Section IV - The Award Article 31

5. What are the changes? What is new?

5.4 Section IV - The Award Article 31 - Decisions

Article 31 ( 1 )

Article 31 (2)

A most significant and most important sentence has been added to the UNCITRAL text, i.e. the provision that, if there is no majority among the arbitrators, the award shall be made by the presiding arbitrator alone.

Long-standing practice has shown the importance of this additional provision. For very good reasons, therefore, the same solution has, since a long time, be adopted by the ICC Rules (see Article 25(1) of the 1998 ICC Rules) as well as by the LCIA Rules (Article 26.3 of the 1998 LCIA Rules). Even more importantly, this additional provision ties in with Article 189(2) of the PI LA.

Unchanged.

Article 32-Form and Effect of the Award

Article 32(1) The sentence has been added that the Arbitral Tribunal may also award costs in awards that are not final.

Again, this addition is most welcome.

The term "costs" comprises all the categories as enumerated in Article 38 of the Swiss Rules and, therefore, also includes fees (interim fees) of the arbitrators. By way of comparison: Article 31 (2), last sentence, of the 1998 ICC Rules, was a new provision to the same effect except that interim cost decisions by the Tribunal can only deal with party-costs, but not in respect of arbitrators' fees and disbursements or costs of the institution.

I consider the new solution of the Swiss Rules clearly preferable. Why should an Arbitral Tribunal that had to spend a very considerable time for rendering an interim award on jurisdiction not be authorized to determine all of the cost issues that have arisen or materialized so far, if deemed appropriate?

Article 32(2)

NOTE: There is no reference to dissenting opinions.³²

I do not consider that a specific reference to the filing of separate or dissenting opinions is necessary. Of course, dissenting opinions are somehow undesirable, and one may wish to avoid them. Nevertheless, my personal conviction is that the right of each arbitrator to render a separate opinion or dissenting opinion must be recognized as a fundamental right or human right.

Nevertheless, as a practical indication: The chair-person should clearly insist that any dissenting view be made known to the other arbitrators prior to finalizing the arbitral award, be it only for the purpose of enabling the other arbitrators to fully and carefully consider (or re-consider) the merits of any dissenting view. Moreover, the chair-person may then reflect whether the dissenting view, instead of requesting the dissenting arbitrator to finalize a separate dissenting opinion, would agree that his dissenting views be reflected within the body of the arbitral award, for instance in a paragraph starting "one Arbitrator voiced a different view in the sense that ... ", whereupon the majority arbitrators (or the chair-person alone) would thereafter explain why they stand by their majority view (or: why the chair-person does not follow or agree to that dissenting view). Many arbitral awards have followed this route, and the dissenting arbitrator may be satisfied by seeing such a reflection within the body of the arbitral award (see also the comments to Article 43(2)).³³

The lran-US Claims Tribunal had added a sentence lo lhis Article: "Any Arbitrator may request that his dissenting vole or his dissenting vote and the reasons therefore be recorded" (see VAN HoF, Commentary on the UNCITRAL Arbitration Rules, p. 217).

Some times, such an approach is criticized, arguing that such a reflection in the body of the award would violate or lift the "secret du delibere". However. such a criticism is non-sensical in my view. The arbitrator who wishes to make his dissenting view known to the parties. clearly waives the secret du delibere, and he/she Is certainly authorized to do so. The secret aims to protect the arbitrator only, not the parties. and if the arbitrators do not consider it necessary to keep the ·veil of th~ secrer, so be Ill Under one of the former presidents of the ICC, it was argued that the reflection of a dissenting view within the body of an arbitral award would weaken its force, authority and persuasiveness. However, again, I do not share this view. In the opposite, the discussion, within the body of the arbitral award, does show that the majority arbitrators (or the chair-person) have indeed carefully considered any dissenting view raised by one of their colleagues. lt also satisfies the clear requirement that the majority arbitrators (or the chair-person) must have the last word (and not the dissenting arbitrator). Finally, I have not seen any arbitral award (containing a discussion of dissenting views within the body of the arbitral award) that had been set aside by a national court (either in the country of origin or In a country of enforcement) on the ground that the award contained a reference to a dissenting view. There are, however, cases where it is indeed quite impossible to reflect a dissenting opinion within the body of the award, and to comment on it. An illustrative example is !he well-known partial award rendered by Dr. Wolfgang K!ihn and Judge Stephen Schwebel of 13 September 2001 in the matter CME Czech Republic B. V. v. Czech Republic, published in World Trade

Article 32(4} First sentence unchanged.

