Interpreting the Flexibility of Arbitration Agreement Requirements in the UNCITRAL Model Law

Introduction

The UNCITRAL Model Law on International Commercial Arbitration as amended in 2006 does not make the requirement of an arbitration agreement to be in writing in a strict and technical sense. It does provide that the arbitration agreement should be in writing. However, it also provides that an arbitration agreement will be in written form if “its content is records in any form”. It is irrelevant whether the arbitration agreement or the main contract is concluded orally or by conduct or in any other manner or form. To make the matter clearer in the event that there is no arbitration agreement between the parties, the Model Law goes on to provide that an arbitration agreement will be considered to be in writing if there is a communication as between parties where one party alleges the existence of the arbitration agreement and the other party does not deny it.

The words used in the Model Law may lead to a supposition that an arbitration agreement must be in writing. This is due to the phrasing of the Article 7 (2). However, this is misleading. The fact is that the arbitration agreement does not by itself have to be in writing. Rather, any recording of the content of the arbitration agreement, include an exchange of letters between parties, with one party alleging and the other party not denying the agreement, is to be taken as an arbitration agreement. This last part is in the same way as an estoppel, where the non-denial by a party to the other’s allegation is deemed to be an acceptance of the agreement.

An interesting part of the UNCITRAL Model Law is that there is no reference to the requirement of a signature for the agreement. Therefore, this additionally makes the written agreement requirement more flexible and less formal. Thus, after providing that the agreement must be in writing, the UNCITRAL Model Law provisions makes it clear that the requirement of written agreement in not in a technical sense of a written and signed arbitration agreement. Rather, any content signifying the agreement is deemed to be the arbitration agreement.

1. Article 7 (2).
2. Article 7 (3).
3. Article 7 (4).
4. Neil Andrews, Arbitration and Contract Law: Common Law Perspectives (Switzerland: Springer 2016) 27.
5. Ibid, 28.

The principle of competence-competence (or kompetenz kompetenz in German and compétence de la compétence in French) is an important principle for admissibility of dispute to arbitration. The principle in international arbitration provides that the arbitral tribunal can rule upon its own competence to hear a particular matter. In other words, whether the arbitral tribunal is competent to admit a dispute to arbitration will be decided by the tribunal itself.

For the enforceability of an arbitration agreement, it is necessary for the arbitral tribunals to consider whether the subject matter of the dispute is arbitrable or not. The case of Fiona Trust & Holding Corporation and ors v Privalov and ors is relevant here. In this case, the House of Lords held that even if the contract has been concluded by fraud, misrepresentation or bribery, the validity of the arbitration agreement within the main contract, or as a separate contract, can only be considered by the arbitral tribunals. As the decision of the court in Fiona Trust & Holding Corporation and ors v Privalov and ors indicates, the court may declare the main agreement or contract to be void, yet the arbitration agreement to be valid, under the doctrine of separability. This means that very few objections to admissibility are successful. For a greater part, the courts leave the matter to the arbitral tribunals.

The UNCITRAL Model Law, Article 16 provides that the tribunal shall have the competence to rule on its jurisdiction. As such a plea that the tribunal does not have the jurisdiction to hear and decide the case has to be raised at the time of the submission of defence itself. In international commercial transactions, the importance of responding to jurisdiction challenges correctly is amplified by virtue of the fact that arbitral awards enjoy much wider international recognition and enforcement than judgments of national courts . The competence-competence principle a step further than its positive effect by establishing a presumption of chronological priority for the tribunal with respect to resolving jurisdiction questions.

Parties to an arbitration have the autonomy to decide the substantive law and rules that are applicable to their arbitration. However, at times, parties may fail to make such a designation or they may simply disagree on the designation. At such times, the arbitrator has the discretion to designate the substantive law or procedure that is to apply in the case.

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1. Gary Born, International Arbitration and Forum Selection Agreements: Drafting and Enforcing (Kluwer Law International 2010).
2. [2007] UKHL 40 .
3. Ayten Mustafayeva,‘Doctrine of separability in International Commercial Arbitration’, (2015) 1 Baku St. U.L. Rev. 93.
4. UNCITRAL, Article 16 (2).
5. Amokura Kawharu, “ARBITRAL JURISDICTION”, (2008) 23 New Zealand Universities Law Review 238.
6. Ibid, 243.

This is seen in this case where one party wants the application of the American Arbitration Association rules and the other party would prefer the Korean International Arbitration Rules. Thus, there is a disagreement on the applicability of the rules.

