Wednesday, October 6, 2010

Vindobona Junction - An introduction to arbitration - Guest post by Mr. Ashutosh Ray

The posts is this section are intended to be of assistance to the  participants in the Willem C. Vis International Commercial Arbitration Moot. Other Readers may find some of these posts too basic. Apologies for the same. However, as this section progresses, the posts will move on from being introductory and discuss topics relevant to the moot at a higher level.

The following is a guest post from Mr. Ashutosh Ray, a former Vis participant from Gujarat National Law University. He seeks to introduce the some basic, yet important, concepts in arbitration. Having a good understanding of these basics is essential in moving ahead to tackle the issues in the moot.

So, Vis is here and it is an Arbitration Moot! Well, this post is to rebrush some basics for the people who already know what arbitration is and infuse the vital points for those who have just started their journey. The new comers to this field should find this tryst with arbitration interesting.

Arbitration is a process whereby two or more parties decide to get their dispute(s) resolved by the rules they want and by the people they want. This very thing brings us to the underlying principle of this creature: “Party Autonomy” (Remember this term, comes very handy). International Arbitration becomes more important because that is the only intelligent way to come to a binding solution in a dispute between parties of differing nationalities because neither of the parties to any international contract would be very amenable to go and “fight out” a case in the courts of an alien country under unfamiliar laws and before unfamiliar people.

The New York Convention 1958 is THE thing that keeps international arbitration alive and can be said to be the initiator of the modern and structured era of international commercial arbitration. It is so far the most successful convention signed by most number of countries in the world. Basically, the Convention ensures that arbitration agreements signed in a country or arbitral awards rendered in a country can be enforced in all other countries that are parties to the Convention.

An international arbitration can be very complex because at one point of time there can be several systems of laws governing it such as the law of the place of arbitration, law of the seat of arbitration (yes there is a difference between place and seat), the law that governs the arbitration, the substantive law of the dispute which would govern the merits(in case of Vis, [UN]CISG), the law which would lead to enforcement of such an award (At Vis, all the parties are signatory to NYC, so there shouldn’t be much problem with that; however domestic laws and public policy considerations of the country where enforcement is to be sought is at times of cardinal importance), the law determining questions of capacity of parties, so on and so forth. 

In addition to these legal systems, in Vis problems and in most real world international arbitrations, the arbitration is held under the aegis of an arbitral institution, attracting the application of the procedural rules of that institution. The Vis moot selects a different arbitration institute every year and so it is important to read the rules  of that institution. The choice of the arbitral institute is the choice of a set of procedural rules to be applied in the arbitral proceedings. Moreover, the institute discharges several functions like the appointment of arbitrators in specified circumstances, replacement of arbitrators, etc. It is to be noted that though most arbitral institutions are named after the places of their location, the choice of an arbitral institution is not a choice of the seat of arbitration. In many instances the answer to the problem or the problem to the answer (that the teams think would be correct but would actually be not due to “that peculiar” article of the rules) lies in rules of that arbitration institute. Apart from that, a general overview of the UNCITRAL Model Law and that of New York Convention is also essential for solving the jurisdiction issues.

A cursory look at the some of the previous years’ Vis problems will establish that the jurisdiction of a tribunal has usually been challenged on the grounds of a vague and ambiguous arbitration clause. Another situation is may be when a party did not have in its mind something when it signed that dispute resolution clause (and you see, there comes party autonomy again i.e the parties did not mean the same thing in the same sense and one party claims not to have agreed to it ever). Or maybe the arbitrator doesn’t seem too good to another party, thus contesting the validity of the appointment of the arbitrator or raising the issue of bias. There can be numerous possibilities which revolve around the interpretation of the arbitration clause itself in a Vis moot. 

Other two very important principles that should definitely come into the picture and should be borne in mind are the doctrine of “seperability” and that of “Kompetence- Kompetence”. 

In brief, the doctrine of seperability establishes that an arbitration clause contained in a contract if a separate agreement and would operate and remain valid even if the contract has come to an end or does not remain valid due to any dispute. This doctrine is to primarily save the interest of the aggrieved party who would otherwise remain without any remedy in case the opposite party established that the contract did not remain in existence any more. This doctrine also implies that the arbitration clause may be governed (e.g., for the determination of its validity) by a system of laws that governs the main contract in which the clause is contained.

The doctrine of ‘Kompetence-Kompetence” or “Competence- Competence” says that an arbitral tribunal has the authority to decide whether it has jurisdiction to deal with the matter brought forth it and whether the dispute is covered  under the arbitration clause of the contract.

Note from Deepak: In the next post, the different legal systems that come into contact with an international arbitration will be discussed at some length.

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