CIArb Assignment 1

What do you understand the term "seat of the arbitration" to mean, and if you were drafting or negotiating an arbitration agreement, what considerations would you take into account in selecting the seat of the arbitration to be specified in the arbitration agreement?
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I. Introduction to Arbitration Agreement and Seat of Arbitration
In light of resolving international trade disputes, depending on specific kind of dispute complexity, various arbitral forms have been presented. Arbitration is one of the methods for the settlement of dispute which the parties agreed voluntarily via arbitration agreement. In essence, arbitration agreement is a kind of agreement by the parties to submit to arbitration all or certain disputes which have risen or which may arise between them in respect of a defined legal relationship. This kind of agreement is one of the key factors in arbitration planning process because without this agreement, it is impossible to resolve the dispute by arbitration.
In the process of drafting an arbitration agreement, it is vital to consider the choice of "seat of the arbitration" because it helps resolve the conflict of law aspects during the arbitration process. This concept, also sometimes called "place of the arbitration," has a rather abstract meaning in international commercial arbitration. Zhao describes it as "the source where the binding force of arbitral award came from." Technically, this term refers to the legal venue of the arbitration proceedings that contain particular law governing and applying for such relevant arbitral procedure. The theory of "seat of the arbitration" demonstrates three main characteristics, as further explained below.
II. Main characteristics of the Seat of arbitration
Firstly, this seat practically determines the lex arbitri (i.e. the law of the place where arbitration is to take place in the conflicts of law) and the courts that may intervene during the arbitration with supervisory jurisdiction as a means of assistance. The seat of the arbitration usually governs arbitral procedure and local court involvement in the arbitration process, which is distinctive from the law governing the substantive issues of the contract. A local court can intervene before a final decision is made by arbitration or even after such decision is announced. In the first sense, this assistance includes tribunal constitution, several interim measures of protection before or amid the arbitral proceedings in order to maintain the status quo or prevent dissipation of assets. In the second sense, the court may intervene in case one party seeks an exequatur if the other party does not respect such order. Moreover, the court shall have the same power of enacting interim measure as the tribunal and shall exercise such power in accordance with its own procedures.
Secondly, the determination of the seat of arbitration decides the validity and the nationality of the award, for the purpose of enforcement and challenge under the New York Convention. As a consequence, it would determine the court entitled to set aside the award because only the court where the award was made is entitled to set aside the arbitral award. This is of great significance in arbitration planning, in particular the enforcement of arbitration awards.
Thirdly, by selecting a given place or seat of arbitration, that country's mandatory national laws are also applicable to the arbitration procedure. For instance, under ad hoc arbitration, law of the seat shall also act as gap-filler and is effective when the law or rule selected by the parties turn out to be silent.
Finally, there is a difference between the seat of arbitration (i.e. the legal venue) and the physical place to hold the hearings or meeting of arbitration needs taking into consideration. The physical place of hearings can be freely chosen by the parties, which depends on the wish, cost-efficiency objective, personal purpose or even being subject to other political issues. The following case, PT Garuda Indonesia vs Birgen Air can clearly illustrate this point. In this case, PT Garuda Indonesia ("Garuda"), had a dispute with Birgen Air, a Turkish company, over an aircraft lease agreement. In this case, Garuda had entered into an agreement with Birgen to lease an aircraft for use to Saudi Arabia. The agreement was governed by Indonesian law and provided for arbitration in Jakarta. A dispute arose and was referred to arbitration, and the terms of reference provided for the place of arbitration to be Jakarta. (It appears that no arbitration rules were specified in the agreement.) Due to unrest in Jakarta, the parties agreed to the suggestion of the three-person tribunal that Singapore should be the place for the hearing. The final arbitration award stated that it was delivered at Jakarta. Garuda subsequently applied to the Singapore High Court to set aside the award under Section 24 of the International Arbitration Act and Article 34 of the UNCITRAL Model Law. Article 1(2) of the Model Law provides: "The provisions of this law, except Articles 8, 9, 35 and 36, apply only if the place of arbitration is in the territory of this state" (i.e., Singapore, for the purposes of the International Arbitration Act). Article 20 of the Model Law provides that "the parties are free to agree the place of arbitration".
