The arbitration process

The arbitration process

Although every arbitration is different, there are general steps and procedures that are followed:

1. Starting the arbitration

Any party to an agreement can start an arbitration (usually called the claimant). The claimant will typically send a notice of arbitration (sometimes called a Notice to Request to Arbitrate, or Arbitration Application) to the other party involved in the dispute. Where and how notice is to be given is often covered under the notice terms of the agreement that is being arbitrated.

This notice should contain information such as:

·         the name and address of both parties,

·         a description of the dispute, and

·         what result the person starting the arbitration hopes to obtain.

The person receiving the notice must respond within a certain time period, and must either confirm the accuracy of the information in the notice, or make corrections to it. If an arbitrator has already been agreed upon, the notice must also be sent to the arbitrator.

2. Choosing the arbitrator

An arbitrator must be chosen and agreed upon by all parties. Often, the process for selecting an arbitrator, and the number of arbitrators that will be required, is set out in the document under dispute. If there is no written agreement, the parties can agree on an arbitrator and decide if more than one arbitrator is necessary. If the parties cannot agree upon an arbitrator, the court may appoint one.

3. First meeting

Once an arbitrator is chosen, all parties and the arbitrator usually hold a first meeting. The parties may also retain legal counsel to attend at the arbitration and represent them. The initial meeting, sometimes called a pre-hearing examination, gives the participants a chance to discuss and clarify any outstanding issues regarding the arbitration process, such as:

·         identifying the issues in dispute,

·         determining what form the arbitration will take: that is, an oral hearing, or in writing,

·         the scheduling of all events, including the date and place of the arbitration hearing, and

·         identifying and listing witnesses and any experts that will be called to give evidence.

This meeting could be held in person, by telephone, or by videoconference.

4. Arbitration hearing

If it is determined that the arbitration will be in writing, the arbitrator will examine documents and render a decision. The arbitrator may ask for further documents or explanations with regard to the documents being examined.

Often, the parties will request an arbitration hearing. At the hearing, each party presents their case, evidence is given, and witnesses may be examined. Depending on the complexity of the case and the monetary value at stake, the parties may choose to hire lawyers to represent them at the arbitration.

5. Decision of arbitrator

Once the arbitration has taken place, the arbitrator or panel will make its decision, which is usually final and binding. The decision must be in writing and provided to all parties. The decision must include an explanation of why the decision was made. Among other things, the decision may involve:

·         ordering specific action to be taken, such as having one party make a payment to the other,

·         ordering an injunction against specific actions, such as refraining from selling a product,

·         monetary awards (which may include one party paying the other party’s costs of arbitration, plus interest).

Subject to applicable legislation and any arbitration agreement that may exist between the parties, the decision of an arbitrator may be appealed to a court of law.

6. Fees and costs of arbitration

There are costs to both parties in preparing and participating in an arbitration. The costs include such things as the arbitrator’s fees, the cost of expert witnesses, disbursements and so on. The costs can vary depending on several factors, such as:

·         whether there was an oral hearing requiring the attendance of the arbitrator and fees for the hearing facility, or if the arbitration required only written submissions,

·         if expert witnesses were called,

·         how long the arbitration lasted, and

·         if the arbitrator awarded costs of the arbitration to be paid by only one of the parties.

Generally, fees or a deposit must be paid when a copy of the notice of arbitration and response is sent to the arbitrator.

Is it important to note that there are time frames that exist for all steps in an arbitration, either as set in the Arbitration Act, or as agreed upon by the parties and the arbitrator.

Rights and duties of arbitrators

Rights and duties of arbitrators Article 11 

(1) An arbitrator must accept his appointment in writing. Such acceptance may be made by signing the arbitration agreement.

(2) An arbitrator must conduct the arbitration with due expeditiousness and undertake measures on time in order to avoid any delay of the proceedings.

(3) Unless agreed otherwise, the parties may discharge by their consent an arbitrator that fails to perform his duties, or does not perform them in a timely manner.

(4) An arbitrator has the right to reimbursement of expenses and a fee for the work completed, unless he has waived these rights in writing. The parties shall be jointly and severally liable for the payment of such expenses and fees.

(5) If an arbitrator has determined the amount of his own expenses and fees, his decision does not bind the parties unless they accept it. If the parties do not accept this decision, the expenses and fees will be determined, upon request of an arbitrator or of a party, by the authority specified in Article 43, paragraph 3 of this Law. The decision made by such authority is a title for enforcement against the parties to the arbitral dispute.

