a dispute, by means of an award enforceable if necessary against the assets of the losing party. Only in limited circumstances, in order to prevent injustice, may the courts set aside or refuse to enforce awards when the arbitral tribunal has not complied with certain essential requirements of natural justice or due process, such as treating the parties with equality and giving each an adequate opportunity to present its case. By contrast, ADR (in the conventional sense, excluding arbitration) is not usually intended to result in a binding determination of rights and obligations. Broadly speaking, the courts will not intervene to protect related procedural rights. This is so because in ADR, the victim of an abuse of process may simply reject the outcome of an ADR procedure, or refuse to participate in it at all. The use of ADR has grown significantly in some countries, often as part of a formal dispute resolution process initiated either by the parties themselves or at the direction of a court. In England, for example, before parties issue proceedings in the courts, they must have made efforts to resolve their differences. The judge will ask to see evidence of this. Sometimes, a failure to explore alternative solutions may result in a costs penalty even if a party is successful in later proceedings. In the United States, the courts regularly refer parties to arbitration. ADR procedures may take many forms, from third-party assisted negotiation to “mini trials”. The procedures may be more or less sophisticated and more or less formalised or structured. They may be described as facilitative or evaluative, interest-based or rights-based. They may take the form of contractual obligations to have personnel of a certain level participate in discussions in the early stages of a dispute, or to seek an “early neutral evaluation” of the merits of each party’s case, by an independent third party. Contracts often simply provide for a “cooling off” period in which parties agree not to take any formal step (such as commencing an arbitration) in order to allow an opportunity for their dispute to be resolved by other means.

This may be direct negotiation or involve an informal, non-binding assessment by a respected third party. In many cases, a perceptive, diplomatic and businesslike outsider may tilt the discussions toward accommodation rather than discord. Some ADR methods commonly used as part of a tiered dispute resolution process are discussed briefly in Chapter 8: Choosing ADR/tiered dispute resolution methods. As the acronym ADR includes the concept “alternative”, it may induce the belief that an ADR clause is a substitute for a traditional forum clause. It most certainly is not. Theodore Roosevelt gave the advice long ago to speak softly but carry a big stick. There have been many instances since then of the use of diplomacy coupled with the threat of force. Speaking softly will often do the job if both parties proceed in good faith. That is what ADR is all about. Nonetheless, most parties will ultimately wish to be able to rely upon their contractual rights, as determined by litigation or arbitration. However willing they may be to pursue negotiations, they understandably have no intention of giving up the stick of a binding procedure if they feel that they are entitled to recover substantially more than the other party is willing to offer. ADR procedures do not usually provide a mechanism to obtain a binding result. That does not, however, mean parties can ignore valid clauses requiring that they negotiate or mediate. A recent Australian Court of Appeal decision1 held that a clause requiring party representatives to “meet and undertake genuine and good faith negotiations with a view to resolving the dispute or difference” was not too uncertain in law, but was valid and enforceable. The more the ADR process is successful in reaching settlement, the fewer arbitrations there will be. But it is just as true that greater use of ADR clauses should have no effect on the frequency of the inclusion of arbitration clauses in international contracts. A disputes clause without an ADR clause may perhaps not be ideal, but at least it can be made to work irrespective of the objections of a recalcitrant party. An ADR clause without a traditional binding disputes clause, at least in the international context, is a recipe for disaster.

Litigation before national courts

Parties occasionally designate a national court as the forum for resolving disputes. But in most international transactions (with the possible exception of those concerned solely with lending or other standard form transactions), it is unlikely that the same national court will be accepted by both sides. Understandably, parties are often unwilling to allow disputes to be determined in the other side’s home territory. Nor are the national courts of a third, neutral, country likely to be appropriate, for several reasons. First, it may be unwise to entrust a dispute governed by a different, or “foreign”, system of law to national judges whose qualifications and training are deeply rooted in their own legal systems. The need to present evidence of such foreign law may be cumbersome and expensive. Secondly, the contract, as well as correspondence and other documents relating to the dispute, may have to be translated into the working language of the judge of the national court. Furthermore, the oral proceedings will necessarily have to be in the judge’s own language, which means that those most closely connected with the transaction may not understand what is being said, or may not be able to make themselves understood. Advocates unfamiliar with the parties and the transaction may have to be retained to play the lead role. Thirdly, it is not always certain that the courts of a country having no connection with either the parties or the subject matter of the dispute will allow their judicial resources (generally paid for by that country’s taxpayers) to be used to resolve disputes between foreign parties. The jurisdiction of a chosen national court may also be open to attack by one of the parties on grounds of forum non conveniens, notwithstanding the parties’ agreement to refer the dispute to those courts. Fourthly, with some exceptions such as cases within the European Union, the network of treaties for the recognition of national court judgments is far from complete. By contrast, arbitration awards are more readily enforceable across national frontiers than judgments of national courts. Fifthly, court actions are generally open to public scrutiny.

Arbitration By contrast with litigation before national courts, arbitration is a private, consensual process (in the sense that it is derived from the parties’ agreement

to refer disputes to arbitration). It is nevertheless intended to result in a binding, enforceable award. Although circumscribed by the parties’ agreement, most standard form arbitration clauses cover claims for breach of contract, specific performance, misrepresentation and other claims “arising out of or in connection with” the contract. Examples of such standard clauses are included in Appendix 1. The main advantages of international arbitration over litigation before national courts may be summarised as follows: • Enforcement of awards: Foreign arbitration awards are enforceable in more than 140 countries which are parties to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention). See Chapter 3: Choosing the place of arbitration, and Appendix 6. By contrast, many countries which have ratified the New York Convention are not party to treaties or other arrangements which facilitate enforcement of court judgments. Arbitration will be a more effective dispute resolution method if it becomes necessary to enforce the award in one of those countries. For example, the People’s Republic of China has signed up to the New York Convention but not to enforcement of judgment treaties with countries such as the US, Germany or the UK. The US has also signed up to the New York Convention but has no treaties for enforcement of US judgments with other states (or vice versa). • Neutrality: The arbitral tribunal and the procedure for the arbitration can be chosen so as to have a non-national character, acceptable to parties and their representatives, regardless of their different backgrounds. • Confidentiality: Arbitration is a private process and the confidential nature of the dispute and the proceedings may be protected (although cannot be assumed). • Procedural flexibility: The parties are free to choose the procedure which suits them best. They are not bound by national procedural rules. There is also increasing use of internationally accepted supplementary materials, such as the International Bar Association Rules on the Taking of Evidence in International Commercial Arbitration, commonly referred to as the “IBA Rules of Evidence”. (The Rules were

first published in 1999 and a revised edition was adopted in May 2010.) • Expert arbitrators: Arbitrators can be selected to meet the particular needs of the case, for example, where specific technical knowledge, qualifications or experience are required. • Speed and cost? The flexibility of the arbitration procedure can lead to savings of both time and money. However, the time and cost involved will depend on the procedure adopted, the degree of co-operation between the parties, the availability of the arbitrator(s) and the fees charged by them as well as any arbitral institution involved. For complex commercial disputes, especially where the amounts at stake are high, arbitration should not necessarily be regarded as a quicker and cheaper alternative to litigation. • Finality of awards: Appeals or other recourse to national courts by a losing party may be excluded or restricted, either by law or by prior agreement between the parties. There are also potential disadvantages in the use of arbitration as opposed to litigation, their significance depending upon the circumstances of each case: • Limited powers of arbitrators: Arbitrators lack effective powers of compulsion. In certain cases it may be necessary for the parties to have recourse to the national courts, for example, to seek injunctions or other forms of interim relief which carry effective sanctions and can bind third parties. (Many arbitration rules expressly provide that applications to the courts for interim relief are not incompatible with the agreement to arbitrate.) • Multi-party and multi-contract disputes: Multi-party disputes can arise where more than two parties (or groups of parties) are involved from the start of proceedings; or a third party wishes to join existing proceedings; or one of the parties to existing proceedings (usually the respondent) wishes to join a third party with whom to share any liability that may arise. Multi-contract disputes can arise where the issues in one set of proceedings are similar to those in another set of proceedings and it makes legal and practical sense to combine them. Numerous examples arise in large-scale infrastructure projects, involving the project owner,

contractor, sub-contractors and lenders. In general, an arbitral tribunal has no power to join third parties (that is, those who are not parties to the arbitration agreement) into arbitration proceedings against their will, nor to order the consolidation of two or more arbitrations without the consent of all parties, even where common questions of fact or law arise which affect all parties. Moreover, even where all parties agree to the consolidation of separate arbitration proceedings, practical difficulties can arise, since workable procedures for multi-party arbitrations are rarely provided for in preexisting arbitration rules. The problems posed by multi-party and joinder issues in particular have been a feature of consultations undertaken as part of the revision of the International Chamber of Commerce (ICC) Rules (presently underway) and the United Nations Commission on International Trade (UNCITRAL) Arbitration Rules (adopted with effect from 15 August 2010). • Awards not binding on third parties: An arbitral award cannot generally bind a third party who has not participated in the proceedings, nor establish a binding legal precedent for future proceedings. • A compromise solution? To some extent, the perception remains that a major disadvantage of arbitration is that arbitrators may try to reach a compromise decision and be reluctant to find unequivocally in favour of one party or the other. In reality, the fear that arbitrators have a tendency to “split the baby” is, at least in the authors’ experience, unwarranted. Unless expressly authorised to do otherwise (for example to decide the dispute ex aequo et bono), arbitrators can be expected to decide the case in accordance with the rights of the parties under the contract and the applicable law. Arbitration statutes (such as the English Arbitration Act 1996, section 46) and many institutional rules (such as the ICC Rules, Article 17) impose a specific requirement to that effect.

Institutional or ad hoc arbitration? Arbitrations may be conducted under the auspices of one of a number of international arbitral institutions or may be handled ad hoc, using rules

tailored to the specific requirements of the parties and the circumstances of the case. Institutional arbitration Among the best known, and most frequently called-upon, international arbitral institutions are the ICC and the LCIA (formerly known as the London Court of International Arbitration). Both the ICC and the LCIA have amended their arbitration rules, effective from 1 January 1998. The operation of both sets of rules is routinely monitored, and both are currently under review again. Other prominent institutions include the International Centre for Settlement of Investment Disputes (ICSID) for use in investment disputes between states or state agencies and nationals of other states; the American Arbitration Association (AAA) and its international section, the International Centre for Dispute Resolution (AAA/ICDR); the Arbitration Institute of the Stockholm Chamber of Commerce (SCC); and a variety of national or regional institutions such as the Deutsche Institution für Schiedsgerichtsbarkeit (DIS), the Chinese International Economic and Trade Arbitral Centre (CIETAC), the Hong Kong International Arbitration Centre, (HKIAC), the Singapore International Arbitration Centre (SIAC), the Dubai International Finance Centre in association with the LCIA (DIFC-LCIA) and the International Commercial Arbitration Court in Russia (ICAC). The selection of appropriate arbitration rules, including those published by the ICC, the LCIA and UNCITRAL, is addressed in Chapter 5: Choosing the rules. There are also a number of institutions catering for disputes arising in a particular trade area or industry, such as the Arbitration and Mediation Center of the World Intellectual Property Organisation (WIPO), the Insurance and Reinsurance Arbitration Society (ARIAS (UK)) for insurance disputes, the London Metal Exchange (LME) for commodities disputes and the London Maritime Arbitrators Association (LMAA) for commercial maritime disputes. Ad hoc arbitration Ad hoc arbitration may be approached by devising special rules or adopting the UNCITRAL Arbitration Rules.

• Specially devised rules: Parties and their advisers may develop their own rules to govern the arbitration procedure, taking account of the nature and circumstances of the particular dispute. However, preparing tailor-made rules in this way can prove to be expensive and timeconsuming, and can lead to costly mishaps if the contract drafters fail to anticipate particular problems. • Adoption of the UNCITRAL Arbitration Rules: These rules were first promulgated in 1976 for use in commercial arbitrations and have achieved wide international recognition. In 2006, the process began of reviewing the rules to modernise them with the stated aim of promoting “greater efficiency in arbitral proceedings”. The revised rules came into effect in August 2010. They are intended for use by parties who prefer to avoid involving an arbitral institution but wish to have a set of generally accepted rules available to them. If the UNCITRAL Arbitration Rules are adopted, an appointing authority should be expressly designated, for example, to appoint arbitrators if one or more parties fail(s) so to do.

ICSID arbitration Private parties and state entities often include arbitration clauses in their contracts, in particular in investment contracts. It is common for such clauses to designate the ICSID Rules or ICSID Additional Facility Rules and thereby enlist ICSID as the administering institution. The Additional Facility was established in 1978 to administer arbitrations that fall outside the scope of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States 1965 (commonly referred to as the Washington or ICSID Convention). For example, the Additional Facility Rules can be used either to resolve disputes where one party is not a contracting state or a national of a contracting state or where the disputes do not arise out of an investment, so long as one of the parties is a contracting state or a national of a contracting state. A detailed explanation of ICSID arbitration may be found in the Guide to ICSID Arbitration.2

Treaty arbitration Arbitrations between states and private parties increasingly arise not from contracts but from bilateral investment treaties (BITs) or multilateral investment treaties (MITs) with arbitration provisions. They are generally known as treaty arbitrations. There are around 3,000 BITs in existence, as well as two principal multilateral regimes, NAFTA and the Energy Charter Treaty (ECT). There is not, unfortunately, a comprehensive list of bilateral treaties. However, the ICSID and United Nations Conference on Trade and Development (UNCTAD) websites provide good starting points in a search for BITs. The ICSID website can also be consulted to check whether ICSID arbitrations have been brought against a state in whose territory an investment is planned.

Growth in the use of arbitration The increasing use of arbitration as a dispute resolution method for international contracts is evidenced by the rise in the number of arbitrations commenced under the rules of various institutions. Figures 1 and 2 below combine data published by a selection of arbitral institutions. The popularity of arbitration as a means of dispute resolution is further illustrated by the findings of a research project undertaken by Queen Mary, University of London and sponsored by PricewaterhouseCoopers (Queen Mary/PwC Report). The first part of the research, published in 2006, was undertaken to establish general trends in dispute resolution. The second part, reported in 2008, concentrated on issues relating to the enforcement of arbitral awards. At the time of this publication, a third survey is being conducted. Figure 1: Number of arbitrations commenced under selected institutional rules (2000-2009)

Source: websites of relevant institutions (see Appendix 7) Figure 2: Number of arbitrations commenced under selected institutional rules (2000-2009)

Source: websites of relevant institutions (see Appendix 7) NB: Figures in italics denote international arbitrations, as defined by the relevant institutions, only. The other figures do not differentiate between international and domestic arbitrations. Pre-2007 LCIA figures do not distinguish between arbitrations (the vast majority) and ADR procedures.

In 2006, general counsel of companies around the world engaged in a wide

range of industries were questioned. 73% stated that they preferred international arbitration either as the sole dispute resolution method or with some form of ADR in a multi-tier process. The principal reasons for choosing arbitration were: concerns about litigating under a foreign law before an unfamiliar court; lack of familiarity with local court procedures and language; lack of confidentiality surrounding proceedings; and the time and costs associated with pursuing litigation overseas. In addition, contributors noted that in some countries they would be concerned about the absence of an independent or impartial judiciary. Finally, even if these issues were successfully navigated, the enforcement of a foreign judgment (especially compared with an arbitration award) was understood to give rise to difficulties. Figure 3: Popularity of arbitration as a means of dispute resolution

Source: http://www.pwc.com/arbitrationstudy

The following information based on ICC published statistics for 2009 cases shows the geographical (Figure 4) and industry sector (Figure 5) distribution of arbitrations. Although the growth of arbitration continues, there is no room for complacency amongst its proponents. Users are increasingly demanding greater efficiency in international arbitration. At a time when many national

court systems are exploring ways to reduce costs, increase efficiency and thus competitiveness, arbitration bodies must also continue to examine their procedures in order to ensure that arbitration remains a viable alternative to litigation. The increased appetite for arbitration has also resulted in an increase – if not a proliferation – of arbitral institutions promoting their own rules. However, our experience is that clients tend to default to the rules of one of the main longstanding institutions, with good reason. Therefore, in the third edition of this Guide, we have continued to focus on those institutions with a proven track record. Figure 4: Geographical origins of parties in ICC arbitrations (2009)

Source: ICC Bulletin, Volume 21, No. 1 (2010) Figure 5: Industry sectors covered in ICC arbitrations (2009)

Source: ICC Bulletin, Volume 21, No. 1 (2010)

In the following chapters, we set out the basic choices which the contract negotiator must make in deciding upon an effective mechanism for dealing with future disputes; starting with the applicable law, then the place of arbitration, the language of the arbitration, the rules to be adopted and the process for selecting arbitrators. This is followed by a chapter dealing with the mechanisms that can be used for dealing with specific issues and then one devoted to ADR and tiered dispute resolution methods. This third edition of the Guide includes a series of drafting tips at the start of each chapter that are gathered together in Chapter 9: Drafting the arbitration clause. We also set out examples of “pathological” clauses to highlight mistakes that contract negotiators should avoid. Appendix 2 shows how the main institutional rules deal with the choices set out in the other chapters. Contract negotiators pressed for time may therefore wish to refer directly to Chapter 9 and Appendix 2 for easily-accessible guidance on key issues, along with Appendix 1 for a selection of model clauses published by the main institutions and/or Appendix 3 for a sample ad hoc clause.

1 2

United Group Rail Services Limited v Rail Corporation New South Wales [2009] NSWCA 177. L Reed, J Paulsson and N Blackaby, Kluwer Law International (second revised edition) 2010.

Chapter 2

Choosing the applicable law Drafting tips

• Points to consider in choosing the governing law for the underlying contract: – single law? If so, national law or general principles of law/common principles of national laws? – more than one law? If so, which is to take precedence or are they to be concurrent? • Does a separate law governing the arbitration agreement need to be specified? If so, which? • Is the contract with a state or state entity? If so, should there be a “freezing” clause or a stabilisation clause? • Should the arbitrators be given power to act as amiables compositeurs? For examples of how selected arbitration rules deal with this issue, see Appendix 2. Contract negotiators need to consider at an early stage what law or rules of law will govern the parties’ substantive rights and obligations under the contract. But that is not the end of the matter. At least six different systems of law may become relevant during the course of an international arbitration: • the law applicable to the substance of the dispute; • the law that determines the capacity of the parties;

• the law that determines the validity of the arbitration agreement; • the law governing the arbitration itself (in particular the procedure); • if there is a conflict of applicable substantive laws, the law under which that conflict is to be resolved; and • the law of the likely place of enforcement of the award. The parties cannot make a choice of the law applicable to capacity, except (for instance) by incorporating a company in a particular country. The parties need not make an express choice in relation to either the law governing the validity of the arbitration agreement or the law governing the procedure of the arbitration itself. This will often follow naturally from the circumstances; the law governing the arbitration agreement is generally that of the contract of which the arbitration clause is a part, and the law governing the conduct of the arbitration is usually that of the place or seat of arbitration. Parties wishing to make explicit exceptions in either respect should seek specialist advice before so doing.

The law(s) applicable to the substance of the dispute Some negotiators have the impression that by opting for arbitration in country X they have chosen the law of that country to govern the merits of any dispute. This is a mistake, attributable perhaps to the traditional notion in some legal systems that submission to a national court involves the implied acceptance of its substantive law. This is an alien concept in international arbitration, where the law of the place of arbitration has a strong claim to govern the conduct of the proceedings; a claim to influence the resolution of any conflict of laws; but no real claim at all to govern substantive issues. In practice, parties sometimes fail to choose any substantive law, thus leaving it to be determined by the arbitral tribunal. This may lead to the application of a system of law which is inconsistent with the intention of the parties. The parties should therefore try to resolve the choice of the substantive law at the time of negotiating the contract. Detailed discussion of the many important consequences of the choice of applicable law is beyond the scope of this Guide. But since we are concerned with the ways of putting in place a reliable arbitral mechanism, the reader is

invited to reflect on the likelihood that, in the absence of a provision to the contrary, the governing law of the contract will generally be deemed to determine the validity, scope and effect of the arbitration clause.3 When might it be useful to stipulate a separate law to govern the arbitration agreement? Until 1996, the courts in India and Pakistan treated arbitration awards made in relation to contracts governed by Indian or Pakistani law as “domestic awards” subject to review by the local courts, even if the place of arbitration was outside India or Pakistan. This enabled the party against whom enforcement was sought to seek to set aside the award on its merits, in a manner excluded by the New York Convention. An example of this was the Sumitomo case4 in which it was held that the procedural law of the arbitration (English law) ceased to apply when the proceedings before the arbitrators were concluded. The enforcement process was held to be subject to Indian law, the governing law of the contract. This issue was thought to have been cured in India by its Arbitration and Conciliation Act 1996 (ACA), although not in Pakistan, where the old legislation remained in force. Part I of the ACA is stated to apply to domestic arbitrations and Part II to off-shore arbitrations. However, subsequent case law suggests that there is still cause for concern. In Bhatia International v Bulk Trading S.A. and Another,5 the Supreme Court of India held that – even in relation to international commercial arbitrations seated outside India – the courts in India have the power to make interim orders under Part I of the ACA, unless the application of Part I has been specifically excluded by agreement between the parties. In the subsequent case of Venture Global Engineering v Satyam Computer Services,6 an award was rendered in London following an LCIA arbitration and then sought to be enforced in Michigan (Venture being a US company). Venture applied to have the award set aside in India rather than in London, the seat of the arbitration. The application failed in the lower courts. But the Supreme Court in India held that unless the parties expressly excluded the application of Part I of the ACA, the Indian courts had jurisdiction to hear a case relating to a foreign award. The Supreme Court went on to allow the application to set aside.7 At the time of writing, proposals for amending the ACA published by the Indian Ministry of Law and Justice are undergoing a process of consultation; however, the proposed amendment to the ACA suggests that parties should exclude by specific agreement between them the application of Part I to international

commercial arbitrations seated outside India.

National laws It is wrong to assume that the choice of applicable law is immaterial if a detailed contract has been drafted, setting out the parties’ rights and obligations in extenso. There are often gaps to be filled. Moreover, some national laws contain mandatory provisions that add to the rights or obligations contained in the contract, or override explicit contractual stipulations. Some laws are particularly favourable to purchasers. Others allow an acknowledged debtor of a liquidated sum to suspend payment by seeking to set off a non-liquidated claim in court or arbitration proceedings. Some laws allow judges or arbitrators to revise contractual terms they find unreasonable, whilst others vigorously take the opposite position. The idiosyncrasies of applicable national laws are often attenuated in international arbitrations by the following factors: • most arbitration rules require the arbitral tribunal in all cases to take account of the terms of the contract and of trade usages; • arbitration is founded in contract; arbitral tribunals are therefore reluctant to disregard contractual provisions, recognising that parties operating internationally are often less aware of the provisions of foreign national laws than those of their home country, and that their legitimate expectations are best fulfilled if they are held to their bargain; • the contract law of many countries has often been influenced by consumer transactions and other situations involving parties whose lack of exposure to the legal arena understandably encourages legislators to protect them; such situations are far less prevalent with respect to international contracts between commercial enterprises involving large amounts of money and drafted by skilled negotiators and their legal advisers; and • a number of national laws have explicitly declared that particular limitations on arbitration shall not apply with respect to international transactions.

Subject to identifying any particular characteristics of the kind indicated above, the interests of certainty usually require that the parties choose the national law of the country most closely associated with the transaction, or a neutral law with rules of contractual interpretation which are well developed and accessible to foreigners (preferably in the language of the contract). This choice will be respected by almost all developed arbitration systems. As expressed in the UNCITRAL Model Law on International Commercial Arbitration “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” (Article 28(1)). The parties’ choice is also explicitly recognised in arbitration rules such as those of the ICC (Article 17), the LCIA (Article 22.3) and UNCITRAL (Article 35(1)). In the course of negotiations there is often a trade-off between a national law favoured by one party and a place of arbitration favoured by another. In such a situation, particular care should be taken to ensure that the place of arbitration is suitable for determining a dispute governed by the national law so chosen, bearing in mind any mandatory rules of law in the place of arbitration: see Chapter 3: Choosing the place of arbitration.

What if no substantive law is chosen? In the absence of a law chosen by the parties to determine the substantive issues in any dispute, how do arbitrators proceed? Traditionally, arbitrators applied the conflict of laws rules of the place (or legal seat) of arbitration in order to determine the applicable law. Accordingly, an arbitral tribunal sitting in London would apply English conflict of laws rules even if neither party was English and the substance of the dispute had no connection with England. This solution met with understandable criticism, since the place of arbitration was often chosen for its geographical convenience or neutrality, or may even have been designated by an arbitral institution. Most modern laws and arbitration rules now give the tribunal the freedom to apply the “rules of law which it determines to be appropriate” (for example, Article 17 of the ICC Rules and Article 35 of the UNCITRAL Arbitration Rules) – the so-called voie directe which does not require reference to any system of conflict of laws – or to select the conflict of laws rules which it considers applicable (see Article 22.3 of the LCIA

Rules and section 46(3) of the English Arbitration Act 1996). Freed from conflict of laws rules of the place of arbitration, arbitrators naturally sought a generally acceptable set of rules for determining the applicable law. An important source was to be found in the 1980 Rome Convention on the Law Applicable to Contractual Obligations which, whilst not directly applicable to arbitration, may nevertheless be viewed as an expression of international consensus. Broadly, the Rome Convention provided that a contract should be governed by the law chosen by the parties and that the choice should be made expressly or demonstrated with reasonable certainty. If no such choice was made, the contract was treated as being governed by the law of the country with which it is most closely connected. The Rome Convention was transposed into the Rome I Regulation on the Law Applicable to Contractual Obligations (EC593/2008), which came into effect on 17 December 2009. Rome I is similar to the Rome Convention but the language is intended to be simpler, the drafting improved and specific articles clarified as a result of the experience of over twenty years of application of the Rome Convention.

General principles of law The best hope of reaching an agreement on the substantive law is sometimes to avoid reference to a national law altogether and opt for “general principles of law”. However, this approach should be adopted with caution. General principles of law are frequently referred to in choice of law clauses, either alone or in conjunction with some national system of law or as forming part of international trade law. Some important arbitral awards have been founded on general principles of law. The problem, for the lawyer as much as for the businessman, is that general principles of law are just that, and not a developed code of law. The concepts that contracts must be obeyed (pacta sunt servanda), that good faith is important in commercial relationships, that a breach of a contractual commitment involves an obligation to make reparation, that a person should not enrich himself or herself unjustly at the expense of another, and similar principles reflect fundamental objectives and values, but do not necessarily provide definite answers to particular questions. If general principles of law are to be referred to in a choice of law clause,

then, because of their necessarily general nature, they are better used in conjunction with a defined system of national law. This creates a concurrence of laws, discussed below.

