UNCITRAL Arbitration Rules 2010 & 1976: A Comparison- Part I

We've had two small overviews of the UNCITRAL Arbitration Rules 2010 last year (here and here). Coinciding with the first anniversary of the 2010 Rules of the UNCITRAL (15 August 2011), we would be having a series of posts on the New Rules. The purpose of this series would be to minutely compare the New Rules with the old one (1976). In this first post of the series, we'll give a brief history of the New Rules.

The United Nations Commission for International Trade Law (UNCITRAL) has been the forerunner in convergence and harmonization of laws relating to international trade law. One of the chief contributions of UNCITRAL has been in the field of international arbitration law. The UNCITRAL Arbitration Rules, 1976 and UNCITRAL Model Law on International Commercial Arbitration, 1985 (“Model Law”) have been used prominently as rules governing arbitrations. Arbitration laws of several countries are on the basis of UNCITRAL’s Model Law on International Commercial Arbitration, 1985. More than sixty seven jurisdictions have based their arbitration laws on the UNCITRAL Model Law on International Commercial Arbitration, 1985. For a list of the countries that have adopted the Model Law, access this link.

The UNCITRAL Arbitration Rules provides the procedural framework primarily for ad hoc arbitrations (Ad hoc arbitrations are those arbitrations which are not administered by any arbitration institution. An arbitration is ad hoc even if an institution is chosen merely for constituting the arbitration tribunal). However, due to the popularity of the said Rules, even several institutions have agreed to administer arbitration under the UNCITRAL Arbitration Rules. Singapore International Arbitration Centre, Hong Kong International Arbitration Centre, Cairo Regional Centre for International Commercial Arbitration, WIPO, are some examples. The Arbitration Rules have been

used in several investment treaties and in well-known arbitrations. The UNCITRAL Working Group II has cited an UNCTAD report wherein about 100 investment treaties were reviewed and in the said treaties about sixty percent of them referred to ad hoc arbitration according to the UNCITRAL Arbitration Rules (Para 33, A/CN.9/717). The below figure represents the arbitration rules under which different international investment disputes have been resolved or are being resolved from 1987 till 2010 See, UNCTAD, Latest Developments in Investor– State Dispute Settlement, IIA, Issue Note No. 1 (March 2011):

Use of UNCITRAL Arbitration Rules in International Investment Disputes

Out of the 390 international investment disputes that have arisen so far, about 109 of these have used the UNCITRAL Arbitration Rules. This is roughly equivalent to about twenty eight percent of all international investment disputes in the world. 

Recently, the UNCITRAL has, after more than three decades,

revised its Rules on arbitration (2010 Rules). For a long time practitioners and academicians have wondered why UNCITRAL has not revised its Arbitration Rules, 1976 just like several arbitration institutions which have revised their Rules from time to time. One of the possible reasons for the non-revision might have been that the adoption of the UNCITRAL Model Law on International Commercial Arbitration was in itself a sort of Rules revision. Paulsson and Petrochilos (Jan Paulsson & Georgios Petrochilos, REVISION OF THE UNCITRAL ARBITRATION RULES) have cited four reasons for revising the Rules: 1. advances in arbitration practice since 1976;

2. the 1976 Rules was based on arbitration rules that are no longer in force;

3. use of the 1976 Rules in context that were not strictly “commercial” and consequent issues such as transparency, consolidation of claims etc that arise of out such use; and

4. the Rules had to be consistent with the procedural standards that had developed in international arbitration since 1976.

Recognising this deficiency, the UNCITRAL, in its 39th session of the UNCITRAL, decided to accord priority to the revision of the UNCITRAL Arbitration Rules. Subsequently, in its 45th session, the Working Group on International Commercial Arbitration and Conciliation compared the UNCITRAL Arbitration Rules, 1976 with the arbitration rules of several other institutions and identified possible areas which might need consideration for revision.

Some of the areas identified were to making the Rules applicable to even non-contractual arbitrations, giving power to arbitral tribunals to change the time limits given in the Rules, Separation of Notice of Arbitration and Statement of Claim, separation of Reply to Notice of Arbitration and Statement of Defence, introduction of provisions for multiparty arbitration, providing for a continuing duty of disclosure of independence and impartiality by arbitrators, having time limits for challenge

for arbitrators and so on. The Working Group has been working since then on the revision of the Arbitration Rules.

More details in the next post on the series.

UNCITRAL Arbitration Rules 2010 & 1976: A Comparison- Part II

This is the second part of a series of posts on the UNCITRAL Arbitration Rules, 2010. The previous post in the series was an introduction to the 2010. This post would cover improvements in the New Rules relating to the model arbitration clause and electronic transmission of the notice invoking arbitration.

Model Arbitration Clause: Arbitration rules of several prominent institutions provide for model arbitration clauses for adoption in contracts. It is advantageous for parties to use the model clause of a specific institution in their contracts if the intent is to refer disputes to arbitrations under the aegis of that institution. Rarely would courts strike down such arbitration clauses because of their wide use (See, KumkumSen, Taking resolution of disputes seriously, Business Standard, March 14, 2011).

The New Arbitration Rules contains such a model clause. The Model Clause reads: "Model arbitration clause for contracts: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.

Note — Parties should 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 and country);

(d) The language to be used in the arbitral proceedings shall be ...”

Possible waiver statementNote — 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."As is well-known, the UNCITRAL Arbitration Rules provides the framework for ad hoc arbitration. Consequently, there is no default authority to enable the constitution of the arbitral tribunal in case the mechanism devised by the parties failed. In case of such failure, the default appointing authority under the Old Rules was the Secretary-General of Permanent Court of Arbitration situated at the Hague. In many instances, parties to the agreement agreed on the UNCITRAL Arbitration Rules even without designating the appointing authority. When their appointment procedure failed, the parties had to resort to the default procedure contained in the Rules: to approach the Secretary General of the Permanent Court of Arbitration. If the parties had contemplated designating an appointing authority, they could have chosen a constituting authority convenient (and probably more inexpensive) to them. With the inclusion of the Model Clause which provides for designation of appointing authorities, such problems are at least mitigated, if not completely eliminated.

Further, the "Note" in the model clause on the "possible waiver statement" is to make the parties aware that the effectiveness of such a provision ultimately depends on the applicable law.

Applicable RulesWhen there was only one version of UNCITRAL Rules, it was not problematic when there was no reference to the year of adoption of the Rules in arbitration agreements. However after the New Rules were published, it became problematic when the parties did not mention the version of the Rules that they wished to adopt in their contract. According to Paulsson & Petrochilos, most of the Investment Treaties simply referred to the arbitration rules of the UNCTRAL without any reference to the version of the Rules applicable(p. 14-15, Jan Paulsson & Georgios Petrochilos, Revision of the UNCITRAL Arbitration Rules).For instance, the Investment Treaty between Greece and South Africa simply mentions that the investor may refer the dispute to “an ad hoc tribunal to be established under the arbitration rules of the United Nations Commission on International Trade Law…” without any reference to the version of the Rules. It is only in some rules that there is either an express mention of the applicable Rules or a test to determine the applicable version of the UNCITRAL Rules. For instance, the Investment Treaty between Australia and India expressly provides that “the Arbitration Rules of the United Nations Commission on International Trade Law, 1976” would govern. The Investment Treaty between Hong Kong (SAR) and Italy provides that the UNCITRAL Rules in force at the time of submission of the dispute would apply to the arbitration.

