PCA Optional Rules for Arbitrating Disputes between Two Parties of Which Only One Is a State Model Arbitration Clauses

• Updated at: February 2023

CONTENTS

Introduction 71

Section I. Introductory Rules 73

Scope of Application (Article 1) 73

Notice, Calculation of Periods of Time (Article 2) 73

Notice of Arbitration (Article 3) 74

Representation and Assistance (Article 4) 75

Section II. Composition of the Arbitral Tribunal 75

Number of Arbitrators (Article 5) 75

Appointment of Arbitrators (Articles 6 to 8) 75

Challenge of Arbitrators (Articles 9 to 12) 77

Replacement of an Arbitrator (Article 13) 79

Repetition of Hearings in the Event of the Replacement of an Arbitrator

(Article 14) 79

Section III. Arbitral Proceedings 80

General Provisions (Article 15) 80

Place of Arbitration (Article 16) 80

Language (Article 17) 81

Statement of Claim (Article 18) 81

Statement of Defence (Article 19) 82

Amendments to the Claim or Defence (Article 20) 82

Pleas as to the Jurisdiction of the Arbitral Tribunal (Article 21) 82

Further Written Statements (Article 22) 83

Periods of Time (Article 23) 83

Evidence and Hearings (Articles 24 and 25) 83

Interim Measures of Protection (Article 26) 84

Experts (Article 27) 85

Failure to Appear or to Make Submissions (Article 28) 85

Closure of Hearings (Article 29) 86

Waiver of Rules (Article 30) 86

Section IV. The Award 86

Decisions (Article 31) 86

Form and Effect of the Award (Article 32) 87

Applicable Law, Amiable Compositeur (Article 33) 87

Settlement or Other Grounds for Termination (Article 34) 88

Interpretation of the Award (Article 35) 88

Correction of the Award (Article 36) 88

Additional Award (Article 37) 89

Costs (Articles 38 to 40) 89

Deposit of Costs (Article 41) 91

Notes to the Text 92

INTRODUCTION

These Rules supersede the ‘1962 Rules of Arbitration and Conciliation for Settlement of International Disputes between Two Parties of Which Only One Is a State.’ The Rules are based on the UNCITRAL Arbitration Rules with changes in order to:

(i) indicate the facilitating role of the Secretary-General of the Permanent Court of Arbitration at The Hague, and the availability of the International Bureau to furnish administrative support;

(ii) provide that agreement to arbitrate under the Rules constitutes a waiver of any sovereign immunity from jurisdiction (parties who choose to do so may also provide for waiver of sovereign immunity from execution by adding language such as shown in the optional provisions to the model clause set forth at page 233);

(iii) clarify that if a party-appointed arbitrator on a three-person tribunal fails to participate, the other arbitrators have the discretion to continue the proceedings and to render a binding award.

The Rules are optional and emphasize flexibility and party autonomy. For example:

(i) the Rules, and the services of the Secretary-General and the International Bureau of the Permanent Court of Arbitration, are available for use by all States and their entities and enterprises, and are not restricted to disputes in which the State is a party to either The Hague Convention on the Pacific Settlement of International Disputes of 1899 or that of 1907;

(ii) the choice of arbitrators is not limited to persons who are listed as Members of the Permanent Court of Arbitration;

(iii) parties have complete freedom to agree upon any individual or institution to be appointing authority. In order to provide a fail-safe mechanism to prevent frustration of the arbitration, the Rules provide that the Secretary-General will designate an appointing authority if the parties do not agree upon the authority, or if the authority they choose does not act.

These Rules are also appropriate for use in connection with multiparty agreements, provided that appropriate changes are made in the procedures for choosing arbitrators and sharing costs. Guidelines to assist parties in adapting these Rules for use in resolving disputes that may involve more than two parties are included at page 245.

A model clause that parties may consider inserting in contracts to provide for arbitration of future disputes and a model clause for arbitration of existing disputes are set forth at pages 233-234.

Explanatory ‘Notes to the Text’ appear at page 92.

PERMANENT COURT OF ARBITRATION OPTIONAL RULES FOR ARBITRATING DISPUTES BETWEEN TWO PARTIES OF WHICH ONLY ONE IS A STATE

Effective July 6, 1993

SECTION I. INTRODUCTORY RULES

Scope of Application

Article 1

1. Where the parties to a contract have agreed in writing that disputes in relation to that contract shall be referred to arbitration under the Permanent Court of Arbitration Optional Rules for Arbitrating Disputes between Two Parties of Which Only One Is a State, then such disputes shall be referred to arbitration in accordance with these Rules subject to such modification as the parties may agree in writing.

