Party Autonomy in UNCITRAL Model Law

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uncitral model law
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Aaqib Mushtaq LLM Scholar (Corporate Law) at Lovely Professional University.

Abstract

UNCITRAL model is a model that was developed in order to sort out the disputes between the two parties. These parties can be of national or international nature. It is because of the inherent nature of the parties that this model law was developed so that a new law is brought into working transcending the national boundaries. The parties usually don’t accept the respective national laws because they don’t trust them, which is a natural thing. Thus, the UNCITRAL came as a bridge to govern the two distinct parties with common law. A beautiful aspect of this law and why it evolved into so much of acclaim within a short span of time is because of the presence of the “Party Autonomy” concept in it. This thing gives the parties right to choose everything from the laws, the arbitrators and thus the desired outcomes; the awards. This paper tries to look into the aspect of Party Autonomy from the view point of different sections of the UNCITRAL model and its correlation with the Indian Arbitration and Conciliation Act, 1996.

Introduction

Arbitration though thought of as a new concept and a recent development, certainly is not so. The Arabs were the people who used this mechanism of dispute resolution. The world of Arab is replete with examples where we find the mention of dispute resolution by way of Arbitration.[1]

Then why we don’t relate the Arbitration with them is because of the Renaissance or we can say the down fall of the Ottoman Empire and the evolution of the different regimes, the literature or their contributions have been blended. It is not only with them; even history is replete with examples like that of Mongols who after a lot of destruction wrote the history a new. To be simple and lucid Humans always try to implant new things and want to write the history as per their convenience.

This present form of the development of the rules or models of Arbitration grew with the growth and development of trade. Industrialisation brought with it the boom of trade, the import and export of goods and services moved across the edges and corners of the world.

However, it is in the nature of humans that they won’t remain calm until they fight. The inherent nature of humans is unstable and they usually fight on pity things, so as to set the tones as per their described strategies. The same happened with this golden age of the economic boom. The trade involved some inbuilt issues among men and they didn’t want them to be settled in the normal court as it involved a lot of time. The new way of dispute resolution was also sought after because the trade was of international nature and the parties were or belonged to different nations or origins.

The UNICTRAL Model law on the international commercial arbitration was prepared by the UNICTRAL and was adopted by the United Nations Commission on International Trade law on 21 June, 1985.

This model Law contains 8 chapters, 36 Articles and is meant to be adopted by different Nations into their domestic laws or simple to develop their domestic laws of arbitration based on this model law.

The UNCITRAL model is altogether a novelty and unique in its approach. However, it contains some notable features and one among them is the provision of “party autonomy”. It is this aspect which separates Dispute resolution mechanism by way of Arbitration from the dispute resolution mechanism of the Courts.

In order to gain a know-how of as to what this Party Autonomy is and as to what exactly is its place and role in the process of Arbitration, it would be apt to do certain categorisations of the UNCITRAL model with the central focal point being the Party Autonomy.

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Arbitration Agreement

The first and foremost thing from which the thrust upon the autonomy of the parties comes into play is the Arbitration Agreement itself. Article 7 lays down that the parties after entering into this document of Arbitration Agreement clearly relegate the scope of the normal courts from plying into the dispute resolution. The second important thing is that the parties remain free or it can be said that the Article is so much liberal that even if the parties to an agreement are not able in the first instance to write up the Agreement or come to the common terms, they can do it later on by making a mention of a separate clause as according to which the Dispute resolution would be done.

This thing of framing a document as the type of Arbitration Agreement even ensure that when the parties by themselves frame the rule of dispute resolution, it certainly ensures that it will cater to their needs effectively. The next important thing about this is that the making of the document by the parties excludes the Judges from fiddling with the matters that are supposed to be resolved by way of arbitration. To put it simply, it ensures that even if one of the parties goes and files the law suit against the other, the other party remains handy with the option of challenging the suit and even court would refrain from entertaining such a law suit. Thus, those matters that are put in the Arbitration Agreement are supposed to be decided by the Arbitrator will remain so and out of the jurisdiction of the court, unless and until the parties themselves waive off such the Arbitration Agreement.

This placement of the Arbitration Agreement can be viewed through another prism that by of way of this Agreement the Parties play an important role of setting the contours of the Jurisdiction of dispute resolution altogether in their hands. The Tribunal or the Arbitrator cannot arbitrate outside the limits. Moreover, this thing shapes the procedure from becoming bogus and ultimately stops it from derailing from the path set and the goal to be established.

