Thirty-four years on from the introduction of the UNCITRAL Arbitration Rules, the modified and improved UNCITRAL Arbitration Rules have come into force.
Four years in the making, the Working Group of the United Nations Commission on International Trade Law ("UNCITRAL") has completed the long-awaited revisions to the UNCITRAL Arbitration Rules of 1976. The new 2010 UNCITRAL Arbitration Rules came into force on 15 August 2010 and are applicable to all arbitration agreements concluded after that date. They reflect the development of international commercial arbitration in the last 34 years. The rules were primarily developed for use in ad hoc arbitrations but have been broadly accepted in both ad hoc and institutional arbitrations. They have also been widely used in investor-state and state-state arbitration.
The modifications and improvements of the UNCITRAL Rules can be divided into four categories. First, some major changes that reflect the evolution of arbitration procedure in line with technological advancements in the last 34 years, particularly the drafting process of arbitration clauses. Second, the suggestion of the designation of the Permanent Court of Arbitration in The Hague ("PCA") and its extended powers as an appointing authority under the rules. Third, a number of changes concerning the arbitral procedure with a view to increasing efficiency. Finally, some further general changes. To conclude, this Insights Article provides a short outlook on the future use of the UNCITRAL Rules.
Major changes regarding the technological evolution
The first group of changes in the UNCITRAL Rules echo technological advances over the last three decades. In particular, the UNCITRAL Rules no longer require an arbitration agreement to be "in writing" (Art 1(2)). Article 1 also does not require that the parties to an arbitration be "parties to a contract" as was stated in the 1976 Rules. This allows a dispute arising from any kind of legal relationship to be referred to arbitration under the UNCITRAL Rules. Importantly, the UNCITRAL Rules are now directly applicable to investor-state arbitration. Further, the prior requirement that communications be physically delivered has been removed as Art 2(1) states:
"A notice, including a notification, communication or proposal, may be transmitted by any means of communication that provides or allows for a record of its transmission."
However, this is limited by Art 2(2) which provides that:
"Delivery by electronic means such as facsimile or e-mail may only be made to an address so designated or authorised."
As a result, where no such electronic address has been designated or authorised, delivery must be made either physically to the addressee, or his/her place of business, habitual residence or mailing address (Art 2(3)).
With respect to email communications, the calculation of time periods under the UNCITRAL Rules begins on the day following the delivery of the e-mail to the designated address of the recipient (Art 2(6)).
Another salient improvement to the 1976 Rules is the ability to have videoconferences at hearings, allowing witnesses to be physically absent from the hearing as Art28(4) allows:
"[t]he arbitral tribunal [to] direct that witnesses, including expert witnesses, be examined through means of telecommunication that do not require their physical presence at the hearing (such as videoconference)".
Each of these changes can be seen as a much-needed update to the UNCITRAL Rules that accounts for developments in arbitral practice over the last 30 years, ensuring that the Rules remain relevant whilst retaining sufficient certainty in their operation.
Institutionalisation in the 2010 UNCITRAL Rules
The second category of changes is the expansion of the powers of appointing authorities under the UNCITRAL Rules. The 1976 Rules tried to promote ad hoc arbitration and encouraged all administration of the arbitral process to be left in the hands of the parties. Accordingly, these rules only gave the PCA the authority to act in the constitution or the challenge of an arbitrator (Art 6 et seq. 1976 Rules). By contrast, the new UNCITRAL Rules provide three additional matters in respect of which a third party, such as the PCA, ACICA or AAA, may assist in the arbitral proceedings. The three additional points are:
in the event that both parties fail to agree upon an appointing authority, the PCA serves as the default appointing authority (Arts 8-10);
upon request of a party the appointing authority may, in exceptional circumstances, deprive a party of the right to appoint a substitute arbitrator and appoint the substitute arbitrator itself (Art 14(2)); and
upon request of a party the appointing authority may supervise the arbitrators' fees and expenses, as discussed below (Art 41).
Additionally, Art 16 now provides an exclusion of liability for arbitrators and the appointing authority.
While the UNCITRAL Rules increase the role of the institution to a certain extent, they still aim to afford the parties maximum freedom in determining the process to be followed, and allow outside entities to assist in proceedings only when necessary The purpose of these amendments is to minimise the ability of a party to create deadlocks and delay the proceedings for tactical reasons by challenging the appointment of an arbitrator or failing to nominate an arbitrator.
