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Permanent Court of Arbitration Publishes New Rules – A Real Alternative for Disputes Involving a state party?

Arbitration News Blog by Herbert Smith

The Permanent Court of Arbitration (PCA), based in The Hague, is most commonly used as an appointing authority in ad hoc arbitrations, usually governed by the UNCITRAL Rules. It has now brought out a set of Arbitration Rules of its own, the PCA Arbitration Rules 2012, effective from 17 December 2012.

What do the new rules seek to achieve?

These rules are, in fact, a consolidation of the PCA’s 4 sets of existing but relatively little used rules: namely the Optional Rules for Arbitrating Disputes between Two States (1992), the Optional Rules for Arbitrating Disputes between Two Parties of Which Only One is a State (1993), the Optional Rules for Arbitration Between International Organizations and States (1996), and the Optional Rules for Arbitration Between International Organizations and Private Parties (1996). The new rules can apply wherever a dispute involves at least one State, State entity or intergovernmental organisation, thereby effectively replacing all of these older rules (although the older rules remain in existence).

They follow similar principles to the UNCITRAL Rules which were last updated in 2010. However, the drafting committee, headed by Professor Jan Paulsson, has sought to ensure that public international law issues are more specifically dealt with and that there is more flexibility for parties. Some of the bespoke provisions include:

A state immunity provision which clarifies that adopting the rules in a dispute with a non-state party constitutes a waiver of immunity from jurisdiction, although immunity from enforcement requires an express waiver.
A default three member tribunal but with an option to appoint a sole arbitrator or five arbitrators. Arbitrators need not be limited to the PCA’s list. There are provisions as to how a five member tribunal should operate, including the ability to continue should one or more arbitrators fail to participate.
The relatively involved role of the International Bureau of the PCA in administering the proceedings.
Acknowledgement that documents annexed to the Statement of Claim may include conventions, treaties or instruments of international organisations.
Specific provisions relating to the tribunal’s decision on its jurisdiction and the ability to bifurcate proceedings.
The application of international law in State to State disputes and of the rules of intergovernmental organisations as part of the applicable law where relevant.
The arbitration of multiparty disputes involving a combination of States, State-controlled entities, intergovernmental organizations, and private parties; the rules allow for the joinder of third parties and for multi-party appointment of arbitrators although they do not provide specifically for the consolidation of related disputes.

What are the options for state parties?

Where a treaty between states or a contract between at least one state or state entity includes an arbitration clause, and where the dispute relates to an investment, parties commonly provide for arbitration under the auspices of ICSID (the International Centre for the Settlement of Investment Disputes). Other alternatives include the ICC, the SCC and ad hoc arbitration under the UNCITRAL Rules.

The ICC, in particular, is currently promoting its rules for the settlement of disputes involving states and state entities and seeking to encourage them to use its rules. The ICC has long dealt with disputes involving states and state entities (they currently constitute 10% of its caseload) but the 2012 Rules make a particular effort to promote its ability to administer such disputes. For example, Article 1 now refers to “disputes”, rather than “business disputes” and Article 13(4) enables the ICC Court to appoint arbitrators without going through National Committees which are sometimes perceived as not wholly independent from government influence. Whilst there are no other modifications to the rules per se, the ICC has provided a Report (the ICC Commission Report: States, State Entities and ICC Arbitration) which sets out some other useful changes that could be made to an arbitration agreement incorporating the ICC Rules in such cases. For example it recommends that parties specify a three member tribunal (rather than the default sole arbitrator), extend the time limit for appointing an arbitrator, opt out of the Emergency Arbitrator provisions and provide for confidentiality (often a concern of States that is not accommodated within the ICSID system).

Whether the new PCA Rules will become a popular alternative to these options remains to be seen. It is certainly the case that, in the wake of withdrawals of certain states from the ICSID Convention (in Latin America in particular), parties are sometimes forced to use another dispute resolution mechanism. Therefore it can be important not to provide for ICSID as a sole dispute resolution option in a treaty or contract. The PCA rules may well provide an attractive alternative and in many ways appear to have considered the particularities of these types of disputes more than any other rules, at least on their face. Unlike other rules, they have also provided a set of varied model arbitration clauses for use in treaties, contracts and other agreements.


Herbert Smith

As one of the world’s leading law firms, we advise many of the biggest and most ambitious organisations across all major regions of the globe. Our clients trust us with their most important transactions, disputes and projects because of our ability to cut through complexity and mitigate risk.   We… MORE >

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