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Arbitration as an Alternative Dispute Resolution Method

A. Main Features

A Private Agreement

An agreement by the parties to submit any dispute or differences between them to arbitration is the foundation stone of modern international commercial arbitration1. An agreement to arbitrate is the only source conferring the jurisdiction over a matter to an arbitral tribunal. The agreement has to be in writing and can take the form of a clause in a general contract or of a separate agreement.

Among the reasons leading contractual partners to include an arbitration clause in their contract, it can be seen that neutrality and confidentiality are among the most important. The perspective of saving costs might be tricky when considering entering into an arbitration agreement. In complex international arbitrations, especially if three arbitrators have been appointed, significant costs might be incurred.

An Arbitrator as a Judge

One of the features that distinguish arbitration from litigation is the fact that the parties to arbitration are free to choose their own tribunal. In international practice, arbitrators will usually be of a nationality different from the parties. The power of arbitrators is regulated under the applicable law. In general, however, they enjoy a great flexibility as to the procedure to be followed.

A Final, Binding and Enforceable Award

The award deciding on the merits of the case is final and has, in most jurisdictions, the same enforceable character as a court judgment. The grounds to set aside an arbitral award are very limited and restrictively interpreted in countries that have adopted a modern arbitration legislation. If it is not carried out voluntarily, the award may be enforced by legal proceedings, either locally or internationally.

Institutional or ad hoc

An institutional arbitration is one for which the services of a specialised institution has been retained to administer the arbitration under its own rules. The arbitration agreement must contain an express reference to an institution or to an institutional set of rules, otherwise it will be considered as an ad hoc arbitration.

An arbitration clause without reference to an institution or to an institutional set of rules is an ad hoc arbitration, where the arbitration mechanism is established specifically for the case at hand. An ad hoc arbitration is independent of all institutions and the procedure adopted applies only to one particular case.

B. International Regulation Framework

The New York Convention (1958)

The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards2 (the “New York Convention”) is the most important international treaty relating to international commercial arbitration. The primary objective of the New York Convention is to establish an international framework to be adopted in national laws that facilitates the recognition and enforcement of foreign arbitration agreements and arbitral awards.

The UNCITRAL Arbitration Rules (1976)

Due to the increasing need for a neutral set of arbitration rules suitable for use in ad hoc arbitrations, the UNCITRAL Arbitration rules3 were prepared by the United Nations, with the intention of “being acceptable in both capitalist and socialist, in developed and developing countries and in common law as well as civil law jurisdictions”4.

The Model Law (1985)

The Model Law on International Commercial Arbitration5 (“Model Law”), adopted by the UNCITRAL in 1985, aims at the harmonisation of the arbitration laws in the different countries of the world by suggesting a text to be adopted at the national level. As such, there are no parties to the Model Law.

Interaction with National Law

In every arbitration there is an underlying national law, normally that of the place of arbitration, which regulates and controls the arbitration. In international commercial arbitration, it may be necessary to refer to as many as four different national systems of law.

First, there is the law governing the recognition and the enforcement of the arbitration agreement. There is also the law which regulates the arbitration proceedings and the law applied by the arbitral tribunal to decide on the substantive matters of the case. Finally, there is the law governing the recognition and the enforcement of the arbitral award.

The Austrian and Canadian Legislations

A. Austria

As an acclaimed venue for East-West arbitral proceedings, Austria has a long tradition of arbitration and made a comprehensive revision of its arbitration legislation in 2006 with the adoption of the new Austrian Arbitration Law6, which integrates the regulations in its Code of Procedure, substantially in accordance with the Model Law.

The Austrian legislation even goes further in certain matters to establish the status of arbitration. For instance, arbitration clauses in some unilateral legal transactions such as wills or companies’ articles of association are recognised as valid arbitration agreements7, as well as exchange of emails recording the agreement to arbitrate8.

Arbitrators may rule on their own jurisdiction9. Their power to determine the procedure is limited to the cases where the parties have not made any agreement and where the matter is not provided for in Austria law10. However, they can appoint experts11 and issue interim measures of protection.

