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A. DESCRIPTION OF ARBITRATION
B. ADVANTAGES OF ARBITRATION
C. KINDS OF DISPUTES THAT CAN BE ARBITRATED
D. THE AGREEMENT TO ARBITRATE
E. COMPARING AD HOC TO INSTITUTIONAL ARBITRATION
II. DRAFTING THE ARBITRATION CLAUSE
A. EXAMPLES OF MODEL CLAUSES
B. ELEMENTS OF AN ARBITRATION AGREEMENT
III. ENFORCEMENT OF ARBITRAL AWARDS
A. COURT ENFORCEMENT OF ARBITRAL AWARDS
B. CONVENTIONS FOR THE ENFORCEMENT OF ARBITRAL AWARDS
C. GROUNDS FOR REFUSAL TO ENFORCE ARBITRAL AWARDS
IV. INTERNATIONAL ARBITRATION RULES
V. INTERNATIONAL ARBITRATION INSTITUTIONS
VI. REGIONAL ARBITRATION INSTITUTIONS
VII. RESOLVING INVESTMENT DISPUTES THROUGH ARBITRATION
A. SPECIFIC ISSUES TO CONSIDER IN INVESTMENT CONTRACTS
B. THE ICSID CONVENTION
A. Description of Arbitration:
With the rapid growth and expansion of the world financial and business communities, it is increasingly important for businesses to have an established method of resolving business disputes quickly, efficiently and constructively.
When disputes arise in the course of business, parties often prefer to settle them privately and informally, in a businesslike fashion that will enable them to maintain their business relationship.
Arbitration is designed for just such occasions, in that it can be designed for quick, practical and efficient resolution.
Arbitration is a voluntary process of dispute resolution where a neutral third party renders a final and binding decision after each side has an opportunity to present its view. This method is especially useful in international business transactions where parties are often unfamiliar with foreign legal systems.
Unlike a judicial process, arbitration is conducted outside the court system by impartial arbitrators who are selected by the parties based on criteria that best fits the nature of the contract. Arbitration is usually conducted by either one arbitrator or a panel of three arbitrators with the structure, format, site and scope of arbitration all decided by the parties and memorialized in the arbitration clause of their contract. The parties usually negotiate the arbitration clause at the same time they develop the initial contract. A properly structured provision will help establish a framework for expeditious resolution of contract disputes.
Arbitration allows the parties greater flexibility than a court proceeding. Parties can decide to have abbreviated time periods in which to respond to claims, where the arbitration will be conducted, how formal the process will be, or whether to involve lawyers in the arbitration.
B. Advantages of Arbitration over Litigation:
1. Impartiality of Decision Maker -- Where a party is concerned that a court in another country may not be neutral, arbitration allows parties chose the arbitrators who will decide the matter;
2. Enforceability of Arbitral Awards -- Arbitration awards are final and can be challenged only under very limited circumstances;
3. Confidentiality -- Where arbitration proceedings and awards are normally private, court proceedings and judgments are frequently public;
4. Expertise -- Parties may choose arbitrators with technical backgrounds who will understand the specific issues in the case;
5. Limited Discovery -- Because the parties may choose to limit discovery in their arbitration, arbitration can be less burdensome;
6. Expense -- Arbitration is usually less expensive than litigation;
7. Brevity -- Arbitration usually produces a resolution more quickly than litigation; and,
8. Relationships -- Arbitration may be viewed as less adversarial, thereby preserving long-term business relationships.
C. Kinds of Disputes Subject to Arbitration:
Generally speaking, there is a two-step process to determine if a controversy is arbitrable:
first, parties should specify in an arbitration agreement or in an arbitration clause of a contract whether disputes will be subject to arbitration; second, the parties should consider that the law of the country in which the arbitration takes place may prohibit arbitration for certain types of disputes. Arbitration for commercial matters, however, is normally encouraged.
