DUE PROCESS IN
I N T E R N AT I O N A L
COMMERCIAL
A R B I T R AT I O N
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DUE PROCESS IN
I N T E R N AT I O N A L
COMMERCIAL
A R B I T R AT I O N
SECOND EDITION
MATTI S. KURKELA
SANTTU TURUNEN
AND
CONFLICT MANAGEMENT
INSTITUTE (COMI)
1
1
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_____________________________________________
Library of Congress Cataloging-in-Publication Data
Kurkela, Matti, 1951–
Due process in international commercial arbitration / Matti S. Kurkela, Santtu Turunen,
and Conflict Management Institute (COMI).— 2nd ed.
p. cm.
Includes bibliographical references and index.
ISBN 978-0-19-537713-2 ((hardback) : alk. paper)
1. Arbitration and award, International. 2. Due process of law.
3. Arbitration agreements, Commercial. I. Turunen, Santtu.
II. Helsingin yliopisto. Conflict Management Institute. III. Title.
K2400.K86 2010
347'.09–dc22
2009046433
_____________________________________________
1 2 3 4 5 6 7 8 9
Printed in the United States of America on acid-free paper.
Note to Readers
This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is
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with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional services. If legal
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that the information has not been affected or changed by recent developments, traditional legal research techniques should
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Dedication
With a thousand thanks to Pirjo,
Jaakko (5), Tuomo (4) and Saana (2)
for the joy in my life
and
to the staff and colleagues at Hannes Snellman
for giving me the facilities and their support
in my endeavours
Matti S. Kurkela
Dedicated to those who strive for the settlement of conflicts by sophisticated and
civilized methods in our global community
Matti S. Kurkela, Santtu Turunen and Conflict Management Institute(COMI)
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Preface to the Second Edition
Due process is an emerging doctrine in international arbitration. Increasing attention
is paid to fairness of arbitral procedure and the procedural safeguards in the proceedings. On the other hand, the traditional benefits of flexibility, efficiency and finality of
arbitration as a method of dispute resolution have to be considered. Thus, the doctrine
of due process is not only current, but also critical for the future of arbitration as a
method of dispute resolution.
We would like to thank professor (h.c.) Matti S. Kurkela for his pioneer work with
the first edition of the book, and the trust vested in COMI with the second edition. The
second edition of the book is produced by University of Helsinki Conflict Management
Institute, COMI. COMI is a research institute focused on judicial conflict management. Arbitration is one of the key areas of research in COMI. The institute has coordinated research work, published several books and organized various seminars on law
of arbitration. It has also developed teaching of arbitration at the faculty of law of the
University of Helsinki. The support association of the institute also offers institutionalised arbitration.
Finally, we would like to thank Santtu Turunen for doing extensive work on the 1st
edition, work that has make this new edition possible. He conducted the research necessary for updating and wrote new sections with great care and skill. This 2nd edition
would not exist without his immense labor. The board of COMI, including professor
Jarno Tepora and research director Risto Koulu, has reviewed the changes in the
second edition. In addition, COMI would like to thank all the people who have taken
part in the process of preparing the book, and especially the production team of Oxford
University Press.
Helsinki, January 20, 2010
Jarno Tepora and Risto Koulu
vii
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Foreword to the First Edition
International arbitrations “float” above national jurisdictions like many international
transactions. To submit international arbitration to a national law may be grossly artificial. The great issue is the extent to which the great principles of arbitration law and
the arbitration practice or “usage” are common or uniform to trading nations and are as
such horizontal or “floating” in lieu of forming a vertical pyramid like national laws.
In my research on letters of credit in the 1980’s I attempted to develop an acid test to
identify substantive lex mercatoria in banking and financial transactions. The test
included three elements: the international character of the transaction; a reasonable
expectation of a trade usage being applicable regardless of contacts to any jurisdiction
and the reasonableness and equitability of such a rule. The same test could mutatis
mutandis be applied to international arbitration: international character; reasonable
expectation of an arbitration “usage” to be applicable; reasonableness and equitability.
The practitioners of international arbitration have sometimes argued for an international appeal board or panel for rapid review and control of the enforceability of the
awards given. Perhaps we could introduce such a control mechanism, at the first stage
perhaps a non-binding review of “due process” on a consultative basis to promote the
enforceability of the awards, to give guidance to national courts and to eliminate the
risks of arbitrary or manifestly erroneous awards. The Conflict Management Institute
of the University of Helsinki Law School could perhaps prepare and submit a proposal
in this respect.
I am very grateful for the great assistance of my assistant Heidi Lautjärvi in writing
this book, the devoted staff of Hannes Snellman library for helping me in the research
and my partners at Hannes Snellman for giving me the opportunity and facilities to
write this book.
Helsinki, March 18, 2005
Matti S. Kurkela
ix
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Foreword to the Second Edition
The idea of the book is to outline the basis of fundamental procedural requirements in
international commercial arbitration, due process in arbitration. Arbitration usually
substitutes ordinary court procedure, and despite the private nature of the method of
dispute resolution, arbitral awards are final and widely enforceable. As a trade-off for
the mandate and status as a legal substitute for ordinary court procedure as well as for
the binding nature and enforceability of the award, there are procedural requirements
which have to be respected.
The starting point of the analysis is the nature of due process as a procedural counterpart of substantive lex mercatoria. International arbitration and due process norms
in international arbitration in a way float above national jurisdictions, just like international transactions and lex mercatoria. International practices create law not only in
substantive but also in procedural domain. In this second edition, the normative nature,
justification and the theoretical ground of due process requirements are discussed further. In addition to international practices, due process requirements are more intensively bound to the common basis of fundamental procedural rights of various legal
cultures.
The changes in the second edition of the book are focused on building an even stronger foundation for the doctrine of arbitral due process and further intensifying the
structure of the book. The intention of the book is to advance understanding of the
procedural rights in arbitration as an entity, place the single norms and guidelines in
context and make it easier to apply due process argumentation in practice. Some specific questions, for example requirement of independence and impartiality of arbitrators have been discussed in more detail compared to the first edition. Generally, also
references to the current discussions in field of arbitration have been made.
Finally, I would like to thank the collegues at COMI, the research director of COMI
Risto Koulu, Matti S. Kurkela research assistant Riikka Koulu and the production team
of Oxford University Press for help and co-operation in preparing the second edition
of the book.
Helsinki, January 20, 2010
Santtu Turunen
xi
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About the Authors
MATTI S. KURKELA, PROFESSOR(h.c.)
+358-400-688584
D.S.U. (Paris 2)
LL.M. (Harvard)
Avocat à la Cour de Paris
Finland:
Laivurinkatu 6 A
00150 Helsinki
matti.kurkela @ mattiskurkela.fi
www.mattiskurkela.fi.
The title Professor (h.c.) was granted to Matti S. Kurkela by the President of the
Republic of Finland. Matti S. Kurkela holds a doctorate of law from the University of
Helsinki, an LL.M. from Harvard Law School and a D.S.U. from the University of
Paris. He has also been admitted to The Paris Bar. He was one of member in Helsinki
Bar before Paris Bar. As docent Matti S. Kurkela lectures in international trade law
and private international law at the University of Helsinki. He has published several
books and articles on financial and contract law and on arbitration. His doctoral thesis
treats bank guarantees in international trade. Matti S. Kurkela’s field of practice
includes mainly financial and contract law and M&A. He has also acted as arbitrator in
national and international arbitration proceedings.
xiii
SANTTU TURUNEN
Researcher, University of Helsinki Conflict Management Institute (COMI)
LL.M., University of Helsinki
santtu.turunen@comi.fi
Santtu Turunen works as a researcher at the University of Helsinki Conflict Management
Institute based at University of Helsinki Law Faculty. He has written several articles
concerning arbitration, and edited books in the field of law. For example, Turunen has
edited a collection of articles on Finnish arbitral award published in the publication
series of the COMI institute. Turunen has also acted as an arbitrator in the institutionalised arbitration offered by the support association of the University of Helsinki
Conflict Management Institute.
UNIVERSITY OF HELSINKI CONFLICT
MANAGEMENT INSTITUTE (COMI)
comi@comi.fi
www.comi.fi
COMI
P.O. Box 4
00014 University of Helsinki
Finland
University of Helsinki Conflict Management Institute COMI is a research institute
focused on judicial conflict management. Arbitration is one of the key areas of research
in COMI. The institute has coordinated research work, published several books and
organised various seminars on law of arbitration. It has also developed teaching of
arbitration at the faculty of law of the University of Helsinki. The support association
of the institute also offers institutionalised arbitration. For more information, see
www.comi.fi.
xiv
MATTI S. KURKELA, PROFESSOR(H.C.)
Summary Contents
Preface to the Second Edition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii
Foreword to the First Edition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix
Foreword to the Second Edition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi
About the Authors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii
Abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxiii
1 Due Process and Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2 The New York Convention as A Starting Point . . . . . . . . . . . . . . . . . . 15
3 Arbitration Agreement as the Basis of Jurisdiction . . . . . . . . . . . . . . 43
4 Aspects of Jurisdiction other than the Agreement . . . . . . . . . . . . . . . 81
5 The Panel and Due Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
6 Due Process Related to Facts and Evidence . . . . . . . . . . . . . . . . . . . 141
7 The Role of the Panel in the Proceedings . . . . . . . . . . . . . . . . . . . . 173
8 Fair Arbitration—Opportunity to Present One’s Case . . . . . . . . . . . 185
9 Due Process, Lex Proceduralia, Fair Arbitration—Procedural
Foundation of Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201
List of References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207
Appendices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 541
xv
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Contents
Preface to the Second Edition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii
Foreword to the First Edition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix
Foreword to the Second Edition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi
About the Authors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii
Abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxiii
Chapter 1
Due Process and Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 The Origin of Due Process Requirements in Arbitration . . . . . . . . . . 1
1.2 How Should Due Process Requirements in Arbitration
Be Defined? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.3 The Floating Nature of the Law of Due Process—Analogy
to Lex Mercatoria . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.4 The Method of Defining Due Process and Lex Proceduralia
in Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.5 Due Process as a Principle of Law . . . . . . . . . . . . . . . . . . . . 12
Chapter 2
The New York Convention as A Starting Point . . . . . . . . . . . . . . . . . . . . 15
2.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.2 Public Policy (“Ordre Public”) as a Ground to Refuse
Recognition and Enforcement . . . . . . . . . . . . . . . . . . . . . . 17
2.2.1 A Vague Category . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.2.2 Procedural Aspects: Just a Right, Not a Duty;
Actions Ex Officio and Sua Sponte . . . . . . . . . . . . . . . . 18
2.2.3 What Constitutes Public Policy? . . . . . . . . . . . . . . . . . . 20
2.2.4 ILA on Fundamental Principles . . . . . . . . . . . . . . . . . . 22
xvii
2.2.5 ILA on Public Policy Rules . . . . . . . . . . . . . . . . . . . . . 24
2.3 Arbitrability of the Subject Matter. . . . . . . . . . . . . . . . . . . . . 24
2.4 Arbitration Agreement (“Mandate in Concreto”)
and the Convention . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.4.1 Agreement as the Basis of the Procedure . . . . . . . . . . . . . 25
2.4.2 Breach of the Procedural Agreement as a Ground
to Refuse Recognition and Enforcement . . . . . . . . . . . . . 26
2.4.3 Ultra Petita—Matters Beyond the Scope . . . . . . . . . . . . . . 28
2.4.4 Waiver Doctrine and the Breach of
the Procedural Agreement . . . . . . . . . . . . . . . . . . . . 32
2.5. Incapacity and Invalidity . . . . . . . . . . . . . . . . . . . . . . . . . 35
2.5.1 Incapacity of the Party and Invalidity of the Agreement . . . . . . 35
2.5.2 Incapacity of a Person . . . . . . . . . . . . . . . . . . . . . . . 35
2.5.3 Invalidity of the Arbitration Agreement . . . . . . . . . . . . . . 36
2.6. Ability to Present One’s Case . . . . . . . . . . . . . . . . . . . . . . 37
2.6.1 Ability to Present One’s Case as a Fundamental
General Requirement. . . . . . . . . . . . . . . . . . . . . . . 37
2.6.2 Ability to Present One’s Case According to
the Agreement and the Law of the Seat . . . . . . . . . . . . . . 39
2.7 Award has to be Final (“Condition Subsequent”) . . . . . . . . . . . . . 40
2.8 Conclusions on the Analysis of Article V of the Convention . . . . . . . . 41
Chapter 3
Arbitration Agreement as the Basis of Jurisdiction . . . . . . . . . . . . . . . . . 43
3.1 Agreement on Basis of Jurisdiction—Mandate in Concreto
Based on Mandate in Abstracto . . . . . . . . . . . . . . . . . . . . . 43
3.2 Existence of an Arbitration Agreement . . . . . . . . . . . . . . . . . . 46
3.2.1 The Written Form . . . . . . . . . . . . . . . . . . . . . . . . . 46
3.2.2 Competence to Determine Competence . . . . . . . . . . . . . 48
3.2.3 The Validity of the Agreement . . . . . . . . . . . . . . . . . . . 51
3.3. On Interpretation of the Arbitration Agreement . . . . . . . . . . . . . 52
3.3.1 Methods of Interpretation . . . . . . . . . . . . . . . . . . . . . 52
3.3.2 Assignment and Transfer . . . . . . . . . . . . . . . . . . . . . . 55
3.3.3 Time Limit for the Award . . . . . . . . . . . . . . . . . . . . . 56
xviii
CONTENTS
3.3.4 Time Limit in the Arbitration Clause as a Statute
of Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
3.3.5 Guarantor’s or Indemnitor’s Right to Invoke
an Arbitration Agreement . . . . . . . . . . . . . . . . . . . . . 60
3.4 Unconscionability or Unreasonability . . . . . . . . . . . . . . . . . . . 62
3.5 The Enforceability of an Arbitration Agreement
and Due Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
3.5.1 Agreement Defining Due Process?. . . . . . . . . . . . . . . . . 66
3.5.2 Good Faith of the Parties . . . . . . . . . . . . . . . . . . . . . 68
3.5.3 Possible Action in Case of Disloyalty . . . . . . . . . . . . . . . . 69
3.5.4 Non-Respect of the Agreement by the Arbitral Tribunal
as Violation of Due Process . . . . . . . . . . . . . . . . . . . . 70
3.5.5 Manifest Disregard of Agreement and Substantive
Law as Violation of Due Process . . . . . . . . . . . . . . . . . 73
3.5.6 Disregard of Facts as Violation of Due Process . . . . . . . . . . . 76
3.5.7 “Carte Blanche” Prayer for Relief and Due Process . . . . . . . . 77
3.6 Arbitration Agreement and Due Process—Summary . . . . . . . . . . . 78
Chapter 4
Aspects of Jurisdiction other than the Agreement . . . . . . . . . . . . . . . . . 81
4.1 Due Process and Jurisdiction—Problems Related
to Aspects Other than the Agreement . . . . . . . . . . . . . . . . . . 81
4.2 Parties to the Proceedings . . . . . . . . . . . . . . . . . . . . . . . . 81
4.3 Arbitrability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
4.4 Res Judicata . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
4.4.1 Defining Res Judicata . . . . . . . . . . . . . . . . . . . . . . . 85
4.4.2 “Effects” of Enforcement Dimensions . . . . . . . . . . . . . . . 89
4.5 Lis Pendens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
4.5.1 Lis Pendens Doctrine in Arbitration . . . . . . . . . . . . . . . . 90
4.5.2 When Are the Proceedings Parallel? Test of Identity
or Similarity and the Enforcement Effects Test . . . . . . . . . . . 91
4.5.3 The Effect of Parallel Proceedings . . . . . . . . . . . . . . . . . 92
4.6 Forum Non Conveniens . . . . . . . . . . . . . . . . . . . . . . . . . . 95
4.6.1 Doctrine of Forum Non Conveniens . . . . . . . . . . . . . . . . 95
CONTENTS
xix
4.6.2 Special Considerations in Arbitration . . . . . . . . . . . . . . . 97
4.7 Conditions Imposed by the Applicable Rules . . . . . . . . . . . . . . . 98
4.7.1 Security for Fees and Costs of the Arbitral Tribunal
and Institution . . . . . . . . . . . . . . . . . . . . . . . . . . 98
4.7.2 Security for Attorneys’ Fees and Legal Costs of the Parties . . . . 99
4.7.3 Security for Loss or Damage . . . . . . . . . . . . . . . . . . 100
4.7.4 Security for the Claims or for the Enforcement
of the Award . . . . . . . . . . . . . . . . . . . . . . . . . 101
4.8 Conditions Imposed by the Panel within its Autonomy . . . . . . . . 101
4.9 Conditions Imposed by the Agreement of the Parties:
Duty to Mediate or Negotiate . . . . . . . . . . . . . . . . . . . . 102
4.10 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Chapter 5
The Panel and Due Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
5.1 The Arbitration Panel in the Dispute Resolution Context . . . . . . . 107
5.2 The Composition of the Panel . . . . . . . . . . . . . . . . . . . . . 108
5.3 Challenging the Arbitrators . . . . . . . . . . . . . . . . . . . . . . 109
5.4 Impartiality and Independence . . . . . . . . . . . . . . . . . . . . 111
5.4.1 The Requirement of Impartial and
Independent Arbitrators . . . . . . . . . . . . . . . . . . . . 111
5.4.2 The Meaning of Independency and
Impartiality in Arbitration . . . . . . . . . . . . . . . . . . . 113
5.4.3 Same but Different? The Standard of
Impartiality in Arbitration . . . . . . . . . . . . . . . . . . . 115
5.4.4 What Constitutes Bias? . . . . . . . . . . . . . . . . . . . . . 118
5.4.5 Duty to Disclose . . . . . . . . . . . . . . . . . . . . . . . . 120
5.4.6 IBA Guidelines—Green, Orange, Red, and
Nonwaivable Red Lists . . . . . . . . . . . . . . . . . . . . 122
5.4.7 Requirement of Impartial Conduct . . . . . . . . . . . . . . . 126
5.5 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
5.6 Communication with the Parties . . . . . . . . . . . . . . . . . . . . 128
5.7 Role of the Secretary . . . . . . . . . . . . . . . . . . . . . . . . . 130
5.8 Fees and Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
5.9 Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
xx
CONTENTS
5.10 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
5.11 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
Chapter 6
Due Process Related to Facts and Evidence . . . . . . . . . . . . . . . . . . . . . . 141
6.1 The Structure of a Legal Decision: Facts and Due Process . . . . . . . 141
6.2 Facts in Legal Decision: Relevance, Sufficiency and Truth . . . . . . . 142
6.3 On the Burden of Proof . . . . . . . . . . . . . . . . . . . . . . . . 147
6.4 Role of Arbitral Panel in Establishing the Facts . . . . . . . . . . . . . 149
6.4.1 Conflicts of Traditions and Culture . . . . . . . . . . . . . . . 149
6.4.2 Guidance via Consultations . . . . . . . . . . . . . . . . . . 150
6.4.3 Direct Intervention by the Panel . . . . . . . . . . . . . . . . 151
6.5 Enforcement of Evidentiary Measures . . . . . . . . . . . . . . . . . 152
6.5.1 “Toolbox” of Measures for Bringing
Evidence into Proceedings. . . . . . . . . . . . . . . . . . . 152
6.5.2 “Internal” Orders . . . . . . . . . . . . . . . . . . . . . . . 153
6.5.3 “External” Orders . . . . . . . . . . . . . . . . . . . . . . . 154
6.5.4 Fact-Finding by the Arbitrators . . . . . . . . . . . . . . . . . 156
6.5.5 Organizing the Evidentiary Hearings . . . . . . . . . . . . . . 157
6.5.6 “Entire Agreement Clauses” and Other Agreements
on Admissibility of Evidence . . . . . . . . . . . . . . . . . . 158
6.6 Questions and Answers . . . . . . . . . . . . . . . . . . . . . . . . 160
6.7 Discovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
6.8 Witnesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162
6.8.1 Prior to Hearings . . . . . . . . . . . . . . . . . . . . . . . . 162
6.8.2 Language . . . . . . . . . . . . . . . . . . . . . . . . . . . 164
6.8.3 “Nothing but the Truth” . . . . . . . . . . . . . . . . . . . . 164
6.8.4 Hostility, Evasiveness or Psychological or
Emotional Ties . . . . . . . . . . . . . . . . . . . . . . . . 165
6.8.5 Questioning . . . . . . . . . . . . . . . . . . . . . . . . . . 166
6.8.6 Cross-Examination and Special Arrangements . . . . . . . . . 168
6.8.7 Timing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169
6.8.8 Compensation for Witnesses . . . . . . . . . . . . . . . . . . 169
6.9 Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169
CONTENTS
xxi
6.10 Other Evidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
6.11 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172
Chapter 7
The Role of the Panel in the Proceedings . . . . . . . . . . . . . . . . . . . . . . . 173
7.1 Managing the Proceedings . . . . . . . . . . . . . . . . . . . . . . . 173
7.2 The Panel and the Facts of the Case . . . . . . . . . . . . . . . . . . 174
7.3 Jura Novit Arbiter and the “Burden of Education” . . . . . . . . . . . . 178
7.4 Administration of Remedies and Consultations . . . . . . . . . . . . . 180
7.5 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183
Chapter 8
Fair Arbitration—Opportunity to Present One’s Case . . . . . . . . . . . . . 185
8.1 Fair Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185
8.2 Equality of Arms and Reasonable Opportunity to
Present One’s Case . . . . . . . . . . . . . . . . . . . . . . . . . . 186
8.3 Right to a Counsel of One’s Choice . . . . . . . . . . . . . . . . . . . 191
8.4 Conflict between Timeliness and Opportunity
to Present One’s Case . . . . . . . . . . . . . . . . . . . . . . . . . 192
8.5 Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196
8.6 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199
Chapter 9
Due Process, Lex Proceduralia, Fair Arbitration—Procedural
Foundation of Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201
9.1 The Three Facets: Due Process, Fair Arbitration
and Lex Proceduralia . . . . . . . . . . . . . . . . . . . . . . . . . . 201
9.2 How to Formulate a Due Process Argument . . . . . . . . . . . . . . 203
9.3 Fairness or Finality? Conflicts of Principles and Goals . . . . . . . . . . 204
9.4 Access to Arbitration and Fair Hearing . . . . . . . . . . . . . . . . . 206
List of References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207
Appendices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 541
xxii
CONTENTS
Abbreviations
AAA Rules
American Arbitration Association, Commercial Arbitration
Rules and Mediation Procedures (Including Procedures for
Large, Complex Commercial Disputes), as Amended and
Effective on June 1, 2009
Act 1996
Arbitration Act 1996 (of England)
Argentina Act
National Code of Civil and Commercial Procedure Law
17.454 of September 19 1967, as reformed by Law 22.434 of
March 16 1981, text consolidated according to Decree 1.042 of
1981, as reported in Jan Paulsson (ed), International Handbook
on Commercial Arbitration, (Kluwer Law International 1984
Last updated: January 1985 Supplement No. 3) pp. 3–7.
CIETAC Rules
China International Economic and Trade Arbitration
Commission (CIETAC), Ethical Rules for Arbitrators, as
Effective on May 1, 2005
Civil Rights Covenant
International Covenant on Civil and Political Rights, Adopted
and opened for signature, ratification and accession by United
Nations General Assembly Resolution 2200A (XXI) of 16
December 1966, entry into force 23 March 1976, in accordance with Article 49
COMI Rules
University of Helsinki Conflict Management Institute—Rules
Convention or
The Convention
Convention on the Recognition and Enforcement of
Foreign Arbitration Awards, New York, June 10, 1958
ECHR
European Convention for the Protection of Human Rights
and Fundamental Freedoms as amended by Protocol No. 11,
Rome, 4.XI.1950
FAA
United States Arbitration Act
xxiii
FCCC Expedited Rules
Central Chamber of Commerce of Finland Arbitration Rules
and Rules and Rules for Expedited Arbitration of the
Arbitration Institute of the Central Chamber of Commerce of
Finland, as Effective on June 1, 2004
France Act
French Code of Civil Procedure–Book IV–Arbitration
as reported in Jan Paulsson (ed), International Handbook
on Commercial Arbitration, (Kluwer Law International 1984
Last updated: February 1998 Supplement No. 26)
pp. 26–12
German Law
German Arbitration Law 1998, in force 1 January 1998
as reported in Jan Paulsson (ed), International Handbook
on Commercial Arbitration, (Kluwer Law International 1984
Last updated: December 2001 Supplement No. 34)
pp. 26–14
IBA
International Bar Association
IBA Ethics
IBA Rules of Ethics for International Arbitrators (1987)
IBA Guidelines
IBA Guidelines on Conflicts of Interest in International
Arbitration (May 2004)
IBA Rules
IBA Rules on Taking of Evidence in International
Commercial Arbitration
ICC
International Chamber of Commerce
ICC Rules
ICC Rules of Arbitration in force as from January 1, 1998
(ICC Publication No 808), as Amended January 1, 2008
ILA
International Law Association
Italy Act
Italian Code of Civil Procedure, Book Four, Title VIII,
Arbitration, Amended by Legislative Decree of 2 February
2006, No. 40, as reported in Jan Paulsson (ed), International
Handbook on Commercial Arbitration, (Kluwer Law
International 1984 Last updated: April 2007 Supplement
No. 49)
Japan Act
Japanese Arbitration Law, No. 138 of 2003, in force 1 March
2004, as reported in Jan Paulsson (ed), International
Handbook on Commercial Arbitration, (Kluwer Law
International 1984 Last updated: March 2005 Supplement
No. 43) pp. Annex I-1–Annex I-20
LCIA
London Court of International Arbitration
LCIA Rules
London Court of International Arbitration: Rules, Clauses &
Costs
xxiv
ABBREVIATIONS
Recommendations
ILA Resolution on Public Policy as a Bar to Enforcement of
International Awards, 2002
Russian Law
Russian arbitration law as reported by Prof. Sergei Lebedev,
“Law of the Russian Federation on International
Commercial Arbitration” (in force 14 August 1993), as
reported in Jan Paulsson (ed), International Handbook on
Commercial Arbitration, Supplement 17. Kluwer Law
International, January 1994
Spanish Act
Spanish Law 60/2003 of 23 December on Arbitration
(in force 26 March 2004), as reported in Jan Paulsson (ed),
International Handbook on Commercial Arbitration, (Kluwer
Law International 1984 Last updated: July 2004 Supplement
No. 41) pp. Annex I-1–Annex I-17
Swiss Rules
Swiss Rules of International Arbitration (2006)
Transnational Rules
Transnational Rules in International Commercial Arbitration,
Edited by Emmanuel Gaillard, ICC Publication No. 180/4,
Paris 1993
UCC
Uniform Commercial Code 2002 Edition
UCP
ICC Uniform Customs and Practice for Documentary
Credits, 1993 Revision in force as of January 1, 1994
UNCITRAL
United Nations Commission on International Trade Law
(UNCITRAL) UNCITRAL Model Law on International
Commercial Arbitration UN Resolution on the UNCITRAL
Model Law, December 18, 2006
UNIDROIT
International Institute for the Unification of Private Law
(UNIDROIT) Principles of International Commercial
Contracts 2004, Rome 2004
WIPO
WIPO Rules
World Intellectual Property Organization
WIPO Arbitration Rules (see e.g., www.arbiter.wipo.int)
ABBREVIATIONS
xxv
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Chapter 1
Due Process and Arbitration
1.1 THE ORIGIN OF DUE PROCESS REQUIREMENTS IN
ARBITRATION
The concept of due process may be given different meanings. However, at its most
fundamental level, the concept refers to the idea that no one should be deprived of his
rights without due process of law. The most traditional and popularly known context
of due process is probably criminal trials, but due process requirements concern civil
cases as well.
Usually due process is seen as a set of criteria that protect a private person in relation
to the State and authorities. Due process requirements are considered to be a part of
constitutional protection of an individual. But in the arbitration context, this starting
point needs to be reconsidered. Arbitration is a private mechanism for dispute resolution.
Parties do not—at least not directly—need protection against the State. In arbitration,
instead of the otherwise competent court, the parties give their dispute to a private arbitration tribunal to be decided. The competence of the tribunal is derived from the parties,
and the tribunal’s actions are based on the contract between the parties, and thus conceptually on freedom of contract. Consequently, the competence of the tribunal is not based
on the power of the State within its jurisdiction, but rather the parties’ own actions. For
these reasons, at first glance due process does not seem relevant to arbitration.
However, a fundamental feature of arbitration is that the arbitral award (the decision
of the tribunal) is a final and binding determination of the parties’ rights and obligations.1 Arbitral awards are widely enforceable, including internationally. Thus the
States delegate jurisdictional power to arbitral tribunals indirectly through agreement
of the parties.
With this delegation of power comes a type of trade-off in the form of standards of
quality applicable to arbitration. Making certain the award is enforceable is one of the
most central duties of the arbitral tribunal. If the arbitral tribunal wants to issue an
1
For a further discussion of definitions and essential features of arbitration, see JULIAN LEW
ET AL., COMPARATIVE INTERNATIONAL COMMERCIAL ARBITRATION 1–14 (1997).
1
enforceable award, the process has to meet certain quality standards. These minimum
quality standards are, of course, procedural. They can be called due process requirements just like the minimum standards in ordinary court procedure. In the same way,
they establish the minimum procedural safeguards necessary for someone to be
deprived of his property or other rights. As such, they can be considered aspects of
such elements as procedural fairness, opportunity to be heard, and equal treatment as
well as access to justice.2
In addition to the delegation-of-power argument in justification of due process
requirements, there are further reasons for requiring arbitration to meet a minimum
quality standard. An arbitration agreement not only entitles the parties to initiate
arbitral proceedings according to the agreement and relevant laws but normally also
prevents a party from starting a procedure in a general court. Thus, an arbitration
agreement limits access to court and thus access to justice, which is generally considered a human right or at least a right at the constitutional level. The European Court of
Human Rights has decided that right of access to court and a public trial in a court
of law can be waived in favor of arbitration via an agreement. However, this does
not mean the European Convention on Human Rights (“ECHR”) would not have any
meaning in relation to arbitration. As arbitration is a kind of a surrogate for normal
court procedure, some procedural standards need to be upheld to compensate for loss
of access to court. The other procedural rights of Article 6 (1) of the ECHR are at least
indirectly applicable in arbitration as well (e.g., the right to oral hearing), and
the Convention States of ECHR have to protect them.3 Also it may be argued, that the
human rights of the ECHR are to some extent horizontally applicable to relations
between private persons and that the states need to take positive measures to ensure,
protect and to secure the rights.4 The idea at this point is not to analyze the actual
impact of the human rights conventions on arbitration but just to point out that the
exclusive nature of arbitration as a method of dispute resolution does result in a need
and justification for certain minimum procedural standards.
2
3
4
2
Kaufmann-Kohler writes: “A comparative review of recent statutes and cases shows a consensus
about two overriding principles, and yet a third appears to be emerging. Party autonomy in
matters of procedure and due process are both well established across national arbitration
regimes. The term “due process” here refers to a number of notions with varying names under
different national laws, including natural justice, procedural fairness, the right or opportunity
to be heard, the so-called principle de la contradiction and equal treatment. More recently,
procedural efficiency has been increasingly advocated by scholarly writers and taken into
account in practice by arbitral tribunals and courts. However, it has not achieved the same
recognition as the first two principles.” Gabrielle Kaufmann-Kohler, Globalization of Arbitral
Procedure, 36 VANDERBILT J. TRANSN’L L. 1321 (Oct. 2003).
See GEORGIOS PETROCHILOS, PROCEDURAL LAW IN INTERNATIONAL ARBITRATION 141 (2004). The
relevance and applicability of the ECHR in arbitration is a wide topic that has generated some
discussion. See e.g., id., Fredrik Rinquist, Do Procedural Human Rights Requirements Apply
to Arbitration—A Study of Article 6(1) of the European Convention on Human Rights and Its
Bearing upon Arbitration, Affarsjuridiska uppsatser (2006), and Sébastien Besson, Arbitration
and Human Rights, 24 ASA BULLETIN (2006) passim.
See for example ALEKSANDAR JAKSIC, ARBITRATION AND HUMAN RIGHTS (2002) at 108–113, 118–27
and 215 – 219.
DUE PROCESS AND ARBITRATION
1.2 HOW SHOULD DUE PROCESS REQUIREMENTS IN
ARBITRATION BE DEFINED?
It is obvious that the method of defining due process defines the whole concept.
Depending on the method, due process may be given different meanings. The most
common approach is usually the national and black letter law approach: due process
exists when the procedure established is compatible with a specific national procedural
law or set of rules. The applicable national law is chosen on the basis of a certain set
of interpretative rules of private international law (e.g., of arbitration).
However, national arbitration laws generally do not provide a solid basis for defining procedural minimum standards. Most of the provisions in national arbitration laws
are not mandatory. Accordingly, parties may agree on some other way of trying the
case instead of following a certain procedural detail or provision in national law. More
often the parties refer to some other set of procedural rules (e.g., rules of an arbitral
institute). In these cases the whole procedure and not just some details are defined on
some basis other than the applicable national arbitration law. Also, the national law is
typically relatively open, at least compared to laws concerning ordinary civil procedure. The arbitrators have a lot of discretion on many specific questions. For example,
if the national law guarantees an opportunity to be heard, it is not always clear when
an adequate opportunity is given to a party.5 In the arbitration context, an excellent
example is the problematic requirement of opportunity to present one’s case as stated
in the New York Convention on the Recognition and Enforcement of Foreign Arbitral
Awards (“the Convention”).
As national laws are in many ways nonmandatory and/or empty of content, they are
not a very suitable basis for defining the concept of due process as a minimum standard
of procedural safeguards, at least not alone. There is also no such directly applicable
black letter law regarding procedural minimum standards, as for example the ECHR is
in relation to the ordinary procedure in most of the European countries.
However, there are more or less indirect national and international minimum standards of procedural safeguards in arbitration.6 Those can be derived first of all from the
5
6
For example, the German Law is very openly formulated apart from some due process requirements: “(1) The parties shall be treated with equality and each party shall be given a full opportunity of presenting his case. (2) Counsel may not be excluded from acting as authorized
representatives. (3) Otherwise, subject to the mandatory provisions of this Book, the parties are
free to determine the procedure themselves or by reference to a set of arbitration rules. (4)
Failing an agreement by the parties, and in the absence of provisions in this Book, the arbitral
tribunal shall conduct the arbitration in such manner as it considers appropriate. The arbitral
tribunal is empowered to determine the admissibility of taking evidence, take evidence and
assess freely such evidence.” German Arbitration Law 1998, in force 1 January 1998 in JAN
PAULSSON (ED), INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION, (Kluwer Law
International 1984 Last updated: December 2001 Supplement No. 34) pp. 26 – 14.
See GARY B. BORN, INTERNATIONAL COMMERCIAL ARBITRATION (2009), at 1765:
All leading international arbitration conventions indirectly recognize and give effect to mandatory requirements of procedural fairness and regularity of the arbitral proceedings. They do so
by permitting arbitral awards to be denied recognition if basic requirements of procedural
HOW SHOULD DUE PROCESS REQUIREMENTS IN ARBITRATION BE DEFINED?
3
norms concerning enforceability of the award.7 If an award does not fulfill certain
procedural standards, it is not enforceable. Combining the meaning of minimum due
process requirements in arbitration with enforceability is also natural because the justification of procedural safeguards is linked with the delegation of jurisdictional powers
through the enforcement. Although due process requirements in arbitration have wider
basis and meaning in arbitration, this is a good starting point for the analysis.
For an arbitral award to be enforceable, the disagreement must be resolved in the
arbitration and the procedural rules applied must meet the fundamental procedural
requirements set forth in the applicable arbitration statute. The in abstracto right to
submit matters to arbitration within the framework of the statute amounts to outsourcing of judiciary functions by the sovereign State. The violations of fundamental
principles in a concrete case may ultimately deprive the award of its enforceability
ipso facto or ipso jure (“nullity”) and ex officio or subject to other conditions or party
action (“voidability”). The right, mandate, or license to settle disputes in arbitration
and the enforceability of the award are subjected to hard conditions. This mandate to
outsource judiciary functions of the sovereign state in abstracto (and in particular, the
conditions of the mandate) describes the most fundamental rules of procedure—that is,
due process.
Even if due process is indeed understood as a kind of a core or foundation of all
procedural rules (the violation or disregard of which will lead to unenforceability of
the award or decision), this does not provide us with simple and unambiguous criteria.
First, it does not include any specific substantial criteria. The question of what constitutes the core that cannot be violated is not yet answered. Second, even enforceability
as to the criteria is to some extent ambiguous. The unenforceability may be automatic
and of a kind that cannot be remedied. Further, enforceability may be denied ex officio
by competent authorities or the unenforceability may be of another character requiring
further action by the parties or those against whom enforcement is being sought.
Unenforceability may also be remedied by lapse of time if no action has been taken
within the period provided by law. An award or a decision may further be enforceable
in one jurisdiction but unenforceable in another. These summary examples warrant the
conclusion that there are various degrees of unenforceability.
This means that procedural rules are of varying force even within a single jurisdiction, and the complexity grows when the analysis is extended to a large number of
jurisdictions, no matter how closely related these jurisdictions may otherwise be.
Should the analysis be extended to cover a multitude of laws of countries actively
engaged in international trade and international exchange, we would inevitably confront one question above all others: Do all these jurisdictions recognize certain identical or similar principles as grounds for denying enforcement, and, if so, what are these
principles? Furthermore, can we identify a common core of procedural rules of all
7
4
fairness have not been satisfied, while leaving room for non-discriminatory, non-idiosyncratic
rules of mandatory national law aimed at ensuring procedural fairness and equality.
See also PETROCHILOS, supra note 3, at 39 about the applicable law: “The law of the arbitration
is in a sense the law of the enforcement (courts)”.
DUE PROCESS AND ARBITRATION
nations or the trading community? This could be approached as some kind of procedural constitution or “lex mercatoria” of procedure.
1.3 THE FLOATING NATURE OF THE LAW OF DUE
PROCESS—ANALOGY TO LEX MERCATORIA
When it comes to material commercial law, there has been a revolutionary change in
legal concepts during the past fifty years. Many researchers with the support of legal
writing and case law in arbitration in particular acknowledge there is a core of material
law common to a great majority of trading nations: lex mercatoria.8 This common
property floats above all jurisdictions and covers horizontally many parts of national
laws.
The acceptance and significance of lex mercatoria is surprising, as still quite recently
material law was a concept sacred to a nation. Its jurisdiction formed a vertical hierarchy
of rules in their own right that were at least prima facie independent from (if not
directly hostile to) even jurisdictions geographically and conceptually close to the
state. This core common to many nations and many trading men might have been concealed from us for a time by political movements and ideologies that blurred the sight,
but which was revealed again by the opening markets, the growing speed of communication, and the reaping of the benefits of international trade.
To many of those engaged in international business law, more and more often the
differences in national material laws appear only superficial in the final analysis; the
terminology is perhaps strange, the concepts likewise, and the theories inconsistent
with those acquired in basic education, or even totally new. However, if we penetrate
“the fog” created by the words and analyze in-depth how the rules are reflected in
reality or what their final impact is on a set of facts, we are often amazed by the similarity of the solution to an issue. Sometimes legal systems take different paths to reach
the same goal (or they may take the same path, but use another name for it). Yet why
is the outcome often the same in essence? Many believe the explanation lies in a
common heritage of legal culture and education, or, what is more radical, in human
consciousness: ultimately we were born with and share the same basic values whether
or not we want to recognize it.
In the field of material law, the hierarchy of the rules of law has become more and
more sophisticated: there is an increasing number of “layers” of rules of different
8
Resolution on Transnational Rules Adopted at the 65th International Law Association
Conference in Cairo on Apr. 26, 1992, p. 247: “Having regard to the preliminary report of the
Committee on International Commercial Arbitration, dealing with the validity and enforceability of arbitral awards based on transnational rules; recommends the following: The fact that
an international arbitrator has based an award on transnational rules (general principles of law,
principles common to several jurisdictions, international law, usages of trade, etc.) rather than
on one law of a particular State should not in itself affect the validity or enforceability of the
award; (1) where the parties have agreed that the arbitrator may apply transnational rules; or
where the parties have remained silent concerning the applicable law. Invites the Committee to
pursue its work on the content and implementation of specific transnational rules.”
THE FLOATING NATURE OF THE LAW OF DUE PROCESS—ANALOGY TO LEX MERCATORIA
5
strength.9 In the very hardest core of law, the rules cannot be contracted out and may
be applied ex officio. In many national laws, this core is described as ordre public or
public policy. We may, however, distinguish international public policy from national
public policy.10 Thus there are at least two layers in the concept of ordre public: national
and international.
In addition there are international treaties, both bilateral and multilateral. Treaties
are often based on a model or standard, but they are not wholly uniform. In the hierarchy,
their status is somewhat sui generis.
Besides ordre public, national laws distinguish mandatory rules from dispositive
ones. The first are always binding and supersede an express agreement to the contrary
whereas the latter may be contracted out. Mandatory rules limit or restrict the freedom
of contract. They should often be applied despite a choice of another material law even
when that choice is not expressly made to avoid the applicability of those mandatory
rules. It is often difficult to tell even when moving within one jurisdiction where the
line should be drawn between ordre public and mandatory rules on the one hand and
between mandatory and nonmandatory rules on the other.
The diversion of the national norms and the foggy nature of constitutive-level laws
may be one reason for the renaissance of lex mercatoria, which has inspired scholars
and practitioners alike. This inspiration has produced remarkable achievements in
legal writing in attempts to codify the “law merchant”.11 In addition, there is a growing
body of case law in its support.12 These efforts have “sealed” the regained status of law
9
10
11
12
6
UNIDROIT 1.4 mentions among other rules of supranational origin: “Nothing in these
Principles shall restrict the application of mandatory rules, whether of national, international or
supranational origin, which are applicable in accordance with the relevant rules of private
international law.”
See, e.g., ILA Recommendations commented on below.
UNIDROIT principles of International Commercial Contracts, Rome 2004; lex mercatoria has
been a very debated issue. Although the issue is by no means exhausted, a reiteration of the
discussion and opinions expressed in this context is not warranted. For the references to the
debate and an admirable analysis of the theory and practice, see PHILIPPE FOUCHARD ET AL.,
TRAITÉ DE L’ARBITRAGE COMMERCIAL INTERNATIONAL 813–47 (1996).
Audley Sheppard, Interim ILA Report on Public Policy as a Bar to Enforcement of International
Arbitral Awards, 19 LCIA ARBITRATION INT’L 240 (2003). “Deciding a dispute on some basis
other than rules of law has been held not to be contrary to public policy. For example, the
Austrian Supreme Court found no infringement of public policy where an ICC arbitral tribunal
sitting in Vienna applied an ‘international lex mercatoria’. The French courts have reached a
similar conclusion. In D.S.T. v. Rakoil (1987), the English court of Appeal rejected the argument that enforcement of an award based upon ‘internationally accepted principles of law
governing contractual relations’ (and more specifically, common practice in international arbitrations, particularly in the field of oil drilling concessions), rather than upon any national
system of law, should be refused on grounds of public policy. Section 46(1)(b) of the English
Arbitration Act 1996, which provides that the parties may agree the basis upon which the tribunal is to determine the dispute, has removed any lingering doubt that the English courts
might consider an award made on the basis of lex mercatoria, or ex aequo et bono, or amiable
composition to be contrary to public policy.” See Pierre Mayer, Litispendance, connexité et
chose jugée dans l’arbitrage international 105–17, in LIBER AMICORUM CLAUDE REYMOND;
AUTOUR DE L’ARBITRAGE (2004).
Lew writes on p. 94 in Reflections: “(iv) Where the parties have not agreed on an applicable
national law, but the case is clearly international and neither party is willing to submit to the
DUE PROCESS AND ARBITRATION
merchant and encourage future efforts aimed at further endorsements producing a
wider and more easily identifiable uniformity. This is crucial as there are no formal
criteria of validity for each and every norm of lex mercatoria in each and every context
or legal system. However, the nonformal validity and the content-based nature of lex
mercatoria make it a useful tool in a situation where distinguishing
the most important and constitutive norms in national law and international treaties is
difficult.
Procedural law—and more specifically due process requirements—seems to suffer
from similar kinds of problems as the field of material law. Different procedural rules
related to fairness of procedure may be of unequal strength with some leading to ipso
facto or ipso jure unenforceability while others have no such immediate effect. Some
rules might be considered as due process requirements in one country, but not in
another. Hence, there seems to be a hierarchy and varying degrees of legal strength
and significance. The consequences of a violation or the available remedy seem to
reflect how fundamental the rule of due process is considered to be and how serious its
violation or disregard is deemed to be.
Also at the international level there are many different kinds of norms that deal with
procedural and due process requirements in arbitration. Different sets of rules, guidelines, and recommendations form a body of soft law that has to be dealt with. Actually
it could be said that different sets of norms (also at the national level) lead to many
different legal orders that exist simultaneously. It is difficult to say to which extent
these legal systems can be separated from the official, national legal systems or from
other unofficial legal orders based on soft law. The soft law norms fill gaps in national
laws, and at least to some extent bind the margin of discretion given to arbitrators in
national laws. The soft law is by nature international. First, it is mostly based on rules
national law of the other; arbitrators should, where appropriate, apply an international standard
such as lex mercatoria, general principles of law or the UNIDROIT Principles. As the
UNIDROIT Principles are a clear, manifest body of rules, with respect to which there are both
travaux préparatoires and legal writings, as well as increasing case law relating to their
application, they can be directly applicable. Equally, arbitrators can use the Principles to help
elucidate or interpret the agreed contract terms. (v) Where arbitrators have selected lex mercatoria, general principles of law or some similar set of rules, or are even acting as amiables
compositeurs or ex aequo et bono, the UNIDROIT Principles provide concrete rules which
may be applicable for the specific contract involved. Where such rules are applicable they can
and should be applied by arbitrators.”
Dessemontet concludes on p. 50 in Reflections: “As arbitral tribunals increasingly apply the
Principles, this should also lead to welcome feedback for their authors, who cannot remain
indifferent to awards that reject the Principles as too divergent from current practice in international trade. Further, the publication of annotated editions of the Principles with citations of
relevant cases would facilitate both the UNIDROIT Secretariat’s preparatory work for a possible revision and correct understanding of the practical significance of the Principles. It might
also prevent conflicting awards, where the differences are of minor importance and not the
outcome of contrasting philosophies.”
For case law, see Joachim Bonell, The UNIDROIT Principles as a Means of Interpreting
and Supplementing International Uniform Law, at 29, in UNIDROIT PRINCIPLES OF
INTERNATIONAL COMMERCIAL CONTRACTS: REFLECTIONS ON THEIR USE IN INTERNATIONAL
ARBITRATION; A Special Supplement of the ICC International Court of Arbitration Bulletin
(ICC Publication No. 642) (2002).
THE FLOATING NATURE OF THE LAW OF DUE PROCESS—ANALOGY TO LEX MERCATORIA
7
and recommendations of more-or-less international organizations or service providers
such as different arbitral institutes. Second, the international arbitration community
adapts the rules discussed in the international arena into the practice of a more national
character.
Because of the substantial number of norms based on international conventions and
soft law of a more-or-less international nature, it is fair to say the law of arbitration has
an almost unique international nature. The traditional national doctrines of legal theory
and sources of law are insufficient in the law of arbitration where the validity of norms
cannot be solely based on national legislation or precedents. Even if the national law
were to function as a starting point for legal analysis, the unavoidable interplay with
the different kinds of sets of norms or systems of law would necessarily lead to a result
at least partly based on international or transnational material. In addition, the general
practices that may partly define the interpretation in many legal problems are to a huge
degree international. Even the practices that at first glance seem to be national are
probably not purely so. In arbitration, the cases are international and the community is
international. Thus, there really cannot be solely national practices. Also, we should
not forget that national laws in many ways are based on international conventions and
model laws. Accordingly, the interpretive material and the goals behind single norms
are to some extent similar.
There is a need for some kind of cross-border and cross-legal order approach similar
to lex mercatoria that also concerns procedural requirements.13 It should be no surprise
that the law of due process seems to have a structure or character somewhat similar to
that of the law merchant.14 However, the body of legal research and literature of due
process in international arbitration are yet to emerge. Just as in material law and lex
mercatoria, the law of due process needs to develop to have a wider and more easily
identifiable uniformity. The goal would be to identify a set of norms that floats above
national jurisdictions and various systems of soft law. This book is, naturally, a part of
this project of creating a kind of lex proceduralia.15
1.4 THE METHOD OF DEFINING DUE PROCESS AND LEX
PROCEDURALIA IN ARBITRATION
As with lex mercatoria, the idea would be to try and find the common denominator to
national legislation, and in the case of arbitration, various kinds of soft law. Other
international normative material could also be used. If we start from what are deemed
to be the most serious violations of due process from a comparative aspect, how much
13
14
15
8
See also Luttrell at 187–200 (2009) about procedural lex mercatoria.
Kaufmann-Kohler, supra note 2, at 1322, asks “Does a procedural lex mercatoria emerge?”
The writer attempts to demonstrate to what extent this has already happened.
Smit discusses lex mercatoria arbitralis, which seems to be a somewhat similar idea: “However,
there does not seem to be any conceptual impediment to developing and applying rules of lex
mercatoria arbitralis to questions relating to the validity and enforcement of arbitral awards.”
Hans Smit, Proper Choice of Law and the Lex Mercatoria Arbitralis, in LEX MERCATORIA AND
ARBITRATION 97 (Thomas E. Carbonneau ed., 1999).
DUE PROCESS AND ARBITRATION
uniformity will we discover? How much and to which level in the hierarchy of the
rules will we find universal principles, wide agreement, or just some uniformity in
legal systems? If we are to analyze the requirements of due process in commercial
arbitration starting from the requirements set forth for the enforceability of awards, we
could of course begin the analysis from various national procedural laws. This would
indeed be a major challenge.
The national laws, naturally, differ to some extent. For example, the German Law
provides:
(2) An arbitral award may be set aside only if:
1. the applicant shows sufficient cause that:
a) a party to the arbitration agreement referred to in sections 1029 and 1031
was under some incapacity pursuant to the law applicable to him; or the said
agreement is not valid under the law to which the parties have subjected it or,
failing any indication thereon, under German law; or
b) he was not given proper notice of the appointment of an arbitrator or of the
arbitral proceedings or was otherwise unable to present his case; or
c) the award deals with a dispute not contemplated by or not falling within
the terms of the submission to arbitration, or contains decisions on matters
beyond the scope of the submission to arbitration; provided that, if the
decisions on matters submitted to arbitration can be separated from those not
so submitted, only that part of the award which contains decisions on matters
not submitted to arbitration may be set aside; or
d) the composition of the arbitral tribunal or the arbitral procedure was not in
accordance with a provision of this Book or with an admissible agreement of
the parties and this presumably affected the award; or
2. the court finds that
a) the subject-matter of the dispute is not capable of settlement by arbitration
under German law; or
b) recognition or enforcement of the award leads to a result which is in
conflict with public policy (ordre public).16
Whereas the United States Arbitration Act (“FAA”) Section 10 provides:
In either of the following cases the United States court in and for the district wherein
the award was made may make an order vacating the award upon the application of
any party to the arbitration:
(a) Where the award was procured by corruption, fraud or undue means.
(b) Where there was evident partiality or corruption in the arbitrators, or either
of them.
(c) Where the arbitrators were guilty of misconduct in refusing to postpone the
hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent
16
German Arbitration Law 1998, section 1059, supra note 5.
THE METHOD OF DEFINING DUE PROCESS AND LEX PROCEDURALIA IN ARBITRATION
9
and material to the controversy; or of any other misbehavior by which the rights
of any party have been prejudiced.
(d) Where the arbitrators exceeded their powers, or so imperfectly executed
them that a mutual, final, and definite award upon the subject matter submitted
was not made.
(e) Where an award is vacated and the time within which the agreement required
the award to be made has not expired, the court may, in its discretion, direct a
rehearing by the arbitrators.