Clarifications in the 2010 UNCITRAL Rules
The third category of changes in the UNCITRAL Rules deal with the clarification of arbitral procedures to eliminate uncertainty in some areas, such as the establishment of procedural timetables and certain procedures to be followed by the parties in selecting the appointing authority. The majority of the amendments consist of the adoption of international best practices developed by arbitrators using the UNCITRAL Rules over the last 30 years. For instance the new UNCITRAL Rules provides for:
the establishment of a procedural timetable as soon as practicable (Art 17(2));
the inclusion of the Claimant's legal arguments and documents and other evidence in the Statement of Claim (Arts 20(2)-(3)); and
a precise outline of the procedure to be followed by the parties in relation to selecting the appointing authority and, if the parties fail to agree, the procedure of how the PCA must act upon request of a party as the designated authority to select an appointing authority (Art 6).
While these procedures may be self-evident for experienced arbitrators, the clarification of such procedures will undoubtedly be useful for new arbitrators and counsel, who are new to or have not dealt with the UNCITRAL Rules extensively.
General changes in the 2010 UNCITRAL Rules
The fourth category of changes under the new UNCITRAL Rules comprises several general amendments to areas including the appointment of arbitrators in a multi-party arbitration, ie. multiple Claimants or multiple Respondents, (Art 4.1), interim measures (Art 4.2), and the arbitrator's fees and costs (Art 4.3).
Previously, the 1976 Rules had no provisions for appointing a three arbitrator tribunal in a multi-party arbitration. This issue is resolved by the new Art 10 which provides that where there are multiple parties as either claimant or respondent, they shall jointly appoint a single arbitrator to the three-member tribunal. This however does not apply if the parties have agreed to use a different number of arbitrators rather than one or three (Art 10(2)).
In the event that the parties are unable to constitute an arbitral tribunal, the appointing authority, if requested by the parties, shall constitute the arbitral tribunal (Art 10(3)). The rationale for using a third-party appointing authority is to avoid the situation where any one party obtains an unjustified advantage by gaining the right to appoint an arbitrator in a multi-party dispute where the others are unable to agree.
Furthermore, Art 17(5) permits the joinder of other parties to the arbitral proceedings, as long as it does not prejudice any party. However, before doing so, the Tribunal must grant each party the opportunity to be heard so as to consider the arguments favouring or objecting to such joinder.
While Art 26 of the 1976 Rules did not have any specific formulation on the scope of interim measures, the new Art 26 delivers much-needed clarity on this issue. It contains a broader definition for interim measures and imposes requirements that must be satisfied in order to obtain them. Furthermore, it gives the tribunal the authority to award interim measures to achieve purposes including, but not limited to, the:
maintenance or restoration of the status quo between the parties;
prevention of actions that would cause imminent harm or prejudice;
preservation of assets to satisfy a subsequent award (ie. "Mareva injunction"); and
preservation of evidence.
Arbitrator's fees and costs
The new UNCITRAL Rules now provide the parties with an opportunity to review the arbitrators' fees and expenses. Under the 1976 Rules, the parties had no right to review the tribunal's calculation of its fees and expenses. In contrast, the new Art 41(3) provides that the tribunal must inform the parties of its proposal as to how it will determine its fees and that within 15 days of receiving the tribunal's proposal, the parties may refer this proposal to the appointing authority for review. Within 45 days of the receipt of such a referral, the appointing authority shall adjust the fees and expenses and this shall be binding upon the tribunal. If the appointing authority fails to act within those 45 days or refuses to do so, a party may refer the review of the tribunal's proposal to the Secretary-General of the PCA (Art 41(3)(c)).
The development of the newly revised UNCITRAL Rules is certainly a step in the right direction in providing quick and effective dispute resolution arbitral proceedings. Additionally the broader formulation, which allows the UNCITRAL Rules to be used directly in investor-state arbitrations and the resolution of complex multi-party arbitrations, will increase their popularity and usage.
It should be noted as a matter of practical importance that the Rules state that the new version is presumed to apply only to arbitration agreements referring to the UNCITRAL Rules that were concluded after 15 August 2010 and that do not specify that a particular version of the Rules is to apply. This however does not apply if the arbitration agreement has been concluded by accepting an offer which was made before 15 August 2010. Such agreements are presumed to remain subject to the 1976 Rules. Consequently, the effects of the new rules may take some time to receive sufficient industry scrutiny. It remains to be seen whether the desired objectives of the UNCITRAL Working Group will be fully achieved. However, as the new rules incorporate international best practices in the arbitration arena and nominate the PCA as its default appointing authority, this will undoubtedly harmonise the evolution of international arbitration jurisprudence.
Moreover, the new rules deliver a variety of valuable improvements whilst maintaining the essential features of an already established and successful set of rules and procedures. It should be expected therefore that they will positively contribute to the efficient conduct of modern arbitrations.
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