THE IMPORTANCE OF THE ‘SEAT’ OF ARBITRATION IN DISPUTE RESOLUTION CLAUSES FOR FINANCE TRANSACTIONS
In recent years, multi-tiered dispute resolution clauses have been increasingly incorporated in finance transactions contracts. These clauses, which typically include an express option for mediation, conciliation and arbitration, aim at resolving complex financial disputes, including derivatives, swaps and cross-border finance transactions. A recent example is the model arbitration clause of the Panel of Recognised International Market Experts in Finance (P.R.I.M.E Finance, based in The Hague, Netherlands) which provides an option for the mediation and arbitration of financial disputes. The existence of this panel of experts is an acknowledgement that finance transactions contracts disputes are decidedly technical, necessitating the appointment of financial sector specialists.
The P.R.I.M.E Finance Arbitration Rules came into effect on 16 January 2012. These Rules are based on the UNCITRAL Arbitration Rules as revised in 2010. As these Rules are generic in nature, they are able to be used in any arbitration undertaken in any jurisdiction based upon any arbitration law. In this article, we focus in particular on Article 18.1 of the P.R.I.M.E Finance Arbitration Rules which is the same as Article 18.1 of the UNCITRAL Arbitration Rules. Article 18.1 deals with the ‘seat’ of arbitration.
The ‘seat’ of arbitration is a most important concept in arbitration law because it activates the applicable domestic arbitration statute of the country where the arbitration is seated. In this context, Alan Redfern, Martin Hunter, Nigel Blackaby and Constantine Partasides state in their book Law and Practice of International Commercial Arbitration (4th ed.), London, Sweet & Maxwell, 2004 at 98 that, “The concept that an arbitration is governed by the law of the place in which it is held, which is the ‘seat’ (or ‘forum’ or ‘lex arbitri’ of the arbitration, is well established in both the theory and practice of international arbitration.” The ‘seat’ of arbitration must be distinguished from the ‘venue’ where the parties and the arbitrators might meet for hearings. The ‘seat’, as opposed to the ‘venue’, is thus a legal concept because, where the parties have agreed upon the seat of arbitration, that seat does not change even though the tribunal conducts all of the hearings in another country.
Jan-Mar 2014 issue