International Commercial Arbitration

International commercial arbitration: An analysis of the provisions of UNCITRAL and Arbitration Act 1996

1. Introduction

International commercial disputes have become a common phenomenon due to the prevalence of international commerce in a globalised world. The effect of globalisation on the way business is conducted and the growing trend of multinational companies operating in multiple locations of the world has made business more seamless in the respect of markets and economy. Business disputes in the globalised world often involve parties situated in two or more jurisdictions and often involve complicated and difficult questions related to conflicts of law and jurisdiction.

Businesses often prefer arbitration to litigation for the resolving of such disputes because arbitration allows a flexibility to the disputing parties to choose applicable laws and procedure and even have a say in the appointment of arbitrators. Nevertheless, despite its obvious advantages, international commercial arbitration also has certain difficulties related to jurisdictional issues, applicability of laws and enforceability of awards. International community has responded to these difficulties by adopting various international law measures, such as the UNCITRAL Model Law on International Commercial Arbitration 1985. The UNCITRAL (United Nations Commission on International Trade Law) created the Model law and the UN General Assembly adopted it in 1985, and the law harmonised the international arbitration procedure to a great extent. This is therefore, one of the most important and groundbreaking developments in international commercial arbitration.

The Arbitration Act 1996 is an enactment of the British Parliament, which is as groundbreaking as the UNCITRAL Model law from the British perspective because it was intended to create a definitive code of arbitration law in England and Wales. The Arbitration Act 1996 took some inspiration from the UNCITRAL Model law but it is not completely based on the UNCITRAL Model law and there are areas of differences between the two. In context of international commercial arbitration, the Arbitration Act, Section 2 is significant because it recognises international arbitrations, where the seat of arbitration may be outside of England, Wales and Northern Ireland, for a variety of purposes. In effect, the Act allows British courts to order stay of legal proceedings under sections 9-11, enforce arbitral awards under section 66, and secure attendance of witnesses under section 43, where the seat of arbitration may be not be in England, Wales or Northern Ireland.

Clearly, the applicability of the UNCITRAL Model law and the enactment of Arbitration Act 1996 has made international commercial arbitration in the English law aligned with the international law. However, questions may be asked as to how far this alignment is seen, or in other words, are there any areas of dissimilarities between UNCITRAL Model law and the Arbitration Act 1996.

The significance of this research comes from the fact that arbitration itself has become significant in the context of international commercial disputes. Arbitration is a useful method of resolution of disputes that are international in nature because it allows the disputing parties to agree upon the law that will be applied to them. Irrespective of its advantages, there are some areas where international commercial arbitration may suffer from disadvantages. One of these disadvantages is that international commercial arbitration may be hindered by differences in national arbitration laws. In the English Arbitration Act 1996, there may be areas that show the national law to be at cross purposes with the UNCITRAL Model law. This poses the research problem for this research. The research problem is to analyse the provisions of the UNCITRAL Model law and the Arbitration Act 1996 in order to evaluate how international commercial arbitrations are facilitated by these laws. Furthermore, the research problem relates to identifying the areas in the English Arbitration law,

which show gaps that affect international commercial arbitration.

The research questions that are formulated for this research are:

• a. What are the provisions in UNCITRAL Model law guide the international commercial arbitration in England?
• b. What are the provisions in the Arbitration Act 1996 that are related to international commercial arbitration?
• c. How far can the Arbitration Act 1996 be said to be aligned with the UNCITRAL Model law? What are the gaps in the Arbitration Act 1996? How do these gaps affect international commercial arbitration?

2. Literature Review

The provisions in the UNCITRAL Model law have led to the harmonising of international law on international commercial arbitration. The Arbitration Act 1996 is aimed at facilitating international commercial arbitration in England and there are many provisions of the UNCITRAL Model law that are taken from the UNCITRAL Model law. The meaning of arbitration agreement is treated the same in both. The Arbitration Act 1996 defines arbitration agreement as “an agreement to submit to arbitration present or future disputes”. Similarly, the UNCITRAL Model Law on International Commercial Arbitration 1985, Article 7, also lays down the principal elements of arbitration agreement, wherein “arbitration agreement is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship.” Section 2 of the Arbitration Act 1996 specifically relates to international commercial arbitration, whether the seat of arbitration in within the UK or not. This allows the English courts to exercise their jurisdiction in certain areas of arbitration.

Irrespective of the provisions in the Arbitration Act 1996 that are aimed at facilitating international commercial arbitration, there are commentators who have pointed out that there are some areas of concern in the law. Carbonneau writes: “[The] statute is less limpid about the place and standing of international commercial arbitration within its regulatory scheme. It still employs a nationality- based definition of international or nondomestic arbitration and allows "exclusion agreements" as long as the New York Arbitration Convention or other treaties do not govern enforcement. The treatment of international arbitration is less unified and suffers from the complication of internal and external cross-references.