On appeal, the Singapore Court of Appeal held that by virtue of Article 1(2) and 20 of the Model Law, Article 34 is only applicable if the "place of arbitration" is Singapore. Section 24 will not apply where Article 34 is not applicable. The arbitration is to be regarded as situated in the agreed "place of arbitration", which identifies the state or territory whose laws will govern the arbitral process. When the parties have agreed on the place of arbitration, the place does not change even though the parties may agree to the tribunal's suggestion to hold hearings at a different place or places. This will result only in a change in the venue of the hearing, not the place of arbitration.
This decision of the court obviously confirmed the distinction between the "place of the arbitration", which determines the arbitral law governing the award, and the venue of the arbitration hearing.
In short, an appropriate seat of arbitration plays instrumental role in international arbitration, with two main features: (1) it determines the lex arbitri and the courts that may intervene during the arbitration with supervisory jurisdiction as a means of assistance; and (2) it determines the validity and the "nationality" of the award, and the court that is entitled to set aside the arbitral award.
III – What to consider when selecting the "seat of arbitration"
Constructing and specifying the seat of arbitration is one of the most critical elements of an effective international arbitration agreement. In principle, the parties are free to arrange the seat of arbitration. They can directly or indirectly make their choice for the seat. The choice is direct when such choice is expressly stated in the parties' arbitration agreement, while the fact that such choice is made by arbitral tribunal or institution (in accordance with the arbitration rules or law) represents an indirect choice. In case the parties fail to choose the seat of arbitration, the arbitral tribunal, institution or the court will make the decision for them. In choosing the appropriate seat of arbitration to specify in the arbitration agreement, there are some aspects to which we need to pay attention.
1) When to consider?
First and foremost, the most important aspect that needs taking into account when selecting the seat of arbitration is that when should we start our concentration on this legal venue? It is recommended that the parties select the seat sharply at the stage of the contract drafting, and specify the venue for the arbitration in the dispute resolution clause. Thus, if a dispute arises, local courts of the selected venue may assist the parties in commencing the arbitration, decide whether an arbitration clause is valid. Timely selection is comparatively important since, as discussed above, the extent and nature of local court intervention varies substantially across different venues. Besides, several issues such as convenience for travelling (by air, by rail,…), postal telecommunication system (to hole conference, Internet infrastructure,…) and even the political stability are considered to be inferior. Preliminary aspect that needs to be counted is the law of the seat of arbitration.
2) Local law on arbitration
Generally, though the arbitration needs to adhere to the local laws concerning some issues of work visas, qualifications of legal representative and taxation, etc., since the relevant procedural law is the law of the seat, and not of the place where the arbitration literally occurs, lex arbitri (i.e. the law of the seat of arbitration) should be taken into account.
Provisions of the law of the seat act as gap fillers and come into play in case the parties have not made any provision about a particular issue or if their agreed arbitration rules do not govern that matter. The arbitration law of the seat will, inter alia, regulate the degree of support and interference of national courts, e.g. when an award is challenged. Particularly, if that country adopted the UNCITRAL Model Law, there should be no concerns in this respect. Nevertheless, this does not mean that the laws of other nations reject the Model Law.
We need to carefully review the venue's arbitral procedural system, since different jurisdictions vary significantly in terms of the authority of local courts and the extent of their intervention in arbitration. All of these guarantee the level of neutrality and convenience. As enterprises continue to globalize in a great sense of turbulence worldwide, and the number of cities characterizing themselves as favorable venues for arbitration keeps growing continuously, we should meticulously consider the legal system to which the arbitration procedure should be connected. Therefore, it is suggested that the seat should be held in a jurisdiction that has a well-developed body of arbitration law, courts experienced with arbitration issues, and a trend of supporting as well as respecting international arbitration agreements and awards. 