The arbitral proceedings are supposed to be conducted in accordance with the rules of law that the parties agree to apply to the substance of dispute. The lex arbitri or the law for the substance of the arbitration may either be the substantive law applicable at the seat of the arbitration, or the substantive law that is agreed to upon by the parties. This is a very important question involved in the arbitration because the law applicable will determine the law governing the arbitration agreement, as well as the question of arbitrability.

The UNCITRAL Arbitration Rules provide:

Article 35

1. The arbitral tribunal shall apply the rules of law designated by the parties as applicable to the substance of the dispute. Failing such designation by the parties, the arbitral tribunal shall apply the law which it determines to be appropriate.

2. The arbitral tribunal shall decide as amiable compositeur or ex aequo et bono only if the parties have expressly authorized the arbitral tribunal to do so.

3. In all cases, the arbitral tribunal shall decide in accordance with the terms of the contract, if any, and shall take into account any usage of trade applicable to the transaction.

If the parties fail to choose a law, or as is seen in this case, they fail to agree on the applicable law, then the decision is left to the arbitrators and they have the discretion to decide the matter. Under the Model Law, Article 28 (2), the arbitrator is authorized to apply the law determined by the conflict of law rules, which the arbitrator considers applicable in the case. Furthermore, as seen above the UNCITRAL Rules provide that the arbitrator may apply the law that it considers the most appropriate. In the past, the arbitrators used to apply the law of the seat of arbitration, but this practice is much less prevalent today. At this point, arbitrators are not bound to choose any law in particular, and therefore, in this case, the arbitrator may choose the American or Korean rules as he considers the most appropriate in the case.

David D. Caron, Lee M. Caplan, The UNCITRAL Arbitration Rules: A Commentary (Oxford: OUP 2013) 112.

Margaret L. Moses, The Principles and Practice of International Commercial Arbitration (Cambridge: Cambridge University Press 2012) 69.

Ibid, 72.

4. In general, the arbitrator must not allow the parties to make the communication of their written statements beyond a period of 45 days. However, an arbitrator has the discretion to extend the time for submission on request of a party. The UNCITRAL Arbitration Rules allow such an extension if it seems justified to the arbitrator. The relevant provision is:

“The periods of time fixed by the arbitral tribunal for the communication of written statements (including the statement of claim and statement of defence) should not exceed 45 days. However, the arbitral tribunal may extend the time limits if it concludes that an extension is justified.”

The noteworthy aspect of the provision is the use of the word “should” instead of “shall” and “must”, signify that Article 25 does not really lay down a hard and fast rule with respect to the time limit of 45 days. In effect, the limit can be modified by the arbitrator, or by agreement as between the parties to the arbitration agreement. After the arbitrator has seen fit to grant one extension, he is not restricted from granting further extensions if it seems justified to him under the circumstances. Thus, there is no upper limit that is given to the arbitrator within which he must require the parties to file their written statements. Here, the arbitrator may make its decision to allow extension without really conferring with the other party, even where one party has unilaterally asked for an extension. However, if the extension required is significant, then the arbitrator must confer with the other party as well. Again, it is noteworthy that there is nothing in the Model Rules that stop the arbitrators from making a decision to extend without a request from any party.

1. UNCITRAL Arbitration Rules, Article 35 (1).
2. Margaret L. Moses, The Principles and Practice of International Commercial Arbitration (Cambridge: Cambridge University Press 2012) 81.
3. UNCITRAL Arbitration Rules, Article 25
4. David D. Caron, Lee M. Caplan, The UNCITRAL Arbitration Rules: A Commentary (Oxford: OUP 2013) 506.
5. Ibid.
6. Ibid.

Finally, it is important to note that in case a party fails to make a submission within the time period fixed, including any extensions that may be asked for by the parties, the tribunal will have the power to terminate the arbitral proceedings. Here the important factor that would lead to such a termination will be the failure of the party to show reasonable cause for the delay of submission.

Bibliography

• Andrews N, Arbitration and Contract Law: Common Law Perspectives (Switzerland: Springer 2016)
• Born G, International Arbitration and Forum Selection Agreements: Drafting and Enforcing (Kluwer Law International 2010).
• Caron DD and Caplan LM, The UNCITRAL Arbitration Rules: A Commentary (Oxford: OUP 2013)
• Kawharu A, “ARBITRAL JURISDICTION”, (2008) 23 New Zealand Universities Law Review 238
• Moses ML, The Principles and Practice of International Commercial Arbitration (Cambridge: Cambridge University Press 2012)
• Mustafayeva A,‘Doctrine of separability in International Commercial Arbitration’, (2015) 1 Baku St. U.L. Rev. 93.

1. UNCITRAL Arbitration Rules, Article 31 (1).
2. David D. Caron, Lee M. Caplan, The UNCITRAL Arbitration Rules: A Commentary (Oxford: OUP 2013) 507.