Common principles of national laws In major contracts between parties operating in the international arena (often involving a state entity or a highly political project), national pride sometimes results in complex applicable law clauses which prove difficult to apply in practice. Well-known examples include the applicable law clause in the Channel Tunnel project where the contract was governed by “the principles common to both English law and French law and, in the absence of such common principles, by such general principles of international trade law as have been applied by national and international tribunals”. Similarly, a familiar form of oil production sharing contract designates as the applicable law “the common principles of the laws of England and the Russian Federation and in default of such common principles, the laws of Alberta, Canada”. Whilst such clauses may be expedient and raise interesting questions for lawyers, they are likely to give rise to uncertainty and hence increased costs for the parties. They should be avoided where possible. So how should this type of situation be resolved? In the event that each party refuses to accept the national law of the other party, one solution may be to select a venue for the arbitration where the relevant substantive law is developed and accessible and agree that such law governs the substantive rights and obligations under the contract. English law and New York law, amongst others, are frequent choices in commercial contracts for that reason.

Concurrent laws Where one party to a contract is a state or state agency, principles of public international law (or general principles of law) are often coupled with a national law, so as to create a separate system of concurrent laws. Public international law (or general principles of law) then acts as a regulator of the national law, to be applied only to the extent that it does not fall below a

minimum international standard. The ICSID Convention provides an example of a concurrent governing law. Article 42(1) provides that, in the absence of an express choice of law by the parties, an ICSID tribunal shall apply the law of the contracting state party to the arbitration and “such rules of international law as may be applicable”. In practice, ICSID tribunals apply international law (including the provisions of any relevant BIT or MIT) and look to national law only as necessary, for example, to determine corporate nationality. A further example may be found in the ECT. Article 26 sets out the dispute resolution procedures available under the ECT. Article 26(2) provides that a dispute is to be decided in accordance with the ECT and the applicable rules and principles of international law. Contracts made between a state or state agency on the one hand and a private entity on the other are often referred to as “state contracts”. The private entity may find itself under considerable pressure to agree that the law governing the contract shall be that of the state concerned. This raises the fear that the state party may subsequently use its legislative powers arbitrarily or in a discriminatory manner to alter the law, and hence the contractual regime. For example, a state might grant a concession to construct and run a railway or to build and operate a gas liquefaction plant. But once the operation is on stream, the state might decree an increase of its share of revenue beyond that originally agreed, or levy additional taxes, or act in some other way that diminishes the private party’s return. One technique sometimes used as a measure of protection against arbitrary legislation or other intervention by the state party is to couple the law of the state party with principles of international law (see above in relation to “Concurrent laws”). Another is that of “freezing” the law of the state party, by agreeing that the governing law is the law in force at the date of the contract, thus avoiding the application of any subsequent change in the law to the detriment of the private party. If freezing the law is unacceptable to the state party, an acceptable alternative might be a “stabilisation clause”, or “economic equilibrium clause”. Under such a clause, the state party would, for instance, undertake that benefits conferred under the contract would not be diminished by supervening legislative or regulatory changes. For example, if the law is subsequently changed so as to affect adversely the private party’s interests, there would be a contractual right to compensation.

The lex mercatoria The increasing complexity and internationalisation of modern trade and commerce have led some lawyers to conclude that what is needed to govern contractual relationships is not a particular national system of law but a modern law merchant. Such a law, it is said, would meet the requirements of international commerce and the expectations of businessmen in much the same way as the lex mercatoria met the requirements of traders living under the Roman Empire; or as enactments of customary law (such as the celebrated Consolato des Mare) met the needs of sailors and merchants in the Mediterranean in the 14th century. This modern law merchant is given various names, including “transnational law”, “the international law of contracts”, “international lex mercatoria” and “international trade law”. Whatever the appellation, the purpose is clear; it is to regulate international commercial transactions by a uniform system of law. The development of lex mercatoria is of particular relevance and importance to international arbitration which, by definition, transcends national boundaries, and seeks to establish an international order for the resolution of disputes in international trade and commerce. It has high judicial backing. In his speech in the English House of Lords’ decision in West Tankers,8 Lord Hoffmann observed: “People engaged in commerce choose arbitration in order to be outside the procedures of any national court. They frequently prefer the privacy, informality and absence of any prolongation of the dispute by appeal which arbitration offers. Nor is it only a matter of procedure. The choice of arbitration may affect the substantive rights of the parties, giving the arbitrators the right to act as amiables compositeurs, apply broad equitable considerations, even a lex mercatoria which does not wholly reflect any national system of law. The principle of autonomy of the parties should allow them these choices.” The problem again, as with the concept of general principles of law, lies in the difficulty in defining the scope of lex mercatoria. Nevertheless, arbitral tribunals have on occasion decided cases according to lex mercatoria, surveying various laws and practices, and their awards have been held to be in accordance with public policy and duly enforceable. There is a risk, however, that until a more comprehensive and specific body

of rules gains acceptance in the international business community, the content of lex mercatoria will remain variable. As long as this is so, the outcome of disputes under a contract governed by lex mercatoria will be difficult to predict, and the prospects of early settlement may be hindered by the absence of a yardstick against which the likelihood of success can be measured. Contract negotiators should be aware of these dangers if the adoption of lex mercatoria is proposed.

The UNIDROIT Contract Principles The International Institute for the Unification of Private Law (UNIDROIT) is based in Rome. Its Governing Council comprises academics and practising lawyers. UNIDROIT promotes the international harmonisation of law and seeks to establish guiding principles. Of particular importance are its “Principles of International Commercial Contracts”, first published in May 1994, which reflected some fourteen years of research and discussion by an international drafting committee. The Principles cover the formation, validity, interpretation and performance of international contracts. According to the preamble, they already form part of both “general principles of law” and lex mercatoria. The second edition of the Principles was published in 2004 with additional chapters addressing: agent’s authority, third party rights, set-off, assignment of rights, transfer of obligations and assignment of contracts, limitation periods and new provisions on inconsistent behaviour and release by agreement. The Principles have also been adapted to cater for electronic contracting. The Principles expressly provide for the possibility of parties agreeing to the application of the Principles to govern their contract. If parties wish to do so, they should make clear that the Principles are to form the applicable “rules of law” of the contract to the exclusion of any national system. If they do not, the parties may find that the Principles bind them only to the extent that they do not conflict with the rules of national law otherwise applicable to the contract. Modern arbitration rules such as those of the ICC, LCIA and UNCITRAL give arbitrators a wide discretion to choose the appropriate “rules of law” in the absence of a clear choice by the parties and do not limit the choice to a national system of law.

Trade usage Article 17.2 of the ICC Rules expressly requires arbitrators to take account not only of the applicable law but also of the provisions of the contract and relevant “trade usages”. Similar provisions are to be found in Article 35(3) of the UNCITRAL Arbitration Rules and Article 28(4) of the UNCITRAL Model Law. They may also be found in national arbitration laws such as Article 1054 of the Netherlands Arbitration Act 1986 which provides that in all cases the arbitral tribunal “shall take into account any applicable trade usages”, or indeed in national substantive laws which call for “relevant trade usages” to be considered when seeking to determine the meaning of contractual undertakings. The UNIDROIT Principles also expressly refer to international trade usages as relevant in the interpretation of contracts. Trade usage must usually be established by evidence in any given case (unless it is common ground that the arbitral tribunal is familiar with the trade in question). However, organisations such as the ICC have been prominent in attempting to establish a commonly understood meaning for terms in frequent use in international trade contracts. Terms such as “ex works”, “CIF” and “FOB” are intended to establish a single international definition of certain rights and obligations. The extent of these rights and obligations is spelt out in an ICC booklet known as Incoterms (International Rules for the Interpretation of Trade Terms). In much the same way, the ICC’s Uniform Customs and Practice for Documentary Credits (UCP), which originated as long ago as 1933, have proved valuable in moving towards a single international standard for the interpretation of these important instruments of world trade. The ICC continually revises the UCP, the current version being the UCP600 which formally came into effect on 1 July 2007. Further assistance may be found in the ICC Rules for Documentary Credit Expertise (DOCDEX), aimed at the speedy and reliable resolution of disputes between banks concerning the application of the UCP. The DOCDEX system came into effect in October 1991 and was revised in March 2002. These are just a few examples of the international standards and rules that emerge in any significant trade or industry which crosses national frontiers. Standard form contracts are commonplace in the shipping trade, the insurance market, the commodity markets and in the energy industry. It is only a small step from the establishment of international terms and conditions to the

establishment of uniform rules for their interpretation. If such rules are uniformly applied by many different national courts, or by arbitral tribunals, the basis is laid for the establishment of an international customary law created by merchants and traders.

The Shari’ah The Shari’ah and other sources of Islamic law also consist of general principles. Despite differences of approach to the Shari’ah amongst Muslim observers, there are similarities that create common concepts which can be applied in arbitration. In the Sanghi Polyesters case9 disputes relating to a financial transaction were to be arbitrated in London under the ICC rules. They were governed by “the Law of England except to the extent it may conflict with Islamic Shari’ah, which shall prevail”. A dispute arose and was referred to arbitration. Following a challenge by the losing party, the English court upheld the award. In what now seems another age, tribunals such as the one which decided the case of Sheikh of Abu Dhabi v Petroleum Development,10 had refused to apply the Shari’ah as they did not consider it to contain “a body of legal principles applicable to the construction of modern commercial instruments”.

Amiable composition and equity clauses In cases where the parties have, for pragmatic reasons, chosen a law to govern the contract which is not the national law of either of them, the decision of an arbitral tribunal based squarely in fairness or equity may be preferable to one based on law, particularly where the contract provides for a long-term relationship. An equity clause may allow for the selection of arbitrators who are not lawyers but who are knowledgeable about the specific subject matter in dispute. Furthermore, giving the arbitral tribunal power to act as amiables compositeurs may fit well in situations where the parties to a long-term agreement wish a third party to have the power to take account of new or changing circumstances in resolving future disputes. Authorising arbitrators to act as amiables compositeurs does not, however, necessarily give them

power to fill gaps or revise the terms of the contract in respect of unforeseen developments. If required, it is best to confer such a power expressly in the arbitration clause or submission agreement. This is considered further in Chapter 7: Choosing mechanisms to deal with specific situations. Such provisions are intended to produce a binding and enforceable award; but one which the arbitral tribunal may reach without applying strict legal principles, if the result would appear unjust or unfair. In particular, amiables compositeurs may take a more flexible approach to the quantification of damages in order to reflect commercial fairness and reality, rather than regarding themselves as bound by rules of law governing standards of compensation. Some jurisdictions question the validity or the international enforceability of awards made by way of amiable composition. England was, in the past, one such jurisdiction. However, English law has now embraced the idea by allowing arbitrators to decide disputes “in accordance with such other considerations as are agreed by [the parties] or determined by the tribunal” (section 46(l)(b) Arbitration Act 1996). Most arbitration rules provide that arbitrators may decide a dispute as amiables compositeurs (or ex aequo et bono) only if the parties expressly agree: see, for example, ICC Rules Article 17.3, LCIA Rules Article 22.4 and UNCITRAL Arbitration Rules Article 35(2). Given the inherent uncertainties in application, contract negotiators should – again – be wary of agreeing at the time of entering into the contract to confer upon arbitrators such broad and elastic powers.

3 4 5 6 7 8 9 10

For an example of an exception to that general approach see the decision of the French Cour de Cassation in Sté PT Putrabali Adyamulia v Rena Holding, Cass. Civ. 1, 29 June 2007. Sumitomo v Oil & Natural Gas [1994] 1 LLR 45. Bhatia International v Bulk Trading S.A. and Another Supreme Court of India, 13 March 2002, Case No: Appeal (civil) 6527 of 2001. Supreme Court of India, 10 January 2008, Case No: Appeal (civil) 309 of 2008. For an example of a different approach by the Indian courts, see the 2009 decision of the Delhi High Court in Max India Limited v General Binding Corporation (FAO) (0S) 193/2009. West Tankers Inc v RAS Riunione Adriatica di Sicurta SpA and another (The Front Comor) [2007] UKHL 4. Sanghi Polyesters Ltd v The International Investor (KCFC) [2000] 1 Lloyds Rep 480. Sheikh of Abu Dhabi v Petroleum Development (1952) ICLQ 247.

Chapter 3

Choosing the place of arbitration Drafting tips

In choosing the place (seat) of the arbitration, consider the following: • Is the country in question a signatory to the New York Convention? • Has the country in question adopted the UNCITRAL Model Law? If it has, are there any significant qualifications to its adoption? If it has not, are its procedural laws up to date and arbitration-friendly? • What is the approach of the local courts, e.g. towards enforcing the parties’ agreement to arbitrate, supporting the arbitration process, and enforcing awards? Are they jealous guardians of their own jurisdiction and powers, or co-operative? Should a clause be included to cater specifically for enforcement of the agreement to arbitrate, limiting any review by the courts to those in the place of arbitration? • Does the proposed country have a sufficient pool of resident experienced and qualified arbitrators? • Will all those likely to be involved in the arbitration be able to travel easily to and from the arbitration venue? • Can any logistical issues be satisfactorily dealt with? For examples of how selected arbitration rules deal with this issue, see Appendix 2. Appendix 6 lists a number of countries from which the place of arbitration could sensibly be chosen, subject to considerations such as the choice of governing law, etc.

One of the key decisions to make when drafting the arbitration clause concerns the legal place or “seat” of the arbitration. (This should not be confused with the physical location where the tribunal meets or holds hearings.) When considering this issue, some contract negotiators mistakenly focus primarily on geographical neutrality. They also typically want a convenient venue, or at least a venue which is equally inconvenient for both parties, as well as cultural neutrality. Whilst these factors should be accorded some significance, two other considerations are paramount, namely the existence of a suitable legal environment in the place of arbitration and the enforceability of the award. Provided these two legal criteria are satisfied, consideration should then be given to practical matters such as geographical convenience for the parties, counsel, witnesses, and arbitrators, as well as the availability of support services. Contract negotiators should not leave the choice to fate or even the discretion of an arbitral institution. Institutions may select a place of arbitration which is geographically “neutral” but which imposes a legal and physical environment which neither party would have chosen freely.

Suitable legal environment Not all countries are safe havens for international arbitration. Some cling to wide powers of judicial review. Others have unclear legislation. Yet others have apparently adequate legislation but their courts seem to misapply the law – for example, by adopting an over-elastic interpretation of violation of public policy as grounds for setting aside awards. Legal systems allowing extensive judicial interference with arbitral awards should be avoided. When selecting an arbitration venue, care should be taken to ensure that the local courts will: • enforce the parties’ arbitration agreement; • not interfere unduly in the arbitral process; and • respect the finality of the award, for example by giving effect to an agreement between the parties to restrict or exclude rights of appeal. A cornerstone of the architecture of international arbitration is the 1958 New

York Convention, which provides for both the enforcement of arbitration agreements (by signatory states agreeing that their courts will suspend court proceedings commenced in breach of an arbitration agreement) and the enforceability of arbitral awards. As a rule of thumb, arbitrations should not be located in countries which are not signatories to the New York Convention. As there are now over 140 signatory states, this is not a particularly restrictive requirement. The full list of New York Convention countries as at 31 August 2010 appears in Appendix 6. Once it has been determined that the chosen place of arbitration is a signatory to the New York Convention, the local law should be reviewed to ascertain whether it gives rise to any concerns. In particular, consideration should be given to whether there is a right of appeal to the local courts. If there is a right of appeal to the local courts, contract negotiators should determine whether it may validly be excluded by agreement between the parties. If so, the adoption of the ICC, LCIA and certain other rules may suffice. The UNCITRAL Arbitration Rules also do not exclude rights of appeal and specific wording has to be added if this is required. The UNCITRAL model clause now includes suggested language: see Appendix 1. In England, the courts have confirmed that the express provisions in the ICC and LCIA Rules waiving the right to appeal are sufficient.10 In Switzerland, on the other hand, it is generally accepted that the possibility of total exclusion of any recourse to the Swiss courts (including challenges on the grounds of excess of authority or violation of the right to be heard) requires an express provision in the arbitration clause itself. Since the general rule in Switzerland is that awards may not be challenged on the merits, the desirability of such a total exclusion is in any event questionable. In most jurisdictions, contractual exclusion clauses cannot remove all possible recourse to the courts; the availability of some limited recourse is mandatory.

Enforcing the arbitration agreement The contract negotiator’s checklist should at least include enquiring as to the means available in the place of arbitration to enforce the parties’ agreement to arbitrate. Judicial mechanisms available to enforce the parties’ agreement to arbitrate (i.e. to prevent one party bringing court proceedings in respect of a dispute falling within the scope of the arbitration clause) have been utilised in

a number of jurisdictions, notably in the form of anti-suit injunctions. The 2009 decision of the European Court of Justice in the West Tankers case has reduced the effectiveness of such measures in the European context, although concerns in some circles about its wider significance have been largely overstated. In England, since West Tankers, there have been three reported cases where the claimants have successfully obtained an anti-suit injunction from the English court preventing the defendant from pursuing court proceedings, including one case where the court held that it had jurisdiction to grant injunctive relief even though there was no actual, proposed or intended arbitration afoot.11 In Roger Shashoua and others v Mukesh Sharma12 the claimants sought an anti-suit injunction preventing the defendant from pursuing proceedings in the Indian courts. The Indian proceedings were commenced in order to challenge an interim arbitration award, made in London, in the claimants’ favour. The defendant argued that London was not the seat of the arbitration, and also that the reasoning in the West Tankers case should be applied, not just in the European Union, but to countries which were parties to a convention, such as the New York Convention. The judge held that this was an appropriate case for an anti-suit injunction to be ordered (although the Court of Appeal has subsequently granted limited permission to appeal the first instance decision). More recently still, the Court of Appeal maintained an anti-suit injunction restraining Tunisian proceedings brought in breach of an arbitration agreement.13 Some arbitration clauses specifically confirm that the tribunal may decide on the validity or enforceability of the arbitration agreement; and occasionally provide that such issues may be decided by the courts, but only those in the seat or place of arbitration. This is intended to have, at a minimum, the in terrorem effect of preventing (or at least discouraging) a recalcitrant party from issuing legal proceedings in a jurisdiction it considers more favourable to its position. See Chapter 9: Drafting the arbitration clause for an example of this type of provision.

Enforceability of awards Most of the more than 140 New York Convention states have adopted the socalled reciprocity reservation. That means that their courts will enforce an

award under the Convention only if it has been made within the territory of another state which is also a party to the Convention. The nationality of the parties is immaterial: it is the origin of the award that counts. Therefore, as stated above, only New York Convention countries should generally be considered as suitable seats for international arbitrations. Other multilateral or bilateral treaties may also come into play, such as the European Convention on International Commercial Arbitration of 1961 or the Inter-American Convention on International Commercial Arbitration of 1975. As a general rule, a state which is a party to the New York Convention and which has also adopted the UNCITRAL Model Law (described below) will be a suitable choice as the seat of arbitration. However, it should be noted that there are many arbitration-friendly states which have their own developed arbitration laws (such as the leading arbitration venues of France, Sweden, Switzerland, the Netherlands, the US and the UK) and so the adoption of the UNCITRAL Model Law is not imperative. The first part of the Queen Mary/PwC Report (2006) referred to in Chapter 1: Choosing the method, noted that the enforcement of arbitral awards was considered “the single most important advantage by the highest number of respondents”. Of those who participated in the follow up survey in 2008, 57% who had experienced enforcement proceedings noted that they took less than one year, 44% had recovered the full value of the award and 84% had received more than 75% of the value of the award.14 Although tempting, it is inadvisable to seek to set out a list of acceptable arbitration venues and thereby provoke protests, justifiable or otherwise, on the grounds of omission. However, some guidance as to the suitability of particular venues may be found in the frequency with which they are selected. The ICC publishes annual statistics of places of ICC arbitration chosen by the parties or fixed by the ICC Court. Figure 6 identifies the twenty places of arbitration most often chosen by the parties or fixed by the ICC Court based on ICC statistics for the period 2000 to 2009. A crucial factor in the choice of the place of arbitration is the attitude of the local courts. The parties’ interest in obtaining a reliable award is obvious; the ICC also has an institutional stake in avoiding countries whose courts have a tendency to interfere with, rather than support, the arbitral process. It can be seen from this ten-year overview that arbitration venues in France, Switzerland and the UK account for over half the total. In addition, London attracts a significant number of ad hoc arbitrations in specific industry

sectors, such as shipping and insurance.

The UNCITRAL Model Law As noted above, one way to determine whether a particular jurisdiction is arbitration-friendly is to check whether the country in question has enacted the UNCITRAL Model Law adopted by the United Nations in 1985. The UNCITRAL Model Law was aimed at establishing an internationally acceptable regime for arbitration which countries could enact with little, if any, local variation. Figure 6: Twenty most popular places of ICC arbitration (2000-2009)

Source: ICC Bulletin, Volumes 11-20 (2000-2009)

In 2006, amendments were adopted to the Model Law designed to take into account changes in commerce and methods of commercial interaction in the previous two decades. The revisions included an amended definition of an “arbitration agreement”, which recognised that methods of communication had changed and introduced provisions for entering into agreements through electronic means. The changes are in line with the 1996 UNCITRAL Model Law on Electronic Commerce and the 2005 UN Convention on Use of Electronics Communications in International Contracts. The definition of

“arbitration agreement” is now wider than that under the New York Convention on which the UNCITRAL Model Law was originally based. There were also significant amendments in the 2006 revision relating to interim measures. Following the revisions, a party is now permitted to seek orders from the tribunal ex parte (i.e. in the absence of the other party). A regime was also devised for recognising and enforcing interim measures. The UNCITRAL Model Law is based upon the principle that the local courts in the place of arbitration should support, but not interfere with, the arbitral process. Some of its key features are as follows: • the notion of any “inherent” jurisdiction of the courts to interfere in the arbitral process is rejected; • courts must support the arbitral process by ordering a stay (suspension) of court proceedings brought in breach of a valid arbitration agreement, thereby reflecting the requirement of Article 2 of the New York Convention; • parties may seek the assistance of the courts to obtain interim relief or bring evidence before the arbitral tribunal (for example by subpoena of documents or witnesses); • no person shall be precluded by reason of nationality from acting as an arbitrator; • each party should receive equal treatment and be given a proper opportunity to present its case; • the role of the courts is limited to: – acting as an appointing authority where the parties’ chosen appointment procedure fails (in practice likely only in an ad hoc arbitration); – deciding upon any challenge concerning the impartiality or independence of arbitrators (also most common in an ad hoc arbitration); – deciding upon any challenge to the jurisdiction of the tribunal; and – deciding any application to set aside the award on the grounds of excess of jurisdiction, failure to give a party a proper opportunity to present its case, or violation of public policy (to be interpreted

restrictively). In other words, judicial revision of the merits of awards should be excluded. In some cases it is difficult to determine whether a particular state has fully adopted the UNCITRAL Model Law; the enacting legislation may contain more or less significant amendments. It may allow anti-arbitration injunctions (as in India) or add substantive grounds for review of awards (as in Egypt). Subject to this caveat, it can be noted that UNCITRAL has compiled a list of some 63 countries that have so far adopted the UNCITRAL Model Law (see Appendix 6).

Practical considerations Once the primary legal issues concerning the possibility of local court intervention and the enforceability of the award are properly evaluated, the contract negotiator should not forget the practicalities of organising the arbitration if and when a dispute arises. The following matters in particular should be borne in mind: • availability of suitable arbitrators: although arbitrators travel all over the world, it is desirable to choose a place of arbitration where there is a sufficient pool of experienced arbitrators, especially since the sole or presiding arbitrator may be chosen for his or her understanding of the local procedural law. In some countries only a handful of arbitrators have experience of complex international disputes in a given area of specialisation or in a given language. With bad luck, they may all be eliminated by conflicts of interest or unavailability, in which case there is a risk of ending up with a mediocre and unreliable tribunal. • location of witnesses: if potential witnesses are mainly located in a particular geographic area, choosing a venue either close to or within that area is likely to reduce cost and enhance the likelihood of attendance. • location of subject matter in dispute: if the contract might give rise to a technical dispute, the arbitrators and the parties’ counsel may wish to examine the subject matter of the dispute (such as the relevant industrial plant, road or building). Consideration should, in such a case,

be given to locating the arbitration in a venue close to the subject matter of the contract. • restrictions on choice of counsel: some jurisdictions require that the parties’ counsel are admitted to the local bar. • availability of support services: it will be necessary to ensure that there are appropriate facilities available in the proposed arbitration venue, including hotel accommodation, hearing rooms, good communications and other support services such as transcribers and interpreters. • visa requirements: all the relevant participants including clients, counsel, witnesses and arbitrators will need to gain entry into the country. Enquiries should be made as to relevant visa requirements. • monetary controls: sums payable in respect of the costs of the arbitration, for example the fees and expenses of the arbitrators, need to be transferred in and out of the country without restrictions. Meetings and hearings outside the place of arbitration Most arbitration rules provide a considerable degree of flexibility in terms of where meetings and hearings may take place. Article 20(2) of the UNCITRAL Model Law states that “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 the inspection of goods, other property or documents”. Similar provisions may be found in the ICC, LCIA, UNCITRAL, CIETAC and AAA Rules. It is therefore perfectly appropriate for tribunals to meet in a location other than the place of the arbitration, for example, in order to hear a particular witness or conduct deliberations. As noted, this does not change the legal place of the arbitration, the courts of which will retain their supervisory role over the arbitration. Change of the place of arbitration? What happens if, although the parties have designated a place or seat of arbitration, problems subsequently arise of a legal, political or practical nature? Can the parties change it? If the parties agree new terms there will be a new arbitration agreement. If not, it is extremely difficult to convince a

tribunal (or an institution or a court) to impose a change. Moreover, an imposed change of the seat may be deemed a violation of the arbitration agreement and therefore create enforcement problems. A possible solution may be to change the location of hearings but not the seat, although that may leave the award exposed to the risk of challenge at the seat. All of this underscores the importance of a careful choice of seat in the first place.