The types of disputes that are considered arbitrable varies among countries. In the United
States, courts have strongly favored arbitration in the resolution of international business disputes. They have held that almost all civil disputes can be arbitrated and have denied arbitration only where Congress has expressly stated that the provisions of a specific law can be enforced only in the courts.
D. The Agreement to Arbitrate
Arbitration agreements are formed at one of two points in time: during the negotiation of a contract, or after a legal dispute arises. Because the contract negotiation process offers greater opportunity to develop an arbitration format without the acrimony that can develop after a controversy arises, inclusion of an arbitration agreement as a clause in a contract is preferable and can streamline the dispute resolution process. The arbitration agreement is generally incorporated into the contract governing the transaction.
E. Comparing Ad Hoc to Institutional Arbitration
Arbitration can be conducted either ad hoc or through an established arbitration institution, with advantages and disadvantages to each.
1. Institutional Arbitration
Parties may choose to take advantage of the established mechanisms/procedures offered by one of the many arbitration institutions. These institutions have formal procedures and rules designed to assist parties. The institution chosen may administer the arbitration according to its own rules or, in most cases, according to other rules if requested.
a. Advantages of Institutional Arbitration:
( 1 ) Availability of pre-established rules and procedures;
( 2 ) Administrative assistance from institutions with a secretariat or a court of arbitration;
( 3 ) Lists of experienced arbitrators, often listed by fields of expertise;
( 4 ) Appointment of arbitrators by the institution if the parties request it;
( 5 ) Physical facilities and support services for arbitrations;
( 6 ) Assistance in encouraging reluctant parties to proceed with arbitration; and,
( 7 ) An established format that has proven workable in prior disputes.
b. Disadvantages of Institutional Arbitration:
( 1 ) Institutions charge administrative fees for services and use of facilities. Expenses may be high in disputes over large amounts, especially where fees are related to the amount in dispute. For small amounts in dispute, institutional fees may be greater than amount in controversy;
( 2 ) The institution's bureaucracy may lead to delays and added costs; and,
( 3 ) Parties may be required to submit responses in abbreviated time periods.
c. Issues to Consider in Selecting an Arbitration Institution:
( 1 ) History of the institution's administration of international arbitrations.
( 2 ) Experience:
- How many international disputes has the organization handled and from where did the disputing parties come?
- Has the institution handled disputes similar to the subject of the contract?
( 3 ) Selection of Arbitrators:
- Are the parties involved in the selection of arbitrators?
- Will the institution automatically select arbitrators from neutral countries, or will they do so only on request?
- Does the institution maintain a roster of arbitrators?- Can parties select arbitrators outside the roster of the institution?
- Does the institution have arbitrators with experience in the subject matter of the contract?
( 4 ) Procedures:
- Does the institution permit flexibility in the conduct of the arbitration?
- Can parties opt out of certain rules or procedures?
- What are the rules regarding time limits in the arbitration?
- Are time limits enforced?
- Does the institution limit the procedural rules selected by the parties?
- Are the institution's rules clear and neutral for all parties?
( 5 ) Cost:
- What administrative fees are charged by the institution?
- Are these fees fixed or based on the amount in dispute?
- Are the arbitrator's fees based on time spent or amount in dispute?
( 6 ) Services:
- Does the institution's staff have experience with international disputes? How large is the
- Does the institution have any affiliations within the region that may facilitate administration of the arbitration?
2. Ad Hoc Arbitration
Ad hoc arbitration refers to a process by which the parties select the arbitration format and structure without using an arbitration institution. The ad hoc approach allows for greater specificity in the design of a mechanism for the particular contract. Parties may select ad hoc arbitration to reduce costs, to accelerate the process and/or to structure proceedings to suit their particular needs.
