International Commercial Arbitration - Assignment Example

International arbitration Insert Name Course, Class, Semester Institution Instructor Date Introduction International arbitration is a widely adopted meth settle disputes that arise mainly in the commercial agreements. International arbitration is a complex process that has to be undertaken in line with the stipulations of the international legal framework. This is because there are a lot of detailed that should be put into consideration once International arbitration is being put in place. International arbitration entails the creation of a contract where parties in a dispute submit their grievances to an arbitrator seeking to derive an amicable solution. The solution attained by the arbitrator is deemed as binding to both the parties involved as adjudicatory procedures are in place to ensure that justice prevails. International arbitration has in the recent past thrived in the business community as a reliable method to settle disputes in the global front. The main reason that has spearheaded the advancements of International arbitration is the fact that, International arbitration facilitates resolution between parties emanating from different cultural, social and legal backgrounds (Stark & O'Brien III, 2012). For the past 50 years or so, the business fraternity has continually adopted the use of International arbitration and this has fostered the growing popularity of the International arbitration discipline. There are reasons as to why International arbitration has been adopted by the business fraternity on the global front. These include; International arbitration negates uncertainties as local parties involved are associated with the national court system. In addition, International arbitration ensures that a faster decision is attained using a more reliable and efficient mechanism. The decision attained by an International arbitration procedure is usually more enforceable by the parties involved as there exists mutual understanding. There are arbitrators who are bestowed with the responsibility to evaluate the fact presented by both parties involved in the dispute and produce an amicable solution. The parties involved in the International arbitration have the liberty top design the appropriate arbitration procedure that would suit both parties (Soons & Verzijl, 1990).In International arbitration, unlike the normal judicial system, ensures confidentiality is upheld as the disputed issues will only be revealed to the parties involved and the arbitrator handling the case. Part 1 Institutional versus Ad-hoc arbitrage procedures The International arbitration procedures depicts broad flexibility when designing many of the arbitral procedures. For instance, the International Bar Association, (IBA’S) rules on taking evidence on matters pertaining the International commercial arbitration have been revised since 2010. The new formulated rules neither adopt the common law jurisdiction that facilitates the broad disclosure on related practices nor civil law that eliminates the entire ability for the parties involved to engage in disclosure related practices (Oehmke, 1990). The International bar association hence facilitates the blending of both the common law and civil law system and this depicts legal flexibility. This depicts the disparity that exists between International arbitration and the normal legal system. The parties involved have the freedom to design their own International arbitration framework. This method is known as the Ad hoc arbitration procedure. International arbitration can either be Ad hoc arbitration or institutional arbitration. With institutional arbitration, the parties involved choose to adopt the already formulated policies and guidelines. The institution has legal arbitration procedures in place that will be adopted by parties in need to resolve disputes (Mistelis & Symposium, 2006). The institution in many instances undertakes the arbitration procedures in the rules stipulated other than the rules requested. Institutional arbitration is usually adopted because it has set guidelines that help resolve disputes negating uncertainty. Institutional arbitrage also facilitates the use of expert arbitrators in the procedure hence resulting in better decision making. When using the institutional arbitrators, better facilities will be availed and the arbitrators will be appointed upon the request of the parties involved. Assistance is also provided to the parties involved in a form of encouragement to carry on with the International arbitration procedures. In addition, due to the fact that the institutional arbitration policies have been proven as workable in the past, there is a higher chance of success. However, there are certain shortcoming allied to institutional arbitration. First, the administrative expenses incurred from the use of the facilities may be exorbitant. There are also bureaucracies in the system that more often than not lead to delays and additional hidden costs (Poudret, Basson, Berti & Ponti, 2007). On the other hand, Ad hoc arbitration provides the freedom to the aggrieved parties to design and select and suitable format without using the institutional arbitration. The Ad hoc arbitration procedure accords greater flexibility in the design structure that takes into account the details of a particular contract. When choosing the Ad hoc arbitration policy, it is fundamental to the parties involved to select the applicable law and the rules under which the arbitration procedure will be undertaken. The language that will be used in the International arbitration procedure needs to be highlighted as well as the place where the International arbitration procedure will