HomeOpinion & AnalysisArbitration insights: Various shades of international commercial arbitration

Arbitration insights: Various shades of international commercial arbitration

BY JACOB MUTEVEDZI

Arbitration is a mechanism for resolving disputes outside the formal curial system. The dispute is determined by one person or a panel of persons known as the “the arbitral tribunal”. The arbitral tribunal renders an award which is legally binding on the parties to the arbitration agreement and is judicially enforceable. Article I of The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (“NYC”) binds Contracting States to recognise and enforce foreign arbitral awards. Article II (3) of the NYC provides that a court of a Contracting State, when seized with a matter in respect of which the parties have made an arbitration agreement, must refer the matter to arbitration.

In the practice of alternative dispute resolution one often hears of terms like “international arbitration”, “domestic arbitration”, “ad hoc arbitration” and “institutional arbitration”. The abovementioned forms of arbitration are just examples and that list is not exhaustive. This article attempts to unpack the meaning of these various forms of arbitration.

Domestic arbitration

Domestic arbitration alludes to arbitration which takes place within one jurisdiction. It excludes any foreign-related factors between the domestic companies, individuals or other economic entities involved. The term “domestic arbitration” is not defined in the Arbitration Act [Chapter 7:15] (“the Act”), however the preamble to the Act as read together with section 3 (1), section 4 and section 5 of the Act makes it apparent that domestic arbitration means arbitration in which the arbitral proceedings take place in Zimbabwe, in accordance with Zimbabwean substantive and procedural law and the cause of action has wholly arisen in Zimbabwe.

International arbitration

According to Article 1 (3) of the Model Law, Arbitration is international if the parties to an arbitration agreement have their places of business in different countries or if the place of arbitration or a substantial part of the obligations of the commercial relationship is in a country outside that of the place of business of the parties. Put simply, it is arbitration of an international nature involving companies, individuals or other entities from different countries. Its purpose is to provide parties engaged in international transactions with a neutral forum for dispute resolution. Increasingly, the term international arbitration is often employed to refer to “international commercial arbitration” for the resolution of disputes between private parties arising out of commercial transactions conducted across national boundaries.

Institutional arbitration

Institutional arbitration is administered by an institution agreed on by the parties and conducted according to that institution’s rules of arbitration. Institutional arbitration is also referred to as “administered arbitration”. Article 2 (a) of the Model law defines arbitration as “any arbitration whether or not administered by a permanent arbitral institution”. Parties may choose, in the arbitration agreement, to refer the dispute to be determined in accordance with the rules of a particular arbitral institution. One or more arbitrators are appointed in such arbitration from a pre-selected panel by the governing body of the institution or by the parties themselves.

Generally, the institution’s role in institutional arbitration includes, among other things, receiving requests for arbitration, appointing the arbitrators, setting and administering the payment of arbitration fees and assisting the arbitrators in handling interlocutory matters, for example an application for the recusal of an arbitrator.

Some of the globally recognised international institutions are, the International Chamber of Commerce (ICC), London Court of International Arbitration (LCIA), Hong Kong International Arbitration Centre (HKIAC), Singapore International Arbitration Centre (SIAC), Kigali International Arbitration Centre (KIAC), International Centre for Settlement of Investments Disputes (ICSID), and the World Intellectual Property Organisation (WIPO), an agency of the United Nations which deals with intellectual property disputes.

Ad Hoc arbitration

When the parties themselves agree on the framework of the arbitration, it is termed Ad hoc arbitration. It may assume a domestic or international character. Russell on Arbitration, 21st Ed, on page 42 states the following about ad hoc arbitration: “The expression ‘Ad Hoc’, as in ‘Ad Hoc arbitration’ or ‘Ad Hoc submission’ is used in two quite different senses: an agreement to refer an existing dispute, and/or an agreement to refer either future or existing disputes to arbitration without an arbitration institution being specified to supervise the proceedings, or at least to supply the procedural rules for the arbitration. This second sense is more common in international arbitration.”

The arbitration is not conducted under the supervision of an arbitral institution. The parties have no obligation to submit their arbitration to the rules of an arbitral institution but stipulate their own rules of procedure. The geographical location of an ad hoc arbitration is key because most of the difficulties concerning the arbitration will be resolved in accordance with the law of the seat of arbitration. The parties are; however, free to agree to adopt the rules framed by a particular arbitral institution without submitting their dispute to such institution. A compromise between purely ad hoc arbitration and institutional arbitration, is to use the UNCITRAL Arbitration Rules without an institution to administer the case. Further, the parties may provide for an appointing authority to assist them in the constitution of the arbitral tribunal or the appointment of a sole arbitrator. This type of arbitration is particularly appropriate for disputes involving governments because states are usually unwilling to submit themselves to an arbitral institution.

Investment arbitration

This is unique because it always involves a state on the one hand, and a foreign investor on the other. The cause of action always concerns the treatment of the foreign investor by the state. Half the time, the investor asserts that its investments has been illegally expropriated, or that it has been treated in an unfair and inequitable manner.

The applicable legal framework is atypical because, usually, the proceedings do not arise from a contract but from a Bilateral Investment Treaty (BIT). On account of state involvement, elements public international law and treaty law are applicable.

  • Jacob Mutevedzi is a commercial lawyer and partner at Clairwood Chambers Attorneys and writes in his personal capacity. He can be contacted at +263775987784 or at jmutevedzi@gmail.com

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