The United Nations Commission on International Trade Law (UNCITRAL) performs several functions, one of which is providing a framework for international commercial arbitration.
The Commission was established in 1966 to improve the legal framework for the facilitation of international trade and investment. As an overarching mandate, UNCITRAL now aims to “further the progressive harmonisation and modernisation of the law of international trade.” It does this by developing legislative and non-legislative instruments relating to commercial law, and encourages its members to adopt them.
It works with the co-operation of its members, which are 70 states, comprised of countries from all around the world.
UNCITRAL’s headquarters are in New York and its annual sessions are held in Vienna and New York alternately.
UNCITRAL Arbitration
A ‘UNCITRAL Arbitration’ is one that adheres to the UNCITRAL Arbitration Rules. These are a comprehensive set of rules, and parties can agree to apply them to the conduct of their arbitral proceeding.
There are three sets of UNCITRAL Rules:
- Arbitration Rules (2021)
This is a comprehensive set of procedural rules for the conduct of arbitral proceedings. The rules can be used in ad hoc arbitrations and institutional arbitration. They are widely recognised as the world’s leading set of ad hoc arbitration rules.
- Expedited Arbitration Rules
Parties may choose the expedited rules for a streamlined and simplified procedure for settling their dispute.
- Rules on Transparency in Treaty-based Investor-State Arbitration
These are a set of procedural rules that provide for transparency and accessibility to the public of these types of arbitrations. For example, procedural orders may be made available for the public to view.
UNICTRAL and its Secretariat do not act as an arbitral tribunal, administer arbitration proceedings, or perform any function relating to individual arbitration proceedings. UNCITRAL provides the rules and parties can apply them as they wish.
Types of dispute
UNCITRAL Rules are used for a broad range of commercial disputes, particularly disputes relating to international trade.
They are also frequently applied to investor-state disputes, and state-state disputes.
UNCITRAL Rules are known for their flexibility and the rules allow parties to tailor the proceedings to the needs of the dispute. That makes them particularly useful for complex or unusual cases.
Application of the rules
UNCITRAL Rules have a broad application and can be used for ad hoc or institutional arbitrations. They are frequently adopted in both types.
Arbitration under the rules has also regularly been agreed for disputes referred to arbitration under bilateral investment treaties.
UNCITRAL Arbitration administered by ICSID
Given that UNCITRAL Rules apply to investor-state disputes, the scenario often arises that UNCITRAL arbitrations are administered by ICSID.
Technically foreign investors can opt for either ICSID arbitration or UNCITRAL arbitration for their investor-state disputes.
So why would parties choose UNCITRAL Rules over a ICSID arbitration?
Sometimes it’s a case of familiarity and what the parties are used to. UNCITRAL is perhaps more widely used worldwide. Other parties are concerned about costs and ICSID is known for its high costs.
However, there are a few points of difference to note between UNCITRAL Rules and ISCID:
- Ability to set aside awards
UNICTRAL awards can be set aside by the courts of a member state at the seat of the arbitration. However, ICSID awards cannot be set aside. That’s because ISCID tribunals operate under a self-contained regime and are not subject to any seat.
- Enforcement
ICSID awards are automatically enforced in any ICSID contracting states. UNCITRAL awards may be refused recognition under Article 5 of the New York Convention (albeit that these grounds are limited).
Unique features
Under the UNCITRAL Rules, no institution acts as secretariat or reviews an award. The arbitration process is in the hands of the parties and their chosen tribunal.
Costs
UNCITRAL Rules require the tribunal’s fees to be “reasonable”, depending on the amount in dispute and how complex the dispute is. After the tribunal is constituted, it is required by the rules to tell the parties how it proposes to determine its fees.
