SCOPE OF JURISDICTION OF UNCITRAL MODEL LAW ON INTERNATIONAL COMMERCIAL ARBITRATION (1985) By - Soumya Gulati
SCOPE OF JURISDICTION OF UNCITRAL
MODEL LAW ON INTERNATIONAL COMMERCIAL ARBITRATION (1985)
Authored By
- Soumya Gulati
Christ(
Deemed To Be University)
TABLE OF CONTENTS
ABSTRACT
1. INTRODUCTION
(SCHEME OF STUDY)
2. LITERATURE REVIEW
3. INTRODUCTION
4. RELEVANCE OF
UNCITRAL
MODEL LAW
5. SCOPE AND
APPLICABILITY
OF THE MEANING OF ARBITRAL
TRIBUNAL
6. THE ARBITRAL
TRIBUNAL’S
JURISDICTION
7. JURISDICTION AND
ADMISSIBILITY ISSUES
8. CONCLUSION
ABSTRACT
A Keen Interest has been taken
towards for moving forward with this particular topic of International
Commercial Arbitration and its relevance
for Settling the disputes between
international bodies and proceed to award just compensation and damages due to various disagreements or
inconveniences which end up creating a body of conflicts which then hinders
private or public peace and prosperity.
The paper shall also illustrate how such
conflicts are to be dealt under the
ambit of International Commercial Arbitration in view of the UNCITRAL Model Law
on International Commercial Arbitration. The Paper shall deal with the validity
and the applicability of the jurisdiction of the Arbitral Tribunal. It shall
take into consideration the foundational aspects as to the formation of this
International Arbitral Tribunal and it shall mainly focus on the scope of the
jurisdictional capacity of the forum to take disputes into its jurisdiction.
Further, as there has always been a conflict between the Domestic and the International
Jurisdiction of States to articulate cases under their own ambit, this paper shall also look into the aspects
of how the law applies on the domestic as well as international body and how it
creates a space for both of these framework to work in a certain type of
Collaboration.
UNCITRAL serves as the central UN
body of law. It was created by the United Nations General Assembly in response
to the recognition that obstacles to the free flow of trade are being caused by
variations in state laws controlling international trade. As a result, this
commission was created with the intention of actively helping to lower or
eliminate these obstacles. With careful regard for the unique characteristics
and requirements of international commercial arbitration, the UNCITRAL Model
Law has been authorized to assist the states in establishing their domestic law
and updating their laws on arbitral procedure.
SCHEME OF STUDY
The Model Law is intended to help
States update and modernise existing laws on arbitral procedure in order to
better reflect the unique characteristics and requirements of international
commercial arbitration. It covers every step of the arbitration process,
including the arbitration agreement, the make-up and authority of the arbitral
tribunal, the scope of the court's involvement, and the enforcement and
recognition of the arbitral verdict. It displays a consensus among States from
all areas and from various legal or economic systems around the world regarding
fundamental principles of international arbitration practise.
The Background as to the formation of
this Model law is of the fact that the Model Law was created to address the
wide variations in national arbitration laws. Based on observations that
Domestic laws were frequently particularly unsuitable for international
issues, there was a need for change and standardization. Sections that compare
arbitration to court litigation are a recurring inadequacy in out-of-date
national laws, as are fragmentary provisions that do not cover all pertinent
substantive law concerns. Even the majority of the legislation that seem to be
current and comprehensive were written primarily, if not entirely, with
domestic arbitration in mind. The unfortunate result of this approach is that
locally grown concepts are imposed on international arbitrations and the needs
of modern practise are frequently not met, even though it is understandable
given that even today the majority of cases guided by arbitration law would be
of a strictly domestic nature.
The fact that national laws vary
greatly makes issues resulting from insufficient arbitration laws or from the
lack of particular legislation governing arbitration worse. In international
arbitration, in which at least one party, and frequently both, are faced with
international and foreign norms and processes, such discrepancies are a regular
source of anxiety. In these situations, obtaining a complete and accurate
understanding of the law that governs the arbitration is frequently expensive,
inconvenient, or unattainable.