When choosing ad hoc arbitration, parties must specify in the arbitration clause all aspects of the arbitration, including applicable law, rules under which the arbitration will be carried out, the number of arbitrators, the method for selecting the arbitrator(s), the language in which the arbitration will be conducted and the place of arbitration. Parties may either develop their own rules or select established arbitration rules to govern the arbitration. Parties may use the rules of an arbitration institution without submitting the dispute to that institution.
II. DRAFTING THE ARBITRATION CLAUSE
The optimal way for parties to ensure a successful arbitration is to draft an appropriate arbitration clause that specifically meets their needs. Although a model clause may be used in standardized contracts, in complex international transactions the parties should tailor the arbitral provision to the needs of the specific contract. An extensive list of model clauses can be found at: http://www.internationaladr.com/
A. Examples of Model Clauses Recommended by Institutions
1. UNCITRAL Arbitration Rules:
"Any dispute, controversy or claim arising out of or relating to this contract, or the breach, termination or invalidity thereof, shall be settled by arbitration in accordance with the UNCITRAL Arbitration Rules as at present in force." UNCITRAL notes that "Parties may wish to consider adding:
(a) The appointing authority shall be... (name of institution or person);
(b) The number of arbitrators shall be...(one or three);
(c) The place of arbitration shall be...(town or country);
(d) The language(s) to be used in the arbitral proceedings shall be...."
2. ICC Arbitration Rules:
"All disputes arising in connection with the present contract shall be finally settled under the Rules of [Conciliation and] Arbitration at the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules." Parties should also designate the place of arbitration in the clause, otherwise, the ICC will choose."
3. NAFTA Advisory Committee on Private Commercial Disputes:
"(a) Any dispute, controversy or claim arising out of, relating to, or in connection with, this
contract, or the breach, termination or validity thereof, shall be finally settled by arbitration. The arbitration shall be conducted in accordance with [identify rules] in effect at the time of the arbitration except as they may be modified herein or by mutual agreement of the parties. The seat of the arbitration shall be [city, country], and it shall be conducted in the [specify] language. The arbitration shall be conducted by [one or three] arbitrators, who shall be selected in accordance with [the rules selected above]."
(b) The arbitral award shall be in writing and shall be final and binding on the parties. The award may include an award of costs, including reasonable attorney's fees and disbursements. Judgment upon the award may be entered by any court having jurisdiction thereof or having jurisdiction over the parties or their assets."
B. Elements of the Arbitration Agreement
The following elements should be considered for inclusion in any arbitration agreement:
1. Scope of Arbitration - The parties should explicitly state the matters that they want the arbitration agreement to cover. However, they should be aware that local law may restrict issues that may be subject to arbitration.
2. Choice of Arbitrator(s)
a. The clause must specify the selection process, otherwise statutes and rules may fill any gaps;
b. If institutional rules are used that provide for selection of arbitrators, no further reference to selection may be necessary;
c. A panel of three arbitrators is standard for international commercial arbitrations, with the parties each appointing one, and the parties or arbitrators selecting a third. In some circumstances an appointing authority will designate any missing members (e.g. where one of the parties refuses to select an arbitrator as a dilatory tactic);
d. A sole arbitrator may be preferable for disputes involving smaller amounts; and,
e. If an arbitrator must have a special skill, it should be specified in the arbitration agreement.
3. Choice of Law
a. The parties should designate the substantive law that will be applied in the arbitration;
b. The parties may select a procedural law. If they do not, the procedural law of the place where the arbitration occurs will apply; and,
c. Absent an express choice of applicable law, the law of the place of the arbitration will be applied.
4. Choice of Location
a. A forum country should be selected that is a signatory to an international arbitration convention (i.e., the New York or Panama Conventions);
b. The location determines the extent of potential assistance, or even interference, by national courts during an arbitral proceeding and it may affect enforcement of the award;
c. Practical features such as facilities, communications and transportation systems, freedom of movement of persons, documents and currency, and support services should be considered; and,
d. The choice of location in the arbitration agreement should include the name of both the city and country.
