Arbitration a Guide to International Arbitration 26050

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Arbitration guide


<ul><li><p>Financial institutionsEnergyInfrastructure, mining and commoditiesTransportTechnology and innovationLife sciences and healthcare</p><p>A basic guide to international arbitration</p></li><li><p>Norton Rose Fulbright</p><p>Norton Rose Fulbright is a global legal practice. We provide the worlds preeminent corporations and fi nancial institutions with a full business law service. We have more than 3800 lawyers and other legal staff based in more than 50 cities across Europe, the United States, Canada, Latin America, Asia, Australia, Africa, the Middle East and Central Asia.</p><p>Recognized for our industry focus, we are strong across all the key industry sectors: fi nancial institutions; energy; infrastructure, mining and commodities; transport; technology and innovation; and life sciences and healthcare.</p><p>Wherever we are, we operate in accordance with our global business principles of quality, unity and integrity. We aim to provide the highest possible standard of legal service in each of our offi ces and to maintain that level of quality at every point of contact.</p><p>Norton Rose Fulbright US LLP, Norton Rose Fulbright LLP, Norton Rose Fulbright Australia, Norton Rose Fulbright Canada LLP and Norton Rose Fulbright South Africa Inc are separate legal entities and all of them are members of Norton Rose Fulbright Verein, a Swiss verein. Norton Rose Fulbright Verein helps coordinate the activities of the members but does not itself provide legal services to clients.</p><p>References to Norton Rose Fulbright, the law fi rm, and legal practice are to one or more of the Norton Rose Fulbright members or to one of their respective affi liates (together Norton Rose Fulbright entity/entities). No individual who is a member, partner, shareholder, director, employee or consultant of, in or to any Norton Rose Fulbright entity (whether or not such individual is described as a partner) accepts or assumes responsibility, or has any liability, to any person in respect of this communication. Any reference to a partner or director is to a member, employee or consultant with equivalent standing and qualifi cations of the relevant Norton Rose Fulbright entity. The purpose of this communication is to provide information as to developments in the law. It does not contain a full analysis of the law nor does it constitute an opinion of any Norton Rose Fulbright entity on the points of law discussed. You must take specifi c legal advice on any particular matter which concerns you. If you require any advice or further information, please speak to your usual contact at Norton Rose Fulbright.</p><p> Norton Rose Fulbright LLP NRF20889 02/15 (UK) Extracts may be copied provided their source is acknowledged.</p></li><li><p>Norton Rose Fulbright February 2015 03</p><p>A basic guide to international arbitration</p><p>The preferred option </p><p>Arbitration is a consensual, binding method of dispute resolution. It is an increasingly popular means of resolving disputes, particularly in relation to international contracts. There are many reasons for choosing arbitration but the key ones are given below. </p><p>Enforcement </p><p>Arbitration awards can be easier to enforce internationally than the judgments of national courts. The United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 known as the New York Convention has been ratified by 154 countries. This means that, in principle, an arbitration award can be enforced in any of those countries. By contrast, court judgments are generally only enforceable in countries where there are reciprocal enforcement arrangements in place. </p><p>So, for example, whilst an English court judgment can be enforced easily in any EU state through the Brussels </p><p>Regulation on the Recognition and Enforcement of Judgments, it can be difficult to enforce an English court judgment in many other countries. By contrast, an English arbitration award can be enforced in 154 countries. </p><p>Where the assets of the potential defendant are in a country where a national court judgment cannot be enforced, arbitration is the obvious choice. </p><p>See page 09 on enforcement. </p><p>See for the text of the New York Convention and a list of signatories. </p><p>Greenland</p><p>Libya</p><p>SudanChad</p><p>Angola Ethiopia</p><p>Namibia</p><p>Iraq</p><p> Somalia</p><p> Yemen</p><p>South Sudan</p><p>Congo</p><p>Turkmenistan</p><p>Papua NewGuinea</p><p>Western Sahara</p><p>Tajikistan</p><p>Malawi</p><p>North Korea</p><p>Togo</p><p>Sierra Leone</p><p>Taiwan</p><p>Belize</p><p>Guinea-Bissau</p><p>Swaziland</p><p>Eritrea</p><p>Suriname</p><p>French Guiana</p><p>Equatorial Guinea</p><p>Gambia</p><p>Signatories to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958</p><p>Data source: UNCITRAL</p><p>Country status</p><p>Member</p><p>Non-member</p><p>0 2,500 5,0001,250km</p><p>NRF20634</p></li><li><p>04 Norton Rose Fulbright February 2015</p><p>A basic guide to international arbitration</p><p>Neutrality and confidentiality </p><p>Parties to international contracts often want to avoid using the home courts of one of the