Some geographical observations A detailed review of every known arbitration venue is not only beyond the scope of this Guide but is also likely to be of limited practical assistance to the contract negotiator. Suffice it to say that some venues can safely be proposed (or accepted), others can be made to work if other factors are in place, but some should be resisted wherever possible. The frequency of the selection of arbitration venues discussed above by reference to available ICC statistics and the scorecard of adherence to the New York Convention and/or the UNCITRAL Model Law (see Appendix 6) are good proxies for a detailed country-by-country analysis of local procedural law and practice. The main features of popular Western European and North American venues are generally well-understood. In the remainder of this chapter, we limit our discussion to some of the issues that arise in relation to the BRIC economies and the Middle East. Increased investment in those areas – as well as a number of arbitration-specific developments – reinforce the need to evaluate the pros and cons of agreeing to arbitration in the country in question. Brazil Brazil ratified the New York Convention in July 2002. Ratification of the New York Convention came shortly after a decision of the Brazilian Supreme Court, which confirmed the constitutionality of the articles of 1996 Arbitration Law (Law 9.307/96) that provided for specific performance of arbitration clauses (eliminating the requirement that a compromisso be executed by the parties after a dispute arose). Further, the largely Model Law-based 1996 Arbitration Law established that foreign awards (those made outside Brazilian territory) may be enforced under the

same rules applicable to domestic awards, subject only to recognition by the Superior Court of Justice (eliminating the double exequatur). In 2004, the Brazilian Federal Private-Public Partnership Law (Law 11.079/04) authorised arbitration in PPP projects provided that the arbitration should be governed by the Brazilian Arbitration Act, the language be Portuguese and the seat in Brazil. The Brazilian Concessions Law (Law 8.987/95) was amended in 2005 to authorise the use of arbitration in concession contracts in general, subject to the same conditions. Nowadays, contracts of most major infrastructure, oil & gas and energy projects and concessions contain arbitration clauses, and Brazilian courts have consistently confirmed the capacity of the Brazilian state and state-owned entities to be party to arbitration proceedings. Despite the Brazilian courts’ general support of arbitration, the absence of a system of binding precedent raises the risk that in specific cases parties engage in protracted litigation before the Brazilian courts, causing delay to the proceedings until an arbitration-friendly decision is rendered by a Brazilian superior court. Indeed, in a few instances, courts have issued antiarbitration injunctions to suspend arbitration proceedings or otherwise unduly interfered. Some applications for recognition of foreign awards have dragged on longer than they should have done because the Superior Court of Justice failed properly to apply the New York Convention. These cases tend to be the exception rather than the rule. The ICC Rules and to a more limited extent the LCIA and AAA Rules are known and used in Brazil. However, as it will be seen in Chapter 5 below, a variety of domestic national and regional institutions successfully operate in the country. Yet, before choosing a domestic institution, parties should fully understand the consequences of their choice, in particular with regard to the appointment of the arbitral tribunal. Some institutional rules provide that the arbitral institution shall choose the chairman of the tribunal or otherwise limit the choice to the institution’s arbitrator list, which, although changing, normally do not feature international arbitrators. Therefore, there are a number of strategic considerations to be taken into account when deciding on whether or not to choose Brazil as a seat, which have to be assessed on a case-by-case basis. A Brazilian seat will normally result in lower costs and a faster enforcement of the award within Brazil. A foreign seat may keep the proceedings free from the interference by the Brazilian courts, but require the party to seek recognition of the award before

enforcement. When foreign parties are involved, the choice of a Brazilian seat also may raise issues of neutrality, especially in disputes under high profile or politically sensitive projects. Russia The Soviet Union’s ratification of the New York Convention in 1960 extends to Russia and other former Soviet states. Historically, many disputes involving Soviet parties were referred to arbitration in Stockholm, and Russian parties have to some extent continued to follow this practice. More recently, London has proved a popular choice, even for disputes involving only Russian parties on both sides. However, despite legislation promoting the recognition and enforcement of foreign arbitral awards, there continue to be considerable practical difficulties in enforcing “foreign” arbitration awards in Russia. In relation to the many projects located within Russia, it may sometimes be preferable, although counterintuitive, to choose a place of arbitration in Russia itself. Bearing in mind Russia’s adoption of the UNCITRAL Model Law and the ability of parties to nominate an arbitrator of their choice, arbitration in Russia under the auspices of the International Commercial Arbitration Court (ICAC), new rules for which became effective in March 2006, may be considered as an alternative to institutional arbitration elsewhere for Russian-related disputes. However, experience shows that there are significant drawbacks. In particular, the procedural rules and traditions that prevail in ICAC arbitrations are in many ways very distinct from the practices common in international commercial arbitration under most leading arbitral institutions, and in some ways bear a closer resemblance to Russian court procedures. There are also still issues concerning enforcement of international arbitral awards rendered in Russia, for example in relation to immovable property. Changes to the court system to clarify that the Commercial Court has jurisdiction in relation to arbitration issues, including the enforcement of awards, may ultimately assist the cause of arbitration in Russia. Some case law from the Commercial Court includes decisions supporting the enforcement of arbitral awards and rejecting spurious allegations that the awards in question are contrary to public policy. An example is the Lugana case16 where a German company eventually succeeded in enforcing three DIS awards in Russia. Lugana were initially partially successful in the lower

courts but their arguments were then rejected several times. Ultimately, the Commercial Court enforced an award allowing Lugana to recover damages, interest on damages and legal expenses, plus interest. The lower courts had decided that recovery of interest on damages and legal costs was contrary to Russian public policy. However, cases from the Commercial Court are mixed in their support of arbitration, with occasional declarations to the effect that Russian law does not permit particular matters to be arbitrated. The by-word is caution: due to the continued unpredictability of rulings of the local courts and the uncertain prospects of enforcement, specialist advice should always be obtained before selecting the place of arbitration for Russiarelated disputes. India India ratified the New York Convention in 1960. The Indian Arbitration and Conciliation Act (ACA) was enacted in 1996 to consolidate and amend the law relating to domestic and international arbitrations, enforcement of foreign arbitral awards and define the law relating to conciliation. The ACA was based on the UNCITRAL Model Law and it was hoped that, as a result of the passing of the Act, certain former practices of the Indian courts would no longer continue. First, the courts in India had previously adopted wide-ranging powers of intervention in the course of the arbitral process, which enabled determined respondents and their imaginative lawyers to stall the proceedings at every stage. Secondly, the Foreign Awards (Recognition and Enforcement) Act 1961, which was intended to implement the New York Convention, had in one instance quite the opposite effect. Section 9(b) of that law provided that any award made under an arbitration agreement governed by the law of India was not a foreign award and could not therefore be enforced in accordance with the provisions of the New York Convention. As a result, an arbitration award made in London in respect of an agreement governed by Indian law could be reviewed by the courts in India as if it were a domestic award (as in the notorious Singer case).17 The Foreign Awards (Recognition and Enforcement) Act 1961 has now been repealed and replaced by the ACA. Nevertheless, the Indian courts have continued to adopt an interventionist approach to arbitration, even under the

ACA. In the Bhatia International case mentioned in Chapter 2, the Supreme Court of India decided that the Indian courts have jurisdiction to make interim orders under Part I of the ACA even in the case of international commercial arbitrations seated outside India, unless the parties specifically agree to exclude the application of Part I. In the Venture Global case also noted in Chapter 2,18 the Supreme Court of India decided that foreign awards may be challenged under Part I of the ACA, unless the parties have specifically agreed otherwise. In considering any such challenge, the courts could examine if there had been contravention of any substantive provision of Indian law. In another case involving two parties incorporated in India, even though one was wholly foreign-owned and controlled, the courts held that they were to be considered Indian parties and therefore Indian law applied irrespective of any choice of law clause. So, even if Part I of the ACA (which applies to arbitrations in India) is excluded, if the dispute is between two Indian companies, it is uncertain if the exclusion provision will be effective. True, there have also been cases where the courts have taken a restrictive approach to intervention in international arbitration.19 But until there has been a significant number of Indian court decisions in support of international arbitration, one must be cautious about choosing India as a place for arbitration. In addition, the Indian tax authorities have adopted a very strict position with respect to the activities of international law firms in India. For example, on one occasion a tax tribunal in Mumbai determined that an international firm had a taxable presence in India based on the physical presence of a handful of its partners and employees in India for a total of 90 days in a 12-month period. Until the position is clarified, it may be difficult to find international law firm counsel willing and able to conduct arbitrations in India. Nevertheless, it may be that legislative and other developments in 2009 and 2010 herald a new approach. The LCIA established a bespoke operation in India in April 2009, the first of its kind, and offers specially devised rules (as well as the usual range of LCIA support services) for arbitrations conducted in India. In December 2009, the Delhi High Court opened a new arbitration centre, which will appoint arbitrators and administer arbitrations, in a further attempt to limit the role of the local courts. In April 2010, proposals for amending the ACA were published by the Ministry of Law and Justice. The consultation paper acknowledges the

concerns of commentators as to the interventionist approach of the Indian courts. Amendments have been proposed that would prevent another Venture Gobal scenario, allowing an award to be enforced even if an application has been made in the local courts to set it aside, and narrow the scope of the “public policy” proviso previously invoked by courts as a reason to intervene. People’s Republic of China The People’s Republic of China (PRC) ratified the New York Convention in 1987. Arbitrations in the PRC may be conducted under the auspices of: • the China International Economic and Trade Arbitration Commission (CIETAC) for cases involving trade, investment, financial and other commercial disputes; • the China Maritime Arbitration Commission (CMAC), for maritime disputes; or • one of various domestic arbitration commissions such as the Beijing Arbitration Commission (BAC) or Shanghai Arbitration Commission (SHAC). Parties arbitrating international disputes within the PRC almost invariably do so according to the rules of CIETAC, or another arbitration commission (such as the BAC or the SHAC). This is because: • under the 1995 Arbitration Law of the PRC, there is no provision for ad hoc arbitration in the PRC (although the Chinese courts will recognise clauses providing for foreign ad hoc arbitrations taking place outside the PRC); and • although the PRC became a member of the ICC in November 1994, there is no clear mechanism for conducting ICC or indeed other foreign institutional arbitrations in PRC or enforcing such awards. Despite such difficulties, ICC arbitrations seated in the PRC have been conducted in the past. While the ICC recognises that there is uncertainty over its status as an “arbitration commission” under PRC law, it has recommended a clause for use where parties nonetheless wish to have recourse to ICC arbitration in the PRC. The clause states that:

“all disputes arising out of or in connection with the present contract shall be submitted to the International Court of Arbitration of the International Chamber of Commerce and shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators in accordance with the said Rules.” In April 2009, the Ningbo Intermediate People’s Court issued an unpublished order to recognise and enforce an ICC award rendered in Beijing. While the legal reasoning provided by the court was questionable, this was, nonetheless, the first time where an ICC award made within mainland PRC was recognised by the local courts. It remains to be seen if other PRC courts will take a similar approach when dealing with future enforcement applications. The governing body of CIETAC is its Arbitration Commission which (like the ICC) does not decide cases, but administers arbitrations according to its rules. The latest version of CIETAC’s rules came into effect in May 2005. CIETAC is based in Beijing but has subcommissions in Shanghai, Shenzhen and Chongqing and a financial arbitration centre in Tianjin where there are also domestic arbitration commissions. The Arbitration Commission maintains panels of arbitrators from which all arbitrators appointed to act in CIETAC arbitrations must be selected. It is now possible to appoint arbitrators from outside the panel, subject to agreement between the parties and confirmation by the CIETAC Chairman. There used to be no objection, either under CIETAC’s rules or according to PRC law, to foreign lawyers representing parties in CIETAC arbitrations. However, in 2002, legislation was enacted relating to representative offices of foreign law firms in the PRC, prohibiting foreign law firms and lawyers from interpreting “Chinese legal matters” in various instances, including arbitration. This was subsequently clarified to allow them to act in arbitrations but not to advise on matters of Chinese law in relation to which there should be co-operation with local co-counsel. There have also been certain other incidents, including a memorandum issued by the Shanghai Bar Association, which called into question the rights of foreign lawyers to represent parties in CIETAC arbitrations. Contract negotiators involved in transactions with Chinese counterparties where the place of arbitration is to be within the PRC should ensure that arbitration clauses refer to CIETAC arbitration or arbitration before another

arbitration commission with updated arbitration rules (see Chapter 5: Choosing the rules). For parties considering arbitration in the PRC, it is worth bearing in mind that the availability of interim relief is generally limited to the preservation of assets or evidence. In addition, such applications are not dealt with by the tribunal, but are transferred by the relevant arbitration commission to the competent court for the latter to decide. In addition, an important point to bear in mind is that the prevailing view under Chinese law is that only foreign-related disputes may be submitted to foreign arbitration. “Foreign-related” disputes are those where at least one of the following three elements of the dispute is “located” outside the PRC: • at least one party, • the subject matter of the dispute; or • the circumstances underlying the legal relationship. For purposes of the above test, Hong Kong and Macau are considered “outside the PRC”. If the dispute is not “foreign-related”, parties are obliged to arbitrate within the PRC. Hong Kong and Singapore Other popular venues in the region are Hong Kong and Singapore. Hong Kong long held the premier position amongst East Asian venues for international arbitrations due mainly to a modern UNCITRAL-based law, its accession to the New York Convention and the availability of highly skilled local professionals and excellent facilities. Although construction and shipping were initially the main types of arbitration, now the subject matter of disputes relates to a wide variety of commercial matters. The Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and Hong Kong Special Administrative Region and the Arbitration (Amendment) Ordinance 2000 provides that an award made in mainland PRC can be enforced in Hong Kong in the same way as a New York Convention award without a review of the merits. The same applies in reverse when an award made in Hong Kong is sought to be enforced in mainland PRC. A new arbitration bill is under review, the aim of which is to make the

provisions more user-friendly and create a regime even more in line with best international arbitration practice. Singapore is also recognised as a leading arbitral venue, and foreign lawyers can now act as advisers and arbitrators in Singapore arbitrations even if the applicable law is Singapore law. Incentives have also been introduced in the form of substantial tax savings for law firms practising international arbitration in Singapore. The Singapore International Arbitration Act 2002 (IAA) is based on the UNCITRAL Model Law. The Singapore courts are mandated to intervene only to assist the arbitration process. In January 2010, Maxwell Chambers was opened in Singapore. It is the world’s first integrated dispute resolution complex of its kind, housing some of the top international ADR institutions and offering state of the art hearing facilities for arbitration and mediation. The ICSID Secretary-General signed a Memorandum of Understanding with Maxwell Chambers, so ICSID arbitrations can now be held at the venue. With this new facility and the measures described above, Singapore seems likely to strengthen its position as a leading arbitration venue. The Middle East Since the last edition of this Guide, the Middle East region, and especially the economies of the Gulf Cooperation Council countries, has assumed an increasingly significant role in international commerce and investment. Contract negotiators will, therefore, need to have a greater awareness than ever before of legal issues arising in the region. Most of the countries in the region (the notable exceptions being Yemen and Iraq) are now signatories to the New York Convention and there is a new found impetus to create better structures for the enforcement of legal rights. This has led to the adoption of new arbitration laws and the establishment of new arbitration centres in a number of countries. The biggest hurdle remains the prospects for enforcement, however, where the track record is at best patchy. Egypt, with its more developed jurisprudence, exercises significant influence across the Middle East. It is not uncommon for courts in the Middle East to draw upon the laws of Egypt when faced with issues for which their own laws provide no clear answer. Egypt also has a well-established arbitration regime, with a track record of handling international arbitrations. The arbitration law is based primarily on the UNCITRAL Model Law.

In the United Arab Emirates (UAE), foreign investors will have regard to the Dubai International Finance Centre (DIFC), an area in Dubai that is an autonomous common law jurisdiction with its own arbitration law closely based on the UNCITRAL Model Law. Outside the DIFC, a draft Federal Arbitration Law has been under consideration for some time, albeit with uncertain prospects of enactment. For Saudi Arabia, it should be noted that government authorities and agencies cannot be parties to arbitration agreements unless they have obtained express permission from the Council of Ministers. There are several arbitral institutions in countries within the region, some of which have been established for quite some time, such as the Cairo Regional Centre for International Commercial Arbitration (CRCICA), established in 1979; and the Gulf Cooperation Council Centre in Bahrain, established in 1993. The Qatar International Arbitration and Conciliation Centre was established in 2007. There are two arbitration centres in Dubai: the Dubai International Arbitration Centre (DIAC) and the more recently established DIFC-LCIA Arbitration Centre. Bahrain has also recently set up the Bahrain Chamber for Dispute Resolution with the AAA/ICDR. Competition between the institutions to administer arbitrations in the region can be expected to be stiff.

10 11 12 13 14 15 16 17 18 19

Shell Egypt West Manzala GmbH and others v Dana Gas Egypt Ltd [2009] EWHC 2097 (Comm). AES UST-Kamenogorsk Hydropower Plant LLP v UST-Kamenogorsk Hydropower Plant JSC [2010] EWHC 772 (Comm) [2009] EWHC 957 (Comm). Midgulf International Ltd v Groupe Clinique Tunisian [2010] EWCA Civ 66. . The majority of these cases have Hong Kong as the place of arbitration, rather than mainland China. Lugana Handelsgesellshaft mbH v Ryazan Plant of Metal-Ceramic Equipment (RPMCE), High Arbitrazh Court of Russian Federation, 12 November 2009. National Thermal Power Corp. v The Singer Group, [1992] 2 SCJ 431 (Supreme Court of India). Venture Global Engineering v Satyam Computer Services Supreme Court of India, 10 January 2008, Case No: Appeal (civil) 309 of 2008. See, for example, Max India Limited v General Binding Corporation (FAO) (0S) 193/2009.

Chapter 4

Choosing the language of the arbitration Drafting tips

• Specify the language of the arbitration proceedings in the arbitration clause itself. • When choosing which language to specify, consider the following: – the applicable law of the contract; – the place (seat) of arbitration; – the language of the contract document(s); – the language of other documents likely to be relevant in any dispute; – the mother tongue of party representatives and likely witnesses; and – the ability of arbitrators/counsel to work in the designated language. For examples of how selected arbitration rules deal with this issue, see Appendix 2. The very nature of international arbitration means that there is rarely a single language common to all the parties, their representatives and advisers, and the arbitrators. Nevertheless, the choice of the language of the arbitration is often ignored in arbitration clauses, risking leaving the parties and the arbitrators to determine the issues in an arbitral Tower of Babel, overpopulated by translators and interpreters. The issue is an important one: translation and interpretation are inevitably

inexact – as well as expensive – sciences, and legal concepts easily explainable in one language may become an awkward mixture of language and approximations in another. The differences in the world’s legal systems are such that many civil law concepts do not translate neatly into the language of common lawyers, and vice versa. The risks of misunderstanding and inappropriate translation of legal concepts from one culture to another increases the importance of having a three-member tribunal where the dispute involves parties from more than one linguistic and legal culture (see Chapter 6: Choosing the arbitrators). This should not, however, be thought of as a substitute for a considered choice of the language of the arbitration at the time of drafting the contract, having regard to such matters as the language of the contractual and other documents. If the parties fail to choose the language of the arbitral proceedings, the main institutional rules will seek to fill the gap. The ICC Rules (Article 16) give the tribunal a wide discretion to decide the language (or languages) of the arbitration, “due regard being given to all relevant circumstances, including the language of the contract”. Likewise, the UNCITRAL Arbitration Rules (Article 19) give the tribunal complete discretion to determine the language (or languages) to be used in the proceedings. The LCIA Rules (Article 17) recognise the need for an “initial language of the arbitration” pending the formation of the tribunal. Unless the parties have agreed otherwise in writing, such initial language “shall be” the language of the arbitration agreement. Where the arbitration agreement is written in more than one language, the LCIA Court decides which language will be the initial language of the arbitration. Once the tribunal has been established, it has a wide discretion to determine the definitive language (or languages) of the arbitration, after giving the parties an opportunity to make written submissions and taking into account the initial language of the arbitration and any other matter it may consider appropriate. By contrast with the approach of most other rules, the ICSID Rules have three official languages: English, French and Spanish. The parties might therefore use any one of these languages or could be required to use all the languages concurrently. Although this may add considerably to the cost of the proceedings, it ensures that the tribunal has the power to recognise and deal with the difficulties that one party might have in properly presenting its case in a language other than its own.

The residual problem with each of the main sets of arbitration rules is the extremely wide discretion granted to the tribunal to determine the language of the arbitration, if not chosen by the parties themselves. Very little guidance is given, subject to varying degrees of importance attached to the language of the contract. In practice, very many international arbitrations are conducted in English, which is widely recognised as the lingua franca of modern international commerce. This predominance of the use of English is implicitly recognised in the LCIA Rules, which preclude a non-participating or defaulting party from complaining “if communications to and from the Registrar and the arbitration proceedings are in English” (Article 17.1). The language of the arbitration should be considered carefully when contemplating the use of the rules of one of the many regional arbitration centres (Chapter 5: Choosing the rules). Although the parties remain free to select the language of the arbitration, the default mechanism may favour the local language. Such is the case, for example, with arbitrations held under the rules of ICAC in Russia and CIETAC in the PRC.

Chapter 5

Choosing the rules Drafting tips

• Consider whether an ad hoc procedure or institutional rules are to be adopted. • Consider adopting the UNCITRAL Arbitration Rules. • If considering ad hoc rules, consider selecting an institution to provide administrative support for the process, as well as appointing arbitrators in default of party selection. Ensure provision is made for (either in the clause or elsewhere in the contract), or consideration given to matters such as: – the capacity/authority of the parties to agree to arbitration; – the arbitrability of disputes under the law applicable to the arbitration clause and, if different, the place of arbitration and/or the likely place of enforcement; – the steps necessary to commence the arbitration; – the appointment of arbitrators; – possibly the timetable for pleadings (and the production of documents and exchange(s) of evidence); – the availability of interim relief, either from the arbitral tribunal or the courts; and – the finality of the award (e.g. excluding rights of appeal). • If considering institutional rules do not try to modify or adapt them without seeking specialist advice.

• Consider adopting the IBA Rules on Evidence for matters not otherwise addressed in the clause itself (or procedural rules).

Institutional or ad hoc? Given the widespread acceptance of a number of arbitral institutions and the use of their published rules, it is not surprising that parties very often choose institutional rules, by adopting the institution’s recommended clause (or at least attempting to do so). This saves the time, energy and expense involved in developing an ad hoc procedure. The 2006 Queen Mary/PwC Report referred to earlier noted that some 75% of those surveyed preferred institutional to ad hoc arbitration. However, to suggest that the only appropriate approach is to avoid ad hoc arbitration altogether (and merely choose between institutions) would oversimplify the issue. Ad hoc rules The principal benefit of an ad hoc arbitration agreement is that it can be tailored to the precise needs of the parties and the circumstances of disputes likely to arise under a particular contract, for example in a particular industry sector. It may also (at least superficially) appear cheaper as it does away with the administration costs of institutional arbitration. In reality, the negotiation of a properly drafted ad hoc clause is a major task and one that should not be undertaken lightly without specialist advice. In the context of the contractual negotiations it is unlikely that the parties will want to devote more time and effort than necessary in establishing a workable and appropriate procedure for resolving disputes not yet anticipated, let alone identified. Parties should not, however, seek to adapt the main institutional rules (such as those of the ICC or LCIA) for use in an ad hoc arbitration. The frequent references to the role of the institution in question make such a makeshift solution generally unworkable. In the relatively rare case of a truly ad hoc arbitration, matters such as capacity and authority of the parties to agree to arbitration, the procedural law and arbitrability of disputes under the law applicable to the arbitration clause (and, if different, the place of arbitration and/or likely place of enforcement)

have to be dealt with expressly. Further, the framework of the procedure should be set out, but parties should avoid establishing every detail of the arbitral procedure as this is best left to be decided once a dispute has arisen. The key elements to include in such a clause are those governing the procedure to be followed, at least until the arbitral tribunal is established, including how the arbitration is to be commenced, the procedure for appointing the arbitrators, a timetable for an initial exchange of pleadings (at least sufficient to enable the parties and the arbitrators to understand the parameters of the dispute) and the finality (e.g. non-appealability) of the award. A suggested all-purpose ad hoc clause is (cautiously) proposed in Appendix 3. The principal disadvantage of an ad hoc arbitration agreement is that its effectiveness depends in practice upon the co-operation of the parties in agreeing procedures at a time when they may already be in dispute. If a party fails to co-operate, a number of time-consuming and expensive challenges may need to be made to the appropriate national court, for example, in relation to the appointment of arbitrators in default of a party appointment, or questions of jurisdiction. Whilst this may depend to some extent on the legal place (or seat) of the arbitration (under the English Arbitration Act, there are a number of default provisions; under French law, there are hardly any), these are matters which are likely to be dealt with more rapidly and effectively through an institutional structure. Furthermore, the strict time limits for the initial stages of the arbitration in the main institutional rules ensure that the arbitration should be “up and running” in a much shorter time than its ad hoc equivalent. The costs that may be saved by not involving an arbitral institution may therefore be illusory in the light of the additional delays in establishing the tribunal, the potential costs of having to apply to court if faced with a recalcitrant party and the additional administrative burden placed upon the tribunal once the arbitration is underway. As a final point, it is worth bearing in mind that in some jurisdictions, such as the PRC, ad hoc arbitrations are not allowed, and parties are allowed to arbitrate only under the auspices of an arbitral institution. The UNCITRAL Rules Time and money can be saved by adopting rules of procedure specially

developed for ad hoc arbitrations. The best known are the UNCITRAL Arbitration Rules, first adopted in 1976. Some thirty years later, a process of revision was undertaken. A detailed report of recommendations by Jan Paulsson and Dr. Georgios Petrochilos was published in September 2006 and is available on the UNCITRAL website. The revised rules themselves came into effect in August 2010. Arbitration agreements concluded after 15 August 2010 will be presumed to refer to the UNCITRAL Arbitration Rules in effect at the date commencement of the arbitration. However, parties may expressly agree to apply a particular version of the UNCITRAL Arbitration Rules. Amongst the main changes are: a requirement (similar to that found in other rules) for the respondent(s) to submit a response within 30 days of receipt of the claimant’s notice of arbitration; the ability of parties to choose the Secretary-General of the Permanent Court of Arbitration at The Hague (PCA) as an appointing authority (instead of merely designating an appointing authority such as the ICC or the LCIA); provisions catering for multi-party arbitrations including allowing the appointing authority to appoint all three arbitrators and the joinder of additional parties; detailed revised provisions dealing with interim measures; a requirement for the tribunal to establish, in consultation with the parties, a provisional procedural timetable for the arbitration as soon as practicable after the tribunal is constituted; and greater scrutiny of the fees and expenses of the arbitrators. Institutional arbitration Institutional arbitration is sometimes described as “administered” or “supervised” arbitration, although the degree of administration varies greatly from one institution to another. This type of arbitration has many advantages and is generally preferred for international proceedings. The rules of prominent and well-established arbitral institutions such as the ICC, the LCIA and the AAA/ICDR and others mentioned in this Guide have benefited from the trial-and-error of practical application over many years. The current edition of the ICC and LCIA rules took effect from 1 January 1998. The AAA’s international rules were revised and took effect from 1 June 2009. Each of the institutions distributes its rules in booklet form, free of charge, and they may be obtained by contacting the secretariat in each case. Alternatively, the institutions’ websites have links to their rules. Appendix 7 contains relevant contact details.

Many of the major institutional rules (as well as non-institutional rules) have been recently updated or are in the process of being revised. Although each is considering specific issues, a number of themes have emerged. They include matters such as better case management; more effective procedures for multi-party and multi-contract cases, including the issue of joinder of additional parties; taking advantage of technological advances; effective provision for interim measures; and more modern and efficient means of communication. The overall purpose is to ensure arbitration remains an attractive and efficient dispute resolution method for modern commercial disputes. Most arbitral institutions provide trained staff and a governing body to administer the arbitration and to advise users. They ensure that the arbitral tribunal is appointed; that the basis of remuneration of the arbitrators is established; that advance payments are made and held in respect of the fees and expenses of the arbitrators; and that time limits prior to the formation of the arbitral tribunal are observed. (In an ad hoc arbitration these matters must be dealt with by the tribunal itself or an administrative secretary appointed by the tribunal once it has been established.) Generally speaking, institutions will administer arbitrations only under their own rules or sometimes in ad hoc cases. Exceptionally, in the Insigma case20 the Singapore courts permitted SIAC to administer an arbitration commenced under the ICC Rules. However this “mixing and matching” approach is generally not to be recommended: the very fact that it was necessary to have recourse to the courts in order to clarify the role of the institution before the arbitration could proceed, tells its own story. We understand that proposed revisions to the ICC Rules will state that only the ICC Court will be authorised to administer arbitrations under the ICC Rules.

