UNCITRAL, Arbitration

This question requires us to evaluate the English law compare to UNCITRAL in regard to the commencement of arbitration and the time constraints placed on the party's during the arbitration. We must discuss if the English law really departs from the rule that parties who submit their international commercial dispute to arbitration are autonomous.
The main part of the UNICITRAL model that concerns us is that of International Commercial Arbitration (Part IV). International businesses have reason to be concerned about the ability of many national courts to deal competently and fairly with the special rules and practices of international trade. International trade often lacks comparable institutions to implement international law and practice, but with a common set of provisions the parties can create tribunals with an international outlook to submit their disputes to arbitration.

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What structural arrangements are needed to organize such ad hoc tribunals? What procedures will promote speed and fairness and will enhance international recognition and enforcement of the award? These are the basic functions of the UNCITRAL Arbitration Rules, unanimously adopted in 1976 by the Commission,1 and promptly recommended for use by the U.N. General Assembly. Since such rules are put into force by the agreement of the parties, there was no need to submit the rules to a diplomatic conference and await the process of ratification. The main provision in English Law on arbitration is The Arbitration Act 1996, and this itself was based on the provisions of UNCITRAL. It came into force in 1997.
The Arbitration Act under section 12(1) provides that where an arbitration agreement to refer future disputes to arbitration provides that a claim shall be barred, or the claimant's right extinguished, unless the claimant takes within a time fixed by the agreement some step- (a) to begin arbitral proceedings, or (b) to begin other dispute resolution procedures which must be exhausted before arbitral proceedings can be begun, the court may, by order, extend the time for taking that step. Furthermore any party to the arbitration agreement may apply for such an order of its own motion.2 The court shall make an order only if satisfied- (a) that the circumstances are such as were outside the reasonable contemplation of the parties when they agreed the provision in question, and that it would be just to extend the time, or (b) that the conduct of one party makes it unjust to hold the other party to the strict terms of the provision in question. Indeed the court has a wide discretion as it may extend the time for such period and on such terms as it thinks fit, and may do so whether or not the time previously fixed (by agreement or by a previous order) has expired.3