The Model Law's guiding principles
and recommended solutions are aimed at easing or removing the aforementioned
worries and challenges. The Model Law offers a particular legal framework
customised to international business arbitration in response to the
shortcomings and inequalities of national laws, without changing any pertinent
treaties in effect in the State implementing the Model Law. The Model Law gives
a set of fundamental guidelines that, while intended for international
commercial arbitration, are not, in and of themselves, inapplicable to any
other sort of arbitration.\
There are some fundamental
misconceptions about international commercial arbitration, despite all of its
benefits. The determination of the jurisdiction of international arbitration is
based on the adage that every coin has two sides. With regard to international
commercial arbitration, it was considered that the system needed to be
denationalised, the national laws should be viewed individually, and lex mercatoria should regulate the
entire regime. However, this was not possible. The national laws could not,
however, be treated with complete disregard at the same time.
STATEMENT OF THE
PROBLEM
How the scope of
Jurisdiction of the International Arbitration Tribunal comes into play?
Further more, How a state reacts when such applicability of jurisdiction
applies to it with either its willingness to co operate or to hold such a
jurisdiction non applicable to its principles of the State?
RESEARCH QUESTIONS
How does the jurisdiction
of the International Arbitration Tribunal Comes into action?
1.
Whether the decisions delivered by the Tribunal to the National
State Parties/National Non State Parties are binding?
OBJECTIVES
1. To
Understand the establishment of the Jurisdiction of the International
Arbitration Tribunal over a State.
2. To determine whether Domestic law of the
States in dispute can be interfered over
the laws prescribed by the UNCITRAL Model Law on International Commercial
Arbitration.
RESEARCH
METHODOLOGY
The methodology used
shall be descriptive in nature as it shall determine the interpretation
of rules taken into consideration for deciding international disputes and the
further adherence of the parties in question towards the International Forum.
The method shall include various opinions given by scholars for the purpose of
an extensive interpretation to establish how the applicability of jurisdiction
works for determining the liability of a State and an extensive study of cases
in relation to jurisdiction shall be taken into consideration to provide a
better understanding of the given issue.
LITERATURE REVIEW
1. Jurisdictional Issues in International Arbitration with Special
Reference to India by Dr. Mukesh Kumar Malviya.
This Author in this paper talks about
the jurisdictional problems in lieu of International Arbitration with India
being its reference. The author states how The Convention aimed to harmonise
the criteria for the enforcement of arbitral rulings and the observance of
arbitration agreements among the signing nations, as well as to promote the
acceptance and enforcement of commercial agreements in international contracts.
2. UNCITRAL Model Law on International Commercial Arbitration 1985 With
amendments as adopted in 2006 by United Nations Commission on International
Trade Law.
It educates us on how the Model law
on international commercial arbitration works. It gives us the foundational
basis for the establishment of the same and also the structural and procedural
aspects of the model law as well. This gives us all the aspects through which
International commercial Arbitration becomes the bigger picture to deal with
issues with arbitration in an international forum.
3. Analyzing the law of international commercial arbitration in India
w.r.t. the UNCITRAL Model Law Amendment, 2006 by Ronika Tater from the
University of Petroleum and Energy Studies, School of Law
Ronika Tater, a student at the
University of Petroleum and Energy Studies' School of Law, wrote this essay.
With the aid of case laws, she discusses the characteristics of the UNCITRAL
Model Law and the effects of its 2006 Amendment on the Arbitration and
Conciliation Act, 1996, in this paper.
4. Jurisdiction of Arbitral Tribunals.
Author:- Dr Zia Ullah Ranjah & Editor:- Dr Andrew Willcocks
The Author
here talks about the jurisdictional aspects of the Arbitral Tribunals in an
international aspect. This paper illustrates the various components which are
crucial for establishing the validity of the Tribunals such as the competence
of the Arbitral Tribunals, the scope of jurisdiction, the jurisdictional
objections, time limit, the burden of proof and the admissibility of the cases.
