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Part III The Initiation of the Arbitration and the Identification and Clarification of the Issues Presented, Ch.8 The Notice Initiating Arbitration

David D. Caron, Lee M. Caplan, Matti Pellonpää

From: The UNCITRAL Arbitration Rules: A Commentary (1st Edition)

David D. Caron, Matti Pellonpää, Lee M. Caplan

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Content type:: Book content

Product:: International Commercial Arbitration [ICMA]

Series:: Oxford Commentaries on International Law

Published in print:: 23 March 2006

ISBN:: 9780199297597

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(p. 341) Chapter 8 The Notice Initiating Arbitration

1 Introduction 341
2 The Notice Initiating Arbitration–Article 3 342
1. A Text of the UNCITRAL Rule 342
2. B Commentary 342
  1. (1) The Notice Requirement–Article 3(1) 342
  2. (2) When Arbitration Proceedings Are Deemed to Have Commenced–Article 3(2) 343
  3. (3) What Information Must Be Provided in the Notice of Arbitration–Article 3(3) 344
  4. (4) Additional Information Provided in the Notice of Arbitration–Article 3(4) 345
  5. (5) The Notice of Arbitration at the Iran-US Claims Tribunal 346
3. C Extracts from the Practice of NAFTA Tribunals 349
4. D Extracts from the Practice of Other Tribunals 350

1 Introduction

Parties bound by an arbitration clause or agreement which provides for disputes to be arbitrated under the UNCITRAL Rules are required by Article 3 to provide a formal notice of arbitration to initiate the proceedings. Article 3(1) explicitly states this notice requirement, while Article 3(2) establishes the date of receipt of notice as the official date for commencement of the proceedings. Article 3(3) details the information which must be included in the notice of arbitration; Article 3(4) gives claimants the option of accelerating the proceedings by providing additional information.

(p. 342) 2 The Notice Initiating Arbitration–Article 3

A Text of the UNCITRAL Rule¹

Article 3 of the UNCITRAL Rules provides:

1. The party initiating recourse to arbitration (hereinafter called the “claimant”) shall give to the other party (hereinafter called the “respondent”) a notice of arbitration.
2. Arbitral proceedings shall be deemed to commence on the date on which the notice of arbitration is received by the respondent.
3. The notice of arbitration shall include the following:
1. (a) A demand that the dispute be referred to arbitration;
2. (b) The names and addresses of the parties;
3. (c) A reference to the arbitration clause or the separate arbitration agreement that is invoked;
4. (d) A reference to the contract out of or in relation to which the dispute arises;
5. (e) The general nature of the claim and an indication of the amount involved, if any;
6. (f) The relief or remedy sought;
7. (g) A proposal as to the number of arbitrators (i.e. one or three), if the parties have not previously agreed thereon.
4. The notice of arbitration may also include:
1. (a) The proposals for the appointments of a sole arbitrator and an appointment authority referred to in article 6, paragraph 1;
2. (b) The notification of the appointment of an arbitrator referred to in article 7;
3. (c) The statement of claim referred to in article 18.

B Commentary

(1) The notice requirement–Article 3(1)

Article 3(1) provides that a claimant simply must send a notice of arbitration to a respondent in order to initiate arbitral proceedings.² The purpose of the rule is “to inform the respondent … that arbitral proceedings have been (p. 343) started and that a particular claim will be submitted for arbitration.”³ Since the notice requirement is a standard provision of most sets of rules of arbitration, Article 3(1) was adopted after minor revision without much discussion.⁴

(2) When arbitration proceedings are deemed to have commenced–Article 3(2)

Under Article 3(2), the date of receipt of a notice of arbitration establishes the date for commencement of the arbitral proceedings.⁵ Paragraph 2 was added to the Preliminary Draft of Article 3 after the issue of determining the date of commencement of proceedings was raised by the Hungarians⁶ and generally accepted by the representatives as an important issue to be resolved under the rule. As noted in the Commentary on the Revised Draft, “the time of commencement of the arbitral proceedings may have relevance to the question of whether provisions on prescriptions of rights or limitations of actions under national law are operative in relation to the dispute.”⁷ The drafters were concerned that parties have a clear understanding of when the time periods, for example, in statutes of limitations begin to run.