Article 1(2) addresses this problem. It reads:“The parties to an arbitration agreement concluded after 15 August 2010 shall be presumed to have referred to the Rules in effect on the date of commencement of the arbitration, unless the parties have agreed to apply a particular version of the Rules. That presumption does not apply where the arbitration agreement has been concluded by accepting after 15 August 2010 an offer made before that date.”Consequently: 5. If the arbitration agreement is concluded after 15 August

2010, the Rules in force on the date of commencement of

arbitration would govern the arbitration.

6. However, even if the arbitration agreement is concluded after 15 August 2010, the parties might agree to apply a particular version of the Rules (i.e., the 1976 Rules)

7. Where the arbitration agreement is concluded before 15 August 2010 without mentioning the applicable Rules, the 1976 Rules would apply.

8. Where the offer to arbitrate is made prior to 15 August 2010 but without mentioning the version of the Rules and the acceptance is subsequent to the effective date of the new Rules, the 1976 Rules would apply.

Electronic Transmission of NoticesWhen the 1976 Rules were adopted, there were no means of electronically transmitting notices/ claims etc. Hence the Old Rules did not contain provisions for validly transmitting notices etc through facsimile or email. The 2010 Rules lays down the framework of transmitting notices through electronic means.The requirement under Article 2(1) is that the notice could be transmitted by any means whatsoever provided such means of communication “provides or allows for a record of its transmission”. In this context, an aspect pertaining to the influence of instruments other than the previous version of the Arbitration Rules needs to be noted. The UNCITRAL Rules has been updated keeping in mind the terminologies and the phrases used in the Model Law. Similarly, UNCITRAL has ensured harmony among it various texts/ instruments. As regards, electronic transmission, the Working Group of the UNCITRAL was of the view that the term "electronic communication" should be used in the Rules as the same was used by UNCITRAL in the United Nations Convention on the Use of Electronic Communications in International Contracts. Another instance of this is harmonious usage is regarding the nature of the electronic communication. Paulsson & Petrochilos had opined that the means of communication should be such that it must provide a “durable record of dispatch and receipt” (p. 23, supra). The Working Group was, however, of the opinion that such terminologies were not used in UNCITRAL’s instruments

and “preference was expressed for the revised draft to be prepared being consistent with terminology used in the existing instruments”. [p. 11, Report of the Working Group on Arbitration and Conciliation on the work of its forty-sixth session A/CN.9/619 (New York, 5-9 February 2007)]More on the Rules in another post.

UNCITRAL Arbitration Rules 2010 & 1976: A Comparison- Part III

This post is the third part in the series of posts on the analysis of the new features in the UNCITRAL Arbitration Rules, 2010. This post deals with provisions pertaining to notice invoking arbitration and the constitution of the arbitral tribunal. Previous posts of this series can be accessed from here and here.

Notice of Arbitration:Under the Old Rules, there was no option for the respondent to file a reply to the notice invoking arbitration. This, at times, denied the respondent an opportunity to comment on the jurisdiction, claim or the counter-claim. (Para 33, A/CN.9/WGII/WP.143). Further, the absence of such a right to the respondent was regarded as leading to improper understanding of the dispute and also having an adverse impact on the possibility of amicable settlement.(p. 5-6, Jan Paulsson & Georgios Petrochilos, Revision of the UNCITRAL Arbitration Rules)

Hence, the Working Group decided to make provisions to enable the respondent reply to the notice of arbitration. Accordingly, Article 4(3) provides that the respondent should communicate to the claimant the Response to the Notice of Arbitration within thirty days from the receipt of notice of arbitration. The content of the Response is virtually same as that

of the Notice. However, the Response may also include: “(a) Any plea that an arbitral tribunal to be constituted under these Rules lacks jurisdiction; (b) A proposal for the designation of an appointing authority referred to in article 6, paragraph 1; (c) A proposal for the appointment of a sole arbitrator referred to in article 8, paragraph 1;(d) Notification of the appointment of an arbitrator referred to in articles 9 or 10;(e) A brief description of counterclaims or claims for the purpose of a set-off, if any, including where relevant, an indication of the amounts involved, and the relief or remedy sought;(f) A notice of arbitration in accordance with article 3 in case the respondent formulates a claim against a party to the arbitration agreement other than the claimant.”Further, while discussing the issue of incomplete Notice or Response, the Working Group was in favour of leaving the consequences of such incomplete notice to the arbitral tribunal rather than dealing with the same in the rules. Therefore, the Rules specifically provide that a deficiency in the Notice of Arbitration or the Response to the Notice of Arbitration would not prevent the arbitral tribunal from being constituted. Once the arbitral tribunal is constituted, it would decide on whether the notice invoking arbitration was sufficient or not.

Appointing Authority: Under the Old Rules, in case of failure of the party appointed procedure for constituting the arbitral tribunal, the parties could agree upon the appointing authority. In case of absence of an agreement as to appointing authority, whether in the first place, or after proposal by a party, the parties had to approach the Secretary General of the Permanent Court of Arbitration (PCA) at The Hague. Article 6(2) of the 1976 Rules provided: “If within thirty days after receipt by a party of a proposal made in accordance with paragraph 1 the parties have not reached agreement on the choice of a sole arbitrator, the sole arbitrator

shall be appointed by the appointing authority agreed upon by the parties. If no appointing authority has been agreed upon by the parties, or if the appointing authority agreed upon refuses to act or fails to appoint the arbitrator within sixty days of the receipt of a party's request therefor, either party may request the Secretary-General of the Permanent Court of Arbitration at The Hague to designate an appointing authority.”Thus, under the Old Rules, the role of the Secretary-General of the PCA was to designate an appointing authority which would complete the process of constitution of the arbitral tribunal. While the UNCITRAL Working Group was considering revision of the Rules, there were proposals, supported by the representatives of the PCA in the Working Group, for making the PCA as the default appointing authority rather than mandating the PCA to designate an appointing authority (Paras 46-50, A/CN.9/665 - Report of Working Group II (Arbitration and Conciliation) on the work of its forty-ninth session). Need for a simple, efficient, and streamlined procedure was the argument given in support of the said proposal. Conversely, the Working Group felt that the existing procedure had been in vogue for several decades and “the proposal [to make the PCA the appointing authority] constituted a major and unnecessary departure from the existing UNCITRAL Arbitration” (Para 49, A/CN.9/665). The Working Group was of the view that the issue was a “political” issue and the UNCITRAL was the appropriate body to take a decision on the same. Ultimately, the proposal to designate the Secretary General of the PCA as the default appointing authority was not retained in the 2010 Rules. However, the Working Group chose a middle path: the Secretary General of the PCA could appoint himself as the appointing authority if one of the parties proposed his name as one of the appointing authorities (Para 51, A/CN.9/665). Article 6(1) of the 2010 Rules reads: "Unless the parties have already agreed on the choice of an appointing authority, a party may at any time propose the name or names of one or more institutions or persons, including the Secretary-General of the Permanent Court of Arbitration at The

Hague (hereinafter called the “PCA”), one of whom would serve as appointing authority.”As stated in our previous post, it makes sense from efficiency and economy perspectives for the parties to an agreement to designate an appointing authority in their arbitration agreement if they opt for UNCITRAL Arbitration Rules. In this regard, Thomas H. Oehmke states: “Cases under the UNCITRAL Arbitration Rules will proceed more efficiently when parties have named in their contract an experienced, impartial institution to act as the authority to designate arbitrators if the parties do not.” [Thomas H. Oehmke, Appendix B5: Procedures for Cases under the UNCITRAL Arbitration Rules (9/15/2005), CMLARB APP B5 (Westlaw)]

Number of Arbitrators:Like in the previous version of the Rules, the default number of arbitrators in the present Rules is three. The Working Group deliberated on the suggestion to have one arbitrator as the default arbitrator (Para 59-61, A/CN.9/614 - Report of the Working Group on Arbitration and Conciliation on the work of its forty-fifth session). The suggestion was that a single arbitrator tribunal was less costly than a three member tribunal. Another advantage was that constitution of the tribunal became simpler and swifter with a single arbitrator. The Working Group also considered the practice of arbitral institutions like LCIA, AAA etc which gave preference to a sole arbitrator. LCIA Arbitration Rules, for instance, provides: “5.4 … A sole arbitrator shall be appointed unless the parties have agreed in writing otherwise, or unless the LCIA Court determines that in view of all the circumstances of the case a three-member tribunal is appropriate.”In the Old Rules, the default number was three. The same practice was retained in the Model Law as well. The Working Group felt that a three member tribunal as the default number has been in vogue for several decades and should continue in the “interests of familiarity”. Hence, Article 7(1) provides for a three member arbitral tribunal by default, subject to the

agreement of the parties to a sole arbitrator.

