UNCITRAL and International Commercial Arbitration

Commercial, by the footnote to article 1, should be given a wide interpretation so as to cover matters arising from all relationships of a commercial nature, whether contractual or not, and the footnote lists supply or exchange of goods or services, distribution, agency, factoring, leasing, construction of works, consulting, engineering, licensing, investment, financing, banking, insurance, concession, joint venture, and carriage of goods or passengers by air, sea, rail or road.

That footnote matters in practice, because whether a dispute is commercial decides whether the Act applies at all, and States that enacted the Model Law without the footnote have generated their own case law on the word.

The definitions and the reading rules: articles 2 to 4

Article 2 defines the terms. Arbitration means any arbitration whether or not administered by a permanent arbitral institution, so ad hoc and institutional arbitration are treated alike. Arbitral tribunal means a sole arbitrator or a panel. Court means a body or organ of the judicial system of a State. Where a provision leaves the parties free to determine an issue, except article 28, that freedom includes the right to authorize a third party, including an institution, to make the determination. Where a provision refers to the parties' agreement, that includes any arbitration rules referred to in the agreement. And a reference to a claim also applies to a counter-claim, and to a defence, a defence to a counter-claim, except in articles 25(a) and 32(2)(a).

Article 2 A, added in 2006, is the interpretation clause. In interpreting the Law, regard is to be had to its international origin and to the need to promote uniformity in its application and the observance of good faith, and questions not expressly settled are to be settled in conformity with the general principles on which this Law is based.

Article 2 A answers the objection that a model law fragments as each State enacts it. A national court reading its own Act is directed to read it as an international text.

Article 3, receipt of communications. Unless otherwise agreed, a written communication is deemed received if delivered to the addressee personally or at his place of business, habitual residence or mailing address; and if none can be found after reasonable inquiry, if sent to the last-known such address by registered letter or any other means which provides a record of the attempt to deliver it. It is deemed received on the day it is so delivered. The article does not apply to communications in court proceedings.

Article 4, waiver of the right to object. A party who knows that a non-mandatory provision of the Law, or a requirement of the arbitration agreement, has not been complied with, and yet proceeds with the arbitration without stating his objection without undue delay or within any time-limit provided, shall be deemed to have waived his right to object.

Article 4 is what prevents a party from keeping a procedural objection in reserve and producing it only if the award goes against it.

The place of the courts

Article 5, the article that defines the whole scheme. In matters governed by this Law, no court shall intervene except where so provided in this Law.

Read article 5 as an exhaustive statement of judicial power. It does not say the courts should be slow to intervene; it says they shall not intervene at all outside the Law. Every permitted intervention is therefore identifiable: appointing an arbitrator where the parties' machinery fails, deciding a challenge, deciding on jurisdiction after a preliminary ruling, assisting in taking evidence, setting aside, and recognising and enforcing.

Article 6 leaves each enacting State to name the court or other authority that performs those functions, which is the principal thing each legislature must supply.

Article 8(1), the negative effect of the agreement. A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration, unless it finds that the agreement is null and void, inoperative or incapable of being performed.

Three points. The court shall refer; it is not a discretion. The request must be made before the first statement on the substance, so a party that argues the merits has lost the point. And the escape is confined to the three words, null and void, inoperative or incapable of being performed, which are taken from article II(3) of the New York Convention worked in [Enforcement of Foreign Arbitral Awards].

Article 8(2). Arbitral proceedings may nevertheless be commenced or continued, and an award may be made, while the issue is pending before the court, so a court application cannot be used to stall the arbitration.

Article 9. It is not incompatible with an arbitration agreement for a party to request an interim measure of protection from a court, before or during the proceedings, or for a court to grant one.

The arbitration agreement: article 7

The 2006 amendments offered States a choice of two texts, which is unusual and worth knowing.

Option I, article 7(1). An arbitration agreement is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, and it may be an arbitration clause in a contract or a separate agreement.

Option I(2) to (6), the writing requirement, relaxed. The agreement shall be in writing, and it is in writing if its content is recorded in any form, whether or not the agreement or contract has been concluded orally, by conduct, or by other means. An electronic communication satisfies it if the information is accessible so as to be useable for subsequent reference. It is also in writing if contained in an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by the other. And a reference in a contract to a document containing an arbitration clause is an agreement in writing provided the reference is such as to make that clause part of the contract.

