Legal Briefing

The revised UNCITRAL Arbitration Rules

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Public Sector | 01 October 2010

On 25 June 2010, the United Nations Commission on International Trade Law (UNCITRAL) adopted its revised arbitration rules (the UNCITRAL Rules).1 The new rules replace the successful UNCITRAL Arbitration Rules adopted in 1976 (the 1976 Rules).2 The revision was not intended to change the structure, the spirit or the drafting style of the 1976 Rules, and should maintain the flexibility that contributed to their success in the past.3

The UNCITRAL Rules are a comprehensive set of rules for ad-hoc arbitration, ie for arbitration proceedings that are not administered by an arbitral institution. UNCITRAL is therefore not an arbitral institution and does not administer arbitral proceedings. Proceedings under the UNCITRAL Rules are not restricted to a particular seat of arbitration or a particular applicable law. Contrary to many institutional arbitration rules, the parties may freely modify the UNCITRAL Rules in accordance with their needs, to the extent this is permitted by the applicable law.4

The universality and the neutrality of the 1976 Rules were major factors of their success. Prior to the fall of communism, they were particularly attractive for arbitration involving parties from the two political blocks.5 The Iran-US Claims Tribunal applied a modified version of the 1976 Rules as its rules of procedure.6 Furthermore, many investment protection treaties provide for UNCITRAL arbitration as one option for dispute resolution between investors and the state party.

The main goals of the revision of the UNCITRAL Rules were:

  • to increase the efficiency of the procedure and to avoid unnecessary delay and expense;7
  • to adapt the rules to current arbitral practice, in particular to the use of modern technology;8
  • to address the needs of multi-party arbitration;9 and
  • to adapt the rules to their use in investor-state arbitration.10

Like the 1976 Rules, the new UNCITRAL Rules are structured into four sections: introductory rules, composition of the arbitral tribunal, arbitral proceedings and the award. The present overview of the new UNCITRAL Rules follows the structure of the rules.

1) Introductory Rules

Unless the parties have agreed to apply a particular version of the UNCITRAL Rules, the new rules apply if the arbitration agreement was concluded after 15 August 2010 (Article 1(2)).11 This does not apply when the arbitration agreement has been concluded by accepting an offer to arbitrate that was made before 15 August 2010. This exception will primarily apply to arbitration on the basis of investment protection treaties, which usually contain a standing offer to investors to arbitrate investment disputes.12

Unlike the 1976 Rules, the UNCITRAL Rules do not require that the arbitration agreement is made ‘in writing’. This change takes into account that several national arbitration laws do not contain a strict writing requirement for arbitration agreements or contain a broad definition of ‘in writing’. The aim was that the UNCITRAL Rules should not contain a possibly stricter writing requirement than the law applicable to the validity of the arbitration agreement.13 The new rules also no longer require that the parties to the arbitration be ‘parties to a contract’ (Article 1(1), 1976 Rules). The new Article 1(1) clarifies that any dispute ‘in respect of a defined legal relationship, whether contractual or not’ may be referred to UNCITRAL arbitration. This clarification is particularly useful for the field of investment treaty arbitation, where the investor and the respondent state frequently do not have a contractual relationship.

The model arbitration agreement annexed to the UNCITRAL Rules indicates that the parties ‘should’ – in addition to the broad recommended submission of a legal relationship to UNCITRAL arbitration – consider adding the following specifications:

  1. a designation of the appointing authority;
  2. the number of arbitrators (one or three);
  3. the place of arbitration; and
  4. the language to be used in the arbitral proceedings.

The determination of these issues will in almost all cases be useful. The parties to an ad-hoc arbitration do not have the assistance of an arbitral institution for the constitution of the arbitral tribunal or for the conduct of the proceedings. If crucial questions regarding the procedure remain undetermined, this may be exploited by one party to delay the proceedings.

The new Article 2(1) allows that notices may be transmitted ‘by any means of communication that provides or allows for a record of its transmission’. Notices by e-mail are therefore possible. However, delivery by electronic means may only be made to an address designated by a party specifically for this purpose, or authorised by the arbitral tribunal (Article 2(2)). It is therefore useful to contractually determine the address to be used for notices, including an e-mail address, before the dispute has arisen.