5. Choice of Language - Parties may designate one language as the official language of the
proceedings and allow simultaneous interpretation into another language.
6. Choice of Rules - Parties should specify the rules of procedure that will govern the arbitration process.
If selecting institutional rules to govern the arbitration, parties
should consider whether those rules
a. The selection of a site where it is not specified in the arbitration clause;
b. Assessment of costs, including allocation between parties;
c. Selection of arbitrators;
d. Powers given to the arbitrator;
e. The language in which the proceeding will be conducted;
f. The substantive law to be applied;
g. The use of experts;
h. The time allowed to arbitrators to make awards;
i. The power of any administering authority over the awards;
j. The availability of provisional relief; and,
k. Flexibility to allow parties to opt out of certain provisions.
If the parties do not use institutional rules, the following items should be included in their own ad hoc rules:
a. Procedure to initiate arbitration proceedings;
b. Means for dealing with the refusal of a party to proceed with arbitration;c. Scope and limitation of discovery;
d. Outline of hearing procedures, including notice and form of the award (whether it must be written out with reasons for the decision); and,
e. Procedures for enforcement of the award.
7. Interim Relief -- Some arbitration rules specifically address matters of interim relief, i.e., whether the parties may apply to a court for a preliminary injunction, an order of attachment or other order preserving the status quo until the arbitrator(s) decide the case. The rules of most arbitration institutions provide that resorting to a court in such circumstances is not incompatible with, or a waiver of, the right to arbitrate under their rules. Moreover, most rules allow the arbitrators to order such relief.
8. Costs -- The arbitration agreement should provide for the allocation of costs.
9. Award of Tribunal -- The agreement should specify that a majority of the arbitrators must agree on an award and that it must be based on applicable law. The agreement should also specify the currency for payment of the award. If the award is to be recognized and enforced internationally, it may need to state reasons and legal basis, including reference to the process by which the legal basis was selected. Some awards contain no reasoning or written report.
III. Enforcement of Arbitral Awards
A. Court Enforcement of Arbitral Awards
The effectiveness of arbitration in providing final and binding resolution of international commercial disputes depends upon the ability to obtain court recognition and enforcement if a party refuses to satisfy an award. When entering into an international business contract, parties should consider whether the country where they expect to enforce an award (usually the country where the losing party is located) has a domestic legal framework in place for the enforcement of arbitral awards and whether that country is a signatory to a treaty that obligates it to enforce arbitral awards.
B. Conventions for Enforcement of Arbitral Awards
1. United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), June 10, 1958 (entered into force in the United States in 1970) [For full text of Convention, see International Legal Materials at 7 I.L.M. 1046.] The New York Convention is the most widely-recognized convention for enforcement of arbitration awards. There are currently 120 parties to the New York Convention. A list of parties can be found on the Internet at:
The Convention provides that each country must "recognize [arbitral] awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied on." This means the party only needs to supply the local court with an authenticated original or duly certified copy of the award and the original or a certified copy of the arbitration agreement in order to apply for enforcement.
The New York Convention obligates each country that is a party to enforce arbitral awards subject to a limited number of defenses (which are discussed in Section C below).
When the United States ratified the Convention, it incorporated two reservations, that U.S. Courts will only enforce arbitral awards where (1) the subject matter of the award is considered to be commercial in nature; and, (2) the award was rendered in a country that is also a party to the New York Convention.
2. Inter-American Convention on International Commercial Arbitration ("Panama Convention"), Jan. 30, 1975 (entered into force in the United States in 1990), [For full text of Convention, see International Legal Materials at 14 I.L.M. 336.]
The Panama Convention is an agreement among certain members of the Organization of
American States providing for the reciprocal recognition and enforcement of international commercial arbitration agreements and awards.
