UNCITRAL’s new draft model clauses target technology disputes
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Tailoring draft model clauses to technology companies
Arbitration should be well-suited to technology disputes, where speed, confidentiality and technical specialism may be key. In particular, arbitration:
- is flexible (including to set procedure and appoint arbitrators with sector experience);
- can be confidential (depending on the applicable rules and law);
- enables adjudication of similar parallel claims in one forum; and
- leads to awards that are more easily enforced than court judgments.
Despite this, arbitration has remained relatively under-used in technology disputes (although this is reportedly changing).
Since 2021, WGII (the working group focusing on dispute settlement, which is responsible for drafting text for consideration and adoption by UNCITRAL) has been considering and preparing draft model clauses to be used for technology-related DR and adjudication. In its February 2023 session, WGII considered an updated version of these draft model clauses, which are the focus of this post.
The draft clauses on offer
The draft model clauses aim to fulfil the DR needs of businesses that function on a project-by-project basis or that are characterised by dynamic development with short life cycles such as start-ups. Such businesses require an express and specialised DR process that is easily accessible and can be integrated into contracts.
WGII has prepared two alternative model clauses: Clause A for highly expedited arbitration and Clause B for a multi-tier DR process. They can be used in combination with either or both of Clause C (for appointment of an expert by the tribunal upon joint proposal by the parties) and Clause D (to safeguard confidentiality).
The clauses are not reserved for “technology disputes”, but can apply more broadly, for example to the construction and financial sectors.
Clause A accelerates an already-expedited arbitration procedure
Clause A is based on the UNCITRAL Expedited Arbitration Rules appended to the UNCITRAL Arbitration Rules 2021, but with even shorter time-frames and time-saving measures:
- The parties either agree on the name of an arbitrator, or the appointing institution or person, when concluding the arbitration clause.
- The parties agree jointly to appoint (or that an institution or person appoint) an expert.
- The tribunal will have three days from constitution to consult the parties for a case management conference.
- The overall deadline for arbitration to be completed is 60-90 days, or such period as the parties specify.
This acceleration should address concerns about prolonged disputes and resulting costs. It may, however, be difficult to agree an arbitrator at the time of contracting when parties do not know what profile will be suited to the actual dispute. Even if the arbitrator is agreed, there is no guarantee that they will be available at such short notice, if, and when, a dispute arises. Choosing an appointing institution may therefore be the more robust option.
Clause B introduces multi-tier DR, with a neutral specialist
Under Clause B (which is an alternative to Clause A), the parties nominate together a neutral specialist, to consult with the parties promptly (within three days) and make a quick determination (within 21 days), with which the parties have to comply.
The parties may then request enforcement of the specialist determination through an arbitration before a sole arbitrator under UNCITRAL’s expedited rules, with jurisdiction limited to the issue of compliance with the determination. The deadlines are tight: 10 days is suggested for the award, although the timing can be set by the parties.
An arbitral review of the specialist determination may also, or alternatively, be requested to re-consider any substantive claim relating to the contract. But this is only once conditions specified by the parties are complete (e.g. completion of a project), or after a certain period of time, in a bid to ensure that the project is not delayed by the arbitration.
WGII’s commentary refers to the award on the enforcement of the specialist determination “possibly being enforceable under New York Convention”. However, there is likely to be debate as to whether this ‘award’ is an interim/provisional award (and therefore not enforceable), given the ability to request an arbitral review.
While Clause B again sets out an expedited procedure, it is possible that multiple rounds of DR and enforcement could limit the objective of speed. For example, the parties may disagree as to whether any relevant factual conditions have occurred that would permit access to the arbitral review (and terminate the right to use the arbitral procedure to request enforcement). It may also be difficult to complete a project, with the threat of an arbitral review looming.
- suggesting that parties specify a long-stop date after which parties can access the arbitral review regardless of any other specified conditionality;
- proposing costs consequences in the arbitral review, if a party has not complied with the specialist determination by the time of arbitral review; and
- proposing future consideration of a provision that the parties agree not to initiate other DR proceedings (including litigation) during the specified period or until the project is complete.
Collaborating on a tribunal-appointed expert under Clause C
Clause C (which can be added to Clause A or B) provides for the tribunal to appoint a single expert, identified by the parties when concluding the arbitration clause. If the parties cannot agree, either the tribunal proposes a list of experts that the parties may strike out and rank, or a specified person or institution appoints.
This approach should be quicker and cheaper than having party-appointed experts and multiple rounds of expert reports. It will be interesting to see whether parties prioritise speed and efficiency, by incorporating this clause, at the expense of the comfort of having a party-appointed expert.
Clause D for default confidentiality
A key benefit for technology-related disputes would be default confidentiality, which is provided for in Clause D (which may be used with Clauses A/B and C). This obliges parties and the decision-maker to keep confidential all aspects of the proceedings that are not in the public domain (subject to exceptions). All others involved in the proceedings would be required to sign an undertaking of confidentiality.
WGII also includes guidance on “inbound” confidentiality (between opposing parties and between a party and tribunal) in respect of information of intrinsic value such as trade secrets, know-how, algorithms or other proprietary information. The tribunal must decide whether to take as proven the fact for which the confidential information could serve as evidence. The tribunal may appoint a confidentiality expert to report to it on the basis of the confidential information on specific issues designated without disclosing that information.
While the inbound confidentiality provision is currently guidance text, rather than a model clause, it could be an important factor for attracting technology companies. Provision for inbound confidentiality is relatively uncommon, as arbitration rules tend not to deal with confidentiality as between the parties, relying instead on national legislation or tribunal discretion. The IBA Rules on the Taking of Evidence in International Arbitration, for example, do not provide the same level of protection in terms of requiring undertakings or providing for inbound confidentiality.
WGII will hold its next session in September 2023. Before that, WGII will discuss the draft model clauses further with potential users (including industry stakeholders and start-ups) and experts, and further revise them.