You have been asked to advise a New Zealand registered company (‘NZ Co’) that wishes to

bring a claim against a Singaporean registered company (‘Sin Co’) pursuant to a contract
between them. The contract contains an arbitration clause stating that any dispute or
difference arising out of or in connection with the contract shall be determined by
arbitration in Perth under the UNCITRAL Arbitration Rules, and designating ACICA as the
appointing authority.

The CEO of NZ Co asks you to give reasoned answers to the following seven questions:

1. Does NZ Co have to arbitrate instead of going to court? If NZ Co ignores the

arbitration clause and brings a proceeding in a court, what can Sin Co do? (6 marks)

NZ Co has to arbitrate according to the arbitration clause. If NZ Co ignores the arbitration

clause and brings a proceeding in a court, Sin Co can request stay of proceeding in that
court.

Having entered into an arbitration agreement, Sin Co would wish to insist on its right to
have the dispute decided by the arbitrators rather than by a national court. Singapore, New
Zealand and Australia are parties to both the New York Convention and the Model Law.
According to the Article II of the New York Convention, the relevant court will have to
recognise the arbitration clause in the contract. Sin Co will then request the court to refer
the parties to arbitration, unless it finds that the arbitration clause is null and void,
inoperative or incapable of being performed. Also Article 8 of the Model Law assures that
the court shall, if a party so requests not later than when submitting his first statement on
the substance of the dispute, refer the parties to arbitration.

By including the arbitration clause in the contract, both Sin Co and NZ Co have waived their
right to have those matters resolved by the court and granted jurisdictional powers to
private individuals, namely the arbitrators.

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 2. How does arbitration differ from going to court? (6 marks)

Neutrality

Litigation takes place before national courts of a country. Whether the litigation takes place
in Singapore or New Zealand, it will be a foreign court for the other party. It will have its
own formalities, and its own rules and procedures developed to deal with domestic matters,
not for international commercial disputes. Here, NZ Co and Sin Co have decided to resolve
the dispute through arbitration in a neutral place, Perth.

Enforceability

At the end of the arbitration process, the arbitral tribunal will issue its decision in the form
of an award, which is a binding decision, not a recommendation that the parties are free to
accept or reject as they please. Unlike court judgement where the losing party can seek an
appeal to the higher court, the arbitral award will be final and subject to appeal on only very
limited grounds. Once the award is made, the winning party can seek enforcement both
nationally and internationally.

Flexibility

So long as the parties are treated fairly, an arbitration may be tailored to meet the specific
requirements of the dispute, rather than conducted in accordance with fixed procedural
rules.

Confidentiality

Litigation is generally open to the public. Arbitration proceedings, documents and awards
are typically private between the parties and arbitral tribunal.

Special powers

Sometimes, an arbitral tribunal may possess greater powers than those of a judge. For
example, an arbitral tribunal may be empowered to award compound interest rather than
simple interest, and decide the dispute as amiable compositeur or ex aequo et bono.

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Continuity of role

An arbitral tribunal is appointed to deal with one particular case to follow from the
beginning to end. This allows the tribunal become thoroughly familiar with the matter in
dispute. In litigation different aspect of the dispute will be handled by different judges who
many never become familiar with the entire dispute.

Competence and Expertise of the Decision Maker

Arbitration allows parties to choose persons with special knowledge to judge their dispute,
whereas parties do not have any influence over the selection of the judge assigned to their
case in litigation.

3. Should NZ Co suggest mediation to resolve the dispute and why? How is mediation
different from arbitration? (4 marks)

NZ Co should suggest mediation to resolve the dispute. Mediation provides an opportunity

to both parties to explore the possibility of amicable settlement prior to arbitral
proceedings. In many instances, an offer to mediate will instead trigger serious negotiations
between the parties, without the involvement of a mediator, which may lead to a
satisfactory settlement. New Zealand, Singapore and Australia have relatively health
mediation practices for business dispute resolution.

Mediation can be organized on short notice and typically lasts no more than a day, whereas
Arbitration can take several months, if not years. The costs associated with mediation is
relatively small compared to arbitration. Mediation also involves face-to-face meeting of the
decision makers in a more friendly atmosphere which is less harmful to commercial
interests with the other party than arbitration. Even if parties do not settle, their willingness
to mediate can preserve their commercial relationship in the future. Moreover, the work
performed in preparing to mediate would overlap with the work need to be done for an
arbitration, and each party will understand the case better, so that a settlement may be
possible in later stage.