For French law (code de procédure civile), see Article 1502, which provides that:
An appeal against a decision granting recognition or enforcement may be brought
only in the following cases:
1. If the arbitrator decided in the absence of an arbitration agreement on the
basis of a void or expired agreement;
2. If the arbitral tribunal was irregularly composed or the sole arbitrator
irregularly appointed;
3. If the arbitrator decided in a manner incompatible with the mission conferred
upon him;
4. Whenever due process has not been respected;
5. If the recognition or enforcement is contrary to international public policy
(ordre public).
At least at first glance, the national rules look too general to be useful in identifying
international due process requirements. Second, they seem to include norms of different
levels of constitutionality. Third, they seem to tackle different kinds of important questions. The conclusion is that the scope of coverage should to be extended from an analysis
of national conditions of due process to an international analysis. The idea is to ask
whether there is a source of international due process beyond traditional methods of comparative law. This seems a natural approach especially when taking into account the
international or transnational nature of arbitration law discussed above. Thus, the idea
would be not to compare the national laws and construct general norms from these individual laws, but to try and directly discuss the international and transnational law of
arbitration.
First of all, the core of procedural minimum standards and due process is approached
by studying the New York Convention (The Convention). This is a natural starting
point if the meaning of due process is bound with the unenforceability of the award.
Thus, in order to outline the hard core of “supranational” due process, a kind of a
reverse method is used: if a violation of a procedural rule will lead to nullity or voidability of the award under the Convention, such procedural rule forms a part of international due process.
However, there are also further sources of law than the one convention. Also the
different kinds of soft law, institutional rules, other international conventions, model
laws, human rights laws, and general procedural principles define the core of due process requirements in arbitration.
As already outlined above, in the signatory States the ECHR is to some extent
applicable also in arbitration. Basically all other procedural human rights requirements
10
DUE PROCESS AND ARBITRATION
except for access to court and publicity indirectly apply in arbitration unless they are
waived. The signatory States have to protect these rights if the award is challenged.17
The practice of the European Court of Human Rights and body of legal research
and literature based on the fair trial requirement of the ECHR can be used in trying to
identify the most crucial procedural safeguards. Also, in some cases convention and
case law may be directly applicable, depending of course on the law applicable to the
specific procedure.
Some kind of a prima facie order of sources is necessary for identifying lex
proceduralia or transnational due process requirements in arbitration:
1)
2)
3)
4)
The New York Convention
Human rights conventions
International soft law concerning arbitration
Principles of law formulated from various national procedural laws
The problem with the first source, the Convention, is that it is relatively open. This
is a challenge regarding other sources as well. However, the interpretation of the
Convention is left to national courts, whereas others such as the ECHR is interpreted
by a single institution, the European Court of Human Rights. International arbitration
soft law is in many cases very specific, but it lacks the institutional and parliamentary
support of national legislation. Also the soft law is not always focused on the constitutional level, but rather often has a relatively practical approach. National legislation is
relevant in this respect only if it has transnational support, and it would be very unlikely
that some internationally recognized due process principle would be supported by
many national arbitration laws but not already be included in the primary international
sources mentioned above.
However, the prima facie order above is not intended for solving conflicts between
the sources of lex proceduralia. To place the Convention “above” human rights conventions does not mean that in conflict situations the Convention would override human
rights when formulating the content of due process requirements. The Convention is
just a more natural starting point for the analysis, especially if lex proceduralia is prima
facie defined or at least approached via criteria of enforceability. The order is relatively
flexible, as there is no formal rule defining due process requirements.
The relation of lex proceduralia and the applicable national arbitration law is another
question. In case of mandatory national law, it is more or less clear that lex proceduralia
mostly has importance only as an interpretative tool, even though a conflict between
mandatory national law and lex proceduralia might lead to the award being at
least internationally unenforceable. In the case of nonmandatory national law, the tribunal should apply due process requirements instead of national law (at least if the
17
See PETROCHILOS, supra note 3, at 151–58, Rinquist, supra note 3, at 128–46, and the sources
and cases cited there, inter alia X v. Federal Republic of Germany 1962 App. No. 1197/61
decision of 5 March 1962, Nordström-Janzon and Norström-Lehtinen v. the Netherlands, App. No.
28101/95, decision of 27 November 1996, Suovaniemi and Others v. Finland, App. No.
31737/96, decision of 23 February 1999.
THE METHOD OF DEFINING DUE PROCESS AND LEX PROCEDURALIA IN ARBITRATION
11
requirements are clear and rule-like) if they have direct institutional support from the
sources mentioned above and if the award needs to be enforceable in countries other
than the place of the arbitration. In many cases, a conflict between national laws and
due process requirements might actually not even exist, as for example nationally
binding international human rights and (national) fundamental rights may already
supersede the ordinary national arbitration law. In addition, we should note the obvious fact that the concept of arbitral due process or lex proceduralia is an interpretative
tool and not a source of law cited as an authority in the decision.
After the analysis of various aspects of procedural safeguards in the Convention, the
various elements of due process are discussed in substantial order. For example, the
following elements of arbitration are discussed from a due process perspective:
1)
2)
3)
4)
5)
6)
The Arbitration Agreement as the Basis of Jurisdiction
Aspects of Jurisdiction Other than the Agreement
The Arbitration Panel and Due Process
Due Process Related to Facts and Evidence
The Role of the Panel in the Proceedings
Fair Arbitration—Opportunity to Present One’s Case
These themes could actually be divided into only two major fair trial themes: access
to court and fairness of the procedure. As arbitration limits access to ordinary courts,
it is important the limitation be lawful. The requirements related to arbitration agreements and jurisdiction as well as in part the requirements related to composition of the
tribunal control the limitation of access to courts. Procedural requirements related to
facts and evidence in the proceeding as well as other strictly procedural questions (and
in part the composition of the panel) have more to do with the fairness of the arbitration procedure. It is of course clear that this kind division would be in the end impossible as many questions (such as the composition panel as noted above) have to do with
both of the topics. Also, it could be thought that the quality and fairness of the process
would be relevant when considering limitations on access.
1.5 DUE PROCESS AS A PRINCIPLE OF LAW
Before going into a more detailed substantial analysis of due process in the Convention
and different elements of due process, one methodological question has to be discussed. The idea of the book could be to just try and identify the set of norms that
define the international due process requirements as more or less specific rules that set
exact limits to arbitral procedure. But this approach does not catch all the meaning of
due process in arbitration. It would be good and both extremely useful and necessary
to identify specific and concrete limits to what can be done procedurally in arbitration.
Without any specific rules or minimum requirements as guidance, the due process
requirements probably could not always be realized in a practical context. However,
the problem with exact rules is that the limits are mostly not general and absolute, but
dependent on the interpretation and context in specific cases.
12
DUE PROCESS AND ARBITRATION
All issues can never be covered by any procedural or material codes or rules. Not
only will there be room for discretion left on purpose to the judge or arbitrator, but also
a need for procedural norms to steer the use of discretion and to govern issues not
expressly or implicitly covered by the procedural statutes applied. In this sense, due
process may be seen as something more than just the identified rules.
To be able to interpret the norms correctly and understand the way with which they
have to be applied, and to further develop the legal norms, we also need to identify the
justification and rationale behind the rule. Single rules that can be identified do have a
common ground of justification. Thus, in addition to single and specific rules, minimum requirements of due process could and should also be approached as parts of
legal principles of arbitration law. As principles of law, due process requirements have
a different ontology compared to rules and can be used more broadly.
Some people separate rules and principles by the level of generality. It is often
considered that rules are more specific orders, whereas principles describe the way
things ought to be done at a more general level. For example, there could be a very
specific rule that a party is always entitled to see all the documentary evidence in the
case, and at more general level, the principle of opportunity to be heard.
However, rules and principles are often separated by other criteria. Rules are said to
apply in an all-or-nothing-way, whereas principles are seen as not necessarily the sole
factor in determining the solution to the legal problem in question, but as arguments or
norms that need to be balanced against other principles.18
Bayles uses an example of the norms that might apply to witnessing a will. There
might be a rule that a will requires two witnesses. If there is only one witness, the will
is invalid by law. What if instead of a rule, there was only principles related to the
issue? For example, there might be a principle that people should be free to dispose of
their property by any device they wish. But it might not necessarily follow from this
principle that freely made wills would be upheld, because there might be a contrary
principle that people should make adequate provisions for their children, which would
lead the analysis in another direction.19
Thus, principles do not apply in all-or-nothing way, but they have weight, and conflicting principles have to be balanced against each other. Their weight is partly dependent on the institutional support of the principle in general and partly on the case-specific
situation at hand. Thus principles in a way form a toolbox that can be used in all
possible situations, not just those that have been resolved before. These principles are
also useful in separating important rules from not-so-important ones.
When discussing the differences of rules and principles, also the different criteria of
validity should be noticed. Whereas the validity of rules in national laws is primarily
assessed on formal criteria (whether they are in force according to the criteria set by
the constitution of the state in question), the validity of legal principles relies on their
acceptance in the legal community and legal culture. However, the acceptance is not
defined by a pure discussion of individual moral values of a judge, but rather by
18
19
See MICHAEL D. BAYLES, PRINCIPLES OF LAW. A NORMATIVE ANALYSIS 11–14 (1987) and RONALD
DWORKIN TAKING RIGHTS SERIOUSLY 22–28 (1977).
BAYLES, supra note 18, at 11.
DUE PROCESS AS A PRINCIPLE OF LAW
13
the institutionalized moral evaluations of the community and the culture. The concretisation of a principle in normative material in the relevant legal culture indicates
institutional support for the principle in question, and binds it to the legal sphere. The
criteria of validity as a separating quality between different categories of norms is
maybe not that clear in arbitration, as neither the validity of many of the soft law rules
often applied in arbitration nor the validity of the procedural norms in the agreements
are of formal kind.
In this book, three main methodical aspects relate to legal principles. First, the principles help to identify the due process requirements in the vast amount of single, specific rules. Second, principles receive institutional support from the single arbitration
specific rules and soft law as well as from deep level procedural law norms that are
internationally acknowledged, and thus the body of procedural principles of international arbitration could be construed on the basis of analysis of single norms that are
widely recognized. Accordingly, the principles work in two ways, which might at first
sight seem logically troubling but in fact forms a sound basis of analysis. Also, the
same norm can function as both a rule and a principle. For example, the concept of an
opportunity to be heard is partly rule-like and absolute, but it has a wider basis in principle that could be called the contradictory principle.
Third, understanding the nature of due process requirements as principles does
increase their importance in both interpretation of law and arbitration practice. Due
process principles steer the use of discretion, which is relatively wide in arbitration. It
also seems clear that good and fair procedures should be maximized unless they need
to be restricted for another reason. Finally, it should not be the ideology or the goal of
the arbitrator to just use the internationally accepted minimum standard of procedural
safeguards, but rather to pursue procedures that are as fair as possible for all parties.
However, to repeat, trying to identify widely accepted and adopted rules provides
institutional support for due process principles. It is just institutional support and
acceptance of the legal community that separates legal principles from moral or other
kinds of principles. Thus, identification of the limits of the hard-core rules is the prerequisite of using the due process norms as principles as well. Underlining the normative character of due process is, however, important so that the few identified and exact
internationally accepted minimum requirements will not be understood as the definite
objective of procedure, or more simply said, as to be enough. Even in those cases in
which the analysis is concentrated on the minimum requirements of enforcement (in
which the due process requirements work as rules, and in which the important question
is the often exclusive relation of other norms and lex proceduralia), one should remember that the procedure should not be as bad as possible but rather as good as possible,
keeping in mind other principles and goals. Thus, the due process principles should be
given thought when interpreting the national laws and filling the normative gaps as
well as when using the margin of discretion in arbitration.
14
DUE PROCESS AND ARBITRATION
Chapter 2
The New York Convention as A Starting Point
2.1 INTRODUCTION
The New York Convention on the Recognition and Enforcement of Foreign Arbitration
Awards (“the Convention”) has been one of the key factors in arbitration becoming an
internationally accepted and adopted method of dispute resolution. The enforceability
of the decisions of State courts has in the main been limited to a single jurisdiction (i.e.,
the jurisdiction where the decision was given). This very limited enforceability has
been extended by a number of bilateral and multilateral treaties. The international
enforceability of decisions of State courts, despite the many safeguards of legal protection including appeal, is still far behind the enforceability of arbitral awards. Despite
efforts to guarantee the “right” outcome, the “right” decisions by State courts lack
enforceability or are internationally distrusted, whereas arbitral awards with fewer
such safeguards or guarantees are widely enforceable. On the one hand, this is almost
a paradox, and on the other, one of the greatest success stories of international collaboration in the field of arbitration. The Convention has been ratified by over a hundred
nations.
The Convention having been ratified by such a large number of independent nations
demonstrates its due process requirements are internationally accepted and reflect the
generally acknowledged fundamental procedural rights of the parties. Thus, if an arbitral award is not enforceable according to the Convention, it would certainly not meet
due process requirements. The Convention is a natural starting point if the meaning
of due process is bound with the unenforceability of the award. To outline the hard
core of “supranational” due process, a kind of a reverse method is used: if a violation
of a procedural rule will lead to nullity or voidability of the award under the Convention,
such procedural rule forms a part of international due process. As a logical starting
point, it could be assumed that if awards are recognized and enforceable, they must
also meet at least the most important requirements of due process. It could also be
assumed that these awards and the procedure that has led to them meet the core criterion of a mandatory procedural trade usage.
15
However, a simple and direct logical connection of due process requirements to
the Convention is not justified. It may be said that it defines the core requirements,
but the Convention consists at least partly of very open norms that need to be interpreted in the context of a particular case. In addition, the Convention does not function
in a legal vacuum; its meaning and its interpretation is naturally and necessarily
affected by surrounding sources of law as well as arbitration practices. Thus, the
Convention as such is a natural starting point for the analysis, but not the end of it.
Also, we should not think the arbitral process cannot or should not be any better
than the minimum requirements of the Convention necessitate. Just as a materially
false arbitral award might be enforceable, a procedurally unsatisfactory arbitration
might lead to an enforceable award. There are due process standards that go further
than the very core of international due process as a prerequisite of recognition and
enforcement.
In this chapter, the requirements of the New York Convention are discussed under
the following topics:
(a) Public Policy (“Ordre Public”) as a Ground to Refuse Recognition and
Enforcement
(b) Arbitrability of the Subject Matter
(c) Requirement of Arbitration Agreement (“Mandate in Concreto”) and the
Convention
(d) Incapacity and Invalidity
(e) Ability to Present One’s Case
(f) Award has to be Final (“Condition Subsequent”)
As we may notice immediately, some of the due process requirements seem at
first glance to be more substantive than procedural in nature. For example, recognition
and enforcement can be refused on the grounds that an award is substantively
against public policy (as is later explained in more detail). Also the second criterion
which is related to the arbitrability of the subject matter seems more substantive than
procedural.
However, in procedure and procedural law in general as well as in arbitration, separating substantive and procedural issues can be difficult. Especially as to arbitration
and even more so in respect to international arbitration, the question of jurisdiction is
very closely related to the material issues at hand and the applicable substantive law.
Certain material requirements can be seen as prerequisites of jurisdiction as a procedural
matter even though this might not be very orthodox in the view of some procedural law
scholars. Thus, requirements that at first seem to be material or substantive can in fact
be seen as procedural. This also widens the concept of procedural due process in arbitration, with these due process requirements in arbitration not necessarily having to be
seen as a substantive due process requirements. This having been said, there is no
reason the requirements mentioned above could not also be categorized as substantive
due process requirements in arbitration meaning that some substantive rights cannot be
created or nullified in the arbitral procedure.
16
THE NEW YORK CONVENTION AS A STARTING POINT
2.2 PUBLIC POLICY (“ORDRE PUBLIC”) AS A GROUND TO
REFUSE RECOGNITION AND ENFORCEMENT
2.2.1 A Vague Category
Public policy as a ground to refuse recognition and enforcement of an award is a
perfect example of the intertwining of the procedural and substantive in arbitration.
Article V(2)(b) of the Convention provides:
Recognition and enforcement of an arbitral award may also be refused if the
competent authority in the country where recognition and enforcement is sought
finds that:
. . . (b) The recognition or enforcement of the award would be contrary to the
public policy of that country.
This ground refers to breach of natural justice or due process and forms a fairly
vague category. There is consensus that the application provides for a serious
irregularity, but despite that the argument encompasses virtually any complaint by an
unsuccessful party.1
1
Sheppard argues:
Enforcement may be refused on grounds of public policy in the event that there has been
a breach of natural justice or due process. This is in addition to the ground in Article V.1(b)
of the New York Convention, which provides that enforcement may be refused if the
party against whom the award is invoked was not given proper notice of the formation/
identity of the tribunal or of the arbitration proceedings, or was otherwise unable to present
his case. . . . This remains a vague category of public policy and one that encompasses
virtually any complaint by an unsuccessful party. There is consensus, however, that there
must be serious irregularity; for example, the ICSID Convention includes as grounds for
annulment: ‘that there has been a serious departure from a fundamental rule of procedure’
(Article 52(d)).
Audley Sheppard, Interim ILA Report on Public Policy as a Bar to Enforcement of International
Arbitral Awards, 19 LCIA ARB. INT’L 39(2003). See also William R. Spiegelberger, The
Enforcement Rate of Foreign Arbitral Awards in Russia (Recent Developments in International
Dispute Resolution Around the World), 17 THE WHITE & CASE INT’L DISP. RESOL. NEWSLETTER
7–8 (Dec. 2004):
The old Russian saying: “don’t fear the law, fear the judge,” is not completely inapt when it
comes to the enforcement of foreign arbitral awards in Russia. Although the Russian legislative regime—the aggregate of treaties and laws—is more or less in accord with most other
sophisticated legal systems, the Russian courts appear to enforce foreign awards at a rate
lower than those of other signatory states to the New York Convention on the Recognition
and Enforcement of Foreign Arbitral Awards (the “Convention”). Our research to date has
yielded about 35 reported cases in which the Russian courts have been called on to enforce a
foreign award. In 20 cases the award was enforced, or likely to be enforced on remand, yielding a net enforcement rate of only 57%. Of all the Convention’s grounds for non-enforcement,
the one most often raised (11 cases) was the public policy exception under Convention
Article V(2)(b).
PUBLIC POLICY
17
2.2.2 Procedural Aspects: Just a Right, Not a Duty; Actions
Ex Officio and Sua Sponte
The basic elements of the Article V 2 (b) of the Convention are:
(i) the competent authority has right to refuse to recognize and enforce an award,
but it is under no duty to do so (“may refuse”);
(ii) the competent authority may refuse the recognition and enforcement ex officio
or sua sponte, i.e., no action needs to be taken or objections raised by a party or the
one against whom enforcement is sought. This does not exclude such an action or
objection by a party. The ground for refusal may be apparent or concealed and, in
the latter case, some kind of a party action may be necessary to cause the competent
authority to refuse the recognition and enforcement.2
(iii) The relevant or applicable public policy is prima facie the public policy of the
country where enforcement is being sought (“lex fori”).3 This public policy may or
may not have been considered by the arbitral tribunal. The public policy may or
may not have been invoked or argued by the parties in the proceedings. The public
policy should or should not have been applied by the arbitral tribunal. These issues
relating to the past conduct of the arbitral proceedings having led to the award
the enforcement of which is being sought and which enforcement may be refused
ex officio are neither directly relevant nor binding on the enforcement authority.
Decisive is the result of possible recognition and enforcement.4
2
See Model Law Decisions: Arcata Graphics Buffalo Ltd. v. Movie (Magazine) Corp., Ontario
Court of Justice, General Division (Eberle J.) 12 March 1993, Original in English, Unpublished:
[1993] O.J. No. 568. “A public policy defence requires a breach of an essential, fundamental
morality of Ontario.” According to ILA Recommendations 3(c):
When the violation of a public policy rule of the forum alleged by a party cannot be established from a mere review of the award and could only become apparent upon a scrutiny of
the facts of the case, the court should be allowed to undertake such reassessment of the
facts.
3
4
This is a debated issue in light of the fact that enforcement may be sought in a multitude of
countries.
See, e.g, Commentary of Indian arbitration law by N. Krishnamurthi and F.S. Nariman,
INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION (Supp. 22, Sept. 1996)), p. 28:
Where damages were awarded without proof of actual loss, contrary to Indian law, the
Supreme Court of India rejected the public policy defence under the Arbitration Protocol and
Convention Act, 1937; likewise where enforcement of a foreign award under the 1937 Act
was resisted on the ground that it would defeat the Indian Law of Limitation and therefore
infringe public policy, the plea was rejected by the High Court of Calcutta—the ICC award
was enforced. After 1961, the public policy defence has been raised under the Act of 1961
implementing the New York Convention in the following cases: (i) European Grain and
Shipping Co. v. Seth Oil Mills—decision of the Bombay High Court, 29 January 1983,
reported in Yearbook Commercial Arbitration IX (1984) pp. 411–415 (the defence raised
was rejected) (ii) General Electric v. Renusagar—decision of the Bombay High Court,
12 October 1989, reported in Yearbook Commercial Arbitration XVI (1991) pp. 561–565
(the defence raised was rejected) (iii) COSID v. Steel Authority of India Ltd.—decision
dated 12 July 1985, reported in Yearbook Commercial Arbitration XI (1986) pp. 502–507
(where the defence raised was upheld). Courts in India do not apply the restrictive criterion
of international public policy. The Act 1961 as interpreted by courts requires, for the public
18
THE NEW YORK CONVENTION AS A STARTING POINT
As noticed above, respect of a national public policy in the enforcement proceedings
may be deemed to be a part of due process. However, the respect is limited to the
enforcement proceedings and to the public policy of the country of the enforcement
procedure. The weight of this conclusion for the purposes of this research is further
reduced by the right to refuse enforcement on the grounds of public policy being given
to the authority of the country whose public policy is in question. It might be somewhat
unrealistic to expect sovereign nations to waive their right to apply the very foundation
of their legal system (i.e., their public policy) or to apply that of other countries.
As discussed above, the issue of violation of public policy may or may not have
been argued or considered during the proceedings themselves. The rules and principles
applicable to arbitral proceedings as to when national public policy is to be taken into
account or applied are not perfectly clear.5 Further, it is unclear if and when this should
happen ex officio, and if considered ex officio, how this should be brought to the attention of the parties during the proceedings as their views and arguments are a matter of
discretion. However, it does seem clear that this should be done in any case as a matter
of due process to avoid there being an element of surprise in the award.6 Actually, the
policy defence to be upheld, that the court be satisfied that the enforcement of the award is
contrary to Indian public policy. There is no control of the court on the merits of the arbitral
decision.
5
6
See, e.g., Eco Swiss China Time Ltd v. Benetton International NV, ECJ 1.6.1999 C-126/97;
Mitsubishi Motors Corporation v. Soler Chrysler-Plymouth Inc., 473 U.S. 614, 87 L.Ed. 2d
444 (1985); and Fritz Scherk v. Alberto-Culver Company, 417 U.S. 506, 41 L.Ed. 2d 270 (to
mention just some of the most important ones).
In Shirley Sloan Pty Ltd v. Merril Holdings Pty Ltd, Supreme Court of Western Australia,
2 March 2000, 18 April 2000 WASC 99, the court summarized the law as follows:
There is no question as to the proposition that breach of the rules of natural justice amounts to
“misconduct” for the purposes of s42(1)(a) of the Act. That is the effect of the definition of
that term in s4 thereof. The real question is whether, where there is misconduct of that kind,
it is such as should attract an exercise of the discretion which s42(1) affords to the court, on
the application of a party to the arbitration agreement, to set aside the award either in whole
or in part. It is unlikely that a court would exercise its discretion in that way, even in the case
of a denial of natural justice, unless the denial was such as (to use the words of Isaacs J in
Melbourne Harbour Trust Commissioners v Hancock (1927) 39 CLR 570 at 588) “has or may
have unjustly prejudiced a party” in a respect material to the outcome of the arbitration (of
Doran Constructions Pty Ltd v Health Administration Corporation (NSW) (1994) 12 BCL 59
at 62–63 and Van Dongen v Cooper [1967] WAR 143 at 145). It is difficult to see why, even
in the context of an Act which provides (by s19(3)) that the arbitrator is not, unless otherwise
agreed in writing by the parties to the arbitration agreement, bound by the rules of evidence
but may inform himself in relation to any matter in such manner as he thinks fit, the legislature
has seen fit the include within the concept of “misconduct” a breach of the rules of natural
justice. It is a matter of fairness. As was said by Goff LJ in Interbulk Ltd v Aiden Shipping Co
Ltd [1984] 2 Lloyds Rep 66 at 75: “In truth, we are simply talking about fairness. It is not fair
to decide a case against a party on an issue which has never been raised in the case without
drawing the point to his attention so that he may have an opportunity of dealing with it, either
by calling further evidence or by addressing argument on the facts or the law to the tribunal.”
Ackner LJ, in the same case said (at 76) “if an arbitrator considers that the parties or their
experts have missed the real point—a dangerous assumption to make. . .—then it is not only
a matter of obvious prudence, but the arbitrator is obliged, in common fairness or, as it is
PUBLIC POLICY
19
opportunity to be heard about the public policy question is closely connected with a
party’s right to an opportunity to present its case.
Under the Convention, it is beyond any doubt that a competent national authority
may refuse enforcement both when the public policy issue has been considered by the
arbitral panel and when it was not brought up at all in the proceedings by the parties or
sua sponte by the members of the arbitral panel. However, the economics and rationale
of legal proceedings may often support the consideration of the public policy issue ex
officio, at least when it is probable it will be raised in the enforcement proceedings or
when the issue appears to be of paramount legal importance not only in the jurisdiction
of likely enforcement but in other jurisdictions per se or ex analogia. If the issue at
hand would be a public policy issue in many jurisdictions, it may be deemed to reflect
international public policy and international comity. Accordingly, due process may
then require that the arbitral panel bring up the issue sua sponte if the parties have not
done so and give the parties an opportunity to present their views before any decision
is taken.
2.2.3 What Constitutes Public Policy?
What constitutes the public policy of a country has not been defined in the
Convention.7 The concept of ordre public may be seen as very narrow or somewhat
sometimes described, as a matter of natural justice, to put the point to them so that they may
have an opportunity of dealing with it.” More recently, in Pacol Ltd v Joint Stock Co Rossakhar
[2000] 1 Lloyds Rep 109 at 115 Colman J said: “In a paper arbitration the temptation to arrive
at a conclusion which may not have been envisaged by either party by reference to matters
upon which the parties have not had the opportunity of addressing the arbitrators or in respect
of which they have not had the opportunity of adducing further evidence, may be a particular
temptation which arbitrators should be careful to avoid.” There is, in this case, no real contest
as to the fact that the arbitrator did not give to the parties the opportunity of dealing with the
point canvassed in para 14 of his reasons. Neither party had raised it and neither expected the
arbitrator to raise it. It is readily apparent from the affidavit evidence put forward by the applicant that, had the parties been given an opportunity to deal with the point, it would have been
shown to be one of no substance, at worst for the applicant, or, at best for the applicant, one
which supported a conclusion different to that at which the arbitrator ultimately arrived.
7
Holtzmann reports:
The New York Convention of 1958 permits a court to refuse enforcement of an arbitration
award if it is contrary to public policy (Art. V). The courts of the United States have held that
the refusal to enforce an arbitration award on the ground of public policy should be strictly
limited and that enforcement should be denied only when, as one court said, the arbitration
award violates the “most basic notions of morality and justice.” (Parsons & Whittemore
Overseas Co. Inc. v. Société Général de L’Industrie du Papier RAKTA and Bank of America,
508 F.2d 969, U.S. Ct. of Appeals, 2d Cir., 1974, summarized in Yearbook Commercial
Arbitration, Vol. I (1976) pp. 215–217). The courts recognize that, particularly since accession by the United States to the Convention, the international public policy of the United
States favors the enforcement of international arbitration as an essential element in promoting
foreign trade and world peace. This international policy has been given precedence over
national public policies expressed in domestic laws.
Howard M. Holtzmann, Report on U.S. Arbitration Law, in INTERNATIONAL HANDBOOK
20
ON
THE NEW YORK CONVENTION AS A STARTING POINT
broader.8 In particular, distinguishing mandatory substantive law from public policy
may sometimes be problematic and difficult. Public policy may encompass both procedural (due process) and substantive issues.9
International public policy is in the process of emerging as an identifiable and
defined concept. In 2002, the International Law Association (ILA) adopted a resolution
on Public Policy as a Bar to Enforcement of International Arbitral Awards
(“Recommendations”).10 ILA Recommendations define international public policy as:
[T]he body of principles and rules recognized by a State, which, by their nature,
may bar the recognition or enforcement of an arbitral award rendered in the context
of international commercial arbitration when recognition or enforcement of said
award would entail their violation on account of either of the procedure pursuant to
which it was rendered (procedural international public policy) or of its contents
(substantive international public policy).
This definition brings up some very interesting elements. It refers to principles or
rules recognized by a State as international public policy. However, it is not until the
same or sufficiently similar procedural principles and rules are recognized by a large
number of States that we will be dealing with truly international public policy or due
process. The draftsmen of the Recommendations have recognized the problem, and the
Recommendations Section (2b) provides:
[I]n order to determine whether a principle forming part of its legal system must be
considered sufficiently fundamental to justify a refusal to recognize or enforce an
award, a court should take into account, on the one hand, the international nature of
the case and its connection with the legal system of the forum, and, on the other
hand, the existence or otherwise of a consensus within the international community
as regards the principle under consideration. (emphasis added).
The Recommendations point out further that international conventions may be evidence of the existence of such a consensus. If one exists, according to the
Recommendations the policy should be called transnational public policy as distinguished from international public policy.
Further, the Recommendations draw a distinction between procedural international
public policy and substantive international public policy. The former term, procedural
8
9
COMMERCIAL ARBITRATION 39 (Supplement 13, Sept. 1992).
For example, it has been discussed to what extent various competition laws form a part of
public policy. See i.a. Matti S. Kurkela, Richard C Levin, Christoph Liebscher and Patrick
Sommer, Certain Procedural Issues in Arbitrating Competition Cases, 194 J. INT’L ARB.
2007.
About public policy in China, see Tang Houzhi and Wang Shengchang in INTERNATIONAL
HANDBOOK ON COMMERCIAL ARBITRATION 40 (Supp. 11, Jan. 1990):
Violation of rules of ‘public policy’ (public social interest) constitutes a ground for setting
aside, thus probably forming an exception to the rule ‘no control on the merits.’ The action
relating to violation of rules of ‘public policy’ should always be in terms of an action for
setting aside. However, it is generally understood that the terms ‘public policy’ should be
construed narrowly to favor arbitration.
10
Adopted at the ILA’s 70th conference held in New Delhi, India, April 2–6, 2002.
PUBLIC POLICY
21
international public policy, seems to be a synonym for due process as used in this
work. It could further be questioned if due process forms a part of public policy or
ordre public as a means or process to achieve or reach the objectives or purpose of
substantive law. Legal systems focus heavily on reaching the right substantive decision but are perhaps considerably less focused on procedural matters, including ensuring that all the relevant facts are fully established before material law is applied. The
role of procedure is often seen as “instrumental”. However, it is clear that due process
or procedural public policy also forms a part of public policy or ordre public.
In addition to the transnational and international public policy, the ILA
Recommendations divide international public policy into three groups of norms based
on their character and ground. These three groups and the examples illustrating them
in concreto are as follows:
(i) Fundamental principles pertaining to justice and morality that the State wishes to
protect even when it is not directly concerned.
Example given: as to substantive fundamental principle abuse of rights and as to
fundamental procedural principle the requirement that tribunals be impartial;11
(ii) Norms designed to serve the essential political, social or economic interests of the
State, these being known as lois de police or public policy rules.
Example given: antitrust law;
(iii) The duty of the State to respect its obligations toward other States and international organizations.
Example given: U.N. resolution imposing sanctions.
This analysis of an authoritative character demonstrates there is a growing sophistication in legal thinking as to hierarchy and the strength of various rules of law as
discussed above.12
2.2.4 ILA on Fundamental Principles
The ILA Recommendations emphasize that the process of identifying and analyzing
the fundamental principles should primarily be done within the framework of the rules
of law of lex fori.13 This recommendation is in full conformity with Article V(2)(b) of
the Convention quoted above. According to the Recommendations, the fundamental
principles of the law applicable to the contract or those of the law of the place of
11
12
13
22
See, e.g., ECHR, Art. 17.
The Recommendations point out that some rules (such as those regarding corruption) may fall
into more than one category. Compare IBA Ethics 5.5 and 6 (see Appendix, p. 366). See
Frances Meadows, OECD Bribery Convention Five Years On: How is it Working and How is
it Monitored?, 5 IBA BUS. L. INT’L 305–525 (Sept. 2004).
See, e.g., Resolution of the ILA on Public Policy as a Bar to Enforcement of International
Arbitral Awards; Sheppard, supra note 1; and Pierre Mayer & Audley Sheppard, Final ILA
Report on Public Policy as a Bar to Enforcement of International Arbitral Awards, 19 LCIA
ARB. INT’L (2003).
THE NEW YORK CONVENTION AS A STARTING POINT
performance or the seat of arbitration are irrelevant for the purpose of the analysis.
However, rules of law foreign to lex fori may become relevant to the extent the
fundamental principles of lex fori are identical to, similar to, or in consensus with
the fundamental principles of those of the international legal community. These principles in common are referred to by the Recommendations as transnational public
policy.14
ILA Recommendations 2(c) introduces further rules establishing the principles of
waiver as an exception to the fundamental principles as follows:
Where a party could have relied on a fundamental principle before the tribunal but
failed to do so, it should not be entitled to raise said fundamental principle as a
ground for refusing recognition or enforcement or the award. (emphasis added)
This recommendation, although representing partly procedural and arbitral traditions, requires a party to actively object to violations of procedural rules or the arbitration agreement in order not to be deemed to have accepted them. The recommendation
may raise questions as to when a party could have relied on a fundamental principle.
Was the failure due to lack of legal knowledge, deliberate choice, or facts unknown to
the party? The Recommendation appears at least prima facie to be too inflexible and
strict at least if “could have” is to be understood in abstracto. It is by no means clear
that failure to do something in a procedure could or would constitute an effective
waiver beyond perhaps the scope of a deliberate and educated choice or gross
negligence. The rule provides that a party is estopped from invoking a fundamental
principle. Should this be the case even when the court may ex officio raise it when it is
not concealed and is sufficiently fundamental? Apart from these procedural doubts, the
rule raises material questions as well perhaps of even a more serious nature, such as
whether fundamental principles in general can be waived and whether such a waiver is
enforceable.15
The fundamental principles (“pertaining to justice or morality that the state wishes
to protect even when it is not directly concerned”) are, by the definition of ILA, fundamental in the sense that they may or sometimes should be applied even ex officio
despite or regardless of a party’s acts or omissions as states and others than just a party
to a dispute may have a vital interest in the enforcement of the fundamental principle
over and above the enforcement of a settlement of a private dispute in an award.
A party’s failure to invoke or rely on a fundamental rule at an earlier stage of the proceedings can hardly bar its application in the enforcement proceedings. A party should
not have the power to waive fundamental rights when these reflect the vital interests of
States, third parties, or society in general. The doctrine of waiver has little, if any
room, within the sphere of fundamental public policy.16
14
15
16
Pierre Lalive, Ordre public transnational (ou réellement international) et arbitrage international, Revue de l’arbitrage 329 (1986). See also Fernando Mantilla-Serrano, Towards a
Transnational Procedural Public Policy, 20 LCIA ARB. INT’L (2004).
Compare with IBA Guidelines.
Eco Swiss China Time Ltd v. Benton Int’l NV, ECJ 1.6.1999 C-126/97.
PUBLIC POLICY
23
2.2.5 ILA on Public Policy Rules
If a public policy rule is of mere “mandatory” character, although classified as part of
public policy of the country of enforcement, it should not be allowed to bar recognition
and enforcement of an arbitral award. A public policy rule should bar recognition and
enforcement when
(i) the scope of the said rule is intended to encompass the situation under
consideration; and
(ii) the recognition or enforcement of the award would manifestly disrupt the essential
political, social, or economic interests protected by the rule.
Public policy is often understood as a principle declared or understood to be vital to
the political, social, or economic interests of a county or society as a whole or a group of
its citizens or residents. The ILA Recommendations make a distinction on the basis of
the consequences of the recognition and enforcement of an award with respect to public
policy rules. Only if the consequences would manifestly disrupt these interests should
the recognition and enforcement be denied or refused. The Recommendations seem to
impose additional qualifications on public policy when compared to the Convention.
Should this distinction be made also in the proceedings so that violations of only
such public policy rules that have manifestly disruptive consequences should be applied
ex officio or when raised by a party? Accordingly, should other “minor” violations
of public policy rules not be relevant at all in the arbitral proceedings? Would this
serve as a procedural international public policy rule on which sufficient consensus
within the international community can be achieved, and as such be a transnational
public policy rule?
2.3 ARBITRABILITY OF THE SUBJECT MATTER
Arbitrability means that the issue may be finally resolved in arbitral proceedings.
Article V(2)(a) of the Convention provides:
Recognition and enforcement of an arbitral award may also be refused if the competent
authority in the country where recognition and enforcement is sought finds that:
(a) The subject matter of the difference is not capable of settlement by arbitration
under the law of that country; . . . (emphasis added)
All issues and matters are not arbitrable although the list of nonarbitrable issues has in
general been reduced to only a few.17 Another dimension is that the arbitral award
may have effects inter partes (between the parties) only and not erga omnes (as to
everyone).
17
See, e.g. Eco Swiss, ECJ 1.6.1999 C-126/97; Mitsubishi Motors Corporation v. Soler ChryslerPlymouth Inc., 473 U.S. 614, 87 L.Ed. 2d 444 (1985); and Fritz Scherk v. Alberto-Culver
Company, 417 U.S. 506, 41 L.Ed. 2d 270 (to mention just some of the most important cases).
24
THE NEW YORK CONVENTION AS A STARTING POINT
In a way, the issue of arbitrability is not all procedural: it also deals with the substantive issue of the scope of authority or power in abstracto (mandate) of arbitrators to
adjudicate matters submitted to them. In this way, it is not unambiguously a due
process issue (i.e., a rule relating to the way the proceedings are to be conducted).
The issue is, however, also procedural. First, arbitrability is a question of jurisdiction of the tribunal and thus more or less clearly a procedural question. Second, there
is the procedural dimension of investigation of the question of arbitrability (e.g.,
whether the arbitrator should raise this issue if the parties believe the issues submitted
are arbitrable although they are not. Also, some or a part of the issues submitted may
be arbitrable and some not). It is also possible that neither the parties nor the arbitrators
become aware of the nonarbitrability of some of the issues. The issue of arbitrability
may then be raised by the enforcement authority. It is further possible that the issues
are arbitrable under the law of the place of arbitration or under other applicable rules,
but nonarbitrable at one or more places of enforcement. In these instances, the issues
need to be resolved in the enforcement proceedings and in accordance with the due
process principle, but their arbitrability as such is covered by the material laws applicable to the dispute or the laws of the place of enforcement.
2.4 ARBITRATION AGREEMENT (“MANDATE IN CONCRETO”)
AND THE CONVENTION
2.4.1 Agreement as the Basis of the Procedure
Arbitration is based on an agreement of the parties. In the arbitration agreement, the
parties authorize and give power (“a mandate”) in concreto to the arbitrators to settle
their present or future disputes. By concluding the arbitration agreement, the parties, in
general, exclude the application of laws and rules meant or designed to govern proceedings before State courts and assume at least implicitly those applicable to arbitration and general principles of legal proceedings. The arbitration agreement is governed
by the freedom of contract.18 There are, however, certain limitations to it (e.g., as to
arbitrability). The agreement is governed by the general rules of law as to formation of
contract including invalidity and capacity of the parties as provided in Article V(1)(a)
of the Convention.19 The arbitration agreement may also be subject to the test of
unreasonableness or unconscionability as being too one-sided.
18
19
Perhaps the minimum key components of a good arbitration clause are: (1) the substantive
law(s) applicable to the dispute; (2) the seat of arbitration; (3) the procedural rules applicable;
and (4) the language(s) to be used.
“The parties to the agreement referred to in article II were, under the law applicable to them,
under some incapacity, or the said agreement is not valid . . .”
ARBITRATION AGREEMENT (“MANDATE IN CONCRETO”) AND THE CONVENTION
25
2.4.2 Breach of the Procedural Agreement as a Ground to Refuse Recognition
and Enforcement
Article V(1)(d) of the Convention provides:
Recognition and enforcement of the award may be refused, at the request of the
party against whom it is invoked, only if that party furnishes to the competent
authority where the recognition and enforcement is sought, proof that:
(d) The composition of the arbitral authority or the arbitral procedure was not in
accordance with the agreement of the parties, or, failing such agreement, was
not in accordance with the law of the country where the arbitration took place;
. . . (emphasis added)
This Article sets forth one of the “weak” grounds for refusal to enforce an award. The
first chapter of Article V(1) provides that refusal is conditional on (i.e., “only if”):
(i) an action by the party against whom enforcement is sought (“request”);
(ii) the party in question submitting sufficient proof of violation of the procedural
framework.
The procedural framework is based on two major elements: (1) primarily the agreement of the parties, and (2) failing such agreement, the law of the country where the
arbitration took place (lex arbitri). We can also construct lex arbitri and its derivatives
as a part of the agreement.
The agreement of the parties may contain diverse elements. It may be a simple
clause of a few words, or may refer the parties to ad hoc arbitration or to institutional
arbitration. In the latter case the clause and the reference to an institution incorporates
in general the rules of arbitration of that particular institution in the arbitration agreement. A simple ad hoc arbitration clause often expressly or implicitly incorporates into
the agreement the arbitration law of a country. There are also ad hoc rules independent
from national laws.20 The arbitration law referred to by the parties does not necessarily
coincide with the place of arbitration (“the seat”), which may be in another country.
The arbitration law of the country where the seat of arbitration is located is also applicable to the extent it is mandatory or in the absence of agreement by the parties.
In addition, beyond the original arbitration agreement, the parties may conclude
agreements supplementing or amending the arbitration agreement. This may happen
prior to the initiation of the proceedings or during the proceedings covering specific
issues or generic procedural principles to be applied.21 Finally, the arbitral panel has
certain powers under the other applicable rules to issue binding procedural orders.
20
21
E.g., UNCITRAL Arbitration Rules.
It may be a question of interpretation whether such a chain of agreements forms one agreement
as amended or several agreements. Friedland gives the following model clause in Arbitration
Clauses for International Contracts:
The owner, the contractor and all subcontractors, specialty contractors, suppliers, engineers,
designers, architects, lenders and bonding companies, and other parties concerned with the
construction of the structure are bound, each to the other, by this arbitration clause, provided
that they have signed this contract or a contract that incorporates this contract by reference or
have signed any other agreement to be bound by this arbitration clause.
26
THE NEW YORK CONVENTION AS A STARTING POINT
Elements of the agreement can be described in a table of hierarchy of the rules:
Ad hoc
Institutional
1. The “Original” Agreement
and the law or rules referred
to therein
1. The “Original” Agreement
and the rules of the institution
referred to therein
2. Subsequent agreements
(prior to or during the
proceedings)
2. Subsequent agreements
(prior to or during the
proceedings)
3. The arbitration law of the
seat of arbitration
3. The arbitration law of the
seat of arbitration
4. Procedural orders by
the panel
4. Procedural orders by
the panel
↑
D
U
E
P
R
O
C
E
S
S
↓
All these elements are likely to contain (and also in an indirect way be) elements of
due process, which covers the proceedings as a whole. Due process may be partly
addressed by express provisions of any rules in the hierarchy or perhaps by none of
them. It may be part of the applicable arbitration rules whether or not expressly referred
to by the parties in the arbitration agreement or in the arbitration law imposed on the
proceedings by the force of the law of the seat of arbitration. However, the implications of due process principles in national law or in the contract of the parties have
to be separated from the international or transnational due process standard or lex
proceduralia.
The law of arbitration of a country may contain various elements:
(i) special code or act on arbitration;
(ii) codified or noncodified procedural principles (e.g., audi alteram partem or the
impartiality of arbitrators);
(iii) arbitration tradition or practice (“usage”);
(iv) potentially applicable international human rights and fundamental rights of the
country.
The rules in the hierarchy form the procedural framework or “constitution” of the
procedural code of a particular procedural decision or disagreement before a panel.
PAUL D. FRIEDLAND, ARBITRATION CLAUSES FOR INTERNATIONAL CONTRACTS 201 (2000).
ARBITRATION AGREEMENT (“MANDATE IN CONCRETO”) AND THE CONVENTION
27
Procedural orders given by the panel must be in full conformity with this constitution.
Should the orders or the conduct of the proceedings violate the procedural code, recognition and enforcement of the award may be refused. The rules in the hierarchy may
have different force. Many of them may be waived by agreement or by conduct (acts
or omission). As already noticed, the constitution is basically chosen by the parties,
and indirectly it forms a contract of the parties.
Having said this, the freedom of the parties to agree on procedural matters during
the proceedings may be limited by the procedural powers of the arbitral panel derived
from the original agreement. The degree to which the parties have freedom to agree in
relation to the other norms in the procedural framework is a very interesting problem.
There certainly is a limit on what the parties can agree to reach an enforceable award.
For example, the parties cannot nominate themselves to be extra arbitrators in the case
(which of course is a relatively extreme example). In some cases, the arbitrators need
to keep the control of the procedure to maintain the minimum integrity of the procedure, which in many respects means applying the minimum due process requirements.
The parties of course need to have control over the material dispute—the arbitrators
cannot and should not stop them from reaching an agreement on the subject matter.
But if the parties want to solve the dispute in arbitration, the dispute resolution procedure also needs to have certain minimum features of that specific procedure. If the
material or substantive applicability of the specific dispute to arbitration is called arbitrability, there could be a similar term to refer to procedurally possible solutions in
arbitration such as arbitral agreeability.
Even if the framework above might look simple, it is far from so. In addition to what
has been discussed above, the scope of the limits set in the original agreement as to the
discretion of the tribunal is a difficult question. The agreement might refer to some set
of rules or arbitration law of a country. This means that not only the rules and that law
would be applicable, but that other sources of law regarding the norms in question
become relevant. The arbitration practice concerning institutional rules, legal literature,
and case law from national courts and other arbitral tribunals are all relevant. Also the
founding procedural principles and procedural minimum requirements of arbitral due
process requirements come into the equation. As a result, the discretion of the tribunal
as well as to some extent the power of the parties to stipulate the procedure might be
within smaller margins than is generally considered.
2.4.3 Ultra Petita—Matters Beyond the Scope
Ultra petita refers to a situation in which the mandate in concreto given by the parties
to the arbitrators in the arbitration agreement is not respected by the arbitrators and
they adjudicate beyond the scope of their authority derived from the parties. The
arbitrators may even when acting within the scope of the arbitration agreement in
abstracto decide on matters not submitted to them by way of prayer for relief. This is
also related to party’s opportunity to be heard and ability to present one’s case discussed later.
28
THE NEW YORK CONVENTION AS A STARTING POINT
Article V(1)(c) of the Convention provides:
Recognition and enforcement of the award may be refused, at the request of the
party against whom it is invoked, only if that party furnishes to the competent
authority where the recognition and enforcement is sought, proof that:
(c) The award deals with a difference not contemplated by or not falling
within the terms of the submission to arbitration, or it contains decisions on
matters beyond the scope of the submission to arbitration, provided that, if the
decisions on matters submitted to arbitration can be separated from those not so
submitted, that part of the award which contains decisions on matters submitted
to arbitration may be recognized and enforced; . . .
This provision of the Convention belongs to the group of “weak” grounds requiring
party action and proof in order to result in nonrecognition and nonenforcement. The
provision can be divided into two subsections:
(i) the award deals with a difference beyond the scope of submission to arbitration
(i.e., the arbitration agreement or clause; or
(ii) the award contains decisions on matters beyond the scope of the submission to
arbitration.
Prima facie the two subsections have a very similar coverage, and we could on the
basis of the wording alone argue that they overlap each other. The wording does not
distinguish clearly issues beyond the scope of the agreement and those beyond the scope
of the prayers for relief or defenses. Both are also subject to waiver, and elements of
mandate in concreto. However, this semantic aspect and its further analysis do not
appear to have anything other than academic value, and it would be an unproductive
activity for the practical purposes of this work, will not be analyzed thoroughly.
The first subsection catches differences that are beyond the submission to arbitration. This refers to the arbitration agreement, or, in the narrower sense, to the arbitration clause between the parties. What falls within the scope of the arbitration agreement
or clause is usually a question of interpretation or construction, but there have been
trends in favor of a wide interpretation.22
22
Merkin writes:
The English courts are, however, perfectly prepared to enforce a written agreement which
does no more than indicate in the vaguest terms that the parties intend to refer disputes
to arbitration, and are reluctant to hold an arbitration agreement to be void for uncertainty.
This approach is possible by virtue of the Arbitration Act 1996, which provides a range
of default terms relating, for example, to appointment of a sole arbitrator under s 15(3) of
the Arbitration Act 1996, replacing s 6 of the Arbitration Act 1950, which will apply if the
parties themselves have not agreed what should be done. A number of decisions illustrate
this point.
ROBERT MERKIN, ARBITRATION LAW 116 (2004). He continues:
Although the general principle remains that arbitration clauses will be given priority where
there are conflicting contract terms, there may be some situations in which the arbitration
clause cannot be regarded as forming part of the dispute resolution process agreed to by the
ARBITRATION AGREEMENT (“MANDATE IN CONCRETO”) AND THE CONVENTION
29
The interpretation raises the issue of the law applicable to the arbitration agreement.
The substantive law applicable to the arbitration agreement is not necessarily the same
substantive law applicable to the underlying agreement or relationship.23
The arbitral panel is in general deemed to have the jurisdiction to decide whether it
has jurisdiction regarding a difference submitted to arbitration.24 This jurisdiction is
primary in the sense that the panel has the authority to resolve it, but subsidiary in the
sense that the decision is often submitted to control by the courts of the seat of arbitration or by the enforcement authority as provided by the Convention.25 The jurisdictional issue may be raised by a party, but it may also be raised by the arbitrators.
However, in the latter case, such raising of the issue may prove to be moot in the sense
that the parties may be in perfect or “silent” agreement that the difference falls within
the scope of the submission. Raising of the issue sua sponte is not, however, fruitless
as when once raised and resolved, the parties cannot later on raise the issue as a ground
for setting aside the award or for refusing its enforcement.
If the issue is raised by a party objecting to the jurisdiction, a decision of the arbitrators in favor of arbitration may be subject to immediate appeal or appeal first after
the closing of the proceedings and rendering of the award.26 A party objecting to the
parties. This was the conclusion reached by Garland J in MH Alshaya Co WLL v. Retek
Information Systems Inc.
23
24
25
26
Id. at 119.
The starting point is whether the parties have made an express choice of the law which is to
govern their arbitration agreement. If there is such an express term, that choice will be regarded
as conclusive even if the nominated law has no connection with the underlying contract to
which it relates, given the divisibility of the arbitration agreement and the underlying contract.
Indeed, the courts have been prepared to accept that disparate parts of a single agreement may
be governed by different applicable laws. The obvious conclusion from the separability principle is that an express choice of law applicable to a substantive agreement which contains an
arbitration clause does not necessarily extend to the arbitration clause itself, and it will be necessary to look at anything that the parties have expressly or impliedly agreed in relation to the
arbitration. By way of example, if the substantive contract is stated to be governed by the law
of New York, and it contains an arbitration clause which specifies that arbitration is to be held
in London as the seat of the arbitration, the almost inseparable relationship between the curial
law of the arbitration and the law governing the arbitration agreement means that the law applicable to the arbitration agreement is more likely to be English than New York law.
Id. at 193.
This is the classic “competence de competence” issue. See UNCITRAL Art. 16(1) and (3) in
the Appendices p. 490.
See UNCITRAL Art. 16(2) in the Appendices, p. 490.