parties in order to ensure neutrality. In addition, arbitration avoids problems with unfamiliar or unpredictable local court procedures. </p><p>Court proceedings are usually public, whereas the parties can agree to keep arbitration proceedings confidential. In this way, the parties can protect commercial practices, trade secrets, industrial processes and knowledge of the dispute itself. In some countries, however, confidentiality may be lost if arbitration proceedings end up in court for example, if the arbitration award is appealed. </p><p>If confidentiality is important then it is sensible to include a confidentiality provision in the arbitration agreement. </p><p>See page 06 on drafting confidentiality clauses. </p><p>Finality </p><p>The parties can, subject to the applicable procedural law, agree that an arbitration award is final and binding, and cannot be appealed to a court. In many jurisdictions, awards (particularly those in domestic arbitration) will not be set aside on the ground of errors of fact or will only be set aside in very exceptional circumstances. Whilst most jurisdictions permit the parties to agree not to appeal to the courts on a point of law, in many jurisdictions the right to appeal on grounds of serious procedural irregularity is mandatory and cannot be excluded, even by agreement. The ability to restrict appeals on points of law means that arbitration proceedings can be concluded more quickly than court proceedings. </p><p>Choice </p><p>In arbitration, the parties have considerable choice over the way in which their dispute is conducted. They can choose in which country, city and, even, in which building they wish to hold their arbitration (although, unlike court proceedings, they will have to pay for the venue). </p><p>The parties are also free to select the arbitrators themselves. This can be helpful where the dispute is of a technical nature, since they can ensure that the arbitrators have particular technical skills or expertise. (Bear in mind, however, that, unlike judges, arbitrators must be paid by the parties.) It is important to agree to the appointment of an odd number of arbitrators (either a sole arbitrator or a panel of three): if two, or four, arbitrators are selected, the panel may be unable to reach a decision due to deadlock. </p><p>The language(s) in which the arbitration is conducted can also be specified by the parties. </p><p>The legal framework International arbitration is subject to a number of layers of regulation and in this respect is more complex in structure than national court litigation. What follows is a summary of the different laws and rules that make up this framework. </p><p>The law governing the contract </p><p>The substantive law of the contract between the parties is the law governing the contract. Regardless of where the arbitration takes place, the arbitrators will apply the substantive law of the contract when deciding the issues in dispute under the contract. </p><p>The law governing the arbitration agreement </p><p>It must be remembered that the arbitration clause within the main contract is a contract in its own right, collateral to the main contract. It is, in effect, a contract within a contract and is severable from the main contract. </p><p>If the arbitration agreement is contained within the main contract, the law of the main contract will usually govern the arbitration agreement (if no other law is chosen by the parties to govern the arbitration agreement and generally none is). However, if an arbitration agreement is entered into after the main contractual dispute has arisen (because the main contract contains no arbitration clause), it will not necessarily follow that the arbitration agreement will be governed by the same law as the main agreement (if no separate choice of law is made in the arbitration agreement). </p><p>Although it is by far the most usual case that the arbitration agreement is governed by the same law as the main contract, it is possible to provide for the law of the arbitration agreement to be a different governing law from that of the main contract. Institutional rules such as the ICC Rules do not deal with the governing law of the arbitration agreement. Their standard clauses do not include a choice of law clause for the arbitration agreement itself but they do stress the desirability of stipulating the governing law of the main contract. </p></li><li><p>Norton Rose Fulbright February 2015 05</p><p>A basic guide to international arbitration</p><p>The law governing the arbitration agreement covers substantive matters relating to the agreement to arbitrate, as, for example, the interpretation and validity of the agreement to arbitrate. The issue of whether a particular dispute falls within the terms of an arbitration clause will be governed by the law governing the arbitration agreement. </p><p>It will also be relevant to issues relating to the recognition and enforcement of the award. For example, under article 5 of the New York Convention, recognition and enforcement of an award may be refused if the arbitration agreement is not valid under the law to which the parties have subjected it. </p><p>The procedural law </p><p>The nature and scope of