Conference on Rules for Institutional Arbitration and Mediation

20 January 1995, Geneva, Switzerland

The Conduct of Arbitral Proceedings Under the Rules of Arbitration Institutions; The WIPO Arbitration Rules in a Comparative Perspective
[Articles 37 to 47 of the WIPO Rules in a Comparative Perspective]

by Marc Blessing, President
Swiss Arbitration Association (ASA);
Bär & Karrer, Zurich

I am sharing this presentation on the conduct of the arbitral proceedings with Jan Paulsson. Our repartition is such that I will deal with the more tedious provisions, leaving all the "goodies" and the more fascinating aspects (i.e. Articles 48 - 59 and Articles 73 - 78) to him.

In order to facilitate a comparative analysis of the major Arbitration Rules, I have prepared -- in addition to the Summary below -- a Comparative Table appended hereto, comparing the provisions of the WIPO Arbitration Rules with those of the International Chamber of Commerce (ICC) of 1988, the International Arbitration Rules of the American Arbitration Association (AAA) of 1 November 1993, the Rules of the London Court of International Arbitration (LCIA) of 1985, the UNCITRAL Arbitration Rules of 1977 and the UNCITRAL Model Law of 1985.

Article 37 WIPO AR: Transmission of the File to the Arbitral Tribunal

37.1 The first step in the arbitral procedure obviously is that the arbitral institution ("the Center") shall have to transmit the files to the Arbitrators.

Four questions arise:

37.2 The WIPO solution is the following:

Unlike the ICC, the WIPO Center shall transmit the file to each Arbitrator as soon as such Arbitrator has been appointed by the respective party (or by the Center). In other words: The Center does not withhold the file e.g. until the Arbitrator to be appointed by the Respondent has been appointed (or until the entire Tribunal has been constituted, including the appointment of the Chairman), nor does the Center withhold the transmittal of the files until the deposit pursuant to Article 70 (or a certain fraction thereof) has been paid.

The immediate transmittal is particularly appropriate because, in a WIPO arbitration, the Center on purpose does not - unlike the ICC - retain the prerogative to confirm the appointment of the arbitrator. The immediate transmittal to the arbitrator has the significant advantage that the arbitrator will immediately be informed on the matter, and this is certainly welcomed in all those situations where the arbitrators will be supposed to designate the presiding arbitrator and where it will be important to them to know as much as possible on the case to be handled (1).

37.3 The WIPO solution (2), therefore, is different from the approach taken by the ICC. According to Article 10 (3) in connection with Article 9 (3) of the ICC Rules, the ICC Secretariat will transmit the file only once at least a fraction (50 %) of the deposit has been paid and the transmittal shall not be made until Defendant’s Answer to the Request for Arbitration has been filed (or upon expiry of the respective time-limits (Article 10 ICC Rules) (4).

Article 38 WIPO AR: General Powers of the Tribunal

38.1 The first element to be clear about is the hierarchy of rules and provisions governing the arbitral procedure. In my view, this hierarchy is as follows:

• First/top level: The Arbitrators and the parties will have to respect the ordre public and the mandatory provisions of law applicable to the arbitration from which the Parties cannot derogate (i.e. in particular some mandatory provisions of the Arbitration Act prevailing at the place of arbitration). These rank in the first priority and, therefore, override any provisions in the institutional Arbitration Rules, or any other agreement made between the Parties.

To note here: only a very few provisions in Arbitration Acts are indeed of a mandatory character. For instance, in Switzerland, only Article 182 (3) concerning the respect of equal treatment is undoubtedly of a mandatory character, whereas almost all other provisions of the Swiss Arbitration Act (Chapter 12 of the Private International Law Statute ["PIL"]) are of a dispositive nature only and thus may, in one way or another, be derogated from by mutual agreement of the Parties, or by decision of the Arbitral Tribunal.

The WIPO Rules, in Article 3 (a) make specific reference to mandatory provisions of the law applicable to the arbitration. To note here further that Article 59 (b) of the WIPO Rules on the applicable law makes reference to the arbitration law at the place of arbitration, unless the Parties have expressly agreed on the application of another arbitration law (provided that such agreement is permitted by the law of the place of arbitration).

• Second level: the institutional Arbitration Rules as such; these Rules will prevail and therefore govern the arbitral proceedings as a consequence of the Parties’ choice to submit their dispute to an arbitral procedure under the particular institutional Rules.

As far as the arbitral procedure is concerned, institutional Arbitration Rules tend to provide only a sketchy skeleton, so as to afford all the requisite flexibility for the Parties and the Arbitrators to shape the arbitral proceedings according to the particular needs of the case. Indeed, it would be entirely wrong for an institution to try to provide a fixed corset for the procedure. Moreover, most of the procedural provisions contained in institutional rules are of a dispositive nature, such that the Parties (or, failing them, the Arbitrators) are still free to depart therefrom and to agree otherwise.

As far as the WIPO Rules are concerned, the provisions on the procedure were considered extremely carefully so as to avoid any sort of a constraint. All provisions are shaped in a way and with the spirit to suggest a flexible structure which will equally be suited for a common-law type of procedure, or a civil-law type of procedure, or any combination thereof.

• Third level: the rules agreed upon by the parties.

Indeed, all institutions and Arbitrators will welcome the mutual consent of the Parties on any procedural issues that may arise in the runway of arbitration and, in fact, the Parties are encouraged to try to solve procedural questions and issues among themselves, possibly with the assistance of the Arbitrators. This notion is specifically expressed in the LCIA Rules, see Article 5 (1).

• Fourth level: the Rules of procedure as may be determined by the Arbitral Tribunal.

Thus, the Tribunal will determine the procedure only in so far as the Parties did not make an agreement thereon. Two observations hereto are to be made:

- None of the major Arbitration Rules requires that the Tribunal should pass a decision in favour of a particular procedural law (such as the Code of Civil Procedure applicable at the place of arbitration). Indeed, any such reference, even if labelled "per analogiam" only, would be quite incompatible with the spirit and basic demands of international arbitration (no matter how good any local procedural code may be). Exactly for this reason institutional rules confine themselves to state that the Tribunal "may conduct the arbitration in such manner as it considers appropriate" (see Article 38 WIPO Rules; Article 16 AAA Rules; Article 15 UNCITRAL Rules; Article 19 (2) UNCITRAL Model Law; similar: Article 11 ICC Rules) (5).

