Places to arbitrate

How do you know that you have an international commercial dispute on your hands?

To recap, both domestic and international arbitrations begin with an arbitration agreement. People or companies doing business with each other agree to refer disputes to arbitration and not to the courts.

However, if one or more of the following factors applies to your arbitration agreement, then under the UNCITRAL Model Law on International Commercial Arbitration, any disputes that your arbitration agreement applies to, must be referred to international commercial arbitration. They are:

1. Parties are in different countries

• When you and the other organisation or company entered into the arbitration agreement, you each had places of business in different countries; or

2. Arbitration agreement specifies another country

• When the place of arbitration agreed in the arbitration agreement is situated outside the country in which you and the other organisation or company have your places of business; or

3. Performance of obligations in another country

• When the place where a substantial part of the contractual obligations of the commercial relationship is to be performed, is situated outside the country in which you and the other organisation or company have your places of business; or the place with which the subject matter of the dispute is most closely connected, is situated outside the country in which you and the other organisation or company have your places of business; or

4. Multiple countries

• When you and the other organisation or business have expressly agreed that the subject matter of the arbitration agreement relates to more than one country.

You must choose a country for the arbitration of your dispute

If you have an international commercial dispute (which international law requires you to refer to international arbitration), then you must choose a country for the arbitration of your dispute

Unless the arbitration agreement specifies that the arbitration will take place in a named place, in a named country (that is, “the place of the arbitration” or “the seat of the arbitration”), then if a dispute arises the parties need to agree where their international arbitration will take place. Alternatively, the appointed arbitral tribunal will decide where the international arbitration will take place.

For reasons that follow, you will want to take as much control as you can in respect to the selection of the country for the arbitration of your international commercial disputes.

Factors to consider when deciding which country will be the place for your international commercial arbitration

As to be expected, choosing a country to arbitrate your international commercial dispute is not a simple exercise. We are about to show you why it is not a simple exercise in the following.

However, we are able to talk you through and advise you on all aspects of choosing a particular country to arbitrate your international commercial dispute.

Lex Arbitri

Countries sometimes have their own specific statutes or legislation, which deal with international commercial arbitration. These statutes are referred to as the lex arbitri or the “law of the place of the arbitration” or the “law of the seat of the arbitration".

These statutes limit the power of the local courts to intervene in your international commercial arbitrations. Typically, these statutes will support both the arbitral process and the enforcement process. However, these statutes vary greatly in detail between countries.

Therefore, it is essential that you are aware of any restrictions, opt-in clauses, opt-out clauses, advantages and disadvantages contained in the lex arbitri of any country you are considering as the place for the arbitration of your international commercial dispute. Furthermore, there will be occasions when the procedurals rules of the arbitration will conflict with the lex arbitri.

We can talk you through these issues and advise you.

UNCITRAL Model Law on International Commercial Arbitration

Some countries adopt in full, or in part, the UNICITRAL Model Law on International Commercial Arbitration (the “Model Law”) as a component of its lex arbitri. Again, it is essential that you are aware of any restrictions, opt-in clauses, opt-out clauses, advantages and disadvantages contained in the adoption of the Model Law in any country you are considering as the place for the arbitration of your international dispute.

We can advise you on how the Model Law may apply to you.

United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards

The United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (or the “New York Convention”) requires that convention states or countries (countries that have ratified the New York Convention) recognise and enforce arbitral awards made in another convention country.

One hundred and forty five countries have now ratified the New York Convention. This means, for example, that if your arbitration took place in Kyrgyzstan, then you could enforce that Kyrgyzstan award in courts as far-and-wide as Nicaragua, Holy See and Liberia (if your opponent had money or assets stashed there).

However, some convention countries have not ratified the New York Convention in its entirety. These countries make “reservations”. Some countries go further. For example, in India a foreign award will only be enforced under the New York Convention if the Central Government of India has notified the convention country (where the award was given) as a “reciprocating territory”. This “notification” is made separately in the Gazette of India. Of the 145 contracting countries, the Central Government of India has notified only 46 countries as reciprocating territories.

This means that if the country in which the arbitration of your international commercial dispute took place is not on the list of the 46 reciprocating territories, then you will be unable to enforce your award in the Indian courts under the New York Convention.

We can advise you on reservations to the New York Convention.

Uniqueness

All countries have unique ways of dealing with legal issues and international arbitration is no exception. Examples are as follows.

Interest

• Islamic countries subject to Sha'ria Law typically do not recognise a right to interest and often regard an obligation to pay interest as usury. This means that if you want to claim interest then you should reconsider obtaining an arbitral award that orders the payment of interest in an Islamic country that is subject to Shar'ria Law. This is because the award may not be enforceable in that country.

Costs

• Some countries will not enforce an arbitral award that orders one party to pay the costs of another. The Philippines is such a country, as demonstrated in the Philippines judgment of Luzon Hydro Corp. v. Hon Rommel O Baybay, etc. v. Transfield Philippines Inc CA-GR Sp No. 94318 (29 November 2006)

Reasons

• In some countries, the prevailing lex arbitri does not require the arbitral tribunal to give reasons for their decisions in their award. Mongolia is such a country. An absence of reasons in the award can make enforcement of the award very difficult.

We can advise you, because we know all of this.

Convenience and costs

• You may agree to arbitrate your international commercial dispute in a particular country, because it is convenient to do so. For example, a wholesaler in Australia may engage a manufacturer in China to produce goods for sale in Australia. The parties may choose Singapore as the place of arbitration because it is geographically half-way between the parties. Therefore, Singapore is geographically convenient.
• Other factors include travel and accommodation costs of witnesses, location of critical evidence, need to visit relevant sites overseas, etc.

We can talk you through all of these factors.

Where to from here?

We can help you whether you are domiciled in, are registered in, incorporated in, have an international commercial dispute in or engage in international commercial activities in any country in the World.

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