1. Introduction

This paper focuses on the impact of place of arbitration towards the parties’ rights in International Commercial Arbitration (hearing after referred to as “ICA”). Researcher utilizes the case laws, legislations, books, online journal articles, blog articles in gathering data to comment on the given statement.

2. Brief History of International Commercial Arbitration

With the global business expansion, forming of cross-border commercial contacts and the diverse of business disputes are on the rise. Therefore, it became impossible to elucidate these disputes through traditional method of courts. Therefore, the trend was created using Alternative Dispute Resolution (hearing after referred to as “ADR”) methods. Thus, arbitration is one of the ADR methods which is frequently using in International Commercial Contracts (hearing after referred to as “ICC”) disputes.

3. Understanding International Commercial Arbitration

3.1 What is Commercial Arbitration

Arbitration of a dispute as to a trade transaction for the supply or exchange of goods or services can be called as commercial arbitration. However the New York Convention does not define the term “commercial” to cover all the international commercial activities.  However, UNCITRAL model law defines “commercial”  as to cover matters arising from all “relationships of a commercial nature, whether contractual or not”.

3.2 What is International Commercial Arbitration

When the commercial dispute becomes international in character and is decided to resolve with the assistance of arbitration, known as ‘International Commercial Arbitration’ which involves as popular method of privately solving disputes in ICCs.

4. Arbitration Agreement

An arbitration agreement is a written contract where the parties decide to resolve the disputes exterior of court and in most of the, ICCs, this is ordinarily implied by an Arbitration Clause (hearing after referred to as “AC”). Further, there are two types of ACs: the arbitration clause to the future disputes and submission agreement to the past which means after the dispute occurred.

Nevertheless, conflict arises related to AC within which such clause is not sufficiently comprised with the relevant information relating to conduct of the arbitration process. UNCITRAL model laws have been given the freedom for the relevant parties to decide the choice of law and choice of  forum for the ICA. Habitually, when forming the ICC the parties not given the proper care and consideration to the AC.

This was commonly known as ‘midnight’ clause’. Drafters of the contract come to discuss this part in the end of the negotiations of commercial contract and include the AC without considering its consequences and further repercussions. Particularly, not selecting the relevant forum for the arbitration emerge as the major issue in ICA which has an enormous impact on the rights of the parties in accompanying the arbitration process.

5. Place of Arbitration

5.1 What is the Place of Arbitration

The “forum for the arbitration provides the legislative framework for the arbitration” where there is no express law applicable to the arbitration agreed by the parties to the contract. Further, the term of “place of arbitration” has been used as “forum” or “seat” of arbitration.

Place of Arbitration should not be misinterpreted with the physical place of hearing the case. Because, the place of arbitration oversees the procedural law of the arbitration, the enforceability of the award and etc., while the place of hearing, is the physical location where the hearing is held. Sometimes the place of hearing the case can be elsewhere, considering the convenience of the parties to the ICC and different from the place of arbitration.

5.2 Determination of the Place of Arbitration

Challenges in choice of forum for Arbitration is solved by means of three sources: statute/Model laws, common law (case laws), agreement between the parties.

Under the Model law the parties are given “freedom to agree on the place of arbitration” and if they fail to do so, the arbitral tribunal (hearing after referred to as “AT”) bound for such determination. As aforesaid, where the place of arbitration has been specifically mentioned in the AC, it is obvious to apply such selected forum state’s law as both substantive and procedural law governing the arbitration, unless and otherwise agreed by the parties.

Nevertheless, when such determination was failed by the parties, AT has empowered to do so, having regard to the circumstances of the case, including the convenience of the parties. In such instance where there is no express choice of forum, there are significance four sources that implies the intention of the parties regarding the place of arbitration: Agreement between the parties, other element of the same agreement, rules of procedure (if any parties have chosen), substantive law (if any).

Nevertheless, there is no express model laws, that state the specific criteria which is required to be followed by the AT when determining proper place for the arbitration except the supra given “two conditions”

6. Fundamental Impact of Place of Arbitration on the Rights of the Parties

6.1 Rights of the Parties in ICA

The basic principle of arbitration is party autonomy or the “will of the parties which is always central to arbitration proceedings” and have also been standardized by the most national laws relating to international arbitration and also recognized by the Model Law.

Therefore parties have given the freedom to do what is intended within the arbitration process which is also bound by certain mandatory public policies.  Thus, parties are free to select the “procedure to be followed by AT”, rules applicable to substance of the dispute, place of arbitration, appointing and number  of arbitrators, language of the arbitration and almost everything connected to the resolution of the dispute.  