Choice of law clause and party autonomy

The choice of law clause also comes into play when we talk of the Party autonomy. Here the parties remain free when we talk of the decision they are going to make regarding the laws that would govern ultimately them during the course of the Arbitration. This feature of the Arbitration is totally different from the method that is being used in the court practice, when there is any sort of dispute between the parties. The parties are never free and are every time made subject to the procedure and practices of the Laws of the land. They cannot telltale the Courts as to how to govern the matter and finally as how to adjudicate the dispute. Therefore, whatever the Court decides has and is the final call upon the Parties; adverse for one and favourable for other.[2]

However, this is not the case with the Arbitration. Here the parties are free or it can be said they are autonomous as to the decision of choosing the laws of dispute resolution. This can be done in the initial stages when the Arbitration Agreement is framed or can be made at any later stage when the actual dispute arises.

The United States Supreme Court stated in Scherk v. Alberto-Culver Co.[3] held that the party autonomy is ‘an almost indispensable precondition to achievement of the orderliness and predictability essential to any business transaction.

Nearly all international arbitration laws, rules, and conventions recognize the principle of party autonomy. Thus, arbitration agreement between parties today must include arbitration clauses with an explicit choice of law, and, in keeping with the principle of party autonomy, the parties’ choice of law is “invariably” applied by arbitrators. The concept is the high point of the provisions of the Nigeria Arbitration and Conciliation Act, 2004[4], the New York Convention, UNCITRAL Model Law, the English Arbitration Act, 1996, Indian Arbitration and Conciliation Act, 1996, Ghana Arbitration and Conciliation Act, 2010[5] and the International Chamber of Commerce (ICC) Arbitration Rules, 2012[6] just to mention a few.

Moreover, this mention of the Choice of law clause is made in the Article 28 of the UNCITRAL model and, it states, “The Arbitral tribunal shall decide the dispute in accordance with such rules of law as are chosen by the parties as applicable to the substance of the dispute. Any designation of the law or legal system of a given state shall be construed, unless otherwise expressed, as directly referring to the substantive law of that state and not to its conflict of law rules.” The notable things of the Article 28 are its rest provision as they are complementary to the Party Autonomy. The first is that in case the Parties fail to decide any law; the role of the Tribunal comes into play but the Tribunal shall apply those laws that are determined by the conflict of laws rules. The second one is that the Tribunal would apply the principles of ex aequo et bono or amiable compositeur only if the parties have expressly authorised the tribunal to do so. The sum total of this thing is that the Tribunal always remains under the parties while arbitrating the Case which thus upheld the Party Autonomy.

The same practice is to be expected from International Tribunals. The ICISD (International Centre for Settlement of Investment Disputes) even makes the mention of the thing that, “the Tribunal shall decide a dispute in accordance with such rules of law as may be agreed by the Parties.”[7]

This Choice of Law can be said to be fair play as the parties always remain satisfied about the laws that are going to be applied. This thing is better than the normal court procedures where parties always remain suspicious and, on their toes, as they never know or know very little about what will come next for their undetermined fate.

Why party autonomy

The most fundamental thing or the crux of the International Commercial Arbitration is that the parties are Autonomous to decide the things. If we relegate this aspect from the UNCITRAL Model Law on Arbitration, it will become shallow or simply of no use.

If we analyse the crux of the Article 19 of the Model Law of Arbitration we will be able to get the thought of the importance of the Party Autonomy. This Article provides that the parties are free to agree on the procedure to be followed by the Arbitral Tribunal in conducting the proceedings. This simply means that everything rests on the shoulders of the Parties as to the selection of the procedure which has to be implanted in the dispute resolution between the parties.

This thing even ensures that Parties would be more than happy with regard to the final judgment as that would be based upon their desires which is based upon pre-described provisions and procedures.[8]

The Authors Redfern and others has described it as:

“Party autonomy is the guiding principle in determining the procedure to be followed in an international commercial arbitration. It is principle that has been endorsed not only in national laws, but by international arbitral institutions and organisations. The legislative history of the model law shows that it was adopted without any opposition”[9]

Party autonomy in UNCITRAL Model

In order to liberate the Parties from the clutches of the Court room procedures the UNCITRAL model was devised and was supposed to be adopted by the different Countries and made a part of their national laws. This would ensure that an effectively time saving mechanism is put in place which will give the parties the freedom to speak their own free will. The provisions of the Model law even allow the parties to devise their own rule and regulations for the effective governance of the Transactions.

However, the autonomy is not so autonomous and that the parties are subject to some mandatory provisions that have been provided in this model law. Some of them are as:

Article 7(2): it provides that the Arbitration Agreement shall be in writing.

Article 18: it provides that the parties shall be treated with equality and each party shall be given a full opportunity of presenting his case. 