 Challenge of arbitrators Article 12

(1) When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose any circumstances likely to give rise to justifiable doubts as to his independence or impartiality. An arbitrator, from the time of his appointment and throughout the arbitral proceedings, shall without delay disclose any such circumstances to the parties unless they have been previously informed of them by him.

(2) An arbitrator may be challenged only if circumstances exist that give rise to justifiable doubts as to his independence or impartiality, or if the arbitrator does not possess qualifications agreed to by the parties or if he fails to fulfill his duties specified in Article 11, paragraph 2 of this Law. Law on Arbitration (Arbitration Act) 6

(3) A party may challenge an arbitrator appointed by him, or in whose appointment he has participated, only for reasons that occurred after the appointment or reasons of which he becomes aware after the appointment has been made.

(4) The parties are free to agree on a procedure for challenging an arbitrator, subject to the provisions of paragraph 7 of this article.

(5) Failing such agreement, a party who intends to challenge an arbitrator shall, within fifteen days after becoming aware of the appointment of the arbitrator or after becoming aware of any circumstances referred to in paragraph 2 of this article, send a written statement of the reasons for the challenge to the arbitral tribunal.

(6) Unless the challenged arbitrator withdraws from his office or the other party agrees to the challenge, the arbitral court, including the arbitrator subject to the challenge, shall promptly decide on the challenge.

(7) If a challenge under the procedure specified in paragraphs 4 and 6 of this article is not successful, the challenging party may, within thirty days after having received notice of the decision rejecting the challenge, or if the arbitral tribunal does not decide on the challenge within thirty days after the challenge was made, in a further thirty days from the moment of the expiration of the first thirty days, request from the appointing authority specified in Article 43, paragraph 3 of this Law to decide on the challenge. While such a request is challenged arbitrator, may continue the arbitral proceedings and make an award.

Relevant Conventions and Documents

Relevant Conventions and Documents

One of the most relevant convention in the field of international commercial arbitration is the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958). It requires courts of contracting states to give effect to private agreements to arbitrate and to recognize and enforce arbitration awards made in other contracting states and it applies to arbitrations which are not considered as domestic awards in the state where recognition and enforcement is sought.

On European point of view, the next relevant legal document is the European Convention on International Commercial Arbitration (1961), which applies to arbitration agreements concluded for settling disputes arising from international trade between physical or legal persons residing in different Contracting States.

The UNCITRAL Model Law on International Commercial Arbitration reflects the worldwide consensus on key aspects of arbitral process accepted by different states and it is designed to assist States in reforming and modernizing their laws on arbitral procedure.

The UNCITRAL Arbitration Rules provides a set of procedural rules upon which parties may agree for the conduct of arbitral proceedings arising out of their commercial relationship. These rules are widely used both in ad hoc arbitration and in permanent arbitration institutions.

In addition with these conventions and documents, arbitration process is regulated by other regional conventions, such as Inter-American Convention on International Commercial Arbitration, and Conventions covering certain subject matters, such as the EU Tax Arbitration Convention, as well as national arbitration laws.

Powers and duties of arbitrators

Powers and duties of arbitrators.

(1)  Arbitrators shall have the duty to conduct fair and impartial hearings, to take all necessary actions to avoid delay in the disposition of proceedings, to maintain order, and to meet the sixty day time frame required  for the rendering of a decision. They shall have all powers necessary to meet these ends including, but not limited to, the power:

(a) To consider any and all evidence offered by the parties which the arbitrator deems necessary to an understanding and determination of the dispute;

(b) To regulate the course of the hearings and the conduct of the parties, their representatives and witnesses;

(c) To schedule vehicle inspection by the technical experts, if deemed necessary, at such time and place as the arbitrator determines;

(d) To continue the arbitration hearing to a subsequent date if, at the initial hearing, the arbitrator determines that additional information is necessary in order to render a fair and accurate decision. Such continuance shall be held within ten calendar days of the initial hearing;

(e) To impose sanctions for failure of a party to comply with

(f) To calculate and order the joint liability for compliance obligations of motor home manufacturers, when applicable, as part of arbitration decisions when ordering repurchase or replacement of a new motor vehicle

.

(2) The board is responsible for the assignment of arbitrators to arbitration hearings. The selection and assignment of arbitrators is not subject to the approval of either party.

