Upcoming Mallesons seminarsMax Bonnell
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In 1980, UNCITRAL, the United Nations Commission on International Trade Law, was responsible for the enactment of the Convention on Contracts for the International Sale of Goods (CISG). In 1985 it released the Model Law on International Commercial Arbitration.
To celebrate these anniversaries, UNCITRAL, in partnership with the Singapore International Arbitration Centre (SIAC), held a conference in late 2005. One day was devoted to a discussion of the CISG, the other to the Model Law.
Those speaking about the CISG represented a mix of the academic and the practitioner, with commentaries on all its principal provisions.
Throughout the discussions a common question was raised: how prevalent is the use of the CISG in international commercial contracts? More than 60 countries have adopted the CISG, including most of the world’s major trading nations. However it is clear there is little empirical data to show whether contracting parties are embracing it or excluding it in the course of their negotiations.
The Model Law presentations focused on principally on the need for harmonisation in the enactment of the Model Law by member states. Delegates were reminded that the Model Law is also able to and has been adopted by a number of important countries, such as Germany, Japan and Korea, for domestic as well as international arbitration.
The following month, at the IBA (International Bar Association) Annual Conference in Prague, its Arbitration Committee conducted a full programme of lectures and workshops. The New York Convention Workshop is now a regular item in the Committee’s conference program and provides an excellent opportunity to catch up on the most recent regulation and enforcement decisions from around the world. However, the stand out session was the Investment Treaty Arbitration Workshop, which revealed how widespread this form of arbitration has now become.
Note
David Fairlie presented a paper on the CISG and Australia at the UNCITRAL/SIAC conference and Sally Fitzgerald participated in an Arbitration Committee panel discussion on the IBA Rules of Evidence at the Prague Conference.
Careful drafting of an arbitration clause can help to prevent inefficiency and uncertainty when the clause is invoked and an arbitration is commenced. There is no need for an arbitration clause to be lengthy or complex, but since it defines the rules that the parties will follow in resolving their disputes, there are some elements that are essential for the clause to be effective. Ideally, an arbitration clause should specify the place of arbitration, the number of arbitrators, the procedural rules that are to apply in the arbitration, the language of the arbitration, and the law that will govern the substance of the dispute.
We are currently acting in an International Chamber of Commerce (ICC) arbitration for an Australian seller against a French buyer. The arbitration clause in the relevant contract provided for an ICC arbitration with a London seat, but did not stipulate the applicable law to be applied to the substance of the dispute.
Article 17 of the ICC Rules provides that where there is no express choice of law made by the parties, “the arbitral tribunal shall apply the rules of law which it determines to be appropriate”. But how is the tribunal to arrive at that decision? In this case, three sets of substantive laws might possibly be applied: Australian law (the law of the seller’s jurisdiction); French law (the law of the buyer’s jurisdiction); or English law (the law of the seat of the arbitration).
Clearly, the tribunal is required to apply conflict of laws principles, but these too will vary from one jurisdiction to another. The safest course is for the Tribunal to apply the conflict of laws principles that are applied in the country where the arbitration is situated. In the present case, that jurisdiction is England, and English law has incorporated the Rome Convention of 19 June 1980 on the Law Applicable to Contract Obligations. Clause 3.1 of the Rome Convention provides that “[a] contract shall be governed by the law chosen by the parties. The choice must be express or demonstrated with reasonable certainty by the terms of the contract and the circumstances of the case”.
In the present case, there is a strong argument available that “the terms of the contract and the circumstances of the case” indicate that the parties intended English law to apply. Firstly, because they chose England as the seat of the arbitration, and nominated no other governing law. Secondly, subsequent sales contracts between the two parties nominated English law as the proper law of the contract. Therefore it is reasonably certain that the parties intended English law to apply to the substance of the dispute.
The issue is important in this case because French law offers a wider range of remedies for the claim than either English or Australian law. The question is yet to be resolved by the Tribunal, but it does illustrate the way in which complicated questions of fact and law can arise when the parties’ intentions are not expressed clearly enough in the arbitration clause.
Author
Max Bonnell, Partner
A round-up of arbitration issues in the Australasia region:
- Singapore
- China
- India
- Malaysia
Singapore
Conflicting findings not a ground for setting aside
PT Asuransi Jasa Indonesia (Persero) v Dexia Bank SA [2005] SGHC 197, 20 October 2005, Prakesh J
PT Asuransi applied to set aside an award rendered in the SIAC (Singapore International Arbitration Centre) proceedings on two main bases:
- the award conflicted with the public policy of Singapore, relying on section 19B of the International Arbitration Act and
- it dealt with issues outside the terms of the submission to arbitration;
PT Asuransi argued that a violation of public policy had occurred, because the findings in the award conflicted with the determinations of another arbitral award rendered in earlier, related proceedings. The Court dismissed the application, stating that conflicting arbitral awards in the same dispute did not always result in a contravention of public policy. The Court clarified the scope of the public policy ground for setting aside an award in Singapore. In addition the appropriate procedure for PT Asuransi would have been for it to object to the jurisdiction of the second Tribunal, on the basis that the issues had already been dealt with by the first Tribunal.