take place. The number of arbitrators will also be indicated in the Ad hoc arbitration mechanism as well as the method that will be inculcated to ensure proper selection of the arbitrators. The parties have the liberty to develop their own rules or follow an already formulated set of rules that will govern the arbitration procedure. There is also an instance where parties might use the institutional arbitration guidelines without submitting the dispute between the two parties to that institution. The rules used while conducting International arbitration International arbitration is complex. This nature of complexity requires various guidelines that will be followed by parties to ensure that justice is served amicably. The rules of conducting international arbitration are mainly under the jurisdiction of the ICC court of arbitration which are referred to as the the rules of conciliation (Smit, Pĕchota,& Juris Publishing, 2005). The rules of arbitration define and regulate how cases are conducted and submitted to the international court of arbitration. When the rules of arbitration are duly followed, the parties in the dispute are assured of a neutral framework when resolving the cross border dispute. The rules of arbitration are commonly known as the ICC rules and they govern the conduct of the international arbitration proceedings from the beginning to the end. Once a particular party fails to honor an agreement, there is a breach of contract. The rules of arbitration govern the following steps; filing of a claim, constituting an arbitral tribunal. Conducting the proceedings, rendering the final decision and determining the costs incurred. The objectives of the international arbitration rules are to offer security and predictability and also accord preference to any party in the selection of the arbitrators. There are also other aspects of the arbitration proceedings that should be governed by the rules of arbitration and include; the place and language that will be used in the arbitration proceedings and the method to choose the arbitrators (Mistelis, 2010).The international arbitration rules hence provide a balance between flexibility and control and this has enhanced the popularity of the ICC rules which are currently enacted in over 180 countries today. The unicitral model law has been adopted by numerous national arbitration laws which provide the following in article 28(1); “The arbitral tribunal shall decide the dispute in accordance with such rules of law as are chosen by the parties as applicable to the substance of the dispute”. Legislation under which the parties have chosen to arbitrate Parties in the contract have to designate the substantive law that will be applied in the arbitration procedures. This is due to the fact that, the international arbitration tribunal would encounter a vast majority of previous cases and clauses applicable to the dispute. This previous clause or precedents provide great help to the arbitrators while undertaking their duties. The parties may choose to rely on procedural law. Where the parties do not expressly rely on any particular procedural law, it is implied that the procedural law of the place where the arbitration procedure will take place will apply (Rubino-Sammartano& Rubino-Sammartano, 2001). This implies that if there is an omission in the dispute resolution clause of the applicable law, the governing law of the place of the arbitration proceedings will take effect. Article 28 (1) clearly asserts the above sentiments through the following statement, “Any designation of the law or legal system of a given State shall be construed, unless otherwise expressed, as directly referring to the substantivelaw of that State and not to its conflict of laws rules.” Interaction between the three elements in the enforcement of international arbitration to resolving a dispute In many business agreements, a dispute resolution clause is well designed in the consent of both parties. The dispute resolution clause is a guideline that will be used to resolve any dispute that may arise from the breach of contract from either party. Breach of contract is an instance when a particular party fails to conduct their business affairs as earlier agreed. The dispute resolution clause may be formulated using the institutional arbitration regulations or the Ad-hoc arbitration procedures (Begic, 2005). The decision mainly relies on the parties involves as they may choose to adopt an already existing policy or they may choose to formulate their own policies. In either instance, in the case breach of contract is committed, the dispute resolution clause is adopted to resolve the standoff. The dispute resolution clause is designed in a manner that both parties will be awarded time to explain the reasons as to why the breach of contract arose. The dispute resolution clause should also be designed in a manner that as the magnitude of the dispute increases, the measures awarded become more stern. It is eminent that when tackling international arbitration, the rules of the ICC court of arbitration should be adopted. This ensures that the dispute resolution clause is formulated in line with the governing rules. The legal jurisdiction in which the international arbitration is to take place should also be clearly indicated in the dispute resolution clause. This is because both parties wish to avoid developing a dispute resolution clause that contravenes with the legal framework of the country in question. The dispute resolution clause is put to use in the instance a breach of contract emanates from either party. Part 2 2. The dispute resolution clause is imperfect The question revolves around a payment dispute that emerged in the futurocity