5. Jurisdiction and
admissibility in dispute resolution clauses by Andrew Tweeddale, Corbett & Co International Construction
Lawyers, London
This paper
talks about when referring to jurisdiction in the context of arbitration, we
mean the power an arbitral tribunal has to rule on the case's merits. An
arbitrator cannot issue a merits-based award if it determines it lacks
jurisdiction. In international commercial arbitration, the term
"admissibility" refers to a tribunal's ability to render a decision
at a specific time while taking into account a potential short-term or long-term
flaw in the claim. If a tribunal decides it has jurisdiction, it must next
proceed to decide the claim's merits, which may include taking into account
issues with admissibility.
6. International Commercial
Arbitration and Mediation in UNCITRAL Model Law Jurisdictions, Fourth Edition
by Peter Binder.
This book provides all the information required when thinking about
arbitration or mediation in one of the nations with Model Laws is provided in
International Commercial Arbitration and Mediation in UNCITRAL Model Law
Jurisdictions. This updated version of a famous text has been completely
rewritten and updated, making it a brand-new book. The tried-and-true
article-by-article approach from the first three editions is still present,
though; it provides all the details required when considering cross-border
arbitration or mediation and lets practitioners know what to expect in each
country.
7. International
Arbitration Law and Practice, Third Edition by Gary B. Born.
This Book provides the fundamental rules, legal concepts, and procedure
of international arbitration are all thoroughly and authoritatively covered in
International Arbitration. All facets of the arbitral procedure, including
international arbitration agreements, international arbitration processes, and
international arbitral judgments, are comprehensively but succinctly covered in
the book. The Third Edition has been completely revised to reflect current
judicial rulings, legislative changes, and arbitral awards.
8. An
Introduction to International Arbitration by Ilias Bantekas
The reader
is introduced to the law and practice of international arbitration in this
succinct yet thorough textbook. Due of the range of disciplines involved,
arbitration is a complicated field that need a method that doesn't assume
anything. This book, which was written by a respected researcher and
practitioner, provides clear explanations of the complex topics of civil
procedure, contracts, conflicts of laws, and international law, among others.
The book, which primarily focuses on international commercial arbitration, also
includes discrete chapters on consumer and internet arbitration and an equally
thorough chapter on international investment arbitration.
INTRODUCTION
International
organizations and countries collaborate to create international conventions to
develop judicial cooperation in jurisdiction and arbitration agreements, with
the goal of enhancing clarity and predictability, commercial efficiency, and
procedural effectiveness. In contrast to jurisdiction, international
collaboration and harmonization in arbitration is more effective. With the
implementation of the New York Convention of 1958, cooperation in arbitration
agreements have been in existence since 1959. In order to further enhance
consistency and certainty, the UNCITRAL also produced model legislation and
consistent norms on international arbitration. In contrast, there is no active
international law governing jurisdictional agreements. The Brussels I
Regulation only has a small impact on international relations and is only
applicable to EU member states. Only the EU, USA, and Mexico have approved and
signed the 2005 Hague Choice of Court Convention. It is hoped that the
Convention will become the legal equivalent of the New York Convention once it
enters into force and is ratified by a significant number of nations. In
addition to the New York Convention, the UNCITRAL has authored model laws and
arbitration rules in an effort to reduce ambiguity regarding the enforceability
of arbitration agreements, the arbitral process, and the interactions between
courts and tribunals[1]
that is brought on by the insufficiency and disparity of domestic law. The
insufficiency and discrepancy leave the parties unclear and may prevent
arbitration from working as a successful dispute settlement process in global
trade. The Model Law was designed expressly to meet the needs of international
business arbitration. By mandating a court to allude the parties to arbitration
when finding a legitimate arbitration agreement[2],
adopting the kompetenz-kompetenz doctrine to enable an arbitral tribunal to
prevail its own jurisdiction[3],
and allowing an arbitral tribunal to continue jurisdiction in cases where the
court is seized to make a decision, it provides a fairly flexible unified law
in determining the formal validity of an arbitration agreement and emphasizes
the enforceability of arbitration agreements.
