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BISummary and Implications of the UNCITRAL Model Law on International Commercial Arbitration
This article aims to introduce the UNCITRAL Model Law on International Commercial Arbitration, formulated by the United Nations Commission on International Trade Law (UNCITRAL), and explore its impact on the international commercial arbitration system.
I. Introduction to the United Nations Commission on International Trade Law (UNCITRAL)
The United Nations Commission on International Trade Law (referred to as the “UNCITRAL”) is a specialized commission under the United Nations. In the 1960s, as international trade grew rapidly, differences in legal systems among different countries became a major obstacle to the development of international trade. In 1966, the UN established the UNCITRAL as the core legislative body in the field of international trade law. It was founded to promote the freedom and facilitation of international trade by unifying legal rules in this field, ensuring the uniformity and coordination of commercial law globally.
The UNCITRAL is composed of representatives from member countries with diverse legal systems and economic backgrounds to ensure broad representation and universality in its work. The committee focuses on developing model laws, conventions, and rules in various areas, including international commercial contract law, international sale of goods law, international commercial arbitration and mediation, e-commerce law, transportation law, international payments, and bankruptcy law. The UNCITRAL Model Law on International Commercial Arbitration (referred to as the “Model Law”) plays a crucial role in the international commercial arbitration system, significantly promoting the development of international commercial arbitration.
II. Legislative Purpose, Background, and Process of the Model Law
The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“the New York Convention”) signed in 1958 greatly facilitated the global recognition and enforcement of international commercial arbitration awards. However, it did not fully address the uncertainty in international commercial arbitration arising from differences in arbitration laws among countries. The international community increasingly recognized the need for a unified legal framework in the arbitration field, leading to the emergence of a unified and exemplary international commercial arbitration model law.
The explanatory notes in Part II of the Model Law elaborate on its legislative purpose: "The Model Law was developed to address considerable disparities in national laws on arbitration. The need for improvement and harmonization was based on findings that national laws were often particularly inappropriate for international cases." The "considerable disparities" manifest in the inadequacies of domestic arbitration laws and variations among them. Many countries have non-systematic domestic arbitration laws, often intertwined with procedural laws. Some domestic arbitration provisions only cater to domestic arbitration needs, neglecting the requirements of modern international arbitration practices. Certain mandatory or non-mandatory provisions in national laws may render arbitration rules and agreements chosen by the parties invalid.
The differences between domestic laws of different countries make parties unfamiliar with arbitration-related legal provisions of other countries, making it difficult to access arbitration-related legal information. These factors affect parties' choices of the place of arbitration.
In 1976, the UNCITRAL organized experts to initiate the drafting work, comparing and studying arbitration laws of different countries. Opinions from experts representing various legal systems and regions were sought to ensure the draft's wide acceptance and applicability. In 1982, the first draft of the Model Law was enacted. In 1985, after multiple rounds of discussions and revisions, a text that comprehensively considered various legal systems and the needs of international commercial practices was gradually formed. The Model Law was finally adopted by the United Nations General Assembly.
In 1999, the UNCITRAL proposed adding provisions related to interim measures in a report. On July 7, 2006, the UNCITRAL amended Articles 1(2), 7, and 35(2) and added Chapter IV A and Article 2A. The form requirements of the arbitration agreement were updated to better conform to international contractual practices, and Chapter IV A established and improved the system of interim measures in arbitration. On December 4, 2006, the UNCITRAL formally adopted the revised Model Law.
The legislation of the Model Law reflects the consensus reached by countries and regions with different legal and economic systems on critical issues in international arbitration worldwide. Therefore, the Model Law has been widely accepted and referenced by countries and regions with different legal cultural backgrounds, such as the civil law legal system and the common law system.
III. Differences and Connections Between the Model Law and UNCITRAL Arbitration Rules
As mentioned earlier, the Model Law is a model regulation formulated by the UNCITRAL in 1985 and revised in 2006. The Model Law is not mandatory and its purpose is to provide a reference for countries worldwide to enact arbitration legislation and for arbitration institutions to formulate arbitration rules. It allows countries and arbitration institutions to adjust and improve the legal system for international commercial arbitration based on their specific circumstances. Globally, by incorporating key content of the Model Law into domestic arbitration laws, countries can achieve coordination in the field of international arbitration, reducing transaction costs in international trade activities, enhancing efficiency, and minimizing obstacles caused by parties' unfamiliarity with the laws of other countries.
The UNCITRAL Arbitration Rules (hereinafter referred to as the "Arbitration Rules") were adopted on December 15, 1976, at the United Nations General Assembly and revised on December 6, 2010. It is the current primary international commercial ad hoc arbitration rule.
