The UNCITRAL Arbitration Rules: Award The UNCITRAL Arbitration Rules: “The xxx shall be made in writing and shall be final and binding on the parties. The parties undertake to carry out the xxx without delay”

International Commercial Arbitration Lecture 8: Award by Feruza Bobokulova

Definition of an Award There is no internationally accepted definition of the term ‘award’. No definition can be found in conventions dealing with arbitration Despite the NY Convention is directed to the recognition and enforcement of awards, the nearest it comes to a definition is: “The term ‘arbitral award’ shall include not only awards made by arbitrators appointed for each case, but also those made by permanent arbitral bodies to which the parties have submitted”

Definition of an Award The term ‘award’ should be reserved for decisions that finally determine the substantive issues with which they deal This involves distinguishing between awards and procedural orders and directions (which are concerned with the conduct of the arbitration) Procedural orders and directions help to move the arbitration forward They do not have the status of awards

Remedies Arbitration awards may cover a range of remedies including: Monetary compensation Punitive damages and other penalties Specific performance and restitution Injunctions Declaratory relief Rectification Adaptation of contracts and filling gaps Interest and Costs

Monetary Compensation The type of award most often made by an international arbitral tribunal is one that directs the payment of a sum of money by one party to the other This payment may represent money due under a contract (debt) or compensation (damages) for loss suffered or both The sum of money awarded is usually expressed in the currency of the contract of the currency of the loss

Specific Performance An AT may be authorized by the parties or by the applicable law to order specific performance of a contract An international AT sitting in the US will have the power to award specific performance and English law empowers and AT siting in England to ‘order specific performance of a contract’ (other than a contract relating to land) unless a contrary intention is expressed in the AA In civil law jurisdictions, specific performance (rather than contractual damages) is the principal remedy for breach of contract

Restitution Restitution represents an attempt to put the clock back: it seeks to put the aggrieved party in the same position as that party would have occupied if the wrongful act had not taken place A good example of the use of this remedy in public international law is provided b the Temple of Preha-Vihaer case, in which the ICJ ordered the government of Thailand to restore the Cambodia certain sculptures and other objects that it had removed from the temple on the border between the two countries

Restitution In practice restitution is rarely ordered, since it is usually impracticable to restore the status quo ante An award of monetary compensation is generally the best available remedy, particularly in commercial disputes The relief sought and granted in investor-state arbitrations confirms that monetary compensation rather than restitutions, is the principal remedy in international arbitration

Injunctions There is no objection in principle to an AT granting relief by way of injuction, if requested to do so, either on an interim basis or as final relief An AT is not usually empowered to make effective orders against third parties and if injunctive relief is required, it is generally quicker and more effective to seek it direct from the court Most sets of international and institutional rules make it clear that the arbitration clause is not to be taken as excluding the jurisdiction of the relevant national court or courts to make orders for interim measures of protection

Delaratory Relief An AT may be asked to make an award, which is simply declaratory of the rights of the parties Modern arbitration legislation often makes express provision for the granting of declaratory relief Even when there is no such provision, however, there is no reason in principle why an At should not grant such relief Instead, declaratory relief has become a common remedy in international arbitration, with requests for contractual damages often coupled with a request for a declaration that there has been a breach of contract

Declaratory Relief A declaratory award establishes the legal position definitively and has binding effect as between the parties It is a useful device, particularly where the parties have a continuing relationship and want to resolve a dispute between them without the risk of damaging that relationship by a demand for monetary compensation It is capable of recognition, but it is not itself capable of enforcement

Rectification Rectification of a contract is a remedy virtually unknown in civil law countries, where it tends to be treated in the same sense as adaptation of contracts and filling gaps In common law countries these concepts are considered separately However, in general an AT may make an order for rectification of a contract if empowered to do so by the parties If no express power is conferred by the AA, the question of the AT’s jurisdiction to order rectification requires closer examination

Adaptation of Contracts and Filling Gaps The adaptation of a contract or the filling of gaps in it raises a different issue from that of rectification When parties have a continuing business relationship, but have failed to provide in their contract for a particular contingency that arises, it may be useful if they are able to refer to a helpful outsider, such as an AT for a decision on how the contingency should be dealt with In the same way, where the parties have entered into a long- term agreement, but circumstances change, it may be helpful if they are able to refer to an AT for a decision as to what is to happen in the changed circumstances