The Model
Law provides the identical reasons for a court's refusal to set aside arbitral
awards and essentially mirrors the New York Convention's regulations for the
acceptance and execution of arbitral awards. The Model Law also stipulates
consistent guidelines for the selection of the applicable law to the dispute's
substance, the make-up of arbitral tribunals, the manner in which arbitral
procedures shall be conducted, and the application of interim and preliminary
measures. Many nations have adopted the Model Law or the arbitration rules into
their domestic legislation, even though they are not required to do so, or have
altered their domestic law to reflect the global trend in arbitration. The most
contentious matter, namely the law that governs the substantive legality of an
arbitration agreement, is still unaddressed by the Model Law. The Arbitration
Rules were also made available by UNCITRAL (revised in 2010). The regulations
also uniformize the make-up of the arbitral tribunal, how arbitral proceedings
are conducted, and how awards are made. The Arbitration Rules may be accepted
by the parties and then be applied to the arbitral procedures. More consistency
and assurance are given. However, there are no conflict resolution procedures
regarding the legality and enforceability of arbitration agreements in the
arbitration rules.
RELEVANCE
OF UNCITRAL MODEL LAW
In the area
of international trade law, the UNCITRAL plays a crucial role for the
organization. In general, the laws of any country are significantly dissimilar.
Arbitration, however, has an international implication because it is frequently
of an international nature. As a result, it is necessary for governments to be
uniform, and in that sense, domestic arbitration laws that have been adopted by
various nations must be consistent. If not, obstacles to the efficient flow of trade
would be made.
Therefore,
it actively contributes to overcoming obstacles. It was created to help
countries establish their domestic law systems and modernize their arbitration
rules while taking into account the requirements of international commercial
arbitration. Modern law aimed to largely overcome worries about inadequacy of
national legislation and inequality between the states in question.
Recently,
UNCITRAL Expedited Arbitration Rules came into being after being enacted on
July 21 and taking effect on September 19 of the same year. These guidelines
serve as the parties' personal preferences. Further, The Model Law is intended
to help States update and modernize existing laws on arbitral procedure in
order to better reflect the unique characteristics and requirements of
international commercial arbitration. It covers every step of the arbitration
process, including the arbitration agreement, the make-up and authority of the
arbitral tribunal, the scope of the court's involvement, and the enforcement
and recognition of the arbitral verdict. It displays a consensus among States
from all areas and from various legal or economic systems around the world
regarding fundamental principles of international arbitration practice.
SCOPE AND
APPLICABILITY OF THE MEANING OF ARBITRAL TRIBUNAL
A single
arbitrator or a panel of arbitrators make up a "arbitral tribunal." A
panel of one or more arbitrators that is assembled and meets to arbitrate a
dispute is known as an arbitral tribunal. A single arbitrator, two arbitrators,
or more arbitrators—including a chairperson or an umpire—may make up the panel.
The Model
Law's Article 16(3) further restricts the tribunal's authority by stating the
following:
The
arbitral tribunal may address a claim (concerning the tribunal's jurisdiction)
in a preliminary question or in a decision on the merits. Any party may ask the
court mentioned in Article 6 to decide the case if the arbitral tribunal
enforces as a preliminary question that it has jurisdiction. This court's decision
shall not be appealable. While the proposal is pending, the arbitral tribunal
may proceed the arbitration process and issue an award.
According
to others, Article 16(3) encourages the unfavorable outcome by allowing
tribunals to decide their own jurisdiction as a preliminary matter and
providing for quick, irrevocable judicial review of the tribunal's decision.
Some
jurisdictions that have adopted the Model Law and whose respective courts have
construed the negative effect into this Article have supported the
aforementioned interpretation of Article 16(3).
In
conclusion, Article 16(3) can be seen as a middle ground between opposing views
on the issue of whether judicial review is permitted at any point during the
arbitral procedure.
THE ARBITRAL
TRIBUNAL’S JURISDICTION
SOURCES OF JURISDICTION
Until it is
fully and legally formed, a tribunal lacks the authority to take any action.
This is expressly stated in the Domestic Acts and is implied in the Model Law's
definition of the term "arbitral tribunal."
Jurisdiction
by Agreement – Party Autonomy
In an
arbitral tribunal, jurisdiction is not "inherent." The agreement
between the parties serves as the basis for the arbitral tribunal's
jurisdiction to resolve a specific issue. No piece of legislation grants
jurisdiction to an arbitral tribunal. Subject only to any necessary statutory
provisions governing the arbitration agreement, the arbitration agreement's
scope will determine the tribunal's jurisdiction. According to the notion of
party autonomy, two parties may grant jurisdiction to a third party to resolve
a dispute on their behalf if they lack the legal right to do so.