Option II dispenses with writing altogether, defining the agreement without any form requirement.

The direction of travel is clear. Form requirements defeat genuine agreements, and the 2006 revision moved from requiring a signed document to requiring only that the content be recorded.

The tribunal: articles 10 to 15

Article 10. The parties are free to determine the number of arbitrators; failing determination, the number shall be three.

Article 11. No person shall be precluded by reason of nationality from acting as an arbitrator unless the parties agree otherwise; the parties are free to agree the appointment procedure; and failing agreement, in a three-arbitrator arbitration each party appoints one and the two appoint the third, with the court or other authority specified in article 6 appointing on default.

Article 12, grounds for challenge. A person approached in connection with a possible appointment shall disclose any circumstances likely to give rise to justifiable doubts as to his impartiality or independence, and shall continue to disclose throughout. An arbitrator may be challenged only if circumstances exist that give rise to justifiable doubts as to his impartiality or independence, or if he does not possess qualifications agreed by the parties, and a party may challenge its own appointee only for reasons of which it becomes aware after the appointment.

Article 13 governs the challenge procedure and article 14 failure or impossibility to act; article 15 the appointment of a substitute.

Competence-competence: article 16

Article 16(1). The arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. For that purpose an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract, and a decision by the tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.

Two doctrines in one paragraph, and they are separate.

Competence-competence: the tribunal may decide whether it has jurisdiction. Without it, any party could stop an arbitration by denying the agreement and forcing the question into court first.

Separability: the arbitration clause is an agreement independent of the contract containing it. Without it, an allegation that the contract is void would destroy the very clause under which the allegation is to be tried, which is circular.

Article 16(2), timing. A plea that the tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence, and a party is not precluded by having appointed or participated in appointing an arbitrator. A plea that the tribunal is exceeding the scope of its authority shall be raised as soon as the matter arises. The tribunal may admit a later plea if it considers the delay justified.

Article 16(3), the court's role. The tribunal may rule on the plea as a preliminary question or in an award on the merits. If it rules as a preliminary question that it has jurisdiction, any party may within thirty days request the court specified in article 6 to decide the matter, and that decision shall be subject to no appeal; while the request is pending the tribunal may continue and make an award.

So competence-competence is a rule about who goes first, not about who decides finally. The court has the last word; the tribunal need not wait for it.

Conduct of the proceedings: articles 17 to 27

Article 17, added in its expanded form in 2006, gives the tribunal power to order interim measures, with articles 17 A to 17 J setting out the conditions, preliminary orders, modification, security, costs, and the recognition and enforcement of interim measures.

Article 18, the fundamental guarantee. The parties shall be treated with equality and each party shall be given a full opportunity of presenting his case.

Article 18 is the provision every other procedural rule bends to, and its breach is a ground for setting aside under article 34(2)(a)(ii).

Article 19. The parties are free to agree on the procedure; failing agreement the tribunal may conduct the arbitration in such manner as it considers appropriate, including the power to determine the admissibility, relevance, materiality and weight of any evidence.

Article 20, place of arbitration; article 21, commencement; article 22, language; article 23, statements of claim and defence; article 24, hearings and written proceedings; article 25, default of a party, under which the tribunal may continue and make the award on the evidence before it rather than treating default as an admission; article 26, tribunal-appointed experts; article 27, court assistance in taking evidence.

The award: articles 28 to 33

Article 28(1), the law applied. The tribunal shall decide the dispute in accordance with such rules of law as are chosen by the parties, and a designation of the law of a State is construed as directly referring to its substantive law and not to its conflict of laws rules, unless otherwise expressed.

The phrase rules of law, rather than law, is deliberate: it allows the parties to choose a body of rules that is not the law of any State.

Article 28(2). Failing designation, the tribunal shall apply the law determined by the conflict of laws rules which it considers applicable.

Article 28(3). The tribunal shall decide ex aequo et bono or as amiable compositeur only if the parties have expressly authorized it. Compare article 38(2) of the Court's Statute in [The International Court of Justice], which requires the same agreement and has never been used.

Article 28(4). In all cases the tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction.

Article 29. Decisions by a majority, though procedural questions may be decided by a presiding arbitrator if authorised.