Further, ICA has been given the parties, opportunity to seek around for the most advantageous law in resolving their dispute and it was permitted to choose another forum’s law while disregarding the application of rules of national laws itself, except the mandatory national provisions.

6.2 Impact of the Place of Arbitration on the Rights of the Parties 

Parties’ choice of Place of arbitration may use as the evidence in understanding the intention of the parties regarding the law governing ICA where the parties have not been selected or parties have become disagree on such. Further it can have an impact on the legal setting of the arbitration as well. Basically in most of the instances, place of arbitration is evidenced in identifying the both substantive law and procedural law, where parties become fail to select such law.

Particularly, procedure in conducting Arbitration accompany by the place or seat of arbitration where parties haven’t agreed otherwise. Therefore selecting the forum is important, since it can have direct impact on the parts’ rights in selection of Procedural Law in the arbitration where they haven’t greed for such.

Under the article 10(1) of the Model law indicate that the parties are free to determine the number of arbitrators and in the failing of such there can be three arbitrators. Nevertheless, the Indian Arbitration and Conciliation Act states that, even though parties are free to determine the arbitrators, number of arbitrators, it cannot be an even number and failing to decide, AT shall consist a sole arbitrator. These sections prove that, if the parties have selected the forum as the India, then their rights become limited. And it can have negative impact on the procedural rights of the parties. Further in Narayan Prasad Lohia v. Nikunj Kumar Lohia states that the section 10(1) of the Indian arbitration act is not mandatory obligation. This emphasizes that even the Indian judiciary has recognized it limits the party autonomy which is the soul principle in arbitration. Therefore, the selectin of the forum for arbitration is much important, since it can directly impact on the procedural law of arbitration.

Furthermore, the Place of arbitration is imperative in a case where the parties have not been chosen the Substantive Law to apply in their dispute.  The choice of a particular forum for the arbitration may signal the parties’ intention that the arbitral laws of that forum should apply.

In Kent Trade and Finance Inc. and others v. JP-Morgan Chase Bank and Another,  Parties have decided the applicable law for the arbitration as the Law of Washington which implies their place of arbitration as the Washington and they had not specifically laid down the choice of substantive law which governs their dispute and the commercial contractual relationship. Subsequently, it was decided that law of the Washington as the place of arbitration become substantive law applicable to the arbitration. It is crystal clear that even if parties have not agreed upon substantive law and if they have chosen the forum for arbitration, then such law of the forum may use as the substantive law. This demonstrates that the place of arbitration protects the parties’ rights in the arbitration process and have a direct impact on substantive law.

Additionally, place of arbitration decide, which courts have the supervisory jurisdiction over the arbitration. Further the judicial review over AT’s decision also lies with the forum state.

Matter arisen, where there is no express choice of forum for the arbitration. such situation, the place arbitration is decided by the AT. Since it is evidential that the place of arbitration has an enormous impact on the parties’ rights in arbitration proceedings,  it is better if parties can select the place of arbitration by themselves.

7. Recommendations and Conclusion

7.1 Recommendations

As aforesaid, since the place of arbitration has a fundamental impact on understanding the intention of the parties relating to selection of, both substantive law and procedural law where the parties have failed to do such, it is better if the parties themselves can decide the place without conferring such important right to the AT. Because they are the people who know what is best in conducting their arbitration proceedings. To overcome such difficulties, it is recommended that there should be a mandatory obligation under both Model Law and Domestic legislations to the parties to include the place of arbitration, at the initial phase of negotiating the arbitration agreement or the ICC.

Further, as previously discussed, there is no express model law addressing the specific criteria which is required to follow by the AT when determining proper place for the arbitration where the parties fail to do so. Therefore, it is recommended to legislate sufficient legal provisions to the Model law, containing more elaborated law that can oblige the AT, when deciding the place of arbitration.

Purpose of enacting Model Law was to adopt a uniform law, by providing fundamental principles that can be applicable to whole system of ICA and to eliminate the harshness due to variety of principles applied by the different nations. However, ratified countries to the Model Law, have incorporated such laws to their national legislations with several modifications without incorporating the same principles which impacts on the uniformity of the system. For an example think of a situation where the arbitrators have appointed under the law of country X and then arbitrators decide the place of arbitration as country Y. if the process of appointing arbitrators under the country X is different from country Y then the arbitration process including the final award can be challenged under the law of the place of arbitration.

Therefore, it is better to make needful amendments to the model law by making oblige every ratified parties to give the same effect of the model law by their national legislations. Then there will be a uniformity of law adopt for the ICA, at least among the ratified countries and thereby can avoid aforesaid severities in law. Further, it would be easy to Enforce the arbitration awards without unnecessary challenging.