Articles 7(2) is a novel provision, intended to reduce the burden of costs on the Claimant in case where the dispute is such that a resolution of the same by a single arbitrator tribunal would be more appropriate. As stated above, Article 7(1) provides that the default number of arbitrators will be three. Article 7(2) provides: “Notwithstanding [Article 7(2)], if no other parties have responded to a party’s proposal to appoint a sole arbitrator within the time limit provided for in paragraph 1 and the party or parties concerned have failed to appoint a second arbitrator in accordance with articles 9 or 10, the appointing authority may, at the request of a party, appoint a sole arbitrator pursuant to the procedure provided for in article 8, paragraph 2 if it determines that, in view of the circumstances of the case, this is more appropriate.”Thus, the appointing authority would help constitute a sole arbitrator instead of a three member tribunal if the following conditions are satisfied: 9. the party issuing the notice of arbitration proposes a single

member tribunal;

10. the recipient of the notice invoking arbitration neither responds to the proposal for appointment of the sole arbitrator nor appoints the second arbitrator;

11. a request is made by a party to the appointing authority to consider appointing a sole arbitrator; and

12. the appointing authority comes to a conclusion that it would be more appropriate to appoint a sole arbitrator instead of constituting a three member tribunal.

The UNCITRAL Arbitration Rules are used in several ad hoc arbitration agreements and disputes that may arise in respect of such agreements may not necessarily be high stakes disputes. In such cases, Article 7(2) affords a certain amount of flexibility and enables the parties to have a cost effective arbitration.

More in the next post.

UNCITRAL Arbitration Rules 2010 & 1976: A Comparison- Part IV

This post is the fourth part in the series of posts on the analysis of the new features in the UNCITRAL Arbitration Rules, 2010. This post deals with provisions pertaining to the constitution of the arbitral tribunal and the independence and impartiality of arbitrators. Previous posts of this series can be accessed from here, here and here.

Appointment of Arbitrators by List Procedure: In the previous post, we had mentioned that the UNCITRAL Arbitration Rules provides for the constitution of the arbitral tribunal by an appointing authority.  In this part of the post, we describe how the appointing authority appoints the arbitrator as per the New Rules. Appointment of the sole arbitrator by the appointing authority is by "list procedure". A typical list procedure system consists of one party to the arbitration circulating a list of arbitrators to the other. However, under the Rules, it is the appointing authority which would communicate a list of arbitrators to each of the parties. Once the list is given, the parties are to delete names from the list which they consider inappropriate and also allot priority to the arbitrators they approve of. The appointing authority would appoint such the sole arbitrator whom both parties have agreed to, in accordance with the priority allocated by them. The selection in the list is to be done within the time limits specified in the Rules.

It is not that the list procedure is compulsory. The parties may agree that list procedure should not be followed. In fact, the appointing authority has the discretion not to employ the list procedure in case it deems it inappropriate to do so. Also, if the appointment cannot be made even after following the list procedure, the appointing authority is given the discretion to appoint a sole arbitrator.

Commentators suggest that although the list procedure is slower as compared to direct appointment, it offers an element of choice to the parties as compared to direct appointment by the appointing authority [ALAN REDFERN ET AL, LAW AND PRACTICE OF INTERNATIONAL COMMERCIAL ARBITRATION 224 (2004)] Institutions such as the ICDR and the Netherlands Arbitration Institute employ the list procedure.

The list procedure was in vogue even under the 1976 Rules for the constitution of a sole arbitrator tribunal. Provisions under the 2010 Rules on the appointment of arbitrators are not drastically different from the 1976 Rules.

On the appointment procedure in the UNCITRAL Arbitration Rules, some commentators have opined:“[T]he Rules present neither a costly nor a lengthy process… From the date of the notice of arbitration this process would require an absolute minimum, 90 days and more likely 150 to 180 days, and may require the payment of the costs of appointing authority. Such periods of time do not see burdensome compared to, for example, the time a party might have to wait on the docket of many municipal courts.”[D. CARON, L CAPLAN & M PELLONPAA, THE UNCITRAL ARBITRATION RULES: A COMMENTARY 331 (2006)]

Some commentators disagree to this view. According to Gary Born, appointment of arbitrators could become complicated under the UNCITRAL Arbitration Rules if parties did not agree on the appointing authority. Born’s chief complaint is that in such a case, there are numerous opportunities for the parties to comment or protest the appointment of an arbitrator. Born also concedes that the Permanent Court of Arbitration, which is the authority appointing the appointing authority, has been discharging is functions well. He also states that the appointing

authorities have also discharged their functions through the list procedure reasonably well, “although the delays that are inherent in the system can sometimes cause frustrations or injustice to the claimants.” [GARY B BORN, INTERNATIONAL COMMERCIAL ARBITRAITON VOL. II 1412-1413]

Constitution of a Three Member Tribunal:Article 9 provides for the constitution of a three member tribunal. Article 9(1) provides for the typical procedure in such cases: each party has to appoint one arbitrator and the two arbitrators so appointed would appoint the third arbitrator. In cases where a party fails to appoint an arbitrator within thirty days from receipt of notification of appointment of the arbitrator, Article 9(2) provides that the other party could approach the tribunal for appointment of the arbitrator. Article 9(3) provides that in case both parties appoint arbitrators in time but the two arbitrators fail to agree on the third arbitrator, the appointing authority would appoint the presiding arbitrator in the same way as it appoints the sole arbitrator. It must be noted that Article 9(2) does not provide how the second arbitrator is to be appointed by the appointing authority. Whether the appointing authority should arbitrarily appoint an arbitrator or it should follow the list procedure is not clear.

Multi-Party Arbitration: Article 10 deals with multi-party arbitration. Multi-party arbitrations are arbitrations involving more than two parties. Between 2002 and 2005, about one-third of the cases that ICC’s International Court of Arbitration dealt with were multi-party arbitrations (p. 7, Jan Paulsson & Georgios Petrochilos, Revision of the UNCITRAL Arbitration Rules). In such cases, constitution of the arbitral tribunal through consensus becomes a challenge in view of the number of parties involved. In case of tri-partite contracts, the typically used procedure is for each of the three parties to appoint one arbitrator and the three arbitrators so appointed to appoint two more arbitrators. Parties

might consider it expensive to have an arbitral tribunal with more than five members. 

The 2010 Rules incorporate the most common solution to deal with constitution of arbitral tribunal in multi-party arbitrations. Article 10(1) provides for appointment in cases were three arbitrators are to be appointed. It provides: “For the purposes of article 9, paragraph 1, where three arbitrators are to be appointed and there are multiple parties as claimant or as respondent, unless the parties have agreed to another method of appointment of arbitrators, the multiple parties jointly, whether as claimant or as respondent, shall appoint an arbitrator.”In cases where parties have specifically provided that the number of arbitrators in the multi-party arbitrations shall be other than one or three Article 10(2) of the Rules provide that parties have to necessarily specify the procedure for appointment in their arbitration agreements. 