There was brief discussion of whether such a provision was needed since municipal law likely would have rules governing the commencement of proceedings in relation to prescriptions and limitations.⁸ However, in the interests of making the rule explicit for the parties involved and of maintaining uniformity for all UNCITRAL conventions, Article 3(2) was modeled on a (p. 344) similar provision in Article 14 of the 1974 Convention on the Limitation Period in the International Sale of Goods,⁹ and adopted.

The Committee chose not to include any specific language to define receipt, leaving that issue to be resolved under Article 2(1).

(3) What information must be provided in the notice of arbitration–Article 3(3)

Article 3(3) lists the information which must be included in a valid notice of arbitration under the UNCITRAL Rules. By expressly providing for the contents of the notice, the drafters were trying to ensure that the respondent received information “sufficient to apprise the respondent of the general context of the claim asserted against him”¹⁰ and “to enable him to decide on his future course of action.”¹¹

Subparagraph (a) explicitly demands that the dispute be referred to arbitration. Subparagraphs (b) through (f) require the claimant to provide information regarding the identity of the parties; the arbitration clause or agreement invoked; the contract at issue; the general nature of the claim and amount involved and, finally, the remedy or relief sought.

Subparagraph (g) requires the claimant to make a proposal regarding the number of arbitrators–either one or three–if the parties have not previously agreed on this point. While there was general agreement on this provision, the drafters emphasized that parties should be encouraged to reach agreement on the number of arbitrators when they are in the process of drafting an arbitration clause or agreement as recommended in the model UNCITRAL arbitration clause.¹²

The main issue, which arose during discussions of the drafting of paragraph 3, was whether notice could be made sufficiently detailed to make it the functional equivalent of a statement of claim, thereby making Article 18 unnecessary. The arguments in favor of consolidating the requirements of Articles 3 and 18 revolved around the interests of accelerating the (p. 345) proceedings and reducing the cost of arbitration to the parties. The Belgian representative also expressed concern that a two–step process could “give rise to delaying tactics on the part of the respondent.”¹³

Other arguments were made in favor of maintaining the distinction between the notice of arbitration and statement of claim. They emphasized the burdens on the claimant of requiring a detailed statement of claim in the early stages of an arbitral proceeding and the value of the two–step process in encouraging parties to resolve their disputes early before too much time and money had been expended. For example, one representative stated that it was premature to impose an obligation to communicate details required under Article 18 at such an early stage in the proceedings, since parties might still be discussing terms of a possible settlement.¹⁴ Another noted that a simple notice of arbitration might lead to early resolution of the dispute with minimum cost to claimants.¹⁵

As a compromise, the Committee decided to maintain the two–tiered system of providing notice and a statement of claim,¹⁶ but to give claimants the option under Article 3(4) of attaching a statement of claim to the notice of arbitration which would meet their obligations under article 18.

(4) Additional information provided in the notice of arbitration–Article 3(4)

The drafters wanted claimants to be aware that while they were required under Article 3(3) to provide certain information in the notice of arbitration, they were not restricted to providing only the listed information. Article 3(4) was meant to give claimants the option to accelerate the proceedings by providing additional information with the notice of arbitration.

Under subparagraph (a), when arbitration is to be conducted by a single arbitrator, the claimant may include his proposal for the appointment of a sole arbitrator and appointing authority pursuant to Article 6(1). In the case where three arbitrators will be used, subparagraph (b) allows the claimant to notify the respondent of his appointment of an arbitrator as referred to in Article 7.

