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A Comparison between the ICC Arbitration Rules and the UNCITRAL Arbitration Rules

1.0 INTRODUCTION

One of the ways in which international arbitrations can be classified is as either ad hoc or institutional. The most popular rules for ad hoc arbitrations are the UNCITRAL Arbitration Rules (1976) (Adopted by the United Nations General Assembly on December 15, 1976). (“UNCITRAL Rules”). UNCITRAL stands for the United Nations Commission on Trading Law. The most popular institutional rules are the Rules of Arbitration of the International Chamber of Commerce, effective as of 1 January 1998. (“ICC Rules”).

In institutional, or administered arbitration there is a supervising institution which may exert a high level of administrative control of the arbitral process, the intention of which is to achieve a suitable procedure and maintain quality control rather than to obstruct or intrude upon the dispute resolution by the arbitrator(s). This is the case with ICC arbitrations which is probably the biggest dispute resolution institution in the world and construction and engineering disputes account for a large amount of these.

In ad hoc arbitrations the parties execute their own particular arrangement without reference to institutional rules on supervision. As UNCITRAL is not an arbitral institution the UNCITRAL Rules are used in ad hoc arbitrations and were designed with international disputes in mind. It should however be noted that it is possible to have the ICC as an appointing authority when using any ad hoc arbitration rules such as the UNCITRAL Rules. Article 3 of Appendix III to the ICC Rules provides that any request for the ICC to act as appointing authority shall be accompanied with a payment of US$2,500.

2.0 MAIN CHARACTERISTICS

Under ICC arbitrations the ICC Court, which is not a court at all, ensures the ICC Rules are applied. The ICC Court is more an administrative and supervisory body than a court. It approves the main steps in the process (including nomination of arbitrators and the Terms of Reference), determines the cost of the arbitration and reviews every award. Many commentators believe that proper administration by institutions can significantly help the arbitration proceedings to keep moving along and if one of the parties is failing to co-operate an institution may be able to influence a difficult party or an arbitrator who is dragging its feet

Ad hoc arbitrations such as under the UNCITRAL Rules are often considered to be cheaper. This is because the proceedings are administered by the tribunal rather than having the additional services (and costs) of an institution. Ad hoc arbitrations can be much more flexible than institutional arbitration in terms of how the arbitration is conducted but this flexibility is dependent on co-operation between the parties and their lawyers. However, if problems arise, for example in respect of the initiation of the proceedings, it may be necessary for the intervention of a court of law, which could be significantly more than the cost of employing an institution.

3.0 COMMENCEMENT OF ARBITRATION

Under Article 4 of the ICC Rules the arbitration is deemed to have commenced on the date the Secretariat receives a written Request for Arbitration from one of the parties whereas under the UNCITRAL Rules the proceedings are deemed to have commenced on the date the respondent receives from the claimant a written notice of arbitration.

4.0 PLACE OF ARBITRATION

The ICC Rules provide that unless the parties have agreed otherwise the place of the arbitration shall be decided by the ICC Court while under the UNCITRAL Rules the place shall be determined by the tribunal. It should be noted that the place of arbitration is of relevance to the determination and influence of procedural rules and also for the recognition and enforcement of the award.

The place of arbitration is frequently not the place where the parties, the witnesses, or the documents are located. It is also the case that regardless of the place of arbitration the tribunal may convene anywhere and as long as the parties agree, it may arrange hearings anywhere.

5.0 ARBITRATORS

5.1 Number of Arbitrators

The UNCITRAL Rules provide that if the parties have not agreed on the number of arbitrators no later than 15 days following the respondent receiving the notice of arbitration, three arbitrators will be appointed. This will have immediate consequences on cost as three arbitrators will obviously cost more than one arbitrator. It is also more difficult for one arbitrator to find time for the hearing.

The ICC Rules are more flexible and specify that the dispute will be decided by either a sole arbitrator or by three arbitrators. If the parties do no agree on the number of arbitrators the ICC Court will decide on whether it is necessary to appoint either one or three arbitrators depending on what they believe the dispute requires.

