This article on ‘Concept of Seat in International commercial arbitration’ was written by an intern at Legal Upanishad.
Introduction
International commercial arbitration has become an increasingly popular method of resolving commercial disputes. Unlike litigation, arbitration offers parties a more flexible, efficient and confidential dispute resolution process. One of the key factors in ensuring the success of international commercial arbitration is the selection of the right seat of arbitration. The seat of arbitration has a significant impact on the arbitration proceedings and can affect the enforceability of the award.
This article will discuss the concept of a seat in international commercial arbitration, its importance, and the factors that should be considered when selecting a seat. The article will also examine the impact of the seat on the arbitration proceedings and the enforceability of the award.
Seat in International Commercial Arbitration
The seat of arbitration, also known as the place of arbitration, is the legal jurisdiction in which the arbitration is seated. It is a legal concept that determines the legal framework and procedural rules that govern the arbitration. The seat of arbitration is typically specified in the arbitration agreement, and once it is determined, it becomes a fundamental element of the arbitration.
The seat of arbitration is distinct from the physical location of the arbitration hearing, which may take place in a different location. The physical location of the hearing is determined by the parties, the arbitral tribunal or the arbitral institution, and it does not affect the legal status of the seat of arbitration.
Importance of Selecting the Right Seat
The selection of the right seat of arbitration is crucial in ensuring the success of international commercial arbitration. The seat of arbitration determines the legal framework and procedural rules that govern the arbitration, which in turn affects the enforceability of the award.
The seat of arbitration also affects the relationship between the arbitration and the national courts. The courts of the seat of arbitration have exclusive jurisdiction over matters related to the arbitration, such as the appointment of arbitrators, the challenge of arbitrators, the enforcement of interim measures, and the setting aside of the award.
Therefore, the selection of the right seat of arbitration is critical to the success of the arbitration, as it ensures that the arbitration is conducted in a legal framework that is conducive to the resolution of the dispute and the enforceability of the award.
Factors to Consider When Selecting a Seat
When selecting a seat of arbitration, parties should consider various factors to ensure that the seat is suitable for the dispute and the parties involved. Some of the factors that parties should consider when selecting a seat of arbitration include:
a. Jurisdiction:
The jurisdiction of the seat of arbitration is a critical factor to consider when selecting a seat. The jurisdiction should be one that is neutral and impartial to both parties and should have a legal system that is conducive to the resolution of the dispute.
In addition, the jurisdiction should have a strong tradition of enforcing arbitral awards.
b. Accessibility and Neutrality:
The accessibility and neutrality of the seat of arbitration are also important factors to consider. The seat should be easily accessible to both parties and should not give one party an unfair advantage over the other. The neutrality of the seat is also important to ensure that the arbitration is conducted in an impartial manner. Parties should select a seat that is not located in a country where there is a risk of political or economic instability, or where there is a risk of bias towards one of the parties.
c. Arbitration Rules:
The arbitration rules that govern the arbitration are also important factors to consider when selecting a seat. Different arbitration rules have different provisions on issues such as the appointment of arbitrators, the conduct of the arbitration, and the enforcement of the award. Parties should consider selecting a seat that has arbitration rules that are suitable for the dispute and the parties involved.
For example, the International Chamber of Commerce (ICC) has its own arbitration rules, which are widely used in international commercial arbitration. The ICC rules provide for a well-defined process for the appointment of arbitrators, the conduct of the arbitration, and the enforcement of the award. The International Centre for Dispute Resolution (ICDR), also have its own rules that parties may consider when selecting a seat.
d. Language and Culture:
The language and culture of the seat of arbitration are also important factors to consider. Parties should consider selecting a seat where the language of the arbitration is commonly used and understood, and where there are qualified interpreters and translators available. The cultural background of the arbitrators and the seat may also be relevant in certain disputes. For example, in a dispute involving a construction project in the Middle East, parties may consider selecting a seat that is located in the region and where the arbitrators have an understanding of the local culture and customs.
e. Costs:
The costs associated with the seat of arbitration are also important to consider. Different jurisdictions have different fee structures for arbitration, which may include fees for the administration of the arbitration, the appointment of arbitrators, and the use of facilities. Parties should consider selecting a seat that has reasonable costs and fee structures, and where the cost of the arbitration is proportionate to the value of the dispute.
