A key factor in the success and the popularity of international arbitration is the inherent freedom and flexibility afforded to those parties with regard to how their dispute will be administered. In regards to this, the decision as to which arbitral procedure will be adopted is a vital decision for both parties as they could have major implications on, for example, the very constitution of challenges in terms of arbitral, arbitrator and tribunal. Even more important is the choice between the ad hoc rules and the institutional rules, such as the ICC, International Chamber of Commerce Rules of Arbitration and the LCIA; London Court of International Arbitration Rules. This decision could make a huge difference in how efficient and well organized the resulting arbitral proceedings could be. It’s the actual parties who drive ad hoc arbitration as it isn’t administered by any institution, thus meaning that parties have a much greater freedom when determining all the aspects of the actual arbitration process. This, invariably, has drawbacks as it requires the parties to cooperate with each other in order to get the arbitration proceedings started. The main benefit of ad hoc arbitration is not only does it offer freedom to the parties involved it can also be a lot more cost efficient. The arbitration rules of UNCITRAL; The United Nations Commission on International Trade Law, of which the first version saw the light of day back in 1976 and the latest being in 2010, provide a fully comprehensive set of rules in terms of procedure which are aimed at the ad hoc arbitration process. At the very core of these rules is respect for the procedural freedom in terms of allowing the parties to adjust and thus shape the arbitral proceedings that will govern their dispute in any way they see fit.
This is an article commentary and differs from other articles , in that it doesn’t adopt the typical approach of listing facts on an article by article basis and instead organises the rules, depending on their individual themes, in 6 different parts. The main aim of this blog is to provide a basic overview of UNCITRAL’s Arbitration Rules, along with their significance when it comes to the practice of international arbitration, as well a short summary of the 3 main topics which represent the major changes that separate the 2010 version from the 1976 version and the special amendments which came into being in 2014.
UNCITRAL was first created back in 1966 by the general assembly of the United Nations as part of their efforts to alter the direction in terms of international economic order and to thus open it up and make it more accessible. Part of the original mandate was the promotion of the new international convention, the model laws and the uniform laws in order to give this new international economic order the best possible chance of having the maximum effect, and this included the creation of a framework to deal with international arbitration. In order to achieve this, UNCITRAL adopted its 3 pronged approach in order to overcome those differences which existed between the legal systems in the USA and in those cultures which could undermine the very efficacy of arbitration on an international level. The first of the 3 prongs was the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards AKA the New York Convention), which provided national courts with a legal framework for arbitration agreements whilst ensuring the enforcement and recognition, within limits, of the awards in the other jurisdictions which are a party to the aforementioned New York Convention.
The second of the 3 prongs was the creation of the original 1976 rules which provided a model for the actual arbitration process itself. Considering that its main intent was the overcoming of the differences between the legal systems in the USA and other cultures in terms of how they approached arbitration as a resolution for disputes, the rules sought to reflect the balance. The UN recommended that these new rules be used in a world where several arbitration institutions, the ICC for example, already existed and offered rules and guidelines regarding the arbitration process within specific cities across the globe. In regards to this, the new rules provided a welcome alternative to the traditional, institutional arbitration. To fully understand the rules we must give kudos to the significant role which the Iran/USA Claims Tribunal played during their inception. In the time following the Iran Islamic Revolution in 1979, the relations between Iran and the USA ventured into crisis both economically and politically. As a result of some serious negotiating, American hostages were finally released on the 19th January 1981 which was also the time when the USA froze all Iranian assets.$1bn of those frozen assets were adjudicated to the pursuing of arbitration proceedings on an international level, with one of these settlement agreements providing for a procedural and substantive framework of law aimed at the settling of the claims via arbitration.
When it came to the procedural rules which applied to the arbitral proceedings, the negotiators turned to these new rules which had been prepared by experts proficient in several diverse legal systems. If any concerns had existed back in 1976 that these new UNCITRAL rules mightn’t be used to an extent which could be classed as significant, that situation dramatically changed once the tribunal started doing its work. The Iran/USA Claim Tribunal quickly developed a comprehensive body of case laws which illustrated the intricacies and subsequent procedures of these rules. Furthermore, the practices of this tribunal made a great contribution to the development of the third and final prong in the work of UNCITRAL, and led to the 1985 creation of the UNCITRAL Model Law on International Commercial Arbitration, AKA the Model Law, the aim of which was to harmonise the national arbitration legislation through presenting itself as the perfect template or text for future national legislatures to take on board. We cannot overstate the popularity of these rules and following their adoption by the Iran/USA claims tribunal, they spread far and wide and their prominence had an influence on the institutional arbitration rules of such regional arbitral centres as Cairo, Kuala Lumpur and Hong Kong, as well as forming the procedural rules for any necessary administration of the disputes under the banner of investment treaties.