As with the 1976 Rules, arbitral proceedings pursuant to the UNCITRAL Rules are initiated by a notice of arbitration. The notice of arbitration must contain the information enumerated in Article 3(3), including:

  1. the identification of the contract or other legal instrument out of which the dispute arises, or a brief description of the relevant relationship;
  2. a brief description of the claim (previously ‘the general nature of the claim’), as well as proposals concerning
    • the number of arbitrators;
    • language; and
    • place of arbitration if the parties have not previously agreed thereon.

The new Article 4 requires that the respondent submit a response to the notice of arbitration within 30 days of the receipt of the notice. The response is intended to provide the respondent with an opportunity to comment on the notice prior to the constitution of the arbitral tribunal. This rectifies the procedural imbalance between the claimant and the respondent existing under the 1976 Rules, which did not provide for a response to the Notice of Arbitration before important questions of procedure, such as the selection of arbitrators and the determination of a procedural timetable, were settled.14

The appointing authority continues to be the cornerstone of the UNCITRAL Rules. The appointing authority is, inter alia, competent to:

  1. appoint a sole arbitrator if the parties cannot agree on a person (Article 8);
  2. appoint a presiding arbitrator if the two party-appointed arbitrators are unable to agree on one (Article 9(3));
  3. appoint an arbitrator in case of default of a party to appoint an arbitrator (Article 9(2));
  4. decide on the challenge of arbitrators (Article 13); and
  5. review the fees and expenses of the arbitral tribunal (Article 41).

As will be shown below, the revised UNCITRAL Rules have further increased the importance of the appointing authority. The broad competences of the appointing authority minimise the dependence of the arbitral process on support from national courts.

The UNCITRAL Rules do not contain a direct determination of the appointing authority in the absence of an agreement of the parties. If the parties cannot agree on an appointing authority, the Permanent Court of Arbitration at The Hague acts as designating authority and designates an appointing authority at the request of a party (Article 6(2)). This procedure may appear burdensome and might have been avoided by the direct determination of an appointing authority in the rules. This proposal was discussed in the Working Group, but was ultimately rejected because the designation of an appointing authority was considered as a major departure from the principle of neutrality with regard to arbitral institutions.15

2) Composition of the Arbitral Tribunal

The new rules maintain the default rule that the number of arbitrators is three unless the parties have agreed on a different number (Article 7(1)). This takes into account that the parties often cannot agree on a sole arbitrator, and that the appointment of a sole arbitrator by the appointing authority usually delays the arbitral process. However, if a party has not responded to a proposal to appoint a sole arbitrator and if the party or the parties concerned have failed to appoint a second arbitrator, the appointing authority may appoint a sole arbitrator at the request of a party if it determines that this is more appropriate in the circumstances of the case (Article 7(2)).

The mechanism for the appointment of the arbitrators has remained substantially unchanged. If the parties cannot agree on a sole arbitrator within 30 days of the receipt of the proposal of a sole arbitrator, any party may request that the appointing authority make the appointment (Article 8(1)). If the parties’ agreement provides for three arbitrators, each party shall appoint one arbitrator and the two-party appointed arbitrators shall appoint the chairperson (Article 9(1)). In the event of a failure to constitute the arbitral tribunal under these rules, the appointing authority shall make substitute appointments at the request of a party.

The revised rules contain a new provision regarding the appointment of arbitrators in a multiparty situation. If the parties have agreed on three arbitrators and there are multiple parties as claimant or respondent, the multiple parties have to jointly appoint one arbitrator (Article 10(1)). In case the multiple parties cannot agree on one arbitrator, the arbitral tribunal is constituted by the appointing authority at the request of a party. In doing so, the appointing authority may, but need not necessarily, revoke an appointment already made (Article 10(3)). This rule, which was inspired by Article 10 of the International Chamber of Commerce Rules of Arbitration, intends to avoid that the party which is able to appoint its arbitrator has an undue advantage in a multiparty situation.16

The new Article 11 clarifies that the duty of an arbitrator to disclose any circumstances likely to give rise to justifiable doubts as to their independence applies throughout the entire proceedings. Recommended model statements of independence are annexed to the rules. The mechanism for the challenge of an arbitrator remains substantially unchanged with regard to the 1976 Rules.