Finally, as mentioned in the discussion of Article 3(3), under subparagraph (c) of Article 3(4), the claimant may submit a statement of claim along with (p. 346) the notice of arbitration and thereby meet the requirements of both Articles 3 and 18. As discussed previously, Article 1 grants the parties conducting arbitration under the UNCITRAL Rules the right to modify the rules by written agreement. Therefore, parties are entitled to modify the notice requirements to fit their particular needs.

(5) The notice of arbitration at the Iran-US Claims Tribunal

Since the UNCITRAL Rules were designed to apply to single claim “ad hoc arbitration relating to international trade,”¹⁷ it should not be surprising that certain provisions of the Rules were not appropriate in the context of the Iran-US Claims Tribunal.

In its modification of the UNCITRAL Rules, the Iran-US Claims Tribunal eliminated the need for claimants to provide a notice of arbitration as required under Article 3. While a notice of arbitration is required in ad hoc arbitration both to notify the respondent of the claimant's intent to arbitrate a claim and to commence the arbitral process, the Tribunal determined that the Algiers Accords under which it was established, did away with this requirement because procedures were already in place under the Accords.¹⁸ Also, much of the information required by Article 3 for the notice of arbitration was covered by Article 18 on the requirements for Statements of Claim to be submitted to the Tribunal.

It was particularly significant for the Tribunal that the Statement of Claim under Article 18 of the Tribunal Rules included a “demand that the dispute be referred to arbitration by the Tribunal,” a required part of the notice called for in Article 3(3). The “demand” is important because the claimant's demand for arbitration coupled with a respondent's unconditional appearance can together constitute an agreement to arbitrate. This raised the question of whether the Tribunal's proceedings were subject to the supervisory jurisdiction of the Dutch legal system inasmuch as Dutch law at that time required that the agreement to arbitrate be in writing and signed by the parties.¹⁹

(p. 347) Undoubtedly, Iran and the United States, the two State Parties to the Algiers Accords, knew they were agreeing to arbitration. Moreover, given Iran's challenges in Dutch court, it is apparent that Iran, like the United States, was aware that it had agreed to arbitration supervised by the Dutch legal system. Thus, Iran could be regarded as being estopped from raising the issue of its written agreement.²⁰ Hardenberg argues that in the case of claims of nationals before the Tribunal, however, there clearly is not an arbitration agreement between the litigants.²¹ In support he cites to the Explanatory Note of the Dutch Foreign Ministry accompanying the Dutch Bill:

Given the absence of voluntary prior contractual agreement between the parties concerned in each individual case and the international nature of the agreement between States underlying the arbitration, doubts may arise as to whether this is indeed arbitration within the meaning of Dutch law.²²

The issue, therefore, was whether not only the State Parties, but also the nationals of each State Party can be said to have agreed to arbitration.

Although one could argue that the state as agent can bind its nationals,²³ (p. 348) the consent of nationals to arbitrate before the Tribunal may be based on a theory of direct agreement. In particular, the Accords manifest a written agreement between Iran and the United States to participate in binding arbitration of claim brought not only by the State Parties, but also by their nationals, even though such nationals were not parties to the Accords. In this sense, the Accords embody a written offer by the two State Parties to the nationals of the other State Party to arbitrate certain claims.²⁴ This offer could be accepted in writing by individual claimants by the filing of Statements of Claim prior to 19 January 1982. Indeed, each Statement of Claim included an element not normally required by the UNCITRAL Rules, “[a] demand that the dispute be referred to arbitration by the Tribunal….”²⁵ Although it is true that the Accords compelled US claimants to abandon their proceedings in US courts, the Accords did not compel them to file or defend claims before the Tribunal. As Mr. Justice Hobhouse observed in Dallal v. Bank Mellat: “It was Mr. Dallal's voluntary act to commence the proceedings before the Hague tribunal. It is true that he may have had no other alternative under the law of the United States if he wished to pursue his rights as he saw them. But that does not make it any the less a voluntary act.”²⁶