The Model Law aims to assist sovereign states' domestic courts in handling international arbitration, innovating their laws on arbitration procedures. Its content includes the effectiveness of the arbitration agreement, initiation of the arbitration procedure, selection and replacement of arbitrators, conduct of the arbitration procedure, the rendering of arbitral awards, their form and enforceability, as well as the support and supervision of domestic courts etc. The Model Law provides a unified legal framework for the legislation of arbitration in various countries, which needs to be adopted and established through legislative processes by sovereign states. However, the Arbitration Rules cover various aspects of the arbitration procedure, providing model arbitration clauses, specifying the procedures for appointing arbitrators and conducting arbitration, and establishing rules on the form, effectiveness, and interpretation of arbitration awards. These rules provide procedural rules for resolving disputes in commercial transactions, obtaining the express consent of the parties involved, it is permissible to apply the Arbitration Rules in arbitration cases, which can guide the smooth progression of the arbitration proceedings.
The enactment of the Model Law and the Arbitration Rules is aimed at promoting the standardization and popularization of international arbitration in the resolution of international disputes.
IV. Contents of the Model Law
The Model Law is divided into three parts:
(I) The first part consists of the complete text of the Model Law in eight chapters. In 2006, a new section, Chapter IVA, titled "INTERIM MEASURES AND PRELIMINARY ORDERS" was added after Chapter IV.
(II) The second part of the Model Law, in addition to introducing the legislative background mentioned above, provides detailed explanations and interpretations of the outstanding features of the law in eight aspects ("Explanatory Notes"). The following will introduce some key content and principles from the Explanatory Notes corresponding to the rules of the first part of the Model Law.
1. Regarding the determination of "International Commercial Arbitration
Article 1(3) of the Model Law explicitly defines the "international" elements:
“(a) the parties to an arbitration agreement have, at the time of the conclusion of that agreement, their places of business in different States; or
(b) one of the following places is situated outside the State in which
the parties have their places of business:
(i) the place of arbitration if determined in, or pursuant to, the
arbitration agreement;
(ii) any place where a substantial part of the obligations of the
commercial relationship is to be performed or the place with
which the subject-matter of the dispute is most closely connected; or
(c) the parties have expressly agreed that the subject matter of the
arbitration agreement relates to more than one country.”
Article 1, paragraph (4) of the Model Law specifically states that: “(a) if a party has more than one place of business, the place of business is that which has the closest relationship to the arbitration agreement; (b) if a party does not have a place of business, reference is to be made to his habitual residence.”
The provision in Article 1 covers most cases typically considered international and expands the concept of internationality: the place of arbitration, the place of contract performance, or the place in dispute is located outside the country where the parties have their place of business; or the parties have explicitly agreed that the subject matter of the arbitration agreement is related to more than one country. Therefore, Article 1 broadly confirms the parties' freedom to submit disputes to the judicial system established by the model law.
2. The Limited Intervention Principle of Domestic Courts
The "Explanatory Notes" point out that conscious decisions by the parties in the arbitration agreement to exclude the jurisdiction of the courts and to choose the finality and convenience of the arbitration procedure should restrict and clearly define the extent of the court's involvement in international commercial arbitration.
Article 5 of the Model Law stipulates: " In matters governed by this Law, no court shall intervene except where so provided in this Law. "
Article 6 of the Model Law further specifies matters on which the court or other institutions may assist and supervise arbitration. Specifically, these include the appointment of arbitrators under Articles 11(3) and 11(4), challenges and termination of arbitrator appointments under Articles 13(3) and 14, jurisdiction of arbitral tribunal under Article 16(3), court assistance in taking evidence under Article 27, and setting aside as exclusive recourse against arbitral award under Article 34(2).
Articles 11(3) and 11(4) provide that:
During the arbitration process, if three arbitrators are required according to the terms but one party fails to appoint its arbitrator within the specified 30 days, or the two arbitrators appointed by each party fail to agree on the appointment of the presiding arbitrator, the parties may apply to the court at the place of arbitration to appoint an arbitrator or presiding arbitrator on their behalf. Similarly, if the arbitration clause specifies a single arbitrator and the parties cannot agree on the choice, one party may request the court to make the appointment.
Article 11 (3): “Failing such agreement,
(a) in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two arbitrators thus appointed shall appoint the third arbitrator; if a party fails to appoint the arbitrator within thirty days of receipt of a request to do so from the other party, or if the two arbitrators fail to agree on the third arbitrator within thirty days of their appointment, the appointment shall be made, upon request of a party, by the court or other authority specified in article 6;
(b) in an arbitration with a sole arbitrator, if the parties are unable to agree on the arbitrator, he shall be appointed, upon request of a party, by the court or other authority specified in article 6.”
