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| Issue No: | 33 |
|---|---|
| Published: | Summer 2006 |
| Article No: | 9 |
| Author: | Eugene Lenehan |
| Title: | A Comparison Between the ICC Arbitration Rules and the UNCITRAL Arbitration Rules - Part 2 |
Introduction
Following on from his article in Issue 32, Eugene Lenehan continues his comparison between:
- the UNCITRAL Arbitration Rules (1976) (Adopted by the United Nations General Assembly on December 15, 1976). (‘UNCITRAL Rules’), and
- the Rules of Arbitration of the International Chamber of Commerce, effective as of 1 January 1998. (‘ICC Rules’)
The ICC Rules are used for institutional, or administered arbitrations, where the ICC acts in a supervisory role and may exert a high level of administrative control of the arbitral process. The intention being to achieve a suitable procedure and maintain quality control rather than to obstruct or intrude upon the dispute resolution by the arbitrator(s).
As UNCITRAL is not an arbitral institution, the UNCITRAL Rules are used in ad hoc arbitrations and were designed with international disputes in mind.
Security for costs
Whilst the ICC Rules do not specifically refer to security for costs, Article 23 does state that the tribunal may 'order any interim or conservatory measure it deems appropriate'. It is suggested that this broad power is sufficient to enable the tribunal to order a party to give security for the costs of the other party.
The current UNCITRAL Rules do not allow the tribunal to make any orders for security for costs. However, there may soon be a revision to these rules as it is reported that UNCITRAL are considering an amendment which would allow the tribunal to order a party to 'provide security for the enforcement of an eventual award, including an award of costs'. The requesting party would need to demonstrate (a) an urgent need, (b) irreparable harm will result if not ordered and (c) there is a substantial possibility that the requesting party would succeed on the merits of the dispute.
Confidentiality
Although confidentiality is widely sold as one of the foremost advantages of arbitration, this is not always fully understood. The Australian case of ESSO/BHO v Plowman [1995] 128 A.L.R. 391 and the Swedish case of Bulgarian Foreign Trade Bank Limited v A.I. Trade Finance Inc. [2000] have helped to highlight this problem.
The UNCITRAL Rules provide solely for the confidentiality of the award and the privacy of the hearing. The hearings are held in camera i.e. in private, unless the parties agree otherwise and the award is made public only with the consent of the parties.
Under the ICC Rules the parties are not bound to keep the award confidential and it is also not clear if the institution is bound by confidentiality. While the tribunal under the ICC may take measures for protecting trade secrets and confidential information and the ICC Court is bound by an obligation of confidence the ICC Rules have no general provision for confidentiality.
The award is not made available by the Secretariat to anyone except the parties but there is no obligation on the parties to keep the award confidential. In this respect the UNCITRAL Rules are slightly better than the ICC Rules.
Non-participation
Under both sets of rules, if one of the parties refuses or fails to appear at a hearing without a valid excuse the tribunal has the power to proceed with the arbitration.
The UNCITRAL Rules deals with the event of a claimant failing, without showing sufficient cause, to communicate his statement of claim. In such cases, the tribunal may terminate the arbitration. If the respondent fails to communicate his statement of defence without showing sufficient cause, the tribunal will order the arbitration to continue. The ICC Rules are silent on such eventualities.
Under the UNCITRAL Rules, if one of the parties fails to produce documentary evidence the tribunal may make the award on the evidence before it. The ICC Rules are again silent on such an eventuality.
Evidence
Both sets of rules are silent about how evidence should be gathered, presented and received. The International Bar Association (IBA) Working Party suggests that this gap is intentionally left in arbitration rules to allow the parties and the tribunal flexibility in formulating the most appropriate procedures for the arbitration.
This flexibility allows the incorporation of rules of evidence such as the IBA Rules of Evidence. Even if such rules are not specifically adopted, they can serve as a guide to arbitrators when conducting the arbitration. It is also possible for the parties and the tribunal to devise procedural rules that allow the admissibility of evidence by video tape, video conferencing or other tools of advanced technology.
If a party fails without satisfactory explanation to produce document(s) that the tribunal has requested, it is suggested that under both sets of rules the tribunal is entitled to draw an adverse inference.
Multi-party costs
The UNCITRAL Rules have no provision for multi-party disputes, whereas the ICC Rules provide for multiple parties whether as claimant or as respondent. However, there is no provision for more than two groups of parties to a dispute.
Where there are multiple parties and where the dispute is to be referred to three arbitrators, the multiple claimants jointly, and/or the multiple respondents jointly, should nominate an arbitrator. Where there is no nomination or the parties cannot agree, the ICC Court will appoint each member of the tribunal.
Paper arbitrations
Under both the ICC Rules and the UNCITRAL Rules, unless any of the parties request a hearing, the tribunal may decide the case solely on the documents submitted.
Hearing
Both sets of rules require the arbitral tribunal to give the parties adequate/reasonable notice of when a hearing is to be held and if either of the parties fails to appear without a good reason, the tribunal can proceed with the hearing.
The ICC Rules allow the parties involved to appear in person or through their representatives. They may also bring their advisors into the hearing but persons not involved with the arbitration are not allowed in. The UNCITRAL Rules do not specifically deal with who can appear.