the law of the seat of the arbitration determines the procedure for the arbitration. Clients will often require that the place at which any arbitration is to take place is a place that is neutral to all parties. It is vitally important to ensure that, when selecting a seat for the arbitration, the requirements and scope of the laws of that place of arbitration are understood. Different countries can import different requirements into their own law and, to be effective, an award will have to comply with all the mandatory requirements imposed by the law of the seat of the arbitration. </p><p>The procedural law acts in concert with the institutional or ad hoc rules (if any) under which the arbitration is to be conducted. The procedural law and the rules govern the conduct of the arbitration; by adopting certain rules, the parties may find that they have contracted into or opted out of various of the default non-mandatory provisions of the procederal law. </p><p>Typically, the procedural law covers questions relating, for example, to the arbitral tribunal itself, such as its appointment and any revocation of its authority, its powers and duties and remedies for any breach of duty. It also determines the availability of interim and procedural remedies. The form and validity of the award and grounds for challenges to the award where challenge is made at the place of arbitration will also be determined by the procedural law. In some instances, the law of the seat of the arbitration can also stipulate that a particular type of dispute cannot be settled by arbitration under local law. In some states, if the proper law of the contract has not been chosen by the parties, it is normally determined by the conflict of law rules of the procedural law: this enables the tribunal to work out which national law to apply to interpret the procedural laws applying to the contract usually the law of the place where the arbitration is taking place. </p><p>The law of the place of recognition and enforcement of the award </p><p>The law of the place of recognition and enforcement of any potential award should also be considered. Is the country a signatory to the New York Convention? What is that countrys national courts reputation in relation to ease of enforcement of arbitration awards? There can be substantial differences in the approach of local courts to the enforcement of a foreign arbitration award. It is important to obtain local advice at the outset (preferably when drafting the dispute resolution clause) on the prospects of enforcing an award in a particular jurisdiction. </p><p>See page 03 on enforcement and the New York Convention. </p><p>The procedural rules of the arbitration </p><p>The parties can (within the constraints of the procedural law) choose their own rules to govern the procedure. There are essentially two options here: institutional rules or ad hoc procedures. </p><p>Institutional rules are chosen when the arbitration is administered by an arbitration institution. The rules of the major institutions are well known and their application is reasonably predictable. </p><p>An arbitration is ad hoc when it is not administered by an arbitration institution. In theory, it is possible for the parties to write their own rules but this is rarely, if ever, done in practice. Instead, the parties use the procedural rules that either they have chosen or on which the arbitrator(s) has decided. Alternatively, the arbitration may be governed solely by the procedural law of the arbitration. </p><p>See pages 08 for a discussion of the relative merits of institutional and ad hoc arbitrations. </p><p>The powers of the tribunal </p><p>The authority of the tribunal (or panel of arbitrators) comes from the contractual arbitration agreement between the parties. The powers of the tribunal are set out in the relevant procedural law and procedural rules. The limits of the arbitrators powers will therefore differ, depending on the procedural law and rules chosen. </p><p>The powers of the court </p><p>The powers of the court to hear applications relating to an arbitration will be determined by the procedural </p></li><li><p>06 Norton Rose Fulbright February 2015</p><p>A basic guide to international arbitration</p><p>law of the arbitration, the procedural rules chosen (if any) and the arbitration agreement. All three of these will affect whether a particular court can hear an appeal of an arbitration award, consider the jurisdiction of the arbitral tribunal or provide interim relief (such as freezing orders) in support of the arbitration. </p><p>Drafting arbitration clauses No one arbitration clause will be suitable for all agreements. The benefit of arbitration is that it can be tailored to meet the needs of the parties. </p><p>That said, the key to drafting a successful arbitration clause is simplicity. This principle applies in the most complex of situations, including multiparty disputes and resolving disputes arising out of a group of related but separate contracts. A skilfully engineered, straightforward clause will enable the parties to avoid further conflict once a dispute has arisen. </p><p>Befo...</p></li></ul>


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