Japan Act 2003 § 23 (4–5) (Japanese Arbitration Law, No. 138 of 2003, in force 1 March 2004,
in JAN PAULSSON (ED), INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION, (Kluwer Law
International 1984 Last updated: March 2005 Supplement No. 43) pp. Annex I-1–Annex I-20)
(4) The arbitral tribunal shall give the following ruling or arbitral award, as the case may be,
on a plea raised in accordance with paragraph (2):
(i) a preliminary independent ruling or an arbitral award, when it considers it has jurisdiction; or
(ii) a ruling to terminate arbitral proceedings, when it considers it has no jurisdiction.
(5) If the arbitral tribunal gives a preliminary independent ruling that it has jurisdiction, any
party may, within thirty days of receipt of notice of such ruling, request the court to decide
30
THE NEW YORK CONVENTION AS A STARTING POINT
arbitration on jurisdictional grounds may also attempt to obtain a court order to stop
the arbitration. This may be an action under the relevant arbitration law or under
protective measures provided by a code of procedure on various grounds.27
Should the arbitrators decline jurisdiction and dismiss the case, a party is not left
without recourse. Instead of arbitration, the party is at liberty to take action in competent
State courts. A party may perhaps also file a claim for declaratory judgment seeking a
confirmation that the difference falls within the arbitration agreement. In some circumstances such an action or appeal may be more attractive than starting litigation in state
courts and probably facing problems of enforcement of the court decision at a later
stage.
Matters beyond the scope of submission may include the difference although a
difference as a word is perhaps closer to a disagreement regarding a larger subject
matter, while a matter is closer to an issue. For instance, the difference may be a distributorship agreement with the matter being failure to deliver on time or request for
damages relating to an unjust termination of the agreement. Further, the matter may
relate to a remedy sought by a party (e.g., declaratory relief, specific performance,
injunction, or damages). Within the difference, there may be various issues or matters,
some of which are closely related to the difference itself but which despite the
closeness are not necessarily always directly within the scope of submission.
The matters submitted to arbitration may not necessarily be fixed at the initial stages
or remain fixed throughout the arbitration. Arbitration may be a very dynamic process
changing its substance, coverage and scope. The matters submitted may be elaborated
on by the parties or the claims and pleadings may lead to withdrawal of matters or to
submission of substitute or new claims. In such instances, administration or management of the proceedings may become critical for the arbitral panel. At the same time,
the parties need to be particularly focused on the changes in the scope of submission
because failure to object to new matters may constitute a waiver barring the party
from invoking the fact that some matters were not within the scope of submission later
on. Failure to object may constitute a waiver, and once constituted by acts or omissions, the waiver incorporates the “alien” matter within the scope of the arbitration
proceedings. The jurisdiction of the panel as to counterclaims or set-off raised may be
a difficult issue to resolve if the counterclaims are not directly related to the original
difference submitted or otherwise clearly within the scope of the arbitration agreement. Article 21(5) of the Swiss Rules incorporates a favorable or liberal position as to
set-off:
The arbitral tribunal shall have jurisdiction to hear a set-off defence even when the
relationship out of which this defence is said to arise is not within the scope of the
arbitration clause or is the object of another arbitration agreement or forum-selection
clause.
the matter. In such an event, while such a request is pending before the court, the arbitral
tribunal may continue the arbitral proceedings and make an arbitral award.
27
E.g., invalidity of the agreement, sovereign immunity, expiration of mandate, public policy,
nonarbitrability, etc.
ARBITRATION AGREEMENT (“MANDATE IN CONCRETO”) AND THE CONVENTION
31
The time when counterclaims falling within the scope of submissions are to be filed
in order to be admitted and heard by the panel is another issue. At some stage, any new
counterclaim (even those very closely linked to the original claim) must be dismissed
by the panel and referred to new proceedings by the parties.
To set aside an ultra petita award requires under Article I of the Convention party
action, i.e., a request by the party and necessary proof. Since the arbitration agreement
must be in writing and the award must likewise be in writing, the ultra petita issue may
in most cases be decided on the basis of documents only after having heard the parties
and no other evidence may be relevant. As far as the consequences of ultra petita
are concerned, Article V(1(c)) provides that “if the decisions on matters submitted to
arbitration can be separated from those not so submitted, that part of the award which
contains decisions on matters submitted to arbitration may be recognized and enforced”.
In the absence of similar separation provisions in Article V (2), it is not clear if the
same principle would apply mutatis mutandis to issues not arbitrable at all or should
this perhaps be interpreted e contrario. The right to waive arbitrators’ action in
excess of party mandate, i.e., ultra petita, seems clear enough. To create a waiver of
arbitrability by acts or omissions seems, however, excluded or is least very difficult to
argue for.
2.4.4 Waiver Doctrine and the Breach of the Procedural
Agreement
Waiver of rights may constitute an enforceable modification of the arbitration
agreement as well as a modification of a material contract.28 For example, the waiver
doctrine is relevant when deciding whether the composition of the arbitral authority or
the arbitral procedure was not in accordance with the agreement of the parties.
UNCITRAL Model Law Article 4 provides:
A party who knows that any provision of this Law from which the parties may
derogate or any requirement under the arbitration agreement has not been complied
with and yet proceeds with the arbitration without stating his objection to such
non-compliance without undue delay or, if a time-limit is provided therefore, within
such period of time, shall be deemed to have waived his right to object.
In addition to express statements, waiver may occur via two very different elements:
(1) acceptance by conduct and (2) omissions. The two elements are interrelated. Let us
presume that a matter is raised during the arbitral proceeding and it is clearly beyond
the scope of the original arbitration agreement. If the parties do not object in any way,
28
Arbitration Act of England 1996 § 73(1) (see the Appendices, p. 287).
UNIDROIT Article 1.8:
A party cannot act inconsistently with an understanding it has caused the other party to have
and upon which that other party reasonably has acted in reliance to its detriment.
Waiver after breach is defined in UCC 1-107:
Any claim or right arising out of an alleged breach can be discharged in whole or in part
without consideration by a written waiver. . . .
32
THE NEW YORK CONVENTION AS A STARTING POINT
they may be deemed to have accepted an amendment of the original arbitration
agreement to widen the scope thereof, even if it is not in writing, as long as it is otherwise unambiguous. Accordingly, they will be prevented from raising that defense at a
later stage.29 Even if the new matter falls in the grey zone in the sense that it may or be
beyond the scope of the submission, a failure to object may be deemed to indicate the
understanding or interpretation of the arbitration agreement by the parties themselves
that the new matter is within the scope of submission and jurisdiction. This failure to
act will become irrevocably binding and the parties will be deemed to have waived (or
accepted) the interpretation.
The doctrine of waivers in contract matters is deeply rooted in the rules of international arbitration institutions and in some legal systems, but it has only a milder
recognition in others. The latter sometimes operate rather on the concept of acceptance
by conduct.30 However, in the sphere of arbitration, the waiver doctrine seems to be
very well-established in serving the interests of the parties and the administration of
justice in general.
Waivers may be classified into at least four different categories. The first division is
based on time: one can waive in advance certain generic rights or a specific right. An
example of a generic waiver given in advance is contained in Article 28(6) of the ICC
Rules:
By submitting the dispute to arbitration under these Rules, the parties . . . shall be
deemed to have waived their right to any form of recourse insofar as such waiver
can validly be made.
However, waivers given in advance may well be problematic as indicated by the
reservation in the phrase “insofar as such waiver can validly be made”.31 In particular,
29
30
Arbitration agreements in general must be made in writing. This requirement does not seem to
apply to agreements made during the proceedings although very often such agreements are
recorded in submissions, minutes, procedural orders, or other documents.
UNIDROIT Art. 2.1.6 (1):
A statement made by or other conduct of the offeree indicating assent to an offer is an
acceptance. Silence or inactivity does not in itself amount to acceptance.
and (3):
However, if by, virtue of the offer or as a result of practices which the parties have established
between themselves or of usage, the offeree may indicate assent by performing an act without
notice to the offeror, the acceptance is effective when the act is performed.
31
France Act Art. 1484 provides:
Whenever, in conformity with the distinction made in Article 1482, the parties have waived
their right to appeal, or have not expressly reserved said right in the arbitration agreement, a
motion to set aside the document characterized as an arbitral award may nevertheless be
raised irrespective of any stipulation to the contrary. It may be granted only in the following
cases:
1. If the arbitrator decided in the absence of an arbitration agreement or on the basis of a
void or expired agreement;
2. If the arbitral tribunal was irregularly composed or the sole arbitrator irregularly
appointed;
3. If the arbitrator decided in a manner incompatible with the mission conferred upon him;
4. Whenever due process (le principle de la contradiction) has not been respected;
ARBITRATION AGREEMENT (“MANDATE IN CONCRETO”) AND THE CONVENTION
33
this relates to generic waivers such as in Article 28(6) above. There are also rights that
cannot be waived in general ex ante such as ordre public and public policy and rights
that can be waived ex post but not necessarily ex ante (e.g., objection to impartiality of
an arbitrator).32
After the violation of a right or an agreement occurs, a specific waiver may in most
cases be validly given. This relates both to substantive contractual and other issues and
to procedural rules or deviations from them. In ICC, practice of the waiver doctrine as
to procedure is codified in Article 33:
A party which proceeds with the arbitration without raising its objection to a failure
to comply with any provision of these Rules, or of any other rules applicable to
the proceedings, any direction given by the Arbitral Tribunal, or any requirement
under the arbitration agreement relating to the constitution of the Arbitral Tribunal,
or to the conduct of the proceedings, shall be deemed to have waived its right to
object.
The Swiss Rules are fully in line, as provided in Article 30:
A party who knows that any provision of, or requirement under, these Rules has not
been complied with and yet proceeds with the arbitration without promptly stating
its objection to such non-compliance, shall be deemed to have waived its right to
object.
The waiver doctrine applies to conflict of interests as well, as provided in IBA
Guidelines Article 4 (a), (b), and (c):
(a) If, within 30 days after the receipt of any disclosure by the arbitrator or after a
party learns of facts or circumstances that could constitute a potential conflict of
interest for an arbitrator, a party does not raise an express objection with regard to
5. In all cases of nullity defined in Article 1480;
6. If the arbitrator has violated public policy (ordre public).
32
As reported in Code of Civil Procedure—Book IV—Arbitration in JAN PAULSSON (ED),
INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION, (Kluwer Law International 1984 Last
updated: February 1998 Supplement No. 26) pp. 26–12.
The Argentina Act Art 760 provides:
1. If means of recourse have been waived they shall be rejected without further substantiation.
2. Waiver of means of recourse shall not, however, prevent the admissibility of explanatory
and nullity recourses based on essential errors in the procedure or when the arbitrators rendered their award after the term therefore had elapsed, or decided on issues not submitted to
arbitration. In the latter case, the ensuring nullity shall be only partial if the award can be
divided (fuere divisible).
3. This appeal shall be decided without any substantiation and only by taking into account the
antecedents already incorporated into the arbitral record.
National Code of Civil and Commercial Procedure Law 17.454 of September 19 1967,
as reformed by Law 22.434 of March 16 1981, text consolidated according to Decree
1.042 of 1981 in JAN PAULSSON (ED), INTERNATIONAL HANDBOOK ON COMMERCIAL
ARBITRATION (Kluwer Law International 1984 Last updated: January 1985 Supplement No. 3)
pp. 3–7.
34
THE NEW YORK CONVENTION AS A STARTING POINT
that arbitrator, subject to paragraphs (b) and (c) of this General Standard, the party
is deemed to have waived any potential conflict of interest by the arbitrator based
on such facts or circumstances and may not raise any objection to such facts or
circumstances at a later stage.
(b) However, if facts or circumstances exist as described in General Standard 2(d),
any waiver by a party or any agreement by the parties to have such a person serve
as arbitrator shall be regarded as invalid.
(c) A person should not serve as an arbitrator when a conflict of interest, such as
those exemplified in the waivable Red List, exists. Nevertheless, such a person may
accept appointment as arbitrator or continue to act as an arbitrator, if the following
conditions are met:
(i) All parties, all arbitrators and the arbitration institution or other appointing
authority (if any) must have full knowledge of the conflict of interest; and
(ii) All parties must expressly agree that such person may serve as arbitrator
despite the conflict of interest.
2.5 INCAPACITY AND INVALIDITY
2.5.1 Incapacity of the Party and Invalidity of the Agreement
Article V (1(a)) of the New York Convention provides that:
Recognition and enforcement of the award may be refused, at the request of the
party against whom it is invoked, only if that party furnishes to the competent
authority where the recognition and enforcement is sought, proof that:
(a) The parties to the agreement referred to in article II were, under the law
applicable to them, under some incapacity, or the said agreement is not valid
under the law to which the parties have subjected it or, failing any indication
thereon, under the law of the country where the award was made. . . .
This provision deals with two issues neither of which is procedural in its essence:
(1) the incapacity of the parties, and (2) the invalidity of the arbitration agreement.
Both can de jure be classified as conditions precedent to the arbitration proceedings
and thus procedural questions. However, both are decided on a material law basis, with
one being related to the powers and capacity of natural or legal persons and the other
to general principles of contract law.
2.5.2 Incapacity of a Person
In the context of international commercial arbitration, presumably it is very uncommon to have an issue regarding the incapacity of a natural person. However, one may
rise in connection with entrepreneurs or traders dealing in their personal capacity rather
than behind a corporate veil. It may also rise in connection with the representation of
INCAPACITY AND INVALIDITY
35
legal persons (i.e., various forms of corporations) if their directors and officers are
affected by some kind of incapacity.
More often the issue is raised if the directors and officers have acted beyond their
power and authority (“ultra vires”). This is an issue governed by the law applicable to
the corporation. The material law applicable is the law governing the person in
question, which for example may be the law of the seat of corporation, the place of
business or residence.
2.5.3 Invalidity of the Arbitration Agreement
Any issue regarding invalidity of the arbitration agreement is to be resolved on the
basis of the material law applicable thereto.33 This law is not necessarily the same
material law applicable to the underlying agreement to which the arbitration agreement
relates. Under the prevailing doctrine, the arbitration agreement is usually regarded as
an independent agreement separate from the underlying agreement and not affected by
its fate.34 However, in practice it is very uncommon for the parties to agree on the law
applicable to the arbitration agreement or to pay much or any attention thereto by way
of indication or presumption as it hardly ever emerges as an issue in negotiations.
For this reason, the subsidiary rule of the Convention (“failing any indication
thereon”) becomes the main rule. In the absence of express choice or “any indication,”
the law applicable to the arbitration agreement is that of the country where the award
was made. In practice this means the law of the country where the arbitration has its
seat (i.e., lex arbitri).
33
Private International Law Act of Switzerland Art. 178:
1. As regards its form, an arbitration agreement is valid if made in writing, by telegram, telex,
telecopier or any other means of communication which permits it to be evidenced by a text.
2. As regards its substance, an arbitration agreement is valid if it conforms either to the law
chosen by the parties, or to the law governing the subject-matter of the dispute, in particular
the law governing the main contract, or if it conforms to Swiss law.
3. The validity of an arbitration agreement cannot be contested on the ground that the main
contract may not be valid or that the arbitration agreement concerns a dispute which has not
yet arisen.
34
Arbitration Act of England 1996 § 7 (see the Appendices, p. 258). See also Japan Act, supra
note 26, at § 13(6):
Even if in a particular contract containing an arbitration agreement, any or all of the contractual
provisions, excluding the arbitration agreement, are found to be null and void, cancelled or for
other reasons invalid, the validity of the arbitration agreement shall not necessarily be affected.
This applies in institutional arbitration as well. See ICC Rules Article 6(4) (ICC Rules of
Arbitration in force as from Jan. 1, 1998 (ICC Publication No 808), as amended Jan. 1, 2008).
36
THE NEW YORK CONVENTION AS A STARTING POINT
2.6 ABILITY TO PRESENT ONE’S CASE
2.6.1 Ability to Present One’s Case as a Fundamental General
Requirement
Article V(1)(b) of the Convention provides:
Recognition and enforcement of the award may be refused, at the request of the
party against whom it is invoked, only if that party furnishes to the competent
authority where the recognition and enforcement is sought, proof that . . .
(b) The party against whom the award is invoked was not given proper notice
of the appointment of the arbitrator or of the arbitration proceedings or was
otherwise unable to present his case. . . .
For a party to present his case, many requirements must be met and many basic
procedural elements must be in place. Many of these issues will be discussed in-depth
later on in this work. The key issue is that even an agreement concerning the procedure
does not necessarily mean that a party would have been able to present his case. The
standard is procedural, not contractual, with the procedural standard being defined not
only by different kinds of procedural black letter law and arbitration-specific soft law,
but also by arbitration practices (including the contractual practices surrounding
arbitration, as already discussed above). From a legal research point of view, the ability to present one’s case is theoretically very interesting as it opens the door to different
kinds of due process arguments and of sources of law. The generality of the requirement in a way undermines the importance of discussion concerning the law applicable
to the proceedings. The applicable procedural law or lex arbitri might be decisive in
setting the award aside at the national level, but the widely applicable general requirement of opportunity to present one’s case opens the enforcement discussion to international discussion and truly international due process requirements.35
The requirement of ability to present one’s case can be characterized as a general
one for at least two reasons. First, in formulation it is very general and open in a way
which means that very different kinds of procedural aspects fall under it. For example,
the requirement has relevance in initiating proceedings, in hearings, and in evidence as
well as in the award. Second, the level of generality of the requirement is higher than
the level of generality of most of the other requirements in the convention. For example, incapacity of a person to make an arbitration agreement is relatively exact as a
criterion of refusing recognition and enforcement, while ability to present one’s case
is vague.
The word unability used in the Convention does not refer to the subjective unability
or a contractual standard of “ready, willing, and able,” but primarily to the objective
opportunity to present one’s case. The subjective ability of a party or of his counsel
to present his case (i.e., professional skills or the strength and elegance of argumentation) is not included in the “ability” referred to by the Convention and remains at a
35
About the discussion concerning applicable procedural law and the level of transnationality of
it, see GEORGIOS PETROCHILOS, PROCEDURAL LAW IN INTERNATIONAL ARBITRATION 19–46 (2004).
ABILITY TO PRESENT ONE’S CASE
37
party’s risk. However, if a party has been denied his right to retain legal counsel of his
choice to represent him, this may constitute unability under the Convention.
The subsection of the Convention cited above enumerates three specific reasons for
a refusal to enforce an award. The first two are proper notice of appointment of arbitrator or of the arbitration proceedings related to initiation of the proceedings. The two
alternatives are separated by the word or, which indicates that proper notice is the key
element: a party must be informed about the initiation of the proceedings for him to
have an opportunity to organize his defense and take other action including filing
counterclaims, gathering and organizing evidence, taking protective measures, etc.
Whether the notice is proper must be assessed on the basis of the arbitration agreement
and other applicable procedural rules, including the law of the seat of arbitration. If
what constitutes proper notice is not well-defined by the rules or law referred to in the
arbitration agreement, the issue may become problematic as to the choice of applicable
procedural rules. As indicated above, proper notice is required in order to allow a party
to “present his case”.36 Thus the proper notice requirement is part of “presenting one’s
case”, a condition precedent required absolutely to constitute due process and to make
possible the rendering of an enforceable award. In the absence of other more specific
rules, proper notice must at the minimum contain information that legal proceedings
are pending, refer to the grounds for jurisdiction, and the identify the parties.
The ability to present one’s case appears to be the most fundamental due process
rule. The very core of the requirement is the foundation of legal proceedings often
expressed by the maxim audi alteram partem. The objective is to have the two parties
both present their case from their subjective point of view and allow them to bring all
relevant evidence supporting their position before the impartial arbitrator, who may
intervene in the proceedings when necessary. The same applies mutatis mutandis when
there are more than just two parties. This generic description is easy to accept: allowing the two very subjective elements allows the parties to shed light on the issues from
all angles and to reconstruct events, after which the arbitrator objectively and impartially strikes a “just” outcome or the proper balance in the conflict.
However, in practice all this is more complex; sometimes parties fail to bring the
necessary facts, mis- or malrepresent or conceal them, or simply do not recollect or know
the facts sufficiently due to a lack of communication or other reasons. Facts keep coming,
36
Japan Act, supra note 26, at § 29(1):
Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular civil
dispute commence on the date on which one party gave the other party notice to refer that
dispute to the arbitral proceedings.
See also id. at § 32(3). Proper notice means reasonable notice (“seasonably”). For what
constitutes reasonable notice, compare UCC 1-204:
(1) Whenever this Act requires any action to be taken within a reasonable time, any time
which is not manifestly unreasonable may be fixed by agreement.
(2) What is a reasonable time for taking any action depends on the nature, purpose and
circumstances of such action.
(3) An action is taken “seasonably” when it is taken at or within the time agreed or if no time
is agreed at or within a reasonable time.
38
THE NEW YORK CONVENTION AS A STARTING POINT
with new ones emerging in sequences that are not planned or even contemplated and
that are not all presented at the same time. The parties’ claims and the theories or
grounds on which they base their claims may change or be incomplete. The parties
cannot always know whether there is sufficient evidence to persuade the panel, whether
the established facts support the claims, or whether a subsidiary claim should be made.
The remedies sought may not be available at law or in the light of the facts, but other
substitute remedies would be if only the party prayed for them. The arbitral tribunal
must manage the proceedings expeditiously and cost-effectively but also provide (in
the arbitrators’ discretion) sufficient guidance to the parties by way of procedural
orders and instructions to fully establish the relevant facts. The proceedings should, if
possible, exhaust the disputes in order to avoid new proceedings relating to the same
set of facts or relationships (except perhaps on the basis of new theories or new
evidence). All this must be done without jeopardizing the impartiality and objectivity
of the adjudication.
It is easy to see that the requirement of timeliness alone makes it sometimes difficult
to balance between the party’s ability to present his case and the other party’s right to
enforce his substantive rights in the chosen dispute resolution mechanism. In practice,
the lack of clarity regarding the limits on a party’s ability to present his case might lead
to problems in case management, as pushing the procedure forward against the will of
a reluctant party runs the risk of an unenforceable award.
2.6.2 Ability to Present One’s Case According to the Agreement
and the Law of the Seat
The due process standard “able to present one’s case” is closely linked to another due
process rule under Article V(1)(d): “The composition of the arbitral authority or the
arbitral procedure was not in accordance with the agreement of the parties, or, failing
such agreement, was not in accordance with the law of the country where the arbitration took place.” The two elements (i.e., the arbitration agreement and the law of the
seat of arbitration) are part of due process; they qualify and specify in part what constitutes due process in an individual case. The arbitration agreement may specify how
a party is to be given the necessary opportunity “to present his case” but it cannot, at
least ex ante, totally eliminate this right. Should this be the case, the proceedings would
perhaps not constitute arbitral proceedings or legal proceedings and the judiciary
would most likely refuse to recognize and enforce any award. The right to present
one’s case cannot be wholly waived during the proceedings, or more exactly, the right
to the opportunity to present one’s case cannot be wholly waived, but the party may at
his option and in his sole discretion choose not to do so in concreto.37
In addition to the arbitration agreement, the law of the country of the seat of arbitration forms a part of due process. The arbitration agreement cannot entirely cover all
37
This may lead to changes in the procedural framework, in particular the rules applied with
respect to the burden of proof.
ABILITY TO PRESENT ONE’S CASE
39
dispositive or “soft” issues of procedure. Then the arbitration law of the seat of arbitration or its general procedural principles may apply, including due process to the extent
not already included in the above. However, procedural rules enacted specifically to
apply to proceedings only before State courts in general cannot be applied at all in
arbitration because the choice of arbitration is expressly or implicitly meant to eliminate exactly those rules and to replace them with other more flexible or “tailor-made”
rules.38
The arbitral proceedings are anchored in the arbitration law of the lex fori, which
means that two “hard” elements are often brought to the legal framework of the
proceedings: (1) the control of the legality of the arbitration proceedings by the court
or other authority of the seat of arbitration, and (2) the availability of specified procedural measures in support of the arbitral proceedings (e.g., to hear witnesses, enforce
procedural orders or partial or final awards, compel production of documents, adopt
interim measures, etc. depending on the law of the seat of arbitration).39 Lex fori is
primarily a “blessing” to the proceedings and a supporting element, but also ultimately
establishes the necessary control so that the mandate given to arbitrators by the legal
system in abstracto and by the parties in concreto is not abused.
2.7 AWARD HAS TO BE FINAL (“CONDITION SUBSEQUENT”)
Article V(1)(e) of the Convention provides:
Recognition and enforcement of the award may be refused, at the request of the
party against whom it is invoked, only if that party furnishes to the competent
authority where the recognition and enforcement is sought, proof that:
(e) The award has not yet become binding on the parties, or has been set aside or
suspended by a competent authority of the country in which, or under the law of
which, that award was made.
This provision does not deal directly with procedural issues in the arbitration but
constitutes rather “a condition subsequent”—enforcement of an award already given
may be refused if:
(i) the award is not final, i.e., it may be subject to appeal or a period of time
provided for in the applicable law for filing an action for setting aside or other
similar action has not run out and the award is not enforceable under the law of
the country or in the country where it was made;
39
The rules governing proceedings often codify or reflect general procedural principles that
apply equally to arbitration. Sometimes national laws refer to procedural laws covering
State court proceedings to “fill a vacuum” of rules or as an ex analogia source of procedural
arbitration law.
UNCITRAL Art. 27 (seeAppendices, p. 493).
40
THE NEW YORK CONVENTION AS A STARTING POINT
38
(ii) the award has been set aside, i.e., a competent authority has declared it null
or void or unenforceable applying the law of the seat of arbitration or the law
applicable to the award; or
(iii) the award has been suspended, which means its enforcement has been denied
or refused at least temporarily pending another action or depending on some
other similar condition.
These circumstances are not of any particular interest for the purposes of due
process although setting aside or a suspension of the award may and often are consequences due process violations in the arbitration. However, this provision does not in
any way indicate what these violations may have been “under the law under which the
award was made”.
2.8 CONCLUSIONS ON THE ANALYSIS OF ARTICLE V OF THE
CONVENTION
The above analysis and the relevance of the various subsections of the article V of the
Convention for the purpose of defining due process could be reported in a table in a
summary fashion as follows:
Article V:
Due Process
Conditions Precedent
1 (b) “Inability to present
his case” i.e. “audi alteram
partem”
1 (a) Incapacity, etc.
1 (c) Scope of submission i.e.
beyond “mandate in concreto”
1 (c) Scope of submission, i.e.
beyond “mandate in concreto”
1 (d) Procedural rules violated
2 (a) Not arbitrable, no
“mandate in abstracto”
Conditions
Subsequent
1 (e) Not final
2 (b) Public Policy (both
substantive and procedural
issues)
Some of the rules can simply be classified as conditions precedent or conditions
subsequent. As an enforceable agreement resulting in an enforceable award, the mandate in abstracto or authority vested in the panel is subject to conditions as to how the
proceedings are to be conducted and as to what may be enforced. The mandate of the
panel (subject to public policy) is to establish the facts and to enforce the arbitration
agreement and underlying agreement as the parties have agreed.
CONCLUSIONS ON THE ANALYSIS OF ARTICLE V OF THE CONVENTION
41
As already noticed above, in one sense, the law of arbitration is procedurally closely
bound to the criteria and law of enforcement. This is especially true when the approach
is concerned with identifying the most fundamental rules of due process in the
Convention. A few remarks can be made on the basis of the analysis:
1) The line between substance and procedure is fading in arbitration, as many substantive norms define the jurisdiction of the tribunal. This is, actually, not very surprising as one of the two major groups of questions concerning due process requirements
has to do with controlling the limitations on access to courts. Questions related to
jurisdiction define the limitation of access to ordinary courts, and even the substantive public policy-related grounds on denying enforceability can be seen from this
perspective as being in a way procedural. Some demands are such that an arbitral
tribunal does not have jurisdiction to deny their protection or infringe them.
2) The criteria set forth in the Convention are not autonomous. First, the Convention
refers to national laws and agreements of the parties. Second, it is of course de facto
bound with internationally (or better transnationally) defined meaning of concepts
and terminology. Thus the normative meaning of the Convention comes from various sources.
3) The Convention is at least partly very openly formulated. For example, from a procedural point of view, the requirement that a party have the ability to present his
case is open to various interpretations.
4) Accordingly, it seems difficult to concretize due process requirements only on the
basis of analyzing the Convention. The other sources of law of international arbitration also have to taken in account in the wider analysis below.
In the next chapters, the content of international due process requirements is
approached in a kind of problem-based manner and the various elements of due
process are discussed in substantial order. For example, the following elements are
discussed:
Arbitration Agreement as Basis of Jurisdiction (Chapter 3)
Other Aspects of Jurisdiction than the Agreement (Chapter 4)
The Panel and Due Process (Chapter 5)
Due Process Related to Facts and Evidence (Chapter 6)
The Role of the Panel in the Proceedings (Chapter 7)
Fair Arbitration—Opportunity to Present One’s Case (Chapter 8)
42
THE NEW YORK CONVENTION AS A STARTING POINT
Chapter 3
Arbitration Agreement as the Basis of
Jurisdiction
3.1 AGREEMENT ON BASIS OF JURISDICTION—MANDATE IN
CONCRETO BASED ON MANDATE IN ABSTRACTO
In arbitration, the jurisdiction of the tribunal is based on agreement of the parties. An
arbitration agreement can be reduced to an authority or power granted by the parties to the
arbitrators to settle their present or future differences (“mandate in concreto”) within the
freedom of contract. The mandate in concreto is based on two mandates by the government
(i.e., the people): (1) freedom of contract, and (2) delegation of judicial authority to render
enforceable decisions (“mandate in abstracto”) subject to due process requirements.
An arbitration agreement has both positive and negative jurisdictional effects. First,
an arbitration agreement grants jurisdiction to the arbitral tribunal (positive effect).
Second, arbitration normally excludes the jurisdiction of ordinary courts (negative
effect). The existence of a valid arbitration agreement is a condition precedent to arbitral proceedings, and thus a due process requirement. No one should be compelled to
arbitration against his will especially if there is no appeal to the ordinary court system.
The exclusion of the possibility of resolving the dispute in an ordinary court restricts
access to justice, which emphasizes the importance of the agreement. Thus, the arbitration agreement often restricts a party’s constitutional and human rights to a public
hearing in a court of law. Accordingly it is important that a proper agreement be
required and that the agreement on which jurisdiction is based be valid.
The negative jurisdictional impact (i.e., that the dispute may not be heard before
courts of law against the will of a party to an arbitration agreement and must be dismissed by the court) is probably one of the main effects of a valid arbitration clause.1
1
Holtzmann reports:
If one party sues in court with respect to any disputes covered by an agreement to arbitrate,
the court must, on the request of the other party, bar the suit so that the arbitration may be held
in accordance with the terms of the agreement. The only question before the court in deciding
on such a request is whether the issue involved in the suit is covered by an agreement to
arbitrate (FAA Sect.3; UAA Sect.2).
43
Most clauses provide for exclusive arbitration and do not allow any “ordinary” appeal
from the award regarding material issues. The parties may of course either expressly
or implicitly waive their right to arbitration, and some national laws impose a duty on
the parties to invoke the clause—sometimes even before answering the substantive
issues. Article II(3) of the Convention provides:
The court of a Contracting State, when seized of an action in a matter in respect of
which the parties have made an agreement within the meaning of this article, shall,
at the request of one of the parties, refer the parties to arbitration, unless it finds that
the said agreement is null and void, inoperative or incapable of being performed.
(emphasis added)
The Convention requires party action to enforce the arbitration, and passivity may
constitute a waiver.
The mandate in concreto or authority given is irrevocable except by agreement of
all parties. As such, it is comparable to agreements granting an irrevocable power and
authority to make decisions binding on the parties, such as agreements forming corporations that also grant irrevocable authority to certain corporate bodies to pass
resolutions for and on behalf of their shareholders even in the absence of unanimity. In
a way, it comes very close to the role of an engineer or architect in construction contracts. As such, there is nothing particularly exotic about it.
However, an arbitration agreement is sui generis in some respects. The agreement
is in general regarded as independent and separate from the underlying transaction.2
It deals primarily with procedural issues constituting an instrument for the enforcement
of the underlying agreement. The arbitration agreement remains ancillary although
Howard M. Holtzmann, Report on U.S. Arbitration Law, in INTERNATIONAL HANDBOOK
COMMERCIAL ARBITRATION 14 (Supp. 13, Sept. 1992).
Spanish Act Art. 11 provides:
ON
1. The arbitration agreement obliges the parties to comply with the agreement and prevents
the courts from hearing disputes submitted to arbitration, provided that an interested party
raises an objection (declinatoria) to jurisdiction.
2
(Law 60/2003 of 23 December on Arbitration (in force 26 March 2004) as reported in JAN
PAULSSON (ED), INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION, (Kluwer Law
International 1984 Last updated: July 2004 Supplement No. 41) pp. Annex I-1–Annex I-17
Prof. Bernardo M. Cremades in INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION (Supp. 13,
Sept. 1992)).
Holtzmann, supra note 1, at 14 reports:
The laws of various states differ, with some, such as New York and those states that have
enacted legislation based on the UNCITRAL Model Arbitration law, applying the separability doctrine and others considering that the arbitration clause and the rest of the contract are
invisible parts of the same agreement. However, international cases are most likely to be
governed by the federal law, which, as noted above, follows the separability doctrine.
Therefore, it is unnecessary for the purposes of this chapter to consider the law in states that
do not apply the separability doctrine. The case of Prima Paint v. Flood & Conklin, cited
above, is important not only because it establishes the federal separability doctrine, but also
because, in so doing, the Supreme Court once again emphasized the strong national policy of
encouraging commercial arbitration. Thus, the Court said that it “honors” . . . the unmistakably clear Congressional purpose that the arbitration procedure, when selected by the parties
to a contract, be speedy and not subject to delay and obstruction in the courts.
44
ARBITRATION AGREEMENT AS THE BASIS OF JURISDICTION
independent from the fate of the transaction, including its termination, cancellation, or
invalidity.3 Standing alone, the arbitration clause has no substance, meaning, or right
of existence.
Yet the doctrine of independence is somewhat an overstatement of the implicit purpose and intent of the parties elevated to the level of doctrine by the necessities and
needs of legal and business practices. International arbitration agreements are often sui
generis in the sense that they are not children of national jurisdictions, but servants of
international exchange, and as such instruments of law merchant. As a consequence,
they are supranational rather than national in their character, attaching only slightly to
national court systems through the seat of arbitration or in connection with their
enforcement.
The focus on and the special attention paid to arbitration are partly due to the lack
of an appeal mechanism and the enforceability of the award. These two factors culminate in qualifications on the mandate created by the arbitration agreement: what are the
material limitations to the power of the arbitrators (which is derived from the parties’
freedom to contract and settle) to settle the disputes arising under agreements? The
power constituted by the arbitration agreement is expressly and implicitly limited to its
compatibility with the substantive law to be applied. For the arbitrators to go beyond
or deviate from this limitation, they must obtain an express authorization of the parties
to proceed ex aequo et bono: in justice and fairness rather the strict rule of law.4 Of
course, the parties themselves can settle their dispute ex aequo et bono at any time.
However, as to procedure, the arbitrators enjoy great freedom to organize the hearings,
and normally the arbitration agreement excludes rules applying to proceedings before
State courts.
An arbitration agreement may provide that all future disputes relating to a legal
relationship or arising in connection therewith between the parties will be submitted to
arbitration. Such a generic arbitration clause covers all future disagreements within the
definition. By contrast, an arbitration agreement may provide that a specific and concrete disagreement that has already arisen shall be submitted to arbitration. Such a
specific agreement does not extend to any unspecified future disputes.5 A specific or
generic clause may refer either to ad hoc or institutional arbitration. The pros and cons
3
4
Compare with letters of credit or on-demand bonds.
ICC Rules 17(3) (see Appendices, p. 410). ICC Rules of Arbitration in force as from Jan. 1,
1998 (ICC Publication No 808), as Amended Jan. 1, 2008).
Japan Act § 36(2–3):
(2) Failing agreement as provided in the preceding paragraph, the arbitral tribunal shall apply
the substantive law of the State with which the civil dispute subject to the arbitral proceedings
is most closely connected.
(3) Notwithstanding the provisions prescribed in the preceding two paragraphs, the arbitral
tribunal shall decide ex aequo et bono only if the parties have expressly authorized it to
do so.
5
(Japanese Arbitration Law, No. 138 of 2003, in force 1 March 2004, in JAN PAULSSON (ED),
INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION, (Kluwer Law International 1984 Last
updated: March 2005 Supplement No. 43) pp. Annex I-1–Annex I-20.).
Art. II(1) of the Convention recognizes expressly both generic and specific clauses “all or any
differences which have arisen or which may arise”.
AGREEMENT ON BASIS OF JURISDICTION
45
of the choice is an ever-stimulating topic for discussion. However, one thing is certain:
it is great to have alternatives to choose from.
3.2 EXISTENCE OF AN ARBITRATION AGREEMENT
3.2.1 The Written Form
Arbitration agreements must be in writing. Under the Convention, written arbitration
agreements must be recognized (Article II):
1. Each Contracting State shall recognize an agreement in writing under which
the parties undertake to submit to arbitration all or any differences which have
arisen or which may arise between them in respect of a defined legal relationship,
whether contractual or not, concerning a subject matter capable of settlement by
arbitration.
For practical purposes, the requirement the arbitration agreements be written seems
to be well-motivated. The same requirement is common in many national laws, thus
reflecting the important legal consequences of concluding such an agreement and
the need for specificity and exactness as to its terms and conditions. However, the
requirement has been reduced or diluted considerably by lowering the criteria of what
constitutes an agreement in writing.6
Article II(2) of the Convention defines writing as follows:
The term “agreement in writing” shall include an arbitral clause in a contract or an
arbitration agreement, signed by the parties or contained in an exchange of letters
or telegrams.
6
Argentina Act Art. 740 provides:
Under sanction of nullity the terms of reference must state the following:
1. Date of conclusion; name and domicile of the parties;
2. Name and domicile of the arbitrators except in the case contemplated in Article 743;
3. Issues submitted to arbitration including a description of the circumstances involved;
4. Penalty payable to the other party by the party filing to carry out actions indispensable
to effectiveness (para la realización) of the terms of reference.
and Art. 744 provides:
1. Once agreement is reached on the terms of reference, they shall be communicated to the
arbitrators for the acceptance of their appointment before the clerk of the court under oath
or promise of loyal and faithful fulfillment of their functions.
2. If any arbitrator renounces his appointment or accepts the challenge of his designation
or becomes incapacitated or dies, he shall be replaced as provided for in the terms of
reference. If nothing has been foreseen therein for this purpose, the new appointment shall
be made by the judge.
(National Code of Civil and Commercial Procedure Law 17.454 of September 19 1967, as
reformed by Law 22.434 of March 16 1981, text consolidated according to Decree 1.042 of
1981 as reported in JAN PAULSSON (ED), INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION,
(Kluwer Law International 1984 Last updated: January 1985 Supplement No. 3) pp. 3–7 by
Prof. Horacio A. Grigeria Naón in Argentina Procedural Law Covering Arbitration, in
INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION (Supp. 11, Jan. 1990)).
46
ARBITRATION AGREEMENT AS THE BASIS OF JURISDICTION
The flexibility in what constitutes a sufficient writing may in some instances create
a gray zone. There may be the necessary element of “writing” as such, but the agreement in writing may be in a document a party only refers to or behind a series of
references (e.g., a reference to an invitation to offer), which in turn refers to general
conditions containing an arbitration clause. Is this an agreement in writing—and is
there an acceptance? There are also instances where an exchange of letters or other
communications makes reference of a number of jurisdictions or arbitration clauses,
thus allowing “cherry picking.” Which one of those references prevails?7 Should we
try to establish a hierarchy, or is it simply a chronological exercise with the latest
superseding any and all prior communications? What if the communications between
the parties relate to a number of relatively independent transactions under a major
framework agreement or general umbrella of collaboration, and some communications
refer to arbitration clauses while others do not? Are they all covered by the umbrella,
and if not, which ones are under the umbrella and which are not? There may be no
simple answers.8 However, clearly the sequence of communications should establish
not only the agreement in writing somewhere in the documentation or a reference to
such an agreement in writing, but also such facts as may be deemed to establish acceptance of or at least constructive knowledge about the clause.9
7
UNIDROIT Art. 2.1.20:
(1) No term contained in standard terms which is of such a character that the other party could
not reasonably have expected it, is effective unless it has been expressly accepted by that
party.
(2) In determining whether a term is of such a character regard shall be had to its content,
language and presentation.
UNIDROIT Art. 2.1.22:
Where both parties use standard terms and reach agreement except on those terms, a contract
is concluded on the basis of the agreed terms and of any standard terms which are common
in substance unless one party clearly indicates in advance, or later and without undue delay
informs the other party, that it does not intend to be bound by such a contract.
8
Derains and Schwartz write:
Of course, even the question of whether an ICC arbitration agreement exists between all of
the parties to an arbitration may give rise to contested, and possibly complex, issues of fact
or law. For this reason, the Court’s only mandate under Article 7 (and Article 8.3) was to
make a “prima facie” decision, which was, moreover, not intended to be definitive insofar as
the parties preserved the right to submit the issue of the arbitration agreement’s existence to
the courts (or to the arbitrators, if the Court decided that the arbitration should proceed).
Depending on how it applied this prima facie test, the Court was nevertheless in a position to
prevent an ICC arbitration from proceeding, at least until such time as a competent court
might decide otherwise.
9
YVES DERAINS & ERIC SCHWARTZ, A GUIDE TO THE NEW ICC RULES OF ARBITRATION 81(1998).
UNIDROIT Art. 2.1.6:
(1) A statement made by or other conduct of the offeree indicating assent to an offer is an
acceptance. Silence or inactivity does not in itself amount to acceptance.
(2) An acceptance of an offer becomes effective when the indication of assent reaches the
offeror.
(3) However, if, by virtue of the offer or as a result of practices which the parties have established between themselves or of usage, the offeree may indicate assent by performing an act
without notice to the offeror, the acceptance is effective when the act is performed.
EXISTENCE OF AN ARBITRATION AGREEMENT
47
UNCITRAL Article 7 provides:
(1) “Arbitration agreement” is an agreement by the parties to submit to arbitration
all or certain disputes which have arisen or which may arise between them in respect
of a defined legal relationship, whether contractual or not. An arbitration agreement
may be in the form of an arbitration clause in a contract or in the form of a separate
agreement.
(2) The arbitration agreement shall be in writing. An agreement is in writing if it is
contained in a document signed by the parties or in an exchange of letters, telex,
telegrams or other means of telecommunication which provide a record of the
agreement, or in an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by another. The
reference in a contract to a document containing an arbitration clause constitutes an
arbitration agreement provided that the contract is in writing and the reference is
such as to make that clause part of the contract. (emphasis added)
The requirement of written form applies to the original agreement, but the original
agreement may be subsequently modified by agreement of the parties prior to or during
the proceedings by express agreement or conduct, or by way of waiver. The agreement
may be a “moveable” thing subject to various changes. This applies in particular to
agreements made during the arbitral proceedings by waiver, express stipulations, or
conduct of the parties. Agreements concerning amendment of the original agreement,
further agreements on specific procedural issues, or generic rules or principles to be
applied in the arbitral proceedings may well be valid and enforceable failing an agreement in writing in the traditional sense. When the parties conclude such additional
agreements prior to or during the arbitral tribunals, the question of whether they are
modifications of the original agreement or new independent agreements is a matter of
interpretation. A presumption in favor of modification rather than a new agreement
may more often be appropriate and justified. Often such additional agreements are
recorded in the minutes of meetings or records of a hearing, terms of reference, correspondence, procedural orders of the panel, or other such corresponding documentation
generated by or in the arbitral proceedings by the panel, secretary, or parties.
In addition, a failure to object by a party may constitute an acceptance via passivity so
as to allow the conclusion that an arbitration agreement between the parties has been
reached.10 This leads to two issues that are matters of interpretation within the panel’s
own jurisdiction: when is a party under a duty to deny a referred-to arbitration agreement,
and when is a reference of such a character as to lead to the formation of a clause.11
3.2.2 Competence to Determine Competence
In a prima facie analysis, an arbitral institution or the panel itself attempts to draw
a preliminary conclusion as to the existence or nonexistence of an arbitration agreement and its terms and conditions to the extent necessary in relation to the issue of
10
11
48
Arbitration Act of England 1996 § 5(5) (see Appendices, p. 257).
Id. § 30 (see Appendices, pp. 267–68).
ARBITRATION AGREEMENT AS THE BASIS OF JURISDICTION
jurisdiction. The final decision regarding jurisdiction (competence) is made by the
tribunal. A prima facie analysis establishes a contingent jurisdiction in the panel to
decide on its own jurisdiction (“competence de competence”).12
UNCITRAL Model Law Article 16 addresses the issue of “competence de
competence”:
(1) The arbitral tribunal may rule on its own jurisdiction, including any objections
with respect to the existence or validity of the arbitration agreement. For that
purpose, an arbitration clause which forms part of a contract shall be treated as an
agreement independent of the other terms of the contract. A decision by the
arbitral tribunal that the contract is null and void shall not entail ipso jure the
invalidity of the arbitration clause.
(2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not
later than the submission of the statement of defence. A party is not precluded from
raising such a plea by the fact that he has appointed, or participated in the appointment of, an arbitrator. A plea that the arbitral tribunal is exceeding the scope of its
authority shall be raised as soon as the matter alleged to be beyond the scope of its
authority is raised during the arbitral proceedings. The arbitral tribunal may, in
either case, admit a later plea if it considers the delay justified.
(3) The arbitral tribunal may rule on a plea referred to in paragraph (2) of this
article either as a preliminary question or in an award on the merits. If the arbitral
tribunal rules as a preliminary question that it has jurisdiction, any party may
request, within thirty days after having received notice of that ruling, the court
specified in article 6 to decide the matter, which decision shall be subject to no
appeal; while such a request is pending, the arbitral tribunal may continue the arbitral proceedings and make an award.
As noted above, although usually the panel will consider any jurisdiction question
at the outset, it may wait until it has heard all matters and make its decision in connection with the final award. Swiss Rules Article 21 (4) provide:
In general, the arbitral tribunal should rule on a plea concerning its jurisdiction as a
preliminary question. However, the arbitral tribunal may proceed with the arbitration and rule on such a plea in its final award.
If the prima facie analysis does not lead to the establishment of an arbitration agreement and the action is dismissed, the parties may take action to have a court of law
resolve the dispute.13 Alternatively, a party may consider filing an action for declaratory relief in a court of law seeking confirmation that there is an enforceable arbitration
agreement. In some instances when the panel’s decision to decline arbitration seems
clearly erroneous, an interim or temporary order to compel arbitration may be
obtained.
Even if the prima facie analysis leads to the conclusion that there “appears to be” an
arbitration agreement in place, this preliminary conclusion by an institution, court, or
the panel itself is not final and binding. It may still be challenged in the arbitration by
12
13
E.g., ICC Rules Art. 6(4) (see Appendices, p. 406).
Stefan Kröll, Recourse against Negative Decisions on Jurisdiction, 20 ARB. INT’L (2004).
EXISTENCE OF AN ARBITRATION AGREEMENT
49
the parties even when the preliminary conclusion has been made by the panel itself.
However, an objection to jurisdiction may have to be raised without undue delay to
avoid the risk of a loss of the right or waiver.14 For example, Swiss Rules Article 21 (3)
provides:
As a rule, a plea that the arbitral tribunal does not have jurisdiction shall be raised
in the Answer to the Notice of Arbitration, but in no event later than in the Statement
of Defence referred to in Article 19, or, with respect to a counterclaim, in the reply
to the counterclaim.
If the arbitral panel assumes jurisdiction, a party still has the right to challenge its
decision in any proceedings aimed at setting the award aside or defending against its
enforcement.15 Thus in absence of any waiver, the decision on assumption of jurisdiction by the panel is seldom final.
If the prima facie analysis indicates that there is sufficient support for the existence
of an arbitration agreement, the parties may accept this conclusion expressly or implicitly. In such an event the prima facie analysis becomes binding and can no longer be
challenged. This may well be the most rational way for the parties to act even when
there are serious doubts as to the justification of the preliminary decision assuming
jurisdiction or even when there is a certainty that the conclusion was erroneous. If the
prima facie conclusion in favor of arbitration is challenged, in the worst case scenario
this may lead to:
(i) continuation of the arbitration proceedings at full intensity and undiminished
force despite the reservation, objection, or protest filed or made in the arbitral
proceedings. The arbitration may require major efforts and may take months if
not years to complete,
(ii) simultaneous parallel litigation may have to be initiated in State courts for declaratory relief, protective measures, refusal to enforce the award, or to set it aside
altogether. These proceedings may take years to complete.
(iii) If the action in (ii) is successful, both a full-scale “double” litigation in courts of
law will follow in the main dispute (already heard and perhaps decided in arbitration) and an action to recover the fees and costs incurred in the arbitration
proceedings may have to be initiated. These proceedings may again take years to
complete.
The applicable laws may provide for more effective measures, and there may be
better alternatives to challenge the jurisdiction than the nightmare scenario above.
However, the scenario partly explains why the waiver doctrine is so well-established
in many arbitration laws and in arbitration practice. The doctrine deserves full support
by the legal community provided that the quality of arbitral proceedings is secured and
due process safeguards are fully in place. From the party’s perspective, unless it wants
14
15
50
Arbitration Act of England 1996 § 31 (see Appendices, p. 268).
Arbitration Act of England 1996 § 32 (1–4) and 67 (see Appendices, pp. 268–69 and 283).
ARBITRATION AGREEMENT AS THE BASIS OF JURISDICTION
such an outcome, the strength of the waiver doctrine requires it to take firm action to
eliminate the risk its acts or omissions may constitute a waiver.
3.2.3 The Validity of the Agreement
Even though it is established that an arbitration agreement exists, its validity may be
challenged. If existence is not established, challenging validity becomes trickier, as in
order for something to be challenged, its existence must be presumed. A party may
simultaneously challenge validity, and seek clarity on the issue via a declaratory action
along the lines of “should these facts be deemed to constitute an arbitration agreement,
the claimant prays it be declared invalid or null”.
Article II(3) of the Convention provides:
The court of a Contracting State, when seized of an . . . , shall, . . . refer the parties
to arbitration, unless it finds that the said agreement is null and void, inoperative or
incapable of being performed.
Prior to the initiation of arbitral proceedings, a court may find the arbitration
agreement is null and void or unenforceable. A ruling may be based on “pathological”
reasons (i.e., the arbitration clause has been drafted in a manner that renders it inoperative or incapable of being performed, or the clause indicates an appointing authority
that has ceased to exist or never existed). These issues may be resolved by way of
interpretation. If a court finds an arbitration agreement to be null and void or unenforceable, it will not dismiss the case and will refuse to refer the parties to arbitration.
The arbitral panel may also hear and try claims regarding invalidity or nullity.16
Determining the validity of the arbitration agreement and that of the underlying agreement lies within the scope of the panel’s jurisdiction. Swiss Rules Article 21(1) and (2)
provide:
1. The arbitral tribunal shall have the power to rule on objections that it has no
jurisdiction, including any objections with respect to the existence or validity of the
arbitration clause or of the separate arbitration agreement.
2. The arbitral tribunal shall have the power to determine the existence or the validity of the contract of which an arbitration clause forms a part. For the purposes of
16
Holtzmann, supra note 1, at 27 reports on the United States:
Under federal and most state laws in the United States, the only basis for a party to contest
the jurisdiction of an arbitrator is if the party denies the existence or validity of an agreement
to arbitrate (FAA Sect.4; UAA Sect.2). If such a challenge is made only to the arbitrator, it
will usually be decided by the arbitrator, although the ultimate power to decide the issue is in
the court. Courts usually will consider the decision of the arbitrators only after the arbitration
is concluded and an award has been rendered (see Chap. VI.2 below). The question whether
a particular dispute is subject to arbitration is itself arbitrable. Therefore, arbitrators have the
power to rule on their own competence or jurisdiction to decide certain issues before them
under the agreement of the parties. If, however, competence is challenged on the grounds that
no valid agreement to arbitrate exists, the issue is one for judicial resolution, typically in a
court proceeding to prevent the arbitration, known as a “motion to stay”.