Adaptation of Contracts and Filling Gaps In the case of filling gaps, there is a gap in the contract to be filled whereas in the adaptation of contracts, the contract may need to be amended, in whole or in part, to meet changed circumstances In legal theory, the filling of gaps in a contract poses fewer problems than its adaptation It may only be a matter of degree, but adding an additional term to the contract, on the basis that it meets the presumed intention of the parties, is a less speculative undertaking than actually changing the contract to meet new circumstances

Interest and Costs An award for the payment of a monetary sum generally includes an award of interest and an award in respect of the other forms of relief discussed may carry with it an award of costs

How an AT Reaches its Decision There must be a deliberation or formalized interchange of views before AT makes its award Rule 15 of the ICSID: ‘(1) The deliberations of the Tribunal shall take place in private and remain secret. (2) Only members of the Tribunal shall take part in its deliberations. No other person shall be admitted unless the Tribunal decides otherwise.’

Majority Voting Ideally, decisions are made unanimously Some favor majority voting, others give the presiding arbitrator a decisive role The UNCITRAL Arbitration Rules provide for the majority voting. However, Art 31(2) makes an exception to this rule, in relation to questions of procedure and allows the presiding arbitrator to decide such questions on his own, subject to revision by the AT In ICSID arbitrations, majority voting prevails

The Role of Party-Nominated Arbitrators Parties rarely abuse the arbitral process to the extent of nominating an arbitrator whose specific function is to vote for the party who nominated him But parties appoint arbitrators whom they believe are likely to be sympathetic to the case they wish to advance during the proceedings

Categories of Awards: Final Awards The term ‘final award’ is customarily reserved for an award that completes the mission of the AT Subject to certain exceptions, the delivery of a final award renders the AT functus officio It ceases to have any further jurisdiction over the dispute and the special relationship that exists between the AT and the parties during the currency of the arbitration ends

Categories of Awards: Final Awards An AT should not issue a final award until it is satisfied that its mission has actually been completed If there are outstanding matters to be determined, such as questions relating to costs or interest or further directions to be given relating to the disposal of property, the AT should issue an award that is expressly designated as a partial or interim award

Categories of Awards: Partial and Interim A partial award is an effective way of determining matters that are susceptible to determination during the course of the proceedings and which, once determined, may save considerable time and money for all involved One example is where an issue of jurisdiction is involved; an interim award on such an issue may shorten or at least simplify the proceedings considerably

Categories of Awards: Partial and Interim The power of an AT to issue partial or interim awards may derive from the AA or from the applicable law The UNCITRAL Rules: ‘In addition to making a final award, the AT shall be entitled to make interim, interlocutory, or partial awards.’

Categories of Awards: Partial and Interim Another example of a situation in which the device of an interim award is likely to prove useful is where there is a dispute between the parties as to the law or laws applicable to the merits of the case If this is not resolved at an early stage, the parties must argue their respective cases by reference to different systems of law In such circumstances, it is often sensible for the AT to issue a preliminary decision on the question of the applicable law

Categories of Awards: Partial and Interim The main disadvantage of a partial or interim award, whether it is on an issue or jurisdiction, applicable law or other matters in dispute is that a further avenue for judicial review is created Judicial intervention during the course of the arbitration may occur on an application by one of the parties to nullify the interim or partial award or on an application to confirm it

Default Awards Occasionally, ICAs are held in which one party (usually the respondent) fails or refuses to take part This failure or refusal may be complete: it may occur from the beginning of the proceedings or it may happen during the proceedings as a result of a change of mind or policy The task of an AT is made more difficult by the failure of one of the parties to take part in the proceedings In such a case, the AT takes on itself the burden of testing the assertions made by the active party and it must call for such evidence and legal argument as it may require to this end

Consent Awards Parties to an ICA often arrive at a settlement of their dispute during the proceedings If this occurs, the parties may simply implement the settlement agreement and in effect revoke the mandate of the AT This means that the jurisdiction and powers previously given to the AT by the parties are terminated