There are 17 state parties to the Panama Convention. A copy of the Convention as well as a list of the parties can be found on the Internet at http://www.sice.oas.org/dispute/comarb/iacac/iacac2e.asp
C. Grounds for Refusal to Enforce Arbitral Awards
Generally, a court must comply with a request to enforce an arbitration award. The grounds upon which a court can refuse to enforce an award are very narrowly defined. Generally, there are seven grounds for refusal to enforce, which fall into two categories:
1. Problems with the conduct of the arbitration itself. The party against whom enforcement is sought must furnish proof that the award is flawed due to:
a. Incapacity of a party;
b. Failure to give proper notice to a party, or the inability of a party to present his/her case;
c. The award fell outside the scope of the arbitration agreement;
d. The selection of the arbitrators violated the agreement; or, if the agreement did not address selection, the selection process violated the law; or
e. The award was set aside or annulled.
2. State sovereignty issues
a. The law of the country in which enforcement is sought prohibits arbitration on the subject matter of the issue in dispute; or
b. The recognition or enforcement of the award would be contrary to the public policy of that country.
IV. INTERNATIONAL ARBITRATION RULES
Unless parties select an arbitration institution that requires use of its own rules, parties may use any of the following rules:
A. Arbitration Rules of the United Nations Commission on International Trade Law
Tel: (212) 963-8302
Fax: (212) 963-3489
In 1976, the United Nations Commission on International Trade Law (UNCITRAL) promulgated rules for use in ad hoc international arbitrations. The rules are widely accepted. Some arbitration institutions have adopted the UNCITRAL Rules as their institutional rules and other institutions will administer arbitrations under the UNCITRAL Rules, if requested.
B. American Arbitration Association International Arbitration Rules
Tel: (212) 484-3266
Fax: (212) 246-7274
The American Arbitration Association (AAA) is an arbitration institution that has developed International Arbitration Rules, Commercial Arbitration Rules, Securities Arbitration Rules, Patent Arbitration Rules, and rules designed for specific sectors including construction, employment, labor, patents and textiles.
C. International Chamber of Commerce Rules of Conciliation and Arbitration
International Chamber of Commerce
Tel: (212) 206-1150
Fax: (212) 633-6025
The International Chamber of Commerce International Court of Arbitration's rules are widely recognized and can also be selected by parties for use in ad hoc arbitrations or in arbitrations conducted by other institutions.
V. INTERNATIONAL ARBITRATION INSTITUTIONS
The list below only offers a survey of some of the more prominent arbitration institutions
available, and is not a complete catalog of all available institutions. A more extensive list of international, regional and national arbitration associations is located on the internet at: http://www.internationaladr.com/
A. American Arbitration Association (AAA)
American Arbitration Association
International Center for Dispute Resolution
New York, NY 10019
Tel: (212) 484-3266
Fax: (212) 246-7274
The AAA performs arbitration services for international disputes under any of its specialized subject matter rules, the UNCITRAL rules or any other rules chosen by the parties. The AAA will administer arbitrations anywhere in the world. In addition, the AAA has cooperative agreements with a number of foreign arbitration institutions.
B. Commercial Arbitration and Mediation Center for the Americas (CAMCA)
American Arbitration Association
International Center for Dispute Resolution1633 Broadway
New York, NY 10019
Tel: (212) 484-3266
Fax: (212) 246-7274
CAMCA was created jointly by the AAA, the British Columbia International
Arbitration Centre, the Quéébec National and International Commercial Arbitration Centre and the Mexico City National Chamber of Commerce. It has its own arbitration rules and offers multinational panels of arbitrators and mediators. Parties who wish to use the CAMCA arbitration procedures, rules and services may file a case with any of the cooperating national institutions.