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In addition to its well-known benefits such as savings of time, cost and commercial
relationship, mediation provides an alternative dispute resolution that does not require
parties to possess any special training, experience, or skills other than their negotiating
abilities, and does not advantage parties from one jurisdiction or another. It can be a means
of simplifying the process of international dispute resolution.

4. What impact does providing for a set of applicable rules have on the arbitration
process? (4 marks)

Providing a set of applicable rules governing the arbitral procedure and rules allow the
arbitral tribunal broad discretion and flexibility in the conduct of arbitral proceedings. It will
set out how the arbitration is to be initiated and conducted, identify the powers and duties
of the arbitrators and cope the basic rights of the parties. It enables the arbitral tribunal to
take decisions on the organization of proceedings that take into account the circumstances
of the case, the expectations of the parties and of the members of the arbitral tribunal, and
the need for a just and cost-efficient resolution of the dispute.

For example, article 17 of the UNCITRAL Rules allows the arbitral tribunal conduct the
arbitration in such manner as it considers appropriate, provided that the parties are treated
with equality and that at an appropriate stage of the proceedings each party is given a
reasonable opportunity of presenting its case.

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 5. Once the notice of arbitration has been served on Sin Co, and given that the
UNCITRAL Arbitration Rules apply, what will be the main procedural steps and
approximate time frame prior to the issuing of the final award? (8 marks)

Response to the notice of arbitration

Within 30 days of the receipt of the notice of arbitration, Sin Co shall communicate to NZ Co
a response to the notice of arbitration (Article 4.1).

Composition of the arbitral tribunal

Number of arbitrators

If NZ Co and Sin Co have not previously agreed on the number of arbitrators, and if within
30 days after the receipt by Sin Co of the notice of arbitration the parties have not agreed
that there shall be only one arbitrator, three arbitrators shall be appointed (Article 7.1).

Appointment of arbitrators

If NZ Co and Sin Co have agreed that a sole arbitrator is to be appointed, they may jointly
appoint the sole arbitrator. If the parties have not reached agreement, the sole arbitrator
will be appointed by the appointing authority, ACICA (Article 8).

If three arbitrators are to be appointed, each party shall appoint one arbitrator. The two
arbitrators will then choose the third arbitrator who will act as the presiding arbitrator of
the arbitral tribunal. If one party fails to appoint an arbitrator, the other party may request
the appointing authority to appoint the missing arbitrator. If within 30 days after the
appointment of the second arbitrator the two arbitrators have not agreed on the choice of
the presiding arbitrator, the presiding arbitrator will be appointed by the appointing
authority, ACICA (Article 9).

Where the appointing authority is to appoint a sole arbitrator, second arbitrator or the
presiding arbitrator, the appointing authority will prepare a list of at least three names to be
provided to both parties. Each party will cancel out the arbitrators it does not wish to
appoint and rank the remaining names in order of preference, and return to the appointing

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authority within 15 days. The appointing authority will then select the sole arbitrator,
second arbitrator or the presiding arbitrator from the remaining names.

Arbitral proceedings

Statement of Claim

Once the arbitration tribunal is constituted, NZ Co needs to provide its statement of claim to
Sin Co and each of the arbitrators within a period of time to be determined by the arbitral
tribunal (Article 20). NZ Co should include the names and address of the parties, a statement
of facts supporting the claim, the points at issue and the relief of remedy sought in its
Statement of Claim.

Statement of Defence

After the statement of claim is served to the respondent, Sin Co needs to respond through
its statement of defence in writing to NZ Co and each of the arbitrators within a period of
time to be determined by the arbitral tribunal. Sin Co can also make a counterclaim or
demand set-off against NZ Co in its statement of defence (Article 21).

Periods of time

The period of time fixed by the arbitral tribunal for the communication of written
statements (including the statement of claim and statement of defence) should not exceed
45 days. But the arbitral tribunal may extend the time limit when appropriate. (Article 25)

Amendments to the claim or defence

During the course of the arbitral tribunal, NZ Co or Sin Co may amend or supplement its
claim or defence, unless the arbitral tribunal considers it inappropriate to allow such
amendment due to the delay or prejudice to other parties or any other circumstances. Such
amendments should fall inside the jurisdiction of the arbitral tribunal (Article 22).