The international acceptability of arbitral institutions Once a party has decided in favour of institutional arbitration it must decide which institution and institutional rules should be used. The last three decades or so have witnessed a proliferation of new arbitral institutions, mostly created along regional or industry lines. Many of the first wave of new regional institutions were aimed at enhancing the status of the city or region in question as a centre for commerce rather than addressing any

real business need and, as a result, struggled to establish a viable caseload. This can create a vicious circle – parties do not insert arbitration clauses providing for arbitration under a new institution’s rules due to the absence of practical experience or fear of the institution’s lack of permanence; consequently the institution is unable to acquire the practical experience and a viable caseload necessary to ensure its permanence. As a result, new institutions take time to acquire the critical mass necessary to guarantee their future or to instil sufficient peace of mind for the contract negotiator to make reference to their rules. The three principal arbitration institutions with the most genuinely international vocation are: the International Court of Arbitration of the ICC (based in Paris), the LCIA (based in London) and the AAA/ICDR (based in New York). The SCC also has an enduring popularity, originally for East/West trade disputes but now for more general commercial disputes. Reference to the rules of any of these (and other) institutions in the arbitration clause satisfies the need to ensure the permanence of the institution and will invoke a modern set of rules – all recently or soon to be revised – which are specially devised and adapted to suit the international arbitral process. As shown in the graph and table in Chapter 1: Choosing the method, there has been a steady – and in some cases dramatic – increase in the caseloads of the institutions since 2000.

ICC The ICC Court was founded in 1923 and has since administered over 15,000 international arbitration cases. In 2009 alone, a record 817 new cases were filed. Its rules were fully revised after extensive worldwide consultation and the current edition came into effect for arbitrations commenced after 1 January 1998. In broad terms, the 1998 changes sought to accelerate the process, fill gaps and adapt the rules to modern practice and allowed tribunals greater discretion in relation to dealing with new claims. The rules are now again under review to reflect the application and experience of the rules in the intervening ten years with the aim of new rules coming into effect in January 2011. The overall philosophy behind the rules revision is to make the ICC process more transparent and efficient and to take account of technological advances.

The ICC Court does not actually decide disputes but appoints arbitral tribunals to deal with them. In 2009, the ICC Court comprised 125 members from nearly 90 countries. The 817 new cases filed in 2009 involved parties from over 120 countries and places of arbitration in 53 countries. Through its procedures for establishing Terms of Reference and the scrutiny of awards, the ICC Court and Secretariat comprehensively supervise arbitrations conducted under its rules. As a result, it is often criticised as bureaucratic, interventionist and expensive. However, this degree of supervision and the institutional cachet of the ICC do appear in practice to enhance the voluntary compliance with and enforceability of ICC awards. In 2008, the ICC opened a branch of its Secretariat in Hong Kong and a liaison officer was appointed to the ICC Dispute Resolution Services in Singapore. The ICC also has offices in New York.

LCIA The LCIA is the oldest of the internationally significant institutions, founded in 1892. The institution was comprehensively internationalised and rejuvenated in 1985 when a new set of rules was promulgated. Those rules were themselves the subject of a major revision culminating in new rules which came into effect for arbitrations commenced after 1 January 1998. The Arbitration Court of the LCIA (which, like the ICC Court, does not decide disputes but selects arbitrators to do so) consists of members elected from the international arbitration community, including a President and seven Vice-Presidents. The LCIA Court’s current President is American (having succeeded a French national in July 2010). The Vice-Presidents represent seven different nationalities. No more than six of the members of the LCIA Court may be British nationals and the current members of the Court represent some 29 nationalities in all. The LCIA has also formed Users’ Councils for Europe, North America, Asia-Pacific, the Middle East, Africa and Latin America. Arbitrations under its rules may be held anywhere in the world. However, in the absence of a clear choice by the parties, the place (or seat) of the arbitration will be London unless the LCIA Court determines otherwise in the light of all relevant factors. As part of a programme of overseas expansion, the LCIA has entered into a joint venture in Dubai and opened an independent subsidiary, LCIA India, in Delhi in April 2009. New

rules under which LCIA India will operate were published in March 2010. They are based on the LCIA Rules with particular provisions to cater for the position under the Indian Arbitration and Conciliation Act and contain a separate INR-denominated schedule of costs. LCIA India has also published a “Notes for Arbitrators” booklet, which provides guidance on issues such as the requirements of independence and impartiality, availability, confidentiality; the conduct of the arbitration proceedings; and costs. In 2009, 272 new LCIA cases were filed, a 50% increase over 2008. 243 of the 272 cases were fully administered by the LCIA under its own rules or the UNCITRAL Arbitration rules.

AAA/ICDR The AAA was established in 1926, principally to service the US domestic arbitration market. However, through its international section, the ICDR, it handles an increasing number of international cases due to the number and strength of US businesses operating in the international arena. (US parties were also the single biggest users of ICC arbitration in 2009.) In March 1991, the AAA first adopted a set of rules expressly for use in international arbitrations and a revised version was promulgated in 1997 for use in arbitrations commenced after 1 April 1997. The Rules are loosely based on the UNCITRAL Arbitration Rules. In the course of 1996, the AAA substantially restructured the way in which it administered international arbitrations by establishing the ICDR in New York, which administers all AAA international arbitrations regardless of the AAA office in which they were filed. Revised AAA Rules became effective on 1 June 2009 and the ICDR has recently adopted document production guidelines for international cases, including processes for e-discovery. In 2009, 836 new cases were filed, a 19% increase from 2008 and 34% increase from 2007. The ICDR has established links with some 62 arbitral institutions around the world, including Singapore (a joint venture with the Singapore International Arbitration Centre), Mexico and Bahrain.

SCC

The SCC has a long-established reputation in the resolution of East-West disputes (especially between Western European parties and parties from the former Soviet Union or the PRC). The SCC Rules were revised with effect from 1 January 2007. A new version of the rules entered into force on 1 January 2010 which include, for the first time, provision for an emergency arbitrator to order interim measures. The SCC Rules are also frequently referred to in the dispute resolution provisions of BITs between Western and Eastern European countries and also feature in the dispute resolution provisions of the ECT. In 2009, 215 new SCC cases were filed, of which 96 involved non-Swedish parties, including parties from Cyprus, Kyrgyzstan, Kenya and the US. Institutional Fees Each institution requires a relatively modest filing fee for the purposes of commencing a claim. Thereafter, the costs involved in using institutional arbitration vary greatly between institutions and may be based upon the amount in dispute (ad valorem), for example as favoured by the ICC and the SCC, or upon the time spent on the case, as provided by the LCIA and AAA/ICDR. Under the 1998 Rules, the Secretary-General of the ICC may request the claimant to pay a provisional advance in an amount intended to cover the costs of the arbitration until the Terms of Reference have been finalised (Article 30(1)). Appendix III to the ICC Rules provides that this amount should not normally exceed the amount obtained by adding together the administrative expenses and likely arbitrators’ fees and expenses incurred in drafting the Terms of Reference. Although this advance is credited to the claimant’s share of the definitive advance on costs (fixed by the ICC Court), it may place an additional financial burden on the claimant at the initial stages of a claim. If, for example, the claimant pays its share of the definitive advance and the respondent refuses to pay, the claimant will be required to pay the respondent’s share of the advance in order for the arbitration to proceed. The ICC website contains a cost calculator which is an easy means of obtaining an indication of the costs likely to be incurred in an ICC arbitration. By inputting basic information as to the value of the claim and number of arbitrators intended to be appointed, a guideline figure can be obtained, plus

information as to potential administrative expenses and advances on costs. The SCC also has a similar facility available on its website. The LCIA publishes scales of minimum and maximum hourly rates for arbitrators’ fees, as well as institutional charges, which will apply unless in exceptional circumstances the parties agree otherwise. The administrative costs of the LCIA are based on time spent by the LCIA staff plus a percentage applied to the tribunal’s fees, plus expenses. The AAA/ICDR operates an ad valorem administrative filing fee structure. Filing fees range from USD 775 for a claim of up to USD 10,000 to USD 12,800 plus 0.1% of amount claimed over USD 10,000,000 for a claim over USD 10,000,000. Under its international rules, AAA/ICDR arbitrators are compensated on the basis of time spent on the case, taking into account their normal rates of remuneration and the size and complexity of the case. The administrator arranges an appropriate hourly or daily rate, in consultation with the parties and the arbitrators themselves. The SCC’s costs are based on the total value of claims, including counterclaims. For any cases with amounts claimed over EUR 100,000,000, the SCC Board will determine costs on an individual basis. Given important differences in approach between the ICC, LCIA, AAA/ICDR and SCC, it is not possible to produce an exact comparison of fees under their respective rules. However, Figure 7 below gives an indication of the likely fees based on a claim of USD 10,000,000. Figure 7: Arbitration fees based on a claim of USD 10,000,000

Source: websites of relevant institutions (see Appendix 7)

ICSID As noted earlier, ICSID was established by the 1965 Washington Convention and seeks to promote the settlement of investment disputes by means of arbitration and/or conciliation. Parties may also choose to apply its Additional Facility Rules in circumstances in which the ICSID Convention does not apply. One particular feature of the ICSID Rules is an internal review procedure

whereby an application for the interpretation, revision or annulment of an ICSID award may be made to the ICSID Secretary-General. If an annulment is sought, an ad hoc committee of three persons is appointed to consider the application. If the award is annulled, in whole or in part, either party may request that the dispute be re-submitted to another arbitral tribunal. This process does not apply to the ICSID Additional Facility regime. ICSID’s caseload was historically modest, seldom exceeding half a dozen cases in any year. From 1995, however, the pace quickened due to the proliferation of investment promotion laws and BITs. By the end of 2009, 305 cases had been registered with ICSID in total, including 25 new cases filed that year. ICSID publishes statistical information about its caseload showing, in addition to the number of cases registered each year under the ICSID Convention and the Additional Facility Rules, such matters as: the geographical distribution of cases by state party; the economic sectors involved; the nationality of arbitrators appointed in ICSID cases; and the overall outcomes of disputes (for example, comparing the number of awards on the merits, the number of awards declining jurisdiction and number of consent awards embodying a settlement agreement between the parties). As noted above, a detailed explanation of ICSID arbitration may be found in the “Guide to ICSID Arbitration”.21

PCA The PCA, which has its bureau at the Peace Palace in The Hague, was established in 1899 to deal with disputes involving states. The PCA now deals with cases between states, between states and the private sector as well as issues within a state. So, for example, the PCA dealt with maritime boundary limits between Guyana and Surinam. It was also the body behind the claims commission hearing issues between Eritrea and Ethiopia. It may also designate appointing authorities (and, from August 2010, the arbitrators themselves) under the UNCITRAL Arbitration Rules. The PCA has an administrative council (member states), members of the court (panel of arbitrators) and an international bureau (secretariat). It is not a court but a permanent administrative framework for arbitral tribunals. On 19 June 2001, the PCA Administrative Council adopted the Optional

Rules for Arbitration of Disputes Relating to Natural Resources and/or the Environment, devised to fill a perceived gap in the arbitration market for the peaceful resolution of environmental matters. The rules are available for use by all parties, whether private or state. Although the PCA has not dealt with many cases, it is nevertheless of interest to contract negotiators for two reasons. First, in keeping with its original purposes to facilitate the resolution of disputes involving states, it has on a number of occasions made its first-rate facilities available so long as at least one of the parties to the dispute is a state or state organisation. Secondly, the PCA’s Secretary-General has the important role of designating appointing authorities under the UNCITRAL Arbitration Rules (Article 6) where the parties have failed to choose such an appointing authority by agreement. Under the new (August 2010) UNCITRAL Rules, the SecretaryGeneral may also appoint one or more of the arbitrators themselves, on the application of a party in default of another party’s selection. The PCA has either acted as an appointing body or been asked to designate an appointing authority in over 360 cases since the adoption of the UNCITRAL Arbitration Rules. As at August 2010 there were 50 cases pending at the PCA: one between two states, 31 between investors and states under BITs or MITs; one between an investor and a state under an investment law; 16 contract disputes between private parties and states or public entities; and one case between private parties under the PCA Optional Rules for Arbitration of Disputes Relating to Natural Resources and/or the Environment.

Regional and national institutions Apart from the main international institutions there are a number of important regional and national or nationally based arbitration institutions which should be considered whenever a dispute arises in a particular geographical area. Indeed, arbitration users have expressed the hope that these institutions will become more established and experienced so that greater choice is available in the relevant areas. However, special care should be taken in selecting some of the less well-known institutions. What matters above everything else is institutional experience, competence and integrity, rather than geographical proximity to one or more of the parties. There are many occasions when it is quite appropriate for parties to

accept a venue far from home. There are no occasions where any party, no matter where it comes from, should entrust its fate to an unknown or unreliable institution. In the following section we provide a brief description of the more important institutions, focussing again on the BRIC economies and the Middle East, plus certain industry-specific organisations. Brazil The Arbitration and Mediation Centre of the Brazil-Canada Chamber of Commerce (CCBC) is the oldest of the Brazilian arbitration institutions – created in São Paulo in 1979 – and has the strongest reputation. It has cooperation agreements in place with similar organisations in Santiago, Milan and Lisbon permitting mutual use of facilities for cross-border disputes. The CCBC is soon to become the first Brazilian arbitration centre to open its arbitrator list to non-Brazilians and plans to open its own dedicated hearing centre in São Paulo. The current CCBC Rules became effective in July 1998 and versions in Portuguese, English, French, Italian and Spanish are available on its website. Other notable Brazilian arbitral institutions which have emerged as genuine competitors to the CCBC include: the Chamber of Mediation and Arbitration of São Paulo (FIESP/CIESP); the Arbitration Centre of the American Chamber of Commerce (AmCham); the Arbitration Centre of the Engineering Institute (CMA-IE); the Board of Arbitration and Conciliation of the Getulio Vargas Foundation (FGV) in Rio de Janeiro; the Brazilian Centre of Mediation and Arbitration (BCMA) in Rio de Janeiro; the Chamber of Mediation and Arbitration (ARBITAC) in Curitaba; and the Chamber of Business Arbitration (CAMARB) in Belo Horizonte and São Paulo. The CCBC standard arbitration clause is included in Appendix 1. Russia Although operational since 1932, the International Commercial Arbitration Court of the Chamber of Commerce and Industry of the Russian Federation (ICAC) was reborn in 1993 as a fully functioning international arbitration institution following the modernisation of Russia’s international commercial arbitration legislation. Its rules were first promulgated in December 1994. It is worthy of consideration for two main reasons:

• awards rendered under its rules may, as a matter of practice, be easier to enforce than other arbitration awards against a Russian party within Russia, which is admittedly difficult terrain; and • the Court and its President have certain statutory powers which include granting interim measures of protection. The current ICAC rules became effective in March 2006. Although the parties are free to nominate arbitrators, the chair and reserve chair of the tribunal must be appointed by the ICAC Presidium from the ICAC panel. Hearings can now take place outside Russia, which was not previously the case. While the March 2006 ICAC rules have brought the institution broadly into line with the rules applicable in the leading Western arbitral institutions, ICAC procedure in practice remains distinct in many ways. The role of the “rapporteur” (dokladchik), the application of oral pleading practices similar to those used in Russian courts, and the limitations of the ICAC facilities in Moscow may come as a surprise to European or North American users unaccustomed to arbitration practices in the Russian Federation. As noted above (Chapter 3: Choosing the place of arbitration) the difficulties of enforcing arbitration awards in Russia and other CIS countries should not be underestimated. It is important, for example, to ensure that the arbitral institution is properly referred to. Russian courts have refused to enforce arbitration awards on the grounds that the institution has not been properly named.22 However, the involvement of a regional institution such as ICAC may offer a greater prospect of success. In 2009, the ICAC dealt with some 250 cases. The ICAC recommended arbitration clause is included in Appendix 1. India As noted above, LCIA India is an independent subsidiary of the LCIA, offering the same services as its parent organisation. It also administers cases under its own rules, published in March 2010 and in force since 17 April 2010, as well as the UNCITRAL Rules or any other rules agreed on by the parties. The LCIA India Rules are based on the LCIA Rules with special provisions which take into account the Indian Arbitration and Conciliation Act, Indian case law and also local arbitral practice. LCIA India has also

published a separate INR-denominated schedule of costs applicable to all arbitrations in which LCIA India provides services, whether as administering or appointing authority, and whether under the LCIA India Rules or other rules. LCIA India has also published a booklet entitled “Notes for Arbitrators” which is intended to provide guidance to arbitrators on issues such as the requirements of independence and impartiality, availability, confidentiality; the conduct of the arbitration proceedings; and costs. The launch of LCIA India has been regarded in many quarters as a positive development and it is anticipated that LCIA India will play an important role in helping to improve the credibility of institutional arbitration in India in keeping with India’s status as an influential economic power. The LCIA India recommended clause is reproduced in Appendix 1. People’s Republic of China China International Economic and Trade Arbitration Commission (CIETAC) has supervised and administered international arbitrations in the PRC since 1956. The current CIETAC Rules came into force on 1 May 2005 and sought to build on the advances made by previous versions of the rules. However, CIETAC is predominantly a national institution and in the absence of agreement to the contrary, the language of the arbitration will be Chinese. There have been few cases where both parties were non-Chinese, relatively few cases with a non-Chinese presiding arbitrator and the secretariat of CIETAC is predominantly Chinese. In 2009, 1,482 new CIETAC cases were filed. Measured by the number of cases as shown in the table in Chapter 1: Choosing the method, CIETAC’s success is not surprising since the 1994 Arbitration Law of the PRC effectively gave CIETAC and its maritime equivalent, the CMAC, a monopoly over the conduct of international arbitrations in the PRC. There is also uncertainty as to whether provision may be made for ad hoc arbitration since only institutional arbitrations are recognised under the Arbitration Law. However, it is now possible for “foreign-related” arbitrations to be conducted by the domestic arbitration commissions, and not just CIETAC. That said, with one or two exceptions, domestic arbitration commissions tend to be less suitable choices for dealing with “foreign-related” arbitrations. Previously, the CIETAC Chairman would choose the chair of the tribunal if the parties failed to do so. Under the 2005 rules, the CIETAC Chairman will

do so only if in the list of candidates provided by the parties there is no person in common. This enhances the chances of the parties deciding upon a mutually acceptable candidate. CIETAC arbitrations may now be conducted outside the PRC, which removes one of the reasons for foreign parties not to agree to arbitrate under the CIETAC Rules. (Previously hearings could be held outside the PRC but the legal place or seat of the arbitration had to be in the PRC.) However if the dispute is considered to be a “domestic dispute”, which could be the case in relation to foreign-owned locally incorporated entities, then it is unclear if Chinese law allows arbitration outside PRC and whether the award would be recognised or enforced in the PRC. CIETAC charges an arbitration fee on an ad valorem basis, which for smaller disputes results in a lower figure than that charged by institutions such as the ICC. While this may appear attractive, foreign arbitrators may be disinclined to accept appointments. Therefore, in the 2005 rules there is provision, in the appropriate circumstances, for CIETAC to charge a “special fee” to cover the foreign arbitrator’s fees and expenses. Unlike most other rules, the CIETAC Rules allow an arbitrator also to act as a conciliator to try to resolve issues between the parties. Over the past few years, CIETAC has introduced a number of additional services. In 2000, it introduced the Domain Names Dispute Resolution Centre, and in May 2003, the Financial Disputes Arbitration Rules which was further amended in 2005. It also has specialist arbitration rules and/or specialist panels of arbitrators for the financial services industry, construction industry, the leather industry and the supply of grain disputes. In 2009, CIETAC published its online arbitration rules. In 2008, CIETAC signed a co-operation agreement with the HKIAC allowing the two organisations to share infrastructure and resources. The CIETAC recommended clause is reproduced in Appendix 1. It is worth noting that the Beijing Arbitration Commission (BAC) is another possible option for foreign parties seeking to conduct international arbitrations in the PRC. The BAC’s foreign-related arbitration caseload has increased steadily in the last few years, and it is establishing its reputation in the Chinese market by seeking to ensure that its arbitration practice is more consistent with international standards, and provides more efficient services for users. In addition, its arbitration fees, especially those for foreign-related arbitrations, are attractive when compared with those of other mainstream

arbitration commissions in the PRC. The BAC recommended clause is also set out in Appendix 1. Hong Kong and Singapore The Hong Kong International Arbitration Centre (HKIAC) was formed in 1985 to meet a growing need for arbitration services in the region. In 1990, Hong Kong adapted the UNCITRAL Arbitration Rules for international arbitrations. It is likely that in 2010 the laws will change, so as to apply the UNCITRAL Model Law to both domestic and international arbitrations. The HKIAC’s Administered Arbitration Rules (AAR), in force from September 2008, apply to domestic and international arbitrations. They are based on the UNCITRAL Arbitration Rules. In 2009, 429 new HKIAC cases were filed. As can be seen from the table in Chapter 1: Choosing the method, HKIAC’s caseload has more than doubled over the last decade, evidence of its strong regional presence and the growth in economic activity in South-East Asia. Under the AAR, the fees of the arbitral tribunal are determined in accordance with fee arrangements agreed between the appointing party or parties and the arbitrator(s) or, in default of agreement, in conformity with the Schedule of Fees and Costs of Arbitration as set out in the AAR. The Singapore International Arbitration Centre (SIAC) was founded in 1991. Revised rules for the SIAC came into effect on 1 July 2010, only three years after the previous revision. The SIAC Rules now provide for the appointment of an “emergency arbitrator” to provide urgent interim relief; a new expedited procedure for low-value cases; and the removal of a requirement (introduced in the previous revision) for the parties to produce a memorandum of issues the tribunal has to decide. Under the SIAC Rules, fees for the arbitral tribunal and the administrative fee are ascertained in accordance with a schedule of fees published by the SIAC, in force at the time of commencement of arbitration. However parties can agree otherwise before the tribunal has been constituted. In 2009, 114 new SIAC cases were filed, and SIAC has become a serious competitor to the HKIAC for Asian arbitrations. The HKIAC and SIAC model clauses are reproduced in Appendix 1. The Middle East

First created in 1994, the Dubai International Arbitration Centre (DIAC) was relaunched in 2006 as an independent institution with a board of trustees composed of a number of well-known international and regionally based arbitration practitioners. Its predecessor, the Dubai Chamber of Commerce, was considered to have been an organ of the state and therefore insufficiently independent. The DIAC Rules became effective on 7 May 2007. The rules are based upon the UNCITRAL Arbitration Rules but adopt elements of the LCIA, ICC, SCC and World Intellectual Property Organisation (WIPO) Rules to reflect best international practice. In 2008, the Dubai International Finance Centre (DIFC) established an arbitration centre in a joint venture with the LCIA (DIFC-LCIA Centre). The DIFC-LCIA Centre Rules are a lightly modified version of the LCIA Rules. The DIFC-LCIA Centre is based at the DIFC in Dubai from where it administers its caseload in cooperation with the LCIA secretariat in London. Although parties have a free choice as to the seat of their arbitration, it is expected that most parties choosing the DIFC-LCIA Centre will designate the DIFC as the seat of arbitration. Indeed, this is the default provision under the rules, in the absence of a contrary agreement of the parties.

Industry-specific institutions Certain industries, such as construction, insurance, shipping and commodities, have developed their own arbitration rules and procedures, many of which are long-established. Amongst the best known in the UK are those developed by ARIAS (UK) for insurance and reinsurance disputes, the LME for commodities disputes and the LMAA for maritime disputes. Addresses and contact details can be found at Appendix 7. Rules have also been developed by WIPO, a specialised agency of the United Nations, for the resolution of intellectual property disputes. The WIPO Centre has handled over 110 cases. WIPO has rules providing for emergency relief by arbitrators in response to the need for short-term protection of rights in intellectual property disputes.

Expedited procedures

A number of arbitral institutions cater for expedited procedures or fast track arbitrations, either in their main rules or separately. The LCIA Rules cater for the expedited formation of the arbitral tribunal (Article 5) and expressly authorise the tribunal, once constituted, to abridge other time limits specified in the Rules (Article 4.7). Much can be achieved in practice with a pro-active institution and tribunal and willing parties. The authors are aware of a recent (2010) LCIA case in which the Request for Arbitration was filed on 8 June, a three-member tribunal was formed by 15 June, a witness hearing was held on 6 July, following exchanges of legal submissions and written fact and expert evidence, and a reasoned award rendered on 21 July. The DIS has specific rules for expedited hearings, as do the SCC and WIPO. WIPO developed an expedited procedure in response to the particular need in intellectual property disputes for quick results. This provides for a sole arbitrator (rather than a tribunal of three arbitrators), shortened time periods for each of the steps involved in the arbitration proceedings, and abbreviated hearings. Both the DIS and WIPO Expedited Arbitration Rules state that where there are gaps, the main rules will apply. The Swiss Rules contain provision for expedited hearings within their main rules (Article 42) as do the CIETAC Online Arbitration Rules (CIETAC Online) (Article 47) (see below). The SCC has developed separate Rules for Expedited Arbitrations which entered into force on 1 January 2010.

Responding to new methods of conducting arbitration One of the advantages of arbitration is the greater procedural flexibility that can be adopted by comparison with many forms of litigation. Although contract negotiators may not think they need to be concerned at the time of drafting with the detailed procedures to be followed during the arbitration, it is useful to be aware of the issues. So, for example, to avoid unnecessary costs, telephone or video conferences may be held instead of requiring parties to attend hearings to discuss the conduct or progress of the arbitration. It has also long been possible to have arbitration by a “documents only” process, thereby avoiding the expense associated with oral hearings. Means of reducing time and costs and making case management more efficient are continually being considered. For example, at a domestic level, the AAA

Web File was established in 2001 creating an electronic platform for filing cases and conducting the subsequent arbitration. WIPO has an Electronic Case Facility which enables secure filing, storing and retrieval of case-related submissions and remote electronic case management. In November 2005, the ICC launched its Netcase facility to enable arbitrations to be conducted in a secure online environment. During an arbitration, disclosure of documents is an area where increasing use of electronic communication in a variety of forms has had a major impact. The IBA’s Rules of Evidence are often used. As part of the recent review of these rules, a sub-committee was formed to look into electronic methods of document production. In October 2008, the UK’s Chartered Institute of Arbitrators (CIArb) published a Protocol for E-disclosure in Arbitration, which recommends early consideration of the issue of disclosure of electronic documents. It then sets out points to consider, such as the types of electronic documents involved, what steps should be taken for the retention and preservation of such documents and the scope and extent of disclosure obligations. The Protocol goes on to highlight particular issues which arise in the context of identifying and producing electronic documents relevant to a dispute, such as agreed software tools, data sampling and format and method of e-disclosure. In 2007, the second edition of the Sedona Principles for Electronic Document Production was published by the Sedona Conference, a law and policy think tank based in the US. This set of 14 principles was designed to provide recommendations and best practices to deal with electronic discovery, and covers issues such as the extent of any obligation to preserve electronically stored information and primary sources of such information.