At least 15 days prior to any hearing the UNCITRAL Rules requires each party to notify details of witnesses to be called including on what subject and the language(s) of the testimony and it is for the tribunal to make arrangements for the translation of oral statements.
Awards
The UNCITRAL Rules do not set any time limit but under the ICC Rules the tribunal is given a period of six months for the final award to be rendered. However, the ICC Court may extend this period.
Both the ICC Rules and the UNCITRAL Rules provide that where there are three arbitrators the decision can be made by the majority but under the ICC Rules, if there is no majority, the award shall be made by the chairman of the tribunal alone.
Under ICC Rules, the award must state reasons whereas under the UNCITRAL Rules the award has to state reasons unless the parties have agreed otherwise.
Under the ICC Rules, the tribunal has to submit its award to the institution for scrutiny before it is mailed to the parties but, under the UNCITRAL Rules, the award is to be communicated to the parties by the tribunal at the place of arbitration.
Under both the ICC Rules and the UNCITRAL Rules, the parties undertake to carry out the award without delay. The ICC Rules waives the right to object to the decision of the tribunal whilst the UNCITRAL Rules state that the award is 'final and binding on the parties' and are otherwise silent on any rights to appeal. Nevertheless, it is considered that, in certain circumstances, overturning awards may be possible
Although the ICC Rules allow the tribunal to correct certain errors in their award, it has been observed that they do not expressly provide for remedying an omission, whereas the UNCITRAL Rules allow the tribunal to 'make an additional award as to claims presented in the arbitral proceedings but omitted from the award'.
Enforcement
Enforcement of arbitration awards is the same under both sets of rules. This is generally done by means of the 1958 New York Convention where arbitration awards are usually enforceable in nearly 100 countries. Countries that have signed up to this convention recognise arbitration clauses and enforce foreign arbitration awards in the same way as domestic court judgments.
This is important because if the assets of the losing party are in a country which it may be difficult to enforce the arbitration award the winning party may not be able to receive his award and, therefore, have no more than a hollow and very expensive victory.
Costs
Although the fees in ICC arbitrations are often more expensive than in UNCITRAL arbitrations, they are generally also more predictable. Ad hoc arbitration has the apparent attraction of avoiding the payment of the administrative fees which institutions charge but parties considering arbitration should be mindful of the lack of control with ad hoc arbitration, especially with regard to arbitrators' fees.
The final act of the ICC Court is to fix the total cost of the proceedings, which include the fees and expenses of the arbitrators, as well as the administrative costs of the ICC. Whilst this is usually carried out in accordance with the Scales of Administrative Expenses and Arbitrator's Fees found at Appendix III of the ICC Rules, the Court may deviate from this scale under exceptional circumstances.
Under both the ICC Rules and the UNCITRAL Rules the tribunal must fix the arbitration costs in its award.
However, under both sets of rules, the parties may have been requested to deposit advances at the outset and these figures might have increased at any time during the proceedings.
In principle, the costs of the arbitration under the UNCITRAL Rules are to be borne by the unsuccessful party but are subject to the tribunal's discretion. Under the ICC Rules the parties' costs are at the discretion of the arbitral tribunal unless agreed otherwise by the parties.
Party autonomy
The principle of the party autonomy rule is based on the parties to a dispute having the autonomy to control the arbitration. Both the ICC Rules and the UNCITRAL Rules seem to recognise this rule in relation to appointing the arbitrators, the choice of forum and the applicable law, paper arbitrations, appointing experts and choosing the language of the arbitration.
Whilst the ICC Rules also allow party autonomy when determining the timetable, the UNCITRAL Rules provide greater control in this respect. However, when it comes to the place of arbitration, the ICC Rules provide greater autonomy and one commentator believes that the application of the party autonomy rule is at its fullest when the parties determine the forum and the regime of institutional arbitration.
Frequency of use
The Paris-based International Court of Arbitration of the ICC is probably the biggest dispute resolution institution in the world and construction and engineering disputes account for a large amount of these [c.20%]. Information from the ICC also ndicates that the number of ICC arbitrations is increasing. This may be in part due to some standard forms of contract requiring arbitrations to be under the ICC rules.
As the UNCITRAL Rules do not involve an institution, there is no official record of how frequently they are used. However, practitioners in international arbitration claim that, whilst UNCITRAL Rules are probably the most used of the ad hoc arbitration rules, they get used significantly less than the ICC Rules. Some have claimed that the ICC Rules are being used as much as ten times as often as the UNCITRAL Rules, although others claim that the UNCITRAL Rules appear more popular in the Eastern Bloc.
There is also some difference of opinion as to whether use of the UNCITRAL Rules could be declining. If their use is declining, it is suggested that it could be due to more contracts, such as those of FIDIC, including provisions for institutional arbitrations.
Conclusions
One of the ways in which international arbitrations can be classified is as either:
- ad hoc
- institutional
The most popular rules for ad hoc arbitrations are the UNCITRAL Rules and the most popular institutional rules are the ICC Rules.
The similarities between the ICC Rules and the UNCITRAL Rules are many and it is suggested that they outweigh the differences. Their substantial differences can often be traced to the fact that one relates to institutional arbitration and the other is used for ad hoc arbitration. It would also seem that ICC Rules and other institutional arbitration rules get used significantly more often than ad-hoc rules and one of the main reasons causing the ICC Rules to get used more frequently is their adoption by institutional forms of contract.