If no procedure is agreed upon in the arbitration agreement for constitution of the tribunal, whether in a multi-party arbitration or otherwise, the appointing authority has been given the authority under the Rules to constitute the entire arbitral tribunal by itself and designate one arbitrator so appointed as the presiding arbitrator.

Impartiality and Independence of the Arbitral Tribunal: Under Article 9 of the Old Rules the prospective arbitrator was only bound to disclose circumstances that were likely to give justifiable doubts as to his or her independence or impartiality to the parties. In addition to incorporating the above obligation, the New Rules obligate the prospective arbitrator to disclose such circumstances to all the members of the arbitral tribunal. This obligation of the prospective arbitrator subsists, as per the New Rules, from the time when a party approaches the prospective arbitrator till the end of arbitral proceedings (Article 11). Further, unlike the Model Law (Article 12), the Old Rules was

not specific on whether such obligation was a “continuing” obligation. The New Rules clarifies that the obligation is “ongoing”. 

The Working Group thought it fit to consider if the obligation to disclose should be in writing [para 48, A/CN.9/WGII/WP.143 - Settlement of commercial disputes: Revision of the UNCITRAL Arbitration Rules]. A suggestion was mooted to have a model statement of declaration of disclosure of circumstances likely to give justifiable doubts as to the independence or impartiality of the arbitrator [Para 49, A/CN.9/WG.II/WP.145 - Settlement of commercial disputes: Revision of the UNCITRAL Arbitration Rules]. The Working Group adopted two statements, one containing a declaration that there is no such circumstance to disclose, and the other providing that notwithstanding any past circumstances, the arbitrator would act in an independent and impartial manner. The purpose of the second statement was that even if there were circumstances that were likely to give justifiable suspicions of independence or impartiality of the arbitrator, the parties could assess whether to continue with the arbitrator or not. The Model Statements read: “Model statements of independence pursuant to Article 11 of the RulesNo circumstances to disclose: I am impartial and independent of each of the parties and intend to remain so. To the best of my knowledge, there are no circumstances, past or present, likely to give rise to justifiable doubts as to my impartiality or independence. I shall promptly notify the parties and the other arbitrators of any such circumstances that may subsequently come to my attention during this arbitration.

Circumstances to disclose: I am impartial and independent of each of the parties and intend to remain so. Attached is a statement made pursuant to article 11 of the UNCITRAL Arbitration Rules of (a) my past and present professional, business and other relationships with the parties and (b) any

other relevant circumstances. [Include statement] I confirm that those circumstances do not affect my independence and impartiality. I shall promptly notify the parties and the other arbitrators of any such further relationships or circumstances that may subsequently come to my attention during this arbitration.”In the Fifty Second session of the II Working Group, a proposal was mooted to have a statement by the arbitrator of readiness to conduct the arbitration diligently, efficiently and in accordance with the UNCITRAL Rules [Para 33, A/CN.9/WG.II/WP.157/Add.2 - Settlement of commercial disputes: Revision of the UNCITRAL Arbitration Rules]. The proposal was accepted and the statement was incorporated in the Annex to the Rules as a part of the statement on independence. “Note — Any party may consider requesting from the arbitrator the following addition to the statement of independence:

I confirm, on the basis of the information presently available to me, that I can devote the time necessary to conduct this arbitration diligently, efficiently and in accordance with the time limits in the Rules .”

More on the Rules in the another post.

UNCITRAL Arbitration Rules 2010 & 1976: A Comparison- Part V

This post is the fifth part in the series of posts on the analysis of the new features in the UNCITRAL Arbitration Rules, 2010.  Previous posts of this series can be accessed from here, here, here and here.

Challenge and Replacement of Arbitrator: The provisions pertaining of challenge of an arbitrator are virtually similar to the Old Rules. However, there is one addition in the New Rules. Where a challenge of an arbitrator is

made by a party and the challenge is notified to the tribunal and to other parties, fifteen days time has been given under the New Rules for:13. the parties to agree to the challenge, or

14. the challenged arbitrator to withdraw

If neither of these happens, the challenging party is free to pursue the challenge and seek a decision from the tribunal on the challenge within thirty days from the date of the notice of challenge [Article 13(4)].

The provisions pertaining to replacement of arbitrator have been streamlined. The procedure for appointment of the substitute arbitrator would be the same as that for appointment of an arbitrator. However, on application by a party, if the appointing authority is of the opinion that it ought to deprive a party of its right to appoint a substitute arbitrator, it may do so. In that case, the appointing authority might, after giving opportunity of being heard to the parties and after obtaining the views of the arbitrators, either appoint a substitute arbitrator or if the need for replacement occurs after the hearings are over, authorize the existing tribunal to continue with the arbitral proceedings without appointing another arbitrator.

Repetition of hearings on replacement of an arbitrator:The previous position as regards repetition of hearings was that the hearings would have to commence afresh if the presiding arbitrator had to be replaced (Article 14). But in case of replacement of other arbitrators, it was up to the discretion of the arbitral tribunal to decide to commence fresh proceedings or to continue with the proceedings. During the deliberations of the Working Group, it was suggested that the new provisions pertaining to repetition of hearings due to replacement of arbitrators be based on Article 14 of the Swiss Rules of International Arbitration, which provided: “If an arbitrator is replaced, the proceedings shall as a rule resume at the stage where the arbitrator who was replaced ceased to perform his functions, unless the arbitral tribunal

decides otherwise.”

The Swiss Rules of International Arbitration, also known in the industry as the Swiss Rules, is based on the UNCITRAL Arbitration Rules, 1976, with certain modifications. Prior to the introduction of Swiss Rules, different Chambers of Commerce and Industry in Switzerland had their own arbitration rules. In 2004, these Chambers of Commerce and Industry, with a view to promote institutional arbitration in Switzerland, joined together and uniformly adopted the Swiss Rules of International Arbitration, thereby replacing their own arbitration rules (See, Introduction to the Swiss Rules of International Arbitration).

The suggestion to use the Swiss Rules was accepted and the relevant provision in the new Rules is based on the said provision of the Swiss Rules. Thus, under the new Rules, the distinction between the presiding arbitrator and the other arbitrators has been abolished. The procedure under the New Rules is that the proceedings would continue from the stage when the replaced arbitrator ceased to perform his functions, unless the arbitral tribunal decides otherwise.

Immunity to Arbitrators and Others: Considerable discussions took place on the scope of immunity to arbitrators and their appointees. During the initial stages of the revision of the UNCITRAL Rules, it was proposed to either limit or exclude the liability of the arbitrators through specific provisions (Para 136, Report of the Working Group on Arbitration and Conciliation on the work of its forty-fifth session A/CN.9/614). Apart from the arbitrators, the UNCITRAL felt that such immunity should be granted to even the appointing authority under the Rules (Para 39-40, Settlement of commercial disputes: Revision of the UNCITRAL Arbitration Rules A/CN.9/WGII/WP.143/Add.1).