Article 24: the parties shall be given sufficient advance notice of any hearing and of any meeting of the arbitral tribunal for the purposes of inspection of good, other property or documents.

Article 31: the award shall be made in writing and shall be signed by the arbitrator or arbitrators.

After going through the above stated Articles, we can draft the conclusion that the Autonomy of Parties is provided with by the model law but subject to certain restriction and which have to be complied with by the parties. Therefore, we can say that the model law has been framed in a balanced way, where on the one side the parties have been given the full autonomy of choosing the laws, rules and regulations and on the other hand they have been curbed in certain aspects. This thing makes the Model Law a better and viable option.[10]

Party autonomy and the Indian aspect

India being a signatory of the Model law of the International Commercial Arbitration made a law for giving a voice to the model Law and thus came the Arbitration and Conciliation Act, 1996.

This Act is divided into III Parts and of which the Part I mainly deals with the Party Autonomy as it leaves everything important to be decided by the Parties themselves so that the final adjudication is done by the Arbitrator(s) who too even are chosen by the Parties themselves.

To give an example, Section 20 of the Arbitration and Conciliation Act provides that the parties are free to agree on the place of Arbitration, failing which it shall be decided by the Arbitrator tribunal.[11]

In Aniket Sa Investment Llc v. Janapriya Engineers Syndicate.[12]

At the outset, it needs to be observed that by now the law is well settled that party autonomy in arbitral agreements is required to be recognized and would be paramount. It is well settled that where two or more courts have jurisdiction to entertain a suit, parties may by agreement submit to the jurisdiction of one Court to the exclusion of the other Court or Courts. Such agreement is not hit by Section 28 of the Contract Act and such a contract would not be against public policy and becomes legal and enforceable. This is the position which was initially recognised in Hakam Singh V.S Gammon India Ltd. This legal position is also recognized even in the context of the arbitration law as can be seen from the decision of the Constitution Bench of the Supreme Court in BALCO (Bharat Aluminium Co. Ltd V.S Kaiser Aluminium Technical Service).

Conclusion

Anytime a good thing comes in, it is received with the arms wide open. More so, if we talk of a law of widest amplitude having enormous social, economic ramifications, it is widely applauded. This being the case with the UNCITRAL Model Law, it came at a time when there was a great boom of the trade; people hardly were having any spare time for the litigation. The procedures of litigation as we know are hard to believe and impossible to bear. The Courts are overburdened with a huge number of cases, which in other words means that it is not good for anyone particularly the business community to profess the cases there as that would disrupt their business and would derail the profit and put the Company in losses.

In order to avoid this thing or to bypass this, Arbitration Model was devised keeping in view the hardships of Court procedures. The mechanism that has been put in place in the Arbitration procedures ensures that the Parties to dispute are relegated of the cumbersome and hectic procedure of the Courts so as to provide speedy, effective and destined results.

Till date it has been achieving what it was supposed to achieve, the first and foremost being its adoption by various State parties into their domestic Laws. Second, people are viewing it as a viable alternate of the Courts for their redressal of their grievances. However, as it is always that the more we do, the perfect it becomes. The same principle applies to the Arbitration Law as it has achieved a lot, but lot more needs to be done. The execution of the Awards has always got the lowest ranking, as there is no best mechanism in place so as to make the Awards enforceable. This grim area needs to be worked upon so as to make the UNCITRAL Model law a better option in place of the Courts or at least it will be able to run parallel to the Courts.        

Endnotes

[1] Al-Ramahi, A. Sulh: A crucial part of Islamic Arbitration. 2008.

[2] Shackelford, E. (2005). Party Autonomy and Regional Harmonization of Rules in International Commercial Arbitration. U. Pitt. L. Rev.67, 897.

[3]  Scherk v. Alberto-Culver Co, 417 U.S. 506, 516 (1974).

[4] ACA, 2004, SS 1 and 2.

[5] The Ghana Arbitration and Conciliation Act, 2010, S 5.

[6] The International Chamber of Commerce (ICC) Arbitration Rules 2012, art 21.

[7] ICSID Convention (1965).

[8] Fagbemi, S. A.  The doctrine of party autonomy in international commercial arbitration: myth or reality? Journal of Sustainable Development Law and Policy (The)6(1), 202-246. 2015.

[9] Redfern and others, (n 5) 315

[10] Uncitral Model Law On International Commercial Arbitration, 1985

[11] The Arbitration And Conciliation Act, 1996

[12] Aniket Sa Investment Llc V. Janapriya Engineers Syndicate.22 Oct. 2019.


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