International Conventions for ADR

Introduction:

After the great economic crisis of 1929 and the Second World War which disrupted the world, some large-economy countries like the US, Britain, and others took care of the reorganization of the post-war world. They took to International trading to rebuild their economy and promoting the free flow of goods, services, and technology throughout the world without any restrictions. This steered to various multilateral agreements signed among different countries of the word. This further lead to the formation of various new organizations such as the UN, World Bank, IMF, etc. to promote International Trade. The growth of international trade was bound to give rise to international disputes beyond the geographical limitations. In settling those commercial disputes in international business ADR regime was required to solve cross border commercial disputes.

The biggest progress in the direction of International ADR is the adoption of the UNCITRAL (United Nations Commission on International Trade Law) model in international arbitration. The remarkable feature of this model is that it has uniformly regularized the concept of arbitration and conciliation to implement it for global application. United Nations has suggested its member nations to implement this model in their domestic legislation to have uniform laws for ADR globally. In this direction various International conventions and treaties have been formed to establish and promote ADR mechanisms worldwide such as The Geneva Protocol on Arbitration Clauses of 1923; The Geneva Convention on the execution of the foreign award, 1927; The New York Convention of 1958 on the recognition and enforcement of foreign arbitral award. This paper aims to discuss these treaties and mechanisms in detail.

1. 1923 Geneva Protocol on Arbitration Clauses[1]

In this protocol, it was recognized by the contracting parties that if any differences may arise in between them for any contract relating to the commercial matter, then they’ll agree to submit those differences to arbitration, or if any other matter that may be resolved by arbitration, they agree to submit to that irrespective of that arbitration takes place in the origin countries of the contracting parties.

Under this protocol, disputes that may be settled through arbitration were restricted to only commercial disputes under their respective domestic laws. The procedure of arbitration through this protocol was to be decided by the will of parties and by the respective domestic legislation of the place where arbitration was to take place. The execution of the arbitration was to take place through the respective national legislation of the contracting parties and their respective national authorities. This protocol could be denounced by the contracting party or state on giving a notice of one year. Such criticism was effected after the date on which the secretary general of the league of nations was notified of it and was in operation from that date after the notification. On behalf of any territory of contracting parties, they could also denounce after the notification to the secretary-general.

2. 1927 Geneva Convention on the Execution of Foreign Arbitral Awards[2]

 In this convention, it was laid down that the enforcement of award could be refused by the contracting parties even if the conditions which were formulated in the article were fulfilled subject to whether the conditions laid down in Article 2 are fulfilled or not.

Some grounds were provided on which the award could be annulled. These are mentioned as follows:

• It is annulled in the country in which that award was made.
• The party against whom the contracting party sought to use award was not provided with sufficient time to present his case or was not properly represented because of any legal incapacity.
• If the difference between the contracting parties decided in such arbitration was beyond the scope of terms of submission to arbitration.

If all the questions which were submitted to the arbitral tribunal were not covered by the award, if the competent authority where that award’s enforcement was sought, deemed fit, it could have postponed such enforcement or may also grant such award subject to such guarantee that competent authority deemed fit. The party that relied upon that award or which was claiming the enforcement of that award was to supply the original award or its duly authorized copy to prove that award was final.

NOTE: This protocol was only applied to any award that was given after the enforcement of the 1923 Geneva Protocol on Arbitration Clauses. It did not apply to colonies or mandate of any high contracting party or territories under suzerainty unless any of those was mentioned in the protocol.

3. 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention)

This Convention provided for the uniform legislative standards for recognition of arbitral awards and agreements or recognition of courts which are treated as ‘foreign’ under legislation due to some “foreign element” in its proceedings. This is known as the Convention on the recognition and enforcement of foreign arbitral awards and commonly known as the New York Convention. This convention was made for the recognition of the rising importance of international arbitration as a method of settling disputes.

The objective behind this convention was the prevention of discrimination between the foreign arbitral award and domestic arbitral awards. It compels contracting parties to recognize and enforce foreign and non-domestic awards in the same way as any domestic award is capable of in the national legislations of the contracting parties. A secondary aim of the Convention is to require courts of parties to give full effect to arbitration agreements by requiring courts to deny the parties access to court in violation of their agreement to refer the matter to an arbitral tribunal.[3] This convention relates to the enforcement and recognition of foreign awards i.e. their field of application.