On the scope of the immunity, the UNCITRAL contemplated two approaches. The first was to have an unequivocal waiver by

the parties similar to the ICC Rules or the Vienna Rules. Article 34 of the ICC Rules of Arbitration provides: “Neither the arbitrators, nor the Court and its members, nor the ICC and its employees, nor the ICC National Committees shall be liable to any person for any act or omission in connection with the arbitration.”Article 8 of the Rules of Arbitration and Conciliation of the International Arbitral Centre of the Austrian Federal Economic Chamber in Vienna (Vienna Rules) states:“Liability of the arbitrators, the Secretary General, the Board and its members and the Austrian Federal Economic Chamber and its employees for any act or omission in relation to arbitration proceedings, insofar as such liability may be admissible by law, shall be excluded.”The other approach, consistent with the Introductory Note to the IBA Rules of Ethics for International Arbitrators (1987), the London Court of International Arbitration Rules and the American Arbitration Association Rules was to grant a similar immunity but to exclude intentional wrongdoing. The UNCITRAL felt that the current practice in several countries of introduction of stricter standards of liability for acts and omissions of judges should be taken into consideration in deciding on the scope of arbitrator immunity (See the “manifest bad faith” standard proposed by Paulsson & Petrochilos (p. 53, Jan Paulsson & Georgios Petrochilos, Revision of the UNCITRAL Arbitration Rules). It was also felt that the interests of the parties should not be compromised by adopting an overly protective arbitral immunity clause. At the same time, arbitrators would also have to be protected against claims of negligence or fault by parties against arbitrators. The UNCITRAL held: “It was generally agreed that any provision that might be introduced in the Rules to exonerate arbitrators from liability should be aimed at reinforcing the independence of arbitrators and their ability to concentrate with a free spirit on the merits and procedures of the case. However, such a provision should not result or appear to result in total impunity for the consequences of any personal wrongdoing on the part of

arbitrators or otherwise interfering with public policy.”(Para 39, A/CN.9/646 - Report of the Working Group on Arbitration and Conciliation on the work of its forty-eighth session)

In the end, the UNCITRAL decided to take the more common approach of granting limited immunity to the arbitrators. (Para 39-40, Settlement of commercial disputes: Revision of the UNCITRAL Arbitration Rules A/CN.9/WGII/WP.143/Add.1).

Thus, as per Article 16 of the 2010 Rules, parties are deemed to have waived of all claims against the arbitrator, the appointing authority or any person appointed by the arbitral tribunal, to the extent permitted by the applicable law. The only exception to this waiver rule is intentional wrongdoing.

Tribunal to Act Fairly and Efficiently: One of the most fundamental provisions under the Old Rules was the directive to the tribunal to act fairly and give the parties full opportunity to present its case. The Working Group considered whether that the term “full” had to be dropped from the said provision. (Para 76-77, Report of the Working Group on Arbitration and Conciliation on the work of its forty-fifth session A/CN.9/614) Secondly, it was also suggested that the phrase “at any stage of the proceedings” implied that the tribunal should grant an opportunity to a party to present its case at every stage, even if such request by that party was inappropriate. The phrase “at any stage of proceedings” was not used in the Model Law (See Article 18). Finally, it was decided to use the term “reasonable” instead of “full” and the phrase “at an appropriate stage of proceedings” instead of “at any stage of the proceedings”. Further, the Rules obligate the tribunal to avoid unnecessary delay and expenses and provide for a fair and efficient arbitral process [Article 17(1)].

Preliminary Hearing: A preliminary hearing is also called preparatory meeting or

preparatory consultations. It is standard procedure to have a preliminary hearing in which several fundamental aspects pertaining to arbitration such as language of arbitration, the governing law of arbitration, the governing law of contract, the procedure for arbitration, time-limits for submissions of pleadings, fee of arbitrators etc are decided. The New Rules provides for such a hearing to be conducted by the tribunal to decide the provisional timetable of the arbitration, after hearing the views of the parties. This provisional timetable is not meant to be sacrosanct and the tribunal may, after hearing the parties, extend or shorten time periods specified in the provisional timetable.

Joinder of Third parties: Right from the beginning of the revision of the Rules, the Working Group, inspired by Article 22.1(h) of the LCIA Arbitration Rules, felt that the New Rules should contain a provision on joinder of third parties (para 6, A/CN.9/WG.II/WP.145/Add.1 - Settlement of commercial disputes: Revision of the UNCITRAL Arbitration Rules). Article 22.1(h) of the LCIA Rules provides: “Unless the parties at any time agree otherwise in writing, the Arbitral Tribunal shall have the power, on the application of any party or of its own motion, but in either case only after giving the parties a reasonable opportunity to state their views: ... (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.”But the main focus of discussions during the revision was the issue of consent of the party who is to be joined as a party. The Working Group was of the opinion that the consent of the party proposed to be joined as a party (hereinafter, “Proposed Party”) must necessarily be taken in view of the fact that arbitration is

based on consent of the parties (Para 121-126 A/CN.9/619 - Report of the Working Group on Arbitration and Conciliation on the work of its forty-sixth session). Hence, the Working Group noted that the Proposed Party must necessarily be a party to the arbitration agreement. The Working Group also noted that there need not be any express consent from the Proposed Party independent of the arbitration agreement. By the mere fact of acceding to the UNCITRAL Arbitration Rules, the party is deemed to have consented to the joinder provisions as well (Para 128-135 A/CN.9/665 - Report of Working Group II (Arbitration and Conciliation) on the work of its forty-ninth session). Apprehensions were raised that absence of express consent from the Proposed Party might pose problems at the stage of enforcement of the arbitral award. Hence, the Working Group decided to incorporate a safety valve for the Proposed Party- before the tribunal decides on the joinder, the Proposed Party (and even the parties to the proceedings) could submit to the tribunal that the joinder would prejudice it (Para 134 A/CN.9/665 - Report of Working Group II (Arbitration and Conciliation) on the work of its forty-ninth session).

Thus, as per Article 17(5) of the New Rules, three conditions must be satisfied for the tribunal to join one or more third parties to the arbitration proceedings:  1. there must be a request from one of the parties. Here, the

Rules is not clear whether the request may be made by a person who is not a party to the arbitration proceedings could apply to the tribunal for being joined as a party to the proceedings. In view of the fact that the Proposed Party had already consented to the joinder by acceding to the Rules, there is nothing that suggests that it might be the party proposing the joinder. But arbitrations are essentially private affairs and that party might not even know of the existence of the arbitration, or the means to communicate to the arbitral tribunal,

2. the person proposed to be joined as a party is a party to the arbitration agreement, and 

3. (iii) after giving an opportunity of being heard to all parties (including the person proposed to be joined as a party) the tribunal is of the opinion that the joinder would not prejudice any party.

Seat of Arbitration: There is a difference between the seat of arbitration and the location of the arbitration proceedings. Seat or the Juridical Seat of Arbitration refers to the jurisdiction to which the arbitration is intrinsically connected. An arbitration cannot be delocalised, that is, it cannot be one which is unconnected to a legal jurisdiction. It has to belong to a jurisdiction, which is either agreed to by the parties or in the absence of such agreement, determined by the arbitral tribunal. However, the arbitral tribunal, may assemble for hearing in one or more locations during the course of arbitration for the sake of convenience. The latter affords certain amount of flexibility to the arbitral process. These two independent aspects have often been confused with each other. Hence, the Working Group initially felt that this distinction must be clearly spelt out in the revised Rules (Para 75-76, A/CN.9/WGII/WP.143 - Settlement of commercial disputes: Revision of the UNCITRAL Arbitration Rules). Also see, p. 80-81, Jan Paulsson & Georgios Petrochilos, Revision of the UNCITRAL Arbitration Rules. Subsequently, however, the Working Group expressed doubts as to whether the revised Rules should contain terminology inconsistent with that of the Model Law (Para 89, Report of the Working Group on Arbitration and Conciliation on the work of its forty-fifth session A/CN.9/614). Another concern raised against clarification of the difference between seat and location of arbitration proceedings was that it might have “unintended consequences to existing contractual drafting practices”. (Para 141, Report of the Working Group on Arbitration and Conciliation on the work of its forty-fifth session A/CN.9/614).

