The new UNCITRAL Arbitration Rules

On 15 August 2010, the updated version of the United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules came into foce. The new UNCITRAL Rules provide a more effective dispute resolution process in light of some pervasive issues that did not exist when the original rules were created in 1976.

Allens Arthur Robinson Special Counsel Nicola Nygh and Lawyer Dr Sam Luttrell report on the changes.

How does it affect you?

Under the UNCITRAL Rules 2010:

  • it is no longer be necessary to agree in writing that the UNCITRAL Rules will be the rules of the arbitration, and any record of an agreement to arbitrate in accordance with the UNCITRAL Arbitration Rules will be sufficient;
  • multi-party arbitrations will be more smoothly run;
  • the respondent must file a response as its first step in the arbitration, rather than just appoint an arbitrator;
  • it is harder for parties to frustrate and delay the constitution of a tribunal and easier to progress the arbitration on a 'low doc' basis;
  • arbitrators are under a continuing obligation to disclose any circumstances likely to give rise to justifiable doubts as to their impartiality or independence;
  • the tribunal has the power to grant a broader range of interim measures of protection; and
  • unless the parties agree otherwise, the Permanent Court of Arbitration at The Hague (PCA) has the power to review and make binding adjustments to the tribunal-costs component of the award.

The previous UNCITRAL Rules

The UNCITRAL Arbitration Rules 1976 were designed in the 1970s for use as a procedural template in ad hoc (ie. non-institutional) international arbitrations. The intention of the UNCITRAL Working Group on International Arbitration (the working group) that produced the first set of UNCITRAL Rules was to provide a neutral framework for the flexible and efficient resolution of disputes between parties from different jurisdictions.

The UNCITRAL Rules 1976 gained widespread acceptance as the procedural benchmark for ad hoc international arbitration, evidence of which can be found in their regular incorporation in the dispute resolution clauses of cross-border contracts and investment treaties.

Besides being used in an unknown number of ad hoc commercial arbitrations, the UNCITRAL Rules 1976 have been used by tribunals convened under the auspices of institutions such as the London Court of International Arbitration. They have also been adapted and used in the context of proceedings before 'hybrid' international tribunals, such as the Iran-United States Claims Tribunal and the International Centre for the Settlement of Investment Disputes. While the practice of these institutions contributed greatly to the jurisprudence of the UNCITRAL Rules, it also revealed areas in which the UNCITRAL Rules could be improved.

Changes in the 2010 version of the rules

In order to produce the new UNCITRAL Rules, the UNCITRAL working group worked in close cooperation with interested inter-governmental and non-governmental organizations over eight sessions, from September 2006 to February 2010. The new UNCITRAL Rules were pre-released on 12 July 2010.

The changes to the UNCITRAL Rules include:

  1. removal of the requirement that the arbitration agreement be 'in writing', reflecting the 2006 changes to the UNCITRAL Model Law on International Commercial Arbitration (Model Law) and rules for communication that bear the influence of the UNCITRAL Model Law on Electronic Commerce (see new UNCITRAL Rules, Article 1(1));
  2. rules that prevent arguments as to the sufficiency of the Notice of Arbitration (or Response) from hindering the constitution of the tribunal (Article 3; Article 4);
  3. rules that require the respondent to file a Response, rather than to simply appoint an arbitrator (Article 4);
  4. rules that improve the efficiency of the proceedings by allowing the parties to elect that the Notice of Arbitration or Response will constitute their Statement of Claim or Defence respectively (Article 20(1); Article 21(1));
  5. provisions that allow for the joinder of other parties to the arbitration agreement (Article 17(5)) and the inclusion of claims against these third parties in the Response to the Notice of Arbitration (Article 4(2)(f));
  6. more detailed rules for the exercise of default appointment functions by the appointing authority in multi-party disputes, including the power to reconstitute the tribunal in full (and revoke earlier appointments) where one party fails to appoint an arbitrator (Article 10(3));
  7. the imposition of a continuing duty of disclosure, under which arbitrators must disclose any circumstances likely to give rise to justifiable doubts as to their impartiality or independence as and when they arise during the proceedings (Article 11), and the provision of an optional model statement of independence (the terms of which reflect the practice of arbitrators at the International Chamber of Commerce);
  8. a provision conferring immunity on the arbitrators, any person appointed by the tribunal (such as an expert) and the appointing authority from claims based on any act or omission in connection with the arbitration, save for intentional wrongdoing (Article 16);
  9. a broad requirement that the tribunal conduct the proceedings in a manner that avoids unnecessary delay or expense and provides for a fair and efficient resolution of the dispute (Article 17(1));
  10. detailed rules for objections to, and the determination of, jurisdiction (Article 23);
  11. a significant expansion of the range of interim measures of protection that the tribunal can put in place, including measures necessary to prevent current or imminent harm to the interests of a party or prejudice to the arbitral process itself, Mareva orders and orders directed at preserving evidence, as well as a Model Law-influenced elucidation of the matters that must be proven by the party requesting the relevant interim measure (Article 26);
  12. basic principles of evidence that broadly reflect international custom and practice and the International Bar Association Rules on the Taking of Evidence in International Arbitration 2010 (Article 27);
  13. a rule that arbitral proceedings shall be conducted in private unless the parties agree otherwise, and rules empowering the tribunal to make orders for 'witnesses out of court' and direct that witnesses be heard and examined by videolink (Article 28);
  14. a relaxation of the rules of waiver, under which a failure to object to non-compliance with the arbitration rules will not be a waiver of the right to object where the party in question can show that its failure to object was justified in the circumstances (Article 32);
  15. rules for the determination of applicable substantive law that allow the arbitrators to apply the law that they determine to be appropriate, rather than strict conflict of laws rules, in the absence of an express choice by the parties (Article 35(1));
  16. rules for awards that require identification of the seat of the tribunal in the award and set out the circumstances in which the award may be made public (Article 34); and
  17. a system for the establishment of a costs regime for the proceedings and a mechanism for the review and adjustment of the tribunal's costs under an award by the appointing authority or the Secretary General of the PCA where the tribunal's determination of costs is either inconsistent with the agreed costs regime or is 'otherwise manifestly excessive' (Article 41).

Application and force

Article 1(2) of the new UNCITRAL Rules provides that the parties to an arbitration agreement concluded after 15 August 2010 shall be presumed to have referred to the Rules in effect on the date of commencement of the arbitration, unless the parties have agreed to apply a particular version of the Rules.

In effect, this article creates a rebuttable presumption in favour of the new UNCITRAL Rules. However, this presumption will not apply to arbitration agreements made before 15 August 2010, under which the 1976 version will apply (unless otherwise agreed), and even after this date it will still be open to parties to stipulate that the 'UNCITRAL Arbitration Rules 1976' will be the rules of their arbitration.

Significantly, consistent with party autonomy, Article 1(1) of the new UNCITRAL Rules allows the parties to modify the new UNCITRAL Rules in any way they see fit.

Comments

The text of the new UNCITRAL Rules reflects a range of recent developments in the law and practice of international arbitration. The modern prevalence of arbitration as a method of resolving international disputes, both in contractual and non-contractual settings, has generated a number of rules and customs that were either absent or in their early stages of development when the 1976 UNCITRAL Rules were drafted.

Many of these contemporary rules and practices are accounted for in the new UNCITRAL Rules, as are some of the pervasive problems of modern international arbitration. Under the new UNCITRAL Rules, many of the difficulties that have been experienced in complex, multi-party proceedings will be alleviated. There is also less scope for the abuse of the arbitration process, with arbitrators having the necessary discretion in key areas to ensure that the proceedings are conducted efficiently, fairly and in the most cost-effective way possible.

The rules also balance the interests of both the users and the operators of international arbitration, with certain provisions increasing the accountability of arbitrators (such as in the areas of costs), and other provisions conferring immunity on the members of the tribunal.

In the broader scheme of things, the new UNCITRAL Rules ensure the continued 'renaissance' of the PCA, and the harmonisation of the jurisprudence of appointment, challenge and costs in international arbitration. It will be interesting to see whether the changes which have been made in the UNCITRAL Rules are adopted in other arbitration rules.