The new Article 14(2) empowers the appointing authority to deprive a party of its right to make a substitute appointment of an arbitrator if it determines that this is justified in view of ‘exceptional circumstances’. This rule provides a sanction for cases in which an arbitrator withdraws, in collusion with a party, from their mandate without justification.17 In such a case, the appointing authority may appoint the substitute arbitrator itself. If the hearings are already closed, the appointing authority may also authorise the remaining arbitrators to proceed with the arbitration and to make an award as a ‘truncated tribunal’.

The new Article 16 provides, like many institutional arbitration rules, for a broad provision on the exclusion of liability for the arbitrators and the appointing authority regarding their actions in relation with the arbitration.

3) Arbitral Proceedings

The revised provisions on the arbitral proceedings adopt procedural rules that were in many cases already good arbitration practice under the 1976 Rules. The revised Article 17 (1) confirms that an arbitral tribunal should exercise its procedural discretion so as to avoid unnecessary delay and expense. A further instrument to increase the efficiency of the proceedings is the requirement to establish a provisional timetable early in the proceedings.18 Article 17 also makes clear that the right of the parties to be heard is not unlimited. Parties must be given a ‘reasonable’ opportunity to present their case and an oral hearing must be requested at an ‘appropriate’ stage of the proceedings (Article 17(1) and (3)).

Article 17(5) allows the arbitral tribunal to join, at the request of a party, one or more third persons to the proceedings if such a person is a party to the arbitration agreement. Further requirements are that all concerned persons are given an opportunity to present their position and that the arbitral tribunal finds that no party is prejudiced by the joinder.

The new provisions on the statement of claim and the statement of defence require that the parties include the legal grounds supporting the claim and that they should ‘as far as possible’ accompany their submissions by all documents and other evidence relied on (Article 20(2)(e) and Article 21(2)).

The revised Article 26 contains a more comprehensive definition of the requirements for the order of provisional measures, aligning the UNCITRAL Rules with the UNCITRAL Model Law on International Commercial Arbitration (in the following ‘Model Law’). The arbitral tribunal’s power to order interim measures extends, without limitation, to:

  1. the maintainance of the status quo between the parties;
  2. the prevention of current or imminent harm to the proceedings;
  3. the prevention of prejudice to the proceedings;
  4. the preservation of assets; and
  5. the preservation of evidence.

4) The Award

Aligning the UNCITRAL Rules with the Model Law, the new rules allow an arbitral tribunal to base its decision on the substance of the dispute on ‘rules of law’ if the parties have agreed thereon. The provision clarifies that a tribunal is not restricted to apply a particular law but may also apply non-binding rules such as the lex mercatoria or the International Institute for the Unification of Private Law (UNIDROIT) principles.

In addition, the new rules increase the power of the appointing authority to review the costs and expenses of the arbitrators. After its constitution, the arbitral tribunal has to inform the parties of how it intends to determine its fees and expenses. This proposal may be reviewed and adjusted by the appointing authority at the request of a party (Article 41(3)). The final determination of the fees and expenses is likewise subject to the review of the appointing authority (Article 41(4)(b)).

5) Conclusions

Many of the modifications of the 1976 Rules are clarifications of issues that were already handled satisfactorily by many arbitral tribunals. These clarifications are nonetheless useful as they provide for a tighter framework for efficient proceedings. The strengthened role of the appointing authority further contributes to the prevention of dilatory tactics and to the control of the costs. The adaptation to the needs of investment treaty arbitration and multiparty arbitration makes the revised rules more attractive for these proceedings. It may therefore be expected that the revised rules will be as appealing and successful as the 1976 Rules.