Illustration:-
Consider a scenario where three people are
stranded on a desolate island in the South Pacific. A notices a coconut that
has fallen from a tree and takes it for himself. But the coconut landed on the
land that we all swore would belong to me, so it is mine, B claims. A and B
decide to take their disagreement to the third resident, C, who rules that
while the coconut belongs to B, A should get one-half of the coconut's milk as
a finder's fee.
This
straightforward illustration indicates that C didn't require state legislation
to resolve the problem or design a suitable solution. The agreement between A
and B to refer the disagreement to C gave C the authority to resolve it. If the
arbitration were to take place in Canada in our example, Canadian arbitral law
would only have the effect of establishing procedural requirements that, if
mandatory, would limit the arbitrator's otherwise unrestricted authority to
resolve the issue. In our scenario, the arbitrator was given the authority to
decide and to create any remedy that looked acceptable without the necessity
for Canadian arbitral law. The parties have that jurisdiction.
Using the
law that the parties have agreed to or, in the absence of agreement, the
principles of law suited to the situation, an arbitral tribunal with full
authority to consider matters not only originating in contract but also tort
and equity. An arbitral tribunal has the authority, where necessary, to apply
the Canadian Charter of Rights and Freedoms, to evaluate the legality of any
matter in the context of the Charter, and to declare any provision of a
contract to be invalid as between the parties. If the agreement to arbitrate is
sufficiently broad, the tribunal may award any commercial remedy under law, in
equity, or capable of being given by a court.
Thus,
clearing the doubt as to how the International Tribunal can have its full
jurisdiction over the state parties and how it can regulate its power in
deciding the matter for both the parties in dispute.
JURISDICTIONAL
AND ADMISIBILITY ISSUES
Whether a
claimant's inability to comply with the terms of a dispute resolution clause
gives rise to an issue of admissibility or jurisdiction is a frequent issue in
commercial contracts across a number of industries. Numerous recent rulings
from around the world have addressed this issue, all of which have determined
that the admissibility of a disputed issue should be the focus of any
discussion of pre-arbitral procedural compliance rather than the jurisdiction
of the arbitral tribunal.
It can be
crucial to distinguish between jurisdictional and admissibility-related
difficulties. An arbitral tribunal cannot proceed to issue an award on the
merits of a matter for which it lacks jurisdiction. Contrarily, admissibility
concerns whether the arbitral tribunal may use its authority to determine the
merits of the claims that have been brought before it.
The distinction
has some practical ramifications as well. For instance, unless there is a
serious violation of fair procedure, decisions on admissibility are typically
not subject to appeal by national courts. As a result, obstinate parties won't
be able to use the national courts to reopen admissibility disputes as a
strategy to postpone or thwart enforcement. It also means that arbitral
tribunals can make decisions on admissibility with a lot of latitude without
worrying about the courts reviewing those judgments. This encompasses the power
to give instructions that will permit compliance with the necessary
requirements to make the claim or issue admissible.
BG GROUP V. REPUBLIC OF AGERTINA[4]
In BG Group
v. Republic of Argentina, 134 S.Ct. 1198 from 2014, the US Supreme Court
rejected an appeal to an arbitration ruling on the grounds that a statutory
pre-condition to arbitration had not been met. This case was an arbitration
under the Argentina-UK BIT initiated by BG Group in response to acts taken by
Argentina in the wake of its economic collapse in late 2001. The arbitration,
which had a hearing in Washington, DC, was won by BG Group. Prior to filing a
claim in arbitration, the Argentina-UK BIT obliged claimants to fight their
claims in Argentina for a period of 18 months. Despite the fact that the BG
Group had not first sought redress from Argentine courts, the arbitral tribunal
had determined that the claim was admissible.
