Application of Arbitration Law

Shahzad,

Generally, where the Contract states that a dispute between the Employer and the Contractor is to be resolved by arbitration (for example, as in accordance with Clause 67.3 of FIDIC), then I cannot see where the local jurisdiction can “muscle-in” on the act. The arbitration clause – if properly drafted – will also declare the location of the arbitration, but the location is really secondary to the choice of arbitration instead of litigation. If the location is not specified, then the parties should agree mutually as to where the arbitration should take place – often this is in a third or “neutral” country to which neither the Contractor nor Employer belong.



Are you saying that the parties have agreed to go to arbitration but the Contract is silent as to the location of the arbitration, and the parties cannot agree on the location? Is this why the matter has ended up in local court? If so, I would suggest that this is wrong, since the Arbitration Tribunal itself will decide where it is to hold the arbitration if the parties themselves are unable to do so.



My other question is, why would the local courts become involved in a dispute that clearly avoids the court system and depends on arbitration for resolving a Contractor/Employer dispute? (unless it is some less than scrupulous local lawyer trying to gain some local benefit!!)



Naturally, dispute resolution procedures and the implementation of relevant laws will vary across the world – and this is reflected in the wording of the specific Contract – but what is universal is that the requirements of the Contract are to be applied irrespective of location.



Cheers,



Stuart



www.rosmartin.com

Shahzaad,

There are four things that need to be considered in looking at the law insofar as international projects are concerned:

 The law of the Contract – this will usually be clearly stated, and it may be established as the jurisdiction of the location of the project. It may also be defined by the jurisdiction of one of the parties. Also, it may be according to the law of an entirely different jurisdiction, such as English law. I have worked on projects in Africa and the Middle East where the Contractors are say, German or French and where the Employers are indigenous, but the Contract is subject to English law, for example.



 Second, the Contract is also likely to state that the Contractor must comply with all local laws etc., (such as health and safety, for example) and if the Contrcator breaches the local law in that regard, then he can be sued in the local courts.



 Third, the Dispute Resolution mechanism – again, in international or cross border contracts, this will be clearly stated, and is very often defined as arbitration, such as under the ICC or UNCITRAL Rules.

If there is a dispute under the Contract, then that dispute must be resolved in accordance with the Contract’s dispute resolution procedures. If the Contract says that disputes are to be resolved by means of arbitration, then that is it! You cannot resolve contractual disputes by applying the local (or any other) law, if the Contract says that such disputes are to be resolved by means of arbitration.



 Fourth, the arbitration procedures themselves may be subject to another jurisdiction, such as Swiss law, which is applied in the event of a dispute taking place related to the arbitration itself. If the contract is properly worded, it will confirm that the arbitration itself is subject to a specific jurisdiction.



From the above, if there is a dispute between the Employer and the Contractor under the terms of a Contract, then if the Contract provides for such dispute to be resolved by arbitration, then that is it – such a dispute cannot be resolved by the local courts, even where it is stated that the Contract is subject to the local jurisdiction.



Cheers,



Stuart



www.rosmartin.com

The application of law incase of dispute shall be clearly mentioned in contracts documents for Major International Projects(MIP)whereby you need expat contractor’s to perform the job, so whatever law is set out in the contract document shall be observed by local country’s court during dispute. If nothing is specified in the contractual document, local country’s law will come into effect.

All contracts, irrespective of the form, come under the jurisdiction of the law of the land on which it is executed. In other words, the final decision lies with the judiciary of the land.



In case of international contracts, the local judiciary should recognise the conditions of the international laws applicable to the contract (for e.g. FIDIC, etc). Only then can similar cases be reffered to in case of an arbitration. In case the local judiciary is not able to solve the case, it has the right to dissolve the matter externally or refer the case to international courts.



Now, to ascertain if the employer has the right to refer to cases in his country depends on the conditions mentioned above.



Hope this helps.