The Court did determine that considering the issues of the second ground were outside the scope of its jurisdiction. However, the Court did not set aside the second award in its entirety, on the basis that the relevant issue was not integral to the rendering of the award.
China
New arbitration body
A new arbitration body, the China Arbitration Forum has been established to promote arbitration to foreign investors in China.
The Forum is a non-profit, independent arbitration body. It aims to become a central meeting point for Chinese and foreign investors, counsel and participants, and to arrange for training programs for Chinese arbitrators. Unlike the China International Economic and Trade Arbitration Commission (CIETAC), the Forum will not host any arbitration proceedings.
India
Prima facie review of existence of arbitration agreement
Shin-Etsu Chemical Co Ltd v Aksh Optifibre Ltd and another [2005] 7 SCC 234, 12 August 2005
Shin-Etsu and Aksh Optifibre entered into an agreement providing for arbitration in Tokyo, and the application of Japanese law to the agreement. Shin-Etsu terminated the agreement and Aksh Optifibre commenced proceedings in India seeking an injunction against the termination of the agreement. Aksh Optifibre claimed that the entire agreement, including the arbitration clause, was void ab initio and incapable of being performed. Shin-Etsu applied to the Indian trial court to have the proceedings referred to the ongoing ICC arbitration proceedings in Tokyo.
The case went to appeal to the High Court. The main issue for determination was whether, in light of Article II(3) of the New York Convention, a finding that the arbitration agreement is “null and void, inoperative or incapable of being performed” should be a final expression of the Court’s view, or should it be a prima facie view formed without a full-fledged trial.
The majority of the Court held that the correct approach at the pre-referenced stage is one of a prima facie finding, according the arbitrators a power of first determination of their jurisdiction. The Court argued that it would defeat the ethos of the Indian Arbitration Act if Courts were empowered to fully examine the arbitration agreement, resulting in the lengthy delay of arbitral proceedings until such a decision were rendered.
Malaysia
Malaysia Arbitration Act 2005
Replacing the Malaysia Arbitration Act, 1952, the new Malaysia Arbitration Act 2005 received Royal Assent on 31 December 2005.
The new Act, adopting the UNCITRAL Model Law, contains some important differences to the 1952 Act. For example, sections 37(1)(a)(ii) and 39(1)(a)(ii) both deem Malaysian law applicable to the arbitration agreement if there is no applicable law clause.
View a copy of the new Malaysia Arbitration Act 2005.
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Sally Fitzgerald
Senior Associate
Dispute resolution
Sally is a senior associate in our Dispute Resolution team and is the coordinator of the International Arbitration group.
The focus of Sally’s work over the last 13 years has been high profile, complex commercial dispute resolution, with a particular focus on international commercial arbitration. In this context, Sally worked for eight years in London in the International Arbitration teams of Clifford Chance and Debevoise & Plimpton, both recognised as leading international commercial arbitration practices.
Sally is a member of the London Court of International Arbitration (LCIA), an Associate Member of the Arbitrators & Mediators Institute of New Zealand (AMINZ). She is a founding member and member of the Executive Committee of the Australasian Forum for International Arbitration (AFIA), a member of the IBA (Committee D, Arbitration) and a member of the LCIA Young Arbitrators’ Group. Sally is also the former alternate member for New Zealand on the ICC International Court of Arbitration. Sally is currently lecturing international arbitration at the University of New South Wales, and lectured in arbitration law and practice at Victoria University of Wellington, New Zealand, in 2003.
Sally’s recent matters involve advising on international arbitrations and the enforcement of international arbitral awards in Australia. Sally also works extensively with transactional lawyers in the consideration of dispute resolution methods and the drafting of dispute resolution clauses, often involving international arbitration.
During October, we will be presenting our China arbitration roadshow.
- Tuesday 24 October 2006, 4pm in Melbourne, at our office: Bourke Place, 600 Bourke Street, Melbourne VIC 3000
- Wednesday 25 October 2006, 4pm in Sydney, at our office: Governor Phillip Tower, 1 Farrer Place, Sydney NSW 2000.
Join our China Arbitration Partners and China Business partners - all based in China - for their roundtable discussion. They will be discussing how to avoid, or, if necessary, settle/win arbitrations held under the auspices of the China International Economic and Trade Arbitration Commission (CIETAC).
There will be an opportunity to meet our panellists at cocktails following each talk. Most of our panelists have been living and working in China for over twenty years. Two of them have received the rare honour of being appointed by CIETAC onto its panel of arbitrators.
More details will be published in our next Update.
Author
Paul Starr, Partner