All the following articles have been published in previous issues of the Trett Digest. They remain the property of their respective authors and may not be reproduced without permission.
If you wish to receive future issues of the Trett Digest by post or email please click here.
The content of these articles is the opinion of the author and not necessarily that of trett consulting.
| Issue No: | 32 |
|---|---|
| Published: | Winter 2006 |
| Article No: | 9 |
| Author: | Eugene Lenehan |
| Title: | ICC & UNCITRAL Arbitration Rules Compared |
In this first of two articles, Eugene Lenehan compares the ICC Arbitration Rules and the UNCITRAL Arbitration Rules and dicusses the various characteristics of each.
Introduction
One of the ways in which international arbitrations can be classified is as either institutional, where the parties adopt the procedural rules established by a professional, trade or governmental institutional body, and that body administers the arbitration process or ad hoc, where there is no institutional body administering the arbitration process.
Institutional arbitration is often chosen to reduce the chances of problems occurring because the institution can manage the process and resolve any procedural problems. Ad hoc arbitrations are sometimes chosen as a lower-cost option because they do not involve institutional fees.
In institutional, or administered, arbitration there is a supervising institution which may exert a high level of administrative control over the arbitral process, the intention of which is to achieve a suitable procedure and maintain quality control rather than to obstruct or intrude upon the dispute resolution by the arbitrator(s). The most popular institutional rules are the Rules of Arbitration of the International Chamber of Commerce, effective as of 1 January 1998. (ICC Rules). This is probably the largest dispute resolution institution in the world and construction and engineering disputes account for a significant proportion of their business.
In ad hoc arbitrations, the parties execute their own particular arrangement without reference to institutional rules or supervision. The most popular rules for ad hoc arbitrations are the UNCITRAL Arbitration Rules (1976) (Adopted by the United Nations General Assembly on December 15, 1976). UNCITRAL stands for the United Nations Commission on Trading Law. As UNCITRAL is not an arbitral institution, the UNCITRAL Rules are used in ad hoc arbitrations and were designed with international disputes in mind. It should, however, be noted that it is possible to have the ICC as an appointing authority when using any ad hoc arbitration rules such as the UNCITRAL Rules.
Main Characteristics
Under ICC arbitrations, the ICC 'Court', which is not a court at all, ensures the ICC Rules are applied. The ICC Court is more an administrative and supervisory body than a court. It approves the main steps in the process (including nomination of arbitrators and the terms of reference), determines the cost of the arbitration and reviews every award. Many commentators believe that proper administration by institutions can significantly help the arbitration proceedings to keep moving along, for example, if one of the parties is failing to co-operate or a tribunal is being dilatory, an institution like ICC can use its position to move matters forward.
Ad hoc arbitrations such as under the UNCITRAL Rules are often considered to be cheaper. This is because the proceedings are administered by the tribunal (i.e. the arbitrator(s)) rather than having the additional services and costs of an institution. Ad hoc arbitrations can be much more flexible than institutional arbitration in terms of how the arbitration is conducted, but this flexibility is dependent on cooperation between the parties and their lawyers. However, if problems arise, for example in respect of the initiation of the proceedings, it may be necessary for the intervention of a court of law, which could be significantly more than the cost of employing an institution.
Commencement of Arbitration
Under Article 4 of the ICC Rules, the arbitration is deemed to have commenced on the date the Secretariat receives a written Request for Arbitration from one of the parties, whereas under the UNCITRAL Rules, the proceedings are deemed to have commenced on the date the respondent receives from the claimant a written notice of arbitration.
Place of Arbitration
The ICC Rules provide that unless the parties have agreed otherwise, the place of the arbitration shall be decided by the ICC Court, while under the UNCITRAL Rules, the place shall be determined by the tribunal. It should be noted that the place of arbitration is of relevance to the determination and influence of procedural rules and also for the recognition and enforcement of the award.
The place of arbitration is frequently not the place where the parties, the witnesses or the documents are located. It is also the case that, regardless of the place of arbitration, the tribunal may convene anywhere and as long as the parties agree.
Arbitrators
The UNCITRAL Rules provide that if the parties have not agreed on the number of arbitrators no later than 15 days following the respondent receiving the notice of arbitration, three arbitrators will be appointed. This will have immediate and obvious consequences on costs. It is also more difficult for the three arbitrators to find available common time for the hearing.
The ICC Rules are more flexible and specify that the dispute will be decided by either a sole arbitrator or by three arbitrators. If the parties do not agree on the number of arbitrators, the ICC Court will decide on whether it is necessary to appoint either one or three arbitrators depending on what they believe the dispute requires.
International arbitration is built around the idea that parties select at least one of the arbitrators and both the ICC Rules and the UNCITRAL Rules conform to this principle. What often happens with international arbitrations is there will be three arbitrators and both parties will select 'their' arbitrator and both arbitrators will then appoint the chairman or the presiding arbitrator. Under the ICC Rules, but unlike the UNCITRAL Rules, the request for arbitration must contain the nomination of an arbitrator, which undoubtedly is a time saving device.
The ICC Rules deals with how the arbitrator is appointed where the parties have agreed to just one arbitrator. If they do not agree on a nomination then the ICC Court will appoint someone.