project. The project was between the claimant; Condesign and the respondent; statinvest. Condesign was bestowed the responsibility complete the futurocity project which was in two phases. The first phase was to design the futurocity project which was to be completed then duly paid before commencement of the second phase. However, the government of Ruritania was forcibly removed through a military coup. Due to the changes in government, the business dealing was also affected and the claimant did not receive any payment as agreed as pertains the first phase. The dispute resolution clause was then enacted to ensure that the standoff was resolved in an amicable manner between the two companies. According to the amended Uncitral arbitration laws of 2010, once a dispute arises, the notice of commencement of arbitration proceedings should be issued to the respondent by the claimant. On February 2012, Mr Machenga issues a letter to the claimant; Condesign alerting the company as to why there have been delays in paying the first phase as earlier agreed. It was clearly indicated in the letter that there was a military coup in Ruritania and tat the government agent currently responsible with the project was second state supervision Corp (SSSCorp) and not statinvest. The dispute resolution clause was deemed imperfect as many rules were not followed and this caused ambiguity. As a result of this ambiguity, the parties would not attain a resolution to the [pending dispute. According to the Uncitral arbitration law of 2010, once the arbitration notice is communicated to either party in the dispute, the International arbitration procedure is deemed commenced. The dispute resolution clause did not follow the stipulated guidelines as it sought the services of a mediator. When the notice of arbitration was issued, it was deemed as the commencement of the arbitration proceedings and hence the dispute resolution clause was misleading. According to the Unicitral arbitration law, the claimant was supposed to institute the arbitration proceedings once the notice was issued and not after the mediator had failed to attain an amicable resolution. It is due to this reason that the dispute resolution clause was considered to be imperfect. 3. A draft of the arbitration clause pertaining the design agreement “Article 47; arbitration procedure; in the instance that a breach of contracts arises due to failure of either party to honor the contract requirements as stated, the aggrieved party will issue notice of arbitration. The party issuing the notice will be the claimant and it will be delivered to the claimant. The notice of arbitration will clearly demand that the dispute be referred to an arbitration and the names and contact of the parties will be issued in fine details. The identification of the invoked arbitration agreement will also be included in the notice of arbitration. Additionally, the notice of arbitration will identify any legal instrument where the dispute arises and a brief summary of the relevant relationship will be provided. The amount involved will also be highlighted as well as the viable remedy being sought by the claimant (Redfern, Blackaby & Hunter, 2004). The International arbitration procedure will be conducted under the ICC rules of conciliation applicable in Melbourne Australia. The International arbitration arbitration procedure enacted will be institutional arbitration. The arbitrators will be solely chosen by the ICC court of arbitration and the place of arbitration will be Melbourne Australia. The International arbitration procedure will be governed by the New York law. Once the arbitration tribunal has been set up, the parties will agree on the language to be adopted while undertaking the international arbitration proceedings” 4. Who is the ICC court likely to choose as an arbitrator between Dr Sunderkay and Ms Ixtapa or any other person According to article 7 of the Uncitral law, where parties in a dispute have not agreed on the number of arbitrators, and 30 days have lapsed and the parties have not agreed on one arbitrator, three arbitrators shall be appointed. The appointing power may be relinquished by either party if there is failure to appoint an arbitrator in the provided timeframe and where the appointing authority deems it prudent to do so in the prevailing circumstances. Article 8 provides that where a sole arbitrator is to appointed and 30 days lapse without an agreement on the suitable sole arbitrator, the appointing authority may appoint a sole arbitrator on the request of either party. In such an instance, the appointing party which is the ICC arbitration court has the power to appoint a sole arbitrator on the request of either party (Pellonpää& Caron, 1994). In the instance the ICC decides on selecting a sole arbitrator, it is likely that the court will select a neutral party. This is because, for justice to prevail and both parties be left content, the court will have to introduce a neutral party as the sole arbitrator. To negate the feeling that one party has been favored, the court will have to introduce a new arbitrator. The major reason why the court will introduce a new sole arbitrator is to avoid the feeling of injustice which may result to discontentment of a particular party. 