UNCITRAL Model Law: International Commercial Arbitration

UNCITRAL Model law was developed to seek the disputes between two parties primarily on legal issues. International or national parties can appear in such a scenario. The model of UNCITRAL law came as a bridge between two distinct parties in a dispute forming a common law. The said gives the party autonomy to select everything that is from the law, arbitrators, and a solution as an award. Thus, it works on the principle of “Party Autonomy” ith different sections of the UNCITRAL Model of Indian Arbitration Act, 1996.

Introduction 

The UNCITRAL Model law was made by UNCITRAL and was adopted by the United Nations Commission on International Trade law dated 21 June 1985.   

There is a total of 8 chapters and 36 articles and is adopted by all domestic or national countries either in the way of alternation or simply to develop the domestic law. The approach of UNCITRAL model law is itself a novel and unique.

Any matter of the arbitration between the parties engaged in an arbitration agreement is said to be an international commercial arbitration if.

  1. The matter that is typically related to disputes between the parties.
  2. The said dispute between the parties should arise from any legal relationship.
  3. The legal relationship risen out can be contractual or non-contractual.
  4. The disputes that have risen should be considered as commercial under the law enforcement in India
  5. One party habitually should have resided abroad

Article 1(3) of UNCITRAL Model Law of International Commercial Arbitration the said arbitration is an international arbitration if.

  1. At the time of conclusion, the party to the arbitration is different in terms of their places and business arena.
  2. Or one of the business places of the partis should be outside their residence.
  3. The agreement between the party was made by expressing the subject matter that the agreement is related to one or more countries. 

“International Commercial Arbitration” relates to the dispute arising out of the relationships based on legal affairs, including contractual or non-contractual. It should be considered as commercial under the law in India also where one party

  • resides or who is a national off any other country except for India.    
  • associated with any other place rather than in India in terms of business or formal associations.
  • Lastly, the government of any foreign country.

Arbitration Agreement

The arbitration agreement itself brought a thrust upon the party to bring “party autonomy” into play.

According to article 7, the party is so independent and so after agreeing both parties can relegate the functioning of the courts. Secondly, the parties here are free and thus we can say article 7 is liberal in terms of the decision rendered upon the sole arbitrator. For instance, if a party to the agreement is not able to come on a common term at the first go then after some time the same can form a separate clause in an agreement according to which the Dispute Resolution shall take place. The framing of the rules by the party themselves is because of the principle to ensure that if the party themselves formulate the rules the same caters the rules according to the need and applicability of the parties.

The other important thing in such an agreement is that the judges are specially excluded in the matter that is fiddling between the matters of the dispute to be solved by the way of arbitration. In other words, if one party goes and files suit against another party then the other party such alleged has a right to file a suit even if the court does not entertain such suits.    

The matters so decided will be judged by an arbitrator by the way of giving an arbitral award in a manner unbiased by any party’s opinion and so out of the jurisdiction of the court but if any party waives off his decision of moving the case of arbitration then the role of arbitrator in such disputes ends there and then. 

Here, in the case, after the agreement formed the tribunal or arbitrator can move outside the limits already prescribed by the law. Certain categorization of the UNCITRAL model law is said to be done to maintain the central focal point based on the party autonomy. 

Choice of Law Clause and Party Autonomy

When we talk about party autonomy the parties are free to choose the law clause to be applied to the decision making on any dispute or international dispute in terms of the UNCITRAL model. This feature is different from that of the normal court proceedings where any party is bound to rules thus formed by the constitution. The party in the court’s proceedings can never direct any court of law the rules or the regulations they are to be governed upon. But in the case where arbitrators are solely selected by the parties the same can direct arbitrator for the rules governed on them during the dispute settlement. 

In the leading case named Scherm v. Alberto-Culver Co.,[1]  the Supreme Court of the United Nations held that party autonomy is a precondition to achieve the predictable nature of any business transactions.

Today all the countries situated near the seas or over the seas follow the principle of party autonomy with recognizing international law. The Nigeria Arbitration Act 2004[2] , UNCITRAL Model Law, the English Arbitration Act 1996, the Indian Arbitration and Conciliation Act 1996, Ghana Arbitration and Conciliation Act 2010[3] , and ICC, Arbitration Rules 2010[4] takes the concept of party autonomy as a whole in their country(where these acts are adopted).

According to article 28 of UNCITRAL Model Law “after deciding the laws on which the dispute shall look upon by the parties, the arbitral tribunal shall decide such award. Any law or rule given by the state in prior shall not be applied unless otherwise stated by the parties or if the parties do not show any keen interest in establishing the law for which the dispute must be taken forward”.                                                  Hence the article mentioned above is complementary to the party autonomy since the arbitrator is also left with the laws for dispute settlement if necessary.

The same principle is followed by ICISD that is the International Center for Settlement of Investment Disputes which also states that arbitral tribunal shall always work upon the guidance of the parties in opting for the laws during settlement.[5] 

Party Autonomy in UNCITRAL Model Law  

However, the party is provided with some autonomy, but this autonomy is not absolute. It is said that certain provisions are to be followed by the parties during the dispute settlement. such laws are mentioned in the act of UNCITRAL model law[6]. Some of them are as follows.

  • Article 7(2)

The agreement should always be in writing

  • Article 18

Each party shall be given equal rights and thus the principle of Audi alteram partem should be followed.

  • Article 24

The parties shall be given proper notice before hearing them so that any document or evidence may be produced in front of the arbitrator in each time.

  • Article 31

The award should be signed by the arbitrator or the arbitrators and always produced in writing.

Hence, we can say that after so much diligence the model law has been provided with certain restrictions that make the model balanced and up o mark by the preconditions of the parties to the dispute.

Party Autonomy in Indian Aspect

India is a signatory to the model law of International Commercial Arbitration law and thus took the provisions forming an Arbitration and Conciliation Act, 1996.

The act is divided into III parts where Section 20 of the Act talks about the provision for the parties to choose the place of the arbitration.                                                 

In the leading case law of Aniket Sa Investment Lick,[7] the court held that the autonomy of the party should be recognized also if two or more courts are occurring in a jurisdiction then parties by agreement may submit the suit to one of the courts in a jurisdiction (this provision was also noted in the BALCO case).

Conclusion

 UNCITRAL Model Law came up into being when courts were being boomed by the trade issues and people were hardly allotted with litigation dates. Though the model law unburdened the courts by providing a cheap and less consuming time for dispute resolution still the model law needs to achieve more in terms of handling parties. The said principle needs to work upon the resolution made by the arbitration so that it can least walk parallel to the working of the court.

FAQs 

Question 1. What Is the Difference Between Convention and A Model Law?

Answer 1. A Convention is basically an instrument which is used for binding in International Law on treaty making capacity of the states. On the other hand, a Model law is a pattern followed by law makers for them to consider a part of their domestic legislation.

Question 2. Are There Any Signatories to A Model Law?

Answer 2. A model law is basically enacted by the government as their domestic law and thus it can be said that there are no such signatories to the model law as found in the treaties.

References

https://uncitral.un.org/en/about/faq/texts

https://uncitral.un.org/

http://www.newyorkconvention.org/uncitral


[1] 417 U.S. 506, 516 (1974)

[2] ACA, 2004, SS 1 AND 2

[3] 2010 (S 5)

[4] Article 21 of the Act

[5] ICSID Convention (1965)

[6] 21 June 1985

[7] 22nd October 2019

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