E-commerce arbitration With the growth of e-commerce, institutions have been considering how to deal with disputes in that area. CIETAC, for example, has published specific rules for this, in the form of the CIETAC Online Rules. These rules, in force from 1 May 2009, are primarily aimed at e-commerce disputes although they can be used for other disputes. The arbitrations will be administered by the Online Dispute Resolution Centre, a service provider established by CIETAC to resolve internet domain name and e-commerce disputes. The CIETAC

Online Rules mirror the main rules but, as one would expect, contain provisions that deal more specifically with the practicalities of e-commerce. For example, there are Articles that deal with deemed dates and times for receipt of electronically transmitted documents and oral hearings will usually be conducted by online methods such as video conferencing. Unless the parties agree otherwise, where the Chairman of CIETAC is to appoint an arbitrator, the appointment will be made from CIETAC’s panel. This seems a retrograde step compared with the main rules. One of three procedures can be used; the main procedure (award within four months of tribunal formation), the summary procedure (award within two months of tribunal formation) and expedited procedure (award within 15 days of tribunal formation). There are also industry-specific rules such as WIPO Uniform Domain Name Dispute Resolution Policy (UDRP) procedures. The UDRP applies mainly to informational domains such as .com, .net, .org, .info, .biz and .mobi. Over 16,000 cases have been dealt with under this procedure, involving parties from over 150 countries and some 30,000 internet domain names.

20 21 22

Insigma Technology Co Ltd v Alstom Technology [2009] SGCA 24. L Reed, J Paulsson and N Blackaby, Kluwer Law International (second revised edition) 2010. Decree No. KG-A40/7725 – 03: Moscow Okrug Federal Arbitrazh 6/11/03: ICLG p. 241.

Chapter 6

Choosing the arbitrators Drafting tips

• Identify the number of arbitrators, whether in ad hoc or institutional arbitration, or leave open (i.e. one or three)? – sole arbitrator for simple, low value contracts – three arbitrators for complex, high value contracts – if three arbitrators, decide how they are to be appointed and what is the deadline for the process · each party chooses one with the third being chosen by the “party” arbitrators? · each party chooses one with the third being appointed by an institution? · all three chosen by an institution? · other method? • Is it useful to identify criteria which the arbitrators are to satisfy? If so, beware of over-specificity. • Check nationality requirements/exclusions (such as under institutional rules) for sole or presiding arbitrators. Are they in compliance with the applicable law? For examples of how leading arbitration rules deal with this issue, see Appendix 2. Arbitration clauses in international arbitrations rarely designate arbitrators by name. There is a good reason: by the time the dispute arises, the arbitrators in

question may be unable or unwilling to act or may otherwise be unsuitable to determine the particular dispute which has arisen. Yet it is possible to go a long way towards determining the future selection of arbitrators by including appropriate provisions in the contract, a possibility which is often overlooked in the drafting process. At the very least, it is essential to establish how the arbitral tribunal will be constituted if no relevant provision is made in the contract itself. One of the concerns expressed about international arbitration is the relatively small pool of experienced arbitrators from whom to choose – even when the relevant rules do not restrict the choice, whether in terms of nationality, specific qualifications or otherwise. Greater use of arbitration around the world has resulted in an increase in the number of arbitrators from various countries. Figure 8 below shows the top twenty countries whose nationals most frequently sat on ICC-appointed tribunals between 2000 and 2009.

Number of arbitrators Many institutional rules, including those of the ICC, the LCIA and the AAA, provide that, if the arbitration clause is silent, the institution will designate a sole arbitrator unless the circumstances justify a three-member tribunal. In the absence of agreement, for some institutions such as the SCC, ICAC and CIETAC, the default position is three arbitrators unless the institution thinks otherwise. The ICC standard arbitration clause (see Appendix 1) suggests that parties leave the number of arbitrators to be decided upon at a later stage, providing for the appointment of “one or more” arbitrators. Nonetheless, in international arbitrations, the preference has traditionally been for threemember tribunals except in cases involving relatively small amounts. For example, in approaching this question, the ICC takes into account the likely complexity of the case as well as the amount in dispute. However, presently a rough rule of thumb used by the ICC is for claims below USD 1m to have a sole arbitrator, above USD 10m, three arbitrators, and claims for amounts in between could be either one or three, depending on the circumstances. The LCIA figures for the same period showed a 50:50 split between sole and three-member tribunals. Figure 8: Nationalities of arbitrators in ICC arbitrations (2000-2009)

Source: ICC Bulletin, Volumes 11-20 (2000-2009)

Institutions such as the LCIA have sometimes specified an arbitral tribunal comprising three arbitrators regardless of the amount in dispute, in order to accommodate the twin objectives of having one arbitrator trained in the applicable law, whilst ensuring that a majority of the members of the tribunal are of a nationality or nationalities different from those of the parties. It is generally preferable to resolve the question of the number of arbitrators in the arbitration agreement itself, albeit that parties may consider that this deprives them of a degree of flexibility in responding to the nature

and complexity of the dispute. The advantages of referring a dispute to a sole arbitrator are self-evident: meetings and hearings can be arranged more easily and fees and expenses will necessarily be lower than with a three-member panel. The arbitration should also move more quickly, since a sole arbitrator need only make up his or her own mind: he or she will not need to spend time in consultation with colleagues in an endeavour to arrive at a unanimous or majority decision. There are also disadvantages to the use of a sole arbitrator. If the sole arbitrator reaches the wrong decision, there is no court of appeal to correct his or her decision. The finality of the arbitration process is, therefore, a good reason to have three arbitrators, except where the extra cost is not justified by the amounts in dispute. In addition, given the usual requirement for a sole arbitrator to be of a neutral nationality, there may not be anyone on the tribunal trained in the law governing the dispute if the governing law is that of one of the parties. In major international contracts, most parties choose to refer disputes to a tribunal of three arbitrators. If the dispute is to be determined by a sole arbitrator and the parties cannot agree who this should be, an arbitrator will be “imposed” upon them by the designated appointing authority or, in the absence of such an authority, by the local court. The arbitrator so chosen may or may not be suitable for the task. What is certain is that he or she will not have been chosen by the parties. Where the arbitral tribunal consists of three members, these problems can be avoided. Each of the parties will usually have the right to nominate one arbitrator, leaving the third arbitrator to be chosen by the two partynominated arbitrators or in some other agreed manner. (This procedure may not apply in the case of multiple party arbitrations: under the ICC Rules (Article 10) if there are multiple claimants or respondents who cannot agree on the appointment of a single arbitrator on behalf of all of them, the ICC Court may appoint each member of the arbitral tribunal designating one to act as chair. Similar provisions exist in the LCIA Rules and AAA Rules.) The advantage to a party of being able to nominate an arbitrator is that it contributes to a feeling of confidence in the arbitral tribunal. This is particularly important in international arbitrations where, in addition to the matters formally in issue, there may well be differences of legal practice, language, tradition and culture between the parties and, indeed, among the members of the arbitral tribunal themselves. An arbitrator nominated by a

party will be able to ensure that that party’s case is properly understood by the arbitral tribunal. In particular, any misunderstandings which may arise during the deliberations of the arbitral tribunal (for instance, because of differences of legal practice or of language) can be resolved. Last but not least, the quality of deliberations of a three-member tribunal should, all things being equal, be greater than that of a sole arbitrator. Even the most able people occasionally make mistakes. When the stakes are high, it may be important to minimise the risk of such mistakes by accepting the extra cost of a three-member arbitral tribunal, especially where – as noted above – there will generally be no possibility of any review of the merits of the decision. Parties sometimes express distrust of a three-member arbitral tribunal which contains two party-nominated members on the ground that the nominees will polarise their positions, with the result that the chair of the tribunal may be forced to split the difference rather than side with one over the other and make a clear decision of principle. A general preference for unanimous rather than majority awards may be thought to contribute to such a tendency. There is little or no reliable research on this question, and it should not be assumed that such polarisation occurs as a matter of course in the international context (unlike tribunals consisting of partisan arbitrators in certain domestic arbitrations). This is therefore not necessarily an adequate basis for favouring the choice of a sole arbitrator. Another perceived disadvantage of three-member tribunals is that one of the party-nominated arbitrators may seek to disrupt the proceedings. Past experience indicates that, very occasionally, a party-nominated arbitrator may deliberately obstruct or delay an arbitration in order to create a strategic advantage for his or her appointing party. This may take many forms, including a refusal to agree on a third arbitrator or a failure to appear on dates selected for hearings or for private deliberations of the arbitral tribunal. One way of avoiding this type of sabotage, which fortunately seems to be on the wane, is to provide that all three arbitrators will be appointed by the appointing authority. Such a provision, however, defeats the purpose described above of allowing each side to feel that it will have the opportunity to select at least one judge of its choice. This drafting technique therefore seems appropriate only in cases where the perceived need to eliminate the risk of abuse in party nomination is acute.

A more frequent limitation is that neither side may nominate an arbitrator of its own nationality. Whilst such a provision falls far short of a guarantee of neutrality, it does in practice greatly reduce the potential for partisan arbitrators. Another variation calls upon the administering institution to provide a list of names to each party, giving each side the opportunity to rank its preferences – generally leading to the identification of a mutually preferred candidate.

Choosing an arbitrator There are no set rules as to how a party should go about identifying suitable candidates as arbitrators. There are some jurisdictions where the choice is restricted. The CIETAC Rules used to restrict the choice of arbitrators to those on CIETAC’s panel. However the main rules were relaxed in 2005 to allow parties to choose from outside the panel, subject to confirmation by the CIETAC Chairman. The 1996 Lawyers Act in Japan allows foreign lawyers to act as counsel, but it is unclear whether foreign lawyers can act as arbitrators. However, this seems to be happening in practice in any event. In Saudi Arabia, only male Muslim arbitrators may be chosen. If there are multiple members, there must be an odd number with the chairperson experienced in the Shari’ah rules. It is advisable when the time comes to conduct appropriate due diligence on potential candidates to try to collate as much information as possible about their previous arbitration experience, articles/papers written on relevant issues, and if possible, prior rulings. The practice of interviewing candidates is acceptable but the interview should not be lengthy and should not discuss the merits of the case, so as to limit subsequent allegations of bias. Some arbitrators have their own code of conduct for interviews, others do not accept them at all. Guidance is available, such as that promulgated by the UK’s Chartered Institute of Arbitrators in the form of “Guidelines on the Interviewing of Prospective Arbitrators”. It is also sensible to ascertain the availability of candidates during the period the arbitration is likely to run (see below).

Independence and impartiality of arbitrators

Notwithstanding the common provision for party-nomination in threemember tribunals, it should be remembered that arbitrators in international arbitrations are usually required to be independent and/or impartial. Many institutional rules, as well as some arbitration legislation, contain express provisions to that effect. (The next revision of the ICC Rules is expected to make explicit that arbitrators must be impartial as well as independent.) Indeed, arbitrators appointed under the main sets of institutional rules must sign a declaration of impartiality and/or independence before accepting the appointment. In July 2004, the IBA published “Guidelines on Conflicts of Interest in International Arbitration” designed to assist arbitrators and the parties in this difficult area. Initially identifying a number of general principles, the guidelines then set out a non-exhaustive list of scenarios classified into a “traffic light” system. If a scenario falls within the red list, the potential arbitrator should either decline the appointment or accept only after the parties have been notified of relevant details and expressly consented. If the arbitrator has, for example, a significant financial interest in the outcome of the case or in one of the parties, he or she should decline. If a scenario falls in the green list, it is unlikely there will be a disqualifying conflict of interest. An example is where an arbitrator has previously published a general opinion (such as in a law article or public lecture) concerning an issue which also arises in the arbitration, provided the opinion is not focused on the case that is being arbitrated. If circumstances fall within the orange list, they are deemed to give rise to justifiable doubts as to the arbitrator’s impartiality or independence such that the arbitrator has a duty to disclose the pertinent facts. The disclosure does not automatically result in a disqualification of the arbitrator – the purpose is to inform the parties of a situation that they may wish to explore further in order to determine objectively whether 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. Examples of orange list scenarios include where the arbitrator has within the past three years served as counsel for one of the parties, but there is no ongoing relationship, or where there exists a close personal friendship between an arbitrator and a counsel of one party. The English court in ASM Shipping of India v TTMI23 decided that the arbitrator should have recused himself because an independent observer

would have shared the discomfort felt by one of the witnesses in that arbitrator’s presence. This was because the arbitrator had acted as counsel in another matter in which allegations were made against the same witness by the party by whom the arbitrator was then instructed. In Italy, in the Crobu24 case, there was a successful challenge to an arbitrator who practised at the same premises as the lawyer representing one of the parties. There is a longstanding debate in arbitration circles about the propriety or otherwise – actual and perceived – of barristers in the same sets of chambers appearing as counsel and arbitrator respectively in the same case. Most arbitration rules recognise the need – often expressed in rules providing for challenges – to avoid a situation in which there may be justifiable doubts in the mind of one of the parties as to the independence and/or impartiality of an arbitrator.

Availability Many users of arbitration, and practitioners, have complained about increasing delays in the process. Amongst the reasons for this is a difficulty in securing time in the diaries of busy arbitrators to attend hearings and deliberations, and to write awards. During the process of party-nomination and any discussions over the selection of a chair, the issue of availability should be addressed as a matter of course. Since August 2009, arbitrators appointed under the ICC Rules must confirm their availability to discharge their functions effectively, as well as their independence. This allows the ICC to assess possible competing demands on the potential arbitrator’s time during the likely period of the case.

Appointment in default of agreement or on behalf of a defaulting party In ad hoc arbitration clauses (whether purely ad hoc or using the UNCITRAL Rules), the proper formation of the arbitral tribunal requires either agreement between the parties as to the identity of a sole arbitrator or agreement between the parties (or the party-nominated arbitrators) as to the identity of

the presiding arbitrator. But what happens if no agreement is reached? In the case of a pure ad hoc clause, it will be necessary to apply to the local court in the place of arbitration to appoint the sole or presiding arbitrator. This is unlikely to satisfy either party. First, it will involve national court proceedings before the arbitration has even commenced. Secondly, the choice may be a parochial one with the appointment of a local lawyer not necessarily well-versed in the practice of international arbitration or the subject matter of the dispute. In order to avoid criticism of the court appointment process, Hong Kong, in the 1996 amendments to its Arbitration Ordinance, provided for the appointment process to be removed from the courts altogether and given to the HKIAC. Singapore has adopted a similar approach with the chairman of SIAC having the default power to appoint arbitrators. The Delhi High Court has recently established an arbitration committee charged with responsibility for appointing arbitrators. Nevertheless, in order to avoid this risk, parties drafting a pure ad hoc clause should provide for an appointing authority which will make the appointment of the sole or presiding arbitrator if the parties cannot agree within a particular time period. Most of the main arbitral institutions are willing to take on this role and will understand the dynamics of the arbitral process and the suitable candidates much better than a national court. In the case of an ad hoc clause adopting the UNCITRAL Arbitration Rules, the parties are better protected. Whilst it is still important to specify an appointing authority, failure to do so (or failure of the appointing authority to act) enables a party to make a request to the Secretary General of the PCA at The Hague to designate the appointing authority or (under the revised 2010 Rules) to appoint arbitrators themselves in cases of default. How do the main arbitration institutions go about appointing an arbitrator when acting as an appointing authority? When making an appointment on behalf of a defaulting party, some institutions strive to identify an individual who most closely corresponds to the choice the defaulting party is deemed likely to have made if it had not defaulted. This often implies the selection of an arbitrator of the same nationality as the defaulting party. Consideration may be given in appropriate cases to providing that, in the event of default, the appointing authority should choose an arbitrator of a neutral nationality (such as that of the place of arbitration).

Selection of sole or presiding arbitrators Whether the arbitration clause calls for party nomination, there remains the problem of choosing the method for selecting the sole or presiding arbitrator, or indeed all the arbitrators in cases where, for example, multiple claimants or respondents are unable to agree on the identity of a party-nominated arbitrator. Most practitioners prefer to have the appointment made by agreement between the parties or between the arbitrators nominated by them. Some practitioners prefer the former, as it avoids the need for the party-nominated arbitrators to enter into discussions with the lawyers for the party who nominated them to determine the suitability of candidates. It also avoids the risk of the party-nominated arbitrators acting in splendid isolation to agree upon a presiding arbitrator with whom the parties or their lawyers may be uncomfortable for one reason or another. Other practitioners prefer the latter solution because of the central importance to the smooth operation of the proceedings that the presiding arbitrator commands the respect of the other two. In practice, the two aspects may be combined, with the party-nominated arbitrators given primary responsibility for selecting the presiding arbitrator, but in consultation with the parties’ counsel. Whichever of the above solutions is adopted, any contractual provisions should provide for a deadline for agreement at the expiry of which either party may approach the appointing authority to make the appointment.

Nationality requirements As noted above, most institutional rules contain a requirement to the effect that, in the absence of agreement by the parties, the sole or presiding arbitrator should not have the same nationality as any of the parties. At the time of writing, there is concern in the UK and possibly elsewhere in the EU following the English Court of Appeal decision in the Jivraj25 case, that such provisions may be discriminatory. The arbitration clause in that case required all three arbitrators to be from the Ismaili community. The clause was declared void for breach of the UK Employment Equality (Religion and Belief) Regulations 2003, on the basis that arbitrators are “employees” within the meaning of the Regulations and thus protected by their anti-

discrimination provisions. The requirement in the clause as to the qualifications of the arbitrators was found not to be severable from the remainder of the arbitration clause. Although the case related to religion and belief, it is thought that the same issues might apply to nationality requirements, for example if the arbitration is seated in London, conducted under the LCIA Rules or other rules containing nationality restrictions, or subject to English law. The situation may be clarified in due course by the Supreme Court in England or possibly the European Court of Justice (ECJ). In the meantime, some contract drafters are amending otherwise standard arbitration clauses adopting institutional rules by removing any restrictions on arbitrator nationality. We have provided sample wording in Chapter 9: Drafting the arbitration clause. Institutions such as the ICC and the LCIA are considering further rule changes (or in the case of the LCIA, the possible disapplication of Article 6 – “Nationality of Arbitrators” –) designed to address the Jivraj issue. Some institutions, such as the LCIA, have also adopted a rule which expressly provides for consideration of the nationality of controlling shareholders (see Article 6.2). Other institutions, such as the ICC, have chosen not to adopt such a rule but in practice the ICC Court will have regard to any controlling interests, to the extent they are known. The application of the nationality test by the LCIA Court can lead to surprising consequences. For example, a company incorporated in the BVI with no business or other connection with the UK is treated (by the application of UK legislation concerning overseas dependent territories) as having British nationality. This therefore precludes the appointment of a British national as the chair or sole arbitrator in a London-seat arbitration under an English law-governed contract, in the absence of a waiver by the other party.

Qualifications of arbitrators Whether they are to be nominated by the parties or designated by the appointing authority, arbitrators may be required to have particular qualifications. The most common requirements relate to professional qualifications, language proficiency, nationality (noted above) and place of residence.

It is possible to go too far. The drafter should be careful not to suffocate the clause with too many restrictions, lest no-one remains to fit the bill. Nor should the qualifications be ambiguous or capable of subjective interpretation (“a respected professor of law from …”) in case there may later be room for argument that the composition of the tribunal was not in accordance with the parties’ agreement (a ground for challenging awards under the New York Convention). We have come across an example of a clause which required arbitrators to be senior executives or retired senior executives in a very small specialised branch of a particular industry. The clause called for party nominations and the respondent sought to declare the arbitration agreement void on the basis that there were no arbitrators fitting the description who were ready and willing to act. They were either too busy being senior executives to want to be arbitrators or were conflicted out of the proceedings by their past relationships with one or other of the parties. Given the danger of being over-specific it is better: • to avoid limitations altogether, thereby allowing the maximum flexibility to select the most appropriate person at the time the dispute arises; or • to impose requirements only if they are fundamental to the efficient operation of the proceedings (for example professional qualifications or language proficiency); or • in order to ensure the establishment of an appropriately balanced tribunal, to exclude arbitrators of the same nationality as one of the parties. Whatever requirements are imposed, they should be stated in objective and unambiguous terms. Finally, should non-lawyers act as international arbitrators? Under most arbitral rules the parties are free to nominate arbitrators whose field of expertise is not the law. However, when international institutions appoint international arbitrators, they almost invariably select lawyers. As three practising lawyers might be expected to observe, this approach is prudent. Whilst an understanding of a range of legal issues, from matters of litis pendens to conflict of laws, may not be essential in domestic arbitrations, it is almost always required in the international context, even in cases which

appear at first sight to turn mainly on factual or technical issues.

23 24 25

[2007] EWHC 927 (Comm). Crobu v Soc Elci 4 May 2006, Foro Italiano, 2006, No. 9, pp. 2559-2560, Tribunale (Court of First Instance), Genoa, Italy. Jivraj v Hashwani [2009] EWHC 1364.

Chapter 7

Choosing mechanisms to deal with specific situations Drafting tips

• Are more than two entities involved in the transaction or project? If so, consider including specific joinder and/or consolidation provisions. • Is confidentiality likely to be a concern? If so, consider inserting an express clause unless a relevant institution’s rules deal with the issue already. • It is necessary to make express provision for interim measures? • Is the contract with a state party? If so, what is the position on state immunity? • If the transaction relates to an investment, consider structuring the investment via a country with which the host country has a BIT. Although many of the circumstances that arise during a dispute cannot be predicted at the time the contract is entered into, there are several recurring specific situations that the contract negotiator can and should anticipate at the drafting stage.

Joinder, consolidation and multiparty arbitrations Certain categories of contracts will inevitably involve more than two parties to disputes arising under them. This can be seen as problematic, because one

of the perceived disadvantages of international arbitration is that it is generally not possible to join additional parties into an existing arbitration without their agreement. Equally, even if there is only one contract between two parties, it may be advantageous to add other parties if and when disputes arise. Joinder The classic example of a situation where joinder of parties is considered necessary or convenient lies in international construction projects, when the employer enters into a contract with a main contractor, who in turn contracts with various sub-contractors and suppliers. If, for example, the employer has complaints regarding the work done, he must arbitrate against the main contractor, who must then separately seek to recover from the sub-contractor or supplier who may be responsible for the defective work or goods. In such a situation, it may appear to be desirable for all parties to be brought into the same arbitration proceedings, so as to save time and expense and avoid the risk of inconsistent awards. This approach represents what might be called the broad interests of justice. However, it does not necessarily represent the particular interests of all the parties to a dispute, who may not want other parties involved in “their” arbitration. Taking again the example of the construction contract, the employer does not wish to become involved in a complicated dispute between the main contractor and one or more sub-contractors; but simply look to the main contractor for compensation, based on the provisions of the main contract alone. National courts generally have the power to order parties to be joined in court proceedings when it is thought to be necessary or convenient. National laws could in theory also confer such powers of compulsion upon arbitral tribunals. However, to do so would offend against the consensual nature of the arbitral process. Such an approach could also lead to difficulties under the present regime for the international enforcement of awards. An arbitral tribunal or an arbitration procedure which is imposed upon parties can hardly be said to be “in accordance with the agreement of the parties” and recognition or enforcement of an award made in such circumstances may therefore be refused under the New York Convention. (If this power were exercised in accordance with the law of the country of the seat of arbitration, it might be

permitted.) An alternative approach is to bring about the joinder of parties by consent. This can be done via the adoption of arbitration rules providing for joinder or by separate agreement when an arbitration agreement is being drawn up. The LCIA Rules (Article 22.1) address this point in the following terms: “22.1 Unless the parties at any time agree otherwise in writing, the Arbitral Tribunal shall have the power … (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.” This rule enables the tribunal, upon the application of a single party, to join in one or more third persons who have consented to the joinder in writing. This relaxes the position under the general law whereby all existing parties to the arbitration (i.e. including the non-applicant party) would have to be parties to the joinder agreement. However, the provision remains unsatisfactory from the perspective of a main contractor sued by the employer under a construction contract, as the main contractor will want to be sure that the subcontractor can be brought into the same proceedings, whether or not he consents. The Swiss Rules also contain provisions for joinder. Article 4(2) allows a third party to request to join the arbitration proceedings without any supporting application by either of the parties to the arbitration. Unlike the LCIA Rules, no consent is needed. Some commentators have suggested that theoretically under the Swiss Rules, a tribunal could order the joinder of a third party, even if that third party is not a signatory to an arbitration agreement and where all existing parties object. Consolidation As to consolidation of separate arbitrations, some jurisdictions have enacted legislation providing for the possibility of court consolidation. Thus the courts of Massachusetts, New York, California and the Netherlands all have the power to consolidate arbitral proceedings where common questions of law or fact are involved. Of these jurisdictions, the Netherlands is unique in

providing for an opting-out approach (Article 1046 of the Netherlands Code of Civil Procedure). The NAI makes express reference to this right to contract out in its recommended clause in the case of international arbitrations. But court-ordered consolidation of arbitration remains the exception rather than the rule. Domestic industry arbitration rules have been less circumspect and provide for consolidation at the instance of the institution. The rules of some commodity associations such as GAFTA provide for a single arbitration between the first and the last party to the transaction when the dispute arises out of a “string” contract, with the award binding all contracting parties. The arbitration rules of the US National Association of Securities Dealers (now known as the Financial Industry Regulatory Authority) also provide for consolidation at the instance of the institution where separately filed claims are related. The ICC Rules (Article 4(6)), SCC Rules (Article 11), and Swiss Rules (Article 4(1)) cater for consolidation subject to conditions. However, in the absence of any express reference to consolidation in the chosen institutional rules, parties should seek to address this issue at the outset and not wait until a dispute has arisen. The idea of an all-embracing decision on any dispute seems more attractive and is more feasible at the negotiation stage than when a dispute has arisen and certain parties begin to see the tactical advantage of separate arbitrations. The most satisfactory solution is to ensure that the parties involved in, say, a major construction project, or in string contracts, execute an “umbrella” arbitration clause or agreement in which they specifically agree at the outset to be joined in arbitral proceedings between other parties to a clearly defined series of related contracts. This maintains the essential consensual element required for the arbitral process. A template setting out the operative provisions of such a clause/agreement is included at Appendix 5. To prevent problems being caused by the subsequent involvement of a subcontractor who was not envisaged at the time of executing such an arbitration clause or agreement, the main contract should stipulate that the main contractor must include the multiparty scheme in any future subcontract, and also provide that his failure to do so would be a breach of the main contract. Appointment of arbitrators in multi-party cases

Another issue predictably arising out of multi-party arbitrations is the need to balance the number of parties and the equal right of all parties to participate in the constitution of the arbitral tribunal. In the landmark Dutco decision in 1992,26 the French Supreme Court upheld a challenge to the jurisdiction of an arbitral tribunal based on the fact that the ICC had required two respondents with diverging interests to nominate an arbitrator jointly, over their objection, whereas the claimant had freely nominated its arbitrator. According to the French court, this breached a rule of international public policy in favour of equality: all parties should be on a level playing field with regard to the constitution of the tribunal. The main institutional rules have been amended to deal with this issue by permitting the institution to appoint the entire tribunal in the event that multiple parties cannot agree on a single nomination: see, for example, Article 10 of the ICC Rules, Article 8 of the LCIA Rules, Article 11(c) of the AAA Rules and Article 13(4) of the SCC Rules. Although not a perfect solution, this avoids the Dutco problem and removes a basis for challenging the recognition and enforcement of the award. The Chartered Institute of Arbitrators published Guidelines on MultiParty Arbitrations in 2006. Much remains to be done before a really successful formula for multi-party arbitration can be achieved – even if it is accepted that this is what parties generally want – before or after a dispute arises. In summary, whilst there was considerable support for it in the 1980s, compulsory consolidation is now recognised as being likely to create more problems that it solves, particularly at the enforcement stage. The ICC’s Guide on Multi-party Arbitration, published in 1982, and the subsequent report of its working party, refrained from suggesting model clauses and advised parties to seek specific legal advice. The problems that continue to arise in the multiparty/multi-contract context is one of the main topics under consideration in the current review of the ICC Rules. There is a proposal which is still being debated to have a separate code of provisions dealing with multi-party, multicontract and consolidation claims. Contract negotiators who contemplate the need to involve more than two parties in a single arbitration should try to cover the position expressly in their arbitration clauses. Appropriate solutions vary greatly according to the circumstances of individual situations, including the law and practice at the place of arbitration.