5. Who decides on the language to be used in the arbitration proceedings? Once the relevant appointments of the arbitral tribunal have been made, the parties should agree on the language or languages that will be used while undertaking the arbitral tribunal. The determination of the language or languages to be used in the arbitration proceedings will apply to the statement of claim, the statement of defense and any other statement or written statement that will be used in the arbitration proceedings. In case there will be oral hearings in the arbitration procedures, the language or languages selected will still be adopted. In addition, the arbitral tribunal may order any document annexed to either the statement of defense or the statement claim delivered in the original language it was written be submitted with an attached translation. The translation will be in the language or languages that were agreed upon by the parties involved in the dispute. It is hence apparent that the parties involved in the dispute or the arbitral tribunal determine the language or languages to be used in the international arbitration proceedings. 6. How is the president of the tribunal likely to be chosen? The current case faces complexity to chose the viable president of the tribunal as the two parties fail to reach an agreement. The respondent as well as the claimant wish that three arbitrators be selected. However, the claimant opines that both parties should select one arbitrator each and the president of the tribunal be appointed by the ICC. On the other hand, the respondent is of the opinion that the both parties in the dispute should each select an individual arbitrator and the two arbitrators should select a president. According to the Unciteral law article 8, both parties have a month since the filing of the claimant's request (Pellonpää& Caron, 1994). The respondent's response was availed almost at the lapse of the 30 days. After the 30 days are over and the parties have not yet agreed with the president of the tribunal, the ICC will have the responsibility of appointing the president. This is due to the fact that, the claimant has requested the ICC to do so and in the lapse of time. The ICC court will have the mandate to appoint a suitable president of the tribunal. Both Dr sunderkay and Ms Ixtapa will form the tribunal as they were appointed by the claimant and the respondent respectively. However, the ICC arbitration court will exercise its mandate to appoint another person as the president of the tribunal. This is due to the fact that, both parties did not agree on the way to appoint the tribunal president and 30 days have elapsed. The respondents idea will thus be overshadowed and the claimants opinion will be realized as the ICC International arbitration court will appoint the president of the tribunal thus making it a three arbitration team. 7. Which procedural law will be used to govern the arbitral proceedings? The location of the arbitral tribunal proceedings will be in Melbourne Australia. In the dispute resolution clause, it is indicated that the New York law will govern the international arbitration procedure. The question seeks to clarify the procedural law that will govern the international arbitration proceeding between the law of the place of arbitration that is Melbourne Australia or the law of New York that is indicated in the dispute resolution clause. According to the Uncitral law, it is stipulated that one of the elements of the dispute resolution clause is the procedural law that will govern the international arbitration proceedings. The Uncitral law also indicates that in the instance that there is an omission to state the procedural law governing the international arbitration proceedings, the procedural law of the location where the arbitration proceedings are held will be adopted. In the dispute resolution clause relating to Condesign and statinvest, the procedural law was clearly stipulated. It is hence evident that the New York procedural law will be adopted except in the instance where the New York law will violate the stipulations of the Australian law. 8. Issues that will be discussed by the arbitration tribunal The issues that will be handled by theinternational arbitration tribunal will revolve around the claimant's notice and the response availed. The claimant issues include the following; the claimant wishes the international arbitration tribunal to make a declaration that the respondent has breached the design contract by failing to pay. This amount due was certified by the resident engineer as of 1st December 2011. Secondly, the claimant wants to receive damages from the respondent suffered as a result of the breach of the contract to the tune of US$ 2 million together with the cumulating interest and the amount should be paid in full. The claimant also wishes that the international arbitration tribunal to officially terminate the second part of the contract thus leaving no further obligation to be handled by the claimant. The international arbitration tribunal will also handle the issue of the letter of credit that had been issued by the Big Bank & Trust. The claimant wants the performance guarantee of the second phase of the Futurocity project that had been issued be returned by the respondent. Finally, the international arbitration tribunal will also handle the determination of the arbitration expenses. The claimant opines that the respondent should cater for the international arbitration expenses incurred for even the lawyers and witnesses in the international arbitration proceedings. According to the respondent, the international arbitration tribunal should handle the following issues; the respondent wishes the international arbitration tribunal determine the position of SSS Corp considering that statinvest is no longer liable to handle the affairs of the futuricity project. In addition, the respondent wishes that the international arbitration claims be dismissed on the grounds that the wrong respondent was summoned. Additionally, the respondent opines that, if the dispute resolution clause is anything to go by, the international arbitration is premature as the mediation efforts werenot yet fulfilled. The respondent also wishes the international arbitration tribunal to excuse it from performing the stipulations of the contract on the grounds of legal impossibility. The international arbitration tribunal will also evaluate whether the respondent is liable to return the letter of credit as the respondent claims that letter of credit is not in its possession. Finally, the respondent wishes that after the costs are determined, the claimant pays 100 percent of the international arbitration costs. 