Business Law Newsletter
International Commercial Arbitration and UNCITRAL's Model Law
The United Nations Commission on International Trade Law (UNCITRAL) is the primary entity within the United Nations overseeing international trade law. One of UNCITRAL’s primary goals has been to prepare or promote:
“the adoption of new international conventions, model laws and uniform laws and promoting the codification and wider acceptance of international trade terms, provisions, customs and practices, in collaboration, where appropriate, with the organizations operating in this field.”
In line with this objective, in 1985, in an attempt to create uniformity in arbitration law and procedure on an international level, UNCITRAL created the Model Law on International Commercial Arbitration (Model Law). Since that time, at least 47 countries and several U.S. states have adopted the Model Law.
Model Law Provides Comprehensive Rules
Although there have been previous attempts at creating uniformity in international arbitration, such as the New York Convention, no other set of laws or procedures matches the Model Law in scope or comprehensiveness. Other international laws generally focus on specific aspects of international arbitration, while the Model Law provides a complete framework.
In effect, the extent of the Model Law’s coverage of procedural rules, among other aspects of arbitration, removes the question of which country’s laws will control the arbitration process. Further, the Model Law’s framework is careful not to affect any relevant treaty “in force in the [country] adopting the Model Law.”
Judicial Interpretation of the Model Law
The Model Law is frequently modified or expanded upon by the foreign country or individual province adopting it. In addition, many jurisdictions place it within a larger statute under a different name, similar to how the United States codified the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards within the Federal Arbitration Act. Consequently, conducting legal research of cases involving the Model Law is challenging since the Model Law is referred to by different names in certain foreign courts.
International Courts Favor Implementing the Model Law
Foreign jurisdictions generally value a pro-arbitration policy with respect to international commercial disputes. Cases adjudicated abroad have upheld the validity of arbitration provisions in agreements between businesses engaged in international business. For instance, in Schiff Food Products, Inc. v. Naber Seed & Grain Co. Ltd (1996), the Saskatchewan Court of Queen’s Bench (Canada) enforced an arbitration clause in a breach of contract action by a New York company (Schiff) against a business located in Saskatchewan (Naber).
In 1992, Schiff sent a written offer to purchase oregano from Naber which included a provision to submit to any disputes to the American Spice Trade Association to be arbitrated in New York. Although Naber never actually returned a copy of the offer with a signature, its actions of sending a sample and promising to perform were deemed an acceptance of the offer. When Naber failed to perform, Schiff submitted the dispute to arbitration in New York and won when Naber refused to participate.
Subsequently, Schiff sought to enforce the arbitration award against Naber in Saskatchewan. In defense, Naber asserted, in part, that the Model Law requires such agreements to be in writing, and that the initial offer which contained an arbitration provision did not satisfy this requirement. In ruling for Schiff, the Saskatchewan court decided that the Model Law does not specifically require a signature from both parties to create a valid agreement to arbitrate. In addition, the evidence suggested that Naber’s refusal to attend the arbitration, accompanied by an attempt to “come to some mutual agreement” suggested that Naber acknowledged the validity of the agreement, despite the lack of a writing signed by both parties. In essence, the court held that Naber impliedly agreed to the terms of Schiff’s offer when it communicated a willingness to perform and failed to deny the existence of a valid contract until pressed by litigation.
Although cases such as Schiff are helpful in predicting how a specific jurisdiction might respond to a given set of circumstances, many such cases do not originate from the country’s highest court, and are therefore not binding precedent upon the lower courts. In addition, it is frequently difficult to monitor whether such cases have been subsequently overruled.
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