- None of the Arbitration Rules suggests that the Arbitrators should make a detailed determination of procedural rules for the entire arbitration. In practice, it is customary to determine the rules only "as far as necessary" and from time to time. However, very careful attention must be given to provide, for the benefit of the parties, a clear understanding of what the ground rules of the procedure will be ("they need to know whether the game to play will be rugby or football") so that they can present their cases accordingly; procedural steps should not come as a surprise, and one of the "tools" to ascertain this, is the Preparatory Conference optionally provided for in Article 29 (3) of the International Arbitration Rules of the Zürich Chamber of Commerce as well as in Article 47 WIPO Rules.

38.2 Minimum Standard: the respecting of equal treatment and of the "right to be heard"

This minimum standard is reflected in all major arbitration rules: Article 38 (b) WIPO Rules; Article 16 (1) AAA Rules; Article 15 (1) UNCITRAL Rules; Article 18 UNCITRAL Model Law (6). The principle is not explicitly reflected in the ICC Rules nor in the LCIA Rules, but there is no doubt that these axiomatic principles are at the heart of those rules as well.

38.3 To what extent can/may the Parties, by their common accord, depart from, or exclude, some of the provisions contained in institutional Arbitration Rules?

This is always a difficult and sensitive question. For instance, the ICC has always been very reluctant to accept an exclusion of particular provisions, and this essentially on the argument that the nature of an ICC procedure should not be changed. Indeed, one may fully understand this attitude against the background of the ICC’s commitment towards monitoring the due conduct of the entire arbitral process, once it is entrusted to the Arbitrators.

Similarly, as a further example, the Zürich Chamber of Commerce is very reluctant to allow a departure from its International Arbitration Rules. In the past, Parties had aimed to derogate from the provision according to which the Chairman of the Arbitral Tribunal is designated by the Zürich Chamber of Commerce itself. This, however, has always been resisted by the Zürich Chamber of Commerce. If Parties insist on the free choice of the Presiding Arbitrator (or on the solution that the Chairman shall be nominated by the Arbitrators), the procedure would no longer be considered as a procedure under the auspices of the Zürich Chamber of Commerce.

As far as WIPO is concerned, the Rules on purpose do not contain any particular provisions. If Parties, in a specific case, intend to derogate from a particular provision of the WIPO Rules, it would be for the Center to determine whether the procedure will still be considered as a procedure under the auspices of WIPO.

38.4 Expeditious Procedure:

The requirement to proceed expeditiously is specifically reflected in Article 5 (2) of the LCIA Rules as well as in Article 38 (c) WIPO Rules. Furthermore, the requirement to proceed expeditiously is reflected in Article 63 (a) WIPO Rules according to which the arbitral award should, "wherever reasonably possible", should be rendered within 12 months after either the delivery of the Statement of Defence or the establishment of the Arbitral Tribunal (whichever event occurs later). Compare also Article 23 (a) WIPO Rules according to which an arbitrator accepting to serve undertakes to dispose of sufficient time to complete his tasks expeditiously. - The ICC Rules, as we all know, provide for a time-limit of 6 months according to Article 18 ICC Rules. To note that the WIPO has established separate Rules for a "fast-track arbitration", namely the WIPO Expedited Arbitration Rules (which will be commented by Jan Paulsson during the afternoon session) (7).

38.5 Extension of Time-limits

It is clear that the Arbitral Tribunal may extend time-limits upon request. The WIPO Rules provide for a particularly broad authority in that

Other rules are silent on this matter. However, the power to extend time-limits must be considered to fall within the overall power of the Tribunal to determine the procedure. A perhaps important element is that the WIPO Rules explicitly state that even time-limits agreed upon by the Parties themselves can, by direction of the Tribunal, be extended (8).

38.5 Should there be a Delegation to the Presiding Arbitrator?

Earlier drafts of the WIPO Rules had contained (in Article 32 (c)) the following provision: "Where the Tribunal consists of three Arbitrators, the Chairman shall be responsible for the organization of conferences and hearings and arrangements with respect to the functioning of the Tribunal". This draft provision, however, was deleted because, in the Experts’ view, it would be against the spirit of arbitration to confer such far-reaching authority to the Chairman of the Tribunal. Indeed, the Arbitral Tribunal as such should function as a team, should give its directives as a team and should decide as a team (9).

However, there may be circumstances of particular urgency, and for this purpose Article 38 (c) WIPO Rules provides for an authority to the Presiding Arbitrator to sign alone, so as to grant an extension of a time-limit.

Article 39 WIPO AR: Place of Arbitration

39.1 Practically all institutional Arbitration Rules of course provide that the Parties may themselves agree (10) on and designate the place of arbitration (11).

39.2 Only where the Parties have not reached an agreement thereto, the designation of the place of arbitration shall have to be made by the institution (see Article 39 WIPO Rules; Article 12 ICC Rules; Article 13 (1) of the AAA Rules; Article 7 (1) LCIA Rules).

When working on the WIPO Rules, the question arose whether the Center should first give the Parties an opportunity to make written or oral submissions regarding the determination of the place of arbitration (see hereto Article 30 of the Draft WIPO Rules circulated up to 17 March 1994). However, the Experts were of the opinion that a cumbersome procedure should be avoided so as to facilitate a rapid determination of the place of arbitration. Article 39 (a) of the WIPO Rules, therefore, provide that the decision as to the place of arbitration shall be made by the Center "taking into consideration any observations of the Parties and the circumstances of the arbitration". This wording favourable compares to Article 16 (1) UNCITRAL Rules and Article 20 (1) UNCITRAL Model Law (in those latter Rules the decision, obviously, is to be made by the Arbitral Tribunal itself).