5.2 Appointment of Arbitrators

International arbitration is built around the idea that parties select at least one of the arbitrators and both the ICC Rules and the UNCITRAL Rules conform to this principle. What often happens with international arbitrations is there will be three arbitrators and both parties will select ‘their’ arbitrator and both arbitrators will then appoint the chairman or the presiding arbitrator. Under the ICC Rules but unlike the UNCITRAL Rules the request for arbitration must contain the nomination of an arbitrator which undoubtedly is a time saving device.

The ICC Rules deals with how the arbitrator is appointed where the parties have agreed to just one arbitrator. If they do not agree on a nomination then the ICC Court will appoint somebody.

The ICC Rules dictates how three arbitrators should be appointed. This could be by means of each party nominating one arbitrator and the third arbitrator, who would act as chairman, being nominated by the ICC Court unless the parties have agreed on some other procedure. However, if a party fails to nominate any arbitrator the appointment will be made by the ICC Court. It is therefore possible that the ICC Court will be responsible for nominating either none, one, two or all three arbitrators.

Unlike the ICC, UNCITRAL does not appoint arbitrators. If the parties have not agreed on who is to be appointed arbitrator(s) and on who would act as appointing authority the UNCITRAL Rules state that either party can request the Secretary-General of the Permanent Court of Arbitration at The Hague will decide on an appointing authority. The fact that the Secretary-General himself does not appoint the arbitrator(s) but designates an appointing authority to do so could itself result in delay. Some commentators consider this mechanism in the rules to be cumbersome and recommend that when using the UNCITRAL Rules an appointing authority be expressly provided for.

Under the UNCITRAL Rules, if each party chooses one arbitrator, the two appointed arbitrators will select the third arbitrator who will act as the presiding arbitrator. Webster (2002) observes that the UNCITRAL Rules do not require consultation with the parties as to the chairman, but they do not exclude it either.

5.3 Replacement of Arbitrators

Under both sets of rules a party to arbitration may challenge an arbitrator for alleged lack of independence or impartiality. Under the ICC Rules the challenge must be submitted to the Secretariat within 30 days from receipt of notification of the arbitrator’s appointment whilst under the UNCITRAL Rules the party has 15 days from either the appointment of the arbitrator or from when the relevant circumstances become known to him. Notification of the challenge must be sent to the other party and to all of the arbitrators.

Both sets of rules also allow for an arbitrator to be replaced upon his death, resignation or if is prevented de jure or de facto from fulfilling his functions.

6.0 STATEMENTS OF CASE

Under the ICC Rules the claimant sets out the details of his claim when sending his request for Arbitration to the Secretariat and the respondent then has 30 days from when he receives the request from the Secretariat to file an Answer. The Terms of Reference referred to below may provide for more detailed pleadings to be made.

Under the UNCITRAL Rules the statement of claim is either sent with the notice of arbitration or it is sent in writing to the respondent and to each arbitrator within a period of time set by the tribunal. The respondent then sends in writing to the claimant and to each arbitrator his statement of defence. Amendments or supplements to the claim and defence may be included at any time during the arbitration unless the tribunal considers it appropriate. This means that the parties’ initial pleadings should not be considered as final or definitive.

The ICC provisions concerning the content of the parties’ submissions are very general in nature. This is in contrast with the UNCITRAL Rules under which (Article 18) the claimant must file a ‘statement of claim including…a statement of facts supporting the claim, the points at issue, and the relief and remedy sought’.

7.0 RULES OF PROCEDURE AND APPLICABLE LAW

The rules that govern the arbitration is in the first place the agreed arbitration rules (in this case either those of the ICC or of UNCITRAL). Where the rules are silent the parties agree (or the tribunal decides upon) more detailed rules of procedure. This may be done by reference to a national law.

Under the ICC Rules if the parties do not agree rules of law to be applied the tribunal will decide after taking into account the provisions of the contract and the relevant trade usages. The UNCITAL Rules are not dissimilar in this respect.

Both the ICC Rules and the UNCITRAL Rules provide that the tribunal will assume the powers of an amiable compositeur or decide ex aequo et bono only if the parties have agreed to give it such powers and in the case of the UNCITRAL Rules, if the law applicable to the arbitral procedure permits such arbitration.

