Significance of Choosing the Right Arbitral Seat in Intl. Commercial Arbitration, Study notes of International Commercial Law

Download Significance of Choosing the Right Arbitral Seat in Intl. Commercial Arbitration and more Study notes International Commercial Law in PDF only on Docsity! Title : Impact of Arbitral seat in the Outcome of International commercial arbitration Introduction International commercial arbitration is an alternative dispute resolution for disputes arising out of commercial transactions between private parties across national borders that will allow the parties to avoid litigation in national courts. International commercial arbitration applies to conflicts of private law. International commercial arbitration has grown in popularity over the years and shows no signs of slowing down. Growth in international arbitration is anticipated in regions where litigation before national courts is currently more prevalent than alternative resolution methods. In this context of increasing use of international commercial arbitration, several cities and states have promoted themselves as attractive arbitral seats. In some cases, this has been done with the intention of receiving the economic benefits flowing from the international legal industry, such as growth in the use of hotels, translators, expert witnesses, and lawyers. Additionally, in the opinion of this author, becoming an important arbitral forum can have profound consequences to an emerging country in the international political arena because it could provide the opportunity to show the world the country’s capacity of duly conducting processes under international standards. arbitration is of paramount importance. Also, it has been stated that having a modern framework for solving international commercial disputes could favour international commerce within a country. For reference purposes, this article first explains the concept of the arbitral seat and then briefly describes what makes a particular forum attractive. Next, it notes the juridical and material consequences of selecting a particular arbitral seat. Finally, it elaborates the conclusion by showing how crucial the selection of the seat could be for the outcome of an arbitration. Concept of the Arbitral Seat Seat of arbitration is a location selected by the parties as the legal place of arbitration, which consequently determines the procedural framework of the arbitration. It is not the same as the venue of the arbitration because the seat refers to the legal, rather than physical, location of the arbitration. The venue is the geographical setting where the proceedings occur and the location where hearings are to take place. Most arbitration statutes and institutional rules distinguish between the seat of the arbitration and the venue in which hearings are held. For instance, Article 16.3 of the Arbitration Rules of the London Court of International Arbitration (LCIA) states, the arbitral tribunal may hold any hearing at any convenient geographical place in consultation with the parties and hold its deliberations at any geographical place of its own choice, which could be elsewhere than the seat of the arbitration. Despite the distinction, the seat and the venue are decidedly connected, being likely to coincide. In fact, when the arbitration agreement is silent about the seat, the venue will be a deciding factor to determine the jurisdiction of the appropriate court. In short, the seat of a particular arbitration is the juridical connection of the arbitral process with a given system of rules and principles. The arbitration law as prevalent and practiced in India, prior to pronouncement of the constitution bench judgment of the Hon’ble Supreme Court of India in case of Bharat Aluminium Company v. Kaiser Aluminium Technical Services Inc.[1], did not pay due significance to the seat or place of arbitration.[2] Importance of juridical seat can also be understood from the judgment of the Court of Appeal of the Republic of Singapore, in the matter of ST Group Co Ltd. & Ors Vs. Sanum Investment Limited , where the court refused to enforce an award made and published at a place other than the agreed seat of arbitration in the agreement. Characteristics of an Arbitral Seat The practical and legal consequences flowing from the selection of the seat of the arbitration makes the decision one of the most important aspects of any international arbitration agreement, forcing the parties to choose it carefully. Considering its significance, the reputation and recognition of certain locations as proper forums to conduct arbitral procedures have been considered the main reasons explaining the selection of a particular city or country as the seat of an international arbitration. Generally, the forums are expected to provide a supportive legal environment, a positive attitude of the nation’s courts towards arbitration, adequate facilities, political stability and the availability of experienced practitioners. Recently, in an effort to understand the features of an attractive arbitral seat, the Chartered Institute of Arbitrators identified the following “key characteristics” that a forum shall present: (1) a modern international arbitration law that limits court intervention in the arbitral process, (2) an independent judiciary respectful of the parties’ choice of arbitration as their method for solving disputes, (3) a pool of practitioners with experience in international arbitration, (4) the commitment to educate actual and future professionals in transnational disputes, (5) the possibility that the parties could be represented by the counsel of their choice, (6) an accessible and safe seat, (7) the material conditions to properly conduct arbitration procedures, (8) ethics and professional norms that govern the behaviour of participants according to the diversity of legal cultures and traditions of international arbitration, (9) the participation of treaties promoting the enforceability of foreign arbitral awards, and (10) the protection of the arbitrator from liability if acting in good faith.