The ICC Rules specify how three arbitrators should be appointed. This could be by means of each party nominating one arbitrator and the third arbitrator, who would act as chairman, being nominated by the ICC Court unless the parties have agreed on some other procedure.
However, if a party fails to nominate any arbitrator the appointment will be made by the ICC Court. It is, therefore, possible that the ICC Court will be responsible for nominating either none, one, two or all three arbitrators.
Unlike the ICC, UNCITRAL does not appoint arbitrators. If the parties have not agreed who is to be appointed arbitrator(s) and who is to be the appointing authority, the UNCITRAL Rules state that either party can request the Secretary-General of the Permanent Court of Arbitration at The Hague to decide on an appointing authority. The fact that the Secretary-General himself does not appoint the arbitrator(s) but designates an appointing authority to do so could itself result in delay. Some commentators consider this mechanism in the rules to be cumbersome and recommend that when using the UNCITRAL Rules, an appointing authority be expressly provided for.
Under the UNCITRAL Rules, if each party chooses one arbitrator, the two appointed arbitrators will select the third arbitrator who will act as the presiding arbitrator. The UNCITRAL Rules do not require consultation with the parties as to the chairman, but they do not exclude it either.
Under both sets of rules, a party to arbitration may challenge an arbitrator for alleged lack of independence or impartiality. Under the ICC Rules, the challenge must be submitted to the Secretariat within 30 days from receipt of notification of the arbitrator's appointment whilst under the UNCITRAL Rules the party has 15 days from either the appointment of the arbitrator or from when the relevant circumstances become known to him. Notification of the challenge must be sent to the other party and to all of the arbitrators.
Both sets of rules also allow for an arbitrator to be replaced upon his death, resignation or if he is prevented de jure (i.e. by law) or de facto (i.e. in reality) from fulfilling his functions.
Statements of Case
Under the ICC Rules, the claimant sets out the details of his claim when sending his request for arbitration to the Secretariat and the respondent then has 30 days from when he receives the request from the Secretariat to file an Answer. The terms of reference (see below) may provide for more detailed pleadings to be made.
Under the UNCITRAL Rules, the statement of claim is either sent with the notice of arbitration or it is sent in writing to the respondent and to each arbitrator within a period of time set by the tribunal. The respondent then sends in writing to the claimant and to each arbitrator his statement of defence. Amendments or supplements to the claim and defence may be included at any time during the arbitration unless the tribunal considers it appropriate. This means that the parties' initial pleadings should not be considered as final or definitive.
The ICC provisions concerning the content of the parties' submissions are very general in nature. This is in contrast with the UNCITRAL Rules under which the claimant must file a statement of claim including ... a statement of facts supporting the claim, the points at issue, and the relief and remedy sought
.
Rules of Procedure and Applicable Law
ICC and UNCITRAL both have procedural rules which govern the conduct of the arbitration. Where the rules are silent on particular issues, the parties agree (or the tribunal decides upon) more detailed rules of procedure. This may be done by reference to a national law.
Under the ICC Rules, if the parties do not agree rules of law to be applied to the issues in dispute, the tribunal will decide after taking into account the provisions of the contract and the relevant trade usages. The UNCITRAL Rules are not dissimilar in this respect.
Both the ICC Rules and the UNCITRAL Rules provide that the tribunal will assume the powers of an impartial referee or decide according to what is right and good only if the parties have agreed to give it such powers and in the case of the UNCITRAL Rules, if the law applicable to the arbitral procedure permits such arbitration.
International commercial contracts sometimes have arbitration clauses that contain a provision that arbitrators need not apply the law, or a particular system of law. They may say that the arbitrator should act as 'amiable compositeur' or to decide it 'according to equity and good conscience' or 'according to the customs and usages of the trade'.
Language (s)
ICC Rules simply provide that the arbitral tribunal shall, after giving due regard to all relevant circumstances, including the language of the contract, determine the language(s) to be used. Subject to an agreement by the parties, there is a similar provision under UNCITRAL Rules which also expressly allows that the arbitral tribunal to order that any documents annexed to the statements of claim or defence to be accompanied by a translation into the language(s) decided upon for the tribunal.
Terms of Reference
The terms of reference is a distinguishing feature of the ICC Rules (and does not apply under the UNCITRAL Rules). They are a summary of the claims and issues in dispute and particulars of the procedure and it is prepared by the tribunal and signed by the parties at the onset of the proceedings.
The ICC Rules include three variants to the terms of reference and these allow varying degrees of flexibility in varying or adding to the terms of reference. They also allocate different degrees of responsibility on the tribunal for how the terms of reference is dealt with after it has been signed.
Although the basic justification for this document is that it crystallises the issues and concentrates the minds of those concerned in the arbitration, some practitioners consider them an annoying necessity to be prepared quickly and to be referred to only if there is a point of procedure that has been dealt with in the terms of reference. Use of the terms of reference is, however, not optional, no matter how simple or straightforward the case.
Even though under the ICC Rules time may be saved by including the Statement of Claim and the nomination of an arbitrator with the Request for Arbitration, some commentators believe more time can be lost under its terms of reference procedure.
Next issue
In continuing this comparison between the ICC and UNCITRAL Rules, the second part of this article will move on to the issues of security for costs, the hearing, evidence, confidentiality, multi-party disputes, paper arbitrations, together the awards and their enforcement. It will also consider the matter of costs and how often each set of Rules is used.