39.3 The importance of the determination of the place of arbitration does not need an extensive discussion - a practical "must" for all arbitration clauses to contain a clear determination of the place of arbitration! It suffices to recall that the place of arbitration triggers the applicability of the lex arbitri (in the sense of the Arbitration Act prevailing at the place of arbitration). It depends on this regime whether mandatory rules of law will be imposed or not, and it is therefore of prime importance to determine the place of arbitration in a so-called "arbitration-friendly country". (12)

39.4 All arbitration rules provide that, notwithstanding the determination of a particular place of arbitration, hearings and meetings may be held elsewhere "at any place considered appropriate" (13). It would, in my view, be normal to discuss the convenience of particular venues (and dates) with the Parties with the view towards reaching a mutual agreement thereon. However, absent such agreement, it will be for the Tribunal to decide on the place for such hearing etc. which may be anywhere (and not solely at the place of arbitration). Only the UNCITRAL Model Law (according to its Article 20 (2)) slightly restricts the Tribunal’s authority, by retaining the wording "unless otherwise agreed by the parties...".

39.5 As far as the "nationality" of the award is concerned, it was important to reflect, in Article 39 (c) WIPO Rules, the well-known provisions of Article 22 ICC Rules according to which the arbitral award shall be deemed to have been made at the place of arbitration (see also Article 7 (2) LCIA Rules and Article 16 (4) UNCITRAL Rules).

Article 40 WIPO AR: Language of Arbitration

40.1 All Arbitration Rules reflect the notion that the Parties are free to determine the language to be used in the arbitral proceedings. The recognition of this freedom sounds banal, but it is not: there are still certain countries and rules where a party may require that, for instance at hearings, the arbitration shall be conducted in a local language, or the arbitral institution may itself impose such a local language, or impose translations into the local language (compare e.g. Article 75 (3) of the Arbitration Rules of the China International Economic and Trade Arbitration Commission ("CIETAC Rules"), effective as of 1 June 1994). Obviously, the international business community seeks to avoid those places where the freedom of choice in respect of the language is not fully recognized.

40.2 Moreover, the international business community tends to avoid those places

[Those who have been involved in such procedures may have had the experience of what it means in practice, if - typically within short time-limits - thousands of pages of written submissions have to be translated into a local language. In Switzerland, by far the largest percentage (possibly 80 % or more) are conducted in the English language; the sole court instance competent to deal with the challenge of an arbitral award (whether partial or final) is the Swiss Federal Supreme Court in Lausanne. While the submission to the Swiss Federal Supreme Court has to be filed in one of the official languages (German, French or Italian), the underlying files (e.g. Memorials and documents submitted to the Arbitral Tribunal, transcripts of hearings, orders of the Tribunal, partial or final awards) may be filed with the Swiss Federal Supreme Court in the English language, and I have never experienced that the Swiss Federal Supreme Court had requested translations thereof, since the Supreme Court judges are proud to be sufficiently fluent in English.]

40.3 As in respect of the language, it is a practical "must", for all those drafting arbitration clauses, to determine the language to be used in the arbitral proceedings. This is normally one of the least controversial elements of the contract as such and may avoid lengthy arguments if indeed arbitral proceedings are to take place.

40.4 However, where the Parties have not agreed on the language, the determination of the language (14) of arbitration will have to be made by the Arbitral Tribunal. Institutional Arbitration Rules do attach a significant weight to the language in which the arbitration clause itself has been drawn up; see Article 40 (a) WIPO Rules; Article 15 (3) ICC Rules; Article 14 AAA Rules. The Tribunal is free to determine another language, having regard to all circumstances of the situation. Certainly, it would be appropriate for the Tribunal to provide a possibility for the Parties to submit their own observations. This is specifically spelled out in the AAA Rules as well as in the WIPO Rules.

40.5 The UNCITRAL Rules, the NAI Rules and the UNCITRAL Model Law do not as such reflect the preponderant weight of the language used for the arbitration clause, but it is appropriate to say that, also under those provisions, the language of the clause as such carries a significant weight.

40.6 What is the Scope of the Determination of the Language ?

This question is specifically covered in Article 17 (1) of the UNCITRAL Rules as well as in Article 22 (1) UNCITRAL Model Law: The determined "language of arbitration" shall apply to any written statements (memorials, submissions) filed by a party to the Tribunal. Likewise, such language shall be used in any oral hearings as well as in the decisions or other communications made by the Arbitral Tribunal.

However, the language-determination does not as such apply to other documents (in particular to the documentary evidence on which each party may wish to rely). In this respect, the Arbitration Rules of WIPO, AAA, LCIA, UNCITRAL and the UNCITRAL Model Law simply state that the Tribunal may order that any documents, submitted in other languages, shall be accompanied by a translation (15) "in whole or in part" into the language of arbitration (16).

Article 41 WIPO AR: Statement of Claim

41.1 Under all Arbitration Rules which we are reviewing here, the arbitral proceedings may be initiated on the basis of a rather short Request for Arbitration (for which the particularities are set out for instance in Article 9 WIPO Rules). If the Request did not contain already the detailed statement of claim (17), the latter will have to be filed within a certain time-period after the constitution of the Arbitral Tribunal. A typical time-period is 30 days (which period of course is subject to an extension which, upon request, may be granted by the Tribunal). The 30 days time-period is reflected in Article 6 (2) LCIA Rules and has found its way also into Article 41 (a) WIPO Rules.

41.2 Article 18 (1) UNCITRAL Rules and Article 23 (1) UNCITRAL Model Law do not provide for a particular time-period. Its determination is left with the discretion of the Arbitral Tribunal (18).

The ICC Rules do not contain any specific provision regarding the submittal of the detailed Statement of Claim (if not already contained in the Request for Arbitration). However, time-periods are either agreed upon between the Parties and the Arbitrators in the framework of the Terms of Reference, or are thereafter separately fixed by the Tribunal.

The AAA Rules contain no specific provision.

41.3 All Rules require (in slightly different wording) that the Statement of Claim be detailed and comprehensive, containing statements of fact as well as legal arguments, including a statement regarding the relief sought.