(p. 349) A quick response might be that although Dallal's act appeared voluntary in that he was not coerced, is an act truly voluntary when there is no other choice? However, as Mr. Justice Hobhouse notes, what choice does any plaintiff have: “Most plaintiffs who commence proceedings are in a similar position. They have to commence proceedings before the appropriate municipal court or else be without legal remedy.”²⁷

In this sense, it is important that the Tribunal possesses jurisdiction over the claims of nationals of one State Party against the other State Party, but not vice versa.²⁸ Unlike in judicial proceedings the nationals of each State Party can choose to be a plaintiff, but cannot be forced to be a defendant. Thus, a written agreement to arbitrate exists in the acceptance by the national of one State Party of the written offer of the other State Party in the Accords through that national's choice to file a written demand for arbitration.²⁹

C Extracts from the Practice of NAFTA Tribunals

94. The revised and expanded terminology in the Statement of Claim is not intrinsically of such great significance. This is particularly so, bearing in mind that Article 3 of the UNCITRAL Arbitration Rules, which in this regard remains unmodified by anything in Part B, and which prescribes the form of a notice of arbitration, requires in (3)(e) simply that such notice include “The general nature of the claim and an indication of the amount involved, if any.” By contrast, Article 18 of those Rules, likewise unmodified by Part B, requires at (1) (b) and (c) that a statement of claim set forth a “statement of the facts supporting the claim” and the “points in issue.” Thus a greater elaboration of detail in the Statement of Claim is permissible, if not, indeed, required.

Ethyl Corporation and The Government of Canada, Partial Award on Jurisdiction (NAFTA Chapter Eleven, 24 Jun 1998), reprinted in (1999) 38 ILM 708, 730.

12. On October 30, 1998, SDMI delivered a Notice of Arbitration pursuant to Article 3 of the Rules. The arbitration is deemed to (p. 350) have “commenced” on that date pursuant to Article 3.1 of the Rules.

SD Myers, Inc. and The Government of Canada, Partial Award (NAFTA Chapter Eleven, 13 Feb 2000), reprinted in (2001) 40 ILM 1408, 1409.

D Extracts from the Practice of Other Tribunals

2. CME Czech Republic B.V. (CME) initiated these arbitration proceedings on February 22, 2000 by notice of arbitration against the Czech Republic pursuant to Art. 3 of the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL).

CME Czech Republic BV (The Netherlands) and The Czech Republic, Final Award (Ad Hoc UNCITRAL Proceeding, 14 Mar 2003), reprinted in (2003) 15(4) WTAM 83, 91.

Footnotes:

1 The Iran-US Claims Tribunal determined, in adopting the Tribunal Rules, that: “No Notice of Arbitration pursuant to Article 3 of the UNCITRAL Rules is to be given.”

2 Note that the national law or treaty governing the arbitral process may impose additional notice requirements. See, e.g. NAFTA, Chapter Eleven, Sub–chapter B, Art 1126 (requiring the delivery of written notice of an arbitral claim to NAFTA Parties other than the respondent within 30 days from the date the claim is submitted).

3 Report of the Secretary–General on the Preliminary Draft Set of Arbitration Rules, UNCITRAL, 8th Session, UN Doc A/CN.9/97 (1974), Reprinted in (1975) VI UNCITRAL Ybk 163, 167 (Commentary on Draft Article 3).

4 As adopted by the Commission, Article 3(1) is modeled after similar provisions in Article 3 of the ECE Arbitration Rules; Article II, paragraph 3 of the ECAFE Arbitration Rules, section 7 of the Commercial Arbitration Rules of the AAA, and section 7 of the Rules and Procedures of the Inter–American Commercial Arbitration Commission. Report of the Secretary–General on the Revised Draft Set of Arbitration Rules, UNCITRAL, 9th Session, Addendum (Commentary), UN Doc A/CN.9/112/Add.1 (1975), Reprinted in (1976) VII UNCITRAL Ybk 166, 168 (Commentary on Draft Article 4).