11 may be remarked here that it is a recognized practice that arbitrators need not specifically travel to the place of arbitration for the purpose of signing the award."

The last sentence was slightly changed to cover the situation that one or two arbitrators may fail to sign the award.

Article 32(5) There is now simply a reference to a special Article 43 regarding the publication of the award.

Article 32(6) The UNCITRAL Arbitration Rules speak of "copies of the Award signed by the Arbitrators", but it is certainly more correct to refer to "originals of the Award .. .", as the Swiss Rules do. Moreover, there is a provision that the Chambers shall retain a copy of the award (it would have been more correct to say "shall retain one original of the Award".

Article 33 -Applicable Law, Amiables Compositeurs

Article 33(1) This is an important change: the Swiss Rules allow the Arbitral Tribunal -in the absence of a choice by the parties of the rules of law governing their relationship -to determine the rules of law with which the dispute has the closest connection.

In contrast, the UNCITRAL Arbitration Rules only refer to the term '1he law".³⁵This was certainly correct in 1976 where, by many scholars, a broad interpretation to the term law had been given. in the sense that the term "the law" would encompass rules of law in a broad sense (thus including for instance rules of international law, transnational rules of law, norms forming part of international public policy, norms of international conventions and a-national rules of law).

However, the extremely extensive debate which has taken place since 1976 on this matter, including the extensive debate on the mirroring provision in the UNCITRAL Model Law {Article 28), has shown a certain tendency and usage in the sense that the term "the law" would (or could)

and Arbitration Materials, June 2002, pp. 109-287, with a separate Dissenting Opinion of Dr. Jaroslav Hand!, published on pp. 288-310.

I strongly recommend to use the neutral wording well adopted for !CC-and LCIA-awards which avoids to mention "Signed on [date] in (ZOrich]", but instead simply states, at the end of the award: "Date:( .... ]; Place of Arbitration: [ZOrich] .. .", followed by the signatures; this avoids a factually wrong impression that the award had been physically signed at the place of arbitration.

Professor PIETER SANDERS, in his recently prepared note proposing a revision of the UNCITRAL Arbitration Rules, suggests -very wisely so - to replace the term "law" by the term •rules of law"; I could not agree more.

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be understood to refer only to one particular national law, whereas, if that limitation should not apply, it would be more appropriate to use the broader term "rules of Jaw".

The making of such a distinction has become even more pertinent since the adoption of the UNCITRAL Model Law which, in its Article 28(1 ), mandates the arbitrators to render the award, having regard to the "rules of Jaw" chosen by the parties; however, in contrast, if the parties have not so chosen "the taw" or the "rules of Jaw" applicable to the case, the Tribunal would have to determine "the law" applicable to the case (in the sense of a national law). Hence, in that latter situation, an Arbitral Tribunal will have a "lesser authority" than the parties.

Those who are familiar with the debate on the UNCITRAL Model Law will recall the concern, voiced by some commentators, that legal certainty and foreseeability could be endangered if an Arbitral Tribunal was authorized, in the absence of a choice·made by the parties, to resort to rules of law, including norms such as "general principles of law",

"international law rules", lex mercatoria, the 1994 UNIDROIT Principles and the like. I disagree with that reasoning; the opposite is true, as my experience has shown in several quite striking cases. :M~

Another change to the UNCITRAL Arbitration Rules is significant: In the absence of a choice of law made by the parties, the UNCITRAL Arbitration Rules provide that the Arbitral Tribunal shall apply the law as determined "by the conflict of taws rules which it considers applicable", whereas the Swiss Rules refer to the "closest connection test".

Again, the tools and the method to be used by an Arbitral Tribunal in its search for the law (or rules of law) that should govern a particular contractual relationship have given rise to very extensive academic debate. While in the 1950s, the old doctrine and tendency prevailed that an Arbitral Tribunal should, for that task, resort to and apply the conflicts of laws system applicable at the place of arbitration, the 1961 European

The author of this report has, in several published articles, criticised the unfortunate solution of the UNCITRAL Model Law which, even more unfortunately, has meanwhile been adopted by many jurisdictions which have changed their arbitration act to basically conform with the UNCITRAL Model Law.

