Types of arbitration

What types of arbitration exist?

Arbitration can be classified in several ways. Each classification highlights a different aspect of the same proceedings.

To understand the main types, we can ask five questions:

• 1. What is the dispute about?

  It may involve, for example, commercial arbitration over a business relationship, or investment arbitration over an investment. In investor–State arbitration, the opposing parties are the investor and the State hosting the investment. Administrative, labour and sectoral matters also require consultation of their own legal frameworks.

• 2. Is the dispute connected with one country or more than one?

  This question helps distinguish domestic from international arbitration. For example, a supply contract between companies established in different countries may give rise to international arbitration. The classification in a particular case depends on the criteria in the applicable law.

• 3. Who organises and administers the proceedings?

  Arbitration is institutional when an arbitral institution administers the proceedings under its rules. It is ad hoc when proceedings are organised without that institutional administration, although they may follow rules chosen in advance. In both cases, the arbitrators decide the dispute.

• 4. What standards will be used to decide the dispute?

  In arbitration in law, the arbitrators apply legal rules. In arbitration in equity, they are authorised to decide according to considerations of fairness in the particular case, within applicable limits. Choosing arbitration does not, by itself, authorise a decision in equity.

• 5. Does arbitration arise from an agreement or a statutory requirement?

  It is voluntary when based on the parties’ agreement. It is mandatory when legislation requires arbitration in a particular situation. A freely agreed arbitration clause remains voluntary even if one party later refuses to honour it.

These categories are not mutually exclusive alternatives. The same arbitration may have several of these descriptions because each answers a different question. Classification alone does not establish that the dispute can be referred to arbitration: the applicable framework must be checked.

In Mozambique: Law 11/99 contains general rules and a chapter on international commercial arbitration. Classification by subject matter must be considered alongside special legislation.

What is commercial arbitration?

It is arbitration of disputes arising from commercial or business relationships, whether contractual or not.

It may concern supplies, construction, distribution, services, financing or business cooperation. In the UNCITRAL Model Law, commercial is interpreted broadly.

It can be domestic or international, ad hoc or institutional. A State being a party to a commercial contract does not, by itself, turn the dispute into treaty-based investment arbitration.

In Mozambique: The commercial nature of a dispute does not remove the need to check arbitrability and the arbitration agreement. For its international character, see Article 52.

What distinguishes domestic from international arbitration?

Arbitration is domestic when it falls within the national scope defined by law. It is international when it has the foreign connections that the law regards as relevant.

The countries where the parties are established, the seat and the place of performance may matter. A foreign arbitrator or the use of English does not, by itself, make arbitration international.

Criteria vary between countries. The UNCITRAL Model Law, for example, considers establishments in different States and certain connections of the contract or arbitration with another State. In Mozambique, classification must start with national law.

In Mozambique: Article 52 links internationality to international trade interests and identifies connections such as the parties’ business domicile, the place of arbitration and substantial performance of obligations. Article 53 links general and special rules.

Are international arbitration and a foreign award the same thing?

No. International describes the arbitration; foreign describes an award in relation to the country where recognition or enforcement is sought.

An international arbitration can produce an award in the very country where enforcement is requested. Conversely, a domestic arbitration in one country can produce a foreign award for another country.

The New York Convention covers awards made in another State’s territory and awards not considered domestic in the State of recognition. The international nature of a dispute does not, by itself, determine the recognition framework.

In Mozambique: Do not confuse Article 52’s criteria with those of the New York Convention. Check the seat, the nature of the award and the recognition rules in the destination country.

What is investment arbitration?

It resolves disputes concerning investments; investor–State arbitration involves an investor and the State hosting the investment.

Consent may appear in a contract or arise from a statutory or treaty offer accepted by the investor on the prescribed terms. A contractual breach claim differs from a claim alleging violation of an investment-treaty protection.

ICSID, the International Centre for Settlement of Investment Disputes, is one available mechanism. The Washington Convention requires written consent and conditions concerning the dispute, investment and parties. A State’s Convention membership alone does not submit it to every investor claim.

In Mozambique: A claim against Mozambique requires identification of the instrument providing consent and its limits. An investment in the country does not automatically confer access to international arbitration.

How do ad hoc and institutional arbitration differ?

In institutional arbitration, an arbitral institution administers the proceedings. Ad hoc arbitration proceeds without that institutional administration.

The institution performs functions under the selected rules, such as assisting with tribunal formation and administration. Arbitrators decide the dispute; the administering institution does not decide it in that capacity.

Ad hoc does not mean rule-free. Parties may adopt the UNCITRAL Arbitration Rules and provide for an appointing authority. UNCITRAL drafts rules but does not administer arbitrations under them. Neither form is always cheaper or more suitable by definition.

In Mozambique: Articles 3 and 27 of Law 11/99 accommodate institutional organisation and the choice of procedural rules. Article 69 addresses institutional centres.

How do arbitration in law and arbitration in equity differ?

In arbitration in law, the tribunal decides under legal rules. In arbitration in equity, it applies considerations of fairness in the particular case, within its authority and applicable limits.

Deciding in equity means seeking a fair solution to the particular case within the authority granted. Choosing arbitration or a flexible procedure does not itself confer that power.

Procedural safeguards and mandatory legal limits still apply. Ex aequo et bono refers to deciding in equity; amiable compositeur describes an arbitrator authorised to resolve the dispute according to fairness within the applicable framework.

In Mozambique: Article 34(2) requires authorisation in the agreement or in a document signed before the first arbitrator accepts appointment. For international commercial arbitration, Article 54(3) requires express authorisation to decide ex aequo et bono or as amiable compositeur.

How do voluntary and mandatory arbitration differ?

Voluntary arbitration rests on consent; mandatory arbitration results from a statutory requirement for particular matters or situations.

A previously accepted clause remains an expression of voluntary arbitration even if a party later prefers court proceedings. A new agreement is not required for every dispute already covered by a valid arbitration agreement.

Mandatory arbitration requires a specific statutory provision: its scope, conditions, procedure and safeguards must be checked. It cannot be presumed merely because a dispute concerns labour, administrative or sectoral matters.

In Mozambique: The general framework of Law 11/99 is structured around the arbitration agreement. Any instance of statutory mandatory arbitration must be confirmed in the applicable special legislation.