(3) Arbitrators must not have a personal interest in the outcome of any hearing, nor be acquainted with any of the participants except as such acquaintance may occur in the hearing process, nor hold any prejudice toward any party. Arbitrators shall not be directly involved in the manufacture, distribution, sale, or warranty service of any motor vehicle. Arbitrators shall maintain their impartiality throughout the course of the arbitration proceedings.

(a) An arbitrator shall sign a written oath prior to the commencement of each arbitration hearing to which he or she has been assigned, attesting to his or her impartiality in that case.

(b) There shall be no direct communication between the parties and the arbitrators other than at the arbitration hearing. Any other oral or written communications between the parties and the arbitrators shall be channeled through the board. Any prohibited contact shall be reported by the arbitrators to the board and noted in the case record.

THE LAW GOVERNING THE ARBITRATION AGREEMENT

THE LAW GOVERNING THE ARBITRATION AGREEMENT

The Governing Law

The law governing the arbitration agreement can be truly different, if the parties chooses to conclude a separate arbitration agreement instead of arbitration clause included in the substantive contract.

In the case of separate arbitration agreements, parties are free to choose the law governing the arbitration agreement. This can lead to situation where the proper law of the arbitration agreement can be different from the law governing the dispute, because the arbitration agreement and the contract from which the dispute arises are separate entities and are governed by different laws.

But on the other hand, in the case of arbitration clauses, finding the governing law can be a bit more difficult. Firstly, the proper law of the arbitration agreement will normally be the law applicable to the substantive contract as a whole. So if the contract contains an express choice of law made by parties, the chosen law also governs the arbitration clause. Secondly, in the case where the parties have failed to express their choice of law, the law governing the contract (and arbitration agreement) is normally implied from the seat of arbitration. And thirdly, if parties have failed to express their choice of law and they have not designated the seat of arbitration, the proper law of the arbitration clause is the law of the country with which it is most closely connected.

Refusal of the Recognition of the Arbitration Agreement

The national court can refuse the recognition of the arbitration

n agreement, if under the law of the country the dispute is not capable of settlement by arbitration. Usually this type of issues are related to status and family law matters, and of course criminal law matters, in which the parties have restricted ability to enter into agreement over the matters. In some countries, also consumers are protected by setting additional requirements for the arbitration agreements.

Validity of the Arbitration Agreement

The validity of the arbitration agreement is considered under the choice of law governing the arbitration agreement. But if there is no choice of law made by the parties, the validity of the arbitration agreement is considered on the basis of the law of the country in which the award is to be made. In some cases it can be hard to say in which country the award is to be made. In these cases, where there is no choice of law and the country in which the award will be made cannot yet be determined, the validity is considered in accordance with the law of the country in which the court is considering the validity.

AWARD AND TERMINATION OF PROCEEDINGS

AWARD AND TERMINATION OF PROCEEDINGS

(1) The arbitral tribunal shall decide the dispute in accordance with such rules of law as are chosen by the parties as applicable to the substance of the dispute. Any designation of the law or legal system of a given state shall be construed, unless otherwise expressed, as directly referring to the substantive law of that State and not to its conflict of laws rules.

(2) Failing any designation by the parties under paragraph 1 of this article, the arbitral tribunal shall apply the law that it considers to be most closely connected with the dispute.

(3) The arbitral tribunal shall decide ex aequo et bono or en qualité d’amiable compositeur only if the parties have expressly authorized it to do so.

(4) In all cases, the arbitral tribunal shall decide in accordance with the terms of the contract and shall take into account the applicable usages.

Decision making by panel of arbitrators Article 28

(1) Unless otherwise agreed by the parties, the arbitral tribunal shall make any decision by a majority of all its members.

(2) If a majority has not been achieved, arbitrators shall continue deliberations on each issue.. If after repeated voting the majority still cannot be achieved, the award shall be made by the presiding arbitrator.

(3) Outside joint sessions of the arbitral tribunal, questions of procedure may be decided by a presiding arbitrator, unless the parties or all members of the arbitral tribunal have not agreed otherwise.

(4) The panel of arbitrators may entrust to one of its members to undertake certain fact-finding activities.

