INTERNATIONAL COMMERCIAL ARBITRATION
Part 1
Question 1: Why is severability such an important principle in arbitration?
The principle of severability is one of the important principles that are to be deployed in modern arbitration; it implies that cases of illegality are associated to the substance of the primary contract rather than the arbitration clause. Initially, the aspect of arbitration was viewed a form of justice that is considered primitive and an institution of peace that served the purpose of upholding harmony among parties in an arbitration although it did not enforce the role of law (Babak, 2006). The principle of severability during an arbitration agreement stands out as the pillar of the entire arbitration process in the present day. The principle of severability serves the main purpose of ensuring that parties who have the main objective of arbitrating their disputes that may be as a result of their contractual relationship in the absence of undue interference from the court, in spite of a case whereby a party questions the legality of the contract and its respective arbitration agreement. The principle of severability stipulates that once parties have legitimately consented in arbitration, they have an undue obligation to ensure that the arbitration process survives owing to the fact that it has been separated from other elements of the contract (Baker, 2010). The principle of severability is important during the arbitration process due to the fact that it reinforces the autonomy of the arbitration process, which serves to guarantee its continuity irrespective of the flaws that have the potential of affecting the contract; this denotes the independence of the arbitration process from the main contract and the lex contractus. The underlying fact is that the principle of severability was adopted with the main objective of protecting the protection arbitration agreement from any issues that may be highlighted regarding the validity of the primary contract (Berend, 2009).
The doctrine of severability is a significant principle especially in cases where arbitration is deployed as an effective means for resolving disputes in international trade. The doctrine is also an important requirement in cases whereby the parties entering an agreement need security from the unpredictable nature of national jurisdictions. As such, the principle of severability serves as a legal protection of the arbitration agreement, which in turn makes significant contributions towards assuring the efficiency of the arbitration process (Greenberg & Christopher, 2011). It can also be firmly asserted that the security of a well-organized global business practices means that the parties in a contractual agreement can have their anticipations met in manner that is devoid of disputes relating to the legitimacy of the primary contract. The different treatments that are awarded to contract and the respective arbitration agreements draws upon the fact that the agreements are not similar in any way (Hamid, 2002). This is due to the fact that arbitration is more associated with the issues relating to procedural dispute resolution. On the other hand, the contractual agreement is mostly associated with the exclusive obligations and rights of the various parties entering into a contractual relationship. Basing on this view, the principle of severability is an important factor that should be taken into consideration during the arbitration process (Kronke, 2010).
There are two important outcomes associated with the doctrine of severability in the arbitration process. The first outcome is that the status of the primary contract does have any influence on the arbitration agreement. The second outcome is that the substantive law deployed during the creation or validating the arbitration agreement can be somewhat different from the law that governs the contract. This approach guarantees the security of the arbitration process (Kronke, 2010). The principle of severability is deployed in order to separate the arbitration agreement from the influence of all national jurisdictions; this implies that in the context of international cases, there are no applicable laws to the arbitral clauses with the exception of the fundamental rules that govern the formation and scope of arbitration agreement. This places the arbitrators in a better position to exercise their jurisdictions (Peter, 1995). It can be summed up that the principle of severability plays an integral role ensuring the integrity of decision making during the arbitration process and ensures that the process goes smoothly without any form of interference. These guarantees the process of the arbitration process irrespective of the challenges associated with the main contract (Peter, 1998).
Question 2: The selection of a seat is the most important clause in any arbitration clause. Discuss
The quantity of information that is contained within the arbitration clauses is usually different according to the contract. For instance, in some arbitration clauses, the parties require the specific application of the state rules in terms of the number of arbitrators and pre-requisite qualifications of the arbitrators, the language to be used in the arbitration process, the venue for the arbitral process and the seat of arbitration. The level of certainty that a well detailed arbitration clause deploys to resolve the dispute is usually encouraged. The identification of the seat of the arbitration is one of the most important elements of an arbitration clause. This is because the selection of the seat of arbitration usually determines that laws that are used in governing the procedures deployed during the arbitration process. The selection of the seat also influences the process and rights that pertain to the enforcement the arbitration awards (Sykes, 1997).
A number of the arbitration statutes distinguish the seat of the arbitration from the venue that will be used for conducting the arbitration hearings. It is not a must that the seat of the arbitration be the same place that will be used for conducting the hearings of the arbitration process. In addition, the seat of arbitration is not usually affected to the change of the venues for the arbitral hearings.
The seat of arbitration is of ultimate significance due to the fact that it influences the law of arbitral procedures that will be adopted during the process and any appropriate interventions over the seat given to the courts that have the mandate to exercise the jurisdictions. For instance, under the Article 14 of the International Chamber of Commerce Arbitration Rules and the Article 16 found in the London Court of International Arbitration rules, the contractual agreement may under the provisions of English Law whereby the parties entering arbitration have consented to have an arbitration seat placed in Qatar. Under this example, issues that relate to the interpretation of the contractual relationship are determined by the English Law; this means that arbitrators are required to make use of the English when carrying out a review on the contractual provisions. The institutional rules that the arbitrators must use during the process should integrate the provisions of the ICC (Peter, 1998). As a result, the appointing of the arbitrators and the respective timing for the submissions and associated costs are determined by the arbitration rules of the ICC. It is important to take into account that the arbitration seat is placed in Qatar. In this case, the Qatar law is also applied during the arbitration process in terms of the arbitration procedures and the time limits associated with the enforcement of the arbitration awards. This denotes the significance of the selection of arbitration seat.