Under the 1976 Rules, there was a requirement that the award be made in the place of arbitration [Article 16(4)]. This requirement has been done away with in the New Rules. Article

18(1) creates a legal fiction whereby the arbitral award is deemed to have been made in the place of arbitration.

Pleadings: Under the 2010 Rules, the statement of claim should also contain particulars of legal grounds or arguments supporting the claim. This requirement was not there under the Old Rules. During the deliberations of the Working Group, it was initially suggested that the statement of claim should be accompanied by legal principles supporting the claim. However, it was felt that the term “legal principles” was too vague. Therefore, the Working Group decided to add the requirement of furnishing the legal grounds in the statement of claim.

The Notice of Arbitration could be treated as the Statement of Claim provided it complied with the requirements specified in Article 20(2). The requirements in Article 20(2) were that the Statement of Claim had to include the following: 1. The names and contact details of the parties;

2. A statement of the facts supporting the claim;

3. The points at issue;

4. The relief or remedy sought;

5. The legal grounds or arguments supporting the claim.

Under the 1976 Rules, it was not obligatory on the part of the Claimant to annex the essential documents which they rely upon in its pleadings, the rationale being that the Claimant would be interested in concluding the dispute resolution as early as possible and would therefore annex such documents to its pleadings. Article 20(4) of the 2010 Rules provide that the pleadings should be accompanied by the documents relied upon by the respective party.

The Secretariat of the UNCITRAL requested the Working Group in July 2006 to consider if there should be an obligation on the parties to annex all documents alongwith their respective pleadings (Settlement of commercial disputes: Revision of the

UNCITRAL Arbitration Rules A/CN.9/WGII/WP.143/Add.1). The Secretariat referred to the rules of World Intellectual Property Organisation and of the London Court of International Arbitration. Article 41(c) of the Rules of the World Intellectual Property Organisation provides: “The Statement of Claim shall, to as large an extent as possible, be accompanied by the documentary evidence upon which the Claimant relies, together with a schedule of such documents. Where the documentary evidence is especially voluminous, the Claimant may add a reference to further documents it is prepared to submit.”Article 15.6 of the LCIA Rules states: “All Statements referred to in this Article shall be accompanied by copies (or, if they are especially voluminous, lists) of all essential documents on which the party concerned relies and which have not previously been submitted by any party, and (where appropriate) by any relevant samples and exhibits.”The Working Group did not want a stringent provision for the following reason: “Concern was expressed that the use of the word “shall” suggested that the claimant would be obliged to communicate a comprehensive statement of claimant and would be precluded from providing subsequent materials. To address that concern, it was suggested that the word “shall” be replaced by “should” in order to establish a standard for the contents of the statement of claim without imposing rigid consequences for departures from that standard.”(Para 121-126 A/CN.9/619 - Report of the Working Group on Arbitration and Conciliation on the work of its forty-sixth session).

Ultimately it was agreed that the Rules should provide that the pleadings “should, as far as possible, be accompanies by all documents and other evidence”. It may be noted that this provision is not quite stringent. Practically, it may so happen that a party might find some relevant document after submission of its pleading. In such cases, Article 20(4) does not prevent a

party from producing such additional documents.

In the Old Rules, Article 19(3) imposed a condition that a counter-claim or a claim for set-off should be based on the same contract. See, [Para 191, Polis Fondi Immobiliari Di Banche Popolare Sgr.P.A v. International Fund For Agricultural Development, an arbitration conducted under the aegis of the Permanent Court of Arbitration. Also see, Alson Dundes Renteln, Encountering Counterclaims 15 Denv. J. Int’l L. & Pol’y 379, 389-390 (1986-1987)]. The Secretariat to the UNCITRAL, citing Article 21(5) of the Swiss Rules of International Arbitration, suggested that the tribunal should have the power, especially in investment disputes, to consider counter-claims and claims for set-off even beyond the contract in respect of which the dispute has been referred to the tribunal (Settlement of commercial disputes: Revision of the UNCITRAL Arbitration Rules A/CN.9/WGII/WP.143/Add.1). Ultimately the requirement that to the counter-claim or set off should be from the same contract was deleted.

More on the Rules in the next post.

UNCITRAL Arbitration Rules 2010 & 1976: A Comparison- Part VI

This  is the sixth and last installment in the series of posts on the analysis of the new features in the UNCITRAL Arbitration Rules, 2010. The UNCITRAL Arbitration Rules became effective from 15 August 2010. This series was intended to be complete on the First Anniversary of the Rules. It has been exactly a year since the New Rules have been adopted. The last post was intended to coincide with the first anniversary of the New Rules. Previous posts of this series can be accessed from here, here, here, here and here.

Power of the Arbitral Tribunal to Rule on its Jurisdiction: The provisions in the 2010 Rules on the power of the arbitral

tribunal to rule on its jurisdiction is based virtually on Article 16 of the Model Law, except for some changes, mostly minor in nature. The only change that could be considered as substantial is that the Model Law provided that in case the arbitral tribunal decided that it had jurisdiction on a preliminary issue as to jurisdiction, a party could appeal to the court on the preliminary issue. This provision is absent in the 2010 Rules. The purpose of the deletion might be because the Model Law was aimed at providing a model of arbitration law and would ideally contain provisions pertaining to the role of courts in the arbitral process. The purpose of the Arbitration Rules, on the other hand, is primarily to govern the procedure pertaining to the conduct of the arbitral proceedings.

The New Rules provides that in case a party challenges the jurisdiction of the tribunal in a court, the tribunal nevertheless had the power to continue with the arbitral proceedings and make an award.

The minor but notable changes made in the 2010 Rules vis-a-vis the Model Law are as follows: 15. The term “null and void” in Article 16(1) of the Model

Law has been modified as “null”

16. The term “ipse jure” in the above provision has been changed to “automatically”.

17. Article 16(1) provides that a plea that the tribunal lacks jurisdiction shall be raised in the statement of defence and not thereafter. However, it does not deal with a plea of lack of jurisdiction as regards counterclaim or set off. The 2010 Rules provides that a plea of lack of jurisdiction in respect of counterclaim or set off should be made in the reply to the counterclaim or set off and not thereafter.

Time Limit for Communication of Pleadings: Article 23 of the Old Rules and Article 25 of the New Rules provide that the time limit for communication of the pleadings should not exceed forty five days unless the tribunal, for justifiable reasons, extends the time limits. The time limit of

forty five days in complicated arbitrations may not be always possible. While the purpose of this provision is to expedite the arbitral process, practically these provisions presents a huge difficulty to the parties. Therefore, the arbitral tribunal should have the discretion right at the outset to give parties more time for the submission of pleadings.

Interim Measures: Unlike the Old Rules, the New Rules elaborately deals with interim measures. The Model Law was amended extensively in 2006 as regards provisions pertaining to interim measures that could be granted by the tribunal. These provisions were inserted in a new Chapter IVA of the Model Law. At the time of revising the Arbitration Rules, the Secretariat to the UNCITRAL suggested that the provisions in Chapter IVA could be adopted in the New Rules. Consequently, several provisions in Chapter IVA were incorporated with changes mutatis mutandis.

The Model Law gives the option to the parties to agree that the tribunal would not have the power to grant interim measures [Article 17(1)]. This option of the parties has not been replicated in the New Rules [Article 26(1)].

According to Article 26(2) of the New Rules, an interim measure is any temporary measure ordered by the tribunal prior to issuance of the final award which is in the nature of, but is not limited to, the following measures: a) Maintenance or restoration of the status quo pending the final decision on the dispute b) Taking an action, or refraining from taking an action, that would prevent4. Current or imminent harm

5. Prejudice to the arbitral process

c) Providing a means of preserving assets out of which a subsequent award may be satisfiedd) Preserving evidence relevant to the resolution of the dispute.

