Turkish Law Blog

Arbitration Agreement under Uncitral Model Law and New York Convention

Gürkan Deniz Gürkan Deniz/ Deniz Legal
17 July, 2019
232

The most known method for dispute resolution is litigation all over the world, which could be also named as court jurisdiction, and it is based on the domestic law of the countries. Within the domestic jurisdiction, each country has its own legal system which differs from countries to countries. Although litigation is preferred method it is not very convenient because the workload of courts causes long judgments and sometimes the expenditures of courts are very high. Due to these facts, an alternative mechanism to the litigation has become necessary. Arbitration is an alternative mechanism of dispute resolution that parties can choose the law, tribunals, and place. This form of alternative dispute resolution is based on the mutual consent of parties and this consent must be contractual which is called as an arbitration agreement. According to the section 6(1) of the AA 1996 defines an arbitration agreement as “an agreement to submit to arbitration present or future disputes (whether they are contractual or not)”[1]On the basis of this definition, clearly, it is a simple consent between two or more parties under the arbitration procedure to treat the dispute under arbitration. The validity of arbitration depends on the arbitration agreement that’s why it is very important and basically there are two types of the arbitration agreement: ‘the arbitration clause’ and ‘the submission agreement’ that one of them applies to the future disputes and the other applies to the existing disputes[2].

The applicability of arbitration agreement varies by countries due to the different legal regimes. However this variety makes it difficult to practice in the international platform, that’s why an international organization The United Nations Commission on International Trade Law (UNCITRAL) Model Law rules all steps of international commercial arbitration proceedings as soft law. For the enforceability of the award, the New York Convention regulates this issue. Before we analyze both regulations, the main purpose is to create integrity with respect to international arbitration proceedings. As will be argued this essay will discuss the main characteristics of UNCITRAL Model Law and New York Convention with respect to the arbitration agreement.

UNCITRAL was incorporated by the United Nations’ General Assembly in 1966 in order to ensure a single unitary international trade law and after that as a legal body of UN, Model law was published. UNCITRAL Model Law was formed for countries to support them to develop their laws on international commercial arbitration and harmonize it with their domestic laws[3].

UNCITRAL Model Law;

  1. set of rules based on soft law regime,
  2. set of recommendations,
  3. is not mandatory,
  4. is a system based on voluntary compliance.

As it is clear from the above articles, it is a soft law regime and only applies to countries that implement model law in their national legal regime. The main purpose is to form a legal framework for the international commercial arbitration proceedings. An arbitration agreement is regulated under article 7 of the UNCITRAL Model Law; according to this article arbitration agreement is defined as a process for the disputes between parties before submitting them to arbitration[4].

UNCITRAL Model Law article 7 (definition and form of the article);

“(As adopted by the Commission at its thirty-ninth session, in 2006)

(1) “Arbitration agreement” is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.

(2) The arbitration agreement shall be in writing.”[5]

UNCITRAL Model Law article 8;

“(1) A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.

(2) Where an action referred to in paragraph (1) of this article has been brought, arbitral proceedings may nevertheless be commenced or continued, and an award may be made, while the issue is pending before the court.”[6]

According to the article 7 of the Model Law, there should be a dispute which is existing or may exist in the future in order to present to arbitration relating to the legal relationship between them whether contracted or not. However, the arbitration agreement could be in an agreement as a clause or a separate agreement. Furthermore, according to option 1 of the Model Law, the arbitration agreement should be in written format. This article defines the arbitration agreement and provides the formal requirements to submit to arbitration.

As it is mentioned one of the main rationales of the UNCITRAL Model Law is to unify an international commercial arbitration proceeding for countries to adopt within their domestic legislation. Furthermore, it also targets to decrease the differences of each member state while the interpretation of liabilities under the New York Convention.[7] As is also understood from this statement UNCITRAL Model Law undertakes a complementary role.

When examining the advantages and disadvantages of UNCITRAL Model Law, advantages far outweigh. The most significant advantage is to set example legislation for countries. Although it is not mandatory, exemplifying status enables countries to adopt this model law within their domestic law. For example, starting to draw an international commercial arbitration code from the beginning could be difficult because it should contain international principles and should be compatible with the domestic legislation of each country. However UNCITRAL Model Law is prepared to be an example of a `model` with respect to international commercial arbitration for countries, that`s why the only duty for them is to pass legislation or to adopt the Model Law in their domestic legal regime. Totally, Model Law is formed with 36 articles and it consists the general provisions, arbitration agreement, composition and jurisdiction of the arbitral tribunal and other arbitral proceedings which implies that the model law is formed from a to z. Another positive aspect is that the UNCITRAL Model Law is formed with international principles to unify the other applications of countries. At this point, it is aimed to decrease the differences between applications of countries. Common use makes the arbitral procedure easier in practice for the disputes arise in different jurisdictions. Conversely, there is no doubt that voluntary compliance is the most significant drawback of the UNCITRAL Model Law. Absence of any obligation or necessity, in other words being a `soft law`, enable countries to adopt this Model Law later or not, in practice. Although it is not mandatory and set of recommendations, the legislation is already adopted by 67 states and 97 jurisdictions[8]. However, the New York Convention, which is applicable for the member/contracting states, is adopted by 149 countries by 2013[9]. As can be seen, there is a considerable amount of majority in practice, due to the mandatory application of the New York Convention. Another drawback is the extent of the Model Law. Clearly, UNCITRAL Model Law is only applicable to international commercial arbitration which limits the extent of the legislation for other disputes such as non-commercial ones.