C. International Chamber of Commerce (ICC) Court of Arbitration
ICC Court of Arbitration
38 Cours Albert 1er
Tel: (011-331) 4953-2878
Fax: (011-331) 4953-2933
U.S. Council for International Business
1212 Avenue of the Americas
New York, NY 10036
Tel: (212) 354-4480
Fax: (212) 575-0327
The ICC provides administrative services to facilitate the settlement of international commercial disputes. The ICC Court is based in Paris and has affiliates in 59 countries, including the United States. It will administer arbitrations under its own rules at any location selected by the parties. However, parties must file pleadings and all other paperwork at the Paris location, which serves as a clearinghouse for all documents, sets costs and fees, decides challenges to the appointment of arbitrators and approves draft arbitral awards. The ICC will review the final award to ensure that it meets the basic requirements for enforcement.
D. Inter-American Commercial Arbitration Commission (IACAC)
c/o Organization of American States,
Administration Building, Room 211
19th & Constitution Avenue N.W.
Washington, D.C. 20006
Tel: (202) 458-3249
Fax: (202) 458-3293
The IACAC operates through a network of arbitration institutions located throughout the Western Hemisphere. Each arbitration institution acts as a "National Section" of the IACAC. IACAC arbitrations are administered exclusively under the IACAC rules, which are nearly identical to the UNCITRAL rules. The IACAC maintains a panel of experienced arbitrators.
E. London Court of International Arbitration (LCIA)
International Dispute Resolution Centre
8 Breams Building
EC4A 1 HP
Tel: (011 44) 020 7405 8008
Fax: (011 44) 020 7405 8009
The LCIA is the oldest international arbitration institution. It maintains a panel of 26 experienced arbitrators from various countries and has developed its own arbitration rules. Although headquartered in London, the LCIA will establish a tribunal and administer arbitrations at any location requested by the parties under any international arbitration rules. If the LCIA administers an arbitration outside of the United Kingdom, it will be assisted by one of its regional Users' Councils.
F. International Center for the Resolution of Intellectual Property Disputes (WIPO Arbitration Center)
34 chemin des Colombettes
P.O. Box 18
1211 Geneva 20
SwitzerlandTel: (011-41-22) 338-9111
Fax: (011-41-22) 740-3700
The World Intellectual Property Organization (WIPO) is a United Nations
organization that is responsible for promoting the protection of intellectual property throughout the world. The WIPO Center administers mediations and arbitrations of international commercial disputes involving intellectual property disputes. At the request of the parties, the WIPO Center will administer an arbitration at any location in the world, but will do so only under WIPO Arbitration Rules. The WIPO Center also offers an Expedited Arbitration Service. Expedited arbitrations are conducted in a shorter time period with only one arbitrator instead of a panel of three.
VI. REGIONAL ARBITRATION INSTITUTIONS
There are many regional arbitration institutions located throughout the
world. Several of the more
prominent institutions are listed below.
A. British Columbia International Commercial Arbitration Centre (BCICAC)
1140 - 1090 West Georgia Street
Tel: (604) 684-2821
Fax: (604) 684-6825
The BCICAC was established by the Government of British Columbia to provide a
the resolution of commercial disputes arising out of both international and domestic business
relationships. The BCICAC administers international arbitrations under its own rules, which
are based largely on the UNCITRAL rules, or under the UNCITRAL rules, upon request.
B. Quéébec National and International Commercial Arbitration Centre
295, Boulevard Charest Est
Quéébec, G1K 3G8
Tel: (418) 649-1374
Fax: (418) 649-0845
The Quéébec Centre administers domestic, interprovincial and international commercial disputes in specialized sectors, including construction, insurance, environment, export, commercial representation, maritime transportation and intellectual property. The Centre does not have its own arbitration rules.
C. Mexico City National Chamber of Commerce
Paseo de la Reforma 42
06048 Mexico, D.F. Mexico
Tel: (011-525) 703-2862
Fax: (011-525) 705-7412
The Mexico City National Chamber of Commerce handles both national and
D. Arbitration Institute of the Stockholm Chamber of Commerce (SCC)
Väästra Träädgardsgatan 9
P.O. Box 16050
S-103 22 Stockholm
Tel: (011-468) 613-1800
Fax: (011-468) 723-0176
Since 1976 the SCC has functioned as an international arbitration institution, and is particularly known for handling disputes involving East-West trade. The SCC administers arbitrations under either its own rules or other rules chosen by the parties. SCC arbitrations are usually conducted by a panel of three arbitrators, with each party selecting one and the SCC choosing the panel chair.