In this regard, it may be noted that Article 17(2) of the Model Law was exhaustive in providing for the kinds of interim measure that an arbitral tribunal could order. The Working Group considered Article 17(2) and concluded that the relevant provision in the New Rules should not be exhaustive in enumerating the interim measures [Para 92-93 A/CN.9/669 - Report of Working Group II (Arbitration and Conciliation) on the work of its fiftieth session (New York, 9-13 February 2009)]. The analogous provision in the New Rules must be drafted so that even measures not contemplated therein may be ordered by the arbitral tribunal. To that effect, Article 26(2) makes it clear that the tribunal had the power to order measures that were not limited to those provided therein.

Further, the party asking for interim measures of the nature specified in (a) to (c) above has to satisfy the arbitral tribunal that: 6. The harm that the interim measures would prevent is not

adequately reparable by an award of damages

7. The harm that would be caused to the applicant substantially outweighs the harm likely to result to the party against whom such measure is sought to be directed.

8. There is a reasonable possibility that the applicant will succeed on the merits of the claim.

As regards interim measure specified in (d) above, the above requirements would apply only to the extent the arbitral tribunal considers its appropriate.

The tribunal possesses the power to modify, suspend or terminate the interim measure it ordered either on the application of a party or in exceptional circumstances suo moto.

The tribunal has the power to order a party applying for interim measure to promptly disclose any material change in the circumstances on the basis of which interim measure was sought or was ordered by the tribunal.

The tribunal has also got the power to order the party that applied for interim measures to pay costs and damages in case the tribunal feels subsequent to granting interim measure that interim measures should not have been granted in the circumstances then prevailing. Such order could be made by the tribunal at any time during the arbitral proceedings.

Examination of Witnesses: According to Article 28(4), witnesses could be examined even by means of telecommunication that does not require the physical presence of the witnesses. Thus, the 2010 Rules has recognised witness examination through video conferencing etc.

Experts Appointed by the Tribunal: Under the Old Rules, the arbitral tribunal could appoint experts on specific issues without consulting the parties. However, under the New Rules, Article 29(1) makes it clear that the tribunal should consult the parties before appointing experts. Further, the New Rules makes it clear that the expert must be independent.

A delegation of the Working Group wanted to make a proposal pertaining to the challenge of arbitrators. The proposal was that experts appointed by the tribunal could be challenged by the parties for the same reasons and in the same way as an arbitrator could be challenged. Another proposal was made that the experts should, along the lines of the IBA Rules on the Taking of Evidence in International Arbitration (IBA Rules), declare their qualifications and a statement of independence and impartiality before they accept their appointment. Relevant portion of Article 6(2) of the IBA Rules on the Taking of Evidence in International Arbitration provides: "The Tribunal-Appointed Expert shall, before accepting appointment, submit to the Arbitral Tribunal and to the Parties a description of his or her qualifications and a statement of his or her independence from the Parties, their legal advisors and the Arbitral Tribunal. Within the time ordered by the Arbitral

Tribunal, the Parties shall inform the Arbitral Tribunal whether they have any objections as to the Tribunal-Appointed Expert’s qualifications and independence. The Arbitral Tribunal shall decide promptly whether to accept any such objection.”Further the proposal provided that the parties would have the right to challenge the independence of the expert (A/CN.9/WG.II/WP.159/Add.1 - Settlement of commercial disputes: Transparency in treaty-based investor-State arbitration - Compilation of comments by Governments). This was accepted. The New Rules also provide, based on the IBA Rules, that after the appointment of the expert, a party can challenge the independence of the expert but only for reasons that the party came to know after appointment of the expert.

Waiver of Right to Object: The provisions pertaining to waiver of the right to object to any non-compliance has been substantially re-worded in the New Rules. The purpose of rewording the provision is to align the provision with the corresponding provision in the Model Law on the waiver of right to object (Para 66-67, A/CN.9/641 - Report of the Working Group on Arbitration and Conciliation on the work of its forty-seventh session). The first significant change is that under the Old Rules, the provision pertaining to waiver of right to object to any non-compliance with the arbitration agreement was absent. This has been incorporated in the New Rules.

Another significant divergence, even from the corresponding Model Law provision is that the tribunal would have the power to conclude that there was no waiver of the right to object if the party could show that its failure to object was justified. During the discussions in the Working Group, it was observed that the provision did not exclude legitimate grounds for a party to not object to the non-compliance of a provision (A/CN.9/684 - Report of Working Group II (Arbitration and Conciliation) on the work of its fifty-first session). Views were expressed that in such a case, the party having legitimate grounds for not

objecting to the non-compliance should have a reverse burden of proving the same. Thus, in case a party did not object to a non-compliance, the arbitral tribunal would treat the same as a waiver, unless the said party can prove that there were legitimate grounds for not objecting to the non-compliance. After discussions, the Working Group decided to adopt the above proposal.

Arbitral Award: Publication of the Arbitral Award: The Old Rules simply provided that an arbitral award can be made public only with the consent of both parties. The Secretariat to the UNCITRAL proposed that the Working Group should consider a situation where a party is under the legal duty to disclose the award (A/CN.9/WGII/WP.143/Add.1 - Settlement of commercial disputes: Revision of the UNCITRAL Arbitration Rules). The Secretariat advised that two options be considered as regards the issue of making the award public. The first option is to retain the provision in the Old Rules that an award could be made public only with the consent of both parties. The second option is to provide that apart from making the award public with the consent of the parties, a party could make the award public for protecting or pursuing a legal right or in relation to legal proceedings before a court or other competent authority (Para 31, A/CN.9/WG.II/WP.145/Add.1 - Settlement of commercial disputes: Revision of the UNCITRAL Arbitration Rules). The Working Group considered the two options suggested by the Secretariat. However, during discussions three kinds of proposals were made on the issue. The first was to retain the provision in the Old Rules on the issue. The second proposal, which received wide support, was to opt for the second option which the Secretariat proposed. The third proposal, which received the least support, was to delete the provision altogether and add a provision in the next sub-clause stating that the arbitral tribunal shall not disclose the award to any third party and leave the issue of disclosure of the award to national laws (Paras 95-99, Report of the Working Group on Arbitration and

Conciliation on the work of its forty-seventh session). Ultimately, the second proposal was adopted (Para 27, A/CN.9/WG.II/WP.151/Add.1 - Settlement of commercial disputes: Revision of the UNCITRAL Arbitration Rules).

Filing or Registration of Arbitral Award: The Old Rules contained a provision to the effect that in case the arbitration law of the country in which the award is made requires the award to be filed or registered by the arbitral tribunal, the tribunal had the obligation to comply with the requirement as per the law, including any requirement of doing the same within a specified time. This provision was considered by the Working Group as unnecessary for the reason that it casts an onerous obligation on the arbitral tribunal when in many cases the tribunal might be unfamiliar with the national laws.In the end, the Working Group decided to delete the provision ((Para 101-105, A/CN.9/641 - Report of the Working Group on Arbitration and Conciliation on the work of its forty-seventh session).

