Commercial agreements require careful consideration of the proposed treatment of disputes before they arise. Both the forum for dispute resolution and the rules to be applied should be agreed as part of the contractual negotiation.
The decision of whether or not to agree to arbitrate can be made either when negotiating a contract or after a dispute has arisen, although in the latter case it is often much harder to agree. The alternative to arbitration or other forms of alternative dispute resolution is litigation. Sometimes referred to as “litigation behind closed doors”, arbitration has certain advantages which contribute to its increasing popularity. These benefits can be summarised as follows:
- Enforcement: simplified enforcement procedures using the New York Convention
- Certainty: forum of dispute resolution is settled
- Flexibility: procedures can be tailor made
- Expertise: parties can select their tribunal
- Privacy: dispute and proceedings are typically confidential
- Neutrality: parties can select a neutral forum
- Cost: can be lower than courts if managed well
- Speed: often faster and more efficient than courts
- Finality: generally not subject to appeal
- Predictability: significant international harmony of law
Which rules to apply?
The widespread international adoption of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 alongside the introduction of many local arbitration laws based on the UNCITRAL Model Law on international commercial arbitration of 1985, might suggest that there are few differences between the various international arbitration rules on offer. However, differences do exist and often these can be significant and important.
The various rules all provide a framework for the procedures and timeframes of the arbitration. These are designed to be flexible manner and can be adjusted to suit the parties’ needs. Some rules offer an emphasis on narrow areas of geographic or commercial focus, whilst others provide sector specific expertise. Local court systems of many countries also commonly facilitate the use of arbitration or other forms of ADR. In all cases the rules are designed to be fair and transparent, but there are certain key differences between the rules which need to be carefully considered on a case by case basis.
The decision of which rules to use may be influenced by the nature of the dispute (e.g. using Word Intellectual Property Organization (WIPO) Rules for a dispute concerning intellectual property, or ICSID Rules for investor-state dispute settlement), geography, or indeed the comparative success of an institutions’ marketing campaign.
Well established organisations providing rules for international commercial arbitration include:
- ICDR/AAA: International Centre for Dispute Resolution, established by the American Arbitration Association
- ICC: International Chamber of Commerce International Court of Arbitration
- LCIA: London Court of International Arbitration
- OCC: Oslo Chamber of Commerce
- SCC: Stockholm Chamber of Commerce
- SIAC: Singapore International Arbitration Centre
- ICAC: International Commercial Arbitration Court of Russia
- CIETAC: China International Economic and Trade Arbitration Commission
In addition, bodies in both London and Singapore offer specialised maritime arbitration services. The London Maritime Arbitrators Association (LMAA) is an association of independent arbitrators who are experienced in maritime law which offers a set of procedural terms (or rules) for its arbitrations. However, LMAA arbitrations remain ad-hoc and the conduct of arbitrations are not administered or supervised by an independent arbitration body, unlike the LCIA and the ICC. The UK’s Arbitration Act applies to LMAA arbitrations.
The Singapore Chamber of Maritime Arbitration (SCMA) was first established in 2004. The SCMA Rules are similar in approach to that of LMAA. The SCMA is not involved in the management and administration of arbitrations, but is available to facilitate the process when called upon to do so and offers expert member arbitrators. Amongst the perceived benefits of this approach is the fact that the parties do not pay administration fees and they are free to agree fee rates with arbitrators rather than using a fee schedule.
In Norway, an agreement to arbitrate may be recorded in an express written agreement, or, an arbitration clause may also be incorporated through:
- Oral agreement (except for consumer relations)
- General reference to a standard form agreement
- Customary use
- Failure to object to the tribunal’s competence
Domestic and international arbitrations are governed by the Norwegian Arbitration Act 2004 (“NAA”) if the seat of the arbitration is in Norway, which is based on the UNCITRAL Model Law. The Norwegian Code of Procedure applies to agreements to arbitrate recorded in writing before the NAA came into effect.
In substance, the NAA shares features common to most international sets of rules. It provides a flexible framework for resolving disputes and achieving a binding award with the assistance of one or three arbitrators. However, where an arbitration clause is included in an international commercial contract involving a Norwegian party, it has become common for a foreign set of arbitration rules to be chosen.
The rules offered by the various arbitral institutions are highly detailed and complex. In the table (fig.1) we have summarised some of the key differences to be considered. It is worth noting that some rules have also been revised we have referred current rules in the table below, since they will generally apply unless express reference to a particular year of the applicable rules is made in a contract.