41.4 Moreover, all Rules require that the Statement of Claim shall, to as large an extent as possible, be accompanied by the documentary evidence. The WIPO Rules also require a schedule (list) in respect of the documents exhibited (which anyhow is good practice for all such filings). Under Article 23 UNCITRAL Model Law, the submittal of documentary evidence considered relevant by a Party is merely permissive and, therefore, not as such a requirement. However, the Arbitral Tribunal may, in its general discretion under Article 19 (2), require a Party to submit the documents in its possession, or to submit a summary; see also Article 25 (c) Model Law.

Article 42 WIPO AR: Statement of Defence

42.1 Again, the WIPO Rules provide for a time-limit of 30 days (compare Article 6 (3) LCIA Rules which allow 40 days and Article 3 (1) AAA Rules which allow 45 days).

42.2 What about Counter-Claims and Set-Off?

Article 42 (c) WIPO Rules is modelled on Article 19 (3) UNCITRAL Rules in the sense that any counter-claim or set-off should be made or asserted by Respondent within the Statement of Defence (but the Arbitral Tribunal may allow, in exceptional circumstances, a later filing).

To note here that the UNCITRAL Model Law, in Article 23, does not contain a provision similar or comparable to Article 19 (3) UNCITRAL Rules. The explanation is that, according to the Commission Report A/40/17 of 21 August 1985, it was decided to add a general provision to Article 2 Model Law in the sense that any reference to a claim should also be understood to comprise a counter-claim. Commentators submit that the same does apply in respect of a claim relied on by the Respondent for the purpose of a set-off (19).

42.3 The difference between the WIPO Rules and the UNCITRAL Rules is that the UNCITRAL Rules contain a limitation restricting the admissibility of counter-claims and set-off to those "arising out of the same contract" (20). This limitation, however, appears to be too narrow, wherefore it has not been retained in the WIPO Rules. Indeed, there is no obvious or simple answer to the question whether a counter-claim could solely be based on the same contract; and even less is there a simple answer whether a set-off can only be pleaded if the set-off claim arises out of the same contract. This latter subject matter has been covered by extensive scholarly writings (21), and notions differ significantly. Under some systems, the admissibility of set-off pertains to procedural law. In many civil law systems the set-off is, essentially, of a substantive law nature in that it extinguishes, fully or in part, the main claim, and may be pleaded irrespective of whether the set-off originates from the same contract or a different contractual relationship. There is wide support for the notion that a set-off should be possible even thought the set-off claim may originate from a different contract with a different arbitration clause, or a clause providing for the jurisdiction of state courts, but the views are far from being universally accepted (22).

For the above reason the WIPO Rules do not contain any specific limitation. In fact, it will be for the Arbitral Tribunal to consider the admissibility of counter-claims and set-off in each individual case (23).

42.4 At this point I may indicate a further aspect which came up in discussions when working on the WIPO Rules and on which it did not appear to be possible to come up with a standard solution which would be convenient in all circumstances: The problem discussed was, how to deal with the admissibility of joinder, interpleader and third party intervention - and the legal consequences connected thereto. This, also, is a very complex area, and it seemed to be wrong to try to provide a solution by one or more separate Articles of the WIPO Rules. In fact, the situations, as they may come up, are so different that it must be left to the Arbitral Tribunal to consider such matters carefully, having regard to all particular circumstances of the individual case (24).

Article 43 WIPO AR: Further Written Statements

43.1 All Rules which we are reviewing today, contain a provision concerning the filing of further written statements, particularly where a counter-claim or set-off has been made by Respondent. The Rules slightly vary in their wording, in that e.g. Article 6 LCIA Rules provides that Claimant may file a Statement of Reply (with the particularity that there is no explicit provision for Respondent’s filing thereafter a Statement of Rejoinder), whereas the WIPO Rules more affirmatively provide for the filing of an answer by Claimant in respect of a counter-claim or set-off; see also Article 5 (2) ICC Rules.

43.2 Otherwise, the Rules provide that the allowing or requiring of further written submissions lies within the Tribunal’s discretion (Article 43 (b) WIPO Rules; Article 17 AAA Rules; Article 22 UNCITRAL Rules) (25).

Article 44 WIPO AR: Amendments to Claims or Defence

44.1 The first drafts of the WIPO Rules circulated until 17 March 1994 provided that claims or counter-claims (within the scope of the arbitration agreement) may be freely amended or added prior to the establishment of the Tribunal and thereafter with the consent of the Tribunal. In subsequent internal drafts this provision had been amended and does now contain four qualifications:

44.2 The WIPO provision (26) is a carefully drafted and indeed improved reflection of the provisions contained in Article 20 UNCITRAL Rules, Article 23 UNCITRAL Model Law, Article 4 AAA Rules and Article 13 (1) (d) LCIA Rules (27). Thus, the WIPO Rules strike, in my view, a very appropriate balance (i) between the requirement to determine the claims up-front, and (ii) the flexibility which is needed, having regard to the circumstances.

44.3 The ICC Rules, in Article 16, have been widely criticized because of their rigidity. Indeed, it is too stiff a solution to require that new claims or counter-claims, submitted after the approval of the Terms of Reference, should only be possible upon consent of the other party (which will have to sign a Rider to the Terms of Reference to evidence its agreement to the submittal of such new claims or counter-claims). It was expected that the 1995 "soft" revision of the ICC Rules (referred to above in various footnotes) would provide an amendment to Article 16; however, this is not so (the ICC Doc. No 420/338 of 14 March 1995 makes no reference to Article 16 of the ICC Rules).

Article 45 WIPO AR: Communication Between Parties and Tribunal

45.1 The provision we have here in front of us is new in the sense that the other Rules (ICC, AAA, LCIA, UNCITRAL Rules and UNCITRAL Model Law) are silent on this point.

45.2 I believe that it is worthwhile for the WIPO Rules to express clearly one of the fundamental elements of due process, and that is that there shall be no ex parte communications between Parties (or their Counsel) and any Arbitrator. One exception, though, is stated, namely the communication in respect of purely organizational matters.

Article 46 WIPO AR: Interim Measures of Protection; Security for Claims and Costs

1. On Interim Measures of Protection

46.1 The wording in Article 46 (a) WIPO Rules, by and large, corresponds to Article 22 (1) AAA Rules; it grants a wide power for the Arbitral Tribunal to order interim measures of protection. The provision also stands in line with Article 26 (1) UNCITRAL Rules and Article 17 UNCITRAL Model Law and Article (1) (h) LCIA Rules (28).

