UNCITRAL 2012 Digest of Case Law on the Model Law on ...

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10 uNCItrAL <strong>2012</strong> <strong>Digest</strong> <strong>of</strong> <strong>Case</strong> <strong>Law</strong> on the Model <strong>Law</strong> on International Commercial Arbitration international trade. 25 The Indian Supreme Court referred to the term “commercial” as used in the Model <strong>Law</strong> and interpreted it to include all “commercial relationships” in contradistinction to relationships <strong>of</strong> a matrimonial, family, cultural, social or political nature. In that case, the court took the view that a contract for consultancy services fell within the meaning <strong>of</strong> “commercial”. 26 The same court held in another case that the relationship between a company and a director, who had also entered into a contract with the company, had a “commercial” element and, therefore, the arbitration clause in the contract should apply. 27 A Canadian court held that the commercial nature <strong>of</strong> a relationship was not dependent upon the qualification <strong>of</strong> the parties as merchants or commercial persons. 28 For example, the sale <strong>of</strong> a residential property was considered as involving a commercial relationship, particularly where the sale was transacted in a business-like manner, with the assistance <strong>of</strong> pr<strong>of</strong>essional realtors, and within a legal framework appropriate for a transaction involving a large sum <strong>of</strong> money. 29 Furthermore, an arbitration case pursuant to the North American Free Trade Agreement (NAFTA) between a private investor and a State party to the NAFTA was said to be a commercial arbitration for the purposes <strong>of</strong> the Model <strong>Law</strong> as the primary relationship between the investor and the host State related to investment. 30 8. However, not all relations related to business would be “commercial”. 31 Where the relation was that <strong>of</strong> employer/ employee as opposed to one <strong>of</strong> pr<strong>of</strong>essional services by an independent contractor, the same was considered as noncommercial within the meaning <strong>of</strong> the Model <strong>Law</strong>. 32 On the other hand, a Canadian court had held that “liability in tort was an arbitrable matter, provided that the relation that created that liability was <strong>of</strong> a “commercial nature”. 33 Nonetheless, a claim for wrongful dismissal and the tort <strong>of</strong> negligent misrepresentation was later held not to satisfy the “commercial” requirement. 34 territorial scope <strong>of</strong> application—paragraph (2) 9. The principle embodied in article 1 (2) is that the Model <strong>Law</strong> as enacted in a given State applies only if the place <strong>of</strong> arbitration is in the territory <strong>of</strong> that State. However, article 1 (2) also contains important exceptions to that principle, to the effect that certain articles apply, irrespective <strong>of</strong> whether the place <strong>of</strong> arbitration is in the enacting State or elsewhere (or, as the case may be, even before the place <strong>of</strong> arbitration is determined). These articles are the following: articles 8 (1) and 9, which deal with the recognition <strong>of</strong> arbitration agreements, including their compatibility with interim measures ordered by a court, article 17 J on court-ordered interim measures, articles 17 H and 17 I on the recognition and enforcement <strong>of</strong> interim measures ordered by an arbitral tribunal, and articles 35 and 36 on the recognition and enforcement <strong>of</strong> arbitral awards. Courts have issued decisions applying the principle that the provisions <strong>of</strong> the Model <strong>Law</strong> apply only if the place <strong>of</strong> arbitration is in the territory <strong>of</strong> the enacting State. 35 25 CLOUT case No. 390 [Re Carter et al. and McLaughlin et al, Ontario Court, Canada, 1 February 1996], also available on the Internet at http://canlii.ca/t/1vtr3; CLOUT case No. 502 [The United Mexican States v. Metalclad Corp., Supreme Court <strong>of</strong> British Columbia, Canada, 2 May 2001], also available on the Internet at http://canlii.ca/t/4xfw. 26 R.M. Investment and Trading Co. v. Boeing Co., Supreme Court, India, 10 February 1994, [A.I.R. 1994 S.C. 1136]. Although the Court was interpreting a provision not forming part <strong>of</strong> the Model <strong>Law</strong>, it made specific mention (at para. 14) that it was aided by reference to the use <strong>of</strong> the term “commercial” in the Model <strong>Law</strong>. The court took the view that promoting the sale <strong>of</strong> an aircraft was a provision <strong>of</strong> “commercial and managerial assistance and information which may be helpful to [the company]’s sales efforts with customers” making the relationship between them a commercial one. 27 Comed Chemicals Limited v. C N Ramchand, Supreme Court, India, 6 November 2008, [A.I.R. 2009 S.C. 494], also available on the Internet at http://www.indiankanoon.org/doc/55003. 