DUE DILLIGENCE FOR COMPANY

DUE DILLIGENCE FOR COMPANY

If your company has ever been involved in a significant transaction, whether in the form of a business combination, a public offering of securities or securing a credit facility, you are probably painfully familiar with the due diligence process. Although the due diligence process can be time consuming and sometimes overwhelming, especially for a target company unfamiliar with the process, it is a crucial component to significant corporate transactions.

Due diligence is essentially the investigation of a target company through reviewing documents and interviewing persons with knowledge about the company. For the buyer of a business or an investor in a significant equity stake in a company, the due diligence investigation will attempt to reveal all material facts and potential liabilities relating to the target business or company. There are various sub-categories of due diligence, including business due diligence, legal due diligence, accounting due diligence and even "special" due diligence. This column will focus on the legal due diligence process, generally from the perspective of a target company, in connection with a merger or acquisition transaction. The summary provided in this column will be helpful for a target company in understanding how to efficiently navigate the legal due diligence process and generally what to expect. The column will briefly summarize (i) the primary reasons for legal due diligence and (ii) the basic manner in which legal due diligence is usually conducted.

Why Is Legal Due Diligence Necessary?

Some of the primary reasons for conducting legal due diligence are outlined below.

·         Better Understand Your Business. Legal due diligence is necessary to give the buyer the information that it needs to learn about your target company and to structure its purchase of your company. In addition, legal due diligence will help the buyer's counsel to become acquainted with your company so that they can communicate effectively with your company's counsel and with the buyer in structuring the transaction.

·         Help to Value the Target Company. The buyer will use the information learned in the legal due diligence process to determine how much to pay for your company. In addition to carefully examining obvious indicators of value such as your company's cash flows and balance sheet, the buyer and its counsel will search for more subtle indicators of value or potential liabilities in things such as (i) your organizational documents and important contracts (e.g., is your company restricted in how or where it operates its business or subject to unusual pricing terms or contingent liabilities?), (ii) lawsuits to which your company is a party, (iii) insurance policies benefiting your company, (iv) employee benefit and labor arrangements, (v) potential environmental claims, (vi) intellectual property owned or used by your company and (vii) rights or obligations under earn-outs or indemnification provisions.

·         Help in Drafting the Relevant Documentation. The information learned in the legal due diligence process will be helpful for both the buyer's counsel and your company's counsel in drafting and negotiating the merger or acquisition agreement and related ancillary agreements. This information will be particularly helpful in allocating risk when drafting your company's representations and warranties, your company's pre-closing promises and the post-closing indemnification rights of the buyer. Further, your company will likely need to prepare a disclosure schedule, to be delivered at the time the primary transaction agreement is executed, that discloses exceptions to the representations and warranties made by your company in the agreement. The information gathered in the legal due diligence process will be helpful for your company and your counsel in preparing the disclosure schedules. In addition, if the transaction includes a securities component, this information will be very helpful in crafting a disclosure document that may need to be delivered to the buyer.

·         Identify Impediments to Closing. In the legal due diligence process the parties will attempt to identify everything that must happen before the transaction can close. For example, counsel will focus closely on (i) your organizational documents, to determine the stockholder and other approvals required to complete the transaction, (ii) your contracts, including assignment clauses, and your permits and licenses, to determine whether the transaction is contractually prohibited or whether specific consents are required; (iii) regulatory requirements, to determine if any governmental approvals are required; and (iv) your debt instruments and capital leases, to determine repayment requirements. With respect to item (ii), note that if the transaction is structured as a sale of your company's assets, it is likely that you will need to seek consent from the other parties to many of your contracts before assigning the contracts to the buyer. If the transaction is structured as a sale of your company's stock, consent will only be required if "assignment" is defined broadly to include a change of control transaction (common in real estate leases). If the transaction is structured as a merger, depending on the applicable state statute, whether consent is required may depend on whether it is a forward merger (in which case the legal existence of your company ceases and seeking consents may be advisable) or a reverse merger (in which case the legal existence of your company continues and it is less likely that seeking consents is required).

·         Legal Opinions. Often the target company's counsel, the buyer's counsel or both will be expected to render a legal opinion at the closing of the merger or acquisition transaction. In order to reach the relevant legal conclusions in the legal opinions, counsel will need to rely on factual information provided by the target company. The legal due diligence process provides counsel with the opportunity to learn this information.

How Is Legal Due Diligence Accomplished?

Some of the primary steps involved in the legal due diligence process are outlined below.  