2. Agreement by a party to arbitration under these Rules constitutes a waiver of any right of sovereign immunity from jurisdiction, in respect of the dispute in question, to which such party might otherwise be entitled. A waiver of immunity relating to the execution of an arbitral award must be explicitly expressed.

3. These Rules shall govern the arbitration except that where any of these Rules is in conflict with a provision of the law applicable to the arbitration from which the parties cannot derogate, that provision shall prevail.

4. The International Bureau of the Permanent Court of Arbitration at The Hague (the ‘International Bureau’) shall have charge of the archives of the arbitration proceeding. In addition, the International Bureau shall, upon written request of all the parties or of the arbitral tribunal, act as a channel of communications between the parties and the arbitral tribunal, and provide secretariat services including, inter alia, arranging for hearing rooms, interpretation, and stenographic or electronic records of hearings.

   Notice, Calculation of Periods of Time

   Article 2

1. For the purposes of these Rules, any notice, including a notification, communication or proposal, is deemed to have been received if it is physically delivered to the addressee or if it is delivered at the addressee’s habitual residence, place of business or mailing address, or, if none of these can be found after making reasonable inquiry, then at the addressee’s last-known residence or place of business or mailing address. Notice shall be deemed to have been received on the day it is so delivered.

2. For the purposes of calculating a period of time under these Rules, such period shall begin to run on the day following the day when a notice, notification, communication or proposal is received. If the last day of such period is an official holiday or a non-business day at the residence or place of business of the addressee, the period is extended until the first business day which follows. Official holidays or non-business days occurring during the running of the period of time are included in calculating the period.

   Notice of Arbitration

   Article 3

1. The party initiating recourse to arbitration (hereinafter called the ‘claimant’) shall give to the other party (hereinafter called the ‘respondent’) a notice of arbitration.

2. Arbitral proceedings shall be deemed to commence on the date on which the notice of arbitration is received by the respondent.

3. The notice of arbitration shall include the following:

   (a) A demand that the dispute be referred to arbitration;

   (b) The names and addresses of the parties;

   (c) A reference to the arbitration clause or the separate arbitration agreement that is invoked;

   (d) A reference to the contract out of or in relation to which the dispute arises;

   (e) The general nature of the claim and an indication of the amount involved, if any;

   (f) The relief or remedy sought;

   (g) A proposal as to the number of arbitrators (i.e., one or three), if the parties have not previously agreed thereon.

4. The notice of arbitration may also include:

   (a) The proposals for the appointments of a sole arbitrator and an appointing authority referred to in article 6, paragraph 1;

   (b) The notification of the appointment of an arbitrator referred to in article 7;

   (c) The statement of claim referred to in article 18.

   Representation and Assistance

   Article 4

   The parties may be represented or assisted by persons of their choice. The names and addresses of such persons must be communicated in writing to the other party, to the International Bureau, and to the arbitral tribunal after it has been appointed; such communication must specify whether the appointment is being made for purposes of representation or assistance.

   SECTION II. COMPOSITION OF THE ARBITRAL TRIBUNAL

   Number of Arbitrators

   Article 5

   If the parties have not previously agreed on the number of arbitrators (i.e., one or three), and if within thirty days after the receipt by the respondent of the notice of arbitration the parties have not agreed that there shall be only one arbitrator, three arbitrators shall be appointed.

   Appointment of Arbitrators (Articles 6 to 8)

   Article 6

1. If a sole arbitrator is to be appointed, either party may propose to the other:

   (a) The names of one or more persons, one of whom would serve as the sole arbitrator; and

   (b) If no appointing authority has been agreed upon by the parties, the name or names of one or more institutions or persons, one of whom would serve as appointing authority.

2. If within thirty days after receipt by a party of a proposal made in accordance with paragraph 1 the parties have not reached agreement on the choice of a sole arbitrator, the sole arbitrator shall be appointed by the appointing authority agreed upon by the parties.

   If no appointing authority has been agreed upon by the parties, or if the appointing authority agreed upon refuses to act or fails to appoint the arbitrator within sixty days of the receipt of a party’s request therefor, either party may request the Secretary-General of the Permanent Court of Arbitration at The Hague (the ‘Secretary-General’) to designate an appointing authority.

3. The appointing...