3) "Attitude" of the local court
Thirdly, based on the development of each country's arbitration law, it is clear that besides countries that advocate the use of arbitration, there are countries, to some extent, do not advocate this mean of dispute resolution. Arbitrations are prevented from proceeding if they take place in country that detests arbitration. In these countries, their national law, more or less, regulate the level of court intervention in the arbitral proceedings. For example, in the past, there was a case that the arbitration committee has to submit the local civil court (of the legal venue of the arbitration) to announce the court the current situation of its judgment. Thus, there are countries that have exceptionally special treatment towards arbitration, which results in perennial troubles for both parties (both the plaintiff and defendant). Arbitration-advocating legal system will restrict the arbitral decision, whereas this can be more flexible in some other countries. In brief, it is important to check whether the country chosen as the seat of arbitration has an accommodating arbitration law or not and to look at how those local courts interpret an enforce this law to avoid all possible risks that barring the arbitration process.
4) Enforceability of the award
Finally, in selecting the seat of arbitration, we should consider the enforceability of the future award. Contract drafters should check in advance whether the considered country is a state that is a signatory party to the New York Convention (the Convention), in order to benefit from the protections of this treaty. Being ratified by 146 countries, this Convention is supposed to be the most important and dominating multilateral treaty regarding international commercial arbitration so far. If a proper place of arbitration in a Convention state is chosen, plenty of benefits can be realized. Basically, once an award is made in jurisdictions that are members of the Convention, this award shall be recognized and enforced by the courts of other member states of the Convention. In other words, the Convention is said to speak of "foreign" awards. Hence, when enforcement sought in the territory of another State, a domestic award may be enforced under the Convention. Besides, the Convention also simplifies the process of recognition and enforcement of awards with the proof shifting mechanism, which makes the enforcement procedure more preferable for dispute resolution in transnational cases. Notably, by siting the arbitration in a state, which is a party to the Convention, the parties can obtain the benefits and protections of the Convention with respect to the aid of the local courts in recognizing and enforcing their arbitration agreement, the arbitral process, and any arbitral award. In a word, this will effectively protect both parties as well as guarantee legal efficiency in doing business abroad.
IV - CONCLUSION
It is undeniable that arbitration is among the most efficient dispute resolutions in international commercial transactions. As discussed above, an appropriate choice of arbitration concerning the seat and the panel thereof promises higher effectiveness and beneficial experience for disputing parties. In particular, careful notes on several aspects such as: the local law of arbitration, attitude of local court, award enforcement ability are considerably essential in drafting arbitration agreement. Therefore, it is recommended that the parties to the commercial contract, at their very first stage of contract drafting, pay sufficient attention to the determination of the place of arbitration with regard to their arbitration planning.


Zhao Xiuwen, On the Seat of International Arbitration and Its Determination (2007) 2 Frontiers of Law in China, 1 accessed at on 31 August 2015.
UNCITRAL Model Law of International Commercial Arbitration, 1985 (amended 2006), Article 7.
Xiuwen (n 1) at p 1.
Redfern, Hunter, et al., Redfern and Hunter on International Arbitration (Oxford University Press, 5th edn, 2009) p 173-193.
A range of Interim measures are to be stated in Articles 26, UNCITRAL Arbitration Rules.
International Trade Center, Trọng tài và các phương thức giải quyết tranh chấp lựa chọn [Arbitration and Alternative Dispute Resolutions], VCCI 2001, p 134-135.
Xiuwen (n 1) at p 3.
CIArb, Workbook: Introduction to International Arbitration (Chartered Institute of Arbitrators, 2014), at p 8.
Garuda v. Birgen - CofA [2002] 1 SLR 393. The case digest is available at http://archive.onlinedmc.co.uk/garuda_v__birgen_appeal.htm accessed on 31 August 2015.
A brief review of the case can be found in David Howell, Distinction between "Place of arbitration" and "Venue of hearings" (International Law Office, April 11 2002) accessed online at on 31st August 2015.
UNCITRAL Model Law on International Commercial Arbitration, Chapter V, Article 20(1).
CIArb (n 5) at p 8.
Pierre Lalive, 2002, The Transfer of Seat in International Arbitration, in Law and Justice in a Multistate World.
CIArb (n 5) at p 8.
Jennifer L. Price, Why Where Matters: The Seat of Arbitration in International Energy Contracts (King & Spalding Newsletter, 2013) accessed at on 31 August 2015.
International Trade Center (n 6), at p 149.
CIArb (n 5), p 7-8.