5 See SD Myers, Reprinted below, section C.

6 Report of the Secretary–General on the Preliminary Draft Set of Arbitration Rules, UNCITRAL, 8th Session, Addendum 3 (Observations), UN Doc A/CN.9/97 (1974), Annex II.

7 Report of the Secretary–General on the Revised Draft Set of Arbitration Rules, UNCITRAL, 9th Session, Addendum 1 (Commentary), UN Doc A/CN.9/112/Add.1 (1975), Reprinted in (1976) VII UNCITRAL Ybk 166, 168 (Commentary on Draft Article 4(2)).

8 Report of the UNCITRAL, 8th Session, Summary of Discussion of the Preliminary Draft, UN Doc A/10017, para 24 (1975), Reprinted in (1975) VI UNCITRAL Ybk 24, 27.

9 Report of the Secretary–General on the Revised Draft Set of Arbitration Rules, UNCITRAL, 9th Session, Addendum 1 (Commentary), UN Doc A/CN.9/112/Add.1 (1975), Reprinted in (1976) VII UNCITRAL Ybk 166, 167 (Commentary on Draft Article 3(1)).

10 Report of the Secretary–General on the Preliminary Draft Set of Arbitration Rules, UNCITRAL, 8th Session, UN Doc A/CN.9/97 (1974), Reprinted in (1975) VI UNCITRAL Ybk 163, 167 (Commentary on Draft Article 3(2)).

11 Report of the Secretary–General on the Revised Draft Set of Arbitration Rules, UNCITRAL, 9th Session, Addendum 1 (Commentary), UN Doc A/CN.9/112/Add.1 (1975), Reprinted in (1976) VII UNCITRAL Ybk 166, 168 (Commentary on Draft Article 4).

12 See above, Chapter 2, section 2.

13 Summary Record of the 2nd Meeting of the Committee of the Whole (II), UNCITRAL, 9th Session, UN Doc A/CN.9/9/C.2/SR.2, at 7–8 (1976).

14 Ibid

15 Ibid at 8.

16 The distinction between Articles 3 and 18 was recognized in Ethyl Corporation, Reprinted below, section C.

17 Report of the UNCITRAL on the Work of its Sixth Session, UN GAOR, 28th Session, Supp No. 17, UN Doc A/9017, para 85 (1973).

18 G Aksen, “The Iran-United States Claims Tribunal and the UNCITRAL Arbitrations Rules, an early comment,” in J Schultsz & A van den Berg (eds), The Art of Arbitration (1982) 1. See also Chapter 11, section 2 on article 18, below.

19 The specific provision of the Dutch Code of Civil Procedure referred to, provides that the “arbitration agreement…must be made in writing and signed by the parties….” Dutch Code of Civil Procedure, Art 623(1) (Unofficial translation prepared by the Asser Institute, 1980). The arbitration agreement is also significant because such a writing is essential to the enforceability of the award, given that the “in writing” requirement is also set forth in the New York Convention. In particular, Article IV of the New York Convention requires that to obtain recognition and enforcement, the party applying shall present the award and the arbitration agreement, such agreement, by Article II of the Convention, being in writing by the parties.

Van den Berg states, in the context of the New York Convention, that the purpose of the requirement of a written agreement “is to ensure that a party is aware that he is agreeing to arbitration.” A van den Berg, The New York Convention of 1958: Toward a Uniform Judicial Interpretation (1981) 171. In this sense, the agreement in writing is the objective manifestation of the consent of the parties, the voluntary act that underlies the notion and legitimacy of arbitration.

20 To van den Berg, estoppel, in the context of the New York Convention, would reflect “a fundamental principle of good faith, which principle overrides the formalities required by Article II(2) of the New York Convention.” Ibid at 185.