E. Hong Kong International Arbitration Centre
38th Floor, Two Exchange Square
8 Connaught Place
Hong Kong S.A.R.
Tel: (011-852) 2525-2381
Fax: (011-852) 2524-2172
The Hong Kong International Arbitration Centre (the Centre) was established in 1985 to provide both domestic and international arbitration services in the Southeast Asian region. The Centre administers international arbitrations under the UNCITRAL rules and provides facilities for arbitrations that are held in Hong Kong under the auspices of other institutions such as the ICC and the AAA.
F. China International Economic and Trade Arbitration Commission (CIETAC)
6/F, Golden Land Building
32 Liang Ma Qino Road
People's Republic of China
Tel: (011 8610) 6464-6688
Fax: (011 8610) 6464-3500, or 6464-3520
CIETAC provides arbitration services for disputes arising from international
economic and trade
transactions. It administers arbitrations only under its own rules. Parties may choose their
arbitrators from a CIETAC roster that includes both Chinese and foreign arbitrators.
G. Japan Commercial Arbitration Association (JCAA)
Taishoseimei Hibiya Building
9-1, Yurakucho 1-chome
Tel: (011-81-3) 3287-3061
Fax: (011-81-3) 3287-3064
The JCAA, which is supervised and financed by the Ministry of International Trade and
Industry, will administer arbitrations under its own rules or under the UNCITRAL rules. Although the rules do not specify a place of arbitration, the JCAA expects that the arbitrations that it administers will take place in Japan.
H. Arbitral Centre of the Federal Economic Chamber, Vienna
Wiedner Hauptstrasse 63, (Schaum)
P.O. Box 319
Tel: (011 431) 50105-4397
Fax: (011 431) 5020-6216
The Arbitral Centre of the Federal Economic Chamber, Vienna (the Vienna Centre) was established in 1975 to handle exclusively international commercial disputes. The Vienna Centre normally administers arbitrations under its own rules, but will administer arbitrations under the UNCITRAL rules at the request of parties.
I. Cairo Regional Centre for International Commercial Arbitration
Al-Saleh Ayoub Street
Zamalek, Cairo, Egypt
Tel: (011 202) 340-1333, or 340-1335, or 340-1337
Fax: (011 202) 340-1336
The Cairo Centre was established in 1978 under the auspices of the Asian-African Legal
Consultative Committee of the United Nations (AALCC), which is comprised of approximately 40 African and Asian countries. The Cairo Centre will administer arbitrations under its own rules, which are adapted from the UNCITRAL Rules, or under the UNCITRAL Rules. The Cairo Centre maintains a list of arbitrators drawn from the African-Asian region.
J. Regional Centre for Arbitration Kuala Lumpur
12, Jalan Conlay
50450 Kuala Lumpur
Tel: (011-603) 242-0103, or 242-0702
Fax: (011-603) 242-4513
The Kuala Lumpur Regional Centre for Arbitration was established in 1978 under the auspices of the Asian-African Legal Consultative Committee of the United Nations. The Centre administers arbitrations under its own rules, which are adapted from the UNCITRAL rules.
K. Singapore International Arbitration Centre
1 Coleman Street #05-08
Tel: (011 65) 334-1277
Fax: (011 65) 334-2942
The Singapore International Arbitration Centre will conduct arbitrations under its own rules as well as under UNCITRAL or other rules as determined by the parties. The Centre has both meeting facilities and support staff to support arbitrations conducted in Singapore.