8.0 LANGUAGE(S)

ICC Rules simply provides that the arbitral tribunal shall after giving due regard to all relevant circumstances, including the language of the contract, determine the language(s) to be used. Subject to an agreement by the parties there is a similar provision under UNCITRAL Rules which also expressly allows that the arbitral tribunal to order that any documents annexed to the statements of claim or defence to be accompanied by a translation into the language(s) decided upon for the tribunal.

If the parties agree on one or two languages for the arbitration on the basis of what is convenient to them and if language is a factor when appointing the arbitrators the number of translations can be limited.

9.0 TERMS OF REFERENCE

The “terms of reference” is a distinguishing feature of the ICC Rules. They are a summary of the claims and issues in dispute and particulars of the procedure and it is prepared by the tribunal and signed by the parties at the onset of the proceedings. One commentator points out that at least under French law having signed the terms of reference the parties are bound by them.

The ICC Rules include three variants to the terms of reference which allow varying degrees of flexibility in varying or adding to the terms of reference and allocates different degrees of responsibility on the tribunal for how the terms of reference is dealt with after it has been signed.

Although the basic justification for this document is that it crystallises the issues and concentrates the minds of those concerned in the arbitration, it is reported that some practitioners consider them an annoying necessity to be prepared quickly and to be referred to only if there is a point of procedure that has been dealt with in the terms of reference. Use of the terms of reference is not optional no matter how simple or straightforward the case

Even though under the ICC Rules time may be saved by including the Statement of Claim and the nomination of an arbitrator with the Request for Arbitration, some commentators believe more time can be lost under its Terms of Reference procedure.

10.0 INTERIM RELEIF

10.1 Security for Costs

Whilst the ICC Rules do not specifically refer to security for costs it is observed that Article 23 does state that the tribunal may ‘order any interim or conservatory measure it deems appropriate’. It is suggested that this broad power is sufficient to enable the tribunal to order a party to give security for the costs of the other party.

It would seem that the current UNCITRAL Rules may not allow the tribunal to make any orders for security for costs. However, there may soon be a revision to these rules as it is reported that UNCITRAL are considering an amendment which would allow the tribunal to order a party to ‘provide security for the enforcement of an eventual award, including an award of costs’. The requesting party would need to demonstrate (a) an urgent need, (b) irreparable harm will result if not ordered and (c) there is a substantial possibility that the requesting party would succeed on the merits of the dispute.

10.2 Other Interim Relief

Practitioner’s claims that in international arbitration requests for provisional and conservatory measures are becoming more and more frequent. If this is an important issue for a party to arbitration the ICC Rules would be preferable to the UNCITRAL Rules.

Unless agreed otherwise by the parties under the ICC Rules the Arbitral Tribunal can ‘order any interim or conservatory measure’ that it deems appropriate whilst under the UNCITRAL Rules the tribunal is restricted to taking interim measures ‘in respect of the subject matter of the dispute’.

Under the ICC Rules the parties may also apply to any competent judicial authority (court) for interim or conservatory measures at any stage unlike the UNCITRAL Rules which say that any party making a request to a court shall not be deemed incompatible with the agreement to arbitrate.

11.0 CONFIDENTIALITY

Although confidentiality is widely sold as one of the foremost advantages of arbitration, this is not always fully understood. The Australian case of ESSO/BHO v Plowman [1995] 128 A.L.R. 391 and the Swedish case of Bulgarian Foreign Trade Bank Limited v A.I. Trade Finance Inc. [2000] have helped to highlight this problem.

The UNCITRAL Rules provide solely for the confidentiality of the award and the privacy of the hearing. The hearings are held in camera unless the parties agree otherwise and the award is made public only with the consent of the parties.

Under the ICC Rules the parties are not bound to keep the award confidential and it is also not clear if the institution is confidentially bound. While the tribunal under the ICC may take measures for protecting trade secrets and confidential information and the ICC Court is bound by an obligation of confidence the ICC Rules have no general provision for confidentiality. The award is not made available by the Secretariat to anyone except the parties but there is no obligation on the parties to keep the award confidential. In this respect the UNCITRAL Rules are slightly better than the ICC Rules.

12.0 NON-PARTICIPATION

Under both sets of rules if one of the parties refuses or fails to appear at a hearing without a valid excuse the tribunal has the power to proceed with the arbitration.