46.2 We may note, however, some slight differences: The LCIA Rules, in Article 13 (1), allow such measures "only after giving the Parties a proper opportunity to state their views" - a wording which may seem to exclude an ex parte order. The other Rules (WIPO, ICC, AAA, UNCITRAL Rules and UNCITRAL Model Law) do not contain such a qualification. In fact, it is my view to say that, in case of urgency, an arbitral tribunal must be able to issue such an order for interim measures "ex parte". Thereafter, the aggrieved party will have to be given an opportunity to state its comments thereto, for further consideration by the Arbitral Tribunal (which subsequently may reconsider or amend the order issued which, of course, does not have a res judicata effect).

46.3 The Tribunal may make the granting of such a provisional order subject to an appropriate security. Under the AAA Rules and the UNCITRAL Rules such a security can be asked only "for the costs of such measures" - which seems to be a rather narrow qualification.

- What are the "costs" of such a measure?

The UNCITRAL Model Law (Article 17) and the WIPO Rules do not contain such a qualification, and this certainly means that the Arbitral Tribunal is free to demand a security not only for the costs of a particular measure but also for the potential damage which may result therefrom. This is the better solution. It also conforms to Article 183 (3) of the Swiss Private International Law Act.

The LCIA Rules, in Article 15 (2), provide for a general authority of the Tribunal to ask for security for legal and other costs of any party.

46.4 The ICC Rules, as at present, are silent on this point. Article 8 (5) only spells out something which anyhow is obvious, namely the right of the party to seek orders for interim measures of protection from any local competent judicial authority prior to the transmittal of the files to the Arbitrators. Once the file is in the hands of the Arbitrators, an application to ordinary judicial authorities should only be made in "exceptional circumstances". However, for the purpose of the 1995 "soft" revision of the ICC Rules, it has now been proposed to add the following new Article 8 (6) to the Rules: "Upon receipt of the file and at the request of a party, the arbitrator may order any interim or conservatory measure." There is, at this time (end of March 1995), no proposal to include a sentence, similar to the last sentence of Article 46 (a) WIPO AR, to the effect that the granting of such measures may be made subject to appropriate security being furnished by the requesting party. Possibly the ICC will explain that such an authority (to impose a security) is already inherent in the arbitrator’s power and, therefore, does not need to be spelled out explicitly; however, it would still be preferable to make this clear, by adding a corresponding sentence.

46.5 To note here: the ICC has established specific rules (the "ICC Pre-Arbitral Referee Procedure" - in force as of 1 January 1990) for the immediate appointment of a "referee" prior to setting up the arbitral tribunal, who is given the power (i) to order any conservatory measures or measures of restoration, (ii) to order any payment which ought to be made, (iii) to order a party to take any step which ought to be taken according to the relevant contract, and (iv) to order any measures to preserve or establish evidence. They do not seem to be used in practice, although they are very carefully drafted. Their Article 6.6 provides that parties undertake to carry out the Referee’s order without delay and waive their right to all means of appeal or recourse or opposition to a request to a state court or other authority to implement the order; Michael Schneider had proposed that the WIPO Rules should also contain such a provision within Article 46, but the Experts thought that such a provision might rather intimidate parties, or reduce the acceptability of the Rules.

46.6 Non - Exclusive Arbitral Jurisdiction:

Most of the Rules are silent with respect to the question whether the Arbitral Tribunal should have - or not have - exclusive jurisdiction (respectively whether the requesting party is at liberty to either submit its request to the Arbitral Tribunal (when constituted) or to any competent judicial authority) (29). The understanding and common consensus in this respect is clear: The requesting party, by and large, is free to either apply to the Arbitral Tribunal, or to apply to a local state court. Both solutions have their own advantages and disadvantages. There is no generally valid answer as to a certain preference to be given to either solution. This entirely depends on the individual circumstances. In this context, most Arbitration Rules clearly express the notion that it is not incompatible with the agreement to arbitrate to address a request for interim measures to any judicial authority (and that such a request cannot be deemed to be waiver of the arbitration agreement); see the explicit provisions in Article 26 (3) UNCITRAL Rules; Article 9 UNCITRAL Model Law; Article 22 (3) AAA Rules and Article 46 (d) WIPO Rules. In contrast, the LCIA Rules provide that, by agreeing to LCIA arbitration, the Parties are taken to have agreed to submit requests for interim measures of protection only to the Tribunal (and not to any court of law or other judicial authority); see Article 15 (3). The ICC Rules do not go so far, but indeed expect a party to apply to the arbitral tribunal for granting interim relief, whereas an application to the ordinary judicial authority should be made in "exceptional circumstances" only (Article 8 (5)).

46.7 Scope of Measures:

What is the scope of the measures which may be ordered by the Arbitral Tribunal (30)?

46.8 In general, under the broader perspective of UNCITRAL, WIPO, AAA the scope of the measures may not only be of a conservatory or protective nature (such as the preservation of means of proof, the maintaining of a present state of affairs and the temporary storage of goods), but may include measures aiming at creating or modifying a particular state of affairs (such as e.g. to safeguard the continued execution of a particular performance - compare hereto the provision in the FIDIC Rules regarding the continuation of construction works - to restrain the pursuance of a particular activity - including an injunction in cases of unfair competition or in connection with an asserted violation of intellectual property rights of any kind, or to protect monetary interests by way of e.g. ordering the prolongation of bank guarantees, or the issuance of a performance bond).

46.9 The broad authority of the Arbitral Tribunal as discussed above is one thing. But yet another thing is to determine, in an individual case, what kind of use the Tribunal should make - when should it issue an order for interim measures? How far should it go when exercising its discretion? Where are the yardsticks to guide the Tribunal to find an appropriate balance?

46.10 A slight difference between the WIPO Rules and the UNCITRAL Model Law may be noted here: Article 17 of the UNCITRAL Model Law makes it clear that the addressee of the Tribunal’s order can only be the other party (or parties) involved in the particular arbitral proceedings, but not any third party. This limitation was inserted into the Model Law on purpose - but even without such an explicit restriction it is quite unlikely for an Arbitral Tribunal to assume the power to order a third party to take any action (unless permitted to do so by law) (33).