Class actions The concept of class actions, whereby a group of individuals affected by a breach of contract or a tort can combine and bring an action against the wrongdoer is well-known in the US and increasingly so in some European jurisdictions. Class actions are another aspect of the difficulties of dealing with multiple parties in arbitration. The interests of justice are served by providing a means for an individual to pursue a claim which that individual might otherwise be unable to advance due, for example, to lack of funds. The wrongdoer also does not have to deal with hundreds or possibly thousands of separate proceedings, but only one. Traditionally, class actions have been brought in the courts. However, in the US there have been some instances of class actions being dealt with through arbitration. The US Supreme Court in Green Tree Financial Corporation v Bazzle,27 supported the principle of class-wide arbitrations. The 2010 Supreme Court decision in Stolt-Nielsen28 requires evidence of intention to consent to class action arbitration. (The AAA and JAMS have provided for such actions; none of the other main institutions has such provisions.) The concept of arbitrating on a class-wide basis is still new in the US and it is too early to assess how it will develop. It is also very early to gauge whether and how it might be applied in the international context. Possibilities include disputes stemming from the mis-selling of consumer goods or financial products and services.

Adaptation of contracts and filling gaps In long-term supply agreements or major construction contracts, it is often stipulated that, at stated intervals (or in the event of unexpected supervening events), the parties will renegotiate certain essential terms of the contract. Such contracts often do not adequately provide for the consequences of a failure of such negotiations. In particular, is it the specific intent of the parties that an arbitral tribunal should have jurisdiction to establish revised terms? In Chapter 2: Choosing the applicable law, we commented that even if the arbitration clause provides for the arbitrators to act as amiables compositeurs, this does not necessarily confer upon them the jurisdiction to fill gaps or revise the terms of the contract. If the parties do intend to confer such a

power on the arbitral tribunal, they should establish in the contract itself a clear link between the revision clause and the arbitration clause. It should be noted, however, that some arbitration laws, for example Dutch law and Swedish law, specifically confer such authority on arbitrators. There are a number of techniques for doing so. Their reliability varies according to the contractual context and the applicable law and it is therefore not possible to make recommendations here that would be suitable for general application.

Confidentiality One of the reasons often cited for choosing arbitration over litigation is that arbitral proceedings are confidential. However, identifying and defining the extent of any obligation of confidentiality in arbitral proceedings has proved to be surprisingly controversial and has resulted in conflicting court decisions within common law jurisdictions, principally in England and Australia. In a series of cases culminating in the decision of the Court of Appeal in Ali Shipping29 and confirmed in Emmott v Michael Wilson & Partners30 the English courts have held that there are implied terms concerning confidentiality in each agreement to arbitrate. However, the terms are subject to certain exceptions, for example where disclosure is required in order to enforce the arbitration award in subsequent legal proceedings, or otherwise enforce or protect a party’s legal rights. By contrast to the approach of the English Courts, the High Court of Australia held in a 1995 case, Esso Australia Resources Ltd,31 that confidentiality was not essential to arbitral proceedings and therefore an obligation of confidentiality could not be implied as a matter of law. The parties are, of course, free to agree a provision in an arbitration agreement as to confidentiality but such an obligation should not be implied. The point made in Australia and some other jurisdictions is that although arbitration is a private process, that does not necessarily mean it is automatically confidential. The drafters of legislation and arbitration rules have dealt with the controversy surrounding the duty of confidentiality in differing ways. The English Arbitration Act 1996 does not include any express obligation of confidentiality as it proved to be too difficult and controversial to define. The

ICC Rules also do not contain an express obligation of confidentiality although they do state that the tribunal may take measures to protect trade secrets and confidential information. By contrast, the LCIA Rules (Article 30) require that all awards, materials produced for the purposes of the arbitration and all other documents produced by another party in the proceedings not otherwise in the public domain should be kept confidential. Similarly, the WIPO Rules contain particularly detailed provisions, reflecting the importance of confidentiality in relation to intellectual property disputes. The SCC Rules (Article 46) state that unless otherwise agreed by the parties, the SCC and the arbitral tribunal will maintain the confidentiality of the arbitration proceedings and the award. Interestingly, no reference is made to the parties’ obligation in this respect. The UNCITRAL Arbitration Rules state that an award may be made public if the parties agree or where disclosure is required of a party by legal duty, to protect or pursue a legal right or in relation to legal proceedings before a court or other competent authority. As a result of this legal uncertainty, if confidentiality is a particular concern to a party, the issue should be specifically addressed at the contract drafting stage.

Capacity of the parties to agree to arbitration This is a matter for the law of the party whose capacity is in question. For example, may a state or a state entity or a partnership or a private property owner enter into an arbitration agreement? In some cases, such questions are sufficiently important for a formal legal opinion to be required, or for a specific contractual warranty to be given. Authority to agree to arbitration The authority of representatives is generally a matter of the law of the person or corporate entity being represented. In some legal systems, questions of authority are governed by the law of the country in which acts of representation are carried out. The powers of independent agents or brokers should be examined with particular care. A recurrent problem arises in connection with arbitration clauses in corporate bylaws; under some national

laws, they are binding only if shareholders expressly accept them at the time of acquiring shares. The law governing the arbitration clause The proper law of the contract – whether it is contractually stipulated by the parties or determined afterwards by the arbitral tribunal – also generally determines the validity, scope and effect of the arbitration clause. The parties should therefore consider whether the arbitration clause meets the requirements of the applicable substantive law. If necessary, a different law may be chosen to govern the arbitration clause (e.g. where the award could be challenged in the courts whose domestic law governs the contract, as has been the case with India and Pakistan) (see Chapter 3: Choosing the place of arbitration).

Procedural law The modern consensus is that arbitrations should be conducted in accordance with the mandatory rules of the law of the place of arbitration. This need not be spelt out in the arbitration clause. Occasionally it may be acceptable to stipulate that the procedural law shall be that of the place of arbitration, including non-mandatory rules. Such a provision should, however, not be accepted without the benefit of expert local advice. Provisions to the effect that the arbitration should be conducted in accordance with the law of a country other than the place of arbitration are potentially dangerous (because they increase the risk of post-arbitration litigation in national courts) and should usually be avoided. Arbitrability of disputes If the dispute is not arbitrable under the law(s) applicable to the arbitration clause or (if different) the place of arbitration or the likely place of enforcement, any resulting award is likely to be unenforceable. The most frequent problems arise in relation to disputes that involve competition, bankruptcy and some intellectual property issues, as well as employment and distribution agreements. For example, a contract drafter in Europe should know that issues of European competition law may be finally decided only by

the European Court of Justice. Likewise, issues as to the validity of an entry on a public register (such as a registered patent or trade mark) will be for the appropriate national courts to determine. Exclusion of appeals The ICC and LCIA Rules both contain provisions to the effect that, by agreeing to arbitration thereunder, the parties waive all recourse or rights of appeal insofar as such waiver is legally permissible. Parties who want finality must ensure that the rules to which they refer (or the arbitration clause itself) contain a similar provision. For example, the UNCITRAL Arbitration Rules do not contain an express provision and appropriate language should be included in the clause. UNCITRAL now provides suggested wording which is included in the model clause in Appendix 1. This crucial feature must, however, be examined in light of the legal position at the place of arbitration. The provision in the ICC and LCIA Rules has been held to be effective as a matter of English law to exclude appeals to the court on the merits. In Switzerland, on the other hand, it is generally accepted that the possibility of total exclusion of any recourse to the Swiss courts (including challenges on the grounds of excess of authority or violation of the right to be heard) requires an express provision in the arbitration clause. (Since the general rule in Switzerland is that awards may not be challenged on the merits, the desirability of such a total exclusion is in any event questionable.) Generally, it is considered that contractual exclusion clauses cannot remove all possible recourse to the courts in most jurisdictions, as some limited recourse is mandatory. Costs The power of the arbitral tribunal to award costs in an international arbitration arises from a combination of the agreement of the parties, the law governing the arbitration agreement, the law of the place of arbitration and the law of the place where recognition or enforcement of the award may be sought. The Rules of the ICC, LCIA, UNCITRAL and the AAA/ICDR, as well as other institutions, each allow arbitral tribunals a wide discretion to award costs, including the fees of the parties’ legal representatives. Nevertheless, it is still important to consider the way in which arbitral tribunals in a particular country are likely to exercise their discretion, since

this varies from place to place. This should be taken into consideration when choosing the arbitrators as their differing attitudes (dependent upon their nationality and legal background) are likely to influence how they exercise their discretion. The English tradition, for example, is to award the costs of legal representation to the successful party up to a “reasonable” level; the American tradition, as well as the practice in many Civil Law countries, is to award little or nothing. Occasionally, parties wish to include an express provision in the arbitration clause to the effect that full costs shall be awarded to the successful party (on the theory that this may inhibit the presentation of speculative claims) or, to the contrary, that each side shall bear its own costs (on the assumption that any dispute will be a gentleman’s disagreement and that in the interest of future relations insult should not be added to injury). Although in England Section 61 of the Arbitration Act 1996 gives the arbitral tribunal a discretion to award costs, Section 60 provides that any provision in an agreement for the arbitration of future disputes that a party or the parties shall in any event pay their own costs, is void. (It has also been suggested that this is because such a provision might be inserted deliberately in standard form terms of business to deter consumers from making claims against a large and powerful organisation.) It is difficult therefore to specify any general practice as to the treatment of costs in international arbitrations.

Contracts with state parties There are a number of issues which arise from a dispute resolution perspective when negotiating contracts with a state or its agencies. First, the commercial party wants to maximise the enforceability of any arbitration award, and so should attempt to obtain effective waivers of state immunity. In addition, the commercial party should consider what (if any) treaty arrangements are in place for the protection of its investment which may provide for the arbitration of disputes directly against the host state of the investment over and above private contractual arrangements such as BITs. Waiver of state immunity The only way to place a sovereign party on an equal footing with a private

one is to ensure that there is a waiver of immunity from execution as well as immunity from jurisdiction, the latter being implied by the arbitration clause itself. Such a waiver of execution may be expressed as follows: “The [sovereign party] hereby waives any right of sovereign immunity as to it and its property in respect of the enforcement and execution of any award rendered by an Arbitral Tribunal constituted pursuant to this agreement.” This language has been suggested by ICSID. However, states are reluctant to agree to such clauses and, even when obtained, such clauses may not be relied upon in all situations. The law of sovereign immunity is complex and varies from one legal system to another. Local and international law advice should therefore be obtained with respect to any contract involving a state party. Treaty arbitration The increase in the frequency and variety of disputes under investment treaties, both BITs and MITs, continues unabated. There are clearly limits on what can be done at the contract drafting stage to provide for arbitration under BITs or MITs. Nevertheless, parties should be aware of their existence as part of the underlying dispute resolution protections when transacting with a state and consider providing for arbitration with the contracting party in accordance with one of the same sets of rules available under the relevant treaty. This would maximise the possibilities of consensual consolidation or, at the very least, the establishment of compatible tribunals. Furthermore, if, for example, a UK company is considering investing in Japan, as there is no BIT in existence between the UK and Japan, the UK company might consider routing its investment through a subsidiary in a jurisdiction which has entered into an investment protection agreement with Japan. Partly in recognition of this type of issue in addition to tax planning, certain jurisdictions, including the Netherlands and Luxembourg, have become increasingly popular as places of incorporation. Structuring an investment so as to take advantage of applicable BITs and MITs has become increasingly common as it can provide an investor with access to protections in the event of state intervention such as the expropriation of assets without full compensation or unfair, arbitrary or non-transparent legislative,

regulatory or judicial treatment affecting the value of the investment. At a broader level, companies should always be alert to the possibility of structuring and restructuring investments to take advantage of investment treaty protection. To offer an example, if a UK company is considering investing in the Democratic Republic of the Congo, as there is no BIT in existence between the UK and the DRC, the UK company might consider routing its investment through a subsidiary incorporated in a jurisdiction which has entered into an investment protection agreement with the DRC, such as Luxembourg. Partly in recognition of this type of issue in addition to tax planning, certain jurisdictions, notably the Netherlands as well as Luxembourg, have become increasingly popular as places of incorporation. Structuring and restructuring an investment so as to take advantage of applicable BITs and MITs has become increasingly common as it can provide an investor with access to protections in the event of state intervention such as the expropriation of assets without full compensation or unfair, arbitrary or non-transparent legislative, regulatory or judicial treatment affecting the value of the investment. In addition, investment treaties typically grant investors the right not to be discriminated against (so-called “national” or “most-favoured nation” treatment), the right to transfer payments in relation to an investment out of the host state without hindrance, and the right to have state undertakings respected. These substantive protections are in turn given teeth through the granting to investors of a direct right of recourse to international arbitration against the host state should any of the treaty protections be violated.

Interim measures of protection Contract negotiators can accomplish much in relation to the availability of interim measures. Most sets of arbitration rules leave open the possibility of court-ordered provisional remedies such as attachments or injunctions, with the result that the availability of such remedies is a matter of national law. (The ICSID Rules seem to be an exception: Rule 39(5) precludes pre-award court intervention unless the parties have agreed otherwise.) Some US courts have been reluctant to grant provisional remedies, on the grounds that to do so would be to interfere with the arbitral tribunal’s jurisdiction; the French courts have established a distinction between applications made prior to the

designation of the arbitral tribunal (which are freely available) and those made thereafter (which are available only in exceptional circumstances); and numerous other legal systems have not pronounced on the subject. The general trend is that court-ordered provisional remedies are not considered to be inconsistent with an agreement to arbitrate. For example, this is recognised expressly in the ICC, LCIA and UNCITRAL Rules. In cases where it appears particularly important that such remedies should be available it may, however, be advisable to avoid uncertainty and delays by making an express contractual provision to that effect. Such a provision may be drafted as follows: “By agreeing to arbitration in accordance with this clause, the parties shall not be precluded from seeking interim measures of protection from a court of competent jurisdiction or other judicial authority, subject always to satisfying the relevant procedural or other requirements imposed by such court or other judicial authority.” In the 1998 case of Van Uden,32 the ECJ was asked to consider whether it was possible to seek interim relief from a court in an EU member state pursuant to Article 24 of the then Brussels Convention where the main dispute resolution method was arbitration. This had always been considered to be unavailable since by Article 1(2) the Brussels Convention is expressed not to apply to arbitration proceedings. (As noted earlier, the position has changed since the West Tankers case.) Van Uden had instituted arbitration proceedings in the Netherlands for breach of contract by Deco Line in refusing to pay a number of invoices. Faced with delays in constituting the tribunal, Van Uden applied to the Dutch courts for interim relief, on the basis of Article 24 of the Brussels Convention which deals specifically with provisional and protective measures. It was held by the ECJ that the existence of an arbitration clause will not exclude an application for interim measures from the scope of the Brussels Convention. Such measures are ordered in parallel to arbitration proceedings and subject to establishing a sufficient link between the nature of the interim relief sought and the territorial jurisdiction of the court, interim relief may be awarded notwithstanding that the substantive dispute is subject to arbitration within, or outside, the EU. It may be even more relevant to specify that the arbitral tribunal has authority to make interim orders. Such authority is in fact already granted

under most arbitration rules, but many international arbitrators are hesitant to use it, not wanting to create the impression that they are prejudging the merits. An express provision may help to change this perception and demonstrate that the availability of effective provisional relief, which may be crucial, is part and parcel of the expectations of the parties in agreeing to arbitration. Such a provision may read as follows: “Without prejudice to the availability of remedies in aid of arbitration as may be available under the jurisdiction of a competent court or other judicial authority, the arbitral tribunal shall have full authority to grant interim measures of protection and to award damages for the failure of a party to respect the arbitral tribunal’s orders to that effect.” Getting such provisions incorporated into a contract is easier said than done. At the time of negotiating an agreement, at least one party (such as the employer in a construction contract) may be unwilling to agree in advance to potentially far-reaching measures, such as provisional disposition of property, in the event of a dispute. And even if such a provision may be accepted, there are many situations in which its practical effect is likely to be disappointing. On the one hand, the prospect of obtaining a meaningful provisional order from the arbitral tribunal may be slight due to the urgency with which it must be granted and time that may be taken to establish the arbitral tribunal. On the other hand, the only national court in a position to grant provisional relief may be located in the home country of one of the parties, and unlikely to treat the matter with sufficient neutrality and dispatch. In the discussions leading to the 1998 revisions of leading institutional rules, attempts to incorporate rules providing for “emergency arbitrators” or “delegates” to make interim measures where the tribunal had not yet been formed foundered as being impractical, possibly excluding the right of recourse to the courts, and of questionable enforceability under the New York Convention. In 2006 however, the AAA provided that for arbitrations conducted under arbitration agreements entered into on or after 1 May 2006, emergency measures of protection would be available prior to the constitution of the tribunal. Under the LCIA Rules, if there is exceptional urgency, a tribunal can be formed on an expedited basis if an application is made to the LCIA

Court. The SCC now provides for the appointment of an emergency arbitrator under its Emergency Arbitrator Rules which came into force on 1 January 2010. The emergency arbitrator can be appointed within 24 hours from the application for interim measures and must make a decision within five days of the appointment. Furthermore – and most controversially – the 2006 revision of the UNCITRAL Model Law makes provision for a party to seek ex parte interim measures from the arbitral tribunal, i.e. without giving notice to the other party.

“Split” clauses It is sometimes thought desirable to provide for certain specified disputes or remedies to be referred to arbitration and others to litigation before the courts. In this Guide we have referred to such provisions as “split” clauses. If such a clause is to be incorporated in a contract, great care should be taken to avoid a preliminary dispute arising between the parties as to the nature of the dispute and, consequently, the procedure to be followed. The essential point to consider when drafting the clause is for the parties to identify the types of dispute or remedy which they do not want to submit to arbitration and then to adopt a suitable form of wording for the purpose. Although the very nature of a split clause makes it difficult to propose a standard form clause of any practical use, the following comments may be of assistance to the drafter: • provision may be made for a dispute arising under particular clauses of the relevant contract to be referred to litigation before the courts rather than arbitration; • alternatively, a general provision may be made for all disputes arising in connection with the relevant agreement to be referred to arbitration whilst: – expressly allowing the parties to seek interim or interlocutory relief from a national court (see above), and/or – expressly providing for court proceedings to be brought insofar as may be necessary for the enforcement of any arbitral award, and/or

– expressly providing that court proceedings may be brought where the arbitrators have indicated that they are not competent to grant relief of the kind sought and that no other appropriate relief can be granted by them; • alternatively, the arbitration clause might provide expressly for one party (such as the lender in a financial transaction) to have the unilateral right to bring court proceedings in respect of particular types of dispute (for example non-payment of an interest instalment). This common type of clause would seem to survive academic criticism that it infringes the principle of mutuality. Not all jurisdictions however accept the validity of this type of clause (e.g. the PRC). In those jurisdictions, if a party seeks to enforce an award obtained on the basis of such a clause, they may fail. Therefore the contract negotiator should check with local lawyers at the place(s) of potential enforcement to check if such clauses are accepted.

Detailed procedural rules The modern trend, manifested in the best known sets of arbitration rules, is to give arbitral tribunals a wide discretion in matters of procedure (in most cases subject to the agreement of the parties). Depending on the characteristics of the arbitrators, very different approaches may be adopted. The ICC Rules, like the UNCITRAL Arbitration Rules, are relatively openended. The LCIA Rules are more detailed, but make it clear that most aspects of the rules are subject to contrary agreement between the parties. In fact, any set of rules which sets out too many mandatory rules of procedure runs the risk of being unpopular in the international arena, as lawyers from different legal cultures may feel that they are not neutral. Yet it may be an advantage – and certainly it may make life easier for the arbitrators – to make clear from the outset such matters as how witnesses may be heard or the extent to which discovery of documents is to be allowed. A widely held misconception is that the way in which the evidence will be presented to an arbitral tribunal depends entirely on the place of arbitration. Whilst mandatory rules of the lex arbitri (the law governing the arbitration) must be respected in order to avoid any risk of the award being set aside, it is unusual for such law to forbid the parties from agreeing on the way in which

evidence is presented to the arbitral tribunal. Modern arbitration proceedings often begin with a discussion between the arbitral tribunal and the parties’ representatives as to the procedure to be followed, in particular the way in which evidence is to be presented. There are essentially four methods of presenting evidence to an arbitral tribunal and these may be categorised as: • production of contemporaneous documents; • testimony of witnesses of fact; • opinions of expert witnesses; and • inspection of the subject-matter of the dispute. These methods can be combined in a variety of ways to produce a tailormade solution for the procedure and presentation of evidence, designed to suit the particular case. It is possible to ensure equality of treatment and due process by imposing some form of agreed structure on the arbitration. It may still be considered tempting to refer to the rules of procedure of the place of arbitration, but this can be dangerous. Some national arbitration laws leave issues of procedure to the unfettered discretion of the arbitrators, with the result that a reference to local procedural rules may be understood as a reference to the rules of procedure applied by the local national courts. Such rules may not only be inappropriate in the context of an international arbitration, but may also be unfamiliar to the parties’ representatives and indeed to the arbitrators themselves. The preferred approach is to consider whether the types of dispute that may be anticipated, given the nature of the contract, lend themselves to a particular procedural framework, and to seek to establish an appropriate procedure in the arbitration clause. In many, if not most instances, no such procedural regime commends itself, and the parties are content to rely on the discretion of the arbitral tribunal within the overall framework of the institutional or other procedural rules. But occasionally the situation is different. For example, joint venture contracts involving a passive partner and a managing partner often provide that the latter is obliged, in the event of any dispute, to disclose operational, technical or financial information. In practice, the IBA Rules of Evidence, which were first introduced in 1999 and revised in 2010, are increasingly used by parties to establish a procedure

intended as a synthesis of common law and civil law approaches. The Rules, which are intended to supplement the chosen rules of arbitration, set out detailed mechanisms for the production of documents and the presentation of evidence by witnesses of fact and experts (who may be appointed by the arbitral tribunal or called by the parties). If the Rules are to be adopted, the IBA suggests the following formulation as an addition to the arbitration clause selecting the appropriate alternative: “[In addition to the institutional, ad hoc or other rules chosen by the parties,][t]he parties agree that the arbitration shall be conducted according to the IBA Rules of Evidence as current on the date of [this agreement/the commencement of the arbitration].” Alternatively, it is common to provide for the use of the IBA Rules at an early stage in the arbitration at the same time as addressing other procedural matters, often during a preliminary hearing before the tribunal.

26 27 28 29 30 31 32

Siemens AG and BKMI Industrienlagen GmbH v Dutco Construction Co., Cour de cassation (1re Ch. civile), 7 January 1992. 539 U.S. 444, 460, 123 S. Ct. 2402, 156 L. Ed. 2d 414 (2003). Stolt-Nielsen S.A., et al., Petitioners v AnimalFeeds International Corp. 130 S.Ct. 1758. Ali Shipping Corporation v Shipyard Trogir [1998] 2 All ER 136. [2008] EWCA Civ 184. Esso Australia Resources Ltd v Plowman [1995] 128 ALR 39. Van Uden Maritime BV v Firma Deco-Line [1998] ECR I-7091.

Chapter 8

Choosing ADR/tiered dispute resolution methods Drafting tips

• Is a tiered dispute resolution process necessary or helpful for this type of contract? • If so, what form(s) of tiered dispute resolution should be adopted? • Should the tiers be mandatory or voluntary? For either option, ensure there are effective deadlines. • Should there be an express provision restricting the use of information in any later court or arbitration proceedings? • Should there be an express provision limiting the role of any neutral adviser in any later court or arbitration proceedings? Remember: – starting an ADR process will not (without specific agreement) stop time running for limitation purposes; and – a binding arbitration clause or reference to some other binding dispute resolution procedure must be included, to take effect if the ADR process fails. Prompted by a growing awareness of alternatives to the traditional dispute resolution methods of litigation and arbitration, it is increasingly common to find staged or tiered dispute resolution procedures in international contracts. These stages or tiers specify one or more “alternative dispute resolution” or ADR methods, coupled with one of the traditional methods (i.e. litigation or arbitration) as a fall-back. ADR is now widely used in many countries, partly through the establishment of organisations dedicated to the promotion and use of ADR

and increasingly through court mandated schemes. The Middle East and Far East have a long tradition of conciliation as opposed to adversarial dispute resolution which also encourages the spread of ADR. The emergence of partnering and alliancing contracts which approach contracts from a nonadversarial point of view either because of the length of the contract or possibility of repeat work, also supports the use of these techniques. The expression ADR is sometimes taken to include arbitration. This causes confusion. Whilst arbitration is undoubtedly an alternative to recourse to national courts, it is nevertheless intended to lead to a binding and enforceable determination of a dispute. In this sense it should be contrasted with the many forms of ADR which involve a consensual (rather than adjudicative) process, often with the involvement of a neutral third party. However, as stated earlier, ADR should not be seen as an “alternative” in the sense of being a substitute for the main dispute resolution process. The contract must contain an effective mechanism for referring the dispute to arbitration or to litigation in the courts, in case the consensual approach proves unsuccessful, within a prescribed period of time. Some parties express concern that suggesting ADR may be taken by their opponent as a sign of weakness. This attitude is, however, far less prevalent than it was. Indeed, in mainstream litigation in the English High Court, parties must confirm that there has been a genuine consideration of ADR before they are permitted to proceed to trial. In any event, any fears of appearing weak may be allayed by incorporating an ADR clause into the contract initially. Whilst most ADR procedural rules provide that admissions or concessions made by a party during the ADR process cannot be used against that party in any subsequent proceedings, there may be a residual concern about revealing one’s hand in case the process later breaks down. Finally, it is sometimes argued that ADR attempts to formalise negotiation methods that have long existed on an informal footing, and therefore has the effect of reducing the available avenues for compromise. This will, however, largely depend upon the attitudes and abilities of both the parties and the neutral third party.