9. how to deal with the request for security bearing in mind the claimant is a small company Issues revolving the determination of international arbitration fees are handled by the arbitral tribunal. The arbitral tribunal has the sole jurisdiction to determine the international arbitration proceedings fees as well as decide the party liable to pay the fees. The respondent has no jurisdiction to meddle into such affairs and thus the order for security or assurance does not arise. Secondly, the the fees are to be paid to the ICC and not to any particular party. The respondent has no mandate to issue an order requesting for security regardless of the capability of the claimant company. The international arbitration tribunal will compile the total international arbitration expenses incurred while undertaking the proceedings. Within 15 days, the international arbitration tribunal will issue the information to the parties involved for any reviews (Dore, 1986). The fees of the international arbitration tribunal proceedings are governed by Article 40 of the Uncitral laws. In the determination of the international arbitration expenses, the appointing authority has the power to make any adjustments that will be binding to both parties in the dispute. In seeking compliance with the Uncitral laws, the respondent's request to order for security cannot be honored by the international arbitration tribunal (Born, 2009). The decision by the sole arbitrator is to dishonor the respondent's request. This is due to the fact that, the respondent’s request is inconsistent with the Uncitral laws hence honoring it would be contravening the rules of arbitration. 10. The letter of credit The letter of credit was issued by the claimant to serve as a performance guarantee on the second phase of the Futurocity project. The second phase of the project is yet to commence and as such, the claimant has reason to request for the injunction. The complexity of the issue arises from the fact that, the initial company is no longer liable in the affairs of the Futurocity project. However, since SSS Corp has been bestowed the responsibility to take over the affairs of the Futurocity project, the company should consider returning the letter of credit to the claimant. In the instance immediate return of the letter of credit is not possible, an injunction should be issued preventing the respondent from calling the Big Bank & Trust as the second phase of the Futurocity project has not yet commenced. The issue of the letter of credit should be addressed to the Big Bank & trust given the fact that, the Big bank & trust is directly related to the second phase of the project. However, the Big Bank & trust should be made fully aware that the matter pertaining the fulfillment of the second phase of the project is under international arbitration and the final decision will determine whether the second phase will still be undertaken. The notice to the Big Bank & Trust should thus be a notice to create awareness and once the final decision is attained by the international arbitration tribunal, further decision will be advised. 11. Postpone the hearing or move the hearing to Paris The issue in question is rather private as it concerns the claimant’s CEOs wife. In the instance that the respondent agrees to the plea of the claimant to whether move the hearing from Australia to Paris or postpone the hearing altogether the decision would have been attained easily. Since the dispute resolution clause clearly indicates that Melbourne is the place of arbitration and the arbitration procedure, the claimants CEO will have to comply with the current situation. The main reason is the fact that it would not be prudent to inconvenience the respondent due to personal reasons as well as contravening the dispute resolution clause. 12. Star witness The issue of the star witness in the case will have to comply with the IBA rules. The claimant lawyer will have to strike out the star witness as all witness will have to be available for questioning by both parties. The claimant will then have to look for another reliable witness due to the fact that, the IBA rules will have to be adopted (Bend, Leitjen & Ynzonides, 2009). 13. How to gather information once the hearing has been concluded Once the hearings and proceedings has been concluded, it would be difficult to gather information that would be considered impartial. If the international arbitration tribunal considers the question to be of prime importance to the decision making process, the international arbitration tribunal would call back the participants after a notice. This is only viable where the information required is vital and its absence might alter the entire decision. 14. Comments on merits of the case Being the sole arbitrator, consultations may not be applicable hence the parties involved may call for a hasty answer. However, in the light of the new fact provided, a month or so will be required for a conclusive answer to be attained. More comments might be misleading in the log run hence nothing further will be said till the final decision is attained. References Baker, S. A., & Davis, M. D. (1992). 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