There is an obligation on the contracting party to recognize an arbitration agreement in written form. The term “agreement in writing” is defined as “an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams”.[4]

However, any foreign arbitral award may be refused subject to certain grounds provided in the convention. These grounds[5] may be pointed out as:

• Lack of valid arbitration agreement
• Violation of due process.
• Excess of the arbitral tribunal’s authority.
• Irregularity in the composition of the arbitral tribunal or arbitral procedure.
• The award “has not yet become binding”, “has been set aside”, or “has been suspended”.

An important provision in the said convention is that validity of any other treaties in the field of arbitration is not affected by the New York Convention. This provision is known as compatibility provision. Another provision in the New York Convention provides that the party is at freedom to base the request of enforcement for arbitral awards on any other treaty or domestic legislation for the enforcement of arbitral awards in place of the New York Convention. This provision is known as a more-favorable right provision.

4. 1961 European Convention on International Commercial Arbitration (Geneva Convention)[6]

This convention applied to agreements to settle disputes arise out of any trade relationship between the two or more physical or legal persons when such agreement is concluded at their habitual place of residence or they are seated in different contracting states[7].

Foreign nationals have been given the privilege to be appointed an arbitrator. This convention is concerned with making the process of arbitration organized and uniform. However, the decision of the arbitrator on issues such as delay in raising plea is subjected to judicial control.

This convention also deals with the jurisdictions of the domestic courts of law. While taking the decisions that concern the validity or existence of agreement of arbitration, these domestic courts of respective contracting parties examine the validity based on the contracting capacity of parties, under the laws which apply to them. The recognition of the arbitration agreement may also be refused if the dispute is incapable of settlement through arbitration under the domestic law of their country. It is upon parties to decide which law is applied by an arbitrator on the substance of the dispute. The parties decide whether arbitrator act as amiable compositeurs based on the law which applies to arbitration. Certain grounds for the refusal or setting aside of arbitral awards are provided in this convention and some articles deal with final clauses.

5. 1965 Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (Washington or ICSID Convention)[8]

This is the convention that deals with the dispute settlement between states and nationals of other states. It was signed in Washington on March 18, 1965. This convention led to the establishment of the International Centre for Settlement of Investment Disputes (ICSID) under the aegis of the World Bank group. The objective of ICSID was the settlement of disputes arising between foreign investors and contracting parties through arbitration and conciliation.

The jurisdiction of the centre is based on the agreement between the parties to resolve any current dispute or any dispute that may arise in the future according to the ICSID rules. A clause is inserted in the contract between the investors and contracting parties for dispute settlement in this way. No party can unilaterally withdraw from submitting their dispute to the jurisdiction of ICSID. The subject of such dispute must be related to investment and it must be formed between a contracting state and a national of other states. Various bilateral treaties chose to go to ICSID arbitration for dispute settlement. It provides the mechanism of both the arbitration procedure as well as conciliation.

ICSID consists of an Administrative council, a secretariat, and also maintains a panel of conciliators and panel of arbitrators. The chairman of the International Bank of Reconstruction and Development (IBRD) is the ex-officio chairman of ICSID. The Administrative Council is composed of representatives of each contracting state. Where the principal representative of the contracting state is absent, each governor and alternate governor of the Bank appointed by the contracting state is ex-officio representative in the administrative council.

The power of administrative regulations and financial regulations in ICSID has been vested in the administrative council. It has the power to make rules of procedure for arbitration and conciliation proceedings; make arrangements for using the facilities of the bank and its services. It has the power to determine the service conditions of the Secretary-General and Deputy Secretary-General. Most of the powers and functions are adopted by a simple majority of half the votes of the council while some are adopted by a special majority of two-third members.

The Principal Officer and legal representative of the ICSID is Secretary. He is responsible for the administration of the center and appointment of staff. He performs the function of the registrar and has the power to authenticate arbitral awards rendered through this convention.

The panel of conciliators and panel of arbitrators consisting of qualified persons. They are designated by each contracting party to the maximum of four and each of them should not be its nationals. Ten persons may be designated by the chairman to each panel. Every person designated in a panel must have a different nationality. They should be of high moral turpitude and competence in the field of law, commerce, industry, or finance.