The arbitrations seat also influences the degree to which the local court will participate in the arbitration process. A number of countries have jurisdictions that do not allow the autonomy of parties; for instance, the imposing of conditions relating to the eligibility and qualifications of the arbitrators and giving the law courts the permission to intervene in the arbitration process as agreed upon by the parties in the agreement. On the other hand, other counties have legal provisions that are more friendly towards the arbitration process and gives permission to the parties to have a high level of autonomy regarding the arbitration procedures (Kronke, 2010). Such a legal framework also helps in the provision of supportive awards, which may include the interlocutory awards. This cases implies the significance of the selection of the seat since it will affect the legal environment of the arbitration process in the sense that the arbitration seat may either involve a legally constrained or supportive environment, which have a significant impact on the success of the arbitration process.
The selection of the arbitration seat also imposes significant influences on the level that the arbitral award can be challenged. This is due to the fact that it is a common occurrence for the law courts to take into consideration cases associated with the appeal of arbitration awards. In addition, the principles adopted the arbitration seat also plays an integral in influencing the level of judicial review by the parties. These factors have a significant role in governing the issuance of the final arbitration award.
As discussed, during the drafting of an arbitration clause that is to be applied in a new contractual relationship, it is vital to take into account the various issues relating the selection of the seat and the functioning of the attribution laws at the local level. This involves an assessment of whether the local courts are restrictive or friendly to the arbitration process. This denotes the significance of selection of the seat when drafting the arbitration clause (Peter, 1995).
Question 3: Mr. Jones, in Australia had a contract with Mr. Schmidt in Germany. Mr. Schmidt complained about the suitability of the goods and started proceedings under the ICC rules in Singapore. Mr. Jones objected to the competence of the tribunal on the grounds that there is a non-existent contract as he never signed the document. This is the only defense Mr. Smith puts forward in relation to the competence of the tribunal. Explain whether Mr. Smith will be successful.
Question 4: Explain how an arbitral award can be enforced in Australia and under which law. Also explain under which conditions an award can be challenged
Grievance arbitration can be defined as a process deployed to settle disagreements between a union and the employer in instances when a collective agreement is being implemented. The role of the arbitrator is to make a binding ruling in case the disputes cannot be resolved. It is important to note that only grievances that cannot be decided upon by the internal grievance procedures require an arbitrator. It is important to note that the arbitrator’s decision is final and parties in dispute have to accept it conclusively. Appeal to the decision of the arbitrator can be granted based on unfair hearing for the involved parties or if there is some inconsistencies in the decision with the principles of the code. Arbitrators usually called in case the parties in dispute have failed to agree, the board can appoint the arbitrators, who are non-partisan and has to receive hearings from both parties and implement a decision.
A guiding principal of arbitration is fairness and impartiality to the disputing parties. In order to achieve this, arbitrators are supposed to give each of the parties an opportunity to present their grievances and to deal precisely with the case of the opponents. In addition, arbitrators usually implement procedures that are deemed suitable to the circumstances of the specific presented case. This serves to offer a fair ground for reaching a long-lasting decision. In order to reach at a fair decision, the arbitrators have to inquire about the status quo, what happens when either of the parties does not consent to the proffer of arbitration and what happens if there is no collective agreement after the cooling off period.
In Australia, the processes that result to arbitration decisions are the occurrence of grievances, which are an outcome of the discharge of an employee by his respective employer or in cases whereby the collective agreement is misinterpreted. In Australia, grievance arbitration can be of two forms, namely interest arbitration and Rights Arbitration. Interest arbitration usually entails disputes relating to the setting up of the terms and conditions regarding a collective bargaining agreement. Rights arbitration on the other hand entails differences relating to the interpretation of the collective agreement that has already been established, As a result, the process of grievance arbitration has the prime objective of resolving the differences that may arise because of the differences during implementation and interpretation of the collective agreement.
References
Babak, B., 2006. The Osler guide to commercial arbitration in Canada: a practical introduction to domestic and international commercial arbitration. New York: Kluwer Law International.
Baker, M., 2010. The Baker & McKenzie International Arbitration Yearbook 2009. Moscow: Wolters Kluwer Russia.
Berend, J., 2009. Aircraft repossession and enforcement: practical aspects, Volume 1. New York: Kluwer Law International.
Bishop, D., 2009. Enforcement of arbitral awards against sovereigns. New York: Juris Publishing, Inc.
Greenberg, S. & Christopher, K., 2011. International Commercial Arbitration: An Asia Pacific Perspective. Cambridge: Cambridge University Press.
Hamid, G., 2002. The international effectiveness of the annulment of an arbitral award. New York: Kluwer Law International.
Kronke, H., 2010. Recognition and enforcement of foreign arbitral awards: a global commentary on the New York Convention. New York: Kluwer Law International.
Peter, E.N., 1995. Conflict of laws in Australia. New York: Butterworths.
Peter, G., 1998. International trade and business: law, policy, and ethics. New York: Routledge.
Sykes, E., 1997. Australian private international law. New York: Law Book Co.
Is this the question you were looking for? If so, place your order here to get started!