EXISTENCE OF AN ARBITRATION AGREEMENT
51
Article 21, an arbitration clause which forms part of a contract and which provides
for arbitration under these Rules shall be treated as an agreement independent of the
other terms of the contract. A decision by the arbitral tribunal that the contract is
null and void shall not entail ipso jure the invalidity of the arbitration clause.
If the arbitral tribunal has been properly constituted and is exercising its jurisdiction, it is fully “operative” and the arbitration agreement is obviously “capable of being
performed”. The decision of the arbitral tribunal holding that the arbitration agreement
is invalid or void will lead to the closing of the proceedings. The decision may be challenged and the issue may be retried in the courts. Depending on applicable arbitration
laws, a decision holding the arbitration agreement valid and enforceable may be challenged during the proceedings or in enforcement proceedings after the rendering of the
award as provided in Article V of the Convention.
3.3 ON INTERPRETATION OF THE ARBITRATION AGREEMENT
3.3.1 Methods of Interpretation
Interpretation of the arbitration agreement refers to giving meaning to the wording of
the arbitration agreement and trying to construct the intent of the parties that has led to
the written agreement. At first this seems to be more of a factual exercise than a legal
problem. However, contract interpretation is always done in a legal context with legal
norms guiding the interpretation. There is also a body of case law concerning interpretation of agreements.
From a legal point of view, the law concerning interpreting arbitration contracts is
even harder to place in legal categories and branches of jurisprudence than arbitration
itself. The law of arbitration in a way crosses over the division between contract law
and procedural law. Arbitration is based on contract, but traditionally the problems of
interpretation often better fit the concepts and models of procedural law. At least the
questions agreed on are procedural, and thus the content of the agreements is also
mainly procedural. However, interpretation of an arbitral agreement is a problem that
at least at first sight seems to a have a closer connection with contract law. From the
branches of law point of view, it would probably be good to describe arbitration agreement interpretation as a contract law problem in a dispute resolution context. Arbitration
agreements as agreements on procedural rules are as such agreements sui generis and
the problems that arise are not fully comparable to issues of interpretation of other
commercial agreements.17
The procedural context is visible in many ways. First, in many cases the problems
are procedural. The primary question is whether the tribunal has jurisdiction, which of
course is a procedural one. For example, questions of the scope of the agreement and
exclusivity are thus in the end questions of jurisdiction. Second, when specific features
17
UNIDROIT Principles of Interpretation may be applied in addition to national rules of
interpretation.
52
ARBITRATION AGREEMENT AS THE BASIS OF JURISDICTION
of the procedure are concerned, the standard practices as well as criteria of what can be
constructed as intent of the parties comes from procedural law. An arbitration agreement is often expressly or implicitly meant to exclude the application of rules relating
to proceedings before State courts, but not to exclude general procedural principles
and their application.
In addition, due process principles are part of the body of law that concerns interpretation of the arbitration agreement. Their main relevance in relation to interpretation of
the agreement is to control the limitation of access to courts as well as the quality and
fairness of the procedure.
Some arbitration-specific principles of interpretation have been developed. For
example, there is discussion whether the approach to problems concerning the scope
of the agreement or its exclusivity should be pro-arbitration or not. The waiver
doctrine in arbitration could probably be be placed under the umbrella of arbitrationspecific law.
As to the scope of the agreements in interpretation, the approach to arbitration
agreements has changed during the past century.18 At the beginning, the theory supported a narrow construction as arbitration was regarded as a somewhat “radical”
exception to normal proceedings, “ousting” the courts of their jurisdiction and
power. Then the trend changed largely in favor of arbitration, but moving recently
perhaps towards “neutrality” with some variety in national laws.19 This seems particularly motivated by international agreements. The importance of drafting a “tailor-made”
arbitration agreement in an individual transaction or dispute (considering the
time and interests at stake) has not been reduced.20 The trend seems to be toward an
18
Holtzmann, supra note 1, at 1 reports:
The law in the United States has long and strongly favored recognition of agreements to arbitrate and enforcement of arbitral awards, both in domestic and international commerce. As early
as 1855, the United States Supreme Court held that arbitration “as a mode of settling disputes
should receive every encouragement from the courts.” (Burchell v. Marsh, 58 U.S. 344.)
19
Samuel writes:
In the US, there was for a while a strong presumption in favour of finding that disputes were
subject to arbitration. This had to be sat on firmly by the same US Supreme Court (albeit differently composed) that had played a part in propounding the doctrine in the first place. The
English courts had in the meantime expressly rejected this approach. In Ashville, May LJ
made it clear that the judges had to construe arbitral agreements neutrally. In Switzerland, the
Tribunal fédéral previously expressed strong pro-arbitration bias in its approach to jurisdictional issues in the Westinghouse case. In that case, the court declined to review the arbitrator’s
findings of fact on which he had based his decision on jurisdiction. In this, court went far too
far. In the hands of arbitrators of much less integrity than Claude Reymond, this could be
perceived as an invitation to manipulate findings of fact to bind a party to an arbitration to
which he had never agreed.
20
Adam Samuel, Fomento—A Tale of “Litispendance”, in ARBITRATION AND PRIVATE INTERNATIONAL
LAW (2004). See the Second Circuit’s approach in JLM Industries, Inc. v. Stolt-Nielsen SA, 387
F.3d 163 (2d Cir 2004).
See PAUL D. FRIEDLAND, ARBITRATION CLAUSES FOR INTERNATIONAL CONTRACTS (2000); JAN
PAULSSON ET AL. THE FRESHFIELDS GUIDE TO ARBITRATION AND ADR, CLAUSES IN INTERNATIONAL
CONTRACTS (2nd rev. ed. 1999). GARY B. BORN, INTERNATIONAL ARBITRATION AND FORUM
SELECTION AGREEMENTS, PLANNING DRAFTING AND ENFORCING (1999).
ON INTERPRETATION OF THE ARBITRATION AGREEMENT
53
“all-catching” interpretation of arbitration clauses supported on the one hand by these
issues in most cases being decided by the arbitral tribunal itself and on the other by the
waiver doctrine. In particular, the waiver doctrine may be stretched to cover many situations if no decisive action is taken without undue delay by the party objecting to the
panel’s assumption of jurisdiction or any other act or omission.
A comparable approach also seems to have been adopted in terms of exclusivity.
The question is whether arbitration agreements should be interpreted to establish
exclusivity even in the absence of an express statement. In light of Article II of the
Convention, this interpretation would seem sufficiently motivated, and the failure to
insert the word exclusive should not be fatal. In any case, the word exclusive is considerably less necessary than the phrase “to the exclusion of conflict rules (private
international law)” is in choice-of-law clauses as a safeguard against the application of
conflict rules.21
The trend in interpreting arbitration agreements or clauses as to their scope has been
toward a wide interpretation in line with the trend in favor of the arbitrability of issues.
These “pro-arbitration” trends cover matters (i.e., issues) that in concreto have been
submitted to arbitration under an arbitration agreement and matters that in abstracto
may be so submitted.
Another issue is the reach and applicability of an arbitration agreement to parties
who are not in a strict sense parties thereto (i.e., when there is no privity of contract).
This issue may be approached from another angle by asking who has the right to participate, intervene, or join in arbitral proceedings. In general, third parties have no such
rights, and privity of contract forms a condition precedent to a person’s right to participate in the proceedings in any capacity.22 In addition, the confidential nature of
arbitration excludes even the presence of third parties from the proceedings without
the consent of the parties.23 In a multi-party arbitration agreement, a party to the agreement has the right to participate and be present unless otherwise agreed, even when no
claims have been made against or by that party. However, there may be situations
where sufficient grounds exist that the panel may by a procedural order limit a party’s
right to be present if he is neither a defendant nor claimant in the proceedings if other
parties to the dispute unanimously make the request. This may relate to trade secrets or
other such matters of confidential nature.24
21
Japan Act § 36(1):
The arbitral tribunal shall decide the dispute in accordance with such rules of law as
are agreed by the parties as applicable to the substance of the dispute. In such case, any
designation of the law or legal system of a given State shall be construed, unless otherwise
expressed, as directly referring to the substantive law of that State and not to its conflict of
laws rules.
24
Japan Act, supra note 4.
ICC Rules Art. 21(3) (see Appendices, p. 412). This rule deals primarily with the issue as to
privacy of the hearings but reflects the same principles. Compare, however, with Swiss Rules
Art. 4(2) that provides more flexibility.
Id. at Art, 20(7) and IBA Rules Art. 9(4) and (5) (IBA Rules on Taking of Evidence in
International Commercial Arbitration).
ICC Rules Art. 20 (7).
54
ARBITRATION AGREEMENT AS THE BASIS OF JURISDICTION
22
23
We have to remember that the arbitration-specific principles discussed above (principle of wide scope and exclusivity of the arbitration agreement) are not normative
principles such as due process or many principles of contract and procedural law.
Principles of exclusivity and wide scope of the agreement are rather descriptive generalizations of what the result of interpretation with support of normative principles
could be like. This means that an interpretation cannot be justified by them alone,
although their institutional support can be used as an argument for an interpretation.
For example, even though there are many good arguments for interpretations of wide
scope and exclusivity, by themselves they are in a way empty arguments.
In most of the cases, the access to justice argument is prima facie the most important
argument in interpretation concerning dispute resolution mechanisms, or the scope or
exclusivity of the agreement. Opposite to what is often presumed, the access to justice
argument does not necessarily work towards restricting arbitration, as it might just be
the other way around. Sometimes arbitration might in fact be the most efficient guarantee of access to justice in the case at hand. This has to be decided taking the
case-specific features into consideration.
The next chapters deal with various typical problems related to interpretation of
arbitration agreements and jurisdiction of the tribunal based on the agreement.
3.3.2 Assignment and Transfer
What if a party to the underlying agreement assigns the agreement as a whole to a new
party and this assignment is accepted by his contractual party, will the new party
(assignee) be bound by the arbitration agreement as well (i.e., may it invoke the arbitration clause, and does it have to submit to the jurisdiction of the arbitral panel if a
claim is filed against it in arbitration)? What if the assignment is not accepted by the
other contractual party? What if the assignment is not only accepted, but the assignor
is also released from contractual liability? What if the assignment covers certain rights
only, but not the agreement as a whole?
Under the prevailing doctrine, an arbitration agreement is legally separate and independent from the underlying agreement.25 The strict, formal, and consistent application
of this doctrine might lead to imposing a requirement of a separate assignment of the
arbitration agreement as well. In many cases, this would be absurd. An arbitration
agreement, although separate and independent, is ancillary in the sense that its assignment separately from the underlying agreement would have no substance or meaning.
Assignment of an arbitration clause without the underlying agreement would be pure
nonsense. Thus, the question is: does the assignment of an agreement or rights thereunder presumably also cover the arbitration agreement therein? No doubt this is an
issue of interpretation if there is no legal presumption in the applicable law. The interpretation should rather be in favor of the assignment covering the arbitration agreement
25
UNCITRAL Model Law Art. 16(1) (see Appendices, p. 490) (United Nations Commission on
International Trade Law (UNCITRAL) UNCITRAL Model Law on International Commercial
Arbitration UN Resolution on the UNCITRAL Model Law, Dec. 18, 2006). See also
UNIDROIT Art. 3.17.
ON INTERPRETATION OF THE ARBITRATION AGREEMENT
55
too, if the agreements are silent, at least in the absence of any indication to the contrary. Such a presumption may be stronger (1) if the arbitration clause is in the same
document, (2) if the whole underlying agreement is assigned and not just some contractual rights (e.g., receivables) and (3) if the assignment amounts to a release of the
assignor from the underlying agreement.26
An assignment de facto may also take place, in which case there is no acceptance or
release by the other party, and the de facto assignee becomes a party under the agreement only factually or via the assignor. All action he takes, he needs to do formally in
the name of the assignor, but at the assignee’s account and risk. Such assignments are
often in use when the assignment would require consent by a contractual party or a
third party, but such consent may not be easily acquired if at all.
3.3.3 Time Limit for the Award
The applicable arbitration act may impose a time limit for rendering the award.27 Also,
sometimes parties set a period of time in the arbitration agreement within which the
26
Nane Oganesyan, Law Firms Again Admitted before the Russian Arbitrazh Courts to Enforce
Arbitral Awards, IBA NEWSLETTER: ARB. AND ADR 80 (International Bar Association Section
on Business Law), Oct. 2004:
Importantly, the proceedings in this matter also add to the controversial issue of transfer of an
arbitration clause in case of assignment of the contract. The very fact that the Supreme Court
did not rule on the substantive issues (which were addressed by both parties in their pleadings) indicated that it did not find anything manifestly wrong in the lower court’s finding
that the arbitration clause did not necessarily pass upon the assignee in a case where the
remaining party did not give a consent to such an assignment. Prior jurisprudence shows that
this forum is reluctant to give attention to side issues, even where they do not govern the
ultimate decision.
27
Italy Act Art. 820 provides:
The parties may, in the arbitration agreement or by agreement preceding the acceptance of the
arbitrators, establish a time limit for the rendering of the award.
Unless a time limit has been established for the rendering of the award, the arbitrators must
render the award within two hundred and forty days from the acceptance of the appointment.
In any case the time limit may be extended:
(a) by means of written declarations by all parties addressed to the arbitrators;
(b) by the president of the tribunal indicated in Article 810, paragraph 2, upon reasoned
request by one of the parties or the arbitrators, after having heard the other parties; the time
limit may be extended only prior to its expiry.
Unless the parties have provided otherwise, the time limit shall be extended by one hundred
and eighty days in the following cases and for not more than once in each such case:
(a) if evidence must be taken;
(b) if expert advice is required ex officio;
(c) if an interim award or a partial award is rendered;
(d) if the composition of the arbitral panel is changed or the sole arbitrator is replaced.
The time limit for the rendering of the award shall be suspended during the suspension of the
proceedings. In any case, after the resumption of the proceedings the residual time limit, if
shorter, shall be extended to ninety days.
Code of Civil Procedure, Book Four, Title VIII, Arbitration, Amended by Legislative Decree of 2
February 2006, No. 40 as reported in JAN PAULSSON (ED), INTERNATIONAL HANDBOOK ON COMMERCIAL
ARBITRATION, (Kluwer Law International 1984 Last updated: April 2007 Supplement No. 49).
56
ARBITRATION AGREEMENT AS THE BASIS OF JURISDICTION
arbitral panel must render an award. Institutional rules often provide for similar deadlines although the period is perhaps automatically or semiautomatically extended in
practice if the award has not been given within the period originally agreed upon
or set.28
What are the consequences if the award has not been given within the period of
time agreed to or provided for by the applicable rules?29 An arbitration agreement is a
“mandate” given by the parties to the panel to settle the dispute in lieu of State courts.
If a time limit has been expressly agreed upon or if such a limit is imposed by the rules
incorporated into the agreement by reference, the mandate expires on the given deadline unless the parties have agreed or otherwise indicated that the deadline is a mere
legally meaningless wish.30 Although perhaps motivated by good intentions, such an
interpretation in the absence of unambiguous support would be radical as it would be
contrary to general rules of interpretation of contract, which is based on a literal interpretation and on the presumption that contract clauses have a meaning and purpose and are
not just “small talk” in writing.31 Finally, the parties may of course extend the deadline
28
AAA Rules 39 and 41 (see Appendices, p. 240) American Arbitration Association,
Commercial Arbitration Rules and Mediation Procedures (Including Procedures for Large,
Complex Commercial Disputes), as Amended and Effective on June 1, 2009); Arbitration Act
of England 1996 § 50 (see Appendices, p. 277); See also ICC Rules Art. 24 (see Appendices,
p. 413).
Argentina Act, supra note 6, Art. 755 provides:
1. If the parties have not fixed the term within the award is to be made, it shall be fixed by the
judge according to the circumstances of the case.
2. The term for issuing the award shall be continuous and shall only be interrupted when
replacement of arbitrators is required.
3. If any of the parties dies, the term shall be extended for thirty days.
4. At the request of the arbitral tribunal, the judge can extend the term for rendering the award
if the arbitrators are not responsible for the delay.
29
Italy Act, supra note 27, Art. 829 provides:
Notwithstanding any prior waiver, a recourse for nullity may be filed in the following
cases:. . .
(4) if the award exceeds the limits of the arbitration agreement, without prejudice to the
provision of Article 817…;
...
(6) if the award has been rendered after the expiry of the prescribed time limit, subject to the
provision of Article 821.
30
France Act Art. 1456:
If no time limit is fixed in the arbitration agreement for the arbitrators’ mission it shall be six
months from the day on which the last arbitrator accepts his mission.
The statutory or contractual time limit for the arbitrators’ mission may be extended at the
request of a party or of the arbitral tribunal by the President of the Tribunal de Grande
Instance, or, in the case envisaged by Art. 1444.2, of the Tribunal de Commerce.
(French Code of Civil Procedure—Book IV—Arbitration as reported in JAN PAULSSON (ED),
INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION, (Kluwer Law International 1984 Last
updated: February 1998 Supplement No. 26) pp. 26–12).
Argentina Act, supra note 6, Art. 756:
Arbitrators who without justification do not render their award within the stated term will lose
all right to their fees and will be, furthermore, held liable for costs and damages.
31
UNIDROIT Art. 4.5:
ON INTERPRETATION OF THE ARBITRATION AGREEMENT
57
at their convenience but no one else can do it on their behalf unless this power is vested
in a court of law or in an institution by the applicable rules.32
Should the deadline have passed without any award being rendered, certain issues
need to be resolved. One is who bears responsibility for the failure, the costs and expenses
incurred by the parties, and the arbitral panel’s fees and costs. This is an issue of liability. The reason for the failure may have been due to the parties, the arbitrator, or reasons
beyond the parties’ or the arbitrator’s control (e.g., illness), and thus a sort of force
majeure. Depending on the applicable rules, the arbitral panel may before the deadline
(but perhaps no longer after the deadline) render a decision or award as to the costs and
fees and who is liable for them when it becomes obvious that no award in the main
difference can be given before the deadline passes and no extension is obtained.
If the deadline has passed, another important material issue may arise. May the parties submit the disputes to courts of law, or was the deadline also a substantive statute
of limitations barring any action on the dispute in the future, and thus amounting to a
final loss of rights?
3.3.4 Time Limit in the Arbitration Clause as a Statute of
Limitation
Does the failure to render an award within the agreed period of time provided for in the
arbitration agreement function as a substantive statute of limitation barring any further
action in any other court, or just a closing of the entry to arbitration leaving the parties
with their ordinary rights and venues? If the arbitral proceedings were started within
the period of time stipulated but not completed prior to its expiration, and if no award
was given within the time limit, the initiation of the proceedings interrupts the running
of the substantive statute of limitation.33 However, the mandate to arbitrate has been
Contract terms shall be interpreted so as to give effect to all the terms rather than deprive
some of them of effect.
32
Italy Act, supra note 27, Art. 821 provides for a waiver:
The expiry of the time limit indicated in the preceding article may not be relied on as a ground
for the nullity of the award if the party, before the deliberation of the award as evidenced by the
decision (dispositivo) signed by the majority of the arbitrators, has failed to notify the other
parties and the arbitrators of its intention to rely on the termination of the arbitrators’ authority
33
UNIDROIT Art. 10.6:
(1) The running of the limitation period is suspended when the obligee performs any act,
by commencing arbitral proceedings or in arbitral proceedings already instituted, that is
recognised by the law of the arbitral tribunal as asserting the obligee’s right against the
obligor. In the absence of regulations for arbitral proceedings or provisions determining the
exact date of the commencement of arbitral proceedings, the proceedings are deemed to commence on the date on which a request that the right in dispute should be adjudicated reaches
the obligor.
(2) Suspension lasts until a binding decision has been issued or until the proceedings have
been otherwise terminated.
The same applies to ADR, UNIDROIT Art. 10.7:
58
ARBITRATION AGREEMENT AS THE BASIS OF JURISDICTION
exhausted, and new arbitral proceedings cannot be commenced except by agreement
of all the parties. In this case, the parties must be presumed to have the right to bring
the action before courts of law.
Does the failure to initiate arbitration proceedings or to file claims in arbitration
within the time provided have similar substantive effects? In addition, does a limitation period in an arbitration clause also constitute an implicit substantive statute of
limitations?
Under Article II(3) of the Convention, this seems to be the case as it provides a court
“shall, at the request of one of the parties, refer the parties to arbitration” and hence
dismiss the action. This article does not directly address the issue as to when the action
is brought, but its obvious purpose is to cover any and all actions brought within the
scope of the arbitration agreement. If the time for bringing action under the arbitration
agreement has expired, the arbitration agreement seems to operate as a statute of limitations as well, although not expressly drafted as such. However, should an action be
brought in a court of law within the time agreed or thereafter, but none of the parties
raises the jurisdictional objection, this may constitute a waiver of the right to arbitration and perhaps also a waiver of the right to invoke prescription depending on the
party’s pleadings and the applicable law.34 In some circumstances, a party may have
the right to file an action in State courts despite an enforceable arbitration agreement
under the applicable arbitration law or on the grounds of cancellation of the arbitration
agreement because of breach thereof by another party.35
In the absence of clear rules to this effect, the issue seems to be one of interpretation.
May a rebuttable presumption be made imposing on one or the other party the burden
of proof of a contrary intention or purpose? In the light of arbitration practice, a presumption in favor of an implicit material statute of limitation seems justified at least in
international commercial disputes.
How much weight, if any, does the word exclusive bring to the interpretation? Does
the exclusivity relate to the period of validity of the mandate for arbitration only, or is
it a statute of limitations clause providing: “no later and in no other venue”? The word
exclusive may create a presumption in favor of a substantive time bar indicating the
purpose “here but nowhere else,” thereby shifting the burden of proof of another intention or purpose to the party advocating for another interpretation. However, this rule is
not written in stone. For instance, it would seem to lose most of its persuasiveness if
the exclusivity is one-sided as it is in many jurisdiction clauses of financial and banking agreements. If the draftsmen left the issue open or could not agree on “the time bar
effects”, the issue is one of interpretation.
The provisions of Articles 10.5 and 10.6 apply with appropriate modifications to other proceedings whereby the parties request a third person to assist them in their attempt to reach an
amicable settlement of their dispute.
34
35
See Arbitration Act of England 1996 § 13(1–2) (see Appendices, p. 260).
Finland Arbitration Act, § 6. This applies to repudiation, including failure to appoint an arbitrator or pay the security.
ON INTERPRETATION OF THE ARBITRATION AGREEMENT
59
3.3.5 Guarantor’s or Indemnitor’s Right to Invoke
an Arbitration Agreement
Many agreements or commitments are made only on the condition that the performance of a party is backed up by an undertaking of a third party as an additional
security arrangement (guarantee). The guarantee or indemnity may cover all of
the performance, a part of the performance, a specific obligation only, damages,
repayment of monies or advances made, etc. For the sake of simplicity, the word guarantee is used to cover all types of these instruments and comparable security
arrangements.
The methods in which the security or guarantee functions and fulfils its purposes
vary. It may be, for example:
(i) a fixed amount of money;
(ii) an open amount of money (damages payable, remaining costs) generally with a
“cap”;
(iii) a specific performance (e.g., completing the works or causing them to be
completed and/or financing this regardless of what it may cost or with a cap
(“bond”).
The guarantee instrument may be, for example:
a)
b)
c)
d)
e)
f)
g)
h)
i)
an indemnity agreement;
a bank guarantee;
a guarantee by a person or company;
a commercial letter of credit (generally issued by a bank);
a bond;
an on-demand guarantee or standby letter of credit;
a combination of a guarantee and a collateral;
a collateral given as a security by a third party;
an insurance.
These instruments, and the performance by the guarantor or indemnitor thereunder,
are traditionally conditioned on certain things, but the terminology may vary in practice.
The material terms and conditions may also vary considerably although the instruments
have been issued as general guarantees or on-demand guarantees. The conditions or
“the trigger” causing the guarantor’s obligation to mature are in general:
(i) breach of an agreement or other corresponding failure by the principal debtor;
and/or
(ii) proof of damage or loss; and/or
(iii) a court decision or an arbitral award; and/or
(iv) a simple or a more motivated demand by the beneficiary of the instrument (i.e.,
the creditor).
60
ARBITRATION AGREEMENT AS THE BASIS OF JURISDICTION
In the simplest form, a simple demand by the beneficiary is the only condition to
trigger the payment obligation of a guarantor under an on-demand guarantee or a
standby letter of credit.
Should there be a dispute between the beneficiary and the guarantor (including or
excluding the principal debtor), what are the rights of the parties to invoke the arbitration clause in the underlying agreement against the guarantor, or the rights of the
guarantor against the other parties in the absence of an express agreement of the parties
or express rules of the applicable law to the effect? If the guarantee instrument contains an arbitration or jurisdiction clause of its own, it may well be exclusive. Even in
such an event the guarantor may acquire additional rights by way of subrogation from
the principal debtor after the guarantor has performed under the guarantee instrument
(and may thus, in theory, have two jurisdiction clauses to choose between).
No doubt this is a question of interpretation. To what extent is it subject to ordinary
rules of interpretation, or are there special features or aspects to be taken into account?
Depending on the facts of the individual case, these may include the following:
(i) the guarantee may be a unilateral undertaking (a letter of credit) or an agreement
(an indemnity). Its bilateral or multilateral character may have an influence on the
interpretation.
(ii) if the guarantor has performed under the guarantee, the rights of the beneficiary
(creditor) against the principal debtor are generally assigned to the guarantor by
force of law or agreement (subrogation) for recovery from the principal debtor.
The principal debtor may also have the right of recourse against the beneficiary
for unfair calling of the guarantee or a counterclaim on another contractual
ground. This could establish the right to the guarantor to invoke the arbitration
clause in the underlying agreement.
(iii) some guarantees are very closely related to or almost identical with the underlying
agreement (providing for specific performance, bonds, etc.) whereas some are
independent and separate thereof (letters of credit issued by banks). In the “independent” group, the interpretation in favor of extending the arbitration agreement to
guarantors may not be as well-founded, whereas in the first group it may be crystal
clear.
There is such a variety of instruments and conditions that general rules may be
impossible to identify. There are, however, things in common to all these instruments.
All the instruments are ancillary. Some are independent from, and some similar to
or even identical with the obligation of the principal debtor. In the event of performance by the guarantor, the interpretation or analysis may change and the right
to arbitrate may be less doubtful or even beyond doubt. If this is the case, should the
situation prior to performance by the guarantor be treated any differently? In many cases,
a presumption in favor of the guarantor’s right to invoke the arbitration clause seems
well-motivated and rational. This applies, in particular, to situations where at least
de facto involvement of all parties in the proceedings is necessary or de jure
indispensable.
ON INTERPRETATION OF THE ARBITRATION AGREEMENT
61
3.4 UNCONSCIONABILITY OR UNREASONABILITY
An arbitration agreement may be very one-sided. Sometimes this may be a natural
consequence of the character of the underlying agreement or the probabilities as to
which of the parties may need legal protection (e.g., licensing patented technology)
and have no “reproachable” elements in it. The best example to demonstrate this justified one-sidedness comes from the financial realm as in lending, as for the one who
lends money almost any ordinary contractual right or remedy is necessary and reflects
no elementary abuse or coercion.36
36
A sample clause used in the practice of law:
(a) Any dispute, controversy or claim arising out of or relating to this Agreement, or the
breach, termination or invalidity hereof, shall be settled by arbitration in accordance with the
UNCITRAL Arbitration Rules as at present in force. There shall be one arbitrator and the
appointing authority shall be the London Court of International Arbitration. The seat and
place of arbitration shall be London, England and the English language shall be used throughout the arbitral proceedings. The parties hereby waive any rights under the Arbitration Act
1996 or otherwise to appeal any arbitration award to, or to seek determination of a preliminary point of law by, the court of England. The arbitral tribunal shall not be authorized to take
or provide, and the Borrower agrees that it shall not seek from any judicial authority, any
interim measures of protection or pre-award relief against the Bank, any provisions of
UNCITRAL Arbitration Rules notwithstanding. The arbitral tribunal shall have authority to
consider and include in any proceeding, decision or award any further dispute properly
brought before it by the Bank (but no other party) insofar as such dispute arises out of any
Financing Agreement, but, subject to the forgoing, no other parties or other disputes shall be
included in, or consolidated with, the arbitral proceedings. In any arbitral proceeding, the
certificate of the Bank as to any amount due to the Bank under any Financing Agreement
shall be prima facie evidence of such amount.
(b) Notwithstanding Section (a), this Agreement and the other Financing Agreements, and
any rights of the Bank arising out of or relating to this Agreement or any other Financing
Agreement, may, at the option of the Bank, be enforced by the Bank in the courts of the
Russian Federation or in any other courts having jurisdiction. For the benefit of the bank, the
Borrower hereby irrevocably submits to the non-exclusive jurisdiction of the courts of
England with respect to any dispute, controversy or claim arising out of or relating to this
Agreement or any other Financing Agreement, or the breach, termination or invalidity hereof
or thereof. The Borrower hereby irrevocably designates, appoints and empowers . . . to act as
its authorised agent to receive service of process and any other legal summons in England for
purposes of any legal action or proceeding brought by the Bank in respect of any Financing
Agreement. The Borrower hereby irrevocably consents to the service of process or any other
legal summons out of such courts by mailing copies thereof by registered airmail postage
prepaid to its address specified herein. The Borrower covenants and agrees that, so long as it
has any obligations under this Agreement, it shall maintain a duly appointed agent to receive
service of process and any other legal summons in England for purposes of any legal action
or proceeding brought by the Bank in respect of any Financing Agreement and shall keep the
Bank advised of the identity and location of such agent. Nothing herein shall affect the right
of the Bank to commence legal actions or proceedings against the Borrower in any manner
authorised by the laws of any relevant jurisdiction. The commencement by the Bank of
legal actions or proceedings in one or more jurisdictions shall not preclude the Bank from
commencing legal actions or proceedings in any other jurisdiction, whether concurrently or
not. The Borrower irrevocably waives any objection it may now or hereafter have on any
grounds whatsoever to the laying of venue of any legal action or proceeding and any claim it
62
ARBITRATION AGREEMENT AS THE BASIS OF JURISDICTION
However, there are instances where one-sidedness or other terms of conditions are
unreasonably burdensome or amount to a de facto denial of justice.37 This hardship in
the arbitration agreement may be due to the dominance of a party or its specific leverage resembling coercion.38 The element of unreasonableness may have existed already
at the time the agreement was concluded or it may have arisen subsequently due to a
change of circumstances in general or only as to one of the parties without his own
fault. These equitable considerations may lead to an adjustment of the clause or even
to its unenforceability. It may also be a factor in the interpretation even when not
amounting to a ground for invalidity or unenforceability.39
may now or hereafter have that any such legal action or proceeding has been brought in an
inconvenient forum.
37
Japan Act Supplementary provisions 3(2) and (4) provides:
(2) A consumer may cancel a consumer arbitration agreement. Provided, this shall not apply
in the event that the consumer is a claimant in arbitral proceedings based on the consumer
arbitration agreement.
...
(4) For the time being until otherwise enacted, any arbitration agreements concluded following the enforcement of this Law, the subject of which constitutes individual labor-related
disputes (which means individual labor-related disputes as described in article 1 of the Law
on Promoting the Resolution of Individual Labor Disputes [Law No.112 of 2001]) that may
arise in the future, shall be null and void.
38
Japan Law, supra note 4.
UNIDROIT Art. 3.10:
(1) A party may avoid the contract or an individual term of it if, at the time of the conclusion
of the contract, the contract or term unjustifiably gave the other party an excessive advantage.
Regard is to be had, among other factors, to (a) the fact that the other party has taken unfair
advantage of the first party’s dependence, economic distress or urgent needs, or of its improvidence, ignorance, inexperience or lack of bargaining skill; and (b) the nature and purpose of
the contract.
(2) Upon the request of the party entitled to avoidance, a court may adapt the contract or term
in order to make it accord with reasonable commercial standards of fair dealing.
(3) A court may also adapt the contract or term upon the request of the party receiving notice
of avoidance, provided that that party informs the other party of its request promptly after
receiving such notice and before the other party has acted in reliance on it. The provisions of
Article 3.13(2) apply accordingly.
UNIDROIT Art. 3.11:
(1) Where fraud, threat, gross disparity or a party’s mistake is imputable to, or is known or
ought to be known by, a third person for whose acts the other party is responsible, the contract
may be avoided under the same conditions as if the behaviour or knowledge had been that of
the party itself.
(2) Where fraud, threat or gross disparity is imputable to a third person for whose acts the
other party is not responsible, the contract may be avoided if that party knew or ought to have
known of the fraud, threat or disparity, or has not at the time of avoidance acted in reliance
on the contract.
39
Determination of the validity of the arbitration clause ultimately lies within the jurisdiction of
the courts. However, the panel itself nonetheless decides even this issue as a “competence de
competence” one at the first stage, then allowing the proceedings to continue or dismissing the
action altogether.
UNCONSCIONABILITY OR UNREASONABILITY
63
The primary framework in which the problem of unfair arbitration agreements has
to be judged is, of course, the question of access to justice. Access to justice might be
hindered in many ways, including both economically or procedurally.
If the arbitration agreement leads to a procedure so expensive that one of the parties
cannot afford it, the party is denied access to justice. This has been discussed in practice as well. For example, an ICC tribunal relied expressly on Article 6(1) of the
European Convention on Human Rights (ECHR) in holding that increasing one’s
opponent’s arbitration costs was a reasonable limitation on the right of access to
justice because it was possible for the party to litigate in State courts.40 However, the
Supreme Court of Finland decided that when one of the parties had become insolvent
and could not afford to get the case arbitrated, the arbitration agreement had become
unreasonable. This was also due to the fact that the insolvent businessman could
receive legal aid if the case were tried in court, but not in arbitration.41 What is interesting in the two cases from a legal argument point of view is that the Finnish Supreme
Court approached the matter on the basis of national contract law and only used the
procedural problem as a supporting argument or criterion in a contract law problem,
whereas the ICC tribunal argued directly on the basis of human rights and access to
justice. These differences show that the problems related to the cost of arbitration and
access to justice are far from solved.
To be clear, the problems related to cost of arbitration and access to justice can
basically be discussed using three different terminologies:
1) Human rights and access to justice as due process principles also confirmed in
ECHR 6(1);
2) Contract law and the doctrines of supervening impossibility of performance and
release on grounds of justice; and
3) Article II(3) of the Convention, which refers to an arbitration agreement incapable
of being performed.42
The ultimate argument is clearly the procedural one, i.e. number one above. This
perspective is probably most often the perspective of a State court deciding whether it
has jurisdiction in the case and whether the negative jurisdictional effect of the arbitration agreement is hindering the proceedings. It might, of course, also be the perspective
of an arbitral tribunal deciding on jurisdiction. In the latter case, contract law approaches
or the relatively artificial Convention approach might more easily be applied.
However, a party cannot be released from an arbitration agreement just by saying
arbitration is too expensive. First, a party should not too easily free itself from the
procedural agreements it has made, as they are basically binding. The party has to have
something to support the argument that had it known the circumstances or had a
realistic chance to act differently, the contract would not have been made. Second,
42
See GEORGIOS PETROCHILOS, PROCEDURAL LAW IN INTERNATIONAL ARBITRATION 126 (2004) and
ICC 9667/1998 (2002), in Rev Arb 1009, 1015–16.
Supreme Court of Finland decision [KKO 2003:60], see also PETROCHILOS, supra note 40, at 128.
See PETROCHILOS, supra note 40, at 128.
64
ARBITRATION AGREEMENT AS THE BASIS OF JURISDICTION
40
41
arbitration might not be the most expensive way to resolve the dispute of the parties.
But in many cases, the problem in practice comes down to a question of resources, as
the party with less may not be able to get the procedure started even if the case would
be a clear winner. It might also be that the procedure is too onerous or the division of
legal costs is such that substantive rights cannot be protected.
Some additional criteria for the evaluation of unreasonableness of the contract could
be given in addition to the access-to-justice argument. This circumstantial criterion
could be seen as more contractual than procedural. In general, attention should be paid
to the position of the parties of the contract and whether or not they are equal. Typically
the parties are not in equal position if one is a major company and one is a consumer.
Second, it might often be relevant whether the jurisdictional effect is based on an
actual arbitration agreement or just an arbitration clause in a substantive contract. If
arbitration is based on a clause, the agreement can more easily be found unreasonable.
Third, the contract process might affect the evaluation. If the arbitration agreement is
included in a standard contract and one of the parties has had no real chance to influence its content, this lends support for setting the arbitration clause aside. Clearly it is
always important by whom the contract is formulated.
The question of costs should be considered together with the circumstantial criteria
described above. What is expensive is always relative. The costs of the expected arbitration should be compared with the usual costs of dispute resolution in the context in
question. Naturally, if the alternative to arbitration is a State court, the cost of that
court should be taken into consideration. We should also remember that in arbitration
the award is final so there are no costs of appeal.
Arbitration has a reputation for being expensive, which is probably often true.
Compared to the courts, in arbitration the costs of the judges and the infrastructure in
a broader sense are allocated to the parties. However, courts are not cheap either. It
varies from case to case whether a natural comparison is the cost of one round in state
courts or whether one or more appeal procedures will likely be necessary. If the case
is only about getting an enforceable decision, the natural comparison is to one trial
only. But if the case is very unclear and the parties are motivated to see it through till
the very end, a better comparison might be the costs of a final decision in a single arbitration proceeding to possibly up to three rounds of trials and hearings in the courts. In
addition, the easy enforceability of arbitral awards internationally may have value if
the award needs to be enforceable in more than one country. In many cases, the higher
cost of arbitration might be a myth.
The arbitration agreement might be also unreasonable for other reasons unrelated to
costs. For example, the procedures may be unreasonable due to an unfair selection of
the panel43 or limitations on a party’s right to present his case.44 It might be that the
procedure is not so unfair that it would violate minimum due process requirements on
any single element, but seen as a whole may appear unbalanced or ineffective. In these
cases it might be necessary to consider whether the arbitration agreement should be set
aside on the basis of due process principles.
43
44
See, e.g., LARS HEUMAN, ARBITRATION LAW OF SWEDEN: PRACTICE AND PROCEDURE 114 (2003).
See PETROCHILOS, supra note 40, at 127.
UNCONSCIONABILITY OR UNREASONABILITY
65
Alternatively, an agreement does not necessarily need to be set aside completely to
make it equitable as a partial change might be enough. For example, the process might
be simplified to make it cheaper or the selection of the panel or procedure might be
changed to make the arbitration more fair (and the agreement thus more equitable).
This way the original intent to arbitrate or at least an acceptance of arbitration could be
respected.
However, whether modification of the agreement is possible depends on the situation. If the question whether the arbitration agreement is sufficiently equitable to be
binding arises when a jurisdictional determination is being made by a State court, the
practical alternatives are either to accept jurisdiction due to problems in the arbitration
agreement or to reject jurisdiction as a result of a binding arbitration agreement. Further
possibilities exist if the problem comes up in arbitration or when enforcing the arbitration agreement.
It should be clear that if the agreement is made equitable by tribunal due to the
agreement originally being unreasonable or unfair, this cannot be considered as a
breach of agreement by the tribunal. The tribunal of course has a duty to justify the
decisions it makes in this respect.
3.5 THE ENFORCEABILITY OF AN ARBITRATION AGREEMENT
AND DUE PROCESS
3.5.1 Agreement Defining Due Process?
The enforceability of an arbitration agreement as to its original contents, including
its further modifications (in particular those made during the proceedings), is a very
interesting issue.45 As an agreement, although perhaps sui generis, it is to be treated as
any other contract with such exceptions as may be applicable due to its special character.
We could question how many truly enforceable elements may exist apart from and
beyond the jurisdictional effect. An answer is apparent in the light of the Convention
in retrospect to Article V(1)(d):
Recognition and enforcement of the award may be refused . . . proof that:
. . . (d) The composition of the arbitral authority or the arbitral procedure was not
in accordance with the agreement of the parties . . .
The key phrase here is “the arbitral procedure was not in accordance with the agreement”. The wording does not cover just the original agreement, but obviously all
subsequent agreements including those made during the proceedings. Thus it seems
that agreement of the parties on arbitral procedure or better respecting the agreement
of the parties constitutes part of international due process. Even if no mechanical connection with due process and the agreement was made, clearly respect for the agreements
45
Most defaults relate to passivity of a party, and in general are dealt with in accordance with
AAA Rule 29 (see Appendices, p. 237).
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ARBITRATION AGREEMENT AS THE BASIS OF JURISDICTION
of the parties is a key element in fairness of the procedure. Although it might sound
strange for a traditional procedural law scholar, it is actually quite natural. Why should
the parties not be able to stipulate on the procedure in general? After all, it is not a
completely strange institution to court procedure. And if the parties are at least to a
certain extent allowed to decide about the procedure, why should these agreements not
be protected in general?
Arbitral proceedings are based on the arbitration agreement forming the foundation
and “the umbrella” under which the proceedings are conducted. In this sense, arbitral
proceedings are contractual and all procedural acts and omissions of the parties and
the arbitrators are contractual acts. Further, this would seem to mean that the arbitration agreement in itself must be enforceable in the arbitration.
A breach or violation of the agreement on procedural matters may be committed by
the other party to the agreement or by the arbitrators. But do all deviations from the
agreement count? What are the criteria necessary to constitute an enforceable arbitration agreement? What are the sanctions if the parties’ agreement parties is not respected?
Article V of the Convention provides that “the award may be refused” (emphasis
added), which means the refusal is not automatic and requires action and proof. Is
there discretion beyond this? Must the violation be material or significant or of such a
nature that it may have had an effect on the outcome? The Convention leaves the door
open to many interpretations.
As arbitration may be analyzed as a contractual performance (although perhaps
somewhat sui generis as such), it is subject to contract principles. In order for a breach
of the agreement to lead to refusal of enforceability, the breach should be material (i.e.,
there is a de minimis rule and insignificant deviations do not cause unenforceability).
The right test of materiality might be whether the breach could have had an effect on
the outcome rather than whether it actually did have an effect.46
46
Specific performance of a commercial agreement is limited by a number of considerations;
UNIDROIT Art. 7.2.2:
Where a party who owes an obligation other than one to pay money does not perform, the
other party may require performance, unless—
(a) performance is impossible in law or in fact;
(b) performance or, where relevant, enforcement is unreasonably burdensome or expensive;
(c) the party entitled to performance may reasonably obtain performance from another
source;
(d) performance is of an exclusively personal character; or
(e) the party entitled to performance does not require performance within a reasonable
time after it has, or ought to have, become aware of the non-performance.
If not available or claimed, other remedies are available. UNIDROIT Art. 7.2.5 provides:
(1) An aggrieved party who has required performance of a non-monetary obligation and who
has not received performance within a period fixed or otherwise within a reasonable period
of time may invoke any other remedy.
(2) Where the decision of a court for performance of a non-monetary obligation cannot be
enforced, the aggrieved party may invoke any other remedy.
THE ENFORCEABILITY OF AN ARBITRATION AGREEMENT AND DUE PROCESS
67
3.5.2 Good Faith of the Parties
Theories have been launched that an arbitration agreement imposes a general obligations of good faith on both parties to collaborate to form an “ideal procedure”. There
is also statutory support for this.47 In generic terms, this would mean that the parties are
under a duty actively to take part in the proceedings in order to have the disputes settled expeditiously and cost effectively.48 Arbitration is based on a contract on procedure,
and all contracts are subject to the duty of good faith.49 The duty should not be exaggerated, but it may apply at least to certain specific obligations even in the absence of
rules to the effect. Swiss Rules Article 15(6) provides:
All participants in the arbitral proceedings shall act in accordance with the requirements of good faith.
In reality, the party who feels insecure of his chances to prevail or knows that he is
in breach of the underlying agreement and expects that the award will be against him
is often not at all willing to contribute to the ideal procedure the parties perhaps contemplated before the disputes arose. In fact a party in breach may resort to various
dilatory tactics and attempt to conceal the facts.50
47
48
Arbitration Act of England 1996 § 40 (see Appendices, p. 272).
Id. § 41(3) (see Appendices, p. 272). UNIDROIT Art. 4.1:
(1) A contract shall be interpreted according to the common intention of the parties.
(2) If such an intention cannot be established, the contract shall be interpreted according to
the meaning that reasonable persons of the same kind as the parties would give to it in the
same circumstances.
49
UNIDROIT Art. 1.7:
(1) Each party must act in accordance with good faith and fair dealing in international trade.
(2) The parties may not exclude or limit this duty.
U.C.C. § 1-102(3):
The effect of provisions of this Act may be varied by agreement, except as otherwise
provided in this Act and except that the obligations of good faith, diligence, reasonableness
and care prescribed by this Act may not be disclaimed by agreement but the parties may by
agreement determine the standards by which the performance of such obligations is to be
measured if such standards are not manifestly unreasonable.
and §1-203:
Every contract or duty within this Act imposes an obligation of good faith in its performance
or enforcement.
50
See Nudrat Majeed, Good Faith and Due Process: Lessons from the Shari’ah, 20 ARB. INT’L.
(2004).
Japan Act § 33 provides:
(1) If the claimant violates the provisions of article 31, paragraph (1), the arbitral tribunal
shall make a ruling to terminate the arbitral proceedings. Provided, this shall not apply in the
case where there is sufficient cause for the violation.
(2) If the respondent violates the provisions of article 31, paragraph (2), the arbitral tribunal
shall continue the arbitral proceedings without treating such violation in itself as an admission of the claimant’s allegations.
(3) If any party fails to appear at an oral hearing or to produce documentary evidence, the
arbitral tribunal may make the arbitral award on the evidence before it that has been
collected up until such time. Provided, this shall not apply in the case where there is
68
ARBITRATION AGREEMENT AS THE BASIS OF JURISDICTION
Reluctance or passivity may of course also be attributed to fully acceptable reasons.
Is a party using his legitimate rights to defense when appearing not to collaborate or
when violating his duty under the arbitration agreement to act in good faith? Although
some kind of loyalty (at least at a technical level) is demanded in litigation in general
courts, it could be said that a party has a broader duty of loyalty toward the opposing
party and the tribunal in arbitration as the party has specifically agreed to solve the
dispute in arbitration. It seems that at least failure to pay the security for costs and fees
or an advance payment required by the panel or by the rules of the institute could constitute a breach of the arbitration agreement. As the duty is so specific, this may create
an actionable right to be enforced in the very same arbitral proceedings as one of the
claims or as a preliminary claim.51 Such a claim could in many cases be subjected to
interim measures or temporary orders in courts of law, but this depends on the arbitration law and other rules applicable to the arbitration agreement.52
A party’s failure to perform in accordance with his duties under the arbitration
agreement may be enforced in courts other than the arbitral tribunal itself, including
via interim measures taken in the courts. As the ultimate control over arbitration rests
with the courts, at least in theory the agreement may be enforced by way of a declaratory claim (as to interpretation) or by an order for specific performance.53 However, in
reality this procedure may be too slow or otherwise impractical, in particular if a foreign
State court decision or order cannot be immediately enforced in the arbitration.
3.5.3 Possible Action in Case of Disloyalty
A breach of the arbitration agreement may give the other party the right to file the
claim(s) in court instead of arbitration, resulting in de facto and de jure termination or
cancellation of the arbitration agreement and constituting a (statutory) waiver.54 A
breach of an arbitration agreement may even in other instances not covered by express
sufficient cause with respect to the failure to appear at an oral hearing or to produce documentary evidence.
(4) The preceding three paragraphs shall not apply when otherwise agreed by the parties.
51
52
53
54
Japan Act, supra note 4.
The law and practice in this area is developing; however, on its face it seems a party should
prefer enforcement in arbitration by specific performance in lieu of other remedies or venues.
See Xavier Favre-Bulle, Les consequences du non-paiement de la provision pour frais de
l’arbitrage par une partie—Un tribunal arbitral peut-il condamner un défendeur au paiement
de sa part de l’avance de frais?, ASA BULLETIN (2001).
The panel and court may both have jurisdiction on these issues. The court may sometimes give
orders ex parte, which seems not to be possible in arbitration unless expressly so authorized by
the applicable rules.
There may be partly overlapping jurisdiction in the arbitral panel and in state courts. Arbitration
agreements should primarily be enforced by way of specific performance as opposed to damages, as damages as a remedy seem in most cases inappropriate and against the intention and
will of the parties.
E.g., Finnish Arbitration Act § 6 provides for the right of cancellation if the other party fails to
appoint an arbitrator or pay a security.
THE ENFORCEABILITY OF AN ARBITRATION AGREEMENT AND DUE PROCESS
69
provisions of any statute or rule constitute such a waiver, releasing the other party from
the jurisdictional limitations imposed on him by the arbitration agreement. It is difficult to determine any reason arbitration agreements should be treated differently from
other types of agreements except the right to enforce the arbitration agreement in the
arbitration by specific performance or other remedies. Once the proceedings have gone
forward, the right to cancel may be deemed to have been waived or at least the materiality required for cancellation is elevated considerably.
An arbitration agreement may thus give grounds for a number of actions or rights
such as:
(i) An action (for specific performance) to enforce the agreement or a duty thereunder in the arbitration itself. This could in some cases be a decision, as an interim
or protective measure, a partial award or procedural order by the arbitral panel;
(ii) An action (for specific performance) to enforce the arbitration agreement or any
duty thereunder in an action filed in a state court having jurisdiction. This would
in most cases be some kind of a protective or interim measure;
(iii) The breach may constitute a waiver releasing the other party from the arbitration
agreement and entitling the non-breaching party to cancel or terminate the arbitration agreement altogether and possibly also to claim damages for the breach.
If the breach of the other party relates to the agreements reached between the parties
during the arbitration proceedings, an action to enforce that agreement may not be
heard by a court during the proceedings at all, as such an action could infringe on the
autonomy of the arbitral proceedings and the power and authority of the panel to
manage them. However, after the proceedings, such a bar would no longer exist, leaving the party the right to attempt to set an unfavorable award aside before courts of law.
As a general principle, intervention by the courts in the arbitral proceedings during
the proceedings should be limited to the very minimum even when it is indirectly in
support of the proceedings.
3.5.4 Non-Respect of the Agreement by the Arbitral Tribunal as
Violation of Due Process
The arbitration agreement may be a simple clause or an extensive set of rules. In many
cases, it refers to one or several sets of rules of arbitration or to statutes, which all by
reference form “the arbitration agreement” as opposed to the simple “arbitration
clause”. The arbitration agreement thus defines both the process of settling the difference and the substantive scope of the mandate. Disregard or violation of this procedural
agreement may lead to the decision or award being set aside under the Convention or
applicable laws.55
55
Japan Act, supra note 4, § 44(1)(vi–viii) provides:
(vi) the composition of the arbitral tribunal or the arbitral proceedings were not in accordance
with the provisions of the laws of Japan (or where the parties have otherwise reached an
70
ARBITRATION AGREEMENT AS THE BASIS OF JURISDICTION
An arbitration agreement is a contract. The contract or agreement is sui generis
covering mostly procedural issues.56 In a sense, it is a multiparty agreement to which
the arbitrators are also parties when they agree to act as arbitrators. In England, the Act
1996 defines the duties of the panel as follows:
(1) The tribunal shall
(a) act fairly and impartially as between the parties, giving each party a
reasonable opportunity of putting his case and dealing with that of his opponent,
and
(b) adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay or expense, so as to provide a fair means for the resolution
of the matters falling to be determined.
(2) The tribunal shall comply with that general duty in conducting the arbitral
proceedings, in its decisions on matters of procedure and evidence and in the exercise of all other powers conferred on it.57
In an arbitration agreement, the parties have different rights and duties as with many
other contracts—and there is nothing special about that. Once the arbitral panel has
been constituted, it may face agreements on procedure of various types:
(i) The “original” agreement and other agreements on procedure concluded by the
parties prior to the initiation of the proceedings.
(ii) Agreements concluded by the parties during the proceedings.
(iii) Agreements concluded between the parties and the panel during the proceedings.