Principal forms of ADR

There are many variations on the types of ADR described below. One of the values of the process is that it may be precisely tailored in each case to suit the parties’ specific requirements. The most widely known forms of ADR are mediation, conciliation, minitrial, non-binding arbitration, expert opinion, early neutral evaluation and adjudication. Most forms of ADR share the same essential features. The process is intended to encourage representatives of the parties to recognise the weaknesses of their own case and the strengths of their opponent’s case, as well as the wider commercial implications of the dispute. By negotiating face-to-face, concessions can be made and opportunities for compromise explored without prejudicing the parties’ legal rights, at least until some form of binding agreement is reached. But it is the role of the third party, someone who is independent of the parties and able to view the dispute objectively which is usually the crucial element. The success of any particular ADR process will largely depend upon that individual’s skills in bringing the parties together and finding areas of agreement. The terms “conciliation” and “mediation” are not terms of art. They are frequently used interchangeably, and there is no generally accepted or consistent usage. Hence, the definitions offered below are not by any means universally agreed. Negotiation: Contractually mandated “good faith” negotiations between the parties may be viewed as a form of ADR. A clause to that effect will usually provide for a “cooling off” period and prevent recourse to arbitration (or litigation) before a certain time period has elapsed. It may be effective in focusing the parties’ minds on the advantages of settlement at the initial stages of the dispute rather than on the tactical advantages to be gained by the commencement of proceedings. It must, however, be subject to a time limit to prevent a recalcitrant party from arguing that arbitration cannot be commenced because negotiations are continuing. Common time periods are 30 or 60 days. It is questionable whether the triggering of a contractual negotiation period will stop time running for limitation purposes, without express agreement to that effect. Mediation: An impartial third party employed by the parties to act as a mediator does not usually make recommendations or render decisions. Rather, he or she assists the parties to negotiate their own solution to the

dispute. The parties can agree on whether the mediator is to consult with them separately (known as “caucusing”), jointly or both. A mediator cannot compel the parties to reach a settlement, though he or she may take a very actively persuasive approach. Conciliation: A conciliator is also appointed by agreement between the parties but will usually take a more active role in the negotiations than a mediator and may well make recommendations as to what he or she would regard as a fair resolution of the dispute. In order to establish the parties’ respective negotiating positions, the conciliator should be allowed to see the parties privately. However, as in the case of the mediator, a conciliator cannot compel the parties to reach a settlement and has no power to impose a binding “award” on the parties. Mini-trial/executive tribunal: The parties’ legal representatives present their respective cases (in abbreviated form) to a panel, usually consisting of a senior executive from each party with a neutral chairman (often a retired judge or other senior lawyer) presiding. The chairman of the panel may simply ensure fair play, or may intervene to help the parties to resolve the problem. If the latter approach is adopted, the process is sometimes referred to as “moderation”. Although the term “trial” is a misnomer, this process does, as the name suggests, involve a more detailed examination of the strengths and weaknesses of the parties’ respective legal positions. It is also likely to result in a non-binding decision which the parties may use as the basis of, or a factor in, further settlement negotiations. Whilst it is tempting to recommend use of the process at the earliest possible stage (so as to maximise savings of costs), it is unlikely to be effective until after at least an initial exchange of pleadings and disclosure of documents. Non-binding arbitration: The process is sometimes referred to as “trial-run” arbitration. An arbitrator appointed by the parties may make a finding on a particular aspect of the case, or make a reasoned award based on a limited review of documents submitted by the parties and other evidence. His or her decision is not binding but the parties may subsequently agree to accept it. Expert opinion or fact-finding: The parties may at any stage of a dispute seek the opinion of an independent expert (such as a specialist in a given technical

field) on one or more aspects of the case. The parties are not bound by the opinion but may subsequently agree to accept it. The ICC’s International Centre for Expertise provides a mechanism for such expert evaluation. Early neutral evaluation: As an extension of the use of experts on technical issues it may be desirable to obtain an independent evaluation of the parties’ respective cases legal issues as well as factual or technical matters in relation to anticipated or actual legal proceedings. Mediation-arbitration: The parties may agree that they will seek to settle a dispute through mediation. However if that fails, they will proceed to the main dispute resolution method of arbitration. In these circumstances, one might expect the mediator and the arbitrator to be different people. That tends to be the way the different methods are handled in English/Commonwealth countries. However in some instances, notably under the CIETAC Rules, it can be the same person. Adjudication: The process can be very short (28 days) with the parties putting forward their case in writing and possibly a hearing taking place. The decision of the adjudicator, unlike other forms of ADR can be binding and must be complied with. However, the objecting party can reserve their position and re-open the dispute subsequently, although they must initially comply with the decision. This form of ADR has been used in construction contracts to provide a quick solution to disputes which might otherwise obstruct and delay major projects. Review boards: Senior representatives from the parties and externals may form a board at the start of a major contract. There can be recourse to the board if the dispute escalates to that level. The board usually visits the site at regular intervals to keep itself updated on the progress so that when a dispute arises, the board members do not have as steep a learning curve in learning of the project as if they had just been appointed.

ADR rules and procedures Institutions such as the ICC, LCIA, AAA, CIETAC, ICSID and UNCITRAL have established ADR rules in one form or another which may be adopted by

the parties in their contracts. Specialist ADR bodies such as the Centre for Effective Dispute Resolution (CEDR) in the UK and the International Institute for Conflict Prevention and Resolution (CPR) in the United States have developed their own mediation and other rules and procedures.

Model clause The exercise of drafting a “model” ADR clause illustrates the nature of the ADR process, namely that it depends for its success largely upon the willing co-operation of the parties. Provisions requiring parties to resolve disputes amicably with or without the intervention of a third party can seem hollowsounding. An ADR clause may not be able to compel a party to approach the resolution of a dispute with an open mind, but a structure can be devised within which given a spirit of co-operation between the parties a solution can be found which is acceptable to all concerned. The clause may refer to various matters (for example, procedural aspects) which are to be agreed by the parties or determined by the third party after the dispute has arisen. The clause itself must provide a framework within which either party may invoke the ADR process without such a step appearing as a sign of weakness or lack of confidence in its strict legal position and, most importantly of all, must contain an effective mechanism for referring the dispute to arbitration or some other formal means of resolution if the ADR process breaks down within a prescribed period of time. Ultimately, neither institutional nor general purpose clauses should be used without thoughtful review and tailoring to specific circumstances, having regard to the nature of the contract and the issues that may arise. A draft clause is suggested – again cautiously – in Appendix 4.

Chapter 9

Drafting the arbitration clause It is always possible to draft sophisticated arbitration mechanisms. Generally, however, we recommend that parties pressed for time should adopt the rules of one of the major arbitration institutions. Appendix 1 sets out the model clauses of selected institutions and Appendix 2 illustrates how some of them deal with some of the basic choices to be made when deciding upon the arbitration process. We have reproduced below, for ease of reference, the specific drafting tips suggested at the beginning of each chapter. We also include additional general drafting tips aimed at avoiding pitfalls. To illustrate and emphasise what contract negotiators should avoid, we set out real-life examples of “pathological” clauses. For those most pressed for time, we also set out a general purpose institutional arbitration clause. The IBA is seeking to provide guidance in its proposed “Guidelines for Drafting International Arbitration Clauses” which at the time of writing are subject to consultation within the arbitration community. Choosing the applicable law: Chapter 2 • Points to consider in choosing the governing law for the underlying contract: – single law? If so, national law or general principles of law/common principles of national laws? – more than one law? If so, which is to take precedence or are they to be concurrent? • Does a separate law governing the arbitration agreement need to be specified? If so, which? • Is the contract with a state or state entity? If so, should there be a

“freezing” clause or a stabilisation clause? • Should the arbitrators be given power to act as amiables compositeurs? For examples of how selected arbitration rules deal with this issue, see Appendix 2. Choosing the place of arbitration: Chapter 3 In choosing the place (seat) of the arbitration, consider the following: • Is the country in question a signatory to the New York Convention? • Has the country in question adopted the UNCITRAL Model Law? If it has, are there any significant qualifications to its adoption? If it has not, are its procedural laws up to date and arbitration-friendly? • What is the approach of the local courts, e.g. towards enforcing the parties’ agreement to arbitrate, supporting the arbitration process, and enforcing awards? Are they jealous guardians of their own jurisdiction and powers, or co-operative? Should a clause be included to cater specifically for enforcement of the agreement to arbitrate, limiting any review by the courts to those in the place of arbitration? • Does the proposed country have a sufficient pool of resident experienced and qualified arbitrators? • Will all those likely to be involved in the arbitration be able to travel easily to and from the arbitration venue? • Can any logistical issues be satisfactorily dealt with? For examples of how selected arbitration rules deal with this issue, see Appendix 2. Appendix 6 lists a number of countries from which the place of arbitration could sensibly be chosen, subject to considerations such as the choice of governing law, etc. Choosing the language of the arbitration: Chapter 4 • Specify the language of the arbitration proceedings in the arbitration clause itself.

• When choosing which language to specify, consider the following: – the applicable law of the contract; – the place (seat) of arbitration; – the language of the contract document(s); – the language of other documents likely to be relevant in any dispute; – the mother tongue of party representatives and likely witnesses; and – the ability of arbitrators/counsel to work in the designated language. For examples of how selected arbitration rules deal with this issue, see Appendix 2. Choosing the rules: Chapter 5 • Consider whether an ad hoc procedure or institutional rules are to be adopted. • Consider adopting the UNCITRAL Arbitration Rules. • If considering ad hoc rules, consider selecting an institution to provide administrative support for the process, as well as appointing arbitrators in default of party selection. Ensure provision is made for (either in the clause or elsewhere in the contract) or consideration given to matters such as: – the capacity/authority of the parties to agree to arbitration; – the arbitrability of disputes under the law applicable to the arbitration clause and, if different, the place of arbitration and/or the likely place of enforcement; – the steps necessary to commence the arbitration; – the appointment of arbitrators; – possibly the timetable for pleadings (and the production of documents and exchange(s) of evidence); – the availability of interim relief, either from the arbitral tribunal or the courts; and

– the finality of the award (e.g. excluding rights of appeal). • If considering institutional rules do not try to modify or adapt them without seeking specialist advice. Consider adopting the IBA Rules on Evidence for matters not otherwise addressed in the clause itself (or procedural rules). Choosing the arbitrators: Chapter 6 • Identify the number of arbitrators, whether in ad hoc or institutional arbitration, or leave open (i.e. one or three)? – sole arbitrator for simple, low-value contracts – three arbitrators for complex, high-value contracts – if three arbitrators, decide how they are to be appointed and what is the deadline for the process · each party chooses one with the third being chosen by the “party” arbitrators? · each party chooses one with the third being appointed by an institution? · all three chosen by an institution? · other method? • Is it useful to identify criteria which the arbitrators are to satisfy? If so, beware of over-specificity. • Check nationality requirements/exclusions (such as under institutional rules) for sole or presiding arbitrators. Are they in compliance with the applicable law? For examples of how leading arbitration rules deal with this issue, see Appendix 2. Choosing mechanisms to deal with specific situations: Chapter 7 • Are more than two entities involved in the transaction or project? If so, consider including specific joinder and/or consolidation provisions. • Is confidentiality likely to be a concern? If so, consider inserting an

express clause unless a relevant institution’s rules deal with the issue already. • Is it necessary to make express provision for interim measures? • Is the contract with a state party? If so, what is the position on state immunity? • If the transaction relates to an investment, consider structuring the investment via a country with which the host country has a BIT. Choosing ADR/tiered dispute resolution methods: Chapter 8 • Is a tiered dispute resolution process necessary or helpful for this type of contract? • If so, what form(s) of tiered dispute resolution should be adopted? • Should the tiers be mandatory or voluntary? For either option, ensure there are effective deadlines. • Should there be an express provision restricting the use of information in any later court or arbitration proceedings? • Should there be an express provision limiting the role of any neutral adviser in any later court or arbitration proceedings? Remember: – starting an ADR process will not (without specific agreement) stop time running for limitation purposes; and – a binding arbitration clause or reference to some other binding dispute resolution procedure must be included, to take effect if the ADR process fails.

Incorporation by reference Special mention should be made of the “short cut” of incorporation by reference. Recourse to arbitration is possible without including an arbitration clause in the contract. An agreement may be reached that a transaction will be subject to the general conditions of a particular industry or corporation. Such

an approach obviously saves time and enables parties to adhere to a complex contract by a rapid exchange of faxes, emails or other forms of communication. And if such general conditions include an arbitration clause, their acceptance may well be effective to create arbitral jurisdiction. Some precautions are nevertheless required. • First, this approach makes it necessary to check not only the clarity of the reference to the general conditions, but also the sufficiency of the arbitration clause contained in those conditions. Some arbitration clauses found in the small print of general conditions appear to have been designed for another age. • Secondly, the courts of many countries are suspicious of an incorporation by reference mechanism. They wonder (often rightly) whether in agreeing the general conditions the parties gave any thought to the fact that they were submitting future disputes to arbitration, particularly abroad. As a result, national courts are more likely to decline to give effect to such an arbitration clause than when they are confronted by a clause adopted by an express provision in the contract. • In a consumer or employment context, it may be that arbitration clauses will deprive a weak party of basic procedural safeguards. Forum selection clauses will not be given effect by the US courts in consumer or employment cases unless the clause has been agreed after the dispute has arisen or if it grants the consumer/employee a right to sue or be sued at his/her place of domicile. Similar protection for consumers and employees in Europe is provided by the provisions of Brussels I. • We therefore recommend that, even if parties seek to create an instant contract by referring to pre-existing general conditions, they should if possible make an explicit reference to the arbitration provisions in those conditions. The results need not be cumbersome, as in the following hypothetical example: “We agree to deliver FOB your vessel at Trondheim, between 5 and 15 January 2015, 5000 tonnes grade 3 quality pulp. Current General Conditions of Scandinavian Pulp Exporters Association to apply. Arbitration under Rules of Stockholm Chamber of Commerce Arbitration Institute, as per Clause 14 said General Conditions. Please notify your acceptance by return.”

• A common problem for parties using this approach – which is intended to be lightning quick and therefore informal – is that senders and recipients of such messages seldom check whether their counterparts have requisite authority to bind the entity they represent. See Chapter 7: Choosing mechanisms to deal with specific situations.

Avoiding pitfalls and “pathological” clauses No discussion of the art or science of drafting arbitration clauses would be complete without mentioning pathological clauses, those where – despite the best intentions of the drafters – a hopeless muddle results. Numerous real-life examples serve as a warning to those who might be tempted to ignore the guidance in commentaries such as this. Examples include: • “In case of arbitration, the ICC Rules of Arbitration shall apply; in case of litigation, any dispute shall be brought before the Courts of England” • “Arbitration, if any, by ICC Rules in London” • “All disputes arising in connection with the present agreement shall be submitted in the first instance to arbitration. The arbitrator shall be a well-known chamber of commerce (like the International Chamber of Commerce) designated by mutual agreement between buyer and seller” • “Disputes hereunder shall be referred to arbitration, to be carried out by arbitrators named by the International Chamber of Commerce in Geneva in accordance with the arbitration procedure set forth in the Civil Code of Venezuela and in the Civil Code of France, with due regard for the law of the place of arbitration” • “All disputes to be resolved through arbitration by the AA” Such provisions – however well-intentioned – can result in confusion, delay, additional expense and frustration. Therefore: • Do not equivocate. If the parties want arbitration to be an exclusive remedy, they must make that clear. If they want arbitration as an available remedy, although not necessarily exclusive, they should make clear that if one of them opts for arbitration, the other may not

neutralise the proceedings by going to court. • Do not designate an appointing authority without first verifying its willingness to accept that responsibility. Parties have found to their regret that judges in a neutral country have declined to become involved in a dispute between foreigners, with the result that the arbitration agreement becomes inoperable and the claimant is left with the prospect of litigating before national courts in what may be hostile territory. • Do not attempt to combine irreconcilable procedural laws. Quite often, negotiators reach unfortunate compromises, such as accepting avenue in country X in return for application of the procedural law of country Y. If the law of country X contains mandatory provisions with respect to any arbitrations taking place within that country, and those are inconsistent with the laws of country Y, intractable problems may arise. • Do not accept a reference to rules or institutions unless you are certain that they exist and that they are acceptable. It is surprising how often contracts refer to non-existing institutions, or to institutions that have no arbitration rules, or to a known institution but using an incorrect appellation. • Do not try to improve on the model clauses of arbitral institutions unless you are sure of what you are doing. There is always the risk that if model clauses are amended, the institution will refuse to administer the arbitration. • Do not use shorthand if this results in any ambiguity which might be exploited by a recalcitrant defendant.

A general purpose institutional arbitration clause Although the safest course is to adopt the language recommended by the institution in question, a general purpose clause might read as follows: “In the event of a dispute, controversy or claim arising out of or in connection with this contract, including any question regarding its existence, validity or termination (a Dispute), the Dispute shall be

referred to and finally resolved by arbitration under the [•] Rules, which Rules are deemed to be incorporated by reference into this clause. The number of arbitrators shall be [one/three] unless the parties agree otherwise in writing. The seat, or legal place, of arbitration shall be [city and/or country]. The language to be used in the arbitration proceedings shall be [•]. [The parties hereby agree that any restriction in the Rules upon the nomination or appointment of an arbitrator by reason of nationality shall not apply to any arbitration commenced pursuant to this clause.]* By agreeing to arbitration under this clause, the parties shall not be precluded from seeking interim measures of protection from a court of competent jurisdiction or other judicial authority, subject always to satisfying the relevant procedural or other requirements imposed by such court or other judicial authority. [Any challenge to the validity or enforceability of the agreement to arbitrate in this clause may be referred only to the arbitral tribunal to be appointed hereunder or to the courts in the seat/place of arbitration]** [The governing law of the contract shall be the substantive law of [•].]***” * See the explanation for this formulation in Chapter 6: Choosing the arbitrators. ** See the explanation for this formulation in Chapter 3: Choosing the place of arbitration. *** To be included if the governing law is not specified elsewhere in the contract. To the extent that Regulation (EC) No. 864/2007 on the law applicable to non-contractual obligations (the Rome II Regulation) is to be taken into account (in the European context) the following formulation should be used: [The governing law of the contract and any non-contractual obligations arising out of or in connection with the contract shall be the substantive law of [•].]

Appendix 1

Model clauses for institutional arbitration A general purpose institutional arbitration clause is proposed in Chapter 9: Drafting the arbitration clause. The international contract negotiator should, however, be aware of the following model clauses recommended by some of the institutions and organisations referred to in this Guide.

Standard arbitration procedures American Arbitration Association/International Centre for Dispute Resolution (AAA/ICDR) “Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be determined by arbitration administered by the International Centre for Dispute Resolution in accordance with its International Arbitration Rules. The parties should consider adding: • The number of arbitrators shall be (one or three); • The place of arbitration shall be (city and/or country); • The language(s) of the arbitration shall be ________.” Insurance and Reinsurance Arbitration Society (ARIAS (UK)) “All disputes and differences arising under or in connection with this contract shall be referred to arbitration under ARIAS Arbitration Rules. The Arbitration Tribunal shall consist of three arbitrators, one to be appointed by the Claimant, one to be appointed by the Respondent and

the third to be appointed by the two appointed arbitrators. The third member of the Tribunal shall be appointed as soon as practicable (and no later than 28 days) after the appointment of the two party-appointed arbitrators. The Tribunal shall be constituted upon the appointment of the third arbitrator. The Arbitrators shall be persons (including those who have retired) with not less than ten years’ experience of insurance or reinsurance within the industry or as lawyers or other professional advisers serving the industry. Where a party fails to appoint an arbitrator within 14 days of being called upon to do so or where the two party-appointed arbitrators fail to appoint a third within 28 days of their appointment, then upon application ARIAS (UK) will appoint an arbitrator to fill the vacancy. At any time prior to the appointment by ARIAS (UK) the party or arbitrators in default may make such appointment. The Tribunal may in its sole discretion make such order and directions as it considers to be necessary for the final determination of the matters in dispute. The Tribunal shall have the widest discretion permitted under the law governing the arbitral procedure when making such orders or directions. The seat of arbitration shall be ________ The proper law of this contract shall be the law of ________.” Beijing Arbitration Commission (BAC) “All disputes arising from or in connection with this contract shall be submitted to Beijing Arbitration Commission for arbitration in accordance with its rules of arbitration in effect at the time of applying for arbitration. The arbitral award is final and binding upon both parties.” Arbitration and Mediation Centre of the Brazil-Canada Chamber of Commerce (CCBC) “Any litigation resulting from the contract hereunder, including its interpretation or execution, shall be definitely settled by arbitration, in

accordance with the Guidelines of the Arbitration Center of the BrazilCanada Chamber of Commerce by three (03) arbitrators appointed pursuant to said Guidelines.” China International Economic and Trade Arbitration Commission (CIETAC) “Any dispute arising from or in connection with this contract shall be submitted to China International Economic and Trade Arbitration Commission, South China Sub-Commission for arbitration which shall be conducted in accordance with the Commission’s arbitration rules in effect at the time of applying for arbitration. The arbitral award is final and binding upon both parties.” Consider adding the words “controversy or claim” after dispute. The parties should decide whether the place of arbitration is Beijing or at one of the regional sub-commissions such as Shanghai or Shenzhen (this limited choice is permitted by Article 12 of the Rules). The language of the arbitration may also be chosen but in the absence of a choice, Chinese will be used. The Secretariat of the Arbitration Commission may require translations into Chinese of documents relied on by the parties to be supplied to it. The number of arbitrators should also be chosen (it is rare for CIETAC arbitrations to be conducted before a sole arbitrator). A suitable, alternative clause could read as follows: “The tribunal shall consist of three arbitrators. Two arbitrators shall be selected by the respective parties. [The presiding arbitrator shall be selected by agreement between the parties or, failing agreement within [10] days of the appointment of the two party-nominated arbitrators, by the chairman of CIETAC].” or: “The tribunal shall consist of one arbitrator who shall be selected by agreement between the parties.” Significantly, the parties should also specify that the sole or presiding arbitrator shall not be of the same nationality as any of the parties, and that they may appoint arbitrators who are not on the Panel of Arbitrators of

CIETAC. German Institution for Arbitration (DIS) “All disputes arising in connection with the contract (… description of the contract …) or its validity shall be finally settled according to the Arbitration Rules of the German Institution of Arbitration e.V. (DIS) without recourse to the ordinary courts of law. It is recommended to supplement the arbitration clause by the following provisions: • The place of arbitration is ________; • The arbitral tribunal consists of __ (number of) arbitrators; • The substantive law of ________ is applicable to the dispute; • The language of the arbitral proceedings is ________.” Dubai International Arbitration Centre (DIAC) “Any dispute arising out of the formation, performance, interpretation, nullification, termination or invalidation of this contract or arising therefrom or related thereto in any manner whatsoever, shall be settled by arbitration in accordance with the provisions set forth under the DIAC Arbitration Rules (‘the Rules’), by one or more arbitrators appointed in compliance with the Rules.” Parties are also advised to include the following in their contractual and submission agreements: 1. The number of arbitrators (1 OR a panel of 3) OR an authorisation for the Dubai International Arbitration Centre (DIAC) to determine the number of arbitrators and their identities; 2. Determine the place of arbitration (“Dubai”) and venue to hold arbitration proceedings (“premises of the Dubai International Arbitration Centre”); 3. Determine the language of arbitration (“English or Arabic”). Dubai International Finance Centre (DIFC-LCIA)

“Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration under the Arbitration Rules of the DIFC-LCIA Arbitration Centre, which Rules are deemed to be incorporated by reference into this clause. The number of arbitrators shall be [one/three]. The seat, or legal place, of arbitration shall be [city and/or country]. The language to be used in the arbitration shall be [________]. The governing law of the contract shall be the substantive law of [________].” Hong Kong International Arbitration Centre (HKIAC) “Any dispute, controversy or claim arising out of or relating to this contract, including the validity, invalidity, breach or termination thereof, shall be settled by arbitration in Hong Kong under the Hong Kong International Arbitration Centre Administered Arbitration Rules in force when the Notice of Arbitration is submitted in accordance with these Rules.” Optional Provisions: “The number of arbitrators shall be __ (one or three). The arbitration proceedings shall be conducted in ________ (insert language).” International Commercial Arbitration Court of the Chamber of Commerce and Industry of the Russian Federation (ICAC) “Any dispute, controversy or claim which may arise out of or in connection with the present contract (agreement), or the execution, breach, termination or invalidity thereof, shall be settled by the International Commercial Arbitration Court at the Chamber of Commerce and Industry Of the Russian Federation in accordance with its Rules.” International Chamber of Commerce (ICC) “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.”

Parties are reminded to stipulate the law governing the contract, the number of arbitrators and the place and language of the arbitration. 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. To ensure the that the clause is as widely drawn as possible, the words “controversies or claims” may be added after “disputes”, so as to neutralise any argument as to the arbitrators’ jurisdiction over undisputed claims. International Centre for Settlement of Investment Disputes (ICSID) “The [Government]/[name of constituent subdivision or agency] of name of Contracting State (hereinafter the ‘Host State’) and name of investor (hereinafter the ‘Investor’) hereby consent to submit to the International Centre for Settlement of Investment Disputes (hereinafter the ‘Centre’) any dispute arising out of or relating to this agreement for settlement by [conciliation]/[arbitration]/[conciliation followed, if the dispute remains unresolved within time limit of the communication of the report of the Conciliation Commission to the parties, by arbitration] pursuant to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (hereinafter the ‘Convention’).” The ICSID mechanism is complex. ICSID has issued a special publication (Doc. ICSID/5/Rev. l) containing a number of highly refined additional model clauses adapted to different circumstances such as consent in anticipation of subsequent ratification by a state which has not ratified the ICSID; special clauses relating to the nature of the dispute; special clauses relating to contracts signed by government agencies or subdivisions; deemed nationality of the investor; preservation of the rights of the investor after compensation; or exhaustion of local remedies. It is no coincidence that many ICSID arbitrations have immediately run into jurisdictional objections which could have been avoided by appropriate drafting. We therefore recommend that no ICSID arbitration clause should be agreed without taking specialist advice. LCIA (London Court of International Arbitration) “Any dispute arising out of or in connection with this contract, including

any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration under the LCIA Rules, which Rules are deemed to be incorporated by reference into this clause. The number of arbitrators shall be [one/three]. The seat, or legal place, of arbitration shall be [City and/or Country]. The language to be used in the arbitral proceedings shall be [_____]. The governing law of the contract shall be the substantive law of [____].” As with the ICC’s standard clause, the words “controversy, or claim” may usefully be added after “dispute”. For LCIA India arbitrations, the following clause is recommended by the LCIA: “Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration under the LCIA India Arbitration Rules, which Rules are deemed to be incorporated by reference into this clause. The number of arbitrators shall be [one/three]. The seat, or legal place, of arbitration shall be [City and/or Country]. The language to be used in the arbitration shall be [_____]. The governing law of the contract shall be the substantive law of [____].” Singapore International Arbitration Centre (SIAC) “Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration in Singapore in accordance with the Arbitration Rules of the Singapore International Arbitration Centre (‘SIAC Rules’) for the time being in force, which rules are deemed to be incorporated by reference in this clause. The Tribunal shall consist of__* arbitrator(s).