46.11 The UNCITRAL Rules, in Article 26 (2) were the first Rules to provide that an order for interim measures of protection may be issued in the form of an interim award. This wording was then taken over by the AAA Rules (Article 22 (2)) as well as by WIPO in Article 46 (c). The effect of this provision, however, is less clear than one may expect. Indeed, it would be overly optimistic to believe that, where the tribunal issues provisional measures in the form of an interim award, the problem of enforcement would be removed: First, many national laws (Arbitration Acts) provide enforceability only to final or partial awards, but not to interim awards, and second it remains highly questionable whether recognition and enforcement for such an interim award could be sought under the New York Convention; to note that the N.Y. Convention does not define the term of the arbitral award as such. I know from my friend Professor Albert Jan van den Berg that there is no easy answer to this, but possibly he could expand further on this topic.

2. On Security for Claims and Costs

46.12 The LCIA Rules (in Article 15.2) and the NAI Rules (in Article 38) were the only ones which provided for an explicit authority of the Arbitral Tribunal to order a party to provide a security for legal and other costs of the opposing party. Jan Paulsson, our next speaker on the programme, who was the essential draftsman for the LCIA Rules, will not fail to praise the importance of this provision - and all those who have heard Jan Paulsson’s comments on the recent Ken-Ren Saga (34) will certainly be convinced that such a provision may be of importance and, in Ken-Ren, might have saved the spending of some two million Swiss francs on additional/unnecessary legal fees and court costs to litigate the matter in English courts.

46.13 The concept of the LCIA and the NAI regarding security for costs has now also found its way into the WIPO Rules; see Article 46 (b).

46.14 However, this is the question: Is it good practice in international arbitration that a party files requests for the posting of security for costs incurred (such as lawyers’ fees), or even for the amount of the claim as such - as this may be possible in ordinary court proceedings and under various Codes on Civil Procedure? The prevailing answer, as of today, certainly is a NO.

Indeed, a notion prevails that it pertains to the general commercial risk of being engaged in business and trade that a party may find itself involved in arbitral proceedings (either as Claimant or as Respondent) and that the up-front costs connected thereto (i.e. the deposit to secure the tribunal’s costs and the costs to retain legal counsel, travelling costs etc) will have to be borne/paid by that party, at least for the time being. Yes, in case of success, the winning party may expect to be awarded a compensation for such costs (according to the rule "the costs follow the event"), but nevertheless, until such time, the party will be out of pocket for such costs. At the end, it will run the risk of being successful to collect the sums (and compensation) awarded to it by the tribunal (including the risk of being able to collect the reimbursement of costs) in the framework of enforcement proceedings.

Despite these risks, it would not normally seem to be justified, in international arbitration, to ask for a security of costs (or even to ask for a security in respect of the claim as such). The WIPO Rules do not suggest that this should be seen differently, however, special circumstances may justify a different approach, and in respect of those exceptional circumstances it was important to retain Jan Paulsson’s clause (in a slightly tempered fashion, since Article 46 (b) specifically says: " ... if it considers it to be required by exceptional circumstances ... " - a restriction which is not contained in Article 15 (2) LCIA Rules).

Article 47 WIPO AR: Preparatory Conference

47.1 Only the International Arbitration Rules of the Zürich Chamber of Commerce, but none of the major Arbitration Rules, contains a specific provision regarding a preparatory conference. The WIPO Rules do reflect such conference specifically, not because Dr Gerold Herrmann insisted to have his "tomb-stone" carved into the Rules, but because such a conference has become good practice in many complex arbitration cases.

On the day before this Conference (i.e. on 19 January 1995), we had a discussion on the well-known UNCITRAL Check-list for Preparatory Conferences (now provisionally (and very modestly) titled "Practice Notes"), and I am not going to discuss its elements in detail. It suffices to stress that Article 47 is merely a "programmatic" Article; it does not intend to commit the Tribunal nor the Parties; this is made clear by the word "may".

47.2 Moreover, there is no suggestion that the Conference will necessitate a physical meeting at one particular place. Thus, the Tribunal and the Parties and their counsel may as well confer by telephone (possibly by conference calls) or by video conference. The importance here is the awareness of all concerned that, at particular instances of the procedure, it may prove useful (or indeed necessary) to thoroughly discuss the up-coming steps - since most of any ex post dissatisfaction of the parties has to do with a complaint about lacking or insufficient information afforded to the parties during the "runway" of arbitration. Experience has shown that the time invested up-front to carefully listen to the parties questions, proposals and concerns.

[Annex (Comparative Table in respect of Articles 37 - 47 WIPO AR) follows]

Notes

1. Compare hereto the similar method according to Art. 6 (2) of the Rules of Arbitration and Conciliation of the International Arbitral Centre of the Federal Economic Chamber, Vienna ("the Vienna Rules").

2. It is likely that the WIPO Center will make one exception to immediate transmittal: if the Request for Arbitration names more than one Respondent, and if the multiple Respondents do not, in the sense of Article 18 (b) WIPO Rules, make a joint appointment of an arbitrator within 30 days, any appointment of an arbitrator previously made by Claimant or Claimants shall be considered void. Because of this provision it would stand to reason that the Center shall wait 30 days before transmitting the file to Claimant’s appointee (so as to avoid any inconvenience if such appointment should become void).

3. The ICC, for its 1995 "soft" revision of its Rules (proposed by its letter dated 14 March 1995, Doc. No. 420/338), intends to remove the reference to Article 5 in the last line of Article 10 of the ICC Rules, such that the ICC would no longer wait until Claimant has filed an Answer to a counter-claim filed by Defendant; this is certainly an appropriate revision, but the fact remains that ICC arbitrators get the files much later than WIPO arbitrators. Sometimes, where parties take a long time to satisfy the requirements under Articles 9 and 10 of the ICC Rules (particularly with respect to the securing of the deposit), the arbitrators may not receive the files for years; the advantage is that arbitrators are not being bothered to look into submissions as long as it remains unclear whether the particular case comes off the ground; the disadvantage is that arbitrators will not be informed on the substance matter and time (and other implications) of a case which they had agreed to adjudicate. Obviously, there are (as always in life!) two sides to the coin.