·         Help Establish the Big Picture First. Before diving into a stack of thick contracts, competent buyer's counsel will first seek to understand your company at a broader level. Unless your company is a public company with SEC reports available at the click of a button, be prepared to help the buyer establish a big picture understanding of your company by providing concise summaries about your business and industry. Such summaries are often found in offering memoranda or in audited financial statements. You might also consider directing the buyer to your website or to relevant news articles about your company.

·         Be Prepared to Provide Documents and Interviews. Buyer's counsel will likely prepare a lengthy due diligence request list asking you to provide every piece of paper that possibly relates to your company. The request list will likely be daunting, but take comfort in knowing that it is often over-inclusive. Still, be prepared to provide copies of all important documents relating to your company, including your company's organizational documents, all material contracts, all documents relating to pending litigation and litigation recently completed, all documents relating to labor and employee benefits matters and tax documents, among others. These documents are often organized in a central "data room," which may be located in your company's offices and where the buyer's counsel and your counsel can convene to spend countless hours reviewing documents. Increasingly, electronic "virtual data rooms" are replacing physical data rooms. In addition, be prepared to make available members of your executive management (preferably your Chief Financial Officer) to answer questions about your company. Interviews can be an extremely efficient way to quickly address issues and resolve concerns in the legal due diligence process.

·         How Much Legal Due Diligence Is Necessary? The legal due diligence process can take anywhere from several days, in a relatively small and uncomplicated transaction, to several months, in a larger and more complex transaction. The scope of legal due diligence in your transaction will depend on the size of your company and the number of issues requiring additional analysis. The legal due diligence process will end when the buyer is satisfied that it has sufficiently identified and analyzed the relevant issues and gained an adequate understanding about your company. The buyer will typically try to substantially complete the legal due diligence process before the primary transaction agreement is executed.

·         Presentation of Legal Due Diligence Findings. The presentation of legal due diligence findings is really only a relevant issue for the buyer and its counsel. The buyer will normally expect its counsel to present legal due diligence findings promptly and in a user-friendly format. For small deals or cost-sensitive buyers, the presentation may take the form of a verbal conversation. On the other end of the spectrum, for large complicated deals, it is not uncommon for legal due diligence findings to be presented in the form of a memorandum, ranging from 50 to 100 pages, that describes all documents reviewed, analyzes the key issues discovered and recommends various solutions. Many buyers simply ask for a bullet-point list of key issues identified in the legal due diligence process. The point is that, if you are a buyer, you should make your expectations clear and communicate with your counsel regarding any cost sensitivities and the format in which you would prefer the legal due diligence findings to be presented.

Legal due diligence is a crucial component to any significant corporate transaction. Although it can be a demanding process, once your company understands the reasons for legal due diligence and the basic manner in which it is usually conducted, the process should proceed more efficiently, saving costs and headache

Commencement of arbitral proceedings

Commencement of arbitral proceedings Article 20

Unless otherwise agreed by the parties, the arbitral proceedings commence:

(1) if the arbitral proceedings are organized and administered by an arbitral institution - on the date when such institution receives the claim;

(2) in any other event (ad hoc arbitration) - on the date on which a notification of the appointment of an arbitrator or a proposal for appointing a sole arbitrator, accompanied by an invitation to appoint the other arbitrator or declare whether he accepts the proposed sole arbitrator, and the statement of claim that submits the dispute to arbitration is received by the respondent

Language Article 21.

(1) The parties are free to agree on the language or languages to be used in the arbitral proceedings. Failing such agreement, the arbitral tribunal shall determine the language or languages to be used in the proceedings. This agreement or determination by the arbitral tribunal, unless otherwise specified therein, shall apply to any written statement by a party, any hearing and any award, decision or other communication by the arbitral tribunal.

(2) The arbitral tribunal may order that any documentary evidence shall be accompanied by translation into the language or languages agreed upon by the parties or determined by the arbitral tribunal.

 (3) Until the language of the proceedings has been determined, a claim, a defense and other deeds can be submitted in the language of the main contract, of the arbitration agreement or in the Croatian language.

(4) If neither parties nor arbitrators can reach an agreement on the language of arbitration, the language of arbitration shall be the Croatian language.