The language of the arbitration shall be ________. * State an odd number. Either state one, or state three.” Stockholm Chamber of Commerce (SCC) “Any dispute, controversy or claim arising out of or in connection with this contract, or the breach, termination or invalidity thereof, shall be finally settled by arbitration in accordance with the Arbitration Rules of the Arbitration Institute of the Stockholm Chamber of Commerce. The parties are advised to make the following additions to the arbitration clause, as required: The arbitral tribunal shall be composed of _ arbitrators (a sole arbitrator). The seat of arbitration shall be ________.* The language to be used in the arbitral proceedings shall be ________. This contract shall be governed by the substantive law of ________ (insert jurisdiction).” *It is rare for arbitrations conducted under the SCC Rules to take place outside Sweden. United Nations Commission on International Trade Law (UNCITRAL) “Any dispute, controversy or claim arising out of or relating to this contract, or the breach, termination or invalidity thereof, shall be settled by arbitration in accordance with the UNCITRAL Arbitration Rules as at present in force. Note – Parties may wish to consider adding: (a) The appointing authority shall be ________ (name of institution or person); (b) The number of arbitrators shall be __ (one or three); (c) The place of arbitration shall be ________ (town or country); (d) The language(s) to be used in the arbitral proceedings shall be ________.

Note – If the parties wish to exclude recourse against the arbitral award that may be available under the applicable law, they may consider adding a provision to that effect as suggested below, considering, however, that the effectiveness and conditions of such an exclusion depend on the applicable law. Waiver: The parties hereby waive their right to any form of recourse against an award to any court or other competent authority, insofar as such waiver can validly be made under the applicable law.” If the parties wish the appointing authority to be the ICC, the appropriate wording (which is recommended by the ICC to deal with the special features of the ICC’s internal structure) should, instead of sub-clause (a) above, be as follows: “The appointing authority shall be the ICC acting in accordance with the rules adopted by the ICC for this purpose.” Consideration may be given to varying the UNCITRAL Rules (which absolutely require majority awards) by providing as follows: “When three arbitrators have been appointed, the 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.” It should be noted that parties who like the UNCITRAL Arbitration Rules but are uncomfortable with the notion of ad hoc arbitration may refer to an institution as an administering rather than merely as an appointing authority. The ICC does not act in such a role, but other institutions will do so. The LCIA has made it clear that it is willing to administer arbitrations under the UNCITRAL Rules, and has published explanations of how it acts in such circumstances. The LCIA suggests that for those purposes the following clause should be used: “Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration under the UNCITRAL Arbitration Rules, which Rules are deemed to be incorporated by reference into this clause.

Any arbitration commenced pursuant to this clause shall be administered by the LCIA. The appointing authority shall be the LCIA. The LCIA schedule of fees and costs shall apply. The number of arbitrators shall be [one/three]. The seat, or legal place of arbitration shall be [city and/or country]. The language to be used in the arbitral proceedings shall be[______] The governing law of the contract shall be the substantive law of [________].” International Arbitral Centre of the Austrian Federal Economic Chamber in Vienna (VIAC) “All disputes arising out of this contract or related to its violation, termination or nullity shall be finally settled under the Rules of Arbitration and Conciliation of the International Arbitral Centre of the Austrian Federal Economic Chamber in Vienna (Vienna Rules) by one or more arbitrators appointed in accordance with these rules. Appropriate supplementary provisions: a) the number of arbitrators shall be __ (one or three); b) the substantive law of ________ shall be applicable;* c) the language to be used in the arbitral proceedings shall be ______. * In this context, consideration may be given to the possible application of the United Nations Convention on Contracts for the International Sale of Goods, 1980. Parties having concluded the arbitration agreement as businessmen may waive their right to have recourse against an award in Austria on those grounds which recourse may be had against a court judgement by way of an application for reopening the case. If this is desired, it is recommended that the following be added: Pursuant to para. 598 (2) of the Austrian Code of Civil Procedure (ZPO), the parties expressly waive the application of para. 595 (1) figure

7 of the said Code.” This standard language could be supplemented in the same way as for the model ICC clause (see above), with the additional observation that the rules of this Centre would not normally be adopted unless the parties intend that the arbitration will take place in Vienna. World Intellectual Property Organisation (WIPO) “Any dispute, controversy or claim arising under, out of or relating to this contract and any subsequent amendments of this contract, including, without limitation, its formation, validity, binding effect, interpretation, performance, breach or termination, as well as non-contractual claims, shall be referred to and finally determined by arbitration in accordance with the WIPO Arbitration Rules. The arbitral tribunal shall consist of [three arbitrators][a sole arbitrator]. The place of arbitration shall be [specify place]. The language to be used in the arbitral proceedings shall be [specify language]. The dispute, controversy or claim shall be decided in accordance with the law of [specify jurisdiction].”

Expedited procedures German Institution of Arbitration (DIS) “All disputes arising in connection with the contract (… description of the contract …) or its validity shall be finally settled according to the Arbitration Rules and the Supplementary Rules for Expedited Proceedings of the German Institution of Arbitration e.V. (DIS) without recourse to the ordinary courts of law. It is recommended to supplement the arbitration clause by the following provisions: The place of arbitration is ________ The substantive law of ________ is applicable to the dispute. The language of the arbitral proceedings is ________.” Stockholm Chamber of Commerce (SCC)

“Any dispute, controversy or claim arising out of or in connection with this contract, or the breach, termination or invalidity thereof, shall be finally settled by arbitration in accordance with the Rules for Expedited Arbitrations of the Arbitration Institute of the Stockholm Chamber of Commerce. The parties are advised to make the following additions to the clause, as required: The place of arbitration shall be ________ The language to be used in the arbitral proceedings shall be ________ This contract shall be governed by the substantive law of ________ (insert jurisdiction).” World Intellectual Property Organisation (WIPO) “Any dispute, controversy or claim arising under, out of or relating to this contract and any subsequent amendments of this contract, including, without limitation, its formation, validity, binding effect, interpretation, performance, breach or termination, as well as non-contractual claims, shall be referred to and finally determined by arbitration in accordance with the WIPO Expedited Arbitration Rules. The place of arbitration shall be [specify place]. The language to be used in the arbitral proceedings shall be [specify language]. The dispute, controversy or claim shall be decided in accordance with the law of [specify jurisdiction].”

Appendix 2

Key features of selected arbitration rules

Appendix 3

Sample clause for ad hoc arbitration 1. Any dispute, difference, controversy or claim arising out of or in connection with this agreement shall be referred to and determined by arbitration in … [place]. 2. The party initiating recourse to arbitration (hereinafter referred to as “the claimant”) shall give to the other party (hereinafter referred to as “the respondent”) a notice of arbitration, which notice shall include: (i) a demand that the matter be referred to arbitration; (ii) the names and addresses of the parties; (iii) a reference to this arbitration clause; and (iv) a description of the nature and circumstances of the dispute giving rise to the claim(s) and a statement of the relief sought including, so far as is possible, an indication of any amount(s) claimed. 3. The arbitral tribunal (“the tribunal”) shall be composed of three arbitrators appointed as follows: (i) each party shall appoint an arbitrator, and the two arbitrators so appointed shall appoint a third arbitrator who shall act as president of the tribunal; (ii) if either party fails to appoint an arbitrator within 30 days of receiving notice of the appointment of an arbitrator by the other party, such arbitrator shall at the request of that party be appointed by … [the appointing authority]; (iii) if the two arbitrators to be appointed by the parties fail to agree upon a

third arbitrator within 30 days of the appointment of the second arbitrator, the third arbitrator shall be appointed by the … [appointing authority] at the written request of either party; (iv) should a vacancy arise because any arbitrator dies, resigns, refuses to act, or becomes incapable of performing his functions, the vacancy shall be filled by the method by which that arbitrator was originally appointed. When a vacancy is filled the newly established tribunal shall exercise its discretion to determine whether any hearings shall be repeated. 4. As soon as practicable after its constitution, the tribunal shall convene a meeting with the parties or their representatives (either in person or by telephone) to determine the procedure to be followed in the arbitration. 5. The procedure shall be as agreed by the parties or, in default of agreement, as determined by the tribunal. However, the following procedural matters shall in any event be taken as agreed: (i) the language of the arbitration shall be … [language]; (ii) the tribunal may in its discretion hold a hearing and make an award in relation to any preliminary issue at the request of either party and shall do so at the joint request of both parties; (iii) the tribunal shall hold a hearing, or hearings, relating to substantive issues unless the parties agree otherwise in writing; (iv) the tribunal’s award shall be final and binding on the parties. By agreeing to arbitration, the parties undertake to carry out any award immediately and without delay; and the parties also waive irrevocably their right to any form of appeal, review or recourse to any State Court on other judicial authority, insofar as such waiver may be validly made. 6. In the event of default by either party in respect of any procedural order made by the tribunal, the tribunal shall have power to proceed with the arbitration and to make its award. 7. If an arbitrator appointed by one of the parties fails or refuses to participate in the arbitration at any time after the hearings on to participate in the

substance of the dispute have started, the remaining two arbitrators may continue the arbitration and make an award without a vacancy being deemed to arise if, in their discretion, they determine that the failure or refusal of the other arbitrator to participate is without reasonable excuse. 8. Any award or procedural decision of the tribunal shall if necessary be made by a majority and, in the event that no majority may be formed, the presiding arbitrator shall proceed as if he were a sole arbitrator. 9. Without prejudice to the availability of such remedies in aid of arbitration as may be available under the jurisdiction of a competent court or other judicial authority, the arbitral tribunal shall have full authority to grant interim measures of protection and to award damages for the failure of a party to respect the arbitral tribunal’s orders to that effect. 10. By agreeing to arbitration under this clause, the Parties shall not be precluded from seeking interim measures of protection from a court of competent jurisdiction or other judicial authority, subject always to satisfying the relevant procedural or other requirements imposed by such court or other judicial authority. [11. The parties agree that the arbitration shall be conducted according to the IBA Rules of Evidence as current on the date of [this agreement/the commencement of the arbitration].]

Appendix 4

Sample tiered dispute resolution clause Negotiation

In the event of a dispute, difference, controversy or claim arising out of or in connection with this contract including any question regarding its existence, breach, validity or termination (a Dispute), the Dispute shall first be referred by notice in writing to the [Chief Executive] of each of the parties who shall consult in good faith and endeavour to resolve the dispute by negotiation. Mediation

If the parties are unable to settle any Dispute by negotiation within [•] days of the referral by them of the Dispute under Clause 1, then the parties must seek settlement of the Dispute by mediation in accordance with the [•]33 Mediation Procedure, which Procedure is deemed to be incorporated by reference into this clause. Arbitration

If the Dispute is not settled by mediation within [•] days of the appointment of the mediator, or such further period as the parties shall agree in writing, the Dispute shall be referred to and finally resolved by arbitration under the [•] Rules, which Rules are deemed to be incorporated by reference into this clause. The language to be used in the mediation and in the arbitration shall be [•]. The governing law of the contract shall be the substantive law of [•].* In any arbitration commenced pursuant to this clause, (i) the number of arbitrators shall be [one/three]; and

(ii) the seat, or legal place, of arbitration shall be [city and/or country]. [The parties hereby agree that any restriction in the Rules upon the nomination or appointment of an arbitrator by reason of nationality shall not apply to any arbitration commenced pursuant to this clause.]** By agreeing to arbitration under this clause, the parties shall not be precluded from seeking interim measures of protection from a court of competent jurisdiction or other judicial authority, subject always to satisfying the relevant procedural or other requirements imposed by such court or other judicial authority. [Any challenge to the validity or enforceability of the agreement to arbitrate in this clause may be referred only to the arbitral tribunal to be appointed hereunder or to the courts in the seat/place of arbitration.]*** * To be included if the governing law is not specified elsewhere in the contract. To the extent that Regulation (EC) No. 864/2007 on the law applicable to non-contractual obligations (the Rome II Regulation) is to be taken into account (in the European context) the following formulation should be used: [The governing law of the contract and any non-contractual obligations arising out of or in connection with the contract shall be the substantive law of [•].] ** See the explanation for this formulation in Chapter 6: Choosing the arbitrators. *** See the explanation for this formulation in Chapter 3: Choosing the place of arbitration. [Alternatively, the ad hoc clause in Appendix 3 may be used.]

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CEDR and the LCIA each publish model mediation clauses.

Appendix 5

Sample multi-party “umbrella” agreement THIS DISPUTE RESOLUTION AGREEMENT is made on [•]. PARTIES [Set out parties to the agreement] WHEREAS [Set out recitals describing background to the transaction and the suite of underlying agreements, including the following: (A) The parties wish to resort to arbitration as the exclusive means of resolving in a final, binding, cost-effective and consistent manner all Disputes (as defined below) arising out of or connected with any of the Transaction Documents (as defined below) and have agreed that, with effect upon entering into this Dispute Resolution Agreement, any Dispute shall be governed by the procedures set out herein. (B) In furtherance of the foregoing, the parties have agreed to enter into this Dispute Resolution Agreement.] IT IS AGREED as follows: 1. DEFINITIONS [Set out definitions, including the following: Dispute means any dispute, difference, controversy or claim arising out of or

in connection with any of the Transaction Documents including any question regarding the existence, breach, validity or termination of any of them; Disputing Parties means the claimant(s) and the respondent(s) to a Dispute and Disputing Party means either the claimant or the respondent, as applicable; Parties means any of the signatories to this Dispute Resolution Agreement and any person to whom a valid assignment or transfer of rights or obligations has been made pursuant to clause 3 hereof; Transaction Documents means the agreements executed or to be executed between some or all of the parties, as listed in the Schedule to this Agreement, and Transaction Document shall mean any one of them.] 2. DISPUTE RESOLUTION [Consider including sample clause for tiered dispute resolution methods set out at Appendix 4, as amended:] (a) Negotiation

In the event of any Dispute, any party may serve notice in writing to the [Chief Executive] of the party/parties who shall consult in good faith and endeavour to resolve the dispute by negotiation. (b) Mediation

If the Disputing Parties are unable to settle the Dispute by negotiation within [•] days of the referral by them of the Dispute under Clause 2(a), then the Disputing Parties must seek settlement of the Dispute by mediation in accordance with the [•]34 Mediation Procedure, which Procedure is deemed to be incorporated by reference into this clause. (c) Arbitration

If the Dispute is not settled by mediation within [•] days of the appointment of the mediator, or such further period as the Disputing Parties shall agree in writing, the Dispute shall be referred to and finally resolved by arbitration under the [•] Rules, which Rules are deemed to be incorporated by reference

into this clause. The language to be used in the mediation and in the arbitration shall be [•]. In any arbitration commenced pursuant to this clause, (i) the number of arbitrators shall be [one/three]; and (ii) the seat, or legal place, of arbitration shall be [city and/or country]. [The parties hereby agree that any restriction in the Rules upon the nomination or appointment of an arbitrator by reason of nationality shall not apply to any arbitration commenced pursuant to this clause.]* By agreeing to arbitration under this clause, the parties shall not be precluded from seeking interim measures of protection from a court of competent jurisdiction or other judicial authority, subject always to satisfying the relevant procedural or other requirements imposed by such court or other judicial authority. [Any challenge to the validity or enforceability of the agreement to arbitrate in this clause may be referred only to the arbitral tribunal to be appointed hereunder or to the courts in the seat/place of arbitration.]** 3. ADDITIONAL PARTIES AND NEW AGREEMENTS If any rights and/or obligations under any Transaction Document are validly assigned or transferred in accordance with the terms of such Transaction Document, then the assignor or transferor shall procure that, prior to and as a condition precedent to such assignment or transfer, the assignee or transferee accepts in writing the rights and obligations to resolve Disputes arising out of or in connection with such Transaction Document in accordance with this Agreement. If any new agreement is entered into between any of the parties or between any party to this Agreement and a third party, the parties shall procure that this Agreement is amended to: (a) add such third party as a signatory to this Agreement; and/or (b) incorporate such new agreement in the list of Transaction Documents. 4. GOVERNING LAW

This Agreement shall be governed by and construed in accordance with the substantive law of [_____].*** [Consider including additional provisions such as: (a) an entire agreement clause; (b) a counterparts clause; (c) a clause setting out the manner in which this agreement may be varied; and (d) an invalidity/severability clause.] SCHEDULE [Set out the list of Transaction Documents.] * See the explanation for this formulation in Chapter 6: Choosing the arbitrators. ** See the explanation for this formulation in Chapter 3: Choosing the place of arbitration. *** To be included if the governing law is not specified elsewhere in the contract. To the extent that Regulation (EC) No. 864/2007 on the law applicable to non-contractual obligations (the Rome II Regulation) is to be taken into account (in the European context) the following formulation should be used: [The governing law of this Agreement and any noncontractual obligations arising out of or in connection with this Agreement shall be the substantive law of [•].]

34

CEDR and the LClA each publish model mediation clauses.

Appendix 6

New York Convention and UNCITRAL Model Law countries and the top 20 places of ICC arbitration (2000-2009)

(a) Declarations and reservations. This State will apply the Convention only to recognition and enforcement of awards made in the territory of another contracting State. (b) Declarations and reservations. This State will apply the Convention only to differences arising out of legal relationships, whether contractual or not, that are considered commercial under the national law. (c) On 10 February 1976, Denmark declared that the Convention shall apply to the Faeroe Islands and Greenland. (d) On 24 April 1964, the Netherlands declared that the Convention shall apply to the Netherlands Antilles.

(e) Declarations and reservations. With regard to awards made in the territory of non-contracting States, this State will apply the Convention only to the extent to which those States grant reciprocal treatment. (f) Declarations and reservations. This State will apply the Convention only to those arbitral awards which were adopted after the entry into effect of the Convention. (g) The United Kingdom extended the territorial application of the Convention, for the case of awards made only in the territory of another contracting State, to the following territories: Gibraltar (24 September 1975), Isle of Man (22 February 1979), Bermuda (14 November 1979), Cayman Islands (26 November 1980), Guernsey (19 April 1985), Jersey (28 May 2002). (h) Declarations and reservations. Canada declared that it would apply the Convention only to differences arising out of legal relationships, whether contractual or not, that were considered commercial under the laws of Canada, except in the case of the Province of Quebec, where the law did not provide for such limitation. (i) This State will not apply the Convention to differences where the subject matter of the proceedings is immovable property situated in the State, or a right in or to such property. (j) Upon resumption of sovereignty over Hong Kong on 1 July 1997, the Government of China extended the territorial application of the Convention to Hong Kong, Special Administrative Region of China, subject to the statement originally made by China upon accession to the Convention. On 19 July 2005, China declared that the Convention shall apply to the Macao Special Administrative Region of China, subject to the statement originally made by China upon accession to the Convention. (k) On 4 June 2008, Slovenia withdrew the declarations made upon succession mentioned in footnotes (a) and (b).

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The majority of these cases have Hong Kong as the place of arbitration, rather than mainland China.

Appendix 7

Contact details of selected arbitral institutions and other organisations American Arbitration Association (AAA) International Centre for Dispute Resolution (ICDR) 1633 Broadway, 10th Floor 10019 New York, NY United States of America Tel: +1 212 716 5800 Fax: +1 212 716 5905 Web: http://www.adr.org E-mail: [email protected] Arbitration and Mediation Center of the Brazil-Canada Chamber of Commerce (CCBC) Rua do Rocio 220, 12º andar, cj.121 Vila Olímpia 04552-000 São Paulo, SP Brasil Tel: +55 11 3044 4249 Fax: +55 11 3044 4249 Web: http://www.ccbc.org.br/ E-mail: [email protected] ARIAS (UK) the Insurance and Reinsurance Arbitration Society London Underwriting Centre 3 Minster Court Mincing Lane EC3R 7DD London United Kingdom Tel: +44 1732 832 475 Fax: +44 1732 835 677 Web: http://www.arias.org.uk Beijing Arbitration Commission (BAC) 16/F, Zhaoshang Building No. 118 Jianguo Road

Chaoyang District 100022 Beijing People’s Republic of China Tel: +86 10 6566 9856 Fax: +86 10 6566 8078 Web: http://www.bjac.org.cn E-mail: [email protected] Centre for Effective Dispute Resolution (CEDR) International Dispute Resolution Centre 70 Fleet Street EC4Y 1EU London United Kingdom Tel: +44 207 536 6000 Fax: +44 207 536 6001 Web: http://www.cedr.co.uk E-mail: [email protected] Chartered Institute of Arbitrators (CIArb) 12 Bloomsbury Square WC1A 2LP London United Kingdom Tel: +44 207 421 7444 Fax: +44 207 404 4023 Web: http://www.ciarb.org E-mail: [email protected] China International Economic and Trade Arbitration Commission (CIETAC) 6/F Golden Land Building 32, Liang Ma Qiao Road Chaoyang District 100016 Beijing People’s Republic of China Tel: +86 10 6464 6688 Fax: +86 10 6464 3500 / +86 10 6464 3520 Web: http://www.cietac.org E-mail: [email protected] Deutsche Insitution für Schiedsgerichtsbarkeit e.V. (DIS) Beethovenstraße 5-13 D-50674 Cologne Germany Tel: +49 221 285 52 0 Fax: +49 221 285 52 222 Web: http://www.dis-arb.de/ E-mail: [email protected]

Dubai International Arbitration Centre (DIAC) Dubai Chamber Building, 14th Floor Bani-yas Road – Deira P.O. Box: 1457 Dubai United Arab Emirates Tel: +97 14 2028 343/270 Fax: +97 14 2028 668/451 Web: http://www.diac.ae E-mail: [email protected] Dubai International Financial Centre (DIFC-LCIA) Building 4, Ground Floor Dubai International Financial Centre District Dubai United Arab Emirates Tel: +97 14 363 2584 Fax: +97 14 362 2697 Web: http://www.difcarbitration.com E-mail: [email protected] Hong Kong International Arbitration Centre (HKIAC) Two Exchange Square, 38th Floor 8 Connaught Place Hong Kong S.A.R. People’s Republic of China Tel: +852 2525 2381 Fax: +852 2524 2171 Web: http://www.hkiac.org E-mail: [email protected] International Arbitral Centre of the Austrian Federal Economic Chamber (VIAC) Wiedner Hauptstrasse 63 PO Box 319 A-1045 Vienna Austria Tel: +43 5 90 900 4398, 4399 Fax: +43 5 90 900 216 Web: http://www.wko.at/arbitration E-mail: [email protected] International Centre for Settlement of Investment Disputes (ICSID) 1818 H Street NW 20433 Washington, DC United States of America Tel: +1 202 458 1534 Fax: +1 202 522 2615/2027 Web: http://www.icsid.worldbank.org

International Chamber of Commerce (ICC) International Court of Arbitration 38 Cours Albert ler F-75008 Paris France Tel: +33 1 49 53 28 28 Fax: +33 1 49 53 29 29 Web: http://www.iccwbo.org E-mail: [email protected] International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation (ICAC) 6 Ilynka Street 109012 Moskou Russian Federation Tel: +7 495 620 00 07 Fax: +7 495 620 01 53 Web: http://www.tpprf-mkoc.ru E-mail: [email protected] International Institute for Conflict Prevention & Resolution (CPR) 575 Lexington Avenue, 21st Floor 10022 New York, NY United States of America Tel: +1 212 949 6490 Fax:+1 212 949 8859 Web: http://www.cpradr.org E-mail: [email protected] JAMS, The Resolution Experts 620 Eighth Avenue, 34th Floor 10018 New York, NY United States of America Tel: +1 212 751 2700 Fax: +1 212 751 4099 Web: http://www.jamsadr.com E-mail: [email protected] LCIA International Dispute Resolution Centre 70 Fleet Street EC4Y 1EU London United Kingdom Tel: +44 20 936 7007 Fax: +44 20 936 7008 Web: http://www.lcia.org/lcia-arbitration.com

E-mail: [email protected] LCIA India 301-A World Trade Tower Barakhamba Lane 110001 New Dehli India Tel: +91 11 4536 2222 Fax: +91 11 4536 2299 Web: http://www.lcia-india.org E-mail: [email protected] London Maritime Arbitrators Association (LMAA) 124 Aldersgate Street EC1A 4JQ London United Kingdom Tel: +44 20 7490 7334 Fax: +44 20 7490 4383 Web: http://www.lmaa.org.uk E-mail: [email protected] London Metal Exchange (LME) 56 Leadenhall Market EC3A 2DX London United Kingdom Tel: +44 20 7264 5555 Fax: +44 20 7630 0505 Web: http://www.lme.com Netherlands Arbitration Institute (NAI) Aert Van Nesstraat 2J J/K NL-3012 CA Rotterdam The Netherlands Tel: +31 10 281 6969 Fax:+31 10 281 6963 Web: http://www.nai-nl.org E-mail: [email protected] Permanent Court of Arbitration (PCA) Peace Palace Carnegieplein 2 NL-2517 KJ The Hague The Netherlands Tel: +31 70 346 9680 Fax: +31 70 356 1338 Web: http://www.pca-cpa.org/

Singapore International Arbitration Centre (SIAC) 32 Maxwell Road 069115 Singapore Tel: +65 6221 8833 Fax: +65 6224 1882 Web: http://www.siac.org.sg Stockholm Chamber of Commerce (Arbitration Institute) (SCC) Jakobs Torg 3 PO Box 16050 SE-103 21 Stockholm Sweden Tel: +46 8 555 100 50 Fax: +46 8 566 316 50 Web: http://www.sccinstitute.com E-mail: [email protected] United Nations Commission on International Trade Law (UNCITRAL) Vienna International Centre PO Box 500 A-1400 Vienna Austria Tel: +43 1 26060 4060 Fax: +43 1 26060 5813 Web: http://www.un.or.at/uncitral E-mail: [email protected] United Nations Conference on Trade and Development (UNCTAD) Palais des Nations 8-14, Av. de la Paix CH-1211 Geneva Switzerland Tel: +41 22 917 1234 Fax: +41 22 917 0057 Web: http://www.unctad.org E-mail: [email protected] World Intellectual Property Organisation Arbitration and Mediation Center (WIPO) 34 Chemin des Colombettes CH-1211 Geneva Switzerland Tel: +41 22 338 8247 Fax: +41 22 740 3700 Web: http://www.arbiter.wipo.int E-mail: [email protected]