Beyond any doubt, validation of the arbitration agreement is very important otherwise arbitration is out of the question. For the valid arbitration agreement it should be in writing in terms of the evidence and also it should be signed by both parties of the agreement. So, the arbitration agreement should provide the formal requirements according to the applicable law.[10]

The New York Convention of 1958 is an international regime for the enforcement of the foreign award and it was adopted by the United Nations. It is the most greatly exercised convention with respect to international arbitration because it is simpler than the forerunners such as ‘Geneva Protocol’ and ‘Geneva Convention’[11]. The main purpose of the New York Convention, which is also known as ‘Convention on the Recognition and Enforcement of Foreign Arbitral Awards’, is to both standardize the enforcement of final award globally and form a distinctive single framework for the foreign awards. However, we should bear in mind that the New York Convention is only applicable to non-domestic or foreign arbitrations. If we consider the key features of the Convention for member states:

  1. international convention based on international public law,
  2. directly applicable,
  3. hard law regime,
  4. binding between member states.

Article II of the Convention deals with the arbitration agreement and according to this article II(1):

“1. Each Contracting State shall recognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration.”[12]

In accordance with Article II, the arbitration agreement must be identified in writing, the dispute, that should exist or future dispute, must be ‘in respect of a defined legal relationship’ and the matter in dispute must be capable of being resolved by arbitration.[13] By this way intervention of national courts is blocked to the disputes that are subject of an arbitration agreement.[14] The main rationale behind the New York Convention is to create global standards and general rules. Furthermore, assisting the enforcement of arbitration agreements and ‘circulation’ of international awards is also provided.[15]

Without an effect a final award is trivial, but New York Convention brings it into effect. The most significant positive aspect of the New York Convention is to be a cornerstone with respect to international arbitration because ‘International Arbitration’ has changed into the constituted method of international commercial disputes.[16] Although it is known that the Convention is only related to the enforcement of foreign awards, it gives a broader impact on the arbitration agreements’ validation than the 1923 Geneva Protocol.[17] Another positive aspect of the Convention is being a hard law regime, there are 149 contracting states right now who are the parties of the Convention, and thus it is binding between member states. Binding effect of the Convention increases the applicability of it's in practice and in this way it is spread around the world easily. Parties cannot disagree or dispute the rules of the New York Convention. When it is examined broadly, there are not many drawbacks of the New York Convention Because 196 countries exist in the world and 149 of them have already signed the agreement and now they are a party to the Convention. Conversely, a Convention on a large scale that much should also have unified the arbitration proceedings besides the recognition and enforcement of the final award.

“If the New York Convention propelled international arbitration onto the world stage, the Model Law made it a star, with appearances in States across the world.”[18]

With the considerations above, the arbitration agreement demonstrates the intention of parties to submit their dispute to the arbitration instead of national courts or litigation. However, the arbitration agreement must provide the formal requirements to be effectual because it constitutes the jurisdiction and arbitral tribunal over the power of national jurisdiction. Power, that parties have, is assigned to the arbitral tribunal by them. At this point, global regulations required and they have already been made which are UNCITRAL Model Law and New York Convention. Although they differ from each other, they provide integrity together. In accordance with the examination of both regulations, it is possible to argue that arbitration agreement can be regulated under them because New York Convention standardizes the recognition and enforcement of the final award globally which enable international arbitration to become more applicable and reliable. Furthermore, UNCITRAL Model Law is a set of recommendations with respect to arbitrations about international commercial law and it enables states to adopt the model law in their domestic legal regime. The main purpose of both regulations is to establish a unique and single framework and decrease the divergences between the applications of the countries. For these reasons, the arbitration agreement should be regulated under these regulations. With the globalization of the international trade, disputes have arisen much more than before and many companies submit their dispute to the arbitration without any doubt to resolve their dispute faster, cheaper and much more reliable way, and it is only possible with the regulations under International Conventions with the participation of the countries all over the world. Establishing a single framework will definitely achieve it.


[1] Karen Tweeddale and Andrew Tweeddale, A Practical Approach to Arbitration Law (Oxford University Press 1999) 71

[2] Alan Redfern and Martin Hunter, Redfern and Hunter on International Arbitration (7th edn, Oxford University Press 2009) 86

[3] Andrea Miglionico, UNCITRAL Rules and Institutional Arbitrations (Lecture Slide, University of Reading 2014)

[4] Karen Tweeddale and Andrew Tweeddale, A Practical Approach to Arbitration Law (Oxford University Press 1999) 321

[5] UNCITRAL Model Law Art 7(1)-(2) Opt. 1.

[6] Ibid, Art 8

[7] Andrea Miglionico, UNCITRAL Rules and Institutional Arbitrations (Lecture Slides, University of Reading 2014)

[8] ‘Status UNCITRAL Model Law on International Commercial Arbitration (1985), with amendments as adopted in 2006’ <>http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/1985Model_arbitration_status.html

[9] New York Convention, ‘New York Convention Countries’ http://www.newyorkconvention.org/new-york-convention-countries

[10] Andrea Miglionico The Arbitral Agreement (Lecture Slides, University of Reading 2014)

[11] Karen Tweeddale and Andrew Tweeddale, A Practical Approach to Arbitration Law (Oxford University Press 1999) 293

[12] New York Convention, Art II(1).

[13] Margeret L. Moses, The Principle and  Practise of  International Commercial Arbitration (Cambridge University Press 2008) 20

[14] Karen Tweeddale and Andrew Tweeddale, A Practical Approach to Arbitration Law (Oxford University Press 1999) 294

[15] Andrea Miglionico, Domestic and International Recognition of Arbitration (Lecture Slides, University of Reading 2014)

[16] Alan Redfern and Martin Hunter, Redfern and Hunter on International Arbitration (7th edn, Oxford University Press 2009) 72

[17] Ibid.

[18] Alan Redfern and Martin Hunter, Redfern and Hunter on International Arbitration (7th edn, Oxford University Press 2009) 76

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