International Commercial Arbitration
Revision No. 5 - Last Updated : 11-04-2002
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Features
of the Act concerning international commercial arbitration |
The New
York Convention on the Recognition and Enforcement of Foreign Awards |
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Following the enactment of the Malta Arbitration Act, 1996, as amended in 1999, and the setting up of the Malta Arbitration Centre, businesses and individuals from Malta and overseas may now settle their disputes efficiently and effectively through institutional international commercial arbitration or domestic arbitration, as the case may be.
Apart from striving to improve the system of administration of justice in Malta, the driving force behind the Act was, indeed, a more ambitious one: that of establishing Malta as a centre for international commercial arbitration so as to further enhance and strengthen Malta’s position as a maritime and financial services centre.
Institutional arbitration
The Malta Arbitration Centre which has its own distinct personality is the entity responsible for encouraging and facilitating domestic arbitration and for the promotion of Malta as an international commercial arbitration centre.
Institutional arbitration is to be distinguished from ad hoc arbitration in view of the facilitating involvement of the institution which entails, among other things, the provision of ready-made rules as well as assistance and logistical support in the conduct of arbitration.
The Centre’s institutional role emerges from various provisions of the Act and is illustrated by the availability of arbitration panels (i.e. lists of possible arbitrators with various fields of expertise and in-depth knowledge of technical matters) and by the fact that the Chairman of the Centre may take final and binding decisions on the appointment of arbitrators in certain circumstances.
All legislative measures possible have been taken to ensure that the Malta Arbitration Centre is truly an independent, objective and capable institution. Among other things, this is ensured through a number of checks and balances which have been built into the functioning of the Centre by way of a division of responsibilities between the Board of Governors of the Centre, the Chairman of the Board of Governors and the Registrar without, in any manner, negatively affecting the overall efficiency of the Centre or the arbitral proceedings facilitated by it.
Some advantages of arbitration
Expertise of arbitrators
Arbitrators can be specifically chosen by the parties from experts in the field to decide on a particular dispute. Naturally, this is particularly useful in disputes where technical facts are at the heart of the issue.
Procedural flexibility
Rules of arbitral procedure are not generally predetermined but can be agreed upon by the parties or decided upon by an arbitral tribunal. This ensures that the procedure will suit the case in issue. Furthermore, arbitration proceedings may be conducted in any language chosen by the parties or by the tribunal.
Lower costs
Arbitration proceedings are often less costly on the whole than court proceedings. More importantly, the efficiency and speed of arbitration ensures good value for money.
Freedom
An arbitration tribunal is not bound to follow the interpretation of the courts and is, moreover, at liberty to decide ex aequo et bono. Thus, an arbitrator may, for example, choose to decide an issue in accordance with customs of trade or a particular industry practice.
Confidentiality
Hearings are held in camera unless the parties otherwise agree. The place where the proceedings are held could be chosen outside the Centre so as to guarantee confidentiality. Moreover, awards, unlike judgements, may only be published with the parties’ consent.
Neutrality of forum
Admittedly, neither party’s national forum can offer the neutrality of an arbitration designed to suit the case. This aspect is further enhanced by the free choice of the language of arbitration.
Some interesting features of the Act
Perhaps the most notable feature of the Act is that domestic and international commercial arbitration are dealt with completely separately.
Whereas the provisions regarding domestic arbitration contain a comprehensive set of rules of arbitration, those dealing with international commercial arbitration are brief and substantially refer to the UNCITRAL Model Law on International Commercial Arbitration.
The Act provides for the settlement of disputes by an impartial tribunal, appointed by the parties without unnecessary delay and expenses. The conduct of the arbitration process respects the principles of the autonomy of the parties subject only to such safeguards as are necessary in the interests of justice and public order.
Another salient feature of the Act is that, in matters governed by the Act, the courts cannot intervene except as provided under the Act. Thus, for instance, matters concerning the jurisdiction of an arbitral tribunal may be decided upon by the tribunal itself. This competence extends to questions relating to the validity of an arbitration clause or to the validity of the entire agreement thereby avoiding any unnecessary and lengthy court proceedings.
Arbitration awards, whether interim, interlocutory, partial or final, cannot be appealed from and are, consequently, final when registered with and by the Centre. It is only possible to appeal against an award to the Court of Appeal if either party alleges procedural irregularities. Furthermore, the Registrar of the Centre may refuse registration of an award if it results that the procedural formalities were not in accordance with the Act.
Where an award is unclear, if errors have been committed or else if claims have been omitted, either party may request the arbitral tribunal to interpret, correct or supplement the award respectively.
What is ‘international commercial arbitration’?
As a rule of thumb, it can be stated that any dispute concerning legal relationships between private individuals in the context of industry, trade, business or the provision of services will generally be deemed to be a commercial or business dispute.
An arbitration is international if the parties have their place of business in different states or when the place or arbitration or the place of performance of the contract is in another jurisdiction than that in which the parties have their place of business or if the parties have agreed that the subject-matter of the dispute relates to various jurisdictions.
The use of the term ‘commercial’ is intended to exclude international arbitration between States as well as disputes between private individuals in connection with Family Law matters.
Features of the Act concerning international commercial arbitration
As already stated, the most noteworthy feature in this respect is the incorporation into the Act of the UNCITRAL Model Law on International Commercial Arbitration. With the incorporation of the Model Law into the Act, Malta has undoubtedly acquired a widely accepted and thoroughly tested system.
While this Model Law is flexible both towards the legal system in which it is incorporated and the varying needs of arbitration practice, at the same time it is sufficiently detailed to serve as a set of rules for ad hoc or semi-institutional arbitration in the absence of an agreement between the parties on specific procedural issues. Having said this, however, the parties are nonetheless free to agree on any or all procedural issues or designate specific rules of international commercial arbitration.
Another important feature is that, although the arbitrators of international commercial arbitration are competent to rule on matters relating to jurisdiction, the Model Law provides for an appeal to the Court of Appeal against such ruling. However, as a safeguard to prevent dilatory tactics, the Model Law prescribes a short period within which the appeal may be filed and allows the arbitration proceedings to continue whilst the appeal is pending.
The New York Convention on the Recognition and Enforcement of Foreign Awards
Arbitration would be quite useless without an effective system of enforcement of arbitral awards.
It is for this reason that Malta has acceded to the New York Convention on the Recognition and Enforcement of Foreign Awards which will render the awards of the Malta Arbitration Centre enforceable in more than 100 countries.
The grounds for refusal by a national court to recognise and enforce an arbitral award are, indeed, very restricted: essentially, recognition and enforcement may only be refused if the arbitration agreement was invalid or if serious procedural flaws occurred during the arbitration proceedings.
A brief mention should also be made of another convention incorporated by the Act which is the ICSID Convention of Washington 1965 on the Settlement of Investment Disputes between States and Nationals of other States. This rather successful Convention which aims to facilitate foreign investment by providing a dispute resolution mechanism acceptable to both the host government and foreign investors may prove most useful for Malta.
Conclusions
Besides alternative dispute resolution such as mediation and other ADR techniques, arbitration is undoubtedly one of the most effective means of settlement of international commercial disputes.
Offering a fully up-to-date legislative framework and the support of the Malta Arbitration Centre as well as a capable but affordable professional community, Malta has, indeed, all the right elements needed to establish itself as an international arbitration centre well-known for its credibility and efficiency in line with other major centres world-wide. This was, in fact, confirmed by UNCITRAL itself.
This, it is augured, will render Malta an even more attractive jurisdiction and further facilitate and encourage foreign investment in Malta.
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