Statements of claim and defense Article 22

(1) Unless otherwise agreed by the parties, the claimant shall in his statement of claim state the facts supporting his claim, the points at issue and relief or remedy sought, and the respondent shall in his statement of defense state his defense in respect of the claimant’s statements, proposals and claims. Law on Arbitration (Arbitration Act) 9 The parties may submit with their statements all documents they consider to be relevant or may add a reference to the documents or other evidence they will submit.

 (2) Unless otherwise agreed by the parties, either party may amend or supplement his claim or defense during the course of the arbitral proceedings, unless the arbitral tribunal considers it inappropriate to allow such amendment having regard to the delay in making it.

Binding arbitration

Binding arbitration

 Binding arbitration involves the submission of a dispute to a neutral party who hears the case and makes a decision. Arbitration takes the place of a trial before a judge or jury. Additionally, the grounds for appealing or setting aside the arbitration decision are very limited and many times may not be available at all. If a person signs a contract that has a mandatory, binding arbitration agreement, he or she gives up the right to go to court.

When a consumer contract contains a binding arbitration agreement, it is important that the consumer know this fact in advance of signing or accepting the contract. Consumers should carefully read all documents before they sign them to find out whether the document contains an agreement for binding arbitration. Consumers also need to read revisions or addendums to contracts already signed which may add an arbitration agreement to an existing contract. Once the consumer has this information, he or she should make an informed decision about whether or not to sign the contract.

What can the consumer expect at an arbitration?

An arbitration hearing is less formal and usually shorter than a trial. The persons present their version of the facts, using witnesses and documents in a way that is similar to a trial, but the rules of evidence and other court procedures usually do not apply. After considering the evidence, the arbitrator makes a decision. The decision may be announced immediately, but usually is made within 30 days.

What if the consumer can’t buy a product without signing an arbitration agreement? Sometimes it is hard for a consumer to purchase new products, such as mobile homes and automobiles, unless he or she signs an arbitration agreement. If the consumer is not willing to sign a predispute arbitration agreement, the consumer should ask that the arbitration clause be removed. If the merchant will not remove the arbitration agreement from the contract, the consumer may consider other ways to buy

How much does it cost the consumer to go to arbitration?

 The cost of arbitration includes filing fees and the arbitrator’s charge. Filing fees for an arbitration may be higher than the fees to file a case in court, and can vary based on the amount of the claim. Some arbitration providers charge a smaller filing fee for consumer cases. Arbitrators usually charge an hourly or daily fee, and the amount of the fee may depend on the type of issues and the experience of the arbitrator. Because people in a court case are not required to pay for the judge or jury, the requirement of paying the decision-maker applies only in arbitration or in private judging. Arbitrators usually have the right to make the losing person pay the costs of the arbitration, or to divide the costs.

ARBITRATION

ARBITRATION

Arbitration is a procedure in which a dispute is submitted, by agreement of the parties, to one or more arbitrators who make a binding decision on the dispute. In choosing arbitration, the parties opt for a private dispute resolution procedure instead of going to court.

Its principal characteristics are:

     Arbitration is consensual

Arbitration can only take place if both parties have agreed to it. In the case of future disputes arising under a contract, the parties insert an arbitration clause in the relevant contract. An existing dispute can be referred to arbitration by means of a submission agreement between the parties. In contrast to mediation, a party cannot unilaterally withdraw from arbitration.

The parties choose the arbitrator(s)

Under the WIPO Arbitration Rules, the parties can select a sole arbitrator together. If they choose to have a three-member arbitral tribunal, each party appoints one of the arbitrators; those two persons then agree on the presiding arbitrator. Alternatively, the Centre can suggest potential arbitrators with relevant expertise or directly appoint members of the arbitral tribunal. The Centre maintains an extensive roster of arbitrators ranging from seasoned dispute-resolution generalists to highly specialized practitioners and experts covering the entire legal and technical spectrum of intellectual property.

Arbitration is neutral

In addition to their selection of neutrals of appropriate nationality, parties are able to choose such important elements as the applicable law, language and venue of the arbitration. This allows them to ensure that no party enjoys a home court advantage.

Arbitration is a confidential procedure

The WIPO Rules specifically protect the confidentiality of the existence of the arbitration, any disclosures made during that procedure, and the award. In certain circumstances, the WIPO Rules allow a party to restrict access to trade secrets or other confidential information that is submitted to the arbitral tribunal or to a confidentiality advisor to the tribunal.