7.2 Conclusion

In concluding the supra findings and facts, researcher identifies, “The selection by the parties of the place in which their international commercial arbitration is to take place will have a fundamental impact on the determination of those rights.  Equally fundamental is the parties’ selection of the law, both substantive and procedural, which will apply to the determination of those rights”.

REFERENCE

Legislations

1. Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York convention) 1958
2. France, Code of Civil Procedure 1981
3. Ontario, International Commercial Arbitration Act, R.S.O. 1990
4. India, The Arbitration and Conciliation Act, No. 26 of 1996
5. U.K. Arbitration Act, 1996
6. UNCITRAL model law on international commercial Arbitration 1985
7. United Kingdom, Arbitration Act 1996

Cases

• Kent Trade and Finance Inc. and others v. JP-Morgan Chase Bank and Another 2008 FCA 399 at 31
• Lesotho highlights Development Authority v. Impregilo SpA and others, [2005] UKHL 43
• Narayan Prasad Lohia v. Nikunj Kumar Lohia (2002) 3 SCC 572.
• R. M. Investment and Trading Co. Pvt. Limited v. Boeing Co AIR 1994 SC 1136
• United Steelworkers of America v. Warrior & Gulf Navigation Company, 363 U.S. 574, 582 (1963)
• Weissfisch v. Julius, [2006] EWCA Civ 218

Book

1. Nigel Blackaby, Constantine Partasides and Alan Redfern, ‘International Arbitration’ (5^th edn, Oxford University Press, New York  2009)

Online articles

1. Anurag K. Agarwal, “Party Autonomy in International Commercial Arbitration” (IIMA Working Papers WP2007-05-06, Indian Institute of Management Ahmedabad, Research and Publication Department, 2007) <https://web.iima.ac.in/assets/snippets/workingpaperpdf/2007-05-06_AAgarwal.pdf> accessed 17^th October 2018
2. Ashraf El Motei, ‘Midnight Arbitratin Clause vs 8 a.m. clause  [Motei Associates- Attorneys-At-Laws, 2015] <https://www.motei.com/articles/midnight-arbitration-clause-v-800-a-m-clause/> accessed 15^th October 2018
3. Ashurst, ‘International arbitration Clause’ [2018] <https://www.ashurst.com/en/news-and-insights/legal-updates/quickguide-international-arbitration-clauses/> accessed 20^th October 2018
4. Choi You Jin,Vishnu Konoorayar Konoorillam and Jaya Vsudevan Suseela, ‘International Commercial Arbitration in South Asia: A Comparative Study’ [2012] Korea Legislation Research Institute, Forthcoming. <https://ssrn.com/abstract=2359220> accessed 20^th October
5. Duhaime.org, Learn law  <http://www.duhaime.org/LegalDictionary/C/CommercialArbitration.aspx> accessed 20^th October 2018
6. Free advice legal <https://law.freeadvice.com/litigation/arbitration/agreement_arbitration.htm> accessed 20^th October 2018
7. Ljiljana Biukovic, ‘International Commercial Arbitration in Cyberspace: Recent Developments’ [2002] njilb 22 <https://scholarlycommons.law.northwestern.edu/cgi/viewcontent.cgi?article=1552&context=njilb> accessed 18^th October 2018
8. Out-Law.Com, ‘international arbitration: substantive, procedural and mandatory rules’ <https://www.out-law.com/en/topics/projects–construction/international-arbitration/international-arbitration-substantive-procedural-and-mandatory-rules/> accessed 20^th October 2018
9. Patrick Jones, ‘The Dispute Resolution Clause in Your Contract Should Be More Than an Afterthought’ [2016] <https://www.fh2.com/dispute-resolution-clause-article/> accessed 15^th October 2018
10. SIAC <http://www.siac.org.sg/71-resources/frequently-asked-questions/180-place-of-arbitration-and-place-of-hearing-what-is-the-difference> accessed 17^th October 2018
11. Thomas G. Heintzman and Moya Graham, ‘Choice of Law and Forum in International Commercial Arbitrations’ [2010] <http://www.heintzmanadr.com/wp-content/uploads/SPEECH-June-2010-Choice-of-Law-and-Forum-in-International-Commercial-Arbitrations.pdf> accessed 20^th October 2018
12. UN, ‘A Guide to UNCITRAL’ [2013] <http://www.uncitral.org/pdf/english/texts/general/12-57491-Guide-to-UNCITRAL-e.pdf> accessed 15^th October 2018