21 L Hardenberg, “The Awards of the Iran-United States Claims Tribunal Seen in Connection with the Law of the Netherlands,” (Sep 1984) IBL 337, 338, originally published in Dutch as “De Uitspraken van het Iran-United States Claims Tribunal naar Nederlands recht bezian,” (11 Feb 1984) Nederlands Juristenblad 167.

22 Indeed, this problem may explain a less specific statement of a US Department of State official some months after the signing of the Accords: “Upon examination of Dutch law, it became apparent that awards rendered pursuant to the Claims Settlement Declaration would not meet certain procedural requirements for valid arbitral awards under Dutch civil code.” M Feldman, “Implementation of the Iranian Claims Settlement Agreement–Status, Issues and Lessons: View from Government's Perspective,” in M Bender (ed), Private Investors Abroad–Problems and Solutions in International Business (1981) 75, 98.

23 In particular, it could be argued that each State Party possesses the authority to agree to arbitration on behalf of its nationals. As van den Berg wrote in response to Hardenberg, “[i]t is arguable that an arbitration agreement can be considered to be present if one regards Iran and the United States as also representing the interests of their subjects when bringing about the Claims Settlement Declaration.” A van den Berg, “Proposed Dutch Law on the Iran-United States Claims Settlement Declaration, A Reaction to Mr. Hardenberg's Article,” (Sept 1984) IBL 341, 343, originally published in Dutch as “Wetsontwerp Iran-United States Claims Tribunal, Een reactie,” (11 Feb 1984) Nederlands Juristenblad 170 (emphasis in original). Indeed, this position is supported by Article 1(3) of the Tribunal Rules, which provides: “The Claims Settlement Declaration constitutes an Agreement in writing by Iran and the United States, on their own behalves and on behalf of their nationals submitting to arbitration within the framework of the Algiers Declarations and in accordance with the Tribunal Rules.” This provision was added to Article 1 of the UNCITRAL Rules as a part of the Tribunal's modification of those Rules.

24 Georges Delaume has argued that such a form of agreement would be sufficient for ICSID arbitration: “Consent may also result from the investor's acceptance of a unilateral offer from the contracting State involved when that State has already consented to ICSID arbitration in relevant provisions…of a bilateral treaty with the Contracting State of which the investor is a national.” G Delaume, “ICSID Arbitration: Practical Distinctions,” (1984) 1(2) JIA 101, 104. Indeed, the increase in ICSID arbitration in recent years is largely due to the many cases in which the jurisdiction of the Centre is based on a bilateral investment treaty. See S Manciaux, “Investissements étrangers et arbitrages entre États et ressortissants d'autres États: Trente années d'activité du CIRDI” (2004) 191–92. Similarly, although the recent UNCITRAL Model Law on International Commercial Arbitration requires a written agreement to arbitrate, a writing exists if there is “an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by another.” Art 7(2), UNCITRAL Model Law on International Commercial Arbitration. See also D Furnish, “Commercial Arbitration Agreements and the Uniform Commercial Code,” (1979) 67 California Law Review 317, 347 (“The arbitration agreement should be made amenable to autonomous creation through the same means recognized for the creation of a sales agreement…”).

25 Tribunal Rules of Procedure, Art 18(1)(a). See below, Chapter 11.

26 Mark Dallal v Bank Mellat, [1986] 1 All ER 239, 254.

27 Ibid.

28 The Islamic Republic of Iran and The United States of America (Jurisdiction Over Claims by a State Party Against Nationals of the Other State Party), Decision 1–A2–FT (13 Jan 1982), Reprinted in 1 Iran-US CTR 101 (1981–1982).

29 As to the Tribunal's relationship to the Dutch legal system, see generally D Caron, “The Nature of the Iran-United States Claims Tribunal and the Evolving Structure of International Dispute Resolution,” (1990) 84 AJIL 104. See also above, Chapter 2, section 3 on Article 15.

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