Once the arbitral award has been issued, art. 607 C.C.P. states that “between the parties, an arbitral award has the effect of a legally binding judgement”. In the case of a foreign arbitral award, Austria is a signatory of the New York Convention and enforcement will be possible after recognition of the award by the court through an exequatur proceeding.

B. Canada

The Canadian Constitution delegates to the provinces a general legislative competence over private legal relationships and the administration of justice, thus broadly covering the area of arbitration.

The Common Law Provinces

All but one of the Canadian common law provinces and territories have adopted an international commercial arbitration act incorporating the text of the Model Law as an annex. British Colombia has drafted its own legislation, also based on the Model Law.

As an illustration, international arbitration proceedings in Canada’s most important trade center, Toronto, are regulated

by the International Commercial Arbitration Act of Ontario12, which only slightly departs from the Model Law.

Ontario goes a step further regarding the rules applicable to the substance of the dispute in absence of an agreement by the parties. In Ontario, arbitrators are expected to determine the applicable law they consider appropriate given all circumstances of the case13 and not on the basis of a legal analysis of which legislation is applicable14. Once recognised by the court, the arbitral award has the same status as a judgment or a court order15.

Québec

Although Québec has not integrated the Model Law to its legislation, the relevant legal provisions in the Code of Civil Procedure (C.C.P.) and in the Civil Code of Quebec (C.C.Q.) are basically in line with international conventions.

The criteria for the validity and interpretation of an arbitration agreement are set forth in articles 2638 to 2642 of the C.C.Q.16, and correspond to arts. 7(1) and 7(2) of the Model Law. The conduct of the arbitration is regulated by the C.C.P.17, which also covers the recognition and enforcement of the arbitral award. The stipulations of the C.C.P. apply when no contrary agreement has been made.

Arbitrators have the power to determine the procedure of the arbitration, to appoint experts, to administrate oaths, and to decide on their own competence. The prerogative to grant interim measures of protection is not expressly ruled in the C.C.P. since its art. 940.4 provides a resort to the court.

However, by interpretation of art 944.1 C.C.P. granting “all the necessary power for the exercise of their jurisdiction” to arbitrators, it can be deducted that arbitrators are empowered to issue interim measures of protection under Québec law18.

Moreover, art. 940.4 is not mandatory and parties can agree to act differently. In Québec, a motion for homologation is necessary in order for an arbitral award to be enforceable like a court judgment19.

Conclusion

As an experienced arbitrator and former judge once said: “It is a cliché that the objectives of the users of arbitration are to achieve speedy finality with fairness and economy of costs. But, like all clichés, it is true20.”

Me Gagné is associate by Konrad & Justich Rechtsanwälte in Vienna. She has worked in commercial law offices in Austria and Canada.

1 Redfern, Alan and Hunter, Martin. Law and Practice of International Commercial Arbitra­tion, London: Sweet & Maxwell, 1999, p. 5 (Redfern).

2 Opened for signature 10 June 1958, 330 UNTS 38 (entered into force 7 June 1959).

3 UNCITRAL Arbitration Rules, 31 UN GAOR Supp. No. 17, UN Doc A/31/17 (1976).

4 Lew, Mistelis and Kröll, p. 26.

5 UNCITRAL, 18th Sess. Suppl. No. 17, UN Doc. A/40/17 (1985) at Annex 1.

6 Schiedsänderungsgesetz, BGBl. I 2006/7.

7 Art. 581 C.C.P.

8 Art. 583 C.C.P.

9 Art. 592 C.C.P.

10 Art. 594 C.C.P.

11 Art. 601 C.C.P.

12 R.S.O., ch. I.9 (1990).

13 Ibid. at art. 6.

14 “Conflict of law rules” in common law provinces or “private international law” in civil law jurisdictions.

15 Commercial Arbitration, supra note 16, at art. 11(1).

16 S.Q. 1991, c.64.

17 R.S.Q., ch. C-25 (1966).

18 The Osler Guide to Commercial Arbitration in Canada. A Practical Introduction to Do­mestic and International Commercial Arbitration. The Hague: Kluwer Law International, 2006, p. 89.

19 Art. 946 C.C.P.

20 Redfern, supra note 1, at p. 72.

 

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