Validity of Awards An At should do its best to ensure that its award is not only correct, but also valid and enforceable The validity of the award must be considered under two headings: form and content In general the requirements of form are dictated by: AA and Lex arbitri

Validity of Awards: Form The AA It is necessary to check whether the AA specifies any particular formalities for the award In practice this means examining any set of rules that the parties have adopted The UNCITRAL Rules lay down the following requirements: The award shall be made in writing; The reasons upon which the award is based shall be stated; The award shall be signed by the arbitrators and shall contain the date on which and the place where it was made; Where there are three arbitrators and one of them fails to sign, the award shall state the reason for the absence of the signature

Validity of Awards: Form Lex arbitri The requirements of form imposed by national systems of law vary from the comprehensive to the virtually non-existent The Swiss Concordat, which may still govern domestic arbitrations in Switzerland, lays down detailed requirements, but for international cases these are narrowed to just four, namely that the award be in writing, reasoned, dated, and signed

Validity of Awards: Form The introductory section of an award Awards usually contain a brief narrative setting out a number of facts relating to the arbitration These may include an identification of the AA or document containing the arbitration clause, a brief description of the disputes that have arisen between the parties, the way in which the AT was established, with dates, and any specific procedural agreement of the parties or rulings of the AT The requirement that the parties should be identified is often fulfilled by giving the award a formal title on a separate title page

Validity of Awards: Form Signatures Some national systems of law require that all arbitrators should sign the award in order for it to be valid This is highly unsatisfactory, since in such cases a dissenting arbitrator may frustrate an arbitration simply by refusing to sign the award The rules of arbitration of the major international arbitral institutions all deal expressly or implied with signature of the award The ICC Rules make it clear that the award must be signed, but that the award of a majority of the arbitrators of if there is no majority, the award of the presiding arbitrator alone, is effective

Validity of Awards: Form Language of Award The award will normally be rendered in the language of the arbitration, although occasionally it may be made either in the language, which is the de factor working language of the AT or in the language that is most convenient for the parties Any mandatory rule of law of the place of arbitration concerning the language of the award must be respected. It is condition of NY Convention

Validity of Awards: Content The contents of an award are dictated primarily by: AA The lex arbitri AAs usually provide that the award is to be final and binding upon the parties It follows that the award should deal with all matters referred to arbitration, in so far as they have not been dealt with by any interim or partial awards

Validity of Awards: Content Unambiguous So far as national systems of law are concerned, the laws of most states require an award to be both unambiguous and dispositive Ambiguity and inconsistency are frequently capable of being cured, either by the AT interpreting the award at the request of the parties or alternatively, by an application to the relevant national court for an order that the award should be remitted to the AT for clarification

Validity of Awards: Content Effective determination of the issues An award must also be dispositive, in that it must constitute an effective determination of the issues in dispute It is not sufficient for the AT to issue a vague expression of opinion The award must be formulated in an imperative tone: ‘we award’, ‘we direct’, or the equivalent

Validity of Awards: Content Effective determination of the issues If there is more than one respondent and a monetary award is made in favor of the claimant, it is essential for the AT to make it clear whether one of the respondents and if so, which one, has the obligation to make the payment An award should not direct the parties to perform an illegal act or require the parties to do anything, which may be considered contrary to public policy. Nor may the award contain any directions that are outside the scope of authority of the AT

Validity of Awards: Content Reasons The Model law: ‘The award shall state the reasons upon which it is based, unless the parties have agreed that no reasons are to be given or the award is an award on agreed terms under Article 30’ The Washington Convention calls for a reasoned award without any exception

Validity of Awards: Content Notification of Awards International and institutional rules of arbitration generally make provision for the notification of the award to the parties The UNCTIRAL Rules provide that: ‘Copies of the award signed b the arbitrators shall be communicated to the parties by the AT’

Reading Materials Redfern, A., Hunter, M., Blackaby, N., and Partasides, C., 2004. Law and Practice of International Commercial Arbitration, 4th edn. London: Sweet and Maxwell. Tweeddale, A. and Tweeddale, K., 2005. Arbitration of Commercial Disputes: International English Law and Practice. Oxford: Oxford University Press.

Thank You for your attention!