Changes To The Rules Introduced in 2010
The move to revising the original rules from 1976 came from a host of international arbitrators with many pointing towards the Pieter Sanders article “Has the Moment Come to Revise the UNCITRAL Rules of Arbitration?”, which was published in 2004 in the Arbitration International, as the catalyst. This article was closely followed by the study which Georgios Petrochilos and Jan Paulsson and submitted to UNCITRAL as a form of guidance. The influences combined and the result was that UNCITRAL’s Working Group 2 started working on revising the rules during the fall of 2006. From the outset it had been agreed that the text and the spirit of the original UNCITRAL Arbitration Rules wouldn’t be affected, with the objective being to bring the rules into alignment with the current arbitration practices being employed internationally. There are many who believe the rules should retain a universally applicable form that can be applied to a wide range of disputes. In regards to this, the popularity of the original rules from 1976 in terms of how they governed disputes relating to investment treaties has triggered a heated debate as to the extent to which the revisions should accommodate this every growing area of international arbitration. When it was tabled, however, it was worded as if the UNCITRAL commission was of the belief that the inclusion of specific provisions on those arbitrations which were treaty based would effectively delay the revisions completion in terms of the new UNCITRAL Arbitration Rules. The committee did agree to address this issue at some point in the future, particularly regarding the rules on transparency. As a principle of guidance Working Group 2, before even embarking on the process of consultation and revision, cautioned against the inclusion of any unnecessary amendments and/or statements within the travaux préparatoires that could cause any questioning regarding the legitimacy of any prior rules applications within specific cases. This made the objective of these revisions the adaptions of those changed which have occurred over the past 30 years in order to avoid the rules becoming too complex. As far as this guiding principle is concerned, it meant that any changes made in the 2010 rules must be clearly understood.
The Modernization of the UNCITRAL Rules
In terms of technological advancements, the decades between the inception of the original rules in 1976 and now seem like light years when you consider the means of communication that exist now compared to back then. The development of such mediums as emails, electronic documents etc has become relevant to how documents are produced today. Electronic evidence is an ever growing faction that has made it increasingly common for requests to come in from recalcitrant parties for extensive files of electronic documents which in turns increases costs and creates an unreasonable burden on producing parties to disclose these documents. Under Article 15 Section 1 of the 1976 rules, parties are granted unrestricted opportunities to present their case/s. Subject to the guidelines of these rules, an arbitral tribunal can conduct arbitration in a manner it considers to be appropriate, as long as all parties are treated equally. In terms of timing, the commission unanimously agreed that on the subject of transparency within treaty based, investor state arbitration, it was worthy of consideration in the future and should be considered to be a matter of priority to be dealt with immediately after the the new revision of the UNCITRAL rules. In terms of future work, it was also agreed by the committee that ensuring transparency within an investor-state resolution was of the utmost importance. The terms ‘full opportunity’ and ‘any stage’ give parties ammunition to demand that enormous amounts of electronic documents be made available to them. Therefore, Article 17 Section 1 of the 2010 rules, the new version of Article 15 Section 1 of the old rules, softens the language to give parties unreasonable expectations in terms of how far they can stretch these rules for their own benefit. Each party is now given ‘reasonable’ opportunities to present its case rather than full and the arbitral tribunal has the right to exercise discretion in conducting the proceeding in order to avoid any unnecessary delays or expenses and to provide an efficient and fair process within which to resolve the dispute between the parties. Thus, the full opportunity has been removed from the rules and their reasonable opportunity can no longer take place at any stage but at an ‘appropriate stage’ in the proceedings which is determined by the tribunal. Even though, during the drafting phase, some delegates were arguing that this needed to be implicit, the general consensus was that acknowledging this would give the tribunal an element of leverage when it was responding to the parties or another arbitrator but still acting within the rules.