Applicable Law: The Old Rules provided that in case the parties did not designate the substantive law of the contract, the tribunal had the power to decide the substantive law of contract based on the conflict of laws rules which the tribunal considers apposite. The New Rules makes no reference to conflict of laws rules. The Working Group had two options in respect of the situation where the parties do not designate the substantive law of contract. One was to retain the corresponding provision in the Old Law. The second option was to allow the tribunal to directly designate the substantive law of contract. This was done for the reason that the tribunal must be given an opportunity to decide directly on the substantive law of contract, especially in view of the fact that there were several non-national instruments such as the United Nations Convention on Contracts for the International Sale of Goods, the UNIDROIT Principles of International Commercial Contracts, the INCOTERMS, the Uniform Customs and Practices for Documentary Credit, or lex mercatoria which

could be decided directly by the tribunal without reference to any conflict of laws rules (Paras 106 -112, A/CN.9/641 - Report of the Working Group on Arbitration and Conciliation on the work of its forty-seventh session).

The 1976 Rules laid down two conditions for the tribunal to decide a dispute ex aequo et bono or as an amiable compositeur. They are: 1. The parties have expressly granted such power to the

arbitral tribunal, and

2. The procedural law of arbitration permits the tribunal to decide a dispute ex aequo et bono or as an amiable compositeur.

The Secretariat of the UNCITRAL proposed, citing the then existing provisions of the ICC Rules (“The Arbitral Tribunal shall assume the powers of an amiable compositeur or decide ex aequo et bono only if the parties have agreed to give it such powers.”), Article 22.4 of the LCIA Rules (“The Arbitral Tribunal shall only apply to the merits of the dispute principles deriving from “ex aequo et bono”, “amiable composition” or “honourable engagement” where the parties have so agreed expressly in writing.”) and Article 28.3 of the AAA Rules (“The tribunal shall not decide as amiable compositeur or ex aequo et bono unless the parties have expressly authorized it to do so"), to delete the second condition (A/CN.9/WG.II/WP.143/Add.1-Settlement of commercial disputes: Revision of the UNCITRAL Arbitration Rules). The 2010 Rules does not make any reference to the second condition.

Terminal of Arbitral Proceedings: As regards termination of arbitral proceedings, the Old Rules provided that before making of the final award if the tribunal considered it unnecessary or impossible to proceed with the arbitration, the tribunal shall have the power to terminate the arbitration proceedings after informing the parties of its intention to do so unless the parties raise justifiable grounds against termination of the proceedings. In the new Rules the

justifiable grounds exception has been deleted.

Correction of Arbitral Awards: The Working Group considered whether a time limit should be fixed for the tribunal to correct minor errors in the award. Wide support was given for such a proposal but there was divergence regarding the time specified. Ultimately, it was decided that the tribunal should correct such minor errors within forty five days (Para 106-107, A/CN.9/684- A/CN.9/684 - Report of Working Group II (Arbitration and Conciliation) on the work of its fifty-first session). Thus, under the New Rules, the tribunal is under an obligation to decide any requests for correction of computational, clerical or typographical errors, or other errors or omissions of a similar nature within forty five days from the request if the tribunal considers such request justified. The term “omissions” was added in the New Rules to include situations such as omission by the arbitrator to put his signature or the date in the award (Para 127, A/CN.9/614 Report of the Working Group on Arbitration and Conciliation on the work of its forty-fifth session).

Costs: The provisions pertaining to costs are some of the most important provisions of the UNCITRAL Arbitration Rules. UNCITRAL Arbitration Rules has been considered by many as ensuring cost effective arbitration as compared to institutional arbitration or other rules. The Working Group considered that failure to provide for exhaustive provisions on costs might lead to reluctance in choosing the Rules by parties.

The Tribunal has been given the power to decide on the costs in the final award or even in a separate decision. In relation to interpretation, correction or completion of award, the tribunal may charge reasonable costs but shall not charge additional fees.

The Secretariat of the UNCITRAL recommended that the term “reasonable” ought to be inserted in the different kinds of costs

enumerated in the definition of “costs” (Para 36 A/CN.9/WGII/WP.143/Add.1 - Settlement of commercial disputes: Revision of the UNCITRAL Arbitration Rules). Accordingly, the New Rules requires that costs should be reasonable. Further, the New Rules provides for an additional requirement as regards the travel and other costs of witnesses: it states that only reasonable travel and other costs will be allowed and such costs have to be approved by the arbitral tribunal. With regard to legal costs, the New Rules states that such costs must be in relation to arbitration and the tribunal must consider such costs reasonable. Thus, the New Rules ensures that there is a greater transparency towards costs incurred by the parties in respect of the arbitration proceedings.

The tribunal is not entitled to charge any fee for proceedings pertaining to interpretation, correction or completion of any award although it is entitled to charge costs for the same.

Article 41 of the New Rules retains the corresponding provision in the Old Rules that the fee charged by the arbitral tribunal shall be reasonable. The Old Rules provided that where an appointing authority states that it will apply a particular method of computation of fees the arbitral tribunal need not treat the same as sacrosanct. The tribunal has the power to take the same into account to the extent it considers it appropriate. The New Rules provides that promptly after the tribunal is constituted, it shall inform the parties of the manner in which it proposes to compute the fee. The parties have the right to approach the appointing authority within fifteen to request for review of the tribunal’s proposal. Within forty five days, the appointing authority has the power to see if the tribunal’s proposal is inconsistent with its method of computation of fee. If the tribunal’s proposal is inconsistent with the appointing authority’s method, the appointing authority can make necessary adjustments to the proposal. Such adjustments would be binding on the arbitral tribunal. In case no appointing authority has been designated or if the appointing authority fails to act within the

said forty five days, a party shall have the right to approach the Secretary-General of the Permanent Court of Arbitration.

To safeguard the interest of the party seeking review of fee, the New Rules provides that such action shall not: 1. affect the determination in the award

2. delay the recognition and enforcement of the award.

Conclusion:In our first post in the series, we had mentioned that the UNCITRAL Rules were popular not only in commercial arbitration circles but also in Investment arbitration. Recognising this, when UNCITRAL considered revision of the 1976 Rules, it was agreed that the generic approach of the Rules should be maintained in the New Rules. At the time of the Revision, there were several proposals to include provisions that relate to investor-state arbitration such as confidentiality, amicus curiae briefs etc. The UNCITRAL was, however, apprehensive in including specific provisions for investor state arbitration, considering generic nature of the Rules. Consequently, the New Rules do not contain specific provisions addressing issues pertaining to investment arbitration.The Milan Club of Arbitrators, a Non-govermental Organisation, proposed that the Rules should contain optional clauses dealing with Investment Arbitration. There were several proposals such as these to address specific Investment Arbitration concerns.However, in view of the urgent need to revise the Arbitration Rules and the complex issues involved in Investment Arbitration, the UNCITRAL felt that such issues should not be brought within the ambit of the Arbitration Rules. Therefore, the UNCITRAL concluded:• Issues pertaining to Investment Arbitration were significantly

different from those in commercial arbitration.

• Any work on Investment Arbitration should not delay completion of the revision of the Arbitration Rules.

• It is not desirable to have specific provisions on Investment Arbitration in the New Rules.

• After the completion of the revision of the Arbitration Rules, the Working Group would seek guidance from the UNCITRAL as to whether to consider specific issues pertaining to Investment Arbitration.

(Para 54-69, A/CN.9/646 - Report of the Working Group on Arbitration and Conciliation on the work of its forty-eighth session).

Subsequent to the revision, the UNCITRAL felt that transparency in Investment Arbitration was an important issue. There was a consensus in the Working Group that transparency in Investment Arbitration was an important issue that needed attention. Hence, the Working Group decided to work on a legal standard on transparency in Investor-State arbitration. The Working Group was of the opinion that the legal standards on increased transparency in Investor-State arbitration would add credibility to the process. Currently, the Working Group has already come up with a draft Standards. It remains to be seen how this legal standards would be adopted in Investment Treaty Agreements alongwith the New Rules.