6. 1985 UNCITRAL Model Law on International Commercial Arbitration[9]

UNCITRAL model laws provide a pattern that may be adopted by the lawmakers of any state on arbitration in their respective domestic legislation. It was adopted by the United Nations Commission on International Trade Law on June 21, 1985. This is not binding, but may only be adopted in domestic legislation with the discretion of the state.

Under this law, court or other authorities are under obligation to perform certain functions such as arbitration assistance and supervision. It defines an arbitration agreement and specifies the forms of it. The number of arbitrators is also specified under this law and parties are at liberty to determine the number but in practice, they are three in number.

The provisions for the appointment of arbitrators and substitute arbitrators are specified and also several grounds are mentioned to challenge his appointment:

1. An arbitrator is bound to disclose any circumstance to the parties which is likely to give rise to justifiable doubts about his impartiality or independence unless they have been informed of by him.
2. He can only be challenged in a circumstance that may give rise to justifiable as to his impartiality or independence or his qualification does not agree with the post of an arbitrator.

The law also deals with the competence of arbitral tribunal to rule in the area of its jurisdiction. The tribunal is also empowered to pass interim measures. The rules regarding the procedure of arbitration and place of arbitration are also specified under this law. Also, the language to be used in arbitral proceedings is agreed upon by the parties.

The law also provides an expert which is appointed by the tribunal which provides for rules which apply to substance dispute.

1. The disputes shall be decided by the tribunal according to the rule of law, up to the limit they are chosen by the parties.
2. When parties fail to make a designation the law determined by the conflict of law rules would be applied by a tribunal which is considered applicable by him.
3. The disputes will be decided as per the terms of contract and usage of trade applicable to them.

It also provides the procedures and provisions regarding the challenge of the award. If any error is there in the award then the request by the party must be sent to the arbitral tribunal within thirty days. If any error is sought in the award and court is justified about it the additional award will be granted within 60 days. It also provides for the mechanism in which recourse to the court may be made for setting aside an award or for setting aside certain matters only by an application. The enforcement or recognition of award may also be refused on certain grounds.

7. 2010 – UNCITRAL Arbitration Rules (as revised in 2010)[10]

The UNCITRAL arbitration rules are widely used in the administered arbitration as well as ad hoc arbitration. They provide a comprehensive set of procedural rules upon which parties may settle for the conduct of proceedings for arbitration. All the aspects of arbitral processes are covered under these rules. They provide model clauses of arbitration along with laying down procedural rules in relation to the appointment of arbitrators, the conduct of proceedings of arbitration and forms, effect and interpretation of the award.

The Original Rules of UNCITRAL arbitration were accepted in 1976 and they are still useful in settlement of varied range of disputes, including such disputes between private commercial parties where any arbitral institution is not involved, disputes between investors and states, state to state disputes and commercial disputes which are administered by arbitral institutions. But over the last 30 years, there have been changes in arbitral practice and there emerged a need to revise rules by the commission to enhance the efficiency of arbitration under rules.

Being in effect since August 15, 2010, the rules provide provisions for multi-party arbitration and joinder, liability, and another provision that provides objection to experts appointed by the arbitral tribunal. The revised rules provided such other innovative features such as new procedures to replace arbitrator, provision of the reasonableness of costs, and review mechanism regarding the costs of arbitration. The goal of such revision was a contribution to the development of international economic relations.

Conclusion

The growth of international trade was bound to give rise to international disputes beyond the geographical limitations. In settling those commercial disputes in international business, the ADR regime was required to solve cross border commercial disputes. For this multiple treaties and conventions were required. Out of multiple treaties and conventions mentioned above the biggest progress in the direction of International ADR was the adoption of the UNCITRAL model in international arbitration. The remarkable feature of this model is that it has uniformly regularized the concept of arbitration and conciliation to implement it for global application. United Nations has suggested its member nations to implement this model in their domestic legislation to have uniform laws for ADR globally.

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References:

[1] 1923 Geneva Protocol viewed at www.arbitration_icca.org. 

[2] 1927 Geneva Convention viewed at www.arbitrationlaw.com.

[3] New York Convention viewed at www.uncitral.org. 

[4] Ibid.

[5] Ibid.

[6]  Geneva Convention viewed at www.uncitral.org / www.jus.uio.no.

[7] Supra.

[8] Washington Convention viewed at www.uncitral.com.

[9] 1985 UNCITRAL Model Law, available at: www.uncitral.org/www.international-arbitrator.net.

[10] UNCITRAL viewed at www.uncitral.org.