The decision of the arbitral tribunal is final and easy to enforce

Under the WIPO Rules, the parties agree to carry out the decision of the arbitral tribunal without delay. International awards are enforced by national courts under the New York Convention, which permits them to be set aside only in very limited circumstances. More than 140 States are party to this Convention.

Mandatory rules for Arbitration

Mandatory rules for Arbitration

The lex arbitri is a set of mandatory rules of law applicable to the arbitration at the seat of the arbitration.  It also can be defined as the juridical seat of arbitration.

Lex arbitri also “determines the relationship between the arbitral tribunal and national courts."  For instance, what extent court intervention during the arbitral proceedings is authorized.

“International commercial arbitration is presumed to be governed by the law of the place in which it is held."  This is the ‘lex arbitri’ or the law of the ‘seat’ of arbitration. But, it includes the principal of party autonomy, which allows the parties to choose the applicable law. “The parties are free to choose rules, which govern their contract."  According to Geneva Protocol, “the arbitral procedure, including the constitution of the arbitral tribunal, shall be governed by the will of the parties and by the law of the country in whose territory the arbitration takes place."  This article demonstrates that there is a strong link between the law of the country where the arbitration takes place and the law governing that arbitration (lex arbitri).

The law of the arbitration agreement (lex arbitri), may be different from the proper law and the procedural law (curial law). “Proper law of the contract governs issues of interpretation, performance, non-performance and liability under the contract and is determined by using the conflict of law rules."  Contracting parties usually insert a clause to determine the proper law to govern the contract. “The lex arbitri is generally different from the proper law of the contract."  

On the other hand, the curial law is the law that governs the procedure of the arbitration. It can be said that, “it is the part of the lex arbitri,"  because, they are, in most cases, the same as the law of the seat of arbitration. And the parties generally do not separate them. “Curial law is determined by parties’ choice, if there is no choice, the curial law is the law of the place of arbitration." 

It is sometimes possible for the curial law to be different from the law of the seat of arbitration. For instance, “parties can choose to hold arbitration in one country but make it subject to the procedural law of another country." Under the Union of India case, arbitration clause providing for the seat to be in London but the procedural law was the Indian Arbitration Act 1940. However, “if parties have not made an express agreement as to the law to govern the arbitral proceedings then it is usual the law of the seat of arbitration will apply to the procedure."  According to the Union of India case, “English procedural law governed the proceedings, with the addition of the sections of Indian Statute that were not inconsistent with English procedure, because Indian procedural law cannot override the mandatory provisions of the English Arbitration Act 1996." 

Furthermore, delocalised arbitration is “to detach an international commercial arbitration from control by the law of the place in which it is held."  The idea is that international commercial arbitration “has no forum". It is not under control of the lex arbitri and the court of the place of enforcement of award. The party autonomy becomes more important and control should come from one place that is “the law of place of enforcement." 

One example is given below is that parties have expressly chosen the German law as a proper law of the contract.

Agreement: ICC Arbitration in London, English/Swiss Arbitrator (ie individual with dual nationality) as Chairman.

It is an institutional arbitration. The best-known institutional arbitrations are the ICC, the LCIA and the ICDR (AAA). The main feature is that, “it provides the arbitrators to settle rules directly and do not need to make a specific references to a national law procedure." 

When parties are drafting an arbitration agreement, they mostly specify the seat of arbitration. The choice of seat is not a physical choice, but it is a legal choice, which allocates the arbitration law applicable to the arbitration procedure. For instance, if parties choose the seat of the arbitration in Turkey, but they required to be decided the substantive issues in accordance with the law of England, nevertheless, the arbitration process will be subject to the national arbitration law of Turkey. Moreover, “if parties do not make an express choice of place of arbitration, the choice will be made, either by the arbitral tribunal itself or arbitral institution."  

According to the ICC Rules 14, which provide that “in the absence of agreement the place of arbitration shall be fixed by the Court of Arbitration and a choice is most commonly based upon the most convenient for the arbitrator himself such as his home country."  In the instant case, the arbitrator has a dual nationality (Swiss and English). So, there is a possibility for Swiss Law to govern the arbitration agreement but England does not recognise delocalisation. It is not possible to apply Swiss Law in the UK.

