January 30, 2010

Understanding UNCITRAL’s Revised Arbitration Rules: A Spectator’s Guide to the Upcoming New York Working Group Session

On the eve of the 52d Session of the UNCITRAL Working Group II (Arbitration and Conciliation), which convenes at the United Nations in New York on February 1 for a five-day deliberation, arbitration practitioners in the United States have just been reminded, by a decision of the influential Second Circuit U.S. Court of Appeals, that when parties agree to arbitrate under arbitration rules like those of the UNCITRAL, they bargain for the nearly unreviewable discretion of the arbitrator in the interpretation of those rules.

As the UNCITRAL Working Group undertakes its “third reading” of the proposed revised UNCITRAL Arbitration Rules, perhaps the penultimate step in a process that began in earnest at the 45th session of the Working Group held in Vienna in September 2006 (and may culminate in approval of the revised rules when UNCITRAL, i.e. the Commission itself, convenes in New York in June), it seems useful to ask: Who shall be the guardians of the drafters’ intentions once this arduous process has been completed? And if the answer is that this responsibility devolves upon arbitrators appointed in individual cases, who will have nearly unreviewable discretion in the interpretation of the rules, then what measures might be taken by UNCITRAL to furnish coherent guidance in written form?

A perusal of the Provisional Agenda for the forthcoming Working Group sessions gives an indication of just how daunting may be task, for arbitrators who will not have attended all of the sessions, to ascertain why the revised text of a rule was so revised, or why an unrevised text of a rule was left as is. The listed background documents pertinent to the discussions to be held this week include 8 reports on the work of the Commission, covering its 32d through 42d sessions, 6 reports of the Working Group covering its 45th through 51st sessions, and 8 notes, and 7 addenda to notes, of the Secretariat concerning revisions of the rules. This week’s session should culminate in a report summarizing its main conclusions, for submission to the 43d session of the Commission scheduled to be held in June.

For those attempting to follow along, the current working documents issued by the Secretariat are working paper (WP) 157
(Draft Rules 1-16), 157 addendum (“Add”) 1 (Draft Rules 17-32), and 157 addendum 2 (Draft Rules 33-43). The prior drafts, from which the current drafts are most directly descended, are found in WP 151 and WP 151, Add. 1.

For the ambitious, all of this material is found on the UNCITRAL website.

It is an imposing challenge to track the history of any particular
change. Take as an example what is the currently proposed draft Article 30(1)(a). It concerns the powers of the tribunal to terminate proceedings if the claimant fails to transmit its statement of claim. The Secretariat’s “Note” (WP 157, Add 1) contains the draft text, which provides that the tribunal “shall issue an order for termination of the arbitral proceedings, unless there are remaining matters that may need to be decided and the tribunal considers it appropriate to do so.” That first portion of the language is essentially unchanged from present Article 28(a). The “unless” clause is a new feature. But the explanatory note in WP. 157 Add 1 is obscure about the purpose of the change, stating that the provision “has been redrafted to clarify that the power of the arbitral tribunal in case the claimant fails to submit its statement of claim is not linited to a dismissal order for termination.” To track the drafting history, one must first go to the Working Group Report from the previous session (A/CN.9/684), which discusses the text of the previous proposed revised draft, which text is found as draft Article 28(1)(a) in WP.151 Add. 1. The enterprising student of drafting history will find that paper on the UNCITRAL website, and will find that the “unless” clause proposed in that draft was “unless the respondent has submitted a counterclaim.” The Working Group report of the Vienna session in Septmber 2009 (CN 684) contains extensive commentary reflecting (1) dissatisfaction with limiting the tribunal’s option to conduct further proceedings to the circumstance of a respondent’s counterclaim; (2) some sentiment in favor of language that would clearly signal the power of the tribunal to conduct preceedings leading to dismissal with prejudice of claimant’s claim; (3) some concern that in some jurisdictions a dismissal with prejudice of claimant’s claim where claimant had not submitted a statement of claim, but only a notice of arbitration, might be subject to annulment; and (4) an underlying motive to expand the tribunal’s discretionary powers to adjudicate claims not fully pleaded, derived from experience that claimants sometimes present vexatious claims in a notice of arbitration, which the Tribunal may wish to address on the merits for reasons (inter alia) of deterrence. One also learns from the Working Group report that the Working Group “requested the Secretariat to reformulate the text, taking account of the suggestions made….” Which is to say — and I say so here with the benefit of having been an observer at the the Vienna session — that several dozen of the best arbitration thinkers on the planet were unable to reach consensus on suitable language, that the Secretariat’s current draft does not necessarily give expression to a consensus view expressed by the Working Group, and that it may be quite hazardous to treat the Working Group reports as authoritative guides to interpretation of a redrafted rule, most especially where the rule emerges from drafting delegated to the UNCITRAL Secretariat after the Working Group’s earlier deliberations failed to find a solution.

One lesson to be learned is that these revised rules often are meant to express permissible rather than mandated or recommended approached to a procedural issue. They are often intended as procedural chameleons, whose complexion will change depending on the applicable procedural law, the nature of the dispute and the disputants, and a variety of other factors.

Still, one may hope that when this revision process reaches an end, as it might this year, the UNCITRAL will see fit to produce an annotated synthesis of the drafting history that offers arbitrators some accessible guidance, to which they may refer day-to-day and in the course of a hearing, to the changes and the deliberative process from which the revised rules emerged.

One Response to “Understanding UNCITRAL’s Revised Arbitration Rules: A Spectator’s Guide to the Upcoming New York Working Group Session”

  1. Eric Sherby says:

    Marc:

    A concise yet convincing critique. This process must make arbitral institutions very happy

    Eric

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