VII. DISPUTES BETWEEN FOREIGN INVESTORS AND HOST GOVERNMENTS
A. Specific Issues to Consider in Investment Contracts
Because of the uncertainty of adequate relief in the courts of another country, an agreement to arbitrate in a forum where enforcement of the award is assured may be essential. When a State is a party to a contract, the contract should include a commitment by the State to resolve disputes through arbitration and to "internationalize" the agreement. Internationalization implies that the rights and duties of parties cannot be legally affected by unilateral action of the host state. The arbitration clause should be sufficiently broad and clear in order to include issues of nationalization, expropriation and unilateral abrogation of "stabilization clauses" (e.g., tax rates, customs exemptions, currency convertibility, remittances and repatriation of capital).
The State should also agree that the arbitration clause is an explicit waiver of sovereign immunity against enforcement and execution of the award or any judgment thereon, and that the award or judgment, if unsatisfied, is enforceable against the State in the courts of any nation in accordance with its laws.
B. The ICSID Convention
International Centre for the Settlement of Investment Disputes (ICSID)
1818 H Street N.W.
Washington, D.C. 20433Tel: (202) 458-1534
Fax: (202) 522-2615
In 1965, ICSID was established under the auspices of the World Bank via the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (ICSID Convention), March 18, 1965 (entered into force in the United States October 14, 1966), [for full text of Convention, see International Legal Materials at 4 I.L.M. 532]. The ICSID system includes rules for both conciliation and arbitration as well as its own enforcement mechanism.
ICSID jurisdiction is conditioned upon written consent, which cannot be withdrawn once granted. Consent by the State is usually given in either an investment or arbitration agreement or in an ICSID clause in a contract, but it could also be provided in the State's investment code or in a bilateral investment treaty (over 150 treaties refer to ICSID arbitration).
ICSID may take jurisdiction of any legal dispute arising from an investment between a contracting State and a national of another contracting State. Both the investor's country of nationality and the host country must be ICSID members in order to use ICSID. If only one of those countries is an ICSID member, ICSID's Additional Facility may be available.
The ICSID Additional Facility was established in 1978 to administer proceedings for settlement of certain legal disputes between States and nationals of other States that fall outside the scope of the ICSID Convention such as in: (a) investment disputes where one party is not a contracting member or national thereof; and, (b) disputes not directly arising out of an investment, provided at one of the parties is either a party to the Convention or a national of a country that is party to the Convention. Existing laws that provide for the enforcement of awards rendered pursuant to the ICSID Convention cannot be relied on to enforce awards rendered by the Additional Facility. The Additional Facility rules require that the arbitration be held only in countries that are party to the New York Convention.
The ICSID Convention attempts to depoliticize investment disputes between States and
foreign investors by providing for a comprehensive system of international arbitration to govern such disputes. Under the Convention, an investor's government need not intervene in the dispute because the host State would participate in an arbitration proceeding on equal procedural footing with the investor.
The ICSID Convention includes its own enforcement mechanism. An administrative "appeal" may be made to the ICSID Secretary-General for the annulment of an award on any of five grounds:
(1) the arbitration panel was not properly constituted;
(2) the arbitration panel manifestly exceeded its powers;
(3) there was corruption on the part of a member of the arbitration panel;
(4) there was a serious departure from a fundamental rule of procedure; and,
(5) the award failed to state the reasons on which it was based. Awards cannot be challenged
outside of the mechanisms provided for under the Convention.
ICSID clauses sometimes require exhaustion of local remedies but more typically require an
investor to choose either local remedies or ICSID. (ICSID Model Clauses, Clauses 13, 12).
Of the approximately 123 countries that have signed the ICSID Convention, approximately 110 have ratified it. Ratification of the Convention obligates Parties's courts to enforce an ICSID award as a final judgment of one of its courts. A list of State parties to the Convention can be found on the internet at: http://www.internationaladr.com/
Kathryn Helne Nickerson
Tel. (202) 482-0937
REVISED March 2005
U.S. Department of Commerce | International Trade Administration