4. The solution adopted by the Netherlands Arbitration Institute ("NAI") essentially corresponds to that of the ICC; see Articles 15 and 20 of the NAI Rules; the same applies with respect to § 15 of the Rules of the Arbitration Institute of the Stockholm Chamber of Commerce ("Stockholm Rules").

5. See also the similar provisions in § 16 (1) Stockholm Rules and Article 19 of the Arbitration Rules of the Chamber of Commerce and Industry of Geneva ("Geneva Rules").

6. See also the same reflection in Article 23 (1) NAI Rules and § 16 (2) Stockholm Rules.

7. Compare hereto also Article 31 Geneva Rules on the Geneva Expedited Procedure as well as Articles 64-74 of the Arbitration Rules of the China International Economic and Trade Arbitration Commission, as of 1 June 1994 ("CIETAC Rules").

8. The ICC, for the purpose of its 1995 "soft" revision of its Rules, follows this spirit in a comparable way, by proposing, in its draft "Additions to the ICC Rules of Arbitration" (Doc. No. 420/338 of 14 March 1995), to insert the following sentence after the first paragraph of Article 13 (2) as well as in Article 18 (2): "In the same manner, the Court may decide to extend any other time-limit fixed by the parties." The difference to WIPO is that the ICC intends to reserve such authority to the institution, whereas under the WIPO Rules such authority vests with the Arbitral Tribunal, except that the Center itself will take care to extend time limits provided for in a number of Articles of the WIPO AR (see hereto Article 4 (g)).

9. In particular, not only the arbitral award as such but also the Procedural Orders (or: Procedural Directives) should - in my view - be given by the "Tribunal" as such, respectively by all three Arbitrators, and not only by the Chairman (as this is, still today, frequently seen where the Chairman sends out letters/Orders himself in the form "I hereby direct ... "). In any event, my strong personal view is that all such Orders (or: Directives) should be issued by the Arbitral Tribunal as such, i.e. by all three Arbitrators. Normally, Orders should be signed by all three Arbitrators, but, for practical purposes, I would believe that the original signature of the Chairman is sufficient whereas the signatures of the two Co-Arbitrators may be attached on separate pages transmitted/retransmitted by telefax. Thus, it should today not be a problem to obtain the signatures of the Co-Arbitrators within a few hours even though one Co-Arbitrator may sit in Tokyo and the other Co-Arbitrator in New York. An alternative which I practice frequently is to explicitly state in the Order itself that the Order had been agreed upon by all three Arbitrators and that the Co-Arbitrators have, therefore, specifically agreed that the Chairman will sign the Order himself, acting for and on behalf of the Arbitral Tribunal.

10. In respect of various provisions, some comments (received by WIPO in Summer 1994 in respect of the then current draft of the WIPO AR) suggested that the parties’ agreement should be an "agreement in writing"; however, such a formal requirement was, on purpose, not retained; indeed, any such agreement (e.g. on some procedural matters, language, place of arbitration etc.) may also be made orally, for instance at an internal meeting among the parties, or at the occasion of a Meeting with the Arbitrators, or at a Preparatory Conference.

11. An exception to the free choice of the parties to designate the place of arbitration is provided for in Article 12 CIETAC Rules which limits the choice of the parties to either Beijing, Shenzhen or Shanghai.

12. Reference is made to the criteria to be checked in this respect listed in Marc Blessing, "Drafting Arbitration Clauses", in: WIPO Publication No. 728 (E) ISBN: 92-805-0498-3, WIPO 1994), pp. 112-114; see also Marc Blessing, "Drafting an Arbitration Clause", in: ASA Special Series No. 8 (December 1994), 46 - 48.

13. See also the 1995 "soft" revision of the ICC Rules; in that revision, it is also proposed to add a sentence to Article 12 of the ICC Rules to the effect that, if exceptional circumstances make arbitration impossible at the place of arbitration as fixed by the Court or agreed by the parties, the Court may fix another place after consulting the parties. -- I would believe that the WIPO Center, if such a situation arose, would also assume such an authority and power on the basis of Article 39 (a) of the WIPO Arbitration Rules. As decisions in such a respect may be difficult and delicate (and certainly not of a routine nature), the WIPO Center is likely to seek the opinion and advice of its Consultative Commission (see hereto the WIPO "white booklet" styled "The Services of the WIPO Arbitration Center", 11 - 15).

14. One commentator (commenting in Summer 1994 on the then circulating draft of the WIPO AR) asked whether the term "language(s)" should be used. The Experts working on the text thought that this was not necessary since, as per Article 1 in fine the singular generally includes the plural; certainly, the Tribunal may determine to use more than one language of arbitration, or to allow e.g. the filing of memorials in two or three languages, and may determine that documents and other evidentiary materials may be received by the Tribunal in several languages without the necessity to provide translations etc.; all of this will have to be carefully directed by the Tribunal.

15. One comment received by WIPO asked whether the Rules should require a particular standard for such translation; for instance, should it be made by a certified or court-approved translator; on purpose, no such standard-requirement came into the WIPO Rules; this will be for the Tribunal to determine, as far as necessary, if controversial.

16. In arbitral practice, this has occasionally given rise to quite difficult and delicate assessments to be made by the Arbitral Tribunal. For instance, in the framework of an arbitration between a German claimant and a US defendant conducted in the English language concerning the acquisition of a Swiss company, most of the relevant underlying documents and contracts of the Swiss company were written in German, and all three Arbitrators were Swiss, fluent in German. Would it, in such a situation, be appropriate to determine that all such underlying documents shall have to be translated into English (as was requested by the US counsel to defendant)? - Determinations of such nature are not easy, and there is no general answer.

17. One commentator (commenting in Summer 1994 on the then circulating draft of the WIPO AR) said that it would be preferable to provide that the detailed Statement of Claim be filed already together with the Request for Arbitration (according to Articles 6 - 10 WIPO AR). Yes, this would certainly expedite the process, but frequently parties prefer to initiate arbitration by means of a rather short Request for Arbitration, see to it that the Tribunal be constituted, during which time they would normally prepare the submittal of the detailed Statement of Claim; as this has become the almost typical procedure, the WIPO Rules do not require a simultaneous filing.