Fortunately, however, Switzerland has not curtailed the authority of the arbitrators, and has granted them the authority to determine. always in the absence of a particular choice made by the parties, that a particular contractual relationship may be governed by "rules of law" (see Article 187(1) of the PI LA). For details hereto see M. BLESSING, Introduction to Arbitration -Swiss and International Perspectives, 1999, pp. 209-227 (also available on the website <www.baerllarrer.ch>); see also M. BLESSING in lhe commentary International Arbitration In Switzerland, Kluwer 2000, pp. 199-214.

Convention pushed that solution into an early grave, for very good reasons.³⁷

Article VII of the 1961 European Convention dispensed the Arbitral Tribunal from applying the conflict of laws system prevailing at the place of arbitration and authorized the Tribunal to determine the proper law

"under the rule of conflict that the Arbitrators deem applicable". Hence, arbitrators were freed, by that landmark provision, from referring to a particular national system of conflict of laws, enabling them to simply take guidance from a confiict rule deemed appropriate or "applicable' (whether national or a-national) for guiding them towards the "proper law of contract". Most of the institutional arbitration rules which came into force between 1960 and 1985 adopted the solution and "wisdom" of Article VII of the European Convention. and so did the UNCITRAL Arbitration Rules in Article 33( 1 ).

Meanwhile. however, most arbitral institutions went even one step further, by avoiding any reference to a connict of law rule altogether, thus allowing the so-called voie directe. For instance, the 1998 ICC Rules, without making reference to any conflict rule, simply state in Article 17(1): "In the absence of any such agreement, the Arbitral Tribunal shall apply the rules of law which it determines appropriate." The 1998 LCIA Rules are quite similar in Article 22.3: " ... the Arbitral Tribunal shall apply the law(s) or rules of law which it considers appropriate."

A variant to that very liberal solution is the reference to the "closest connection" (or "centre of gravity" or "most significant relationship"); this notion is frequently referred to as one of the central concepts in private international law. The concept has found its way into Article 4.2 of the Rome Convention, into the US Second Restatement, as well as into Article 187(1) of the PI LA and§ 1051.2 of the Tenth Book of the German Code of Civil Procedure and, most appropriately, has now also found its way into Article 33(1) of the Swiss Rules.

Article 33(2) Unchanged regarding the ex aequo et bono decision and amiable composition.

Article 33(3) Unchanged: The contract and its terms (explicit or implied, and their interpretation} are, we may recall, the prevailing source for the

37 The fact Is that the various nalional conflict of laws systems have failed to provide any kind of the desired predictability, proposing divergent solutions. See hereto in detail M. BLESSING, Regulations in Arbitration Rules on Choice of Law, ICCA Congress Series No. 7, 1996, pp. 391-446.

arbitrator's decision on the merits. Equally significant is the reference to the usages of the trade; compare also Article 17(2} of the 1998 ICC Rules.

Article 34-Settlement or Other Grounds for Termination

Article 34(1}

Article 34(2}

Article 34(3)

Unchanged.

As a remark: In the case of a consent award requested by the parties, the Tribunal will normally (not only in antitrust arbitrations) have to be reasonably satisfied as to terms, prior to endorsing the parties' settlement with their own signatures, for obvious reasons which require no further discussion.

Unchanged.

Clerical amendments only and, of course, the reference that the award shall also be communicated to the Chambers.

Article 35- Interpretation ofthe Award Article 35( 1 )

Article 35(2)

First sentence unchanged.

By way of comparison: the UNCITRAL Model law is slightly more restrictive in its Article 33(1 )(b), in that it allows an interpretation only if so agreed by both parties, and the request would have to identify

· a

specific point or part of the Award"; the concern behind the more cautious wording is the fear that requests for interpretation might be abused in an attempt to obtain a revision of the award, and might be a manoeuvre initiated with a view of paving the ground for further steps seeking to have the award set aside.

Addition: The second sentence which provides that, where one party has requested the Arbitral Tribunal to give an interpretation of the award, the other party may comment on such a request within a time-limit not normally exceeding 30 days. This addition to the UNCITRAL Arbitration Rules corresponds to the solution adopted in Article 29(2) of the 1998 ICC Rules. However, even without such an additional sentence, the right to be heard would anyhow require the Arbitral Tribunal to invite the other party for comments.