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Hearing

Organisation of the hearing

Hearings are normally held on a date fixed by the arbitral tribunal, either at the request of
one or both of the parties, or on its own initiative. Hearing dates are fixed after consultation
with the parties on the dates convenient to the parties, their respective lawyers and the
arbitral tribunal.

Procedures at the hearing

During the hearing, each party will present a brief opening statement. The opening
speeches give a summary of the issues in dispute and what is claimed or denied. The oral
testimony of the witnesses for each party will then be heard. NZ Co will call each witness of
fact and examines them, after which Sin Co cross-examines each witness. NZ Co will then
get another opportunity to re-examine each witness. Then Sin Co will open its own case and
presents its own witnesses.

The parties then make closing speeches. The tribunal then closes the haring stage of arbitral
proceedings. However, the arbitral tribunal may reopen the hearing at any time before the
award is made in exceptional circumstances (Article 31).

Award

Decisions

Where the is more than one arbitrator, any award will be made by a majority of the
arbitrators (Article 33).

Form and effect of the award

The award must be made in writing and shall be final and binding on the parties. The
tribunal must state the reasons upon which the award is based and the award must be
signed and dated by the arbitrators and indicate the place of arbitration. The copies of the
award signed by the arbitrators shall be communicated to the parties by the arbitral
tribunal.

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 6. Where will the various meeting and hearing be held and who decide this? (3
marks)

Although NZ Co and Sin Co has chosen Perth as the place of arbitration, the arbitral tribunal
may, unless otherwise agreed by the parties, meet at any place it considers appropriate for
consultation among its members, for hearing witness, experts or the parties, or for
inspection of goods, other property or documents (Art 20(2) of the Model Law). This does
not mean that the seat of the arbitration changes with each change of location. The legal
place of the arbitration remains the same even if the physical place changes from time to
time.

7. According to what rules of law are the merits of the dispute to be determined, and
who decides this? (4 marks)

Under the Article 28 of the Model Law, the tribunal shall decide the dispute in accordance
with such rules of law as are chosen by the parties as applicable to the substance of the
dispute. The arbitrators are bound to apply the merits of the dispute the rules of law chosen
by the parties.

The arbitral tribunal may also decide ex aequo and bono or as amiable compositeur only if
the parties have expressly authorised it to do so (Art 28 (3) of the Model Law). It means that
the arbitrator can apply a rule of law without resorting to his powers as an amiable
composituer and must satisfy himself of the compatibility of the resulting solution with
equity.

If the parties fail to choose the rules of law applicable to the merits of the dispute, the
arbitral tribunal shall apply the law determined by the conflict of law rules which it
considers applicable (Art 28 (2) of the Model Law). In such case, the arbitrators may have
recourse to the conflict of rules of one or more States, or to general principles of private
international law. They can also select the appropriate rules such as the law of a State, an
international convention, or the lex mercatoria for the purpose of resolving the dispute.

In all cases, the arbitral tribunal is required to take into account the usage of the trade
applicable to the transaction (Art 28 (4) of the Model Law).

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 8. What can NZ Co do if it loses the arbitration? (5 marks)

Within 30 days after the receipt of the award, NZ Co may first request the arbitral tribunal
give an interpretation of the award. The interpretation will be given in writing within 30
days after the receipt of the request (Article 33(1) of the Model Law).

NZ Co can make application to set aside the arbitral award before the Supreme Court of
Western Australia. The application for setting aside an award must be made within three
months of receiving the award, or if request for an interpretation has been made, within
three months of that request being disposed of by the arbitral tribunal (Article 34(3) of the
Model Law).

Article 34(2) of the Model Law provide two categories for the Court to set aside arbitral
award.

1) NZ Co must proof (Article 34(2)(a) of the Model Law):

 lack of capacity of the parties to conclude an arbitration agreement
 lack of a valid arbitration agreement
 lack of notice of appointment of an arbitrator or of the arbitral proceedings or
inability of a party to present its case;
 the award deals with matters not covered by the submission to arbitration
 the composition of the arbitral tribunal or the conduct of arbitral proceedings are
contrary to the effective agreement of the parties or, failing such agreement, to the
Model Law

2) the court finds (Article 34(2)(b) of the Model Law) that:

 the subject-matter of the dispute is not capable of settlement by arbitration
 the award is in conflict with the public policy

Following complete annulment, NZ Co can recommence proceedings because the award

simply does not exist —that is, the status quo ante is restored.