18. Same solution in Article 20 (2c) Zürich Rules.

19. Howard M. Holtzmann and Joseph E. Neuhaus, A Guide to the UNCITRAL Model Law on International Commercial Arbitration (1989), 172.

20. See also the similar provision regarding counter-claims in Article 25 (2) NAI Rules.

21. See e.g. Peter A. Wild, "Die Verrechnung im internationalen Privatrecht, unter besonderer Berücksichtigung der schweizerischen und der US-amerikanischen Rechtsordnung" (1992) and bibliography cited there.

22. See hereto the specific provision in Article 27 Zürich Rules which reads as follows: "The Arbitral Tribunal also has jurisdiction over a set-off defence if the claim that is set off does not fall under the arbitration clause, and even if there exists another arbitration clause or jurisdiction clause for that claim".

23. In the ICC Case No. 5971 where I had to sit as Presiding Arbitrator, the Tribunal had to consider the situation that, for the purpose of erecting a certain production facility, three different/separate contracts (with different arbitration clauses and different choice of law provisions) were established, one being a Joint Venture Agreement, the second being a Sales Agreement (for the sale/purchase of industrial equipment and installation) and the third being a Know-how Agreement. The Claimant instituted legal action at the ICC, basing its claim solely on the Joint Venture Agreement which provided for ICC Arbitration in Paris. Respondent invoked, by way of set-off, defences originating not only from the Joint Venture Agreement but also from the Sales Agreement and the Know-How Agreement. The Arbitral Tribunal had to consider whether such set-off claims are admissible. The Tribunal considered that all three Agreements are interrelated and form a "unité économique" and then proceeded to an examination of the requirements for set-off under various national laws and, in essence, came to the conclusion that the set-off claims could validly be brought within the arbitration, essentially due to the close interrelatedness of the three Agreements (making them an "ensemble légal"), such that the invoking of the legal distinctiveness of the contracts by Claimant would appear to be an abusive defence.

24. Compare hereto the interesting and detailed provisions as contained in Article 41 NAI Rules as well as in Article 18 Geneva Rules.

25. See also Article 25 NAI Rules.

26. Some commentators (commenting in Summer 1994 on the then circulating draft of the WIPO AR) suggested narrow limits for amendments, for instance requiring the explicit consent by the Tribunal, or excluding any "new" claims or defenses, or permitting amendments only in "exceptional circumstances". All these restrictions, however, were found to be over-reaching; it suffices to say that the Tribunal may disallow the amendment - and it will have to reflect carefully on the impact of its decision; compare hereto also the comments by Jacomijn J. van Hof, "Commentary on the UNCITRAL Arbitration Rules - The Application by the Iran - U.S. Claims Tribunal", 135 - 141.

27. Compare hereto also Article 34 NAI Rules.

28. See also Article 37 NAI Rules, Art. 28 of the International Arbitration Rules of the Zürich Chamber of Commerce; compare further Art. 32 of the Rules of the Milano Chamber of National and International Arbitration; Art. 16.6 of the German-French Chamber of Commerce and Industry; Art. 3.4 of the Russian Maritime Arbitration Commission Rules. No provision is contained in the ICSID Rules, the Rules of the Arbitration Institute of the Stockholm Chamber of Commerce and the CIETAC Rules.

29. An exception is laid down in Article 23.1 Geneva Rules which clearly provides for an alternative authority; compare also Article 37 (4) NAI Rules.

30. There exists abundant literature on this subject which cannot be listed here; one of the most recent contributions on the subject comes from late Walter G. Semple, "The UNCITRAL Model Law and Provisional Measures in International Commercial Arbitration", in: The Arbitration and Dispute Resolution Law Journal (ADRLJ December 1994), 269 - 289. A highly interesting report on the practice of the Iran-US Claims Tribunal in respect of interim measures can be found in Jacomijn J. van Hof, "Commentary on the UNCITRAL Arbitration Rules - The Application by the Iran-US Claims Tribunal" (1991), 175 - 191.

31. See hereto Holtzmann/Neuhaus, "A Guide to the UNCITRAL Model Law on International Commercial Arbitration" (1989), 530 ss.).

32. For instance, in Switzerland, the Tribunal can - if the provisional order is not voluntarily complied with - seek the judicial assistance from the local Swiss court (Article 183 Swiss Private International Law Statute "PIL"), either from the court at the place of arbitration, or from another Swiss court (e.g. from the court at the place of residence of a witness). The Swiss court will, applying its own procedural law, examine the Tribunal’s request; it will neither make a de novo examination, nor simply affix a rubber-stamp on the Tribunal’s order in the sense of an exequatur. Rather, the court will adopt a middle-way and, in essence check on a prima facie basis, whether certain formal prerequisites had been met and whether, on the merits, the urgency and/or the exposure to irreparable harm or damages is sufficiently explained, and whether the measures ordered by the Arbitral Tribunal are also available under the state court’s own domestic procedural law.

33. One commentator (commenting in Summer 1994 on the then circulating draft of the WIPO AR) suggested that the Tribunal should also be empowered to ask any ordinary state court or judicial authority to issue, take or make any provisional orders or other interim measures it deems necessary. His proposal, though, did not find its way into the WIPO Rules, essentially because it may seem unlikely that a foreign court would accept to exercise such jurisdiction on the basis of a request from the Tribunal. The situation may be different if such a request is addressed to a judicial authority within the country of the place of arbitration, if such a judicial assistance is provided for according to the local Arbitration Act; see hereto the explicit provision to this effect in Article 183 (2) of the Swiss Private International Law Act "PIL").

34. See hereto also the articles by Brian Davenport, "The Ken-Ren Case: Much Ado About Nothing Very Much" and David Branson, "The Ken-Ren Case: It is an Ado Where More Aid is Less Help", in Arbitration International Vol. 10 No. 3/1994, 303 ss and 313 ss.

Commentary - Gerald Aksen

Commentary - Michael Schneider

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