If the parties have agreed upon a specific procedure for the appointment of arbitrators but fail to adhere to such procedure in selecting their arbitrator, or if arbitrators chosen by each party have not followed the agreed procedure in designating the presiding arbitrator or sole arbitrator, either party is entitled to apply to the local court, requesting the court to appoint arbitrators in accordance with the established procedure.
Article 11(4) “Where, under an appointment procedure agreed upon by the parties,
(a) a party fails to act as required under such procedure, or
(b) the parties, or two arbitrators, are unable to reach an agreement expected of them under such procedure, or
(c) a third party, including an institution, fails to perform any function entrusted to it under such procedure, any party may request the court or other authority specified in article 6 to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.”
Article 13(3) stipulates that the parties may request the court to consider applications for the recusal of arbitrators.
“(3) If a challenge under any procedure agreed upon by the parties or under the procedure of paragraph (2) of this article is not successful, the challenging party may request, within thirty days after having received notice of the decision rejecting the challenge, the court or other authority specified in article 6 to decide on the challenge, which decision shall be subject to no appeal; while such a request is pending, the arbitral tribunal, including the challenged arbitrator, may continue the arbitral proceedings and make an award.”
Article 14 stipulates that when an arbitrator is unable or fails to fulfill their duties, the parties have the right to request the court to decide whether to revoke the appointment of the arbitrator.
Article 14(1) “If an arbitrator becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay, his mandate terminates if he withdraws from his office or if the parties agree on the termination. Otherwise, if a controversy remains concerning any of these grounds, any party may request the court or other authority specified in article 6 to decide on the termination of the mandate, which decision shall be subject to no appeal.”
Article 14(2) “If, under this article or article 13(2), an arbitrator withdraws from his office or a party agrees to the termination of the mandate of an arbitrator, this does not imply acceptance of the validity of any ground referred to in this article or article 12(2).”
Article 16(3) stipulates the authority of the arbitral tribunal to render a decision on its jurisdiction. If a party is dissatisfied with the tribunal's determination of jurisdiction, they have the right to raise an objection on the jurisdictional issue before the local court, which is empowered to make a final determination.
Article 16(3) “The arbitral tribunal may rule on a plea referred to in paragraph (2) of this article either as a preliminary question or in an award on the merits. If the arbitral tribunal rules as a preliminary question that it has jurisdiction, any party may request, within thirty days after having received notice of that ruling, the court specified in article 6 to decide the matter, which decision shall be subject to no appeal; while such a request is pending, the arbitral tribunal may continue the arbitral proceedings and make an award.”
Article 27 stipulates that after the agreement of the arbitral tribunal, the parties may request the court's assistance in obtaining evidence.
Article 27 “The arbitral tribunal or a party with the approval of the arbitral tribunal may request from a competent court of this State assistance in taking evidence. The court may execute the request within its competence and according to its rules on taking evidence.”
Article 34(2) stipulates the circumstances under which an arbitral award may be set aside by the court, following the application of the parties and with the consent of the arbitral tribunal.
Article 34(2) “An arbitral award may be set aside by the court specified in article 6
only if:
(a) the party making the application furnishes proof that:
(i) a party to the arbitration agreement referred to in article 7 was under some incapacity; or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of this State; or
(ii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iii) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside; or
(iv) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Law from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Law; or
(b) the court finds that:
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law of this State; or
(ii) the award is in conflict with the public policy of this State.”
The Model Law explicitly defines the matters in which a court may intervene in arbitration and sets clear limits on the procedures that can be intervened. For parties choosing arbitration, especially foreign parties, preventing unpredictable interference from the court in the arbitration process is most importance.”
3. Principle of Competence of Arbitral Tribunal to Rule on Its Jurisdiction
Article 16(1) stipulates the authority of an arbitral tribunal to render decisions on its jurisdiction. The arbitral tribunal may independently determine whether it has jurisdiction, including making determinations on the validity of the arbitration agreement, without resorting to the courts. The arbitration clause should be considered as a separate agreement independent of the contract.
“(1) The arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. For that purpose, an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.”
(III) The third part provides recommendations on the interpretation of Article 2(2) and Article 7(1) of the New York Convention. It represents a synthesis of judicial practices from various countries and regions, following the widespread acceptance of the New York Convention globally.