No such provisions occur under the UNCITRAL model. Indeed the courts under English law can extend the rights of the party under the agreement, and this can undoubtedly provide for flexibility in the law and a greater chance of coming to what would seem like a fairer decision to the lay man. However the trade off is a lack of certainty in the law. Under UNCITRAL should the parties decide to adopt the rules then they will be certain that the time limits to action will apply to both parties, however under the English Arbitration Act 1996 the parties can never be certain that any such clause will hold up to the speculation of the court, as circumstances that did not come into the parties contemplation may occur, or unjust behaviour may be deemed to have occurred. This seems something of an anomaly as by their very nature the rules under the Arbitration Act are meant to provide certainty in the case of a dispute. It can therefore be argued with conviction that the parties have to sacrifice autonomy under The English law in the name of power given to the courts to give effect to flexibility and discretion.
However, in argument against this contention it seems that the Courts have not taken the discretion to extend time to be something that is either readily or frequently applied. Section 12 was sought to be relied upon is the case of Markos N.4 Here a consignment of steel coils was shipped from Russia to the USA on CFR Philadelphia terms. Payment terms were by letter of credit providing for payment against the usual documents including freight pre-paid bills of lading. The contract provided that charterparty bills of lading were acceptable. The importers then asked for a copy of the relevant charterparty. However, having been told by the sellers that they were not allowed by the owners to disclose this to any third party "except lawyer or arbitrator", the request was not pursued.
The cargo was discharged, during the course of which it became apparent that it had sustained damage. Proceedings were commenced against the owners of the carrying vessel (S) in Texas by the importers (I) on 5 March 1997 (and subsequently transferred to New York). On 20 February 1998 S prepared a pleading including an argument to the effect that the action should be dismissed for reasons of forum non conveniens. It subsequently became apparent that the sub-charter of the vessel to the sellers was on the Gencon form, incorporating an English law and jurisdiction clause. On 15 January 1999 S applied for a stay of the American proceedings - and judgment in their favour was given on 12 August 1999. Shortly thereafter I commenced arbitration proceedings in London and, on 20 January 2000, issued an application seeking either a declaration that the proceedings were not time-barred or an extension of time to commence the arbitration proceedings pursuant to s.12 of the Arbitration Act 1996.
Could the claimants nevertheless rely on s.12 (3) of the Arbitration Act 1996 to extend the time for the commencement of the proceedings. The judge pointed out that it was well accepted, indeed beyond doubt, that this provision was introduced with a view to restricting the circumstances in which time might be extended (as compared with the previous 1950 Act). So far as ground (b) under section 12 (see above) is concerned, he regarded it as settled law that the claimants must attribute their failure to comply with the time bar to the conduct of the other party. He could detect no such causative conduct in this case. Rather, the defendants in the American proceedings were as ignorant of the existence of the arbitration clause as the claimants and it was only fortuitous that, after the expiry of the one-year time bar, they ascertained the same.
The judge considered that the court could not interfere with a contractual bargain unless the circumstances were such that, if they had been drawn to the attention of the parties when they agreed the provision, the parties would at the very least have contemplated that the time bar might not apply. The relevant time for making this assessment was the time when the receivers became parties to the bill of lading, i.e. upon endorsement. The judge concluded that, viewed from that stage, the claimants were unable to establish that it was not reasonably practicable for them to obtain a copy of the charterparty in question before the expiry of the time limit. In any event, he did not consider that it would be just to extend time. The American proceedings had been prosecuted in a desultory manner. Had they been pursued more assertively it was likely that the arbitration clause would have been discovered in time. Moreover, even after the American action had been stayed and the defendants took the time point in the English arbitration, the claimants had not issued their application with sufficient despatch.
What is the commencement date of proceedings? Under the UNCITRAL Model Law on arbitration Article 21 - unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent.5 Under the English Law the Arbitration Act 1996 section 14 (1) the parties are free to agree when arbitral proceedings are to be regarded as commenced for the purposes of this Part and for the purposes of the Limitation Acts. However it goes beyond UNCITRAL by providing that, in section (2) if there is no such agreement the following provisions apply - 14(3) Where the arbitrator is named or designated in the arbitration agreement, arbitral proceedings are commenced in respect of a matter when one party serves on the other party or parties a notice in writing requiring him or them to submit that matter to the person so named or designated. (4) Where the arbitrator or arbitrators are to be appointed by the parties, arbitral proceedings are commenced in respect of a matter when one party serves on the other party or parties notice in writing requiring him or them to appoint an arbitrator or to agree to the appointment of an arbitrator in respect of that matter. (5) Where the arbitrator or arbitrators are to be appointed by a person other than a party to the proceedings, arbitral proceedings are commenced in respect of a matter when one party gives notice in writing to that person requesting him to make the appointment in respect of that matter. The autonomy of the parties could be argued to be compromised under both provisions, but English Law provides certainty as regards various situations. The autonomy of the parties in not effected in varying degrees here, and thus this would go against the proposition on autonomy being reduced by English Law as arguably in this case UNCINTRAL effects their autonomy equally as much.
How do the provisions on limitation compare? The Convention on the Limitation Period in the International Sales of Goods 1989 contains the main provisions of UNCITRAL as regards limitation. The Limitation Convention grew out of the work of the United Nations Commission on International Trade Law (UNCITRAL) towards the harmonization and unification of international sales law. This grew out of necessity, as while most legal systems limited or prescribed a claim from being asserted after the lapse of a specified period of time, numerous disparities existed among legal systems with respect to the conceptual basis for doing so. As a result there were disparities in the length of the period and in the rules governing the limitation or prescription of claims after that period. Those disparities created difficulties in the enforcement of claims arising from international sales transactions, and thus burdened international trade.
UNCITRAL decided to prepare uniform international legal rules on the limitation period in the international sale of goods. Article 8 provides that the limitation period shall be four years. Article 9 states that Subject to the provisions of articles 10, 11 and 12 the limitation period shall commence on the date of which the claim accrues. The commencement of the limitation period shall not be postponed by either (a) a requirement that the party be given a notice as described in paragraph 2 of article 1, or (b) a provision in an arbitration agreement that no right shall arise until an arbitration award has been made. Under Article 13 the limitation period shall cease to run when the creditor performs any act which, under the law of the court where the proceedings are instituted, is recognized as commencing judicial proceedings against the debtor or as asserting his claim in such proceedings already instituted against the debtor, for the purpose of obtaining satisfaction or recognition of his claim. This maintains a degree of certainty by setting out principles that are not to be derogated from.
In contrast under the Arbitration Act 1996 the Court has discretion in how limitation is calculated - Section 13(2) the court may order that in computing the time prescribed by the Limitation Acts for the commencement of proceedings (including arbitral proceedings) in respect of a dispute which was the subject matter- (a) of an award which the court orders to be set aside or declares to be of no effect, or (b) of the affected part of an award which the court orders to be set aside in part, or declares to be in part of no effect, the period between the commencement of the arbitration and the date of the order referred to in paragraph (a) or (b) shall be excluded. Again whilst the English Law can be said to provide flexibility depending on the merits of the case, there is no doubt that parties under the UNCITRAL rules will be, more certain as to when exactly limitation will occur.
In conclusion a limited degree of autonomy of the parties is sacrificed under the English Law, whilst admittedly sacrificing certainty, always a great hindrance in arbitration agreements, this provides greater flexibility, and depending on the application of the extensions to UNCITRAL of the Arbitration Act 1996 this may lead to fairer decisions. However it is a matter of great contention whether in arbitration agreements fairness should ever be sacrificed for legal certainty. Due to the inherent nature of an arbitration agreement I would err to answering that question in the negative.

  1. UNCITRAL, Report on Ninth Session (1976) paras. 46-57, VII Yearbook 20-27. The process of preparing the rules is described in Mr. John Dietz's Introduction to Part IV of the Symposium. The Rules are set forth at IV-E.[^ Return]
  2. Section 12(2)[^ Return]
  3. Section 12(4)[^ Return]
  4. Thyssen Inc v. Calypso Shipping Corporation SA - The Markos N - 2000 LLR 2 at Page 243 [^ Return]
  5. UNCITRAL Model Law on International Commercial Arbitration (1985) (as adopted by the United Nations Commission on International Trade Law on 21 June 1985) CHAPTER V - CONDUCT OF ARBITRAL PROCEEDINGS[^ Return]

BIBLIOGRAPHY

The Arbitration Act 1996: A Commentary -- Bruce, etc. Harris Blackwell Science

The Arbitration Act 1996: an Annotated Guide (The Essential Law Series) -- R.M. Merkin LLP Professional Publishing

Dispute Process. ADR and the Primary Forms of decision making by Michael Palmer and Simon Roberts. (1998) Butterworths.

International Commercial Arbitration: Scotland and the UNCITRAL Model Law (Greens Practice Library) -- Fraser P Davidson W.Green & Son

UNCITRAL's Model Law on International Commercial Arbitration: Interim Meeting - Lausanne 1984 (ICCA Congress Series) -- Albert Jan van den Berg (Editor) Kluwer Law International

Theory and Practice of Multiparty Commercial Arbitration: With Special Reference to the UNCITRAL Framework -- Isaak I. Dore Kluwer Academic Publishers

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