The UNCITRAL Model law is regarded to be significantly impactful for the Arbitration Act 1996. However, the lacunae in the Act that are pointed out by Carbonneau above imply that there are areas where the British law is different from the UNCITRAL Model law. For example, the British legislation has chosen to allow exclusion clauses. Furthermore, there is a lack of uniformity within the international commercial arbitration law. There are differences in the way that the British law defines public policy as compared to many other jurisdictions and this has an impact in international commercial arbitrations where one party is British and the Arbitration Act 1996 may be applied as per the provisions of Section 2 of the Act. For instance, in France, the applicability of public policy would make the issue non-arbitral despite the validity of the arbitration agreement, under the French Civil Code, article 2060. Similarly, in Germany, validity issues are not arbitral on public policy grounds. The same situation is not seen in the UK, as here public policy issues will not lead to ipso facto inadmissibility of dispute to arbitration, and the arbitral tribunal shall have the discretion to decide on admissibility of the matter. Therefore, the issues relating to enforceability of the arbitral awards that may be given by arbitral tribunals become difficult as the arbitral tribunal may admit the matter if it is contrary to public policy but the award will become unenforceable. For instance, in Soleimany v Soleimany the Court of Appeal refused to enforce the arbitral award as it related to smuggling as the award would be illegal in Iran. In Westacre Investment Inc V Jugoimport-SPDR Holding Co Ltd, it was held that when the award is contrary to the public policy of the state where the contract was to be performed, it shall be contrary to the public policy in the UK to enforce that award. This difficulty in the English law creates an ambiguity with regard to international commercial arbitration awards and their enforceability in England. Furthermore, there is a discrepancy in the manner in which arbitration may be admitted but then later the award may not be enforced. In other words, the English courts do not interfere in the question of arbitrability of the dispute, but do interfere in the enforceability. This points to a significant gap in the law.

With regard to presumption of confidentiality in arbitration agreements, the Court of Appeal’s decision in favour of judicial enforcement of such a presumption in Ali Shipping Corp. v. Shipyard "Trogir', garnered both praise as well as censure. Brown lauded the English stance as this would bring certainty into the area. On the other hand, Shakleton considered that the stance taken by the English court took arbitral confidentiality to an extreme and went beyond its original purpose.

3. Research Methodology

I. Type of investigation

The investigation for this research will be conducted with the descriptive research method, which is focussed on research that involves inquiries into the way things are. The present research will involve an abstract descriptive research as it is related to analysing the nature of the provisions of the UNCITRAL Model law and the Arbitration Act 1996. As such, the researcher does not know what the nature of these provisions is and the research questions are also tentative in nature at this point.

The research will be doctrinal in nature. One of the objectives of doctrinal legal research is to identify and analyse factual material, and identify and analyse legal issues. Doctrinal research relies on court judgements and statutes to explain the law. Moreover, doctrinal research allows interpretative tools or legal reasoning to evaluate legal rules, for deriving recommendations for further development of the law. The topic of this research being “International commercial arbitration: An analysis of the provisions of UNCITRAL and Arbitration Act 1996”, the research is aimed at an analysis of the provisions of the Arbitration Act 1996 and the UNCITRAL provisions. This analysis needs to be done by recourse to case law and statutory law in order for the analysis to be focused on the provisions of the Arbitration Act 1996 and the UNCITRAL, in so far as it relates to international commercial arbitration within the English legal system. Considering this, doctrinal legal research will give the appropriate approach to the research problem.

The research will employ a qualitative approach. Qualitative legal research is defined as “non-numerical and contrasted with quantitative (numerical) research.” As the research will be qualitative, the researcher will not formulate a hypothesis, instead a set of research questions will be formulated in the initial stage of the research.

The research will be conducted with both primary sources and secondary sources. Primary sources, of which the Arbitration Act 1996 and the UNCITRAL Model Law will form the principal sources, will give the main provisions that are to be analysed in the research. Secondary sources will include books, articles in journals and commentaries that are related to the area of research, that is, international commercial arbitration under the UNCITRAL and the Arbitration Act 1996.

II. Ethical issues

As the researcher has chosen doctrinal research with secondary sources, certain ethical issues will arise in the research. These ethical issues relate to giving credit to the sources and the researcher will ensure that the secondary sources will be duly referenced in the dissertation. Moreover, the researcher will ensure that the sources cited in the research are credible academic sources, such as books and peer reviewed journals.

III. Data analysis plan

The data is the research will be qualitative data and as such it will be challenging to organise and analyse the data. The data will include analysis of the provisions of the Arbitration Act 1996 and the UNCITRAL Model law. Case laws, commentaries on the provisions and other secondary sources will also form the data of the research. The analysis of this data will be done with the help of thematic analysis, as this will help the researcher to organise the research. The researcher will read through the data and glean out the major themes in the data.

4. Timetable

5. References

Books

• Binder P, and Sekolec J, International commercial arbitration and conciliation in UNCITRAL model law jurisdictions (London: Sweet & Maxwell 2005).
• Dobinson I and Johns F, ‘Qualitative Legal Research’, in Mike McConville (ed.), Research Methods for Law (Edinburgh University Press 2007).
• Harris B, Planterose R, and Tecks J,The Arbitration Act 1996: A Commentary (John Wiley & Sons 2008).
• Hill J, and Chong A, International Commercial Disputes: Commercial Conflict of Laws in English Courts (Bloomsbury Publishing 2014).
• Lynch KL, The forces of economic globalization: Challenges to the regime of international commercial arbitration (Kluwer Law International 2003)
• McConville M and Chui WH, ‘Introduction and Overview’, in Mike McConville (ed.), Research Methods for Law (Edinburgh University Press 2007).
• Merkin R, and Flannery L,Arbitration Act 1996 (5th edition, Oxon: CRC Press 2014).
• Vaus DD, Surveys in social research (6th edition, Routledge 2013).
• Willis JW and Jost M, Foundations of Qualitative Research: Interpretive and Critical Approaches (Thousand Oaks: Sage 2007).