Another category is the orders given by the panel in the absence of agreement by the
parties (i.e., in the absence of an agreement on an issue that the panel has the mandate
to set the rule, and in a sense “to conclude the agreement for the parties”). Even before
the panel has been constituted, issues exist that are beyond the powers of the parties to
agree on in general (e.g., ordre public) or special issues that are so intimately related
to the proceedings and the person of the arbitrator that the parties cannot agree on them
without the agreement of the arbitrator (e.g., the parties cannot agree that the arbitrator
must conduct an inspection of construction works in a war zone). Accordingly, to form
a binding agreement on procedure, some matters must be consented to by the arbitrators. Certain issues (e.g., relating to the conduct or management of the proceedings
including the element of intelligence, division of burden of proof and establishing of
relevant facts, burden of education, consideration, deliberations, what is to be deemed
agreement on matters concerning the provisions of the law that do not relate to the public
policy, such agreement);
(vii) the claims in the arbitral proceedings relate to a dispute that cannot constitute the
subject of an arbitration agreement under the laws of Japan; or
(viii) the content of the arbitral award is in conflict with the public policy or good morals of
Japan.
56
57
Lord Mustill disagrees to some extent in his in-depth analysis of an arbitration agreement.
Michael J. Mustill, Is It a Bird, LIBER AMICORUM CLAUDE REYMOND 205–18 (2004).
Arbitration Act of England 1996 § 33 (see Appendices, p. 269).
THE ENFORCEABILITY OF AN ARBITRATION AGREEMENT AND DUE PROCESS
71
established, legal conclusions, motivations to the decisions or awards, etc.) remain
within the exclusive powers of the arbitrators. Thus, the parties do not have an unlimited freedom to agree on everything regarding procedure.
Should the arbitrators not respect the arbitration agreement or agreements on procedure, a party may claim or demand the panel to remedy the failure. If this does not lead
to the desired measures and respect for the agreement, a failure by a party to protest or
reserve its right may constitute a waiver resulting in a loss of the right to have the
award set aside or to prevent the enforcement of the award on this ground. The less
significant the failure, the more easily the waiver is constituted. What is significant
may vary and be very difficult to assess, and an exact definition may not be given. If
the breach of the panel is material and violates the very core of due process, and no
reasonable action by the party in the arbitral proceedings has remedied the failure,
court action may be available. The courts of the seat of arbitration and the arbitral law
of the place of arbitration (i.e., lex arbitri) are the primary sources of legal protection
either by way of ordinary action under arbitration law or by resort to protective or
interim measures if this is possible under lex arbitri.58 In addition to remedies specifically available under lex arbitri, a violation of international due process may be a
sufficient ground for remedial action in court. Finally, actions to set aside the award or
stop its enforcement are available, but they may not necessarily provide the relief
sought.
Should all the parties object to the arbitral tribunal’s acts or omissions, the parties
may unanimously cause the arbitrator(s) to resign and terminate the proceedings (“the
veto”).59 However, the arbitrator may defend his position if the issue lies within his
exclusive powers, his acts or omissions are well-founded in due process or his personal
ethics, or if the collusive acts of the parties have reduced his role to being an instrument of unlawful activity. Should such a conflict arise, a hearing should be held and
the arbitrator should offer his resignation or, in an extreme case, simply refuse to continue and close the proceedings altogether.60
If the arbitrator has been acting in bad faith, deliberately concealing a bias, having
concealed communications with a party or parties or their representatives beyond the
hearings (violating thereby the audi alteram partem principle and depriving a party
from presenting his case or failing to inform other arbitrators or parties exhaustively
58
59
60
Id. § 68 (1–3) (see Appendices, pp. 283–84).
Id. at §§ 23 and 24 (see Appendices, pp. 264–65).
Id. at § 25. See also Gabrielle Kaufmann-Kohler, Qui contrôle l’arbitrage? Autonomie des
parties pouvoirs des arbitres at principe d’efficacité, LIBER AMICORUM CLAUDE REYMOND 162
(2004):
En résumé, soit l’arbitre n’a d’autre choix que de démissionner, soit sa sentence court le
risqué de se voir refuser l’execution. Même si elle s’abat rarement, l’épée de Damoclès est
là, qui menace l’effectivité de l’arbitrage.
If a party has submitted forged documents, a witness committed perjury, an expert testified in
bad faith, or party having used other fraudulent methods or otherwise grossly acted in bad faith,
such acts by a party may be deemed to constitute material breaches of the arbitration agreement
as well as violations of due process and ordre public, with the consequence of making the
award unenforceable or null.
72
ARBITRATION AGREEMENT AS THE BASIS OF JURISDICTION
about such contacts or communications), or accepting concealed payments or fees or
other compensation aside, such behavior (even when constituting only “a minor detail”)
must be assessed with extreme strictness and may constitute a material breach of
express or implied conditions of the arbitration agreement. Even in its most innocent
forms, such conduct is likely to constitute a violation of due process and ordre public
and may result in the voidability or nullity of the award.
3.5.5 Manifest Disregard of Agreement and Substantive Law as
Violation of Due Process
UNCITRAL Model Law Article 28 provides:
(1) The arbitral tribunal shall decide the dispute in accordance with such rules of
law as are chosen by the parties as applicable to the substance of the dispute. Any
designation of the law or legal system of a given State shall be construed, unless
otherwise expressed, as directly referring to the substantive law of that State and
not to its conflict of laws rules.
(2) Failing any designation by the parties, the arbitral tribunal shall apply the law
determined by the conflict of laws rules which it considers applicable.
(3) The arbitral tribunal shall decide ex aequo et bono or as amiable compositeur
only if the parties have expressly authorized it to do so.61
(4) n all cases, the arbitral tribunal shall decide in accordance with the terms of the
contract and shall take into account the usages of the trade applicable to the
transaction.
As the mandate in concreto is limited to what the applicable material law provides,
what are the consequences of the arbitral panel passing that borderline without express
authorization? What if the decision or award is in (manifest) disregard of the law? To
analyze this issue, we must presume that which has been established (i.e., the facts)
are indisputable. It is clear that by changing what has been established, the issues
61
Argentina Act Art. 769 provides:
Amiables compositeurs shall proceed without any legal formalities; They shall limit themselves to receiving the pleadings or documents submitted by the parties, to requesting from
them the explanations they deem proper and to making the award according to their best
knowledge and understanding.
Art. 771 provides:
1. No means of recourse can be raised against an award of amiables compositeurs, unless it
was made after the expiration of the term therefore or decided on issues not submitted to
arbitration. The parties can lodge a claim for its annulment within five days of the communication of the award to the parties.
2. After the claim for nullity has been lodged, the judge will communicate it to the other party
for five days. Once this term has elapsed, with or without any answer from the other party, the
judge shall make a final decision on the validity or nullity of the award.
Argentina Act, supra note 6.
THE ENFORCEABILITY OF AN ARBITRATION AGREEMENT AND DUE PROCESS
73
change and the award may change.62 If facts have been fully established, enforcing the
agreement requires proper application of the law, which in turn requires the law to
have been substantively fully established.
If we presume that the facts are “right” and the burden of proof is fully met, what
remains to be done is to apply the substantive law to the facts. If we further presume
that the law has been fully established and that no dispute exists as to its substance
and the burden of education is thus fully met, the task of drawing the conclusions
may be very easy and almost mechanical. However, there may remain issues of interpretation as to what a statement or particular clause in the agreement means and
how it was understood, how the transaction is to be classified, and how a statute or
principle should be applied, etc. These issues of interpretation are within the powers
and authority of the arbitrators and whatever the outcome, if it remains within the
authority of interpretation, there is no disregard of the law and no violation of the
mandate. Furthermore, laws often on purpose leave great flexibility, and, perhaps
even more often (at least in the areas of business law), the slowness of the legislative
process leaves vacuums where no specific statutory rules can be identified or established. Even in the latter case, the issue may often be decided based on “macro rules”
such as principles of contract, the law or trade usages, etc. There is hardly anything
really new that would not be covered by established principles of the law. The
legislation sometimes gives wide (or at least formally) almost unlimited powers or
discretion to the judge or arbitrator. This applies to an exceptional extent to rules
62
Sheppard reports:
The courts in a number of countries have rejected the argument that an incorrect interpretation of substantive law by the tribunal is a sufficient reason to refuse enforcement, for
example: Switzerland, France, England, Germany and the Philippines.
Audley Sheppard, Interim ILA Report on Public Policy as a Bar to Enforcement of International
Arbitral Awards, 19 LCIA ARB. INT’L 240 (2003).
Compare with Chinise law as reported by Tang Houzhi and Wang Shengchang in INTERNATIONAL
HANDBOOK ON COMMERCIAL ARBITRATION 35 (Supp. 11, Jan. 1990):
The circumstances (grounds) for refusing enforcement of [u]domestic[/u] arbitration awards
set forth in the second paragraph of Art. 217 of the Law on Civil Procedure (reproduced here
as an Annex to the new Arbitration Law (see Annex II)) are as follows:
(1) the parties have neither included an arbitration clause in their contract nor subsequently concluded a written arbitration agreement;
(2) the matters decided in the award exceed the scope of the arbitration or are beyond the
arbitral authority of the arbitral institution;
(3) the formation of the arbitral tribunal or the arbitration procedure was not in conformity
with statutory procedure;
(4) the main evidence for ascertaining the facts was insufficient;
(5) application of law was truly incorrect; or
(6) in arbitration, arbitrators committed embezzlement, accepted bribes, practiced graft or
made an award that perverted the law. Apparently grounds (4) and (5) directly relate to the
merits of the award. The People’s Court may rule ex officio to deny enforcement of a
domestic arbitration award if it finds that enforcement of the award will be contrary to the
public social interest. (emphasis added).
Currently, Art 217 is Art 217 of the Civil Procedure Law of the People’s Republic of China, as
reported in JAN PAULSSON (ED), INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION, (Kluwer
Law International 1984) pp. 1 – 5.
74
ARBITRATION AGREEMENT AS THE BASIS OF JURISDICTION
of unreasonableness or unconscionability known in many leading statutes.63 The issue
of unreasonableness or unconscionability is subjective, but its consequences may
be dramatic—de facto it may be in substance very close to a mandate ex aequo
et bono.64
The issues in dispute must be decided in accordance with the agreement of the parties. The panel has no authority to act beyond that unless it has been expressly given
ex aequo et bono authority. The agreement is comprised in general by both the written
contract and by reference, the applicable law.
Application of the law to the disagreement requires expertise in that law. However,
in international arbitration, the panel does not necessarily have this expertise. “The
burden of education” deals with this issue. If the position of the applicable law is not
sufficiently established or if it is erroneously applied, the agreement of the parties is
not properly enforced. Should this happen in bad faith or via collusion by the parties
(i.e., by fraudulent methods), ordre public has been violated. If such an erroneous
outcome is due to the gross negligence of the panel, even though the panel acted in
good faith, this does not make the erroneous decision any better; thus, it may still constitute a violation of the authority and the agreement of the parties and as a consequence
amount to a violation of ordre public, in particular if manifestly erroneous.
If “the error”, however, is merely an issue of interpretation or opinion, there is no violation of ordre public.
If the decision or award rendered is within the mandate in concreto (e.g., an issue of
interpretation or classification), and as such expressly or implicitly within the discretion left to the arbitrator, there is no grounds for setting it aside. The same applies to
“errors” whether true errors only or possibly erroneous conclusions.65 These are matters that are at a party’s risk in arbitration as they are in courts of law. However, if the
outcome is clearly erroneous and in manifest disregard of the agreement or made in
bad faith, both the mandate in concreto and in abstracto may have been violated and a
ground for setting aside or nullity exists.
63
64
65
Such general provisions authorizing courts to modify or disregard unconscionable or unreasonable terms and conditions of agreement appear in many statutes in many jurisdictions including
the United States, Germany, and Scandinaviam countries.
UNCITRAL Model Law Article 28(3) (see Appendices, p. 504).
Des Williams, Setting Aside of International Award, 9 IBA NEWSLETTER: ARB. & ADR
(International Bar Association Section on Business Law) 81, Oct. 2004:
The court held that the errors of law made by the arbitrator went beyond mere errors in relation to the merits, and illustrated “circumstances in which the decision maker misconceives
the whole nature of the enquiry or of his duties, thereby denying a party the right to a fair
trial.” The court concluded that the errors of law committed by the arbitrator fell into the
category of reviewable errors of law which amounted to gross irregularities resulting in an
unfair trial. In the light of this finding, the court did not consider it necessary to deal with the
other grounds for review. Telcordia is applying for leave to appeal against the judgement. If
leave to appeal is granted, the appeal will ultimately be heard by the Supreme Court of
Appeal.
THE ENFORCEABILITY OF AN ARBITRATION AGREEMENT AND DUE PROCESS
75
3.5.6 Disregard of Facts as Violation of Due Process
What if the arbitrators render an award or a decision in (manifest) disregard of facts?66
It may be a simple mistake or an omission. A mistake may or may not affect the
award or it may be the decisive element. It may be perfectly human, or it may be due
to negligence or gross negligence. It may even be deliberate.67 Sometimes a mistake
may happen because of a fraud or forgery committed by a party that is not discovered
until later.
The arbitrator is generally vested with extensive power to assess the evidence and
draw his conclusions as to what has been established and what has not.68 It may be
advisable for the arbitrators to discuss the status of evidence with the parties at some
stage before giving the final award. If however it should be beyond doubt that the arbitrator acted in disregard or in manifest disregard of undisputed facts, did he act in
excess of his mandate? Undoubtedly this would be a violation of due process, as the
material and procedural agreements of the parties have to respected. However, such
situations are exceptional. Furthermore, the impression by the parties that the panel has
by negligence or bias drawn the wrong conclusions from the evidence submitted can
be reduced or eliminated by the panel by holding status hearings (“consultations”) at
appropriate intervals.
Even if such an error or disregard is established beyond any doubt, reopening of the
proceedings is in general excluded. However, the party has other rights or remedies
whose existence and extent depend on national law and the interpretation of the
Convention. Extreme caution is to be used in such an analysis because there are as
many realities as there are people—and this also applies to arbitrators. Matters of judgment in good faith or opinions are not reproachable and belong to the realm of human
behavior. Errors cannot be excluded from arbitral proceedings. As unsatisfactory as
these errors may materially be to a party’s interests, they are often fully within the
scope of submission or power of the panel (i.e., the mandate in concreto) and belong
to the risks assumed by the parties in choosing arbitration.
66
Sheppard, supra note 62, at 241:
An award may also be contrary to the facts, or fundamentally perverse or irrational. It is
generally regarded that such perversity (unaccompanied by some serious procedural irregularity) is not a sufficient ground for refusing enforcement on grounds of public policy or
otherwise.
67
68
Compare IBA Ethics 5.5 and 6 (IBA Rules of Ethics for International Arbitrators (1987)).
Id. at Art. 9(1):
The Arbitral Tribunal shall determine the admissibility, relevance, materiality and weight of
evidence.
76
ARBITRATION AGREEMENT AS THE BASIS OF JURISDICTION
3.5.7 “Carte Blanche” Prayer for Relief and Due Process
Sometimes the parties file a generic prayer for relief along the following lines:
. . . or any other such remedy or relief deemed just and equitable by the arbitrators.
. . .69
What is this? It is not on its face specific enough to constitute a claim to be rejected
or endorsed. The panel may request the claimant to be more specific. If this is done, the
problem ceases to exist, but this is not always possible. The intention of the claimant
is often to allow the panel to administer the relief and remedies not ex aequo et bono,
but otherwise freely in line with the jura novit curia principle within their discretion
and within the scope of the agreement.70 If both parties give such a mandate, there
would not be any controversy, but as long as it is only unilateral, it does not constitute
a part of the arbitration agreement. It is only a power or authority given unilaterally.
The giving of such a carte blanche mandate is not per se unlawful. Should the respondent be heard specifically on such a prayer of his adversary? If he objects to such free
administration of relief, the power cannot be exercised as such. If he accepts, there is
no problem: the mandate has been given by both parties, thus constituting an agreement. If the respondent does not object or protest, this may also constitute a waiver and
an agreement or estoppel is formed.
If the panel reaches a conclusion that the relief prayed for is not available, but a corresponding relief that has not been specifically prayed for would and could be granted
in addition to other relief prayed for on in lieu of such other relief, the arbitral tribunal
may hesitate to take any action and decide not to grant such alternative relief as it could
be ultra petita. This might result in the rejection of the claims and perhaps in a new
arbitration where the issue of res judicata could be raised. On the other hand, to raise
this issue of appropriate remedy may be fully in line with the jura novit arbiter rule, in
69
Franz Kellerhals, in his paper “How to Draft Your Prayers for Relief in International Arbitration”
delivered at the ASA Conference of Sept. 3, 2004 in, Berne, Switzerland, raised the following
issue about prayers:
Can they contain conditions? Example No. 4 Antitrust Dispute (Pharmaceutical products):
Claimant requests an award that (1) Respondent shall be ordered to refrain from publishing
any information which explicitly or implicitly alleges that a comparative study shows differences in efficiency between “Colgate” and “Binaca,” unless this allegation is supported by a
scientifically acknowledged research study. (2) . . . Consequences of awards drafted in insufficient specific terms as a result of insufficiently clear prayers.
Example No. 5 Contract Dispute:
The Claimant requests an award (1) . . . (2) granting it any remedy or relief that the arbitrators
deem just and equitable and within the scope of the agreement of the parties, including, but
not limited to, specific performance of the contract dated May 1,. . . .
70
Another alternative is to draft the relief sought in order of priority (i.e., primarily, then secondarily if the primary relief is not granted, etc.). However, this may become clumsy and tedious
if the facts are unclear in the light of evidence and there are many theories or grounds
available.
THE ENFORCEABILITY OF AN ARBITRATION AGREEMENT AND DUE PROCESS
77
particular after consultation with the parties.71 A more constructively spirited panel
may convene a hearing, preferably giving notice of the hearing in writing including the
agenda, to discuss the issue. If a new more specific claim is submitted as a consequence, the ultra petita problem may have been solved. If no specific claim is submitted
but a carte blanche prayer for relief has and a hearing has been held, the granting of the
relief not specifically prayed for could well be procedurally acceptable, at least in the
absence of objections or protests by the other party. It would not necessarily be ultra
petita any longer, and, in addition, both parties have been heard or “consulted.” This
would perhaps be in accordance with the jura novit arbiter principle and the mission
of arbitration: cost-effectiveness and expediency.
3.6 ARBITRATION AGREEMENT AND DUE PROCESS—SUMMARY
An arbitration agreement has two important jurisdictional effects. First, it has a positive jurisdictional effect, which means that the tribunal specified in the agreement has
jurisdiction to resolve the dispute between the parties. Second, it has a negative jurisdictional effect, which means that State courts do not have jurisdiction. Because of
these effects, it is extremely important for the protection of both substantive and procedural rights of the parties that the selection of the cases for arbitration is fair and in
accordance with the parties’ intention, and to a certain extent, even their interest.
The nature of the arbitration agreement as a sui generis contract influenced by both
contract and procedural law has often been discussed. It is not important to place arbitration agreements in specific branch of jurisprudence. Rather, it is important to try and
merge the doctrines so that the result is fair, foreseeable, and efficient.
There have been attempts to construct interpretative principles especially concerning the scope of arbitration agreements such as those regarding whether the scope of
the agreement should be read narrowly or widely and the principle of exclusivity.
These arbitration-specific principles are not normative principles such as due process
or the many principles of contract and procedural law. Rather they are descriptive
generalizations of what the result of interpretation with support of normative principles
could be like. This means that an interpretation cannot be justified by them alone,
although they can be used as support in an argument for an interpretation.
In most of the cases, the access to justice argument is prima facie the most important
one for interpretation concerning dispute resolution mechanisms. However, in contrast
to the general belief, the access to justice argument does not necessarily work for
restricting arbitration, as the reverse may be true. Arbitration might in fact be the most
71
Compare with material law UCC § 1-106:
(1) The remedies provided by this Act shall be liberally administered to the end that the
aggrieved party may be put in as good a position as if the other party had fully performed but
neither consequential or special nor penal damages may be had except as specifically provided in this Act or by other rule of law.
(2) Any right or obligation declared by this Act is enforceable by action unless the provision
declaring it specifies a different and limited effect.
78
ARBITRATION AGREEMENT AS THE BASIS OF JURISDICTION
efficient guarantee of access to justice in the case at hand. This has to be evaluated
taking the case-specific features in consideration.
Even though the arbitration agreement generally has to be followed—and following
the agreement of the parties is also in some respects a part of due process—this does
not mean the agreement can bind the parties or the tribunal to an unfair procedure. The
due process requirement of fair arbitration as well as the requirements of access to
justice and access to courts may lead to setting aside such an arbitration agreement
either partially or completely.
ARBITRATION AGREEMENT AND DUE PROCESS—SUMMARY
79
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Chapter 4
Aspects of Jurisdiction other than the
Agreement
4.1 DUE PROCESS AND JURISDICTION—PROBLEMS RELATED
TO ASPECTS OTHER THAN THE AGREEMENT
In addition to criteria related to the arbitration agreement, other aspects have to be
considered when deciding the question of jurisdiction in arbitration. As already mentioned when discussing the Convention, these questions may concern which parties
participate in the procedure and the arbitrability of the subject matter. The classical
procedural questions of res judicata and lis pendens are relevant.
As already discussed above, some of the due process requirements seem at first
more substantive than procedural (e.g., arbitrability). However, in procedure and procedural law in general as well as in arbitration, separating substantive and procedural
issues can be difficult. Especially in arbitration, the question of jurisdiction is very
closely related to the material issues at hand and the applicable substantive law. Certain
material requirements can be seen as prerequisites of jurisdiction as a procedural matters, although this would not be orthodox in view of some procedural law scholars.
4.2 PARTIES TO THE PROCEEDINGS
First, the persons acting in the process must have a legitimate interest to act as a party
in the procedure. This means they have to have a legal relationship (or better, an interest) according to the rules of substantive law to act in the procedure. Also, a party
needs to be in the sphere of the arbitration agreement to be able to act in the case. For
example, company A cannot initiate proceedings on grounds of an arbitration agreement between companies B and C.1 Another dimension is that the arbitral award may
have effects inter partes only and not erga omnes. From the practical point of view,
1
There are of course exceptions based on definitions of corporate identity, etc. But basically in
those cases also, there needs to be something to bind the company to the agreement.
81
this means the parties to the proceeding must be identified before a jurisdictional
decision is made.
Second, parties acting in the procedure cannot be under some incapacity. Article V(1)(a)
of the Convention provides that recognition and enforcement of the award may be
refused if the parties were, under the law applicable to them, under some incapacity.
As already noticed above, the problem is extremely rare in the context of international
commercial arbitration, at least as to the incapacity of a natural person. The problem
may, however, rise in connection with entrepreneurs or traders dealing in their personal
capacity and not behind a corporate veil. It may also rise in connection with the representation of legal persons (i.e., various forms of corporations) if their directors and
officers are affected by some kind of incapacity. Even more often, there might be discussion whether the officers of a legal entity have acted in their power and authority.
In addition, all the parties need to be included in the proceedings. Before going forward in arbitration or taking any measures of procedural or substantive significance,
all the parties to the arbitration agreement must be given notice of the initiation of the
proceedings and the requests or claims filed and be given a reasonable opportunity to
take whatever action is deemed founded at this stage in accordance with the audi
alteram partem principle unless the arbitration agreement provides otherwise.2 This
applies in particular to multi-party arbitration clauses. In multi-party arbitration, it may
be difficult or impossible to know at the initial stages whether the conflict concerns all
or just some of the parties to the agreement; therefore, it is absolutely necessary to put
all on notice and give them a reasonable opportunity to present their views, defenses
or claims.3
A party’s response may vary, as a party may:
(i) signal total indifference (“this does not concern us and we do not wish to be
involved at all”);
(ii) note that the matter is of some importance and the party requests to be kept on
notice to a certain extent (which needs to be defined), but does not want to participate, be present, or file claims;
(iii) reserve the right to be present and be actively involved although not formally as
a party either as a claimant or as a defendant;
(iv) assume total disregard or passivity whether or not the party has direct or indirect
interests or whether or not claims against him have been made.
There may certainly be other variations in the intensity and activity or passivity of a
party to a multi-party arbitration agreement and the proceedings initiated thereunder
even if the party is not a party to the material dispute. A party may have a direct or
2
3
82
See James R. Sentner, Jr., Who is Bound by Arbitration Agreements? Enforcement by and
against Non-Signatories, 6 BUS. L. INT’L (Jan. 2005); Swiss Rules of International Arbitration
(2006) Art. 8(3)–(5) (see Appendices, pp. 461–62).
Bernard Hanotiau, A New Development in Complex Multiparty-Multicontract Proceedings:
Classwide Arbitration, 20 ARB. INT’L 39 (2004).
ASPECTS OF JURISDICTION OTHER THAN THE AGREEMENT
indirect interest in the matter and the award may have direct or indirect effects, legal
or commercial, on his position or on the underlying transaction or its fate.4
4.3 ARBITRABILITY
An arbitration agreement subjects the parties to the jurisdiction of the arbitral panel (i.e.,
in personam jurisdiction). However, for the arbitral panel to also have subject matter (in
rem) jurisdiction, the matter must be arbitrable (i.e., the issue be finally resolved in
arbitral proceedings). Arbitrability is thus a condition precedent to jurisdiction.
A general qualification of arbitration is that the matter in controversy must be legal.
It must relate to enforceable rights and obligations, which in general means in concreto
actions aimed at causing a specific change in material reality or at preventing such a
change (e.g., by having something declared and clarified). Most of the changes prayed
for including those for the preserving the status quo may be measured in money
(damages), but not all of them.
Arbitrability is often defined as causes of actions within the freedom of contract
(i.e., matters that the parties could settle or agree on). Is this simple or just simplistic?
Consider that matters not within the freedom of contract are not easy to define. Most
of them may be characterized as ordre public or public policy.5 However, as discussed
above, ordre public and public policy are by no means clear guidelines and may
reach various national and international dimensions (i.e., the public policy of a particular jurisdiction).6 Arbitrability of a subject matter has been expanded to areas that
4
5
Arbitration Act 1996 of England § 72 (see Appendices, p. 287). Consolidation of arbitration
cases is in general not possible in the absence of an agreement of all the parties: LARS HEUMAN,
SKILJEMANNARÄTT 41 [Law of Arbitration] (1999). ALAN REDFERN & MARTIN HUNTER, LAW AND
PRACTICE OF INTERNATIONAL COMMERCIAL ARBITRATION 25 (3rd ed. 1999).
The China Law is described as follows:
a. According to Art. 2 of the new Arbitration Law, contractual disputes and other disputes
regarding rights and interests in property are arbitrable. However, the following disputes may
not be arbitrated:
1. marital, adoption, guardianship, support and succession disputes;
2. administrative disputes that laws require to be handled by administrative authorities.
Under other laws of the PRC, the following disputes are normally required to be resolved by
relevant governmental authorities or by the competent People’s Courts:
1. disputes arising from infringement on the right of patents, trademarks and copyright;
2. disputes concerning bankruptcy; and
3. disputes relating to antitrust.
However, with the implementation of the new Arbitration Law, one may argue that the foregoing disputes listed in items 1 to 3 are arbitrable since the new Arbitration Law apparently
allows a dispute that is of a non-contractual nature to be submitted to arbitration. Furthermore,
the new Arbitration Law by its wording in Art. 2 tends to exclude only two types of disputes
as mentioned above from the ambit of arbitration.
6
(as reported by Tang Houzhi and Wang Shengchang in INTERNATIONAL HANDBOOK ON
COMMERCIAL ARBITRATION 17 (Supp. 11, Jan. 1990)).
Pascal Hollander, Arbitration: Belgium; Assessing Arbitrability under the New York
Convention, INT’L LAW OFFICE: ARB. NEWSLETTER (International Bar Association), Feb. 2005:
However, in a sharp contrast with Article V.2.a, Article II.3 of the convention does not state to
which law the state court must refer in order to decide whether the dispute is arbitrable, at the
ARBITRABILITY
83
undoubtedly belong to ordre public or public policy. The two perhaps paramount
cases, Mitsubishi and Scherk clearly demonstrate this.7 Mitsubishi dealt with antitrust
law and Scherk with securities issues, both of which are the main pillars and/or the
foundation of the economic order and market economy. However, arbitrability is
restrained or controlled by two major factors:
(i) the direct effect and enforceability of an award is limited to the parties (“inter
partes effect”) and the award does not bind third parties or authorities who are at
liberty to take whatever action they deem appropriate;8 and
(ii) the award, if incompatible with public policy, may be revisited or scrutinized by
courts in connection with enforcement proceedings, which may result in the award
being set aside or perhaps already initially declared void.9
stage of recognition of the arbitration agreement (at the outset of a court proceeding, when one
of the parties raises an objection to the court’s jurisdiction). The convention’s silence on this
issue has created legal uncertainty. Some commentators defend the view that a coherent interpretation requires that the arbitrability of a dispute be assessed by reference to the lex fori,
whatever the stage at which it takes place. Others consider that such assessment must be done
by referring to the law chosen by the parties to govern their arbitration agreement (i.e., the lex
arbitri or, more generally, lex contractus, as the parties seldom submit their arbitration agreement to a law which differs from the substantive law chosen to govern their main agreement).
and
Supreme Court Decision: In its decision issued on October 15 2004 the Supreme Court allowed
the appeal. It ruled that: “Article II.3 of the New York Convention allows the court to which the
issue of arbitrability of the dispute is submitted, on the occasion of an objection to jurisdiction,
to decide this issue by reference to its own legal system. By doing so, the court determines the
limits within which, in certain matters, private jurisdiction is compatible with the legal order.”
The court further stated, in passing, that: “when the arbitration clause is submitted, by the
choice of the parties, to a foreign law, the state court of which the jurisdiction is objected may
rule out arbitrability if the public policy of its own legal system is affected by this choice.”
7
8
9
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc., 473 U.S. 614, 87 L.Ed. 2d 444
(1985); Scherk v. Alberto-Culver Co., 417 U.S. 506, 41 L.Ed. 2d 270.
Helsinki Court of Appeals 22.8.2003 2419 (S 01/1007).
In Scherk, supra note 7, the majority opined:
A parochial refusal by the courts of one country to enforce an international arbitration agreement would not only frustrate these purposes, but would invite unseemly and mutually
destructive jockeying by the parties to secure tactical litigation advantages. In the present
case, for example, it is not inconceivable that if Scherk had anticipated that Alberto-Culver
would be able in this country to enjoin resort to arbitration he might have sought an order in
France or some other country enjoining Alberto-Culver from proceeding with its litigation in
the United States. Whatever recognition the courts of this country might ultimately have
granted to the order of the foreign court, the dicey atmosphere of such a legal no-man’s-land
would surely damage the fabric of international commerce and trade, and imperil the willingness and ability of businessmen to enter into international commercial agreements.
and the minority as follows:
Moreover, the securities market these days is not made up of a host of small people scrambling to get in and out of stocks or other securities. The markets are overshadowed by huge
institutional traders. The so-called “off shore funds” of which Scherk is a member, present
perplexing problems under both the 1933 and 1934 Acts. The tendency of American investors to invest indirectly as through mutual funds may change the character of the regulation
84
ASPECTS OF JURISDICTION OTHER THAN THE AGREEMENT
4.4 RES JUDICATA
4.4.1 Defining Res Judicata
The nonexistence of res judicata is a condition precedent to arbitration.10 Res judicata
has been defined as follows:
1. An issue that has been definitely settled by judicial decision. 2. An affirmative
defense barring the same parties from litigating a second lawsuit on the same claim,
or any other claim arising from the same transaction or series of transactions and
that could have been—but was not—raised in the first suit.11
but not its need. . . . Moreover, the international aura which the Court gives this case is
ominous. We now have many multinational corporations in vast operations around the
world—Europe, Latin America, the Middle East, and Asia. The investments of many
American investors turn on dealings by these companies. Up to this day, it has been assumed
by reason of Wilko that they were all protected by our various federal securities Acts. If these
guarantees are to be removed, it should take a legislative enactment. I would enforce our laws
as they stand, unless Congress makes an exception. The virtue of certainty in international
agreements may be important, but Congress has dictated that when there are sufficient
contacts for our securities laws to apply, the policies expressed in those laws take precedence.
Section 29 of the 1934 Act, which renders arbitration clauses void and inoperative, recognizes no exception for fraudulent dealings which incidentally have some international factors. The Convention makes provisions for such national public policy in Art. II (3). Federal
jurisdiction under the 1934 Act will attach only to some international transactions, but when
it does, the protections afforded investors such as Alberto-Culver can only be fullfledged.
10
It may also be a ground for setting aside as provided by Italy Act, supra note 5, Art. 829(8):
[I]f the award is contrary to a previous award which is no longer subject to recourse or to a
previous judgement having the force of res judicata between the parties, provided that this
objection has been raised in the arbitration proceedings.
11
Code of Civil Procedure, Book Four, Title VIII, Arbitration, Amended by Legislative Decree
of 2 February 2006, No. 40 as reported in JAN PAULSSON (ED), INTERNATIONAL HANDBOOK ON
COMMERCIAL ARBITRATION, (Kluwer Law International 1984 Last updated: April 2007
Supplement No. 49)
BLACK’S LAW DICTIONARY (Bryan A. Gardner ed., 9th ed., 2009). Black’s definition presupposes
that there is a duty to raise a claim. But is there a duty to raise all potential claims in connection
with a specific claim? Not necessarily, so although there may be a gray area that is subject to
interpretation and the applicable procedural laws and material rules, this is by no means clear
at least as far as international arbitration is concerned. See, e.g., Argentina Law Art. 754:
1. Arbitrators shall decide all issues submitted to their decision within the term established in
the terms of reference or derived from any eventual extensions agreed upon by the parties.
2. It shall be presumed that all questions ancillary to the submitted issues and those, the resolution of which before arbitrators has been consented to by the parties, have been submitted
to the decision of the arbitral tribunal.
(Argentinian National Code of Civil and Commercial Procedure Law 17.454 of September 19
1967, as reformed by Law 22.434 of March 16 1981, text consolidated according to Decree
1.042 of 1981, as reported in Jan Paulsson (ed), International Handbook on Commercial
Arbitration, (Kluwer Law International 1984 Last updated: January 1985 Supplement No. 3)
pp. 3–7.) See Christer Söderlund, Lis Pendens, Res Judicata and the Issue of Parallel Judicial
Proceedings, in The Swedish Arbitration Act, 1999, Five Years On: A Critical Review of
Strength and Weaknesses, Session IV: The Proceedings, 22 J. INT’L ARB. (Aug. 2005).
RES JUDICATA
85
Res judicata is one of the classical problems of procedural law theory that has
engaged the thoughts of procedural law scholars for ages; it has been discussed also in
the arbitration context.12 Res judicata presupposes that there has been a former action
that has already been heard and adjudicated by a court that had in rem and in personam
jurisdiction:
(i)
(ii)
(iii)
(iv)
between the same parties;
on the same ground;
praying for the same relief; and
decided on its merits.13
The easiest of these criteria is perhaps the first one, namely that the dispute has been
adjudicated between the same parties. In most cases, the identity of a person can be
verified as it does not change and is not subject to interpretation.14 As to natural persons, this is very much true and, as far as legal persons are concerned, although subject
to change (via bankruptcy, merger, etc.), the legal identity is usually not affected and
remains verifiable without a major risk of confusion.15
12
13
About this discussion, see Filip De Ly & Audley Sheppard, ILA Interim Report on Res Judicata
and Arbitration, 25 ARB. INT’L 35–66 (2009). At the International Law Association’s 72nd
Biennial Conference in Toronto in 2006, the ILA International Commercial Arbitration
Committee reported on “Lis Pendens and Arbitration” and “Res Judicata and Arbitration,” and
the Conference adopted a number of recommendations on these topics. The committee sought
to give guidance to arbitrators faced with a prior judgment or award that is argued to be res
judicata: “Arbitral tribunals are not necessarily required to apply the same procedural rules as
domestic courts and have greater freedom to apply procedural rules that are appropriate for
international arbitration. For international arbitration, where arbitrations are often conducted
under institutional international rules and increasingly uniform laws, a global harmonised
approach to res judicata would be commendable and the final report will have to elaborate on
any such approach.” Id. at 38).
Mayer writes:
4. Lorsque la demande dont est saisi l’arbitre a déjà été jugée par le tribunal d’un pays
étranger au siège, l’arbitre qui s’estime compétent, et qui constate que le tribunal étatique a
statué au mépris de la convention d’arbitrage, doit accepter de connaître de la demande.
5. Lorsqu’un autre arbitre a déjà jugée la demande soumise à l’arbitre, celui-ci n’a pas le
pouvoir d’en connaître, sauf accord de toutes les parties.
6. Lorsqu’une partie invoque la chose déjà jugée par un autre tribunal (étatique ou arbitral)
entre les mêmes parties, mais sur une demande différente, l’arbitre ne peut méconnaître la partie
de la décision (jugement ou sentence) qui règle le sort de cette autre demande, sauf accord de
toutes les parties. En revanche, il conserve sa liberté d’appréciation à l’égard des points de fait
ou de droit que le premier tribunal a tranchés dans le cadre de son raisonnement.
14
15
86
Pierre Mayer, Litispendance, connexité et chose jugée dans l’arbitrage international, in LIBER
AMICORUM CLAUDE REYMOND 202–03 (2004).
Mergers, demergers, reorganizations, combinations, etc. may cause a problem as to identity:
did the company survive or was it dissolved?
Piercing the corporate veil and alter ego doctrines may somewhat confuse the prima facie
clarity of the picture.
ASPECTS OF JURISDICTION OTHER THAN THE AGREEMENT
However, the “same ground” criterion may be problematic. Let us assume that an
action for damages has been filed and that there has already been another action for
damages between the same parties. According to the claimant, the prior action was
based on certain breaches of an agreement, and the latter is based on another set of
breaches. If the acts and omissions of the defendant have constituted a number of interrelated breaches of both minor and major significance, how well does the claimant
need to define the breaches invoked as grounds in an action for damages? If in an
attempt by the claimant to exhaustively and openly describe the past reality, all the
breaches were listed and reported as facts in both statements of claims, can this conscientious reporting of facts in itself constitute res judicata although only some of those
breaches were invoked as grounds for relief? Something else is required. When does a
description of the past and a full disclosure of facts constitute a ground for a claim to
be blocked by res judicata, resulting in an everlasting action-proof shield? What something else is required? Res judicata cannot be evoked simply by a description of facts
that may or may not form “a breach of an agreement.” The grounds for a claim and the
facts are not the same thing—and only the grounds may constitute res judicata.
However, a claim on another legal basis might not be possible on the grounds of
exactly the same facts as before. Thus, in addition to the same ground, there should be
a prayer for some relief based on the new ground.16
The third issue of “same relief” is perhaps the most complicated one. It borders with
the jura novit arbiter principle, but the border may not be clearly visible. If we
assume the jura novit arbiter principle that was applied on the substitute relief (i.e., not
expressly prayed for by the parties but considered by the panel and rejected), would
this constitute res judicata as to a subsequent action for the same substitute relief ? If
the jura novit arbiter principle leads to consideration by the panel of granting substitute relief that was not expressly prayed for, this should be discussed in a “consultation” hearing with the parties to avoid later confusion. If what may concretely follow
from the application of the jura novit arbiter principle in the arbitral proceeding is not
openly discussed in a hearing during the proceedings, the award (as just and brilliant
as it might otherwise be) may be subjected to being set aside on the grounds of ultra
petita if relief not expressly prayed for by the parties is either granted (as a substitute
relief) or rejected. If the parties, however, are heard on the issues under consideration
resulting from the application of the jura novit arbiter principle and the hearing does
not result in any modifications of the prayers for relief, it might be advisable for the
arbitral tribunal to expressly indicate in the award what their conclusions were as to the
issues (i.e., not decided, rejected, endorsed, awarded) to avoid subsequent lack of clarity as to res judicata or ultra petita.
The ILA final report on res judicata considers the effect of a prior arbitral award and
sets out the criteria for an award to have conclusive and preclusive effects. The
Committee endorsed a triple identity test (namely same parties, cause of action, and
16
These requirements may impose high standards on the draftsmen of the statement of claims
and on the arbitral panel reviewing them.
RES JUDICATA
87
claim for relief).17 In the ILA Recommendations on Lis Pendens and Res Judicata, the
triple identity test is formulated as follows:
An arbitral award has conclusive and preclusive effects in further arbitral proceedings if:
− it has become final and binding in the country of origin and there is no
impediment to recognition in the country of the place of the subsequent
arbitration;
− it has decided on or disposed of a claim for relief which is sought or is being
reargued in the further arbitration proceedings;
− it is based upon a cause of action which is invoked in the further arbitration
proceedings or which forms the basis for the subsequent arbitral proceedings; and
− it has been rendered between the same parties.18
Further, according to the Recommendations:
An arbitral award has conclusive and preclusive effects in the further arbitral proceedings as to:
− determinations and relief contained in its dispositive part as well as in all
reasoning necessary thereto;
− issues of fact or law which have actually been arbitrated and determined by
it, provided any such determination was essential or fundamental to the
dispositive part of the arbitral award.19
In addition:
An arbitral award has preclusive effects in the further arbitral proceedings as to a
claim, cause of action or issue of fact or law, which could have been raised, but was
not, in the proceedings resulting in that award, provided that the raising of any such
new claim, cause of action or new issue of fact or law amounts to procedural unfairness or abuse.20
Another due process-related question would be whether there ought to be exceptions to conclusive and preclusive effects of arbitral awards if the awards were procured by fraud or unfair procedures not respecting due process. The ILA Committee
considered these questions generally best to be left to the consideration of the national
17
18
19
20
88
The Committee supported the application of issue estoppel. It also gave guarded endorsement
to the application of an abuse of rights doctrine in limited circumstances. See Filip De Ly &
Audley Sheppard, The International Law Association (ILA) International Commercial
Arbitration Committee Reports on Lis Pendens and Res Judicata, Arbitration International, 25
ARB. INT’l 1–2 (2009).
Filip De Ly & Audley Sheppard, ILA Recommendations on Lis Pendens and Res Judicata and
Arbitration, Arbitration International, 25 ARB. INT’L 83–85, para. II/3 (2009).
Id. at para. II/4.
Id. at para II. See also Filip De Ly & Audley Sheppard, ILA Final Report on Res Judicata and
Arbitration, 25 ARB. INT’L 67–82 (2009).
ASPECTS OF JURISDICTION OTHER THAN THE AGREEMENT
enforcement courts according to national laws.21 However, clearly the international
norms concerning due process are in part directly applicable also nationally, and in
part share the same foundation and function as interpretative framework.
4.4.2 “Effects” of Enforcement Dimensions
A decision given by a court (as opposed to an award in arbitration) may have different
and probably considerably reduced international enforceability. The enforceability may
relate to one or a few jurisdictions only whereas arbitral awards may be enforced in a
large number of countries. Should this be taken into account when judging whether and
to what extent a former decision in the same matter constitutes res judicata—and as
such a condition precedent to the proceedings? It is also foreseeable that arbitration may
be resorted to so as to gain wider enforceability for a decision already given in a country
when court decisions of the country are not enforceable as such due to a lack of bilateral
or multilateral treaties. As the ultimate objective of the law is to give legal protection in
concreto and not just to declare in abstracto who was right, enforcement effects should
be taken into account. If the enforcement effects of an earlier court decision in the same
issue are more limited than those of an arbitral award, such an earlier decision does not
automatically constitute res judicata.22 However, the decision is relevant in the proceedings
21
22
De Ly & Sheppard, ILA Final Report, supra note 20, at 79: “The limited acceptance of procedural unfairness or abuse regarding res judicata does not imply that the Committee endorses a
general theory of procedural unfairness or abuse in international commercial arbitration. The
broader ramifications of any such theory need further research including its characterization
(contractual and/or procedural) and its scope of application which exceeds the ambit of the res
judicata project.” Thus, “Finally, the Committee accepts that there ought to be exceptions to
conclusive and preclusive effects of arbitral awards, for instance if the award was procured by
fraud. Other exceptions may be left to the lex arbitri (e.g., revision of awards by means of
recourse such as the requête civile or tierce opposition under which in certain circumstances
discovery of new documents may provide a way to reopen a case or where a third party who is
affected by an award may be entitled to reopen a case) or the lex causae which provide the
background under which the parties have had their dispute arbitrated.”
For the effects between different parties in English Law, see Sarita Patil Woolhouse, The Effect
of an Arbitration Award on Subsequent Arbitration between Different Parties—An English
Law Perspective, 7 INT’L ARB. L. REV. 156 (Oct. 2004):
In an ideal world interdependent disputes like those in Lincoln v Sun Life would be decided by
a single tribunal in a consolidated arbitration. However, a tribunal has no power to consolidate
proceedings unless the parties agree on confer such a power. In most cases, the decision of an
arbitral tribunal would be binding only on the parties to the arbitration and those claiming
through them. The exceptions when an earlier award is held to be binding on a subsequent
arbitration tribunal appear to have been made in the following cases: (a) when the earlier
award, under a contractual machinery for dispute resolution, determined the rights and obligations of the parties to a contract A and B, so that the award can be treated as part of the contract
and thus proved in the same way as any contract can be proved; and (b) where the breach of a
charter-party and sub-charter is proved to be the same and the arbitrators have held the charterer under a charter-party liable to a sub-charterer in a particular amount the better view as a
matter of principle is to say that the cause of the liability so determined was the breach of the
charter-party. By analogy in cases involving re-sale of goods similar principle should apply.
RES JUDICATA
89
with its role and significance in the arbitral proceedings varying between the two
extremes in the discretion of the panel: (1) the proceedings may be fully reopened, or
(2) the proceedings may be very limited (essentially circling around the earlier proceedings), with the award being based solely on the force of the earlier decision.
4.5 LIS PENDENS
4.5.1 Lis Pendens Doctrine in Arbitration
Lis pendens (i.e., pending litigation) or lis alibi pendens (litigation pending elsewhere)
may constitute a ground for dismissing an action or alternatively put it on hold pending
the outcome of the other action.23 Thus, the nonexistence of lis pendens may be a
condition precedent to the initiation of arbitral proceedings.
Originally lis pendens was a doctrine applied in courts in one legal system or jurisdiction only when an identical or at least similar lawsuit was pending elsewhere (i.e.,
in the courts of another jurisdiction or in an arbitration, whether its seat is in the
same or another jurisdiction). Does the lawsuit already pending create a ground for
dismissal? It would seem that if the case is pending in violation of the arbitration
agreement, which has not been effectively waived, the pending case could be disregarded altogether and the arbitration should proceed.24
As the problem is being approached from the perspective of arbitration, the effect of
lis pendens from the perspective of a court need not be analyzed, although it may provide
some guidance ex analogia. Before proceeding any further, we need to establish when
lis pendens may be relevant. This analysis is comparable to that regarding res judicata,
namely that there is a similar or identical action already pending. However, there is
a major difference in that res judicata deals with what was already (finally) decided.
What was decided relates to what was claimed or prayed for, and here lis pendens and
res judicata overlap.
The general rule is that a tribunal that otherwise is considered to have jurisdiction
can proceed with arbitration despite parallel proceedings pending before a national
23
Private International Law Act of Switzerland Art. 181:
The arbitral proceeding is pending as of the time when one of the parties submit its request to
the arbitrator or arbitrators designated in the arbitration agreement or, in the absence of such
designation, from the time when one of the parties initiates the procedure for the constitution
of the arbitral tribunal.
24
See e.g., Manuel Liatowitsch, Die Anwendung der Litispendenzregel von Art. 9 IPRG
durch schweizerische Schiedsgerichte: Ein Paradoxon? Überlegungen zu einem
Bundesgerichtsentscheid vom 14. Mai 2001 im Lichte von BGE 124 III 83; Jean-Marie
Vulliemin, “Litispendance et compétence internationale indirecte du juge étranger (Note sous
ATF 127 III 279)”. See also Söderlund, supra note 10.
This is in general the case as an arbitration clause in the main establishes exclusivity. Italy Act,
supra note 11, Art. 819-ter provides:
The arbitrators’ jurisdiction shall not be excluded by the pendency of the same dispute before
the judge or by the connection between the dispute referred to them and a dispute pending
before the judge.
90
ASPECTS OF JURISDICTION OTHER THAN THE AGREEMENT
court or another arbitral tribunal. Proceedings are parallel if the parties and one or
more of the issues are the same or substantially the same.
4.5.2 When are the Proceedings Parallel? Test of Identity or
Similarity and the Enforcement Effects Test
To constitute relevant lis pendens, the former action must have been:
(i) between the same parties
(ii) on the same grounds
(iii) praying for the same relief.
The first criterion is relatively clear. If there are other parties involved in the subsequent arbitral proceedings, no such lis pendens is constituted that would justify dismissal of the case altogether. In special circumstances, the proceedings may be
streamlined to take into account the pending case and its outcome. However, prudence
is required as there is no certainty the other litigation will ever be pursued to its end.
Yet the parallel proceedings may allow some measures that will reduce the risk of
double expenditures.
Here the phrase “the same ground” is more complex than as discussed in connection
with res judicata. However, again if possible the facts and the grounds for claims
should be distinguished. The phrase “the same relief” may be problematic, too. We
should note in particular that protective or interim measures can hardly ever constitute
a lis pendens that could lead to the dismissal of a claim. Such measures are not final
even when granted, and there are limitations as to their effects and international
enforceability. In addition, the arbitral panel may have its own authority and power to
adjudicate such issues in addition to the jurisdiction of various courts. A pending petition for “first aid” cannot bar one from proper medical care.
When analyzing the similarity, we may apply either a strict compliance doctrine or
a more flexible sufficient similarity test. When analyzing a pending lawsuit that is
subject to modifications and even withdrawal, strict compliance may well be a healthier approach as similarity may at any time erode or even be transformed into apparent
dissimilarity.
If all the criteria of similarity are there, the panel may apply another test, the
“enforcement effects” test.25 To do so, the panel first assumes the pending lawsuit
25
Samuel comments on a Swiss case as follows:
It is the next step of the court’s argument that causes the problem. It applies “litispendance”
to arbitration tribunals. It gives a number of reasons. Since arbitration awards are enforceable
in the same way as judgements, there is the same need to avoid having contradictory arbitration awards in circulation as there is with judgements. Case law has established that if a
foreign court whose judgement is enforceable in Switzerland concludes that it has jurisdiction, an arbitral tribunal is bound by that view. . . . Having decided that an arbitrator is bound
by the “litispendance” requirements of Swiss law LDIP Art 9, the court moves onto consider
whether the Panamian judgement on the case would be enforceable in Switzerland. Since the
LIS PENDENS
91
“as it is” is pursued to its final end. It then examines how widely the decision will
be enforceable geographically and whether the geographic coverage coincides or
overlaps with the enforcement effects of any award that may be rendered in the arbitral
proceedings. If the enforcement effects are identical in coverage, the issue merits
further consideration. However, if they are not identical, and if the coverage overlaps
only to a limited extent, the panel may elaborate further by identifying the jurisdictions
that may be of relevance to the parties both in general and for enforcement purposes.
Do the enforcement effects overlap in the area of likely enforcement? If not, to
what extent would the enforcements effects of the decision and the award overlap
with the jurisdictions of likely enforcement? If major difference in coverage still exists,
the effect of the parallel proceedings to the consideration of the panel should be
limited.
4.5.3 The Effect of Parallel Proceedings
As already noted above, lis pendens does not in general constitute a legal bar to
arbitration.26 This is true at least if the earlier lawsuit is pending in the courts of a
jurisdiction other than that of the seat of arbitration unless otherwise provided by
the applicable procedural rules (e.g., those of lex arbitri).27 This conclusion seems
applicant was a Panamian company, this did not receive any discussion. Anyway, the Court
rejected the argument that its approach of allowing a foreign court to delay and then bind a
Swiss arbitral tribunal would enable a foreign country to deliberately ignore an arbitration
agreement. Such a judgement, it pointed out, would not be enforceable in Switzerland. The
case it cites for this states that enforcement of a judgement would be refused if an arbitration
agreement applicable to the dispute complied with the New York Convention. The Court
finishes by commenting obiter that the question of whether the applicant waived his rights to
arbitrate has to be decided by Panamian law as the relevant lex fori. In doing so, it relied on
one of its previous decisions. That concluded that where a party was alleged to have waived
its right to arbitrate before a Swiss Cantonal court, that court was right to apply its own law
to determine whether such a waiver had occurred.