V. The Influence of the Model Law
The drafting and formulation of the Model Law gathered experts representing countries from major legal systems around the world and multiple international organizations. It has broad representation, reflecting the consensus and needs of countries in relevant areas. Many countries and regions have enhanced their arbitration systems based on the Model Law. According to data officially published by the UNCITRAL, as of November 2023, 84 countries and regions worldwide have enacted legislation based on the Model Law.
(I) Adoption of the Model Law
Some countries and regions grant legal force directly to the Model Law, such as Singapore and Hong Kong, which specify that the Model Law has legal force within their jurisdictions. The Hong Kong Arbitration Ordinance (“Arbitration Ordinance”) comprehensively adopts 36 articles of the Model Law, explicitly stating that the incorporated provisions are considered part of the Ordinance. However, these countries and regions often supplement and modify the Model Law. For instance, the Arbitration Ordinance adds or retains provisions related to local laws, including specific provisions on the enforcement of arbitral awards between the mainland and Macau, arbitration fees, and other special clauses.
In summary, countries generally adopt the Model Law in three ways: 1. integrating it entirely into domestic law; 2. incorporating and improving its provisions as part of national arbitration laws; 3. directly enacting a separate domestic law with reference to the Model Law.
(II) Application of the Model Law in Common Law, Civil Law, and Mixed Legal Systems
Representative countries of the Common Law system, such as the United Kingdom, enacted the "Arbitration Act 1996" when adopting the Model Law. While the UK had an "Arbitration Act 1967" as early as 1679, subsequent arbitration laws were mostly based on case law, lacking a clear, independent legal code. The "Arbitration Act 1996" incorporated the fundamental principle of respecting party autonomy from the "Model Law" and made improvements to outdated or domestically inconsistent regulations. The Act allows arbitral tribunals to determine their own jurisdiction, limiting the intervention of courts. Additionally, the recognition of non-domestic arbitration in the UK reflects support for the development of arbitration systems and respect for party autonomy.
Representative countries of the Civil Law system, such as Germany, were significantly influenced by the 1985 Model Law in their arbitration legislation. Initially, German arbitration law was stipulated in the 1877 "German Code of Civil Procedure," but after two minor amendments, it could not keep pace with the rapid development of international trade and commercial arbitration. In 1998, a major reform was carried out, referencing the Model Law and updating many outdated provisions in German arbitration law, enhancing the parties' freedom in arbitration procedural rules and the choice of applicable law. The reform emphasized impartiality and independence in the standards for arbitrator disqualification, aligning with the Model Law. The 1998 Act was more detailed in certain aspects compared to the Model Law, such as providing a more nuanced approach to the form of arbitration agreements.
South Africa, a representative of the Mixed Legal System, officially incorporated the Model Law into its domestic legal system with the passage of the "International Arbitration Act 15 of 2017" in December 2017. The new law stipulates general principles of international commercial arbitration, arbitration agreements, recognition and enforcement of foreign arbitral awards, etc. While considering its domestic legal practices, South Africa made minimal modifications to the Model Law to achieve international harmonization in arbitration law. This move aims to demonstrate support for arbitration, ensure party autonomy, limit court intervention, and align South Africa's international arbitration legal system with global standards.
(III) Impact on China's Arbitration Law
On July 30, 2021, the Ministry of Justice of the People's Republic of China issued “the People's Republic of China Arbitration Law (Revised) (Exposure Draft)" (referred to as the Exposure Draft"). This draft referenced relevant content from the Model Law, with significant progress in three main areas. Firstly, it increased and standardized the interim arbitration system, rejecting the previous provision that excluded temporary arbitration not managed by the arbitration institution through limiting the selection of arbitration institutions. This fully respects party autonomy, aligning with the fundamental principle advocated by the Model Law and contemporary international commercial arbitration. Secondly, it improved the provisions related to interim measures, expanding the section on interim measures from two provisions concerning property preservation and evidence preservation to a comprehensive set of regulations. It detailed the meaning, scope, issuance, enforcement, modification, suspension and termination, extraterritorial enforcement, and emergency arbitrators, broadening the applicable temporary measures to include behavior preservation and other short-term measures. This aligns with the amendments made to the Model Law in 2006 regarding interim measures. Thirdly, it clarified the conditions for the application of provisions related to foreign-related arbitration, stipulating that disputes with foreign elements should use foreign-related arbitration. This contributes to the elevation of China's international arbitration standards and status.
The "Exposure Draft" aligns China's arbitration legislation with the Model Law, making it more consistent with international mainstream practices and the requirements of the New York Convention. This facilitates the recognition and enforcement of arbitration awards worldwide, strengthening the efficacy and authority of China's international commercial arbitration.
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