Trade Law Commission adopts model law on international commercial arbitration.

Trade Law Commission adopts model law on international commercial arbitration

The United Nations Commission on International Trade Law (UNCITRAL) on 21 June adopted a model law on international commercial arbitration.

Legal experts from 72 countries and international organizations, participated in the three-week meeting (3-21 June, Vienna), during which the Commission also considered legal obstacles to the use of automatic data processing, a draft legal guide on electronic funds transfers, a draft convention on international bills of exchange and promissory notes, a legal guide to drawing up international construction contracts for large industrial projects, and uniform legal rules on the liability of transport terminal operators.

Chairman of the eighteenth session was Roland Loewe (Austria). Ivan Szasz (Hungary), Luiz G. Paes de Barros Leaes (Brazil) and Houzhi Tang (China) were Vice-Chairmen. Elikunda E.E. Mtango served as Rapporteur.

Model law: The model law, formulated after four years of deliberations, is to be forwarded to the 1985 General Assembly for recommendation to Member States. It is designed to assist with settlement of commercial disputes between parties from different countries. If the model law is widely adopted, uniform procedures and practices will make international commercial arbitration easier and ensure it functions properly by eliminating provisions currently found in national laws.

The Commission in 1980 had surveyed national laws on arbitration, finding that they had been drafted with the prime or exclusive aim of settling domestic disputes. Mandatory and non-mandatory provisions of an applicable law may, however, have adverse effects aggravated by both disparity between national laws and their inadequacy for international cases. At present, international commercial arbitration is subject to traditional and often peculiar procedural rules contained in local codes of civil procedure from which contracting parties may not deviate, even where the country has developed special rules for arbitration and not simply adapted its laws governing court proceedings.

A special internationally-agreed model law for international commercial arbitration would remedy such a situation in two ways: by providing a basis for harmonizing national laws and thus enhancing freedom of choice of the place of arbitration, and by providing a progressive basis for Governments to evaluate their own commercial arbitration law with a view to modernization and improvement.

The model law recommended by UNCITRAL:

* Provides a liberal framework that offers disputing parties a broad scope for agreeing on the rules of procedure--allowing them, for example, to refer in their contracts to the standard procedures suitable for their trade or branch of industry. Where such agreement is lacking, it gives wide discretion to the arbitrators regarding the conduct of the proceeding--including rules for taking evidence. This effectively excludes the use of inappropriate local rules of a court or arbitral procedure and it limits the extent of any intervention of local courts where the arbitral proceedings are taking place;

* Has only a few mandatory rules, intended to ensure fairness and equal treatment of the disputing parties, and provide freedom and discretion for arbitration;

* Contains supplementary provisions to assist in arbitration where parties concerned have not agreed on procedural rules;

* Has provisions on recognition and enforcement of arbitral awards which apply irrespective of the country where the award was made. Whereas the 1958 New York Convention dealt only with foreign awards, the new model law no longer makes such a territorial distinction, instead drawing a new line on more substantive grounds determined by whether an arbitration is international or not.

International payments: the work of UNCITRAL on a guide for legislators and lawyers on legal problems arising from electronic funds transfers has resulted in a draft guide for transmission to Governments and interested international organizations for comment. The draft is to be revised in light of comments received and submitted to the Commission's 1986 session for possible adoption. In 1986, the Commission will also consider a draft convention on international bills of exchange and international promissory notes.

Computer records: The use of automatic data processing (ADP) is becoming firmly established in many phases of domestic and international trade. Legal rules, however, are often based on pre-ADP (paper-based) ways of documenting such activities and may thus create obstacles to the use of ADP--for example by leading to legal insecurity or by impeding its efficient use where it would otherwise be justified.

UNCITRAL considers that, because development of international trade has not noticeably suffered, despite substantial differences in the rules of evidence as they apply to paper-based systems of documentation, there is no need to unify the rules of evidence regarding use of computer records. Nevertheless it also considers that there is a need to adapt existing legal rules to the developments in the use of ADP, at the same time providing the same or better legal security as paper-based documentation.

The Commission recommended Governments review: legal rules affecting the use of computer records as evidence; legal requirements that certain trade transactions or trade-related documents be in writing; legal requirements of hand-written signature or other paper-based method of authentication; and legal requirements that documents submitted to Governments be in writing and manually signed.

Construction contracts: Work is to continue on a legal guide on drawing up construction contracts for large industrial projects. Partly on the recommendation of the Asian-African Legal Consultative Committee, consideration will be given to enhancing the draft guide by addition of annexes, for example, on legal issues related to joint ventures, on concession agreements in the field of natural resources, and on tendering and procurement.