Impact of the Seat on the Arbitration Proceedings
The seat of arbitration has a significant impact on the arbitration proceedings and can affect various aspects of the arbitration, including the governing law, the arbitration rules, the enforceability of the award, judicial intervention, and confidentiality.
a) Governing Law
The seat of arbitration determines the governing law of the arbitration. The governing law is the substantive law that applies to the dispute and is determined by the law of the seat of arbitration. The governing law can have a significant impact on the outcome of the arbitration, as it determines the legal principles and standards that are applied to the dispute. Therefore, parties should consider selecting a seat that has a legal system that is conducive to the resolution of the dispute, and where the governing law is appropriate for the dispute and the parties involved.
b) Arbitration Rules
The seat of arbitration also determines the arbitration rules that apply to the arbitration. Different arbitration rules have different provisions on issues such as the appointment of arbitrators, the conduct of the arbitration, and the enforcement of the award. The arbitration rules can have a significant impact on the efficiency and effectiveness of the arbitration. Parties should consider selecting a seat that has arbitration rules that are suitable for the dispute and the parties involved, and that provide for a well-defined process for the appointment of arbitrators, the conduct of the arbitration, and the enforcement of the award.
c) Enforceability of the Award
The seat of arbitration also affects the enforceability of the award. The award is a final and binding decision of the arbitral tribunal and is enforceable in accordance with the law of the seat of arbitration. The enforceability of the award depends on the legal system of the seat of arbitration, and the recognition and enforcement of the award may be subject to certain procedural requirements and limitations.
d) Judicial Intervention
The seat of arbitration also affects the relationship between the arbitration and the national courts. The courts of the seat of arbitration have exclusive jurisdiction over matters related to the arbitration, such as challenges to the award and requests for judicial assistance. The relationship between the arbitration and the national courts can have a significant impact on the efficiency and effectiveness of the arbitration. Parties should consider selecting a seat that has a legal system that is conducive to the resolution of disputes through arbitration, and where the courts are supportive of the arbitration process and provide a fair and efficient system for challenging the award and seeking judicial assistance.
e) Confidentiality
The seat of arbitration also affects the level of confidentiality that applies to the arbitration. Different jurisdictions have different rules on confidentiality, and parties should consider selecting a seat that has rules that are suitable for the dispute and the parties involved.
Conclusion
The seat of arbitration is a crucial factor to consider when selecting a forum for the resolution of international commercial disputes through arbitration. The seat of arbitration determines the governing law, the arbitration rules, the enforceability of the award, the relationship between the arbitration and the national courts, and the level of confidentiality that applies to the arbitration.
Parties should consider a range of factors when selecting a seat, including jurisdiction, accessibility and neutrality, arbitration rules, language and culture, and costs. By carefully considering these factors, parties can select a seat that is suitable for the dispute and the parties involved, and that provides a fair and efficient system for the resolution of the dispute through arbitration.
List of references:
- The Seat of Arbitration in International Commercial Arbitration, Aceris Law LLC, 8 November 2017, available at: https://www.acerislaw.com/seat-arbitration-international-commercial-arbitration/
- Vikas Goel and Vivek Gupta, Impact of Seat in Arbitrations – Domestic as well as International, Singhania & Partners, 9 April 2020, available at: https://singhania.in/blog/impact-of-seat-in-arbitrations-domestic-as-well-as-international
- Devesh Juvekar and Dikhat Mehra, SEAT OF ARBITRATION, RSP, available at: https://www.manupatrafast.in/NewsletterArchives/listing/ILU%20RSP/2015/Sep/SEAT-OF-ARBITRATION.pdf