Unchanged as to the substance.

Article 36-Correction ofthe Award

Article 36( 1 ) Same addition as in Article 35( 1) of the Swiss Rules.

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Article 36(2) Article 36(3)

No substantive change.

Article 37-Additional Award Article 37(1)

Article 37(2) Article 37(3) Article 38 - Costs

Again, the same addition as in Articles 35(1) and 36(1) of the Swiss Rules.

One may note here that the 1998 ICC Rules do not provide for the possibility granted to either party to request the making of an additional award as to claims presented In the framework of the arbitral proceedings but allegedly not dealt with by the arbitral award. The rationale for that omission was that, due to the scrutiny of the arbitral award by the ICC prior to its approval, such an omission should not really occur.

Likewise, the International Arbitration Rules of the International Centre for Dispute Resolution (American Arbitration Association) of 1 July 2003 do not provide for the possibility to require an additional award (see Article 30).

In contrast, Article 27.3 of the 1998 LCIA Rules does permit requests for an additional award.

No substantive change.

Insignificant change: The word "determine" was substituted for the word "fix" (as used in the UNCITRAL Arbitration Rules). The solution is that the Arbitral Tribunal shall determine the costs in its award. However, according to Article 40(4), the draft award has to be submitted to the Chambers for consultation on the decision as to the assessment and apportionment of the costs. Hence, the Swiss Rules do provide for an institutional scrutiny particularly as to the cost determination.

Article 38( e) Unchanged. This paragraph deals with the costs for legal representation and assistance.

Two remarks may be appropriate: First, it has become common for institutional arbitration rules to refer to the "reasonable legal and other costs" incurred by the parties in connection with the arbitration (see, e.g., Article 31(1) of the 1998 !CC Rules; Article 28.3 of the 1998 LCIA Rules) .

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Article 38(f)

Article 39 Article 39(1)

Article 39(2)

Article 39(3)

In other words, an Arbitral Tribunal is not taken to apply any local tariffs of a particular bar association, but will be guided by its own appreciation of reasonableness and, in so doing, the Arbitral Tribunal enjoys a large amount of discretion, for good reasons.

Second, it has become more and more customary that parties not only claim the costs of outside lawyers, but also the costs of their in-house legal departments, and there is a growing trend to accept these under a rule-of-reason approach. Less frequently, parties will even want to submit a claim for the management time absorbed by the arbitration proceedings. Such claims have been received by Arbitral Tribunals with a greater degree of reluctance.'"

Changed, by making reference to Appendix B (Schedule of the Costs of Arbitration}.

A second part was added to the sentence to make particular reference to a reasonable cost-determination in case of discontinuation of the arbitral proceedings, such as in the case of a settlement. This, of course, corresponds to good arbitral practice.

This Article was entirely changed so as to make reference to the Schedule of Costs as per Appendix B.

The corresponding Article of the UNCITRAL Arbitration Rules was replaced by a provision regarding the allocation of fees among the members of an Arbitral Tribunal.

According to this new provision, the chairman of the Tribunal shall normally be entitled to receive between 40 and SO % of the fees, and each eo-arbitrator between 25 and 30 %, having regard to "the time and

There is some justification in arguing that the absorption of management lime in case a dispute arises is part of the price of engaging in international business and trade and, therefore, should not be a compensable expense. However, in particular circumstances, a compensation for management time might nevertheless be appropriate. As a practical suggestion: 11 is always wise for the chairperson of the Tribunal lo raise the issue with counsel (for instance at the organizational meeting, or latest prior to closing the last hearing, to raise the issue in what format the parties will be expected to turn in their notes on costs, suggesting that counsel to both sides should agree on the format for submitting their own lawyers' fees (one total figure only, or a statement as to every monthly or quarterly bill submitted to the respective client, with details/without details etc.). Idem in respect of witnesses and experts Oust one total figure for each witness separately, or a full accounting including airfare, hotel bills, etc.) and more importantly, the chair-person should suggest to counsel to agree among themselves to what extent in-house representation costs should be charged, and for whom and at what rate. When raising these Issues properly, counsel to both sides will in almost all cases be able to agree on that format, and this will avoid the undesirable

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