Article 30, settlement. If the parties settle, the tribunal terminates the proceedings and, if requested and not objected to, records the settlement as an award on agreed terms, which has the same status and effect as any other award.

Article 31. The award shall be in writing and signed, shall state the reasons upon which it is based unless the parties agreed otherwise or it is an award on agreed terms, and shall state its date and the place of arbitration.

Article 32, termination; article 33, correction and interpretation of the award and additional awards.

Setting aside: article 34

Article 34(1). Recourse to a court against an arbitral award may be made only by an application for setting aside in accordance with the article. There is no appeal on the merits.

Article 34(2), the exhaustive grounds. An award may be set aside only if:

(a) the applicant furnishes proof that

(i) a party was under some incapacity, or the agreement is not valid under the law to which the parties subjected it or, failing indication, under the law of the enacting State;

(ii) the applicant was not given proper notice of the appointment of an arbitrator or of the proceedings, or was otherwise unable to present his case;

(iii) the award deals with a dispute not contemplated by or not falling within the terms of the submission, or contains decisions on matters beyond the scope of the submission, with the express saving that if the matters submitted can be separated, only the offending part is set aside;

(iv) the composition of the tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless that agreement conflicted with a provision of the Law from which the parties cannot derogate, or, failing agreement, was not in accordance with the Law; or

(b) the court finds that

(i) the subject-matter is not capable of settlement by arbitration under the law of that State; or

(ii) the award is in conflict with the public policy of that State.

Notice the structure. The first four grounds must be proved by the party applying; the last two the court may take of its own motion. And every one of them is about the process or the limits of the reference, not about whether the tribunal decided the merits correctly. An award that is wrong in law stands.

Article 34(3), the time limit. An application may not be made after three months from the date on which the applicant received the award, or from the disposal of a request under article 33.

Article 34(4), the remission power. The court, when asked to set aside, may suspend the setting aside proceedings for a period it determines, to give the tribunal the opportunity to resume the proceedings or take such other action as will eliminate the grounds for setting aside.

Articles 35 and 36 deal with recognition and enforcement and with the grounds for refusing it, and those grounds are almost identical to article 34(2) because both are taken from article V of the New York Convention, which is the next chapter. The practical difference is one of forum: an application to set aside can be made only in the State where the award was rendered, while enforcement may be sought in any State, so the public policy and arbitrability grounds may be answered differently from country to country.

India

India enacted the Model Law as the Arbitration and Conciliation Act 1996, whose Preamble records that the General Assembly recommended that all States give due consideration to the Model Law in view of the desirability of uniformity of the law of arbitral procedures. Part I of the Act follows the Model Law for arbitrations seated in India; Part II gives effect to the New York Convention and the Geneva Convention. The Act has been amended several times, notably in 2015, 2019 and 2021, chiefly to shorten timelines, to narrow the public policy ground and to regulate the automatic stay of enforcement.

The relationship to state this correctly. India is bound by the New York Convention as a treaty. It is not bound by the Model Law by any rule of international law, because a model law binds nobody: India is governed by the Arbitration and Conciliation Act 1996, which its Parliament enacted, and the Model Law is the source that Act was drawn from.

A worked example

State AA's company and State BB's company agree by exchange of emails to arbitrate in State CC, whose law enacts the Model Law. A dispute arises. The buyer sues in State CC's court and, after filing a defence on the merits, asks the court to refer the matter to arbitration. The seller says the whole contract is void for fraud, so the arbitration clause is void too. The tribunal rules that it has jurisdiction. The award goes against the buyer, who says the arbitrators got the contract law wrong.

Is there an arbitration agreement in writing? Under Option I of article 7 the requirement is met where the content is recorded in any form, and expressly by an electronic communication whose information is accessible so as to be useable for subsequent reference. An exchange of emails qualifies.

Is the arbitration international? Article 1(3)(a): the parties have their places of business in different States. Yes.

The late request to refer. Article 8(1) requires the request not later than when submitting the first statement on the substance of the dispute. Filing a defence on the merits first is too late, and the court will not refer.

The fraud argument. Article 16(1): the arbitration clause shall be treated as an agreement independent of the other terms of the contract, and a decision that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause. That is separability, and it defeats the argument.

The preliminary ruling on jurisdiction. Article 16(3): a party may within thirty days ask the court specified in article 6 to decide the matter, and that decision is subject to no appeal; meanwhile the tribunal may continue and make an award.