26
27
Adam Samuel, Fomento—A Tale of “Litispendance”, in ARBITRATION AND PRIVATE
INTERNATIONAL LAW 257 (2004).
See De Ly & Sheppard, supra note 18, at 82, para I/1: “An arbitral tribunal that considers itself
to be prima facie competent pursuant to the relevant arbitration agreement should, consistent
with the principle of competence-competence, proceed with the arbitration (‘Current
Arbitration’) and determine its own jurisdiction, regardless of any other proceedings pending
before a national court or another arbitral tribunal in which the parties and one or more of
the issues are the same or substantially the same as the ones before the arbitral tribunal in the
Current Arbitration (‘Parallel Proceedings’). Having determined that it has jurisdiction, the
arbitral tribunal should proceed with the arbitration, subject to any successful setting aside
application.”
Mayer, supra note 13, at 202 writes:
Sauf accord de toutes les parties, l’arbitre ne doit pas se dessaisir au profit du tribunal d’un
pays étranger au siège, saisi, même antérieurement, de la même demande, s’il s’estime compétent et constate que le tribunal étatique a été saisi au mépris de la convention d’arbitrage.
L’arbitre saisi d’une demande déjà pendante devant un autre arbitre, et qui constate que ce
dernier a été régulièrement désigné et saisi, n’a pas le pouvoir de connaître de la demande,
92
ASPECTS OF JURISDICTION OTHER THAN THE AGREEMENT
to be in line with UNCITRAL Model Law Article 8 and with subsection (2) in
particular:
(2) Where an action referred to in paragraph (1) of this article has been brought,
arbitral proceedings may nevertheless be commenced or continued, and an award
may be made, while the issue is pending before the court.
Thus, if the earlier action is pending in a court in another jurisdiction, the arbitral
tribunal should proceed with the proceedings unless the party initiating the arbitration
has effectively waived its rights under the arbitration agreement or unless there are
other exceptional circumstances.28 However, it may be more problematic when the
earlier action is pending in a court of the same jurisdiction, as the panel may refuse to
go forward for reasons of “convenience.” There is also the risk that any award would
be set aside if it conflicts with the court’s decision.29
According to the ILA recommendations, if the earlier proceeding is pending before
another arbitral tribunal, the later tribunal should decline jurisdiction or stay the arbitration partly or completely on whatever conditions and for whatever duration it
sees fit, provided that it is not precluded from doing so under the applicable law, and
provided that it appears:
− the arbitral tribunal in the earlier parallel proceedings has jurisdiction to resolve
the issues in question; and
− there will be no material prejudice to the party opposing the request because of
(i) an inadequacy of relief available in the parallel proceedings; (ii) a lack of due
process in the parallel proceedings; (iii) a risk of annulment or nonrecognition or
nonenforcement of an award that has been or may be rendered in the parallel
proceedings; or (iv) some other compelling reason.30
sauf accord de toutes les parties. Sauf accord de toutes les parties, l’arbitre ne peut, sous
prétexte de connexité, se dessaisir au profit d’un tribunal étatique ou d’un autre arbitre d’une
demande qui entre dans sa compétence et dont il a été régulièrement saisi. Il peut toutefois,
à la requête d’une partie, surseoir à statuer jusqu’à ce que la juridiction saisie de la demande
connexe ait rendu sa décision, s’il estime pouvoir trouver dans celle-ci des éléments
d’information importants; il est libre d’apprécier l’opportunité d’un tel sursis, en tenant
compte, notamment, de l’état d’avancement respectif et de la durée probable des deux
instances.
28
29
30
See De Ly & Sheppard, supra note 18, at 83, para I/4: “Where the Parallel Proceedings are
pending before a court of a jurisdiction other than the jurisdiction of the place of the arbitration,
consistent with the principles of competence-competence, the tribunal should proceed with
the Current Arbitration and determine its own jurisdiction, unless the party initiating the
arbitration has effectively waived its rights under the arbitration agreement or save in other
exceptional circumstances.”
See id. at 83, para. I/3: “Where the Parallel Proceedings are pending before a court of the jurisdiction of the place of the arbitration, in deciding whether to proceed with the Current
Arbitration, the arbitral tribunal should be mindful of the law of that jurisdiction, particularly
having regard to the possibility of setting aside of the award in the event of conflict between
the award and the decision of the court.”
See id. at para. I/5.
LIS PENDENS
93
If the concurring former pending suit is pending in arbitration and not in a court,
enforcement effects are likely to be identical or at least to overlap to a great extent.
This would be a reason for the panel to consider what measures (if any) are necessary
or at least beneficial to reduce the double expenditure and the risk of awards with conflicting outcomes.31 The parties are the masters of the proceedings, but if they do not
agree, the issue remains within the procedural powers of the arbitrators. The primary
task of the arbitral panel is to settle the matter expeditiously and cost-effectively. It
would not be fully in line with the mission to stop the proceedings altogether or to slow
them down in anticipation of the outcome of the other pending case because of costeffectiveness only. There must be greater reasons for doing this if the parties do not
agree on such an adjournment.
The ILA Recommendations mention avoiding conflicting decisions and protecting
parties as much as possible from oppressive tactics as elements to be considered alongside the costs.32 However, there is always the risk that the other proceeding is withdrawn or faces other problems that slow it down dramatically, which in turn would
slow down the whole dispute resolution process. As a general rule, the panel should
take a critical approach to staying the proceedings or declining jurisdiction on the basis
of other proceedings if the parties do not agree on a more constructive approach.
The ILA Recommendations conclude that the arbitral tribunal may, as a matter of
sound case management, temporarily stay the proceedings on request of a party until
the outcome (or partial or interim outcome) of the other pending proceeding (whether
court, arbitration, supranational, or any active dispute settlement process). This may be
done provided the arbitral tribunal is not precluded from doing so under the applicable
law, the outcome of the other pending proceedings or settlement process is material
to the outcome of the instant proceeding, and there will be no material prejudice to
the party opposing the stay.33 If the enforcement effects test shows identical or wide
31
This was the outcome in two parallel R.S.Lauder arbitrations in Stockholm and London
described by Söderlund, supra note 11, at 357
In the realm of parallel proceedings there is certainly reason to mention the recent Czech
Republic investment arbitrations which for obvious reasons have aroused a great deal of
attention. A Dutch company, “CME,” invested in operating a TV license in Czech Republic
which (according to the company) was lost as a consequence of government interference.
CME initiated arbitral proceedings in Stockholm making use of the arbitration option incorporated in the Dutch/Czech Bilateral Investment Treaty requesting substantial damages. Prior
thereto an arbitration had been initiated in London by a private individual who ultimately
controlled CME. Being a US national he was allowed to do this under the US/Czech Bilateral
Investment Treaty. That arbitration took place in London. The factual succession of expropriatory actions complained of in the London arbitration were the one that also constituted
the basis for the action in Stockholm. Notably the two tribunals reached opposite results. The
London tribunal did not find any liability on the part of the Czech Republic and dismissed
the US national’s claim for damages. The Stockholm tribunal, however, held that the
Czech Republic was in fact liable to CME and awarded damages in an amount of USD
269,814 million plus interest.
32
33
94
See also Bianca Bezdek, 20 ASA BULLETIN 249 (2002).
See De Ly & Sheppard, supra note 18, at 83, para. I/2.
See id. at para. I/6.
ASPECTS OF JURISDICTION OTHER THAN THE AGREEMENT
coverage, it strongly speaks for considering action on the basis of lis pendens. If the
concurring earlier matter is pending in arbitration rather than in court, the tests are the
same, but as the likelihood of wide or identical coverage of enforcement effects grows,
the issue merits a profound analysis in the interests of the parties and procedural efficiency and economy. If the earlier claim is identical and under the same arbitration
agreement, there can hardly be any doubt: the latter proceedings must be put on hold
or dismissed altogether unless the earlier proceedings are not proceeding or are likely
to be closed without a judgment on the merits for reasons beyond the control of the
parties and the arbitrators. However, unless otherwise provided by lex arbitri or other
applicable rules, lis pendens and its effects remain within the discretion of the panel,
and it is not a condition precedent of mandatory character to the continuation of the
proceedings.
From the perspective of this book, it is interesting that the ILA Recommendations
mention lack of due process in the parallel proceedings as a reason not to stay the arbitration on the grounds of lis pendens.34 This underlines the emerging importance of
the doctrine in arbitration. Finally, the tribunal does not have to raise the question of
parallel proceedings by its own initiative. The question of parallel proceedings should
be raised as soon as possible by a party if it is not to be waived.35
4.6 FORUM NON CONVENIENS
4.6.1 Doctrine of Forum Non Conveniens
Forum non conveniens refers to a court which has in personam and in rem jurisdiction
regarding the dispute, but which whether due to reasons of geographic distance, language, or applicable law is not a convenient or the most suitable forum for hearing the
case.36 The doctrine refers to the convenience of the parties, but in practice the convenience of the court system and its personnel is sometimes taken into account. There
are a few places where courts tend to be overloaded with cases not just of their own
citizens but of foreigners. As flattering as it may be to the courts and countries in question, it may be overly burdensome to these people. Such exceptional circumstances
may lead to adding either explicitly or implicitly the convenience of the court to the
real motivation for dismissal on the grounds of inconvenience.
Black’s defines forum non conveniens as follows:
The doctrine that an appropriate forum—even though competent under law—may
divest itself of jurisdiction if, for the convenience of the litigants and witnesses, it
34
35
36
Id. at para. I/5.
See id. at 84, para. I/7.
See David W. Rivkin & Suzanne M. Grosso, Forum Non Conveniens: A Doctrine on the Move,
5 BUS. L. INT’L 1 (Jan. 2004). See also Dimitri Santoro, Forum Non Conveniens: A Valid
Defense under the New York Convention?, 21 ASA BULLETIN (2003).
FORUM NON CONVENIENS
95
appears that the action should proceed in another forum in which the action might
originally have been brought.37
For the doctrine to be applied, there must be a more convenient forum readily available (i.e., otherwise mere inconvenience is not sufficient and might amount to denial
of justice).38 Hence convenience is a matter of comparison of various fori available to
the parties and the procedural efficiency provided or offered by these courts. This is a
task of considerable difficulty that imposes a heavy duty of education on the parties
and the arbitrators. As we approach the issue from the perspective of an arbitral tribunal, we should primarily compare the pros and cons of arbitral efficiency with that of
the courts of the country or countries that would otherwise or “originally” have jurisdiction and be available for hearing the action.
Arbitral proceedings may in most cases prove superior in particular in the light of the
enforcement effects test, which is relevant also in this analysis. However, this rule is not
absolute, and some court systems offer cost-effective and expeditious proceedings
(although these may be hampered or blessed by recourse to one or more levels of appeal).
It is very unlikely we will need to compare the convenience of one arbitration versus
another, as in addition to being mostly an academic exercise, it may prove to be impossible
despite the relative uniformity of many arbitration laws or institutional rules because the
parties, arbitrators, and infrastructures provide for such diversity that any attempt at a
systematic analysis of two proceedings yet to be “tailor-made” would be in vain.
37
38
BLACK’S LAW DICTIONARY, supra note 11.
Des Williams, Setting Aside of International Award, Newsletter, 9 IBA NEWSLETTER: ARB. &
ADR 81 (International Bar Association Section on Business Law, Oct. 2004)
Shortly after the partial award was made, Telcordia sought enforcement thereof in the US
District Court for the District Columbia. In July 2003 Telcordia’s petition to enforce the
partial award was dismissed for lack of personal jurisdiction and on forum non conveniens
grounds. In onsidering the forum non conveniens issue, the US District Court held as follows:
“Telcordia has not questioned the ability of South African courts to provide an alternative
forum to resolve the parties’ dispute. In fact, the South African High Court is currently
reviewing Telcom’s petition to set aside the partial arbitral award that Telcordia seeks to
enforce. South Africa is a signatory to the New York Convention, making it possible for
Telcordia to seek enforcement of the arbitral award in South Africa. Telcordia argues that it
was foreseeable that it would seek enforcement of the arbitral award in the United States,
merely because it is an American company and Telkom agreed to arbitration, but that
argument—which essentially means that Telcordia agreed to South African law and South
African courts with its fingers crossed—is rejected on policy grounds.” Telcordia’s appeal to
the United States Court of Appeal for the District of Columbia against the dismissal of
Telcordia’s petition to enforce the partial award was heard in April 2004. The District Court’s
judgement was affirmed. Telcordia had asserted that the District Court had erred by dismissing the case on forum non conveniens grounds, because this ground is not specified in Articles
V or VI of the New York Convention. The Court of Appeals held that it did not need to concern itself with the application of forum non conveniens in this context, nor did it need to
address personal jurisdiction.
96
ASPECTS OF JURISDICTION OTHER THAN THE AGREEMENT
4.6.2 Special Considerations in Arbitration
In arbitration, a party may make a motion to dismiss the case on the ground of forum non
conveniens. Such a motion could be deemed to be a breach of the arbitration agreement
infringing the sacred pacta sunt servanda. A motion in itself does not, however, necessarily amount to a real breach, but is aimed at seeking permission from or declaration by
the panel that in this particular case and in these particular circumstances the proceedings must be dismissed or put on hold pending another suit (whether already filed or to
be filed). Could such a motion be granted by the tribunal? On its face, this seems impossible as arbitration is based on agreement (i.e., consent and express purpose), and often
provides for exclusivity—accordingly, there is no convenient alternative. However,
there is still a remote possibility such a request could be granted if forum non conveniens
is classified as a procedural principle applicable to the arbitration in question or an
implied condition of the arbitration agreement incorporating a procedural framework by
reference. This possibility could also be realized through lex arbitri containing the principle of forum non conveniens and vesting the panel with such authority.
What special or extreme circumstances would justify such a radical decision? The
proceedings may simply be too heavy and too costly (e.g., involving several arbitrators,
long distances, etc.) creating an unreasonable burden and true inconvenience as such.39
If the arbitral proceedings are used abusively (e.g., to cause the other party to “bleed to
death” in legal fees and costs, to force production of sensitive documents for no apparent good reason or for unrelated purposes, or simply to harass and tie up management
resources of a small competitor), could this constitute such special circumstances?
39
Compare the concept of hardship in UNIDROIT Art. 6.2.1–6.2.3:
6.2.1 Where the performance of a contract becomes more onerous for one of the parties, that
party is nevertheless bound to perform its obligations subject to the following provisions on
hardship.
6.2.2 There is hardship where the occurrence of events fundamentally alters the equilibrium
of the contract either because the cost of a party’s performance has increased or because the
value of the performance a party receives has diminished, and
(a) the events occur or become known to the disadvantaged party after the conclusion
of the contract;
(b) the events could not reasonably have been taken into account by the disadvantaged
party at the time of the conclusion of the contract;
(c) the events are beyond the control of the disadvantaged party; and
(d) the risk of the events was not assumed by the disadvantaged party.
6.2.3 (1) In case of hardship the disadvantaged party is entitled to request renegotiations. The
request shall be made without undue delay and shall indicate the grounds on which it is
based.
(2) The request for renegotiation does not in itself entitle the disadvantaged party to
withhold performance.
(3) Upon failure to reach agreement within a reasonable time either party may resort to
the court.
(4) If the court finds hardship it may, if reasonable,
(a) terminate the contract at a date and on terms to be fixed; or
(b) adapt the contract with a view to restoring its equilibrium.
FORUM NON CONVENIENS
97
There may be other reasons such as using discovery to fish for evidence for another
action or embarrassing the management. However, although such actions may be abusive, they do not constitute inconvenience under the forum non conveniens doctrine
and may be remedied by other more appropriate measures.
However, the non conveniens doctrine could be considered from an access to justice
perspective, as this is the due process principle that might justify the application of non
conveniens in arbitration. If for some reason the forum is such that it would deny access
to justice, it could be considered a forum non conveniens. However, it would probably
be better to classify this situation as a case of modifying the agreement on the grounds
of equity, or even better, applying the contract in a way that ensures an equitable result.
Thus, it would often not be the forum but the procedure that would be changed.
To succeed in a forum non conveniens motion, a party should irrevocably commit to
accepting another arbitration clause or jurisdiction clause that eliminates all or at least
some elements of the asserted inconvenience. The panel cannot take such action on its
own initiative, but in some circumstances it could suggest the parties attempt to agree
on modifications of their arbitration agreement or enter into a new arbitration agreement to reduce costs and eliminate the inconvenience (e.g., by reducing the number of
arbitrators or changing the place of arbitration).40 However, the panel on its own naturally has no power to amend or disregard the original arbitration agreement except in
accordance with applicable contract law.
Finally, William W. Park in his article “Arbitration in Banking and Finance” opines
from a practical perspective:
Unlike judges, arbitrators rarely (if ever) refuse to hear a dispute because of forum
non conveniens or the parties’ lack of diversity of citizenship. If the parties can provide an adequate deposit to cover costs, professors around the world can usually be
found eager to supplement meager academic stipends by serving as arbitrators.41
4.7 CONDITIONS IMPOSED BY THE APPLICABLE RULES
4.7.1 Security for Fees and Costs of the Arbitral Tribunal and
Institution
A requirement of paying fees or an advance as a security for fees and costs may be a
condition precedent to arbitration proceedings.42 The ICC Rules provide for such in the
form of a provisional advance covering the period until the Terms of Reference have
been drawn up.43 National laws contain provisions to the same effect as the ICC Rules.
43
Matthias Scherer, The Place of “Seat” of Arbitration (Possibility, and/or Sometimes Necessity
of its Transfer?)—Some Remarks on the Award in ICC Arbitration No. 10’623, 21 ASA
BULLETIN (Mar. 2003).
William W. Park, Arbitration in Banking and Finance, 17 ANN. REV. BANKING L. 213 (1998).
A registration fee may be the first condition precedent. See ICC Rules Art. 4(4). Arbitration
Act 1996 of England § 38(3) (see Appendices, p. 271).
ICC Rules Art. 30(1) and (2) (see Appendices, p. 415).
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ASPECTS OF JURISDICTION OTHER THAN THE AGREEMENT
40
41
42
Failure to pay the advance is sanctioned by (1) suspension of the proceedings and (2)
withdrawal (dismissal) of the claims without prejudice.44
Article 30 of ICC Rules deals with the security for the fees and costs of the tribunal.
Article 30(4) of the ICC Rules provides:
When a request for an advance on costs has not been complied with, and after consultation with the Arbitral Tribunal, the Secretary General may direct the Arbitral
Tribunal to suspend its work and set a time limit, which must be not less than 15
days, on the expiry of which the relevant claims, or counterclaims, shall be considered as withdrawn. . . .
Thus, the duty to pay the advance is expressly covered by the Rules and the Rules
are by reference an integral part of the arbitration agreement. Under the ICC Rules,
could an arbitral tribunal order a party to pay this advance, and could the order or
award then be enforced against the defaulting party? The ICC Rules are silent on the
issue, and a definite answer may not exist. The lex arbitri may give support for such an
interpretation, and even in the absence of an express authorization, such an order does
not appear extreme in light of the traditional doctrine of wide arbitral jurisdiction and
enforceability of contractual rights in general.45 Also, access to justice as a key due
process principle would support this interpretation, especially if continuing the proceedings seems reasonable and effective from an access to justice point of view considered from the perspectives of all parties.
4.7.2 Security for Attorneys’ Fees and Legal Costs of
the Parties
The institutional rules often do not cover the duty to deposit a security for the attorneys’ fees and costs of the parties.46 There are many reasons for this. However, ICC
Rules do provide:
The costs of the arbitration shall include . . . the reasonable legal and other costs
incurred by the parties for the arbitration.47
44
45
46
47
ICC Rules Art. 30(4): “. . . Such party shall not be prevented, on the ground of such withdrawal,
from reintroducing the same claims or counterclaims at a later date in another proceeding.”
Swiss Rules Art. 41 (see Appendices, p. 474).
As to Swiss law, see Bernard Berger, Prozesskostensicherheit (cautio iudicatum solvi) im
Schiedsverfahren, 22 ASA BULLETIN (2004). See, however, London Court of International
Arbitration: Rules, Clauses & Costs (LCIA Rules) Art. 25.2 (see Appendices, pp. 442–43).
ICC Rules Art. 31(1). Derains and Schwartz write:
Under Article 31(1), the arbitrators have complete discretion to allocate the costs as they see
fit. Unlike some other arbitration rules (such as, for example, the UNCITRAL Rules, Article
40, or those of the Arbitration Institute of the Stockholm Chamber of Commerce, Article 29),
the Rules do not provide for the bearing of the costs “in principle” by the unsuccessful party.
Nor is the arbitrators’ discretion necessarily limited by any related legal requirements. Not
surprisingly, however, the treatment of costs by arbitrators is often influenced by their national
backgrounds. In this regard, there are three different approaches that appear to be most commonly followed. One is to order that all of the costs be borne by one of the parties (i.e., the
CONDITIONS IMPOSED BY THE APPLICABLE RULES
99
and further that:
Decisions on costs other than those fixed by the Court may be taken by the Arbitral
Tribunal at any time during the proceedings.48
The latter provision could be understood as an authorization to order such a security
deposit, but the absence of an express stipulation as to such an effect could with reference to Article 30 to the contrary be understood to exclude such a possibility. The issue
is not significant as decisions regarding costs may be made by the panel “at any time.”
However, the question of securities could be relevant from a due process point of view
as a requirement of a significant advance could hinder access to arbitration.49
4.7.3 Security for Loss or Damage
A duty to give a security for loss or damage potentially caused via a legal action or the
enforcement of a decision or award is exceptional but not unknown in arbitration
practice. To require such a deposit, there should be an express authorization in the
applicable rules. In the absence of such express rules, the authority of the panel to
order such a measure may be challenged, but such a power cannot be categorically
excluded. On the contrary, it may be a part of the mission (i.e., giving legal protection).
However, like all demands for securities, it might hinder access to arbitration and thus
make it more difficult to enforce substantive rights.
At least two situations may be identified in which grounds for a subsequent damage
claim might arise:
1) A decision or award is enforced, but then later amended or revoked altogether.
Such a situation is not likely to arise in arbitration where the decisions and awards
are in general final without recourse to appeal.
2) An abusive claim was filed, or action was taken for the sole purpose of causing
damage or loss to the other party by way of costs and time required to defend that
party’s rights, and the recovery of such costs may be uncertain.
losing party). It is, thus, for example, the usual rule in England that the successful litigant is
entitled to an Award of costs (i.e., the costs follow the event). Another approach, prevalent in
Germany, Switzerland and Austria, in particular, is the allocation of the costs in proportion to
the outcome of the case (e.g., 75/25 or 60/40), taking into account the relative success of the
claims and defences. Yet a further possibility is to require that the costs be shared equally
by the parties or that they bear their own costs. Arbitral tribunals may also consider that
administrative costs and arbitrators’ fees and expenses, on the one hand, should be treated
differently from legal and other possible expenses, on the other.
48
49
100
YVES DERAINS & ERIC SCHWARTZ, A GUIDE TO THE NEW ICC RULES OF ARBITRATION 341–42
(1998).
ICC Rules Art. 31(2).
See GEORGIOS PETROCHILOS, PROCEDURAL LAW IN INTERNATIONAL ARBITRATION 126 (2004).
ASPECTS OF JURISDICTION OTHER THAN THE AGREEMENT
The first category applies to interim actions and protective measures. The ICC Rules
have expressly addressed the issue authorizing the panel to require such a deposit in its
discretion:
The Arbitral Tribunal may make the granting of any such measure subject to appropriate security being furnished by the requesting party.50
From the point of view of access to justice, it is the second category that might cause
problems. The threshold showing for such securities to be required should be rather
high. Otherwise in some cases the decision regarding securities could decide the overall case.
4.7.4 Security for the Claims or for the Enforcement of the Award
Security for the claims is not common in arbitration practice or law.51 In general, the
parties are under no duty to give a security for the enforcement of the arbitral award,52
but interim protection may be available before the award becomes final. In the enforcement proceedings under the Convention, a party taking action against the enforcement
may be ordered to provide a suitable security.53 However, we have to draw a distinction between dispute resolution and enforcement procedures including interim
measures. Requiring a security for enforcement as a prerequisite of jurisdiction could
probably often lead to denying access to arbitration.
4.8 CONDITIONS IMPOSED BY THE PANEL WITHIN ITS
AUTONOMY
What conditions may the panel impose on the proceedings apart from those expressly
authorized by the applicable rules? The panel may require a security for the costs of
arbitration under institutional rules or applicable arbitration laws, but could the panel
require such a security in the absence of such an express authorization? Could the
panel on its own initiative or at the request of a party impose other such conditions not
expressly provided for in the applicable rules such as submission of documents, duty
to negotiate, or pre-arbitral discovery?
In principle, there is conceptual support in the procedural autonomy and powers of
the panel to take any such procedural actions or measures that serve the interests of the
50
51
52
53
ICC Rules Art. 23(1) (see Appendices, pp. 412–13). Swiss Rules Art. 26(2) (see Appendices,
p. 468).
LCIA Rules Art. 25.1 (see Appendices, pp. 442–43).
See, however, Arbitration Act 1996 of England § 11 (see Appendices, p. 259).
See Model Law Decisions: Europcar Italia S.p.A. v. Alba Tours International Inc., Ontario
Court Justice, General Division (Dilks, J.), 21 January 1997, Original in English, Unpublished:
[1997] O.J. No. 133; 23 O.T.C. 376; CLOUT. “The grounds permitting refusal of recognition
and enforcement of an award in Article 36 are permissive, not mandatory. An application to
enforce an award was suspended pending appeal in Italy, and the respondent was ordered to
provide security.”
CONDITIONS IMPOSED BY THE APPLICABLE RULES
101
parties and are necessary to carry out the task of the panel in a particular difference
(mandate in concreto) or the mission of arbitration in general to grant relief and legal
protection when warranted (mandate in abstracto and in concreto). This autonomy and
power cannot be limited to what is expressly authorized. The autonomy is restrained
or limited by the agreement of the parties, but in the absence of such agreement, the
panel could or perhaps even should be presumed to be able to take any such procedural
measures that serve in accomplishing its task and mission and on which the parties can
agree in principle. There is no reason to tie the hands of the panel to what is expressly
authorized in the applicable rules or in the agreement of the parties. These do not often
cover relief or legal protection or do so only very superficially.
Ultimately, the limits of this autonomy and power may be defined by the procedural
rules and principles applicable to arbitration in general. The statutes or rules meant to
be applicable specifically or exclusively to proceedings before courts are, however,
inapplicable. The latter do not constitute principles of arbitration law and, in addition,
may be more national than international in their character.
However, some procedural principles are common to arbitration and court proceedings alike. A sound presumption would seem to be that the panel may take any and all
actions that a court could take, and in addition, has broad authority to take other actions
and impose other conditions as and when deemed necessary. The procedural authority
resembles the ex aequo et bono authority regarding material issues. After all, why
would arbitration be preferred if the procedure were as formal and rigid as before the
courts? The great advantage of arbitration lies in its flexibility. This does not, however,
extend to substantive law issues where the panel’s authority is usually limited by what
is provided in the agreement of the parties and the material law.54
Once again, the tribunal does have to pay special attention to guaranteeing parties’
access to justice and the possibility of enforcement of substantive rights. The tribunal
also has to pay special attention to making the actual proceeding accessible and not
raising the threshold for engaging in a legitimate proceeding for a reason that is not
comparably important.
Finally, the panel’s autonomy and authority could perhaps be compared to the right
and the duty to manage a company: there must be freedom to take proper action when
necessary without submitting all issues to the board of directors or shareholders.
4.9 CONDITIONS IMPOSED BY THE AGREEMENT OF THE
PARTIES: DUTY TO MEDIATE OR NEGOTIATE
The arbitration agreement or arbitration clause may contain contractual duties relating
to the settlement of the matter prior to arbitration or such duties may be imposed in the
terms and conditions of the underlying agreement. These duties may relate to negotiating prior to resorting to arbitration.
54
102
What is substantive and what is procedural is not always distinguishable: for example, is the
right or remedy to claim damages or specific performance substantive or procedural—or
perhaps both?
ASPECTS OF JURISDICTION OTHER THAN THE AGREEMENT
The duty to negotiate may be very specific and not just a generic duty to negotiate
“in good faith to reach an amicable settlement out of court”. Sometimes the negotiation or mediation mechanism specifies various tiers of negotiation (e.g., climbing the
ladder of the corporate hierarchy before being referred to an outside mediator). It is not
always clear whether such duties are enforceable rights, and even when enforceable,
whether they are truly conditions precedent to arbitral proceedings in the sense that the
proceedings cannot be started prior to completion of all the required “ADR steps”.55
Theories are being tested and clarity is being sought in the interest of expediency
and avoiding unnecessary expense.56 In any case, the “steps” cannot be presumed to
prevent a party from applying for protective or interim measures before courts of law.57
Do they then bar such measures in arbitration? This is undoubtedly an issue of construction and interpretation, but by whom? This issue of interpretation would at least
prima facie seem to be within the jurisdiction of the arbitral tribunal. Does the initiation of arbitral proceedings (e.g., by filing a request at an institution to have the tribunal constituted for the purpose of interpreting the agreement) and making a claim for
interim or protective measures already violate the duty to negotiate or mediate?
Protective and interim measures relate to the initial stages of arbitration and are not, in
substance, part of the arbitral proceedings, although they are ancillary thereto. Having
an arbitral tribunal constituted for these purposes does not categorically violate the
55
See Karl Mackie’s article, The Future for ADR Clauses after Cable & Wireless v. IBM, 19
LCIA ARB. INT’L., (2003). UNIDROIT establishes ADR as an effective measure to interrupt
the running of statute of limitation. UNIDROIT Art. 10.7:
The provisions of Articles 10.5 and 10.6 apply with appropriate modifications to other proceedings whereby the parties request a third person to assist them in their attempt to reach an
amicable settlement of their dispute.
56
See Laminate Acquisition Co. v. BTR Australia Ltd [2004] I AII E.R. 737. Louise Barrington,
ADR Clauses and a Duty to Negotiate in Good Faith, 9 IBA NEWSLETTER: ARB. & ADR 25–26
(Oct. 2004) wrote:
Reyes J referred to the continental concept of “good faith” in adjudicating commercial disputes, and to the concern of English courts to ensure that fiduciaries do not act in bad faith
towards beneficiaries. In light of this experience he said, “. . . it is difficult to see why an
English or Hong Kong Court should have any real difficulty in assessing whether parties have
objectively acted in a spirit of cooperation and good faith.” Citing Queensland’s Judge Kirby,
Reyes J said there is no blanket rule against the enforcement of all agreements to agree.
Rather, the court needs to ask whether there are objective criteria against which reasonable
compliance with the agreement can be assessed. If there are such criteria, the agreement may
be enforced. In reaching this conclusion, the judge also considered the Judicial Working
Party Report’s Proposal No 674, recommending that judges be empowered to make adverse
costs orders in cases where mediation has been unreasonably refused, saying “It would be
odd and contrary to common sense expectation for the law to say that, if one side deliberately
flaunts the agreement by not participating in mediation at all, the bargain cannot be enforced
and the time and expense which both parties sought to minimise by agreeing to mediate
cannot be avoided. . . . It would be equally strange for the Court to say that in all cases an
agreement to mediate . . . is unenforceable, while the Court reserves to itself a power to
penalise a party in costs for failing to mediate. . . .”
57
Even if expressly barred, such a waiver could hardly be enforceable in abusive or other such
situations where duties are being deliberately violated or fraud is being committed. Arbitration
Act 1996 of England § 9(2) (see Appendices, p. 258).
CONDITIONS IMPOSED BY THE AGREEMENT OF THE PARTIES
103
purposes of “negotiation-mediation” duties. However, when a statement of claims for
“ordinary” relief is filed, the issue becomes more substantive.
Agreements—even those with only the temporary effect of restraining access to
legal protection—should in principle be narrowly construed. If the restraints imposed
are significant in light of the underlying transaction, the parties involved, or the circumstances in general, they may be unconscionable or unreasonable or even amount to
denial of justice; thus, such restraints could as such be considered null and void as a
violation of international ordre public. Such restraints may be classified as “waivers to
legal protection”. In any case, they must be narrowly construed, and their enforceability must be unambiguous as to their use as conditions precedent.
However, negotiation clauses in the contracts of the parties must be understood. If
functional, such agreements could lead to effective dispute resolution, which is in a
broader view also a prerequisite for access to justice. Yet it is clear that an analysis of
the genuine purpose of the clause has to be made in casu. If it seems taking into consideration the contract and the circumstances of making the contract as well as the
circumstances in the context of the dispute resolution in progress that the negotiation
or similar clause could not possibly lead to timely resolution of the dispute in questions, the argument of effective protection of substantive rights seems even more
valid.
4.10 SUMMARY
Arbitrability is probably the most challenging and problematical procedural aspect or
prerequisite of jurisdiction in addition to the arbitration agreement. Arbitrability is a
very arbitration-specific problem that touches the very foundations of arbitration as a
method of dispute resolution. Theoretically, it might have a lot to do with the core of
due process: what claims can be examined and what rights can be established or
validated might at least in the long run have something to do with the quality of the
procedure and the procedural safeguards of arbitration. As arbitrability has a strong
bond with substantive law, and as discussing it in much more detail would require a
broad analysis of various substantive law areas, the analysis in this book remains
superficial.
On the other hand, the other jurisdiction-related problems discussed above such as
res judicata and lis pendens are classical procedural problems that are handled in detail
in classical procedural law research. Although they do have arbitration-related “twists,”
they are not discussed in more detail in this book.
In general, in relation to all jurisdictional questions, access to justice and effective
protection of substantive rights is prima facie the most important argument. However,
we have to remember that at least traditionally, access to courts is the primary guarantee (or better, the necessary guarantee) of access to justice. This binds the jurisdictional
questions more intensively than often thought to the procedural questions raised in
arbitration. In order to guarantee access to justice and to be able to make access to
courts less relevant, arbitration procedures have to be as fair, affordable, and certain
104
ASPECTS OF JURISDICTION OTHER THAN THE AGREEMENT
as possible. Also, all the extra steps or requirements that might make access to arbitration more difficult hinder the enforcement of the parties’ substantive rights.
Exclusive jurisdiction of the tribunal might conflict with the parties’ right of access
to courts. However, having to argue a dispute in more than one forums raises the costs
of dispute resolution, thus making it more difficult to enforce substantive rights. In that
way it is a due process matter when the tribunal decides when appropriate that it does
not have jurisdiction. On the other hand, the tribunal in question might just be a party’s
only chance to de facto access to an effective dispute resolution method
and enforcement of his substantive rights. Thus the due process argument requires
the tribunal to find it has jurisdiction when appropriate and not to unreasonably deny
jurisdiction. The problem has to be decided by balancing the relevant arguments in
each specific case at hand.
SUMMARY
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Chapter 5
The Panel and Due Process
5.1 THE ARBITRATION PANEL IN THE DISPUTE RESOLUTION
CONTEXT
The composition and construction of the arbitration panel is clearly of great importance
for the procedure as a whole, for legitimacy of the institution and each arbitral award,
for the fairness of the arbitral proceedings and for compliance with due process requirements. In classical procedural law, the independence and impartiality of the courts and
judges is one of the classical fair trial themes both in research and practice; no wonder
it is interesting and important in arbitration as well.
In State courts, the tribunals are permanent and independent from governmental
control. The judges are permanent officials who solve cases brought to them, and their
authority and jurisdiction is based on law. In contrast, in arbitration most of the tribunals are not permanent. Tribunals are mostly constituted case by case, and the authority of the arbitrators and the jurisdiction of the tribunal are most of the time based on
the arbitration agreement between the parties. Also, court procedure is rather exactly
prescribed by law, but in arbitration the procedural details are often decided in the
contract—or even more likely left to the discretion of the arbitrators. In ordinary court
procedure, the parties can appeal, but arbitration leads to a final decision.
This short and self-evident comparison should highlight the importance of qualified,
independent, and impartial tribunals in arbitration. However, the question of independency and impartiality is not only twice as important but also probably at least twice
as difficult in arbitration in comparison with court procedure. Even though it is discussed with the same terminology (and in many countries in similar norms), the context makes the problems and solutions look different.
Impartiality is one of the key elements of the arbitration procedure. An impartial
decision maker is what separates arbitration from some of the other forms alternative
dispute resolution (ADR). Some ADR scholars might say that arbitration is not ADR,
but rather private court procedure. This is based on the difference between the purposes in arbitration and traditional ADR such as mediation. In traditional ADR, the
content of the agreement (i.e., the solution) is not important, as the primary goal is to
107
resolve the conflict in a sociological sense between the parties. In court procedure and
in arbitration, the goal is to solve the legal dispute correctly on factual and legal bases
regardless of the social situation between the parties after the decision. For example, it
is actually questionable whether a mediator needs to be impartial as long as he gets the
conflict resolved. This is because the mediator does not have the power to end the
dispute as that remains with the parties. In arbitration, the arbitrator has all the power,
not only over the substantive result, but in many cases over the procedure as well.
Also, the idea in arbitration is that disagreeing parties let the third party resolve the
matter. This way the impartial decision maker in a way defines arbitration in the field
of dispute resolution mechanisms.
From a due process perspective, the position of the panel from its own point of view
is not that interesting. However, the rights and duties of the arbitrators naturally reflect
on the rights and duties of the parties. Accordingly, they might also connect with due
process requirements.
What constitutes the position of the arbitrator is a classic question in arbitration
jurisprudence. Is it a contractual relationship, or is the position of arbitrator strictly
based on law? Without getting too deeply into this problem (which is not a key issue
for the objective of this work), it is probably safe to say that the legal position of the
arbitrator is a mixture of both contract and law-based rights and obligations. An arbitrator cannot make enforceable decisions just on the basis of a contract, and thus the
law gets to also partly define the rights and obligations of arbitrators in relation to the
parties. However, no one has to arbitrate, and once one has committed to arbitrate, one
is at least to some extent bound to it.1
5.2 THE COMPOSITION OF THE PANEL
There are various ways of constituting an arbitral panel or appointing arbitrators:
(1) as provided by a national arbitration act or institutional rules, (2) by appointment
of a party or by appointment of an institution or a third party, (3) by the two arbitrators
appointed, (4) by a court of law, (5) by agreement, or (6) by a mixture of these. The
most common procedure for constituting an arbitral tribunal seems to be each party
appointing one arbitrator and the two electing a third as chairman (if they can reach a
consensus). In most cases the mechanism of appointment provides for a secondary
safeguard should the primary appointing authority fail to nominate the arbitrator within
the time period indicated or if the arbitrators fail to agree on the chairman.
The number of arbitrators may also vary. The most common is perhaps a sole arbitrator, but three arbitrators are very common too, in particular in larger cases under
institutional rules or in statutory ad hoc arbitration.
ICC Article 8(1) and (2) provides:
(1) The disputes shall be decided by a sole arbitrator or by three arbitrators.
(2) Where the parties have not agreed upon the number of arbitrators, the Court
shall appoint a sole arbitrator, save where it appears to the Court that the dispute is
1
108
See, e.g., LARS HEUMAN, SKILJEMANNARÄTT 220 [Law of Arbitration] (1999).
THE PANEL AND DUE PROCESS
such as to warrant the appointment of three arbitrators. In such case, the Claimant
shall nominate an arbitrator within a period of 15 days from the receipt of the notification of the decision of the Court, and the Respondent shall nominate an arbitrator within a period of 15 days from the receipt of the notification of the nomination
made by the Claimant.
The rules applicable to the appointment of arbitrators (whether by an agreement,
statute, or institutional rules) are part of international due process as demonstrated by
the provisions of Article V(1)(d) of the Convention:
Recognition and enforcement of the award may be refused . . . proof that: The composition of the arbitral authority or the arbitral procedure was not in accordance
with the agreement of the parties, or, failing such agreement, was not in accordance
with the law of the country where the arbitration took place;. . . .
In principle, the appointment mechanism is always primarily based on the agreement of the parties, and the statute or other rules of appointment are incorporated
therein by reference. In the absence of an express reference, the vacuum is filled by the
applicable arbitration law. Such a vacuum is not necessarily an omission or error by a
party or parties, but often a well-informed and conscious choice equal in force to a
specific agreement containing an express reference. Perhaps only occasionally the
vacuum is something the parties could not agree on, leaving “the unknown” to be filled
by whatever provisions the applicable law may contain.
The fairness of the mechanism of constituting the panel is also an independent due
process requirement. If the mechanism is very unbalanced, the agreement might not be
equitable and it might be considered unreasonable from the point of view of one of the
parties.2 The arbitration agreement and thus the jurisdiction of the tribunal might be
challenged on that ground even if the suggested arbitrators would not clearly be biased
or partial with the grounds being the agreement, not the arbitrators as such. Thus a
defense claiming that the arbitrators are independent and impartial regardless of an
unfair constituting procedure seems false.
From a practical point of view, if a party thinks the arbitrators suggested in an
unbalanced process are in fact impartial, the allegedly favored party could well agree
to change the mechanism into a balanced one. This would be a timely solution to the
problem. However, if there is no agreement on changing the procedure at that point, it
is not certain the arbitrators would later be found partial despite their having been
chosen in an apparently unfair manner. In fact, the threshold for finding the arbitrators
partial might be high.
5.3 CHALLENGING THE ARBITRATORS
Do the rules applicable to challenging arbitrators form part of what constitutes “the
composition of the arbitral authority” under the Convention? In business practice,
2
Id. at 132.
CHALLENGING THE ARBITRATORS
109
arbitration clauses seldom contain specific rules as to how an arbitrator could be
challenged, but institutional rules often contain such specifics as do arbitration laws.3
UNCITRAL Model Law Article 13(1) and (2) provide:
(1) The parties are free to agree on a procedure for challenging an arbitrator,
subject to the provisions of paragraph (3) of this article.
(2) Failing such agreement, a party who intends to challenge an arbitrator shall,
within fifteen days after becoming aware of the constitution of the arbitral tribunal
or after becoming aware of any circumstance referred to in article 12(2), send a
written statement of the reasons for the challenge to the arbitral tribunal. Unless the
challenged arbitrator withdraws from his office or the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge.
The challenge may relate to qualifications agreed upon by the parties, qualifications
provided by the applicable rules, or the applicable arbitration law or national or international due process. Most of these norms are substantive and go to the very core of
arbitration. One of the most fundamental due process principles is that of impartiality,
but in certain arbitration rules or agreements of parties the impartiality is reduced or
waived by express reference to appointing “partial” or “biased” arbitrators from both
or all sides.4 Sometimes expertise in a particular field often seems to be the overriding
interest of the parties superseding an orthodox requirement of impartiality.5
With reference to the Convention’s provisions, we could ask: was the composition
of the arbitral tribunal in accordance with the agreement or with the lex arbitri if the
rules relating to bias, disqualification and resignation were not complied with or were
disregarded? As such, the rules are part of the arbitration agreement by reference
(although perhaps not part of the arbitration clause itself), we must conclude these
ancillary mechanisms are so closely and so intimately connected with the appointment
that they form part of what is to be deemed to be part of “the composition of the arbitral
tribunal.”
The arbitrator’s bias may be disclosed or concealed. In the latter case, the mere
existence of the disqualification process cannot have had any relevance as to the consequences of such a concealed bias. If a disqualification process conducted in full
compliance with the agreement of the parties arrives at a manifestly unjust decision
allowing a grossly biased person to continue as an arbitrator despite objection, does it
bar other action by the objecting party?
Article 13(3) of the UNCITRAL Model Law provides:
(3) If a challenge under any procedure agreed upon by the parties or under the
procedure of paragraph (2) of this article is not successful, the challenging party
may request, within thirty days after having received notice of the decision rejecting the challenge, the court or other authority specified in Article 6 to decide on the
challenge, which decision shall be subject to no appeal; while such a request is
3
4
5
110
ICC Rules of Arbitration in force as from January 1, 1998 (ICC Publication No 808), as
Amended January 1, 2008 (“ICC Rules”) 11(2) and (3) (see Appendices, p. 409).
See IBA Guidelines on Conflicts of Interest in International Arbitration (May 2004) (“IBA
Guidelines”) 4(a) (see Appendices, p. 375).
See id. 4(c).
THE PANEL AND DUE PROCESS
pending, the arbitral tribunal, including the challenged arbitrator, may continue the
arbitral proceedings and make an award.
The decision under the Model Law may be challenged but the proceedings may
continue despite such challenge.
5.4 IMPARTIALITY AND INDEPENDENCE
5.4.1 The Requirement of Impartial and Independent Arbitrators
As already said above, in general legal proceedings are expected to be conducted by
impartial and independent arbitrators.6 To bring it to head, should this not the case we
could delete the word legal before the word proceedings.7 In a commercial dispute,
considerable economic interests may be at stake. This increases the moral hazard (i.e.,
the risk of unethical behavior or undue influence).8 Even the appearance of moral
6
See Model Law Decisions: Logy Enterprises Ltd. v. Haikou City Bonded Area Wansen
Products Trading Co., Court of Appeal (Liu, Bokhary, Nazareth JJ.A.) 22 May 1997, published
in English: 12(11) International Arbitration Report E-1 (Nov. 1997): CLOUT.
A party seeking to show danger of bias must show real danger. The argument that arbitrator’s
conclusion “could not readily be explained except by bias” may be rejected where the record
before the court cannot support an inference of bias.
7
See, e.g., David Sandy, Independence, Impartiality, Arbitration and the Human Rights Act in
England, 20 LCIA ARB. INT’L. (2004). Compare with amiable compositeurs in the Argentina
Act Art. 768:
1. Amiables compositeurs can be only challenged for reasons supervening their appointment.
2. They can be legally challenged only on any of the following grounds:
1) Direct or indirect interest in the dispute;
2) Consanguinity with any of the parties within the fourth degree on the parents’ side
or relationship with any of the parties within the second decree on the husband’s or
wife’s side;
3) Manifest enmity on account of specific circumstances with any of the parties.
3. In the incidental plea concerning challenge, the procedural rules provided for arbitrators
shall be observed.
8
(Argentinian National Code of Civil and Commercial Procedure Law 17.454 of September 19
1967, as reformed by Law 22.434 of March 16 1981, text consolidated according to Decree
1.042 of 1981, as reported in JAN PAULSSON (ED), INTERNATIONAL HANDBOOK ON COMMERCIAL
ARBITRATION, (Kluwer Law International 1984 Last updated: January 1985 Supplement No. 3)
pp. 3–7).
About Chinese law, see Tang Houzhi and Wang Shengchang in INTERNATIONAL HANDBOOK ON
COMMERCIAL ARBITRATION 22 (Supp. 11, Jan. 1990):
According to Art. 38 of the new Arbitration Law, an arbitrator shall assume legal liability, if
any of these circumstances exist:
1. the arbitrator has privately met with a party or agent or accepted an invitation to entertainment or a gift from a party or agent and the circumstance is serious; or
2. while arbitrating the case, the arbitrator committed embezzlement, accepted bribes,
practiced graft or made an award that perverted the law.
Although China has laws and regulations on bribery, gift-taking, and corruption as well as
civil liability, the Arbitration Law, use of the term legal liability in Art. 38 implies that an
IMPARTIALITY AND INDEPENDENCE
111
hazard should be eliminated, and the rules relating to bias and impartiality are there for
this purpose. This is still a major concern even in modern society.9
The IBA Guidelines10 Article 1 provides:
Every arbitrator shall be impartial and independent of the parties at the time of
accepting an appointment to serve and shall remain so during the entire arbitration
proceeding until the final award has been rendered or the proceeding has otherwise
finally terminated.
The ICC Rules11 provide:
Every arbitrator must be and remain independent of the parties involved in the
arbitration.12
arbitrator would be subject to economic or criminal sanctions if the arbitrator deliberately
commits misconduct during arbitration proceedings.
9
Japan Act §§ 50–52 establish a strong policy reflecting these Japanese values of honor and
integrity and concerns shared with other trading nations:
50 (1) An arbitrator who accepts, demands or promises to accept a bribe in relation to its duty
shall be punished by imprisonment with labor for not more than five years. In such case,
when the arbitrator agrees to do an act in response to a request, imprisonment with labor
for not more than seven years shall be imposed.
(2) When a person to be appointed an arbitrator accepts, demands or promises to accept a
bribe in relation to the duty to assume with agreement to do an act in response to a request,
imprisonment with labor for not more than five years shall be imposed in the event of
appointment.
51 When an arbitrator with agreement to do an act in response to a request, causes a bribe in
relation to its duty to be given to a third person or demands or promises such bribe to be given
to a third person, imprisonment with labor for not more than five years shall be imposed.
52 (1) When an arbitrator commits a crime described in the preceding two articles and
consequently acts illegally or refrains from acting in the exercise of its duty, imprisonment
labor for a definite term of not less than one year shall be imposed.
(2) The provisions of the preceding paragraph shall apply when an arbitrator accepts,
demands or promises to accept a bribe, or cause a bribe to be given to a third person or
demands or promises a bribe to be given to a third person, in relation to having acted
illegally or refrained from acting in the exercise of its duty.
(3) When a person who was an arbitrator accepts, demands or promises to accept a bribe
in relation to having acted illegally or refrained from acting in the exercise of its duty
during its tenure as an arbitrator with agreement thereof in response to a request, imprisonment with labor for not more than five years shall be imposed.
Section 54 provides:
A person who gives, offers or promises to give a bribe as provided for in articles 50 through
52 shall be punished by imprisonment with labor for not more than three years or a fine of not
more than two million five hundred thousand yen.
10
11
12
112
(Japanese Arbitration Law, No. 138 of 2003, in force 1 March 2004, as reported in JAN PAULSSON
(ED), INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION, (Kluwer Law International 1984
Last updated: March 2005 Supplement No. 43) pp. Annex I-1–Annex I-20).
IBA Guidelines.
ICC Rules.
Id. Art. 7(1) (see Appendices, p. 406).
THE PANEL AND DUE PROCESS
The problem of impartiality seems to be increasing rather than fading away. In the
introduction to the IBA Guidelines, the eminent drafters described the issues accurately:
Problems of conflicts of interest increasingly challenge international arbitration.
Arbitrators are often unsure about what facts need to be disclosed, and they may
make different choices about disclosures than other arbitrators in the same situation. The growth of international business and the manner in which it is conducted,
including interlocking corporate relationships and larger international law firms,
have caused more disclosures and have created more difficult conflict of interest
issues to determine. Reluctant parties have more opportunities to use challenges of
arbitrators to delay arbitrations or to deny the opposing party the arbitrator of its
choice. Disclosure of any relationship, no matter how minor or serious, has too
often led to objections, challenge and withdrawal or removal of the arbitrator.
Before going into details, it is necessary to clarify the basic meaning and core of
independency and impartiality in the arbitration context.
5.4.2 The Meaning of Independency and Impartiality in
Arbitration
There is some discussion concerning what independency and impartiality mean in an
arbitration context.13 Binder writes:
Impartiality (occasionally incorrectly referred to as “neutrality”) is the “test for the
lack of impermissible bias in the mind of the arbitrator toward a party or toward the
subject-matter in dispute,” as was outlined by M. Scott Donahey in this context.
This test is a subjective one and it is not directed at the appearance of bias but to its
actual presence, which is “inferred from the facts and circumstances surrounding
the arbitrator’s exercise of the arbitral functions.” Independence, on the other hand,
is a term that refers to the relationship between the arbitrator and the parties and
indicates prior or current personal, social or business contact between them. The
closer the relationship between these “spheres,” the less “independent” the arbitrator or tribunal is considered to be. Unlike the test for impartiality, the test for independence is an objective one, as prior business or financial relations are easy to
determine. Professor Lalive came up with a well-chosen, albeit cynical definition of
the term at the VIth Symposium on International Arbitration (Paris, October 1988):
“Independence implies the courage to displease, the absence of any desire, especially for the arbitrator appointed by a party, to be appointed once again as an
arbitrator.14
Binder’s definitions seem to differ from the well-established counterparts used
in ordinary procedure. According to Binder, impartiality is defined by a subjective
test and decisive is the actual presence of bias, where independence concerns the
13
14
See also Luttrell at 20–24 about the difference between concepts of impartiality and independency and the meaning of neutrality.