It is clear under the Arbitration agreement that the arbitration takes place in London under the ICC arbitration. However, it does not necessarily mean that “the lex arbitri is the place of the arbitration"  but, “in the absence of the choice of lex abitri, it will be the seat of the arbitration that has the closest connection."  So, the law of the arbitration agreement (lex arbitri) will be the national arbitration law of England. The reasons for that may find under the section 2 of Arbitration Act 1996 provide that “the provisions of this part apply where the seat of the arbitration is in England and Wales or Northern Ireland." The seat of arbitration means “the juridical seat of the arbitration", which is mostly lex arbitri of the arbitration.

Arbitration Agreement

Arbitration Agreement

The UNCITRAL Model Law defines an arbitration agreement as "an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not." This means that parties agrees to settle their disputes in arbitration process instead of public litigation. Basically, parties can choose which kind of disputes fall under the arbitration. It can mean that all disputes arising out of their legal relationship are to be settled in the arbitration process, or on the other hand, parties can choose that only certain kinds of them falls under it. Also, as the wording of the definition states, the arbitration agreement can be drafted before or after the dispute has arisen.

The arbitration agreement also defines the scope of the arbitral tribunal's jurisdiction. The arbitral tribunal does not have jurisdiction over the matters which are not covered by the arbitration agreement made by the parties. In other words, if the parties have agreed to settle certain kinds of disputes in the arbitration, the tribunal has no jurisdiction over other matters.

There are two types of arbitration agreements: "separate" arbitration agreements and arbitration clauses. Separate arbitration agreements are those which constitute a whole new agreement, where parties agrees to settle their dispute in arbitration. Arbitration clause means a provision, included in the contract between parties, which contains an obligation to settle disputes in arbitration.

National arbitration laws can set out different requirements for the form of the arbitration agreement. The main rule is that the arbitration agreement must be in writing. However, the requirement is pretty loose, because the requirement can be fulfilled by the exchange of letter or telegrams, or in otherwise documented way.

Seat of Arbitration

Basically, the concept of the seat of arbitration determines the procedural rules of the arbitration proceedings. It refers to the geographical and legal jurisdiction to which the arbitration process is tied. In other words, it is the place where the arbitration is held. For example, the arbitration agreement can state that the proceedings are to be held "in London under the rules of the ICC". Parties are free to identify the seat of arbitration. If they fail to do so, the seat is implied from an express choice of law governing the procedure. For example, if the arbitration agreement states that the dispute is settled in accordance with Indian law, the seat is considered to be in India.

ARBITRAL TRIBUNAL

ARBITRAL TRIBUNAL

If the parties have not agreed otherwise, three arbitrators shall be appointed.

1)  No person shall be precluded by reason of his nationality from acting as an arbitrator, unless otherwise agreed by the parties.

(2) Judges of Croatian courts may only be appointed as presiding arbitrators or as sole arbitrators.

(3) Parties are free to agree on the procedure of appointing the arbitrator or arbitrators, subject to the provisions of paragraphs 4 and 5 of this article.

(4) Failing such agreement,

1) in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two arbitrators thus appointed shall appoint the third arbitrator as presiding arbitrator. If a party fails to appoint an arbitrator or fails to inform the other party of this appointment within thirty days of the notice of appointment by the other party accompanied by a request to appoint an arbitrator, or if two arbitrators fail to agree on the third arbitrator within thirty days of the appointment of the last appointed of them, the appointment of the arbitrator shall be made, upon request of a party, by the appointing authority specified in Article 43, paragraph 3 of this Law;

 2) in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator, such arbitrator shall be appointed, upon request of a party, by the appointing authority specified in Article 43, paragraph 3 of this Law.

(5) Where, under an appointment procedure agreed by the parties,

 1) party fails to act as required under such procedure, or

2)  parties or arbitrators are unable to reach an agreement required of them under such procedure, or

3)  third party, including an institution, fails to perform any function entrusted to it under such procedure, any party may request the appointment authority specified in Article 43, paragraph 3 of this Law to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.

(6) The appointing authority specified in Article 43, paragraph 3 of this Law, in appointing an arbitrator, shall have due regard to any qualifications required of the arbitrator by the agreement of the parties and to such considerations as are likely to secure the appointment of an independent and impartial arbitrator, and, in a dispute with an international element, in the case of a sole or presiding arbitrator, shall take into account as well the advisability of appointing an arbitrator of a nationality other than those of the parties.

(7) A decision on a matter that is, pursuant to paragraphs 3 or 4 of this article entrusted to the appointing authority specified in Article 43, paragraph 3 of this Law, shall not be subject to appeal.