The complaint that the tribunal was wrong on the law. Not a ground. Article 34(1) makes setting aside the only recourse, and article 34(2) lists the grounds exhaustively; none of them is error of law or of fact.

Change one fact: an arbitrator was appointed without notice to the buyer. Article 34(2)(a)(ii) applies, the buyer bearing the burden of proof, and the application must be made within three months of receipt of the award.

Distinctions table

What it does NOT mean

UNCITRAL is not a treaty organisation. It is a subsidiary organ of the General Assembly under article 22 of the Charter.

A model law is not international law. It binds only when a legislature enacts it.

Article 5 is not a presumption against intervention. It excludes intervention outside the Law altogether.

Competence-competence does not make the tribunal the final judge of its own jurisdiction. Article 16(3) gives the court the last word, subject to no appeal.

Separability is not a rule that a void contract has a valid clause. It is a rule that the clause is judged independently.

Setting aside is not an appeal. Article 34(2) lists process grounds; error of law is not among them.

India is not bound by the Model Law. It is governed by the Arbitration and Conciliation Act 1996, which enacts it.

Limits and criticism

Uniformity is only as good as the enactments. States adopt the Model Law with modifications, and the differences cluster in exactly the places that matter, the definition of public policy, the scope of court powers and the finality of awards, so the harmonisation the instrument promises is partial.

Public policy under article 34(2)(b)(ii) is the escape valve and it is undefined. It was intended to catch serious departures from fundamental notions of procedural justice, and in several jurisdictions it has been read to admit review of the merits, which defeats the whole design of article 34.

Party equality can be bought. Article 18 guarantees equal treatment and a full opportunity to present the case, and an arbitration is still paid for by the parties, so the party with resources can outspend the other in a way the article does not reach.

The system depends on a treaty it does not contain. The Model Law can make an award final and unappealable, and it cannot make it enforceable abroad. That is the work of the New York Convention, which is why the two chapters belong together.

Quick revision

UNCITRAL: established by the General Assembly in 1966, a subsidiary organ under Charter article 22; instruments are conventions (bind on ratification), model laws (bind on enactment), rules (bind by contract), and guides.

Model Law article 1: applies to international commercial arbitration; territorial, except articles 8, 9, 17 H to 17 J, 35 and 36; international if places of business in different States, or the seat or place of performance is abroad, or the parties expressly agree the subject matter relates to more than one country; commercial to be given a wide interpretation.

Article 5: no court shall intervene except where so provided. Article 8: the court shall refer if asked not later than the first statement on the substance, unless the agreement is null and void, inoperative or incapable of being performed; the arbitration may continue meanwhile. Article 9: court interim measures are not incompatible.

Article 7 Option I: an agreement to submit existing or future disputes in respect of a defined legal relationship, whether contractual or not; in writing if the content is recorded in any form, including electronic communication, an exchange of claim and defence not denied, or an incorporating reference. Option II: no form requirement.

Article 10: failing agreement, three arbitrators. Article 12: duty to disclose; challenge only for justifiable doubts as to impartiality or independence or want of agreed qualifications.

Article 16: competence-competence and separability; plea not later than the statement of defence; on a preliminary ruling in favour of jurisdiction, the court decides within thirty days, no appeal, and the tribunal may continue.

Article 18: equality and a full opportunity of presenting his case. Article 19: party autonomy on procedure. Article 25: default does not admit the claim. Article 28: rules of law chosen by the parties, substantive law only; failing choice, conflict rules; ex aequo et bono only if expressly authorized; always the terms of the contract and the usages of the trade. Article 31: written, signed, reasoned, dated, place stated.

Article 34: setting aside is the only recourse; grounds proved by the applicant: incapacity or invalid agreement, no proper notice or unable to present his case, beyond the submission (severable part only), composition or procedure contrary to the agreement; grounds the court may find: non-arbitrability and public policy. Three months from receipt of the award. Article 34(4): the court may suspend to let the tribunal cure.

India: the Arbitration and Conciliation Act 1996, Part I following the Model Law and Part II the New York and Geneva Conventions.