Peter Binder, Italian Arbitration Law, in INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION
83–84 (Supp. 17, Jan. 1994).
IMPARTIALITY AND INDEPENDENCE
113
relationship between the parties and the arbitrator and is defined by an objective test.
In procedural law or general court procedure, impartiality seems to have a broader
meaning defined by an objective test. Independence on the other hand is attached to
other kinds of criteria mostly concerned with the institutional position of courts and
judges. Independence in Binder’s terminology seems to be something that is generally
placed under impartiality.
Impartiality in the general procedural context refers to the objectivity of the courts
and the judges in individual cases. Objectivity here means freedom of bias and prejudice for any reason, whether related to the parties or the subject matter. The impartiality
of the judge is usually defined by a two part test in which subjective and objective
impartiality are separated. First, the subjective test provides that a judge acts impartially in an individual case and is in fact not willing to promote the success of one of
the parties in the case at hand. If there is no evidence to support the opposite, subjective
impartiality is presumed. The problem is, as evident, that proving the subjective partiality of a judge is in practice impossible. That is why the objective test of impartiality
is de facto decisive. The objective test provides that there should not be any objectively
justified doubts concerning the impartiality of the judge in light of “externally visible
circumstances”. In opposition to Binder’s terminology, the objective test is not limited
to the judge’s relation to the parties in the case but rather to all the circumstances that
might cast a shadow over the judge’s impartiality.15
It should be obvious that the question of impartiality of an arbitrator has to be
decided on grounds of an objective test of bias.16 It should be very rare that the subjective test would be applicable as partiality would only be relevant in the most obvious
cases. It would probably be fair to say that only nearly fraudulent behavior would lead
to disqualification if the subjective test was the only criterion. Also, being able to control the impartiality of a judge and avoid being judged by someone whose impartiality
can be objectively questioned is clearly a due process requirement in arbitration as
well. It may at times be in conflict with the requirements of practicality, and it certainly
can be used to obstruct the proceedings, but the fairness and integrity of the proceedings have to given priority.17
15
16
17
114
Another stranger in the arbitration terminology is neutrality, which is often used to refer to the
national neutrality of the panel, or to an arbitrator nominated by a party but still acting neutrally
and objectively (see M. Scott Donahey, The Independence and Neutrality of Arbitrators, 9 J.
INT’L. ARB. 31 (1992) and Douglas Earl McLaren, Party-Appointed vs. List-Appointed
Arbitrators: A Comparison, 20 J. INT’L ARB. 233 (2003)).
See David A. Lawson, Impartiality and Independence of International Arbitrators—
Commentary on the 2004 IBA Guidelines on Conflicts of Interest in International Arbitration,
23 ASA BULLETIN 22 (2005): “The differences in the existing statutes, rules and guidelines as
to the impartiality and independence of international arbitrators have often been more a question of form than substance. The main exception to this is the ongoing dispute of whether to
apply a subjective or an objective standard for measuring impartiality and independence of
international arbitrators. Surprisingly, there has been little by way of academic discussion in
this area.”
As to applying the subjective and the objective test to arbitrators, see Otto L O De Witt Wijnen
et al., Background Information on the IBA Guidelines on Conflicts of Interest in International
Arbitration, 5 IBA BUS. L. INT’L 442(Sept. 2004).
THE PANEL AND DUE PROCESS
Independency, on the other hand, is a difficult concept in the arbitration context. In
general, procedure independence refers to the institutional frame that allows judges
and courts to work free of any outside pressure and be impartial. Attention is paid to
there being a general impression of neutrality and institutional protection against
outside pressure as well as to the way judges are appointed and the length of their term
in office.18 Even though independence refers more to the institutional setting, separating the requirements of independency and impartiality is difficult.19 However, it should
be clear that due to the requirement of independency, the arbitrators should be in a
position that allows them to be objectively free of any orders from anyone concerning
the case in question.
5.4.3 Same but Different? The Standard of Impartiality in
Arbitration
In the national arbitration law of many countries, the standard of independence and
impartiality is the same as what is applied to judges in State courts.20 However, arbitral
proceedings lack some of the institutional guarantees natural to the courts. The tribunals are in many cases appointed ad hoc and the arbitrators are not guaranteed a livelihood as arbitrators. Furthermore, the arbitrators have acted in various positions in the
business and legal worlds and so are often much more closely connected to the outside
world than ordinary judges. From many perspectives, this is a great benefit, but from
the perspective of impartiality this causes potential problems.
One of the biggest single problems in applying similar standards of impartiality to
both the judges and arbitrators has to do with the way arbitrators are nominated.
Arbitrators are often nominated by the parties; for example, it is usual that both of the
parties nominate one arbitrator and the arbitrators together decide the chairman of the
tribunal. A question arises whether these party-appointed arbitrators can ever be impartial according to the same criteria applied to ordinary judges. Most likely, the answer
is they can’t.21
It seems clear that at least in an objective test, an arbitrator might be seen to be
encouraged to promote the case of the nominating party. These nominations are very
18
19
20
21
ECHR in Langborger v. Sweden (Application no. 11179/84). Judgment 22 June 1989,
para 32.
Id. “In this case it appears difficult to dissociate the question of impartiality from that of independence”.
See De Witt Wijnen, supra note 17, at 443–44.
See also Peter Schlosser, Die Unparteilichkeit des Schiedsrichteramtes, ZEITSCHRIFT FÜR
ZIVILPROZESS 139 (1980).“Die deutsche ZPO etwa hat durch die Verweisung auf das Recht der
Richterablehnung klare Befangenheitstatbestände ausgewiesen, ohne nach der Art der
Schiedsrichterbestellung zu fragen.—Wollte man mit diesem Grundsatz wirklich ernst machen,
so könnte freilich so gut wie jeder von einer Partei benannte Schiedsrichter abgelehnt werden.
Allein die Tatsache, dass der Prozessgegner eine Person als Schiedsrichter bestellt hat, ist
geeignet, die Besorgnis ihrer Befangenheit zu begründen.” See also HEUMAN, supra note 1, at
238–39, and Stephen C. Rogers, Can Tripartite Arbitration Panels Reach Fair Results? 8 DISP.
RESOL. MAG. 27 (2001).
IMPARTIALITY AND INDEPENDENCE
115
sought after, and being nominated carries with it financial renumeration.22 An arbitrator naturally might feel a debt of gratitude toward the nominating party. Also, it is
reasonable to presume that an arbitrator might expect a party in a similar position or
branch of business to be in need of an arbitrator some time in the future. Finally, it is
reasonable to think the satisfaction of a party regarding the award and procedure in
general determines whether that party will nominate the arbitrator again. Thus it is not
surprising that according to a study, 90 percent of the arbitrators nominated by a party
vote in a way favorable to the nominating party.23
However, this does not mean we can assume the arbitrators subjectively mean to be
partial. The point is that in applying an objective test, it is reasonable to suspect the
impartiality of a party-nominated arbitrator if the test would be interpreted in a similar
way as in court procedure. Also, it is a general procedural principle that impartiality is
defined by the objective test, as otherwise it would practically not have any relevance.
It would actually be fair to say the requirement of impartiality as defined by the objective test is in fact a due process requirement. Whether the standard of impartiality
required or the waiver doctrine affects the result is a different thing.
The conclusion is not, though, that all party-nominated arbitrators can always be
disqualified. The standard of impartiality might be different in arbitration, and the
waiver doctrine naturally changes the situation. Still, ascertaining the meaning of
the impartiality requirement in arbitration seems to be difficult for courts as well, and
there seems to be no clear doctrine of what kind of impartiality is actually required.24
This easily leads to situations in which the partiality of arbitrators may seem to be
accepted.25. This seems to be the case especially when it comes to party-appointed
arbitrators, where the partiality might be seen to be automatically accepted and waived
by the parties.26
22
23
24
25
26
116
See Schlosser, supra note 21, at 124.
See Seth Lieberman, Something’s Wrong in the State of Party-Appointed Arbitration: Healing
ADR’s Black Eye That is “Nonneutral Neutrals”, 5 Cardozo J. Conflict Resol. 226 (2004).
See Laurence Shore, Disclosure and Impartiality: An Arbitrator’s Responsibility vis-à-vis
Legal Standards, DISP. RESOL. J. (Feb. 2002), passim.
See Deseriee A. Kennedy, Predisposed with Integrity: The Elusive Quest for Justice in
Tripartite Arbitrations, 8 GEORGETOWN J. LEGAL ETHICS 781 (1995).
Id. at 768, and especially 770–71: “Concerned first with maintaining the purported efficiencies
of arbitration and judicial economy, courts hesitate to be used as a means of challenging arbitration awards and accordingly decline to review alleged errors of law, procedure or ethics.
Courts typically remain unmoved by allegations of improper arbitrator relationships or conduct, especially with regard to party-appointed arbitrators. The judges argue that “(s)ince both
parties, by agreeing to upon tripartite arbitration, have necessarily accepted the idea of partisan
“appointees”, neither may object to the other’s designation of someone associated with his
interest or related to him”. See also at 752: “. . . prevailing customs and judicial inaction licence
an arbitrator to perform a number of services on behalf of his nominating party during the
course of arbitration”. See also Lieberman, supra note 23, at 233–37: “Even those partyappointed appellate decisions that recognize the importance of arbitrator neutrality have simultaneously conceded that the party-appointed arbitrators may be partisan representatives of each
sides.” . . . “Both arbitrators and the highest courts are unclear about the role of party-appointed
arbitrators. This lack of clarity will only perpetuate the confusion already existing among practicing arbitrators and the parties that appoint them.”
THE PANEL AND DUE PROCESS
In the legal literature concerning arbitration, it is often assumed that sympathies for
another party do not hinder someone acting as an arbitrator as long as the arbitrator can
set them aside and act conscientiously and professionally.27 However, this kind of
approach seems unrealistic and only leads to the fundamental problem being ignored
and left unsolved. As Rau writes, “A mythology that promotes the belief that international arbitrators can be relied on not to allow their sympathy ‘to override their conscience and professional judgment’—regardless of whether this is taken as empirical
description or a mere aspiration—seems calculated only to increase these dangers of
self-deception and sandbagging.”28
To be a bit more analytic, the idea that professional judgment could override latent
sympathies seems to be a bit naïve and based on a relatively simplistic theory of epistemology and ontology in legal proceedings. It presumes there is an objective outsider
perspective regarding both law and facts that is available to the arbitrator. However,
that kind of objective view is never available, not in arbitration or in court procedure.
Ideology, religion and history among other attachments cause people to observe the
world from a certain perspective.29 Even if this is seen as a given fact in all dispute
resolution, in arbitration there are probably more attachments and possibly more concrete attachments to certain sides in the dispute than in the courts.
Therefore, there seems to be a gap between the rhetoric of impartiality and the idea
of the requirements needed for a good and functioning arbitration practice. As Rau
puts it, “(E)ven in the best of circumstances an official rhetoric of ‘independence’ and
the tolerated latent ‘sympathy’ must exist in an uneasy tension.”30 It would seem that
there are two possible solutions to this problem. First, it would be possible to openly
admit that the standard of impartiality in arbitration is lower than in court procedure.
In some form, this probably has to be done, especially what comes to institutional
guarantees in the courts and the implications of the nomination practices. However, as
stated above, if required by the parties, objective impartiality is one of the key due
process requirements that cannot be sacrificed for reason of practical need.31
27
28
29
30
31
See HEUMAN, supra note 1, 238–39.
Alan Scott Rau, On Integrity in Private Judging, 14 ARB. INT’L 115, para. I(b). (1998).
See Bedjaoui s. 7 ss., para. I: “Like all men, an arbitrator has a conscience which gives him a
certain outlook at the world. He cannot detach himself from all the emotional ties which, consciously or unconsciously, may influence his thoughts. Whenever men are judged, including
judgement by arbitration, as we have already said, a wager is laid on impartiality. An arbitrator
is not a disembodied, floating being, without origins, or ethnic, cultural, religious, social and
other attachments. ‘There are’ states a report to the symposium of 20 November 1970 on arbitration, ‘some indistinct forms of which pose a very difficult problem for those who will be
demanding about indisputable impartiality. These forms are called Ideology (or that which
we name ideology), Religion (or that which we name religion) and History (of more recent
inspiration).’”
Rau, supra note 28, at 115, para. I(b).
See id. at para. I(a): “Occasional pronouncements on the ‘law of arbitration’ purport to identify
the standards to which we hold arbitrators with those standards of impartiality demanded of
public judicial officers. More often, however, it is blithely assumed that our expectations of
arbitrators must be considerably more relaxed”.
IMPARTIALITY AND INDEPENDENCE
117
Second, the waiver doctrine is there to rescue the impartiality of arbitrators. Potential
biases are widely disclosed, and a party who has not raised the issue cannot later insist
on partiality. Thus, it is said a party accepts the arbitrator and waives possible partiality
based on disclosed facts. However, impartiality (at least in the frame formulated above)
is a holistic concept, and judging the relationship of the disclosed and waived causes
of partiality to the whole situation and possible later-arisen facts and causes is difficult.
Also, a waiver is problematic in relation to partiality, as it might be difficult to openly
challenge the fairness and integrity of the person who is going to resolve the dispute.
But this is a general problem in procedural law.
When judging the impartiality of a specific arbitrator or a specific panel, we should
probably take the total picture into consideration. If the panel is relatively equal taking
into consideration the process of its formulation, the background of the arbitrators and
other attachments discussed above, and the position and nature of the specific dispute
and the parties, we could probably be more understanding when determining whether
factors could possibly constitute bias. In contrast, if the panel or the procedure of nominating it already is relatively unfair or unbalanced, we should give greater weight to
every single possibility of bias. Also, if a party has already waived many single instances
of bias, any newly emerging reasons should be given more importance and relevance.
The requirement of impartiality and the discussion about it seems problematic in
arbitration. On the one hand, a flexible attitude towards the impartiality requirement
further promotes the practicality of arbitration as a dispute resolution method, guarantees the finality of decisions and makes it easier to get a panel with the best substantive
knowledge. On the other hand, the lack of neutrality and impartiality of the panel
reduces the status and credibility of arbitration as a dispute resolution method especially in comparison to trial.32
5.4.4 What Constitutes Bias?
After the more theoretical framework set forth above, the next questions involve what
kind of things could actually constitute bias, and what kind of facts could lead to an
arbitrator failing the objective test discussed above. So the criterion is objective: may
the circumstance in question affect the person’s impartiality? Whether the particular
circumstance has any concrete effect on the person’s work as part of the tribunal is
irrelevant for the objective test. Bias arises from many factors, including:
(i) economic dependence (employment, consultation, trading, joint interests);
(ii) emotional ties, which may be friendly (such as family ties, friendship) or unfriendly
(competitor, hostility, fear);
32
118
See Kennedy, supra note 25, at 781: “Permitting non-neutral arbitrators to engage in advocacy
and prejudge cases reduces the public’s confidence in the fairness of the system and ensures
that arbitration remains inferior to litigation. The continued relegation of arbitration to an inferior status, exhibits the courts’ historical distaste for arbitration. The judiciary’s mistrust of
arbitration is manifested in its willingness to accept biased arbitrators’ involvement in the
process and its refusal to raise the standards of partiality and misconduct.”
THE PANEL AND DUE PROCESS
(iii) prior involvement in or knowledge about the matter;
(iv) personal interests in common with a party or interests or ties with a person in (i) or (ii)
above having an indirect interest in or relationship with the matter or a party; or
(v) prior position taken as to the particular issue in dispute.33
In addition to a more or less self-evident list of things, we should pay special attention to the focus of the impartiality analysis. The analysis is always done in context,
and the meaning of things might differ case by case. This has to be kept in mind when
using the guidelines and lists described below.
In general it could be mentioned that economic factors seem to have been put in a
relatively pronounced position in the list of possible reasons of bias. At least in part
this is probably because people are assumed to be motivated by money. It might also
be because the simplified idea of partiality is ascribed to the active subjective will of
an arbitrator to make one of the parties win. But because of the increased relevance of
objective criteria of the analysis, other factors should have greater influence. It might
be that friendship or even a personal relationship with one of the parties might have a
greater importance in an objective and holistic analysis than a small amount of money
paid for some service years ago.
Under the IBA Guidelines (which partly replace the IBA Rules of Ethics), bias is
determined by:
(i) “Subjective analysis” test
(a) An arbitrator shall decline to accept an appointment or, if the arbitration
has already been commenced, refuse to continue to act as an arbitrator if he or
she has any doubts as to his or her ability to be impartial or independent.
(ii) Third party “objective doubt” test
(b) The same principle applies if facts or circumstances exist, or have arisen
since the appointment, that, from a reasonable third person’s point of
view having knowledge of the relevant facts, give rise to justifiable doubts as
to the arbitrator’s impartiality or independence, unless the parties have
accepted the arbitrator in accordance with the requirements set out in General
Standard (4).
(iii) Objective test as to justifiable doubt
(c) Doubts are justifiable if a reasonable and informed third party would reach
the conclusion that there was a likelihood that the arbitrator may be influenced
by factors other than the merits of the case as presented by the parties in reaching his or her decision.
(iv) “Per se” rule (arbitrators are deemed to be human beings)
(d) Justifiable doubts necessarily exist as to the arbitrator’s impartiality or
independence if there is an identity between a party and the arbitrator, if
the arbitrator is a legal representative of a legal entity that is a party in the
33
See also IBA Ethics Art. 3.
IMPARTIALITY AND INDEPENDENCE
119
arbitration, or if the arbitrator has a significant financial or personal interest in
the matter at stake.
The guidelines underline the importance of the objective test. However, the requirement of likelihood to be influenced by factors other than merits as criteria of justifiability of doubts seems a bit exaggerated. From a due process point of view, it should
be enough that it would be objectively possible the arbitrator would be influenced by
factors other than merits as likelihood is difficult to prove. However, we should read
the guidelines as being soft rather than black letter law.
5.4.5 Duty to Disclose
Independence and impartiality are safeguarded by the arbitrator’s duty to disclose facts
or circumstances that may cast a doubt in these respects.34 If parties did not know about
potential bias, they would not be able to challenge the impartiality of an arbitrator, and
we could not rely on the waiver doctrine to solve problems related to bias. The duty to
disclose covers a wider range of things and is far more extensive that what constitutes
bias.35
UNCITRAL Model Law Article 12 provides:
(1) When a person is approached in connection with his possible appointment as an
arbitrator, he shall disclose any circumstances likely to give rise to justifiable doubts
as to his impartiality or independence. An arbitrator, from the time of his appointment and throughout the arbitral proceedings, shall without delay disclose any
such circumstances to the parties unless they have already been informed of them
by him.
(2) An arbitrator may be challenged only if circumstances exist that give rise to
justifiable doubts as to his impartiality or independence, or if he does not possess
qualifications agreed to by the parties. A party may challenge an arbitrator appointed
by him, or in whose appointment he has participated, only for reasons of which he
becomes aware after the appointment has been made.36
Article 3 of the IBA Guidelines defines the duty to disclose as follows:
(a) If facts or circumstances exist that may, in the eyes of the parties, give rise to
doubts as to the arbitrator’s impartiality or independence, the arbitrator shall
34
35
ICC Rules Art. 7(2) and (3) (see Appendices, p. 406).
See De Witt Wijnen et al., supra note 17, at 305–25; Japan Act § 18, supra note 9, at 3–4:
(3) When a person is approached in connection with its possible appointment as an arbitrator,
it shall fully disclose any circumstances likely to give rise to justifiable doubts as to its impartiality or independence.
(4) An arbitrator, during the course of arbitral proceedings, shall without delay disclose any
circumstances likely to give rise to justifiable doubts as to its impartiality or independence
(unless the parties have already been informed of them by the arbitrator).
36
120
See also Swiss Rules Art. 9, 10 and 11 (see Appendices, p. 462).
See also IBA Ethics 5.1.
THE PANEL AND DUE PROCESS
disclose such facts or circumstances to the parties, the arbitration institution or
other appointing authority (if any, and if so required by the applicable institutional
rules) and to the co-arbitrators, if any, prior to accepting his or her appointment or,
if thereafter, as soon as he or she learns about them.
(b) It follows from General Standards 1 and 2(a) that an arbitrator who has made a
disclosure considers himself or herself to be impartial and independent of the parties despite the disclosed facts and therefore capable of performing his or her duties
as arbitrator. Otherwise, he or she would have declined the nomination or appointment at the outset or resigned.
(c) Any doubt as to whether an arbitrator should disclose certain facts or circumstances should be resolved in favor of disclosure.
(d) When considering whether or not facts or circumstances exist that should be
disclosed, the arbitrator shall not take into account whether the arbitration proceeding is at the beginning or at a later stage.
In the current practice of law, this has sometimes been stretched to the extreme,
with even the tiniest potential conflicts of interest, past or present, in a multijurisdictional law firm being disclosed as potential ground for bias.37 It is certainly
safer and preferable to disclose rather than to conceal, but a trademark application
filed by an associate in Buenos Aires can hardly constitute a bias to a Paris partner of
the same firm that would prevent them from becoming an arbitrator in the absence
of other conflicts.
The IBA Guidelines introduce a more “Protestant” view into what has to be disclosed. IBA Guidelines Article 6 provide:
(a) When considering the relevance of facts or circumstances to determine whether
a potential conflict of interest exists or whether disclosure should be made, the
activities of an arbitrator’s law firm, if any, should be reasonably considered in each
individual case. Therefore, the fact that the activities of the arbitrator’s firm involve
one of the parties shall not automatically constitute a source of such conflict or a
reason for disclosure.
(b) Similarly, if one of the parties is a legal entity which is a member of a group
with which the arbitrator’s firm has an involvement, such facts or circumstances
should be reasonably considered in each individual case. Therefore, this fact alone
shall not automatically constitute a source of a conflict of interest or a reason for
disclosure.
(c) If one of the parties is a legal entity, the managers, directors and members of a
supervisory board of such legal entity and any person having a similar controlling
influence on the legal entity shall be considered to be the equivalent of the legal
entity.
37
See also IBA Ethics Art. 4. At the same time this may constitute another problem, namely, that
of a duty of confidentiality and the extent to which it prevents disclosure.
IMPARTIALITY AND INDEPENDENCE
121
IBA Guidelines Article 7 imposes on both the parties and the arbitrators a duty to
investigate and disclose:
(a) A party shall inform an arbitrator, the Arbitral Tribunal, the other parties and
the arbitration institution or other appointing authority (if any) about any direct or
indirect relationship between it (or another company of the same group of companies) and the arbitrator. The party shall do so on its own initiative before the
beginning of the proceeding or as soon as it becomes aware of such relationship.
(b) In order to comply with General Standard 7(a), a party shall provide any information already available to it and shall perform a reasonable search of publicly
available information.
(c) An arbitrator is under a duty to make reasonable enquiries to investigate any
potential conflict of interest, as well as any facts or circumstances that may cause
his or her impartiality or independence to be questioned. Failure to disclose a
potential conflict is not excused by lack of knowledge if the arbitrator makes no
reasonable attempt to investigate.
The duty to disclose can be seen to also have other purposes than just informing the
parties of the factors that may possibly affect the objective impartiality of a judge.
Broad disclosure makes the arbitrator consider his relationship to the case and the parties. It might be that during the disclosure process the arbitrator notices some biases or
prejudices exist. In an ideal world, this would make the arbitrator pay special attention
to being impartial in decisions where objective impartiality might be in question. This
way the duty to disclose might be important not only from point of view of objective
impartiality, but also from the subjective, pedagogical point of view of the arbitrator.
Just as with many procedural questions, a fair procedure might not only be necessary as
an intrinsic value but also as an instrumental guarantee of the quality of the decision.
5.4.6 IBA Guidelines—Green, Orange, Red, and Nonwaivable
Red Lists
Besides the duty to disclose, there is some soft law guidance as to what need not be
disclosed. The IBA categorizes situations based on a range from “green” (no need to
disclose as no conflict presented), to “orange” (potential conflict must be disclosed, but
waiver exists if parties do not timely object), to “red” (conflict must be disclosed and
may or may not be waivable).
This is the IBA Guidelines Green List:
4.1. PREVIOUSLY EXPRESSED LEGAL OPINIONS
4.1.1 The arbitrator has previously published a general opinion (such as in a law
review article or public lecture) concerning an issue which also arises in the arbitration (but this opinion is not focused on the case that is being arbitrated).
4.2. PREVIOUS SERVICES AGAINST ONE PARTY
4.2.1 The arbitrator’s law firm has acted against one of the parties or an affiliate of
one of the parties in an unrelated matter without the involvement of the arbitrator.
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THE PANEL AND DUE PROCESS
4.3. CURRENT SERVICES FOR ONE OF THE PARTIES
4.3.1 A firm in association or in alliance with the arbitrator’s law firm, but which
does not share fees or other revenues with the arbitrator’s law firm, renders services
to one of the parties or an affiliate of one of the parties in an unrelated matter.
4.4. CONTACTS WITH ANOTHER ARBITRATOR OR WITH
COUNSEL FOR ONE OF THE PARTIES
4.4.1 The arbitrator has a relationship with another arbitrator or with the counsel for
one of the parties through membership in the same professional association or
social organization.
4.4.2 The arbitrator and counsel for one of the parties or another arbitrator have
previously served together as arbitrators or as co-counsel.
4.5. CONTACTS BETWEEN THE ARBITRATOR AND ONE OF THE PARTIES
4.5.1 The arbitrator has had an initial contact with the appointing party or an affiliate of the appointing party (or the respective counsels) prior to appointment, if this
contact is limited to the arbitrator’s availability and qualifications to serve or to the
names of possible candidates for a chairperson and did not address the merits
or procedural aspects of the dispute.
4.5.2 The arbitrator holds an insignificant amount of shares in one of the parties
or an affiliate of one of the parties, which is publicly listed.
4.5.3 The arbitrator and a manager, director or member of the supervisory board, or
any person having a similar controlling influence, in one of the parties or an affiliate
of one of the parties, have worked together as joint experts or in another professional capacity, including as arbitrators in the same case.38
In addition, the guidelines also provide some direction as to what needs to be disclosed and what is usually considered to be waived if not reacted to, what has to be
explicitly waived, and what cannot be waived at all. In the Orange List cases, the arbitrator is deemed to have been accepted if no timely objection is made. The Orange List
is as follows:
3.1. PREVIOUS SERVICES FOR ONE OF THE PARTIES OR
OTHER INVOLVEMENT IN THE CASE
3.1.1 The arbitrator has within the past three years served as counsel for one of the
parties or an affiliate of one of the parties or has previously advised or been consulted by the party or an affiliate of the party making the appointment in an unrelated matter, but the arbitrator and the party or the affiliate of the party have no
ongoing relationship.
3.1.2 The arbitrator has within the past three years served as counsel against one of
the parties or an affiliate of one of the parties in an unrelated matter.
38
The user is instructed further as follows:A flow chart is attached to these Guidelines for easy
reference to the application of the Lists. However, it should be stressed that this is only a schematic reflection of the very complex reality. Always, the specific circumstances of the case
prevail.
IMPARTIALITY AND INDEPENDENCE
123
3.1.3 The arbitrator has within the past three years been appointed as arbitrator on
two or more occasions by one of the parties or an affiliate of one of the parties.
3.1.4 The arbitrator’s law firm has within the past three years acted for one of the
parties or an affiliate of one of the parties in an unrelated matter without the involvement of the arbitrator.
3.1.5 The arbitrator currently serves, or has served within the past three years, as
arbitrator in another arbitration on a related issue involving one of the parties or an
affiliate of one of the parties.
3.2. CURRENT SERVICES FOR ONE OF THE PARTIES
3.2.1 The arbitrator’s law firm is currently rendering services to one of the parties
or to an affiliate of one of the parties without creating a significant commercial
relationship and without the involvement of the arbitrator.
3.2.2 A law firm that shares revenues or fees with the arbitrator’s law firm renders
services to one of the parties or an affiliate of one of the parties before the arbitral
tribunal.
3.2.3 The arbitrator or his or her firm represents a party or an affiliate to the arbitration on a regular basis but is not involved in the current dispute.
3.3. RELATIONSHIP BETWEEN AN ARBITRATOR AND
ANOTHER ARBITRATOR OR COUNSEL
3.3.1 The arbitrator and another arbitrator are lawyers in the same law firm.
3.3.2 The arbitrator and another arbitrator or the counsel for one of the parties are
members of the same barristers’ chambers.
3.3.3 The arbitrator was within the past three years a partner of, or otherwise
affiliated with, another arbitrator or any of the counsel in the same arbitration.
3.3.4 A lawyer in the arbitrator’s law firm is an arbitrator in another dispute
involving the same party or parties or an affiliate of one of the parties.
3.3.5 A close family member of the arbitrator is a partner or employee of the law
firm representing one of the parties, but is not assisting with the dispute.
3.3.6 A close personal friendship exists between an arbitrator and a counsel of one
party, as demonstrated by the fact that the arbitrator and the counsel regularly spend
considerable time together unrelated to professional work commitments or the
activities of professional associations or social organizations.
3.3.7 The arbitrator has within the past three years received more than three appointments by the same counsel or the same law firm.
3.4. RELATIONSHIP BETWEEN ARBITRATOR AND PARTY AND OTHERS INVOLVED
IN THE ARBITRATION
3.4.1 The arbitrator’s law firm is currently acting adverse to one of the parties or an
affiliate of one of the parties.
3.4.2 The arbitrator had been associated within the past three years with a party or
an affiliate of one of the parties in a professional capacity, such as a former employee
or partner.
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THE PANEL AND DUE PROCESS
3.4.3 A close personal friendship exists between an arbitrator and a manager or
director or a member of the supervisory board or any person having a similar
controlling influence in one of the parties or an affiliate of one of the parties or a
witness or expert, as demonstrated by the fact that the arbitrator and such director,
manager, other person, witness or expert regularly spend considerable time together
unrelated to professional work commitments or the activities of professional
associations or social organizations.
3.4.4 If the arbitrator is a former judge, he or she has within the past three years
heard a significant case involving one of the parties.
3.5. OTHER CIRCUMSTANCES
3.5.1 The arbitrator holds shares, either directly or indirectly, which by reason of
number or denomination constitute a material holding in one of the parties or an
affiliate of one of the parties that is publicly listed.
3.5.2 The arbitrator has publicly advocated a specific position regarding the case
that is being arbitrated, whether in a published paper or speech or otherwise.
3.5.3 The arbitrator holds one position in an arbitration institution with appointing
authority over the dispute.
3.5.4 The arbitrator is a manager, director or member of the supervisory board, or
has a similar controlling influence, in an affiliate of one of the parties, where the
affiliate is not directly involved in the matters in dispute in the arbitration.
The Red List is divided into waivable and nonwaivable bias. Nonwaivable conflicts
indicate absolute “hard” protection, and as such they are a reflection of due process.
This is the nonwaivable Red List of situations where the arbitrator cannot serve:
1.1. There is an identity between a party and the arbitrator, or the arbitrator is a legal
representative of an entity that is a party in the arbitration.
1.2. The arbitrator is a manager, director or member of the supervisory board, or
has a similar controlling influence in one of the parties.
1.3. The arbitrator has a significant financial interest in one of the parties or the
outcome of the case.
1.4. The arbitrator regularly advises the appointing party or an affiliate of the
appointing party, and the arbitrator or his or her firm derives a significant financial
income therefrom.
Whether a potential arbitrator in his subjective analysis considers himself to be
impartial and independent regardless of a Red List factor is irrelevant: this is a per se
rule such as price-fixing in antitrust laws, where it is always evil and there is no “rule
of reason.” The Red List continues with lesser “evils,” which may be waived by the
parties when fully disclosed. The waivable Red List is as follows:
2.1. RELATIONSHIP OF THE ARBITRATOR TO THE DISPUTE
2.1.1 The arbitrator has given legal advice or provided an expert opinion on the
dispute to a party or an affiliate of one of the parties.
2.1.2 The arbitrator has previous involvement in the case.
IMPARTIALITY AND INDEPENDENCE
125
2.2. ARBITRATOR’S DIRECT OR INDIRECT INTEREST IN THE DISPUTE
2.2.1 The arbitrator holds shares, either directly or indirectly, in one of the parties
or an affiliate of one of the parties that is privately held.
2.2.2 A close family member4 of the arbitrator has a significant financial interest in
the outcome of the dispute.
2.2.3 The arbitrator or a close family member of the arbitrator has a close relationship with a third party who may be liable to recourse on the part of the unsuccessful
party in the dispute.
2.3. ARBITRATOR’S RELATIONSHIP WITH THE PARTIES OR COUNSEL
2.3.1 The arbitrator currently represents or advises one of the parties or an affiliate
of one of the parties.
2.3.2 The arbitrator currently represents the lawyer or law firm acting as counsel for
one of the parties.
2.3.3 The arbitrator is a lawyer in the same law firm as the counsel to one of the
parties.
2.3.4 The arbitrator is a manager, director or member of the supervisory board, or
has a similar controlling influence, in an affiliate5 of one of the parties if the affiliate is directly involved in the matters in dispute in the arbitration.
2.3.5 The arbitrator’s law firm had a previous but terminated involvement in the
case without the arbitrator being involved himself or herself.
2.3.6 The arbitrator’s law firm currently has a significant commercial relationship
with one of the parties or an affiliate of one of the parties.
2.3.7 The arbitrator regularly advises the appointing party or an affiliate of the
appointing party, but neither the arbitrator nor his or her firm derives a significant
financial income therefrom.
2.3.8 The arbitrator has a close family relationship with one of the parties or with a
manager, director or member of the supervisory board or any person having a similar controlling influence in one of the parties or an affiliate of one of the parties or
with a counsel representing a party.
2.3.9 A close family member of the arbitrator has a significant financial interest in
one of the parties or an affiliate of one of the parties.
5.4.7 Requirement of Impartial Conduct
The meaning and relevance of impartiality is not, however, limited to the person of the
arbitrator, but covers the conduct of the proceedings from beginning to end, as can be
seen in the ICC Rules:
In all cases, the Arbitral Tribunal shall act fairly and impartially and ensure that
each party has a reasonable opportunity to present its case.39
39
126
ICC Rules Art. 15 (2).
THE PANEL AND DUE PROCESS
Impartial proceedings mean equal procedural treatment of the parties to the extent
this is possible due to the different roles of the parties as claimant and respondent or to
other such reasons.40
5.5 WAIVER
A waiver of conflict or bias is covered by Article 4 of the IBA Guidelines and follows
the strong waiver tradition in arbitration spiced with common sense as it relates to a
globalized economy and business. In the waiver doctrine of bias, it is essential that
informed parties who are at least to a certain amount free to make their own decisions
can accept a biased arbitrator if they so want. From an ADR perspective, this is neither
unusual nor generally considered problematic, even though from the classical procedural law point of view the starting point usually is a completely independent and
impartial judge regardless of party wishes. Even though it is considered at least sometimes a type of ADR, arbitration does necessitate some standard of due process and
fairness concerning impartiality of the decision maker as the award should be an
impartial decision based on facts and the norms applicable to the case in question. In
other words, there is a minimum standard that is not waivable. Beyond that, the standards concerning disclosure and equitable contract have to do with the idea that any
waiver should be informed and voluntary.
Allowing a manifestly biased person to continue to act as an arbitrator in proceedings based on impartiality is likely to constitute such a violation of due process as to
be actionable in any case. Such a right cannot be waived in abstracto.41 The right to
impartial proceedings may be deemed to be a nonwaivable one both ex ante and in
abstracto, except perhaps when the partiality has been institutionalized and is equal on
both sides (i.e., there is a bias in favor of both or all groups of interest, such as occurs
in labor law arbitration). The disqualification process per se does not amount to a
waiver whether based on statute, rules, or agreement if the result is not compatible
with due process.
A waiver ex post and in concreto may, however, arise if a party consciously and
deliberately chooses not to object to or challenge the appointment of an arbitrator or
fails to resort to the remedies or measures available. For a waiver to arise, the parties
must have full knowledge of all the relevant facts constituting the bias. A good question is whether the waiver is binding if the award carries manifest earmarks of bias and
partiality after a waiver of the bias. Should a party then be deemed to be bound by his
own choice, which was presumably based on good faith reliance on the impartiality of
the arbitrator despite the arbitrator’s bias?42 Such an outcome could appear unfounded
and unjust. Also, the basic nature of arbitration is to deliver a neutral decision by a
40
41
42
Swiss Rules Art. 9 (see Appendices, p. 462).
See IBA Guidelines 4(b) and 2(d).
UNIDROIT Art. 1.7:
(1) Each party must act in accordance with good faith and fair dealing in international trade.
(2) The parties may not exclude or limit this duty.
WAIVER
127
neutral third party. If a waiver was given, it was naturally done trusting the arbitrator
would still respect his duty to be neutral. Thus, it would be not only from a procedural
but also from a contractual point problematic to find the waiver absolutely binding.
However, it is very difficult to prove that an arbitrator has not acted impartially, and
the opposing party would probably find an award in its favor acceptable as the expected
outcome. Therefore, a party should consider carefully before accepting a partial arbitrator. If no waiver is deemed to have occurred by the prior reliance, the party must
take action within a reasonable time or a waiver is created.43
The Convention provides: “The composition of the arbitral authority . . . in accordance with the agreement of the parties,” and the word agreement may be deemed to
carry an implicit condition of both initial impartiality of an arbitrator and a duty to
disclose all grounds for a bias, as well as an implicit covenant that the arbitrator’s initial impartiality shall not change, but that if it does so, the change shall be disclosed to
the parties. The paramount role of the waiver doctrine as well as that of impartiality
impose a duty of full disclosure as to a material bias including what may only appear
to be a bias without any material or true substance.
5.6 COMMUNICATION WITH THE PARTIES
The audi alteram partem principle (as reflected in the right to present one’s case) and
the principle of impartiality both require that:
(i) Every communication between a party and an arbitrator or the panel be made in
the presence of all the parties allowing an immediate comment or answer or
communicated to all of them in the same manner at the same time. This is
43
UNIDROIT Art. 3.5:
(1) A party may only avoid the contract for mistake if, when the contract was concluded, the
mistake was of such importance that a reasonable person in the same situation as the party in
error would only have concluded the contract on materially different terms or would not have
concluded it at all if the true state of affairs had been known, and
(a) the other party made the same mistake, or caused the mistake, or knew or ought to
have known of the mistake and it was contrary to reasonable commercial standards of fair
dealing to leave the mistaken party in error; or
(b) the other party had not at the time of avoidance acted in reliance on the contract.
(2) However, a party may not avoid the contract if
(a) it was grossly negligent in committing the mistake; or
(b) the mistake relates to a matter in regard to which the risk of mistake was assumed or,
having regard to the circumstances, should be borne by the mistaken party.
and Art. 3.8:
A party may avoid the contract when it has been led to conclude the contract by the other
party’s fraudulent representation, including language or practices, or fraudulent non-disclosure
of circumstances which, according to reasonable commercial standards of fair dealing, the
latter party should have disclosed.
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not limited by the “relevance” of the communication, but applies to any and
all communications.44 The only significant exception may be the election of the
chairman:
Throughout the arbitral proceedings, an arbitrator should avoid any unilateral
communications regarding the case with any party, or its representatives. If
such communication should occur, the arbitrator should inform the other party
or parties and arbitrators of its substance.45
(ii) Should the above, for no good reason or for a reason not have been complied
with, the arbitrator shall fully disclose the communication to the other arbitrators
and the parties without any delay and the reason for deviating from the
above practice.46 The failure to disclose will cast a “dark cloud” of bias on the
arbitrator and, professionally, on the counsel or party in question. In addition, it
may constitute a violation of due process with such consequences as this may warrant including setting the award aside.
Swiss Rules Article 15 (4) provides:
All documents or information supplied to the arbitral tribunal by one party shall at
the same time be communicated by that party to the other party.
The reason for such a bypassing of the panel may be to have an arbitrator’s “private”
guidance as to the relevance and sufficiency of evidence, burden of education, etc.
However, all these issues should be discussed in consultations with all parties present
and under guidance of the chairman of the panel to avoid any appearance of partiality
or undue influence. In institutional arbitration or if the panel has a secretary, all the
communications may be channeled via an officer or the secretariat.47
Another problem is that in this age of dynamically developing ADR, the participation or activity of the panel in promoting a settlement may be raised as a potential bias.
This may indeed be problematic in particular in the light of the audi alteram partem
principle as provided in IBA Ethics:
Where the parties have so requested, or consented to a suggestion to this effect by
the arbitral tribunal, the tribunal as a whole (or the presiding arbitrator where appropriate), may make proposals for settlement to both parties simultaneously, and
preferably in the presence of each other. Although any procedure is possible with
the agreement of the parties, the arbitral tribunal should point out to the parties that
44
Japan Act § 32(4), supra note 9:
A party who supplied written statements, documentary evidence or any other records to the
arbitral tribunal shall take necessary measures to ensure that the other party will be aware of
their contents.
45
46
See IBA Ethics 5.2 and 5.4.
IBA Ethics 5.3.
Japan Act § 32(5), supra note 9:
The arbitral tribunal shall take necessary measures to ensure that all parties will be aware of
the contents of any expert report or other evidence on which the arbitral tribunal may rely in
making an arbitral award or other rulings.
47
LCIA Rules Art. 13 (see Appendices, pp. 435–36).
COMMUNICATION WITH THE PARTIES
129
it is undesirable that any arbitrator should discuss settlement terms with a party in
the absence of the other parties since this will normally have the result that any
arbitrator involved in such discussions will become disqualified from any future
participation in the arbitration.48
5.7 ROLE OF THE SECRETARY
The secretary is a necessary officer in many both ad hoc and institutional arbitration
cases. The presence of the secretary and his person should be consented to by the parties. It is also proper to require that the secretary be impartial as if she were an arbitrator although decision making, deliberations, and the conduct of the proceedings are not
within the secretary’s functions. The exact scope of the rights and duties of a secretary
have not been defined and depend on the circumstances of the case, and in particular,
on the number of arbitrators. Besides managing and organizing submissions, evidence,
and hearings, the secretary may be valuable as the exclusive channel of communications between hearings to avoid any impression of attempts of undue influence or
improper communications. Sometimes the permanent secretariat carries out some of
the tasks of the secretary.49
For example, Swiss Rules Article 15(5) provides:
The arbitral tribunal may, after consulting with the parties, appoint a secretary.
Article 9 of these Rules shall apply by analogy to the secretary.
5.8 FEES AND COSTS
As we move from the primarily procedural questions to the more contractual and liability part of the relationship between arbitrators and the parties, the fees and costs of
arbitration is an ever-occurring issue. Arbitration has a reputation of being an expensive and exclusive method of dispute resolution. This is probably often due to the need
to pay fees to arbitrators unlike in court proceedings, as well parties in arbitration often
choosing those with the best expertise both as arbitrators and counsel.
The costs may be justified because of the benefits of arbitration. There are always
some obvious savings as in general, there is no appeal. The proceedings may in other
ways be less time-consuming than court proceedings. Awards have been given in less
than six months or a year even in some of the most complex cases. However, some
48
49
IBA Ethics 8.
About Chinese law, see Tang Houzhi and Wang Shengchang, supra note 8, at 23:
Exchanges of arbitration documents between the parties and between the parties and the
arbitrators must be done through the secretariat of the arbitral institution. The respondent
shall submit his written defense within 45 days and counterclaim, if any within 60 days, after
receipt of the arbitration notice from the secretariat of the arbitral institution. The parties may
authorize attorneys to act on their behalf in arbitration proceedings. Such attorneys may be
Chinese or non-Chinese persons.
See also ICC Rules Art. 3.
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arbitral proceedings may take years to be completed. Recently the focus has been on
managing the proceedings more efficiently. A competent panel—and in particular, a
dynamic chairperson—may make the difference, but even the most sophisticated panel
cannot always prevail over litigious or dilatory parties or extensive facts and testimony. Sometimes respect of due process simply requires lengthy proceedings.
Comparing arbitration to proceedings in courts of law in general is unproductive.
National legal systems vary to such an extent along with the financial and human
resources available to them that there is no one single truth to be discovered. In international disagreements, certain things speak in any case strongly for arbitration:
international enforceability of the award, possibility of having a panel with the required
expertise, and potential to gain time and save money. Confidentiality is often mentioned as a major advantage, but this is very relative whereas privacy is undoubtedly
often an advantage but one that cannot be always fully guaranteed.
The arbitrators naturally have a right to a fee for the work they do for the parties.
These fees are often primarily based on the time used, the individual arbitrator’s
expertise, and the amount of the monetary or other interests at stake. The fees may
appear high when the arbitrator is a professor who has very little costs and no overhead
to carry. However, for a practicing lawyer, arbitrator fees divided by the hours of work
required may be considerably less attractive as falling below the attorney’s normal
hourly rates. Besides the time spent and the expertise required, a particularly tight time
schedule or other such special circumstances are in general factors to be taken into
account in setting the fees.
Arbitrator fees are to be openly disclosed to the parties and the institution involved
if not set by the institution itself.50 The fees and costs of the arbitration must be set by
the panel and be borne by the parties.51 In institutional arbitration, it is usually the
institution that sets the amounts, often based on a flexible table.52 In ICC proceedings,
the Court does that. The fees and costs of the parties and the extent they are recoverable are to be fixed by the panel.53 In ad hoc arbitration, decisions as to the costs of the
parties are to be made by a court or the panel itself unless otherwise provided by
the applicable rules. There are various systems as to the fixing of the fees of the
arbitrators.
Swiss Rules Article 38 provides:
The arbitral tribunal shall determine the costs of arbitration in its award. The term
“costs” includes only:
(a) The fees of the arbitral tribunal to be stated separately as to each arbitrator
and to be determined by the tribunal itself in accordance with Article 39;
(b) The travel and other expenses incurred by the arbitrators;
(c) The costs of expert advice and of other assistance required by the arbitral
tribunal;
50
51
52
53
IBA Ethics 5.5 and 6 (see Appendices, p. 366).
See Micha Bühler, Awarding Costs in International Commercial Arbitration: An Overview, 22
ASA BULLETIN (2004).
ICC Rules Art. 31(1) and (2).
ICC Rules Art. 31(2) and (3).
FEES AND COSTS
131
(d) The travel and other expenses of witnesses to the extent such expenses are
approved by the arbitral tribunal;
(e) The costs for legal representation and assistance of the successful party if
such costs were claimed during the arbitral proceedings, and only to the extent
that the arbitral tribunal determines that the amount of such costs is reasonable;
(f) The costs for the administration of the arbitration payable to the Chambers
in accordance with Appendix B (Schedule of the Costs of Arbitration).
In addition, Swiss Rules Article 40(1)–(3) provides:
1. Except as provided in paragraph 2, the costs of arbitration shall in principle be
borne by the unsuccessful party. However, the arbitral tribunal may apportion each
of such costs between the parties if it determines that apportionment is reasonable,
taking into account the circumstances of the case.
2. With respect to the costs of legal representation and assistance referred to in Article
38, paragraph (e), the arbitral tribunal, taking into account the circumstances of the
case, shall be free to determine which party shall bear such costs or may apportion
such costs between the parties if it determines that apportionment is reasonable.
3. When the arbitral tribunal issues an order for the termination of the arbitral proceedings or makes an award on agreed terms, it shall determine the costs of arbitration referred to in Article 38 and Article 39, paragraph 1, in the text of that order or
award.
The discussion concerning the fees might sometimes seem a bit apologetic in tone.
Sometimes arbitration really is expensive, and the experts taking part really look after
their financial interests. At least as far the parties agree, there is no reason to moralize
about this. From a legal point of view, high costs might hinder access to justice in some
cases and thus be relevant in decisions concerning arbitration clauses and jurisdiction.
However, arbitration as a dispute resolution method does not always have to be expensive. Arbitrators do not always have to be professors or business law attorneys if the
dispute in question does not require that and the parties do not want it. Arbitration as a
procedure is flexible, and its flexibility can be used to provide affordability. Arbitration
as a dispute resolution method has a huge potential in small claims procedures and as
a competitor to such things as complaint boards or other attempts to lower the process
threshold. This especially true in countries where access to courts is getting more and
more expensive and exclusive due to complicated court procedures and increasing
costs of legal services.
5.9 LIABILITY
The mission of an arbitrator or arbitral panel is sui generis and has numerous dimensions. The panel is at the same time acting within the mandates in abstracto and in
concreto. The mandate in abstracto is the power vested in the panel by the government. In this respect, the panel’s function resembles that of a judge. The scope of this
power and authority and the consequences of its abuse are key issues of due process.
The mandate in concreto is likewise an authority vested in the panel, but one done by
the parties in casu. The scope of this mandate is defined by the parties within their
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THE PANEL AND DUE PROCESS
freedom of contract, and in the absence of their express agreement, by applicable laws
and other rules. In institutional arbitration, the power is vested in the panel by the institution when it is acting as the appointing authority. The mandate in concreto resembles to
some extent retention of an expert or a professional with the exception that a nominating
party will not have any (or at least very little) control over the arbitrator except when the
parties agree unanimously. Even then there is an area where an arbitrator and a panel
remain totally independent, with this independence being protected by the mandate in
abstracto. The powers (i.e., the mandate in concreto) may likewise be abused or violated, which may result in the award being unenforceable or other legal consequences.
The task or mission of arbitrator resembles that of a director in a company. Both
directors and arbitrators need to abide by certain procedural and ethical rules—and
failure to do so may lead to liability. In neither case should this liability be extended to
matters of judgment or discretion if the procedure and ethical standards applied in the
decision-making process have been impeccable.
The liability of an arbitrator may arise in theory from violation of due process as
described in this book. These may include violations of fundamental procedural rules such
as audi alteram partem, failure to disclose conflict of interest or bias, negligence, gross
negligence or even deliberate wrongdoing. In this area, common standards are emerging
from a large variety of national traditions and professional and institutional interests.
Anyway, liability should be more likely to follow from not taking the procedural standards
into account than faults in the substantive law application.
The mission (i.e., the mandate in abstracto of the arbitrators) has been defined in
IBA Ethics as follows:
All arbitrators should devote such time and attention as the parties may reasonably
require having regard to all the circumstances of the case, and shall do their best to
conduct the arbitration in such a manner that costs do not rise to an unreasonable
proportion of the interests at stake.
It is also defined by the Arbitration Act 1996 (of England) § 33 as follows:
(1) The tribunal shall
(a) act fairly and impartially as between the parties, giving each party a reasonable
opportunity of putting his case and dealing with that of his opponent, and
(b) adopt procedures suitable to the circumstances of the particular case,
avoiding unnecessary delay or expense, so as to provide a fair means for the
resolution of the matters falling to be determined.
(2) The tribunal shall comply with that general duty in conducting the arbitral proceedings, in its decisions on matters of procedure and evidence and in the exercise
of all other powers conferred on it.
The task (i.e., the mandate in concreto) is defined by the parties in the arbitration
agreement or in the submissions.54 The liability is quasi-contractual, including the
54
Argentina Act (supra note 7) Art. 745, 748, and 756 provide:
Art. 745
Acceptance by arbitrators of their appointment as such shall entitle the parties to compel them
to carry out their functions and to hold them liable for costs and damages derived from the
non-performance of arbitral functions.
LIABILITY
133
giving of an extensive and irrevocable power and authority subject to unanimous
veto only.55
In addition, IBA Ethics impose the following standards on a person accepting
appointment as an arbitrator:
A prospective arbitrator shall accept an appointment only if he is fully satisfied that
he is able to discharge his duties without bias. A prospective arbitrator shall accept
an appointment only if he is fully satisfied that he is competent to determine the
issues in dispute, and has an adequate knowledge of the language of the arbitration.
A prospective arbitrator should accept an appointment only if he is able to give to
the arbitration the time and attention which the parties are reasonably entitled to
expect.