28 CLOUT case No. 390 [Re Carter et al. and McLaughlin et al, Ontario Court, Canada, 1 February 1996], also available on the Internet at http://canlii.ca/t/1vtr3. 29 Ibid. 30 CLOUT case No. 502 [The United Mexican States v. Metalclad Corp., Supreme Court <strong>of</strong> British Columbia, Canada, 2 May 2001], also available on the Internet at http://canlii.ca/t/4xfw. Mexico had argued that, despite the wide meaning to be given to the term “commercial”, the relationship between Mexico and the investor was not commercial in nature as it was a regulatory relationship in that the dispute had arisen due to the exercise <strong>of</strong> a regulatory function by the Mexican municipality. This argument was rejected by the Court, which took the view that arbitration did not arise under an agreement between the Municipality and the investor in connection with regulatory matters but pursuant to NAFTA, which was an agreement dealing with the treatment <strong>of</strong> investors. 31 A/CN.9/264, Analytical commentary on draft text <strong>of</strong> a model law on international commercial arbitration, under article 1, para. 18, which states that “Not covered are, for example, labour or employment disputes and ordinary consumer claims, despite their relation to business”, available on the <strong>UNCITRAL</strong> website at http://www.uncitral.org/uncitral/en/commission/sessions/18th.html. 32 CLOUT case No. 111 [Borowski v. Heinrich Fiedler Perforiertechnik GmbH, Alberta Court <strong>of</strong> Queen’s Bench, Canada, 12 August 1994]; CLOUT case No. 505 [Ross v. Christian and Timbers, Inc., Ontario Superior Court <strong>of</strong> Justice, Canada, 30 April 2002], also available on the Internet at http://canlii.ca/t/1wc57. In deciding whether to refer the parties to arbitration, the court held that the applicable statute was not the International Commercial Arbitration Act that implements the Model <strong>Law</strong> in Ontario but rather the Arbitration Act which contained different though generally compatible rules. 33 CLOUT case No. 586 [Kaverit Steel and Crane Ltd. v. Kone Corp., Alberta Court <strong>of</strong> Appeal, Canada, 16 January 1992], [1992] ABCA 7 (CanLII), also available on the Internet at http://canlii.ca/t/1p6kc. 34 CLOUT case No. 1048 [Patel v. Kanbay International Inc., Ontario Court <strong>of</strong> Appeal, Canada, 23 December 2008], [2008] ONCA 867, also available on the Internet at http://canlii.ca/t/220b1. 35 CLOUT case No. 13 (also reproduced under CLOUT case No. 383) [Deco Automotive Inc. v. G.P.A. Gesellschaft für Pressenautomation mbH, Ontario District Court, Canada, 27 October 1989]; CLOUT case No. 383 [Deco Automotive Inc. v. G.P.A. Gesellschaft für Pressenautomation mbH, Ontario District Court, Canada, 27 October 1989].
10. The omission <strong>of</strong> the word “only” in the enactment <strong>of</strong> the Model <strong>Law</strong> in one State has given rise to some controversy. 36 In two decisions, the Indian Supreme Court held that such omission makes the provision merely inclusive and “clarificatory” and would not prevent the court from assuming jurisdiction over arbitrations held or pending outside the State. 37 In another case, the same court held that, even though the word “only” has been omitted, the law will not apply to arbitrations outside the State. 38 (See also below, section on article 34, para. 12). 11. Although the place <strong>of</strong> arbitration was not located in the enacting State and thus pursuant to article 1 (2) only articles 8, 9, 17 H, 17 I, 17 J, 35 and 36 applied, a court referred to the definition contained under article 1 (3) to determine whether an arbitration was international within the meaning <strong>of</strong> the Model <strong>Law</strong>, based on the reasoning that the Act enacting the Model <strong>Law</strong> permitted reference to the definitions <strong>of</strong> the Model <strong>Law</strong>, without affecting the scope <strong>of</strong> application <strong>of</strong> the provision referred to in article 1 (2). 39 Part one. <strong>Digest</strong> <strong>of</strong> case law 11 Mandatory law, arbitrability—paragraph (5) 12. The Model <strong>Law</strong> does not determine which matters may or not be subject to arbitration. The existence <strong>of</strong> legislation providing that certain matters must be dealt with in or by a specific court action or by a certain prescribed procedure would not render, according to some court decisions, the Model <strong>Law</strong> inapplicable, or an otherwise valid arbitration agreement invalid or inoperable. 