The US
Supreme Court ruled by a majority that the courts should assess if the
participants are obligated by an arbitration clause in the absence of a
provision in the arbitration agreement to the contrary. In contrast, the
arbitral tribunal shall determine the scope and application of any specific
procedural requirements for the use of arbitration. The arbitral tribunal's
judgment on this issue could not be challenged by the courts on a case-by-case
basis, according to the US Supreme Court, which considered the litigation
requirement under the Argentina-UK BIT as a procedural condition.
According
to Republic of Sierra Leone v. SL Mining Ltd [2021] EWHC 286 (Comm.), English
courts declined to annul an arbitration judgment on the grounds that the
respondent had disregarded some arbitration preconditions.
The core
issue involved the revocation of a mining license. The license included a
multi-tiered dispute resolution clause that required the parties to try to
resolve differences amicably for three months following the delivery of a
notice of dispute before initiating arbitration procedures. Just six weeks
earlier, the defendant had delivered a notice of dispute and a request for
arbitration.
On the
grounds that the arbitral tribunal lacked substantive jurisdiction to settle
the issue, the claimant sought to annul the ruling under section 67 of the
English Arbitration Act 1996. The English court found that the preconditions to
arbitration are issues of admissibility and not jurisdiction, and that the
prominent opinions and authority all tilt "one way."
The second
English judgement, NWA v. NVF [2021] EWHC 2666 (Comm.), is a recent High Court
ruling concerning a dispute in which the parties stipulated in their
arbitration agreement that they would first attempt to resolve any disagreement
through mediation. The High Court took note of the Sierra Leone case and agreed
with it, concluding that this was an issue of admissibility rather than
jurisdiction. By claiming that no disputes had been brought before an
arbitrator in conformity with the arbitration agreements, NWA sought to set
aside the Sierra Leone lawsuit. The High Court went on to conclude that the
claim had been lawfully submitted to arbitration and that the question of
whether it had been made too early was one for the arbitral panel, not supervisory
courts, to resolve, rejecting this as a "distinction without
substance."
Arbitral
tribunal's ability to make decisions regarding
its
jurisdiction
The
arbitral tribunal may make decisions regarding its own jurisdiction, including
decisions regarding any challenges to the existence or legality of the
arbitration agreement. To that end, A contract's arbitration clause is to be
regarded as a separate agreement from the other terms of the agreement; and If
the arbitral tribunal rules that the contract is void, that does not
automatically mean that the arbitration clause is also void.
A claim
that the arbitral tribunal lacks jurisdiction must be made before the statement
of defence is submitted, but a party is not prohibited from making such a claim
just because he or she appointed or assisted in the selection of an arbitrator.
As soon as
the topic claimed to be outside the scope of the arbitral tribunal's authority
is brought up during the arbitral proceedings, a defence that the arbitral
tribunal is doing so must be raised.
CONCLUSION
The
decisions of the courts demonstrate a clear pattern in favor of treating the
acceptance of dispute settlement and amplification clauses as admissibility
issues rather than jurisdictional ones. It engages important policy issues
regarding arbitration, along with a respect for honouring arbitration
agreements and fostering the swift resolution of disputes, in addition to being
of enormous practical value by minimising needless jurisdictional objections to
arbitral rulings.
These kinds
of policy concerns could indicate a global trend toward treating conformity
with vague kinds of clauses as an issue of admissibility instead of
jurisdiction. However, since it would still be conceivable for an arbitral
tribunal to decide that a claim is not ripe for adjudication as a matter of
admissibility, parties to contracts are expected to want to continue adhering
to their conflict escalation clauses. The fact that national courts are
increasingly treating the observance of dispute settlement agreements as
involving concerns of admissibility does not imply that these clauses are not
significant. Instead, it indicates that the arbitral tribunal is free to
resolve the matter as it seems fit. This could result in the parties having to
spend more money, wait longer, and even perhaps have to start the case over
again after they have fulfilled with all applicable clauses in the dispute
resolution agreement. Even if such drastic actions are not necessary, failing
to follow the contract's applicable dispute resolution clauses could result in
costly consequences or even a suspension of the legal process to give the party
in default time to fulfil its duties.
Thus, The
Model law creates a significant way of dealing cases in terms of its jurisdictional scope and admissibility.