The UNCITRAL Rules deal with the event of a claimant failing, without showing sufficient cause, to communicate his statement of claim. In such cases the tribunal may terminate the arbitration. If the respondent fails to communicate his statement of defence without showing sufficient cause the tribunal will order the arbitration to continue. The ICC Rules are silent on such eventualities.

Under the UNCITRAL Rules if one of the parties fails to produce documentary evidence the tribunal may make the award on the evidence before it. The ICC Rules are again silent on such an eventuality.

13.0 EVIDENCE

Both sets of rules are silent about how evidence should be gathered, presented and received. The IBA Working Party suggests that this gap is intentionally left in arbitration rules to allow the parties and the tribunal flexibility in formulating the most appropriate procedures for the arbitration.

This flexibility allows the incorporation of rules of evidence such as the IBA Rules of Evidence. Even if such rules are not specifically adopted they can serve as a guide to arbitrators when conducting the arbitration. It is also possible for the parties and the tribunal to devise procedural rules that allow the admissibility of evidence by video tape, video conferencing or other tools of advanced technology.

Both the ICC Rules and the UNCITRAL Rules have provisions which allow the tribunal to summon the parties to provide evidence. One commentator explains that ‘the reasoning behind these provisions is that arbitration is a consensual process between the parties. As such, third parties are not subject to or involved in such a process’.

When it comes to the matter of obtaining documents from adverse parties it would seem that although the ICC Rules do not specifically refer to a right to issue an injunction for a failure to supply documents, most commentators accept that such a right exists.

If a party fails without satisfactory explanation to produce document(s) that the tribunal has requested, it is suggested that under both sets of rules the tribunal is entitled to draw an adverse inference.

14.0 MULTI-PARTY DISPUTES

The UNCITRAL Rules have no provision for multi-party disputes whereas the ICC Rules provide for multiple parties whether as claimant or as respondent. However there is no provision for more than two groups of parties to a dispute.

Where there are multiple parties and where the dispute is to be referred to three arbitrators, the multiple claimants, jointly and/or the multiple respondents jointly should nominate an arbitrator. Where there is no nomination or the parties cannot agree the ICC Court will appoint each member of the tribunal.

15.0 PAPER ARBITRATIONS

Under both the ICC Rules and the UNCITRAL Rules unless any of the parties request a hearing, the tribunal may decide the case solely on the documents submitted.

16.0 HEARING

Both sets of rules require the arbitral tribunal to give the parties adequate/reasonable notice of when a hearing is to be held and if either of the parties fails to appear without a good reason the tribunal can proceed with the hearing.

The ICC Rules allow the parties involved to appear in person or through their representatives. They may also bring their advisors into the hearing but persons not involved with the arbitration are not allowed in. The UNCITRAL Rules do not specifically deal with who can appear.

At least 15 days prior to any hearing the UNCITRAL Rules requires each party to notify details of witnesses to be called including on what subject and the language(s) of the testimony and it is for the tribunal to make arrangements for the translation of oral statements.

17.0 AWARDS

17.1 The Award

The UNCITRAL Rules do not set any time limit but under the ICC Rules the tribunal is given a period of six months for the final award to be rendered. However the ICC Court may extend this period.

Both the ICC Rules and the UNCITRAL Rules provide that where there are three arbitrators the decision can be made by the majority but under the ICC Rules if there is no majority the award shall be made by the chairman of the tribunal alone.

Under the ICC Rules the award must state reasons whereas under the UNCITRAL Rules the award has to state reasons unless the parties have agreed otherwise.

Under the ICC Rules the tribunal has to submit its award to the institution for scrutiny before it is mailed to the parties but under the UNCITRAL Rules the award is to be communicated to the parties by the tribunal at the place of arbitration.

Under both the ICC Rules and the UNCITRAL Rules the parties undertake to carry out the award without delay but under the ICC Rules the parties are also deemed to have waived their right to any form of recourse.

17.2 Remedying an Omission

Although the ICC Rules allow the tribunal to correct certain errors in their award, it has been observed that they do not expressly provide for remedying an omission whereas the UNCITRAL Rules allow the tribunal to ‘make an additional award as to claims presented in the arbitral proceedings but omitted from the award’.