40 Issues arising from copyright, despite existence <strong>of</strong> a specified statutory regime for resolution, were held to be arbitrable by the Canadian Supreme Court. 41 13. Some cases have arisen against companies involved in insolvency proceedings. Courts have generally held the view that steps taken in insolvency including petitions for liquidation in court were not matters subject to an arbitration agreement but were matters within the company law or insolvency law. 42 In one case involving a liquidation petition filed by a respondent in an arbitration, the court granted an injunction against the winding-up proceedings until after the disputes between the parties had been decided in arbitration. 43 36 India, The Arbitration and Conciliation Act, 1996. 37 Bhatia International v. Bulk Trading S. A. & Anr., Supreme Court, India, [(2002) 4 SCC 105]; Venture Global Engineering v. Satyam Computer Services Ltd., Supreme Court, India, 10 January 2008, [(2008) 4 SCC 190: A.I.R. 2008 SC 1061], also available on the Internet at http://indiankanoon.org/doc/75785. In the earlier decision, the Court used that reasoning to grant interim measure in aid <strong>of</strong> an arbitration pending in Paris. In the latter case, Venture Global, however, the Indian Supreme Court assumed jurisdiction over an award rendered in an arbitration under the rules <strong>of</strong> the London Court <strong>of</strong> International Arbitration (LCIA) made outside India and ruled that it was competent to consider an application to set aside the foreign award. The court stated that the Indian legislature “is also not providing that Part I will “only” apply where the place <strong>of</strong> arbitration is in India (emphasis in original). Thus, the legislature has not provided that Part I is not to apply to arbitrations which take place outside India.” 38 Shreejee Traco (I) Pvt. Ltd. v. Paper Line International, Supreme Court, India, [(2003) 9 SCC 79]. 39 CLOUT case No. 28 [BWV Investments Ltd. v. Saskferco Products Inc., UHDE-GmbH, et al., Saskatchewan Court <strong>of</strong> Queen’s Bench, Canada, 19 March 1993]. 40 CLOUT case No. 116 [BWV Investments Ltd. v. Saskferco Products Inc. et. al. and UHDE GmbH, Saskatchewan Court <strong>of</strong> Appeal, Canada, 25 November 1994], [1994] CanLII 4557 (SK CA), also available on the Internet at http://canlii.ca/t/1nqlf, (this case revised CLOUT case No. 28 [BWV Investments Ltd. v. Saskferco Products Inc., UHDE-GmbH, et al., Saskatchewan Court <strong>of</strong> Queen’s Bench, Canada, 19 March 1993]); CLOUT case No. 526 [Union Charm Development Ltd. v. B+B Construction Co., Ltd., High Court—Court <strong>of</strong> First Instance, Hong Kong Special Administrative Region <strong>of</strong> China, 12 June 2001], [2001] HKCFI 779, also available on the Internet at: http://www.hklii.hk/eng/hk/cases/hkcfi/2001/779.html, where the claimant applied for an order that it may proceed with arbitration instead <strong>of</strong> proceeding with pro<strong>of</strong> <strong>of</strong> debt, notwithstanding the fact that the defendant was in liquidation, and the court, exercising its discretion, ordered the parties to proceed with arbitration. Some States (for instance, New Zealand, Singapore, Malaysia) that have enacted the Model <strong>Law</strong> have made this position clear by adding wording to the effect that “The fact that any written law confers jurisdiction in respect <strong>of</strong> any matter on any court <strong>of</strong> law but does not refer to the determination <strong>of</strong> that matter by arbitration shall not, <strong>of</strong> itself, indicate that a dispute about that matter is not capable <strong>of</strong> determination by arbitration.” 41 Desputeaux v. Éditions Chouette (1987) inc., Supreme Court, Canada, [2003] 1 S.C.R. 178, 2003 SCC 17, available on the Internet at http://canlii.ca/t/1g2jh, where the fact that a statutory provision assigns an exclusive jurisdiction to a particular judicial system does not prohibit or exclude arbitration. The court in the case examined the objectives <strong>of</strong> the statutory provision governing questions <strong>of</strong> copyright and held that the provision is not intended to exclude arbitration. 42 Re Sanpete Builders (S) Pte. Ltd., High Court, Singapore, [1989] SLR 164; CLOUT case No. 707 [In the Matter <strong>of</strong> Mech-Power Hong Kong—China Limited, High Court—Court <strong>of</strong> First Instance, Hong Kong, 4 June 1996], [1996] HKCFI 307, also available on the Internet at: http://www.hklii.hk/eng/hk/cases/hkcfi/1996/307.html. 43 Metalform Asia Pte. Ltd. v. Holland Leedon Pte. Ltd., Court <strong>of</strong> Appeal, Singapore, [2007] 2 SLR 268.
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