Test yourself

1. What is UNCITRAL and what kinds of instrument does it produce?

It is the United Nations Commission on International Trade Law, established by the General Assembly in 1966 as a subsidiary organ under article 22 of the Charter, with the mandate of promoting the progressive harmonisation and unification of the law of international trade. It has no constituent treaty and no power to bind. Its instruments are of four kinds, distinguished by how they take effect: conventions, which are treaties binding on States that ratify them, such as the Convention on Contracts for the International Sale of Goods of 1980; model laws, which are texts States are invited to enact as their own legislation and which bind nobody until a legislature passes them; rules, such as the UNCITRAL Arbitration Rules, which bind because the parties adopt them by contract; and legislative guides and notes, which are advice.

2. When does the Model Law apply?

By article 1(1) it applies to international commercial arbitration. By article 1(3) an arbitration is international if the parties to the agreement had, when they concluded it, their places of business in different States; or if the place of arbitration determined in or under the agreement, or any place where a substantial part of the obligations of the commercial relationship is to be performed or with which the subject-matter is most closely connected, is outside the State in which the parties have their places of business; or if the parties have expressly agreed that the subject matter relates to more than one country. Commercial is to be given a wide interpretation, covering all relationships of a commercial nature whether contractual or not. By article 1(2) the provisions apply only if the place of arbitration is in the enacting State, except articles 8, 9, 17 H, 17 I, 17 J, 35 and 36, which must operate whatever the seat because they exist to support an arbitration held elsewhere.

3. Explain competence-competence and separability.

Both are in article 16(1). Competence-competence is the rule that the arbitral tribunal may rule on its own jurisdiction, including objections to the existence or validity of the arbitration agreement; without it, a party could halt any arbitration simply by denying the agreement and forcing that question into court first. Separability is the rule that an arbitration clause forming part of a contract shall be treated as an agreement independent of the other terms, so that a decision by the tribunal that the contract is null and void does not entail ipso jure the invalidity of the clause; without it, an allegation that the contract is void would destroy the very clause under which the allegation was to be decided. Competence-competence decides who goes first rather than who decides finally, because article 16(3) allows any party, within thirty days of a preliminary ruling upholding jurisdiction, to ask the court to decide the matter, that decision being subject to no appeal, while the tribunal may continue and make an award in the meantime.

4. On what grounds may an award be set aside?

Article 34(1) makes an application for setting aside the only recourse to a court against an award, and article 34(2) states the grounds exhaustively. Four must be proved by the applicant: that a party to the agreement was under some incapacity or the agreement is not valid under its governing law; that the applicant was not given proper notice of the appointment of an arbitrator or of the proceedings or was otherwise unable to present his case; that the award deals with a dispute not contemplated by or falling outside the terms of the submission, or contains decisions beyond its scope, only the separable offending part being set aside where separation is possible; and that the composition of the tribunal or the procedure was not in accordance with the parties' agreement or, failing agreement, with the Law. Two the court may find of its own motion: that the subject-matter is not capable of settlement by arbitration under the law of that State, and that the award conflicts with its public policy. The application must be made within three months of receipt of the award, and by article 34(4) the court may suspend the proceedings to let the tribunal cure the defect.

5. What is the effect of article 5?

It provides that in matters governed by the Law no court shall intervene except where so provided in the Law. It is not a presumption or a counsel of restraint but an exclusion: any judicial power over an arbitration must be found in the Law itself. The interventions the Law does permit are therefore identifiable, and they are the appointment of an arbitrator where the parties' machinery fails under article 11, the deciding of a challenge under article 13, the decision on jurisdiction after a preliminary ruling under article 16(3), assistance in taking evidence under article 27, setting aside under article 34, and recognition and enforcement under articles 35 and 36, with article 6 leaving each enacting State to name the court that performs these functions.

6. What is India's position?

India enacted the Model Law as the Arbitration and Conciliation Act 1996, Part I of which follows the Model Law for arbitrations seated in India and Part II of which gives effect to the New York Convention and the Geneva Convention. The Act has been amended several times, notably in 2015, 2019 and 2021, chiefly to shorten timelines, to narrow the public policy ground for setting aside, and to regulate the stay of enforcement pending challenge. The legal relationship must be stated precisely: India is bound by the New York Convention as a treaty, and is not bound by the Model Law at all, because a model law creates no international obligation. What governs arbitration in India is the Act its Parliament passed, and the Model Law is the source from which that Act was drawn.