18.0 APPEAL

ICC Rules waives the right to object to the decision of the tribunal whilst the UNCITRAL Rules state that the award is ‘final and binding on the parties’ and are otherwise silent on any rights to appeal. Nevertheless it is considered that in certain circumstances overturning awards may be possible.

19.0 ENFORCEMENT

Enforcement of arbitration awards is the same under both sets of rules. This is generally done by means of the 1958 New York Convention where arbitration awards are usually enforceable in nearly 100 countries. Countries that have signed up to this convention recognise arbitration clauses and enforce foreign arbitration awards in the same way as domestic court judgments.

This is important because if the assets of the losing party is in a country which it may be difficult to enforce the arbitration award the winning party may not be able to receive his award and therefore have no more than a hollow and very expensive victory.

20.0 COSTS

20.1 Size and Predictability

Although the fees in ICC arbitrations are often more expensive than in UNCITRAL arbitrations, they are generally also more predictable. Ad hoc arbitration has the apparent attraction of avoiding the payment of the administrative fees which institutions charge but parties considering arbitration should be mindful of the lack of control with ad hoc arbitration especially with regard to arbitrators’ fees.

20.2 Arbitrators’ Fees / Institution’s Costs

The final act of the ICC Court is to fix the total cost of the proceedings, which include the fees and expenses of the arbitrators as well as the administrative costs of the ICC. Whilst this is usually carried out in accordance with the Scales of Administrative Expenses and Arbitrator’s Fees found at Appendix III of the ICC Rules, the Court may deviate from this scale under exceptional circumstances.

Under both the ICC Rules and the UNCITRAL Rules the tribunal must fix the arbitration costs in its award. However, under both sets of rules the parties may have been requested to deposit advances at the outset and these figures might have increased at any time during the proceedings.

20.3 Parties Costs

In principle, the costs of the arbitration under the UNCITRAL Rules are to be borne by the unsuccessful party but are subject to the tribunal’s discretion. Under the ICC Rules the parties’ costs are at the discretion of the arbitral tribunal unless agreed otherwise by the parties.

21.0 PARTY AUTONOMY

The principle of the party autonomy rule is based on the parties to a dispute having the autonomy to control the arbitration. Both the ICC Rules and the UNCITRAL Rules seem to recognise this rule in relation to appointing the arbitrators, the choice of forum and the applicable law, paper arbitrations, appointing experts and choosing the language of the arbitration.

Whilst the ICC Rules also allow party autonomy when determining the timetable, the UNCITRAL Rules provide greater control in this respect. However, when it comes to the place of arbitration the ICC Rules provide greater autonomy and one commentator believes that the application of the party autonomy rule is at its fullest when the parties determine the forum and the regime of institutional arbitration.

22.0 FREQUENCY OF USE

The Paris-based International Court of Arbitration of the ICC is probably the biggest dispute resolution institution in the world and construction and engineering disputes account for a large amount of these [17.7% in 1999]. Information from the ICC also indicate that the number of ICC arbitrations is increasing. This may be in part due to some standard forms of contract requiring arbitrations to be under the ICC rules.

As the UNCITRAL Rules do not involve an institution there is no official record of how frequently they are used. However, practitioners in international arbitration claim that whilst UNCITRAL Rules are probably the most used of the ad hoc arbitration rules, they get used significantly less than the ICC Rules. Some have claimed that the ICC Rules are being used as much as ten times as often as the UNCITRAL Rules although others claim that the UNCITRAL Rules appear more popular in the Eastern Block.

There is also some difference of opinion as to whether use of the UNCITRAL Rules could be declining. If their use is declining, it is suggested that it could be due to more contracts such as those of FIDIC providing for institutional arbitrations.

23.0 CONCLUSIONS

The similarities between the ICC Rules and the UNCITRAL Rules are many and it is suggested that they outweigh the differences. Their substantial differences can often be traced to the fact that one is an institutional arbitration and one is an ad hoc arbitration. It would also seem that ICC Rules and other institutional arbitration rules get used significantly more often than ad-hoc rules and the writer concludes that one of the main reasons causing the ICC Rules to get used more frequently is their institutional aspects.

Alway Associates

Date: February 2005

Alway Associates

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