One of the most significant changes in rules of 2010 as opposed to 1976 was the formal recognition of the wide range of disputes which the rules of 1976 had been applicable to without actually saying so. The result of this is Article 1 Section 1 of the new rules which refers to all disputes as being defined as a legal relationship whether a contract is present or not. This greatly, and intentionally, broadens the scope as it allows non-contractual disputes to be included under the rules, examples of which are trademark infringements and non-contractual issues relating to the states responsibility on investment treaties. Article 1 Section 2 of the 2010 rules removes the requirement from the 1976 version which stated that a requirement of all arbitration agreements was that they were concluded in writing. The new rules recognize the modern realists that an arbitration agreement doesn’t necessarily need to be concluded by pen being put to paper as we are now in the age of electronic communication. Another big change is that of where, under the original rules, arbitral tribunals had very tools at their disposal with which to restrict the dilatory tactics of those parties seeking to obstruct the proceedings. With regard to how prominent wireless technology and the Internet is today, Article 2 Section 1 of the 2010 rules has relaxed the 1976 requirement that notices must be physically delivered and may now be delivered by any form of communication thus bring the electronic methods of communication into the mix. This rule is, however, somewhat limited by Article 2 Section 2 which only allow electronic delivery if the email address provided has been either designated by the party/ies or the tribunal has authorized it for the specific purpose of receiving case related documents. Even though one of the main intentions of the 2010 rules was to reflect the modern developments in communication, it’s was deemed important enough to add this condition to A2 S2 in order to avoid recipients getting an ‘unfair surprise’. Article 28 Section 4 gives the tribunal the discretion to conduct examinations of witnesses, including experts, through various means of telecommunication including video conferencing. Telecommunication, as a term, has deliberately been left broad in order to ensure that these rules still apply should new forms of electronic communication be developed and thus allowing them to be utilized into the arbitration process. Even though the rules don’t specifically provide for it, arbitral tribunals now have the authority to determine the relevance, admissibility, weight and materiality of any evidence which has been provided remotely by any method of telecommunication under Article 27 Section 4. the broadening of the appointing authority’s role has been significantly changed in the 2010 rules and expand this role into 3 new, among other, main areas;
Appointing authority’s can, upon request from a party, make the decision to appoint a sole arbitrator if the authority determines that due to the circumstances this is a more appropriate action
Upon request from a party, and in exceptional circumstances, the appointing authority could, after giving both the parties and other arbitrators the chance of expressing their views, deny any party the right to appoint their own substitute arbitrator and appoint one of their own choosing
In response to a request from one of the parties, the appointing authority could both review and then adjust the tribunals proposal as well as its determination of relative fees and expenses
Article 6 of the new rules, which specifically deals with appointment and designation of authorities is, in several respects, pretty much unchanged from the original but there are some pretty useful revisions in place. In the 1976 rules the PCA, Permanent Court of Arbitration, only had a limited role in which to act within the constitution of the tribunal and address any challenges to the arbitrator. Article 6 Section 2 of the 2010 rules, however, makes a specific identification of the PCA’s Secretary-General as the appointing authority’s main authority should the parties not reach an agreement relating to who the appointing authority should be within the designated 30 day window. This is backed up by Article 6 Section 1 which expressly states that the aforementioned Secretary-General can actually serve as the appointing authority. Thus, this addition clarifies the position that the PCA’s Secretary-General can act as both the designating authority and be chosen to directly serve as the appointing authority. The logic behind this decision in the assurance that arbitral proceedings aren’t subject to any unwanted delaying tactics. It also provides all parties with both the security and the certainty that the new rules provide for a certain degree of oversight within the proceedings. In relation to the expanded role afforded to the appointing authority, these new rules are more resemblant of institutional rules by the fact they are relying not on a national court but on a third party to offer support relating to the decision making. Despite this widened role, the 2010 rules remain true to the autonomy of a party and the only real purpose of these amendments was to avoid any unwanted halts in the arbitral proceedings and to permit, in certain circumstances, intervention.
Even though they are now 6 years old, the 2010 rules are still relatively recent as an addition to the international rules of arbitral practices and the application of these rules will become ever more closely observed as time goes by. That said, the new version of the UNCITRAL rules which came into being on the 1st April 2014 was to establish a sold link to the UNCITRAL rules regarding transparency. This is the result of the 3 year effort made by the Working Group 2 and represents a huge development in making arbitration dealing with investor- state issues much more open and accessible to the public. It was during the preparation of these new rules on transparency that one of the most heated debates took place which was concerning the scope of the application in respect to both present and future treaties such as those which were concluded after the date on which the rules of transparency came into effect. The views on the UNCITRAL rules are generally mixed but, in general, lawyers and arbitrators alike are satisfied with the changes that have been made in both 2010 and 2014 in terms of bringing the rules, albeit kicking and screaming, into the 21st century.