The liability of arbitrators has been debated, with some voices advocating that arbitrators should enjoy immunity from liability.56 Such an extreme position is difficult to
defend, and the trend in thinking seems to be toward treating the arbitrator as a professional, taking into account arbitration’s very special features.57 For some practitioners,
arbitration has become their only profession and business. Also as arbitration institutes
have been sued, they attempt to limit their liability.58
Art. 748:
The terms of reference shall become ineffective:
1. By unanimous decision of those who concluded them;
2. By expiration of the term fixed in the terms of reference or, failing this, the legal term,
irrespective of any liability of the arbitrators for interests and damages because the term
unfruitfully expired on account of their fault and notwithstanding the payment of any
penalty under Article 740, sect. 4, if any of the parties were at fault;
3. If during three months the parties or the arbitrators did not take any action aimed at
giving impetus to the arbitral proceedings.
Art. 756
Arbitrators who without justification do not render their award within the stated term will lose
all right to their fees and will be, furthermore, held liable for costs and damages.
55
See Ottoarndt Glossner, INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION 10 (Supp. 17,
Jan. 1994), describing the position of German law as follows:
According to German law there exists between the parties, on the one hand, and the arbitrator,
on the other, a contract to arbitrate (Schiedsrichtersvertrang). By virtue of this contract the
arbitrator must faithfully fulfil the functions he has assumed. Although the contract to
arbitrate is governed by the provisions applicable to contracts in general, the courts have held
that the liability of the arbitrator is the same as that of a judge. Accordingly, he will not be
held liable for errors made in good faith.
56
This seems to be the case in the United States as Holtzmann reports:
The general rule in the United States is that an arbitrator, like a judge, is immune from civil
liability for acts related to his or her decision-making function, even if the arbitrator was careless and made a wrong award. This principle is not found in the arbitration statutes, but it is
established in court decision. Courts have extended this immunity to arbitral institutions,
such as the AAA.
57
58
134
Howard M. Holtzmann, Report on U.S. Arbitration Law, in INTERNATIONAL HANDBOOK
COMMERCIAL ARBITRATION 18 (Supp. 13, Sept. 1992).
Arbitration Act 1996 of England § 29 (see Appendices, p. 267).
ICC Rules Art. 34 (see Appendices, p. 416).
ON
THE PANEL AND DUE PROCESS
Arbitrators cannot disclaim their liability for gross negligence or deliberate violations of the arbitration agreement or the applicable laws.59 Perhaps in most cases, their
liability should be limited to these areas. However, in the absence of such express
limitations, the standards of professional or commercial liability may apply.60 It may
be unclear what the appropriate substantive source is for these standards. In the absence
of bad faith or gross negligence, liability can hardly be extended beyond the direct
costs incurred.61
Swiss Rules Article 44 provides:
1. None of the Chambers or their staff, arbitrators, tribunal-appointed experts or the
secretary of the arbitral tribunal shall be liable for any act or omission in connection
with an arbitration conducted under these Rules, save where the act or omission is
shown to constitute deliberate wrongdoing or extremely serious negligence.
59
UNIDROIT Art. 7.1.6:
A clause which limits or excludes one party’s liability for non-performance or which permits
one party to render performance substantially different from what the other party reasonably
expected may not be invoked if it would be grossly unfair to do so, having regard to the purpose of the contract.
60
See also IBA Ethics Introductory Note (see Appendices, pp. 363–64).
See Yves Derains, “France”, in INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION. Kluwer
Law International (1998), commenting on French Arbitration law:
The Paris Court of Appeal has recently affirmed that the liability of the arbitrator is of a contractual nature, and arbitrators can only be held liable for negligence in their duty in acting as
a judge (Paris, March 24, 1977, Rev. Arb. 1978.31). Therefore the grounds for the liability of
arbitrators are the same as those which may justify the liability of judges (Art. 505 of the
C.C.P.). It means, in practice, that arbitrators might be held liable in the case of denial of
justice, for instance, if the arbitrators fail to render a decision within the time limit provided,
or withdraw without a valid reason. However, the party acting against the arbitrator will have
to prove the prejudice suffered (see Req. November 4, 1903, D.P. 1904.1.185). This seems
difficult, unless parties have not provided for a method of replacement and the introduction
of a new arbitration is barred by a time limit.
A Mexican arbitrator’s liability exposure is addressed in Mexico Law:
The Commercial Code is silent in regard to the liability of arbitrators towards the parties.
Nevertheless, Art. 636 CCP establishes that the courts ‘shall compel the arbitrators to comply
with their obligations’ and Art. 269 of the Lay Orgánica de los Tribunales del Fuero Comun
provides that when the arbitrator(s) do not render their award on time, they will not be entitled to receive their fees. Although this hypothesis seems never to have come up in practice,
it is to be assumed that arbitrators are liable for costs and damages derived from the nonperformance of their arbitral function, and that such liability would be enforceable by civil
actions when the arbitrator acted illegally or against good customs causing damages to the
parties (Art. 1910 Civil Code).
61
(Mexican arbitration law as reported by Prof. José Luis Siqueiros & Alexander C. Hoagland in
INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION 10 (Supp. 19, Aug. 1995)).
An arbitral award had been set aside earlier because the chairman had failed to disclose
significant consultations given to the parties prior to and during the proceedings. A party sought
damages from the chairman on this ground. The Finnish Supreme Court reversed the decision
of the Circuit Court and the Court of Appeals and held that in the absence of proof to the contrary, the arbitrator is liable. It remanded the matter to the court of first instance for the issue of
amount of damages. Finnish Supreme Court decision S2003/993, 31.1.2005.
LIABILITY
135
2. After the award has been made and the possibilities of correction, interpretation
and additional awards referred to in Articles 35 to 37 have lapsed or been exhausted,
neither the Chambers nor the arbitrators, the tribunal-appointed experts or the
secretary of the arbitral tribunal shall be under an obligation to make statements to
any person about any matter concerning the arbitration, nor shall a party seek
to make any of these persons a witness in any legal or other proceedings arising out
of the arbitration.
The Swiss Rules tackle the issues in line with the most current trend establishing
liability for gross negligence or deliberate wrongdoing only. They provide further
that there is no duty to give testimony after corrective and other such measures have
been exhausted and establish a bar to a party action to compel those involved to
testify.
5.10 CONFIDENTIALITY
The duty of confidentiality covers the arbitrators even in the absence of statutory law
to back it up.62 It is an implicit condition and covenant of the arbitration agreement,
and sometimes even an express one. IBA Ethics provide:
The deliberations of the arbitral tribunal, and the contents of the award itself, remain
confidential in perpetuity unless the parties release the arbitrators from this obligation. An arbitrator should not participate in, or give any information for the purpose
of assistance in, any proceedings to consider the award unless, exceptionally, he
considers it his duty to disclose any material misconduct or fraud on the part of his
fellow arbitrators.63
CIETAC Rules Article 33 provides:
1. Hearings shall be held in camera. Where both parties request an open hearing, the
arbitral tribunal shall make a decision.
2. For cases heard in camera, the parties, their representatives, witnesses, interpreters, arbitrators, experts consulted by the arbitral tribunal and appraisers appointed
by the arbitral tribunal and the relevant staff-members of the Secretariat of the
CIETAC shall not disclose to any outsiders any substantive or procedural matters
of the case.64
Confidentiality may relate to many things and be understood in a number of ways.
First, it may be understood as privacy as opposed to a public hearing: the proceedings
62
63
64
136
In general, see ALAN REDFERN & MARTIN HUNTER, LAW AND PRACTICE OF INTERNATIONAL
COMMERCIAL ARBITRATION 27–43 (3rd ed. 1999). For institutional arbitration, see London Court
of International Arbitration (LCIA) Rules Art. 30 (see Appendices, p. 446). See also World
Intellectual Property Organization (WIPO) Rules Art. 52.
IBA Ethics Art. 9.
China International Economic and Trade Arbitration Commission (CIETAC).
THE PANEL AND DUE PROCESS
are not open to anybody except the parties and arbitrators. For someone to be admitted,
a third party needs to have the consent of the parties, and perhaps also that of the panel,
depending on the circumstances and the third party in question. For example, the panel
may deny entry to the media, but not to a party’s advisers. If warranted, in some cases,
the panel may limit the right of a party’s representative to be present or even that of a
party itself.65
A third party may be permitted to participate or be present with the consent of the
parties and the panel. A third party may have such a right even in the absence of consent by all the parties if the panel allows this in accordance with the applicable procedural rules.
Swiss Rules Article 4(2) provides:
Where a third party requests to participate in arbitral proceedings already pending
under these Rules or where a party to arbitral proceedings under these Rules intends
to cause a third party to participate in the arbitration, the arbitral tribunal shall
decide on such request, after consulting with all parties, taking into account all
circumstances it deems relevant and applicable.
But does this confidentiality extend to the parties? Are documents or information
submitted under legal protection? In general, this is not the case although it may be a
very common belief even among practitioners that a duty of confidentiality is imposed
on the parties. There are very few statutes to award legal protection or appropriate
remedies to enforce such a duty in the absence of an agreement. There is thus a risk of
a party disclosing documents, information, or testimony to third parties or to the media.
If there is an agreement in place establishing such a duty or if the rules applicable to
the arbitration agreement provide for a contractual duty of good faith, the arbitral panel
may act within its power and jurisdiction to enforce such a duty by procedural orders
or interim awards.
Various authorities may need or request the information and documents submitted
or be simply interested in reviewing them for reasons either disclosed or concealed.
These authorities may be antitrust enforcement agencies, tax officials, the police,
securities trading or banking supervision agencies, and even courts of law hearing
cases between third parties in which documents submitted or statements made in the
arbitral proceedings may be deemed relevant. Such requests or orders may be directed
to the panel or its members or to the parties or their counsel jointly or separately.
Depending on the applicable rules, a request by such a third party may be enforceable and may require compliance. However, it is the duty of the panel and the parties
to establish that there are sufficient legal grounds for such a request and that there is a
duty to comply with it if directed to by the panel. Undoubtedly, if necessary the issue
could be submitted to a court of law for declaratory relief. If the request has either been
made by a court of the seat of arbitration or endorsed by it, this should at least establish
its prima facie lawfulness provided that the duties of confidentiality prevailing in the
65
HEUMAN, supra note 1, at 30–40.
CONFIDENTIALITY
137
arbitral proceedings were already heard or tried by the court in conflict with the duty
to disclose, establishing res judicata.
Swiss Rules Article 43 eliminates most of this controversy by establishing a
clear rule:
1. Unless the parties expressly agree in writing to the contrary, the parties undertake
as a general principle to keep confidential all awards and orders as well as all
materials submitted by another party in the framework of the arbitral proceedings
not otherwise in the public domain, save and to the extent that a disclosure may be
required of a party by a legal duty, to protect or pursue a legal right or to enforce or
challenge an award in legal proceedings before a judicial authority. This undertaking also applies to the arbitrators, the tribunal-appointed experts, the secretary of
the arbitral tribunal and the Chambers.
2. The deliberations of the arbitral tribunal are confidential.
The third issue of some importance to the international arbitration community and
for the development of law and research in arbitration practice is the confidentiality of
the award itself. The issue is unclear in the absence of specific rules. Swiss Rules
Article 43 tackles the issue with impeccable accuracy and style:
3. An award may be published, whether in its entirety or in the form of excerpts or
a summary, only under the following conditions:
(a) A request for publication is addressed to the Chambers;
(b) All references to the parties’ names are deleted; and
(c) No party objects to such publication within the time-limit fixed for that
purpose by the Chambers.
Disclosing the award in its entirety is often inevitable in enforcement proceedings.
Many awards are, however, enforced voluntarily, which in itself is honorable but
may as a side effect hinder the development of international arbitration law and
practice.
5.11 SUMMARY
The key procedural question related to the panel in arbitration is that of impartiality.
Impartiality of an arbitrator is also a key factor among due process requirements. It in
a way symbolizes the questions raised by the status of arbitration on one hand as an
ADR method and on the other as a privatized court procedure.
Impartiality also raises theoretically challenging questions, as more-or-less similar
standards are imposed on arbitrators and judges even though their institutional settings
and natural attachments to the parties and the parties’ circles of life are far more extensive. The objective test of impartiality is decisive, but it might be that the standard of
impartiality is in some cases at least de facto a bit lower. Also, the waiver doctrine is
often be used to bypass the problem.
For example, the IBA guidelines are useful in deciding what facts actually have to
be disclosed and what facts do cause bias. However, even these guidelines have to be
138
THE PANEL AND DUE PROCESS
read in the context of each case, including the particular parties and panel. The
situation as a whole might have relevance for the assessment of facts concerning
impartiality. When resolving problems concerning impartiality, we have to remember
that the primary goal is to guarantee the fairness of the procedure, not the practicality
of proceedings or the finality of the award.
SUMMARY
139
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Chapter 6
Due Process Related to Facts and Evidence
6.1 THE STRUCTURE OF A LEGAL DECISION: FACTS AND DUE
PROCESS
Arbitration, just like basically any legal decision making, is a combination of three
elements: (a) facts, (b) law, and (c) application of the law to the facts.
This chapter focuses on questions related to facts in arbitration. Just as in court
proceedings, there are many: Which facts are important? Whose task is it to include the
facts in the process? Which of the parties has to incorporate which facts? Are only the
parties or also the tribunal responsible for having a sound factual basis for the proceedings? How can a party bring facts into the proceeding? What kind of evidence can be
presented and collected? Finally, what are the criteria by which facts are accepted or
rejected as a basis of an award?
The second element in adjudication and in arbitration is the law or laws.1 The question of law and question of facts cannot really be separated. First, as disputes are
decided on legal grounds, the law defines the legally relevant facts. Also, the conception of factual reality that lies behind the legislation and substantive law formulates
what is relevant for the legal proceeding in question. Second, many of the facts are not
brute in such a way that they can be understood without the specific language and
meaning attributed to them in the relevant community. Thus, the law also defines facts,
1
Based on the UNCITRAL Model Law, Russian Law Art. 28 provides:
1. The arbitral tribunal shall decide the dispute in accordance with such rules of law as are
chosen by the parties as applicable to the substance of the dispute. Any designation of the law
or legal system of a given State shall be construed as directly referring to the substantive law
of that State and not to its conflict of laws rules.
2. Failing any designation by the parties, the arbitral tribunal shall apply the law determined
by the conflict of laws rules which it considers applicable.
3. In all cases, the arbitral tribunal shall decide in accordance with the terms of the contract
and shall take into account the usages of the trade applicable to the transaction.
(Russian arbitration law as reported by Prof. Sergei Lebedev, Law of the Russian Federation
on International Commercial Arbitration (in force Aug. 14, 1993), in INTERNATIONAL HANDBOOK
ON COMMERCIAL ARBITRATION (Supp. 17, Jan. 1994)).
141
and therefore is not just an external scale imposed on them. For example, what is a
reasonable time for a claim on faulty delivery? What is a faulty delivery? Facts and law
work together.
The third element is application of the law to the facts. For example, the actual
application could be called intelligence, referring to the intellectual exercise of reconstructing the past on the grounds of established facts and then applying the relevant
laws to those facts. As stated above, in a procedural context facts and law cannot really
be discussed separately. They are separate entities both of which get their meaning
partly from one another in the proceedings.
Even though facts are often seen as empirical reality, it is evident they have a strong
due process dimension. We cannot enforce substantive law in proceedings without
facts, and thus establishing them is a prerequisite of legal protection of substantive
rights. However, establishment of facts is a procedural activity governed by procedural
law and ultimately by due process rights and requirements. First, procedural rules and
orders have be such that the arbitral procedure can be seen to be an alternative access
to justice as compared to general court procedures. If the rules of evidence in arbitration would de facto make it impossible for a party to receive legal protection for substantive rights, the waiver of right of access to a court would not be valid. More
positively formulated, to be a valid waiver of access to courts, arbitration has to provide a reasonable possibility of legal protection. Second, the arbitration procedure has
to be fair. The parties have to be able to present their cases and have the opportunity to
be heard. These rights include the presenting evidence and examining witnesses as
well as challenging the evidence presented by the other party.
6.2 FACTS IN LEGAL DECISION: RELEVANCE, SUFFICIENCY AND
TRUTH
The primary objective of the proceedings is to resolve the conflict between the parties
and give legal protection to the rights of the parties. At a secondary level, this requires
determining the issues raised by the parties and claims made on the basis of the established relevant facts and applicable law. Usually this involves the tribunal deciding
questions of facts and evidence as only rarely do the parties agree on all the facts. The
interest of the parties in establishing facts is naturally limited to the extent such facts
serve their own interests by supporting their claims or defenses. The strategy of a party
as to bringing evidence is often the function of a number of considerations:
(i) a subjective assessment of what is relevant (legal analysis);
(ii) a subjective assessment of the weight of evidence in support of the facts asserted
but denied by the adversary (“sufficiency”).
Each party may have a different strategy, which overlaps to a greater or lesser extent
with that of his adversary.
Establishing the facts describes in generic terms something that is easy to comprehend in abstracto, but if we move to the real world and a disagreement of some
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DUE PROCESS RELATED TO FACTS AND EVIDENCE
complexity, the exercise often becomes complicated. Which facts are we to establish?
Leaving aside the issue of burden of proof, we may look to a simple rule of thumb: a
party must establish the facts that are alleged by him but denied by his adversary (and
thus disputed), and that would support his legal position and the theory on which his
claims are based (i.e., those that are as such simply favorable to him).
Only relevant facts need to be established. In general, these are the facts that support
the position, theory, and claims of a party, and the arbitral tribunal may refuse to admit
irrelevant evidence.2 However, the concept of relevance may change due to lack of
evidence or unexpected evidence or to an action of a party that modifies the claims
during the proceedings. Relevance may also be difficult or even impossible to judge
before other evidence (e.g., witness testimony) has been admitted.
For a party and his counsel, one of the most difficult things to do in legal proceedings is to judge when the evidence submitted has been sufficient to prove the facts and
to convince the panel. Was the similar or identical testimony of three persons
sufficient—or should still other witnesses be called? Was the testimony even deemed
to be similar? What if the evidence is sufficient at this stage, but what if in light of
evidence brought in at a later stage of the proceedings by the other side, it will no
longer be convincing? There is no objective way to measure the persuasiveness of the
evidence. Therefore, in the interests of doing justice, when the circumstances warrant
the panel should consider holding one or more status review hearings. To do so or not
is wholly in the panel’s discretion, but if no such reviews or consultations are held, the
risks of giving “wrong” awards based on partial truths and facts not accurately established will increase and the economies of the proceedings may suffer.
Sufficiency may also be seen from another perspective. Reconstruction of the past
is similar to putting together a jigsaw puzzle. In order to “see” the picture, we do not
have to put all the pieces in their places (except perhaps in some criminal law cases).
It may well be sufficient to have a piece here and another there. If these pieces are in
critical positions, we will be able to imagine or figure out the rest by experience and by
way of logic. The same applies to evidence: if we see a person in a New York airport,
and the same person is seen in Chicago a few hours later, we know he must have taken
a plane. If we see two competitors in a secret meeting, we do not necessarily know
what they are talking about, but we may suspect that a merger is on the way or that
pricing or competition is being discussed or perhaps being restrained. If we thereafter
notice a parallel price increase in the market or an increase in their quoted share prices
at the stock exchange, we may be closer to a hit, but we may not be quite there yet—or
are we? There is a risk in drawing conclusions: our intelligence may misguide us and
our logic may fail. The person in Chicago may not be the same after all, or the missing
2
Hascher writes:
Le recours à la preuve testimoniale n’est jamais obligatoire pour l’arbitre qui peut donc
l’écarter si un témoignage est sans pertinence ou si les faits sont suffisamment établis par
d’autres modes de preuve.
Dominique Hascher, La Révision en Arbitrage International, LIBER AMICORUM CLAUDE
REYMOND 115 (2004). Irrelevance may be established by agreement of the parties. The most
common agreement to this effect is the “entire agreement” clause.
FACTS IN LEGAL DECISION: RELEVANCE, SUFFICIENCY AND TRUTH
143
pieces of the puzzle when found and put in their places reveal something very different
from what we were convinced they would.
Once the proceedings have started and evidentiary hearings have been held, the
strategy may change. New issues may arise or the sufficiency of evidence already submitted may have to be reconsidered.3 The parties generate “the movement” in the
proceedings. This movement may be misdirected on purpose or due to subjectivity or
erroneous analysis. The parties may focus their actions and bring evidence on issues
lacking relevance and omit evidence on other issues. The parties may have different
understandings as to (1) what is relevant, (2) what needs to be proved; and (3) what
evidence is sufficient to establish a disputed fact. Although the “power” is generated
by the parties, and the relevance of the issues determined in light of their legal theories
and the facts to be established by their assertions and denials, the parties do not know
to what extent their assessment, analysis, and strategy is in accordance with the analysis of the panel at any given time. In addition, both the party analyses and that of the
panel may and are likely to change when the evidentiary hearings proceed.
As noted above, all the relevant facts need to be established. The parties are expected
to present their subjective views on what the facts mean and their legal consequences
as this may allow the panel to guide the parties toward a settlement. The arbitral tribunal is left with the difficult mission of conducting the proceedings and the evidentiary
hearings in a manner that is most likely to lead to the establishment of the relevant
facts. To accomplish this task, the panel may have to take measures on its own
initiative:
[T]he Arbitral Tribunal may request any person to give oral or written evidence on
any issue that the Arbitral Tribunal considers to be relevant and material. Any witness called and questioned by the Arbitral Tribunal may also be questioned by the
Parties.4
The role and duties of the panel in bringing the necessary evidence to establish the
facts is debated and remains somewhat unclear. However, the panel needs to maintain
impartiality and the appearance of impartiality. This is a crucial due process aspect of
managing the proceedings, especially when taking an activge role in collecting evidence or trying to encourage parties to settle. On the other hand it sould be clear that
3
Mexico Law Art. 1439 provides in line with UNCITRAL:
1. Within the period of time agreed by the parties or determined by the arbitral tribunal, the
claimant shall state the facts supporting his claim, the points at issue and the relief or remedy
sought and the respondent shall state his defence in respect of these particulars, unless the
parties have otherwise agreed as to the required elements of such statements. The parties may
submit with their statements all documents they consider to be relevant or may add a reference to the documents or other evidence they will submit. Unless otherwise agreed by the
parties, either party may amend or supplement his claim or defence during the course of the
arbitral proceedings, unless the arbitral tribunal considers it inappropriate to allow such
amendment having regard to the delay in making it.
4
144
(Mexican arbitration law as reported by Prof. José Luis Siqueiros & Alexander C. Hoagland in
INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION (Supp. 19, Aug. 1995)).
IBA Rules on Taking of Evidence in International Commercial Arbitration of Ethics for
International Arbitrators (1987) (“IBA Rules”) Art. 4(4).
DUE PROCESS RELATED TO FACTS AND EVIDENCE
trying to protect the parties’ substantive rights cannot per se be in contradiction with
due process requirements. Another issue exists regarding truthfulness in the presentation of evidence. To what extent are the parties under an obligation or a duty to disclose facts? The issue is of some complexity. In the ideal world, legal proceedings
would be concentrated on application of the law to clear and true facts. In reality, the
facts or the patterns established by the facts cannot be fully verified, and even good
faith assessments of facts by neutral third parties may differ. On the one hand, we have
the orthodox ideal of “truth and nothing but the truth,” and on the other a diversity of
understandings or recollections of what really transpired. There may be as many truths
as there are persons to report on it. However, as to the facts, the parties should refrain
from even innocent misrepresentations and concealment.5 The borderline between
subjectivity and misrepresentation is unclear, and misrepresentation is constituted on
the basis of a person’s knowledge.
The truth and the relationship of the parties to it can be analyzed by dividing the
issue into two different classes: (1) the active duty to bring out or disclose the “whole”
truth, and (2) the passive duty to ensure that all statements or submissions made are
truthful although not necessarily disclosing the whole. This is somewhat in line with
the contractual duties of the parties in commercial transactions. Even though the good
faith understanding of facts by the parties may dramatically differ, due (e.g., to a lack
of knowledge of all the facts, poor communications, or misunderstandings), the parties
must be deemed to be under a duty to ensure (“in good faith”) that the statements made
by them and their submissions reflect the truth. However, they may not have to reflect
the truth in the sense that they could not omit to state something needed for the statement not to be misleading, as such a standard may be too sophisticated. The proceedings must allow subjectivity, and a party is not in any position to know what in the final
analysis is “the overall scenario” in which all the evidence, submissions, and facts are
being analyzed as to their relevance and evidentiary weight. What may appear to be an
outright lie is not necessarily anything but a subjective belief in the light of incomplete
knowledge or an emotional analysis.
Fraudulent misrepresentation may constitute fraud and expose a party to criminal
sanctions, but concealing the truth is not necessarily as apparent a violation as fraudulent statements. However, in some circumstances concealing something may be equal
to fraudulent misrepresentation. A party can hardly be under a duty to bring evidence
or give statements detrimental to his position (at least not on his own initiative), but
may be under a duty to do so at the request of his adversary or under an order or ruling
of the panel. The failure to comply with a procedural order of the panel may have serious legal consequences to the position of a party.
5
BLACK’S LAW DICTIONARY (Bryan A. Gardner ed., 9th ed., 2009) defines misrepresentation as:
1. the act of making a false or misleading statement . . . with the intent to deceive.
2. . . . an assertion which does not accord with the facts . . . innocent misrepresentation, a
false statement not known to be false; a misrepresentation that, though false, was not made
fraudulently.
See also BLACK’S definition of negligent misrepresentation and fraudulent misrepresentation.
FACTS IN LEGAL DECISION: RELEVANCE, SUFFICIENCY AND TRUTH
145
In any case, a party is deemed to be in breach of his procedural duties if he misrepresents or malrepresents the facts.6 Express and deliberate misrepresentation or
the concealing of facts may constitute fraud.7 If misrepresentation (or malrepresentation) amounts to fraudulent methods, perjury, or forgery, it is a breach of international
due process.8 It may lead, among other things, to the award being set aside (if not
discovered until the award is given), or the award being declared null and void or
becoming unenforceable.9 If discovered or exposed during the proceedings, it may
undermine the credibility of all the theories of the party in breach tainting perhaps even
those parts of his action that are based on truth and constitute plausible causes of
action. In any case, such breaches of duty should be taken into consideration when
awarding legal costs.
A considerably more difficult issue is the existence or nonexistence in an individual
case of a duty to actively disclose the truth even when it may be detrimental as opposed
to simply ensuring that what is stated is true. Even when there is no such duty, the
issue arises if the other party or the panel submits a question to that effect or if a
party is requested to produce documents or other testimony or to allow discovery.
Refusal to comply with such an order or to answer truthfully may lead to the inference
that facts detrimental to the party are being deliberately concealed. The consequences
may thus be more detrimental than disclosing the truth. Under the IBA Rules
Article 9(4):
If a Party fails without satisfactory explanation to produce any document requested
in a Request to Produce to which it has not objected in due time or fails to produce
any document ordered to be produced by the Arbitral Tribunal, the Arbitral Tribunal
may infer that such document would be adverse to the interests of that Party.
Article 9(5) further provides:
If a Party fails without satisfactory explanation to make available any other relevant
evidence, including testimony, sought by one Party to which the Party to whom the
request was addressed has not objected in due time or fails to make available any
evidence, including testimony, ordered by the Arbitral Tribunal to be produced, the
Arbitral Tribunal may infer that such evidence would be adverse to the interests of
that Party.
6
7
8
9
Arbitration Act 1996 of England § 68(2)(g) (see Appendices, pp. 283–84).
IBA Rules Art. 9 (4–5); Arbitration Act 1996 of England § 40(7).
See e.g., Marianne Roth, Consequences and Prevention of False Evidence Under the English
Arbitration Act 1996: A Comparative Perspective, 13 ARB. INT’L (1997); Vincent Heuzé, La
morale, l’arbitre et le juge, 2 REVUE DE L’ARBITRAGE (1993); “ICC: Extortion and Bribery in
Business Transactions,” Report adopted by the 131st Session of the Council of the ICC, Nov.
29, 1977. Reprinted in June 1993.
Hascher, supra note 2, at 124:
La fraude procédurale, si elle est de nature à rendre exceptionnellement possible la rétractation d’une sentence arbitrale qui en est affectée, est aussi une violation de l’ordre public
international comme l’a admis la Cour de cassation dans l’affaire Westman, qui ouvre le
recours en annulation.
146
DUE PROCESS RELATED TO FACTS AND EVIDENCE
6.3 ON THE BURDEN OF PROOF
The burden of proof, of course, defines who has to bear the risk of a fact not being
proven in the proceedings. De facto, it also allocates the duty to act to prove a fact to
support the claim or defense. In the end, decisions about burden of proof are often
critical for the result of the proceedings and the findings in the award and securing
access to justice especially if the evidence is scarce, and thus they have a due process
connection. The role of burden of proof in establishing the facts of the case also underlines the importance of procedural aspects for the decision on the facts of the case in
legal decision.
In general, a party seeking a change or confirmation bears the burden of proof to
establish the relevant facts that will cause the panel to accept his position and award
him the relief he seeks (or alternatively to accept his defense and reject a claim made
against him). At the outset, this looks very simple. However, a party on whom the
burden of proof would rest solely on the basis of this principle may not be in a position
to bring the evidence himself or it may be considerably more accessible to his adversary or a third party. The burden of proof may shift or be shifted to the party for
whom it is easier to prove the matter or to whom the evidence is more easily accessible. The rules of burden of proof are interrelated with those of the production or means
of evidence.10
The rules on the division of burden of proof in international commercial arbitration are
unclear.11 They are also neither clear nor uniform in national codes of procedure although
very much in line in principle.12 Sometimes parties have agreed on how the burden of
proof is to be divided between them in case of a dispute (such as whether the goods
delivered were defective or conforming at the time of delivery). Sometimes the agreement restrains the bringing of evidence or provides that for the purposes of the proceedings, certain evidence submitted will be irrebuttable (i.e., it cannot be challenged).13
10
11
12
Refusal to bring evidence or produce documents may de facto amount to proof of the existence
of a fact negative or detrimental to the party refusing to comply with a request for production.
Allan Philip, The Standards and Burden of Proof in International Arbitration, 10 ARB. INT’L
Vol 10 (1994). How the burden of proof is divided in casu is primarily in the discretion of a
party but ultimately in the discretion of the panel. Consultations may be held when issues are
complicated and evidence is being brought in sequence.
Merkin writes:
The Arbitration Act 1996: any residual possibility that the weight attached to evidence by the
arbitrators can be challenged has, it would seem, been all but removed by the Arbitration Act
1996. Subject to the right of the parties to agree otherwise, and provided that the procedure
for the presentation of evidence is fair and does not give rise to serious irregularity, s 34(2)(f)
of the 1996 Act confers upon the arbitrators a more or less complete discretion to decide the
relevance or weight of any evidence, oral, written or other, sought to be tendered on any matters of fact or opinion.
13
Robert Merkin, ARBITRATION LAW 607 (2004).
ICC Uniform Customs and Practice for Documentary Credits, 1993 Revision in force as of Jan.
1, 1994 (“UCP 500”) Art. 3 and 4 provide:
3. a) Credits, by their nature, are separate transactions from the sales or other contract(s) on
which they may be based and banks are in no way concerned with or bound by such
ON THE BURDEN OF PROOF
147
In complex cases with numerous facts, the burden of proof regarding a fact may
depend on whether another fact has or has not been established, such as:
(i) was there a defect (e.g., was the prefabricated concrete cast reinforced by specified steel structures as provided in the contract)?;
(ii) was the defect visible, and if so, when was it visible prior to having been concealed during construction under other structures of the building?;
(iii) was the employer’s representative in a position or under a duty to inspect the
concrete and the steel structure at any stage, and if so, did he inspect it?;
(iv) if visible and to be inspected, was the defect of such a nature that he should or
could have understood that it was defective, and if so;
(v) did he accept, protest, or reject this part of the construction?
Sometimes a single fact, when fully established, renders most or even all other testimony moot or worthless (e.g., in the example cited above, a witness, supported by
notes in writing that he made at the time the employer’s representative noticed the
alleged defect, told the contractor to remove the defective parts and deliver new ones
at no additional cost). On the basis of this testimony, all the other evidence relating to
issues (ii–iv) above seems to become irrelevant except (i), which may remain relevant
if the existence of a defect is still disputed.
What about the existence of a defect? Was it established or is further evidence necessary? The problem is whether the parties could or should know this in advance or
during the proceedings. What has been established and what has not been established
is within the exclusive powers of the arbitrators. If they consider the witness testimony
to be fully creditworthy, should the arbitrators not advise the parties of their conclusions at necessary intervals to expedite the proceedings, save costs, and allow the parties to focus on the facts not yet established? This is perhaps uncommon but by no
means prohibited or impossible. Such measures and reviews by the arbitrators would
seem to improve the chances of having the relevant facts fully established in a
contract(s), even if any reference whatsoever to such contract(s) is included in the Credit.
Consequently, the undertaking of a bank to pay, accept and pay Draft(s) or negotiate and/
or to fulfil any other obligation under the Credit, is not subject to claims or defences by the
Applicant resulting from his relationships with the Issuing Bank or the Beneficiary;
b) A Beneficiary can in no case avail himself of the contractual relationships existing
between the banks or between the Applicant and the Issuing Bank.
4. In credit operations all parties concerned deal with documents, and not with goods, services and/or other performances to which the documents may relate. Uniform Rules for
Demand Guarantees (ICC Publication No. 458), Art. 2(b) provides:
Guarantees by their nature are separate transactions from the contract(s) or tender conditions
on which they may be based, and Guarantors are in no way concerned with or bound by such
contract(s), or tender conditions, despite the inclusion of a reference to them in the Guarantee.
The duty of a Guarantor under a Guarantee is to pay the sum or sums therein stated on the
presentation of a written demand for payment and other documents specified in the Guarantee
which appear on their face to be in accordance with the terms of the Guarantee.
148
DUE PROCESS RELATED TO FACTS AND EVIDENCE
cost-effective manner and help them in conducting the proceedings as expeditiously
as possible.14
6.4 ROLE OF ARBITRAL PANEL IN ESTABLISHING THE FACTS
6.4.1 Conflicts of Traditions and Culture
The panel may adopt either a very passive or active role with respect to all the above
factors: relevance, sufficiency, and burden of proof.15 The reason for being passive
may be based on law, arbitration, tradition, fear of appearing to be partial or subjective,
or perhaps the desire to avoid the appearance of “advocating” rather than “arbitrating.”16
We may further defend this passivity by referring to the character of the matter as
dispositive and to the fact the parties are at full liberty to settle the matter and/or to
organize the procedures for its settlement in any manner they deem fit. But are not all
matters in arbitration of such a dispositive character? Should the parties and the panel
have a lesser duty to establish the facts than does a witness?
Different legal traditions exist in these respects, which may be reflected in international arbitration.17 Sometimes arbitrators are expected to act in line with the rules
applicable in court proceedings, and if they do not act accordingly, it may shock or
puzzle the parties. On the other hand, business communities and legal traditions may
expect the arbitrator to conduct the proceedings in a manner closer to business behavior and culture than the formal traditions of the “old” judiciary. Arbitrators are often
expected to handle the proceedings in a flexible and gentleman-like manner, and even
(at least when expressly authorized) to adjudicate ex aequo et bono or bear the
14
15
IBA Rules Preamble (3) (see Appendices, p. 391).
Acording to Tang Houzhi and Wang Shengchang in INTERNATIONAL HANDBOOK ON COMMERCIAL
ARBITRATION 24 (Supp. 11, Jan. 1990) “No “discovery,” no “terms of reference” and no “crossexamination” are used in arbitration in China. Normally CIETAC arbitrators play a very active role
in the course of oral hearings. Strongly influenced by inquisitorial tradition, CIETAC arbitration
allows the arbitrators to raise any question vis-à-vis the parties provided that the arbitrators do not
extend bias to either of the parties.”
16
17
In a dispute there is always a winning and a losing party. This may cause an arbitrator not to
act as any action may be interpreted as hostile or partial. The same may apply to adjudicating
strictly by the book or encouraging parties to look for a compromise. This moral hazard is present when arbitration becomes a quasi-profession in a limited market.
Nudrat Majeed in Good Faith and Due Process: Lessons from the Shari’ah, 20 ARB. INT’L.
(2004): 112 concludes:
This is particularly relevant in the context of international dispute resolution where the
essence of successfully resolving disputes lies in a mutual respect and understanding of the
various laws and practices indigenous to each culture. If international dispute resolution is, as
is forever advertised, flexible with a great degree of party autonomy in choosing the law or
international legal principles to govern a dispute, then there is no better time than the present
to adopt a truly international and comparative approach.
ROLE OF ARBITRAL PANEL IN ESTABLISHING THE FACTS
149
earmarks of a mediator. It seems that there is great flexibility (souplesse) in arbitration
in the way proceedings are conducted.18
This “vacuum” may well be the most valuable feature of international arbitration
allowing the panel and the parties to adjust procedural measures and mix in other
ingredients in a manner most suitable for the case at hand.19 It does not, however, mean
that “anything goes”.
The problem is exacerbated when one or more parties are not fully professional or
have a vision of the relevance and sufficiency of the facts and the division of the
burden of proof that differs from the panel’s. Although this might be painfully obvious
to the panel, the arbitrators may refrain from intervening or guiding the parties, instead
leaving them to bear their own risks, including their choice of the right counsel. In an
international context when parties and their counsels come from very different cultural
and legal backgrounds, this may not always be appropriate, amounting at the extreme
to injustice although not necessarily to any specific violation of due process.
There is at least one factor the arbitrators should use their best efforts to actively
manage the proceedings if the parties cannot agree on it: time. Considerably less controversy or conflicts arise from setting the time schedule than as to many other issues,
provided the parties are given a reasonable opportunity to present their cases. There
seems to be a wide consensus that the objective of arbitration is to have the dispute
solved expeditiously. If the proceedings are not managed actively, there is a risk of
unnecessary delays and adjournments and the outcome may be not come until after
several years of ordeal, expense, and related frustration. However, there are instances
where even under the best process management the proceedings take years rather than
months to complete.
6.4.2 Guidance via Consultations
The panel must use its autonomy and procedural powers20 to conduct the proceedings
cost-effectively and expeditiously while still establishing the relevant facts. This is
18
IBA Rules Preamble (2) states:
IBA Rules are not intended to limit the flexibility that is inherent in, and an advantage of
international arbitration, and the Parties and Arbitral Tribunals are free to adapt them to the
particular circumstances of each arbitration.
19
20
A cynical lawyer with wide experience in arbitration opines that arbitrators avoid intervening
and manage proceedings based on pure laziness and convenience; according to him, this passivity is “the most powerful of all forces within any legal system”. There is undoubtedly some
truth to this.
Craig, Paul, and Paulsson write:
The result in practice is that the arbitrators tend to be deferential to each others’ notions of fair
procedure. Accordingly, procedural questions arising in the arbitration are resolved pragmatically rather than dogmatically. One may participate in many ICC arbitrations before hearing a
reference to a single article of a national code of civil procedure. The prevailing rule is that of
professional common sense, and good sense in this context tends to reflect an amalgam of three
jurists’ legal culture. It may confound theoreticians, but rarely causes a hitch in practice.
Laurence W. Craig et al., INTERNATIONAL COMMERCIAL ARBITRATION: INTERNATIONAL CHAMBER OF
COMMERCE ARBITRATION (1984). See also Act 1996 § 34(2)(f) (see Appendices, pp. 269–70).
150
DUE PROCESS RELATED TO FACTS AND EVIDENCE
conveniently done by status review hearings to be held to guide the parties to focus on
essential matters. IBA Rules provide in Preamble (3):
Each Arbitral Tribunal is encouraged to identify to the Parties, as soon as it considers it to be appropriate, the issues that it may regard as relevant and material to the
outcome of the case, including issues where a preliminary determination may be
appropriate. (emphasis added)
The word may is well-chosen in this provision in lieu of will or regards.
Thus when the circumstances are ripe and warrant such an intervention, the parties
and their counsel should be given an opportunity to hear, review, and comment on a
nonbinding status review (“consultations” or hearings) by the panel as to what has been
established and which facts may still need to be shown. Such reviews could be held one
or more times and touch on the other aspects of bringing in the evidence necessary to
reconstruct the past. Subject to developments and modifications later on, these reviews
conducted in an informal hearing or in connection with other hearings may cover:
(i) what may or may not be relevant evidence in light of the prayers for relief and
claims made or the modifications thereof;
(ii) sufficiency of the evidence submitted; and
(iii) division of burden of proof on open issues.
Such interventions could bring in an element of true intelligence, and when properly
conducted, would not jeopardize the panel’s impartiality and neutrality. However, the
problem with an active role of the panel is that the parties might get an impression on
partiality or an impression that the arbitrator has already chosen a point of view in the
case and is no longer neutral towards new evidence. The activity of the panel should be
understood in the context and not per se interpreted to imply partiality. However, the
arbitrators have to be careful not to give ground to false impressions. The same concerns
also i.e. the role of the panel in collecting evidence and not just the consultations.
6.4.3 Direct Intervention by the Panel
In addition to such “guidance” given to the parties, the panel may wish to intervene
directly on “its own account” in the interests of being able to fully understand the case.
Before taking direct action, the panel should hear the parties on the action contemplated and on the reasons for it (“consultation” or hearing).
If the guidance has not produced the desired facts, the direct action may include the
following:
(i)
(ii)
(iii)
(iv)
questions to the parties;
orders to submit documentary evidence;
orders to hear witnesses; and
hearing of experts appointed by the parties or chosen by the panel itself.21
21
Arbitration Act 1996 of England §§ 33 and 34.
ROLE OF ARBITRAL PANEL IN ESTABLISHING THE FACTS
151
The approach to direct intervention should be somewhat more conservative than as
to mere guidance. It should also be resorted to only when the fundamental or otherwise
apparently relevant facts have not been established at all or have been insufficiently
established, in particular if the evidence could be made easily accessible. Although
possible, direct intervention should in general not be against a unanimous objection of
all the parties (“right to veto”). However, such unanimity may cause the panel to consider dismissing the case or parts of it or resigning if the unanimity appears to be
inspired by collusive acts or collusive objectives or by violations of law or ordre public
that all the parties wish to conceal.
6.5 ENFORCEMENT OF EVIDENTIARY MEASURES
6.5.1 “Toolbox” of Measures for Bringing Evidence into
Proceedings
In general, the parties call witnesses or experts and submit documents in their possession. However, sometimes persons identified as witnesses are reluctant to appear in the
proceedings or simply refuse.22 Relevant documents or other evidence may be in the
possession of persons reluctant to surrender them to the parties or to the panel. A party
may also refuse to produce documents or other evidence, answer questions, or disclose
other facts (e.g., allow on-site inspections). If difficulties are encountered in bringing
evidence, there is a “toolbox” of measures available depending on the procedural
rules applicable to the proceedings, the parties, and the reluctant or hostile third
parties.23 Clearly, this tool-box is needed to provide the parties a possibility to defend
and concretize their rights effectively.
22
23
Id. at §§ 43 and 44 (1–3) (see Appendices, pp. 273–74).
These include enforcing by courts, drawing adverse inferences, and shifting the burden of
proof; see Gabrielle Kaufmann-Kohler & Philippe Bärtsch, Discovery in International
Arbitration: How Much is Too Much? ZEITSCHRIFT FÜR SCHIEDSVERFAHREN [German Arbitration
Journal] 21, Part 1 (2004). Act 1996 § 41 (5–7) (see Appendices, pp. 272–73). Japan Act § 33
(1–2):
(1) If the claimant violates the provisions of article 31, paragraph (1), the arbitral tribunal
shall make a ruling to terminate the arbitral proceedings. Provided, this shall not apply in the
case where there is sufficient cause for the violation.
(2) If the respondent violates the provisions of article 31, paragraph (2), the arbitral tribunal
shall continue the arbitral proceedings without treating such violation in itself as an admission of the claimant’s allegations.
(Japanese Arbitration Law, No. 138 of 2003, in force 1 March 2004, as reported in JAN PAULSSON
(ED), INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION, (Kluwer Law International 1984
Last updated: March 2005 Supplement No. 43) pp. Annex I-1–Annex I-20).
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DUE PROCESS RELATED TO FACTS AND EVIDENCE
6.5.2 “Internal” Orders
If a party to the arbitral proceedings refuses to produce a document or bring other evidence or allow a measure requested by the other party, the arbitral tribunal may endorse
the request by a procedural order. Article 3(6) of the IBA Rules addresses this “internal
issue” as follows:
The Arbitral Tribunal shall, in consultation with the Parties and in timely fashion,
consider the Request to Produce and the objections.24 The Arbitral Tribunal may
order the Party to whom such Request is addressed to produce to the Arbitral
Tribunal and to the other Parties those requested documents in its possession, custody or control as to which the Arbitral Tribunal determines that (i) the issues that
the requesting Party wishes to prove are relevant and material to the outcome of the
case, and (ii) none of the reasons for objection set forth in Article 9.2 apply.
The rule describes the steps in the process:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
Request by a party to the other;
Refusal by the other party;
Same request by the party to the Arbitral Tribunal;
Consultations with the parties;
Analysis of relevance and materiality by the Arbitral Tribunal;
Order to produce/No order.
If the order is given but not respected by the party against whom it was issued, there
are further alternatives for action:
(i) Enforcement of the arbitral tribunal order as such or as an “award;”
(ii) Enforcement of the order of the arbitral tribunal by way of obtaining a decision of
a court of law to the same effect by a party or by a party with the endorsement of
the arbitral tribunal.25
To what extent the above measures are available depends on the procedural laws
applicable, primarily those of the seat of arbitration (lex arbitri) or secondarily of
another having jurisdiction over the party or the person in possession of the documents.26 Sometimes no enforcement is done due to the costs and time required, with
24
25
26
Request to produce is a term defined in the IBA Rules as meaning a request by a party for
a procedural order by which the arbitral tribunal would direct another party to produce
documents.
Arbitration Act 1996 of England § 42 (see Appendices, p. 273).
Hascher writes:
Les arbitres ne peuvent ordonner l’ecécution forcée de leurs décisions en matière de discovery
comme d’ailleurs de production de pièces, s’ils ne disposent de l’assistance d’un juge étatique. Il convient de rappeler que l’application directe des conventions internationales
d’entraide judiciaire est réservée aux tribunaux ordinaires. Dans ces conditions, l’unique
solution pour le tribunal arbitral serait de demander le concours du juge, dans la mesure tout
ENFORCEMENT OF EVIDENTIARY MEASURES
153
the party requesting the production and the arbitral tribunal perhaps being satisfied
by the negative or adverse inference to be made from the refusal.27 Another possible
sanction or consequence may be shifting the burden of proof.28
6.5.3 “External” Orders
If the documents and other evidence are in the possession of third parties and these
third parties refuse to produce or submit them, a party may (1) submit a request to this
effect to the arbitral tribunal, or (2) be entitled under other procedural rules to take
other measures to force the production or submission of such evidence.29 Sometimes
au moins où la loi du siège prévoit une telle faculté. Il faut remarquer que le recours au juge
pour ordonner la discovery en ralation avec un arbitrage a été supprimé en droit anglais, ou
est le plus souvent refusé comme aux Etats-Unis. En pratique, le problème de la production
forcée des documents ne se pose guère. La sanction consiste à tirer toutes conséquences sue le
plan de la preuve d’une abstention ou d’un refus après en avoir averti les parties, ainsi que
l’établissent de très nombreuses decisions parmi lesquelles on citera la sentence CCI8520 de
1997 dont il a été parlé plus haut (section I, paragraphe 2); l’ordonnance rendue le 7 octobre
1993 dans l’affaire CCI7078: ‘if the opposing party bound to produce documents . . . fails to
produce the documents within the established period of time without showing sufficient cause
for such failure, the Arbitral Tribunal decide what consequences would follow from such
failure and may, inter alia, rely on inferences it can make from the known circumstances.’ ou
encore la sentence no 426-276-3, Arthur J. Fritz and Co. v. STTS, prononcée le 30 juin 1989
par le Tribunal irano-américain de La Haye.
27
28
Dominique Hascher, Principles et Pratiques de Procédure dans l’arbitrage Commercial
International, in RECUEIL DES COURS: COLLECTED COURSES OF THE HAGUE ACADEMY OF INTERNATIONAL
LAW 92–93, Tome 279 de la Collection (1999).
IBA Rules Art. 9(4) and (5).
Arbitration Act 1996 of England § 41(7) provides:
If a party fails to comply with any other kind of peremptory order, then, without prejudice to
section 42 (enforcement by court of tribunal’s peremptory orders), the tribunal may do any of
the following:
(a) direct that the party in default shall not be entitled to rely upon any allegation or
material which was the subject matter of the order;
(b) draw such adverse inferences from the act of non-compliance as the circumstances
justify;
(c) proceed to an award on the basis of such materials as have been properly provided to it;
(d) make such order as it thinks fit as to the payment of costs of the arbitration incurred in
consequence of the non-compliance.
29
Rhys Davies et al. conclude in Third Party Discovery in Arbitration Proceedings, 7 INT’L ARB.
L. R. 164 (Oct. 2004):
Although third party discovery may be available in the United States, England and Wales and
Germany, the conditions under which it may be ordered vary significantly. There are also
significant differences within the United States. If third party discovery is likely to be necessary, a party negotiating an arbitration agreement needs carefully to choose the situs of the
arbitration, so as to maximise the chances of obtaining the discovery sought. By contrast, if
third party discovery is likely to be unhelpful, this may involve negotiating a location like
Germany, where its availability is very limited.
154
DUE PROCESS RELATED TO FACTS AND EVIDENCE
there may not be other measures available or a party may prefer to proceed via the
arbitral proceedings, in which case a request is submitted to the panel.
The IBA Rules describe this step in Article 3(8):
If a Party wishes to obtain the production of documents from a person or organization who is not a Party to the arbitration and from whom the Party cannot obtain the
documents on its own, the Party may, within the time ordered by the Arbitral
Tribunal, ask it to take whatever steps are legally available to obtain the requested
documents. The Party shall identify the documents in sufficient detail and state why
such documents are relevant and material to the outcome of the case. The Arbitral
Tribunal shall decide on this request and shall take the necessary steps if in its discretion it determines that the documents would be relevant and material.
We should in particular note the words “within the time ordered by the Arbitral
Tribunal” while reflecting on:
(i) the conduct and management by the panel;
(ii) what constitutes reasonable opportunity under the audi alteram partem rule and
due process as to the closing of admission of evidence;
(iii) the risk of constitution of waiver in the event of failure to comply.
The sequence of steps is:
(i)
(ii)
(iii)
(iv)
(v)
failure to obtain the documents;30
request to the panel;
consultation with the parties;
analysis of relevance and materiality by the panel;
“necessary steps” by the panel if it deems the document relevant and material.
What the necessary steps may be depends on the applicable procedural rules,
including recourse to courts of law in the seat of arbitration or in other places.
The above IBA Rule covered the production of documents. The same procedure
applies to other evidence as provided in Article 4(10):
If a Party wishes to present evidence from a person who will not appear voluntarily
at its request, the Party may, within the time ordered by the Arbitral Tribunal, ask
it to take whatever steps are legally available to obtain the testimony of that person.
The Party shall identify the intended witness, shall describe the subjects on which
the witness’s testimony is sought and shall state why such subjects are relevant and
material to the outcome of the case. The Arbitral Tribunal shall decide on this
30
See Model Law Decisions: Vibroflotation A.G. v. Express Builders Co. Ltd. High Court of
Hong Kong (Kaplan J.), 15 August 1994, Original in English, Unpublished: CLOUT,
“Subpoenas duces tecum can be granted under Model Law Article 27, if requested by the arbitral tribunal or by a party with the approval of the arbitral tribunal.”
This can hardly be interpreted to mean objective failure (i.e., unavailability of any legal measure or action or an exhaustion of the same but failure to voluntarily obtain such evidence).
ENFORCEMENT OF EVIDENTIARY MEASURES
155
request and shall take the necessary steps if in its discretion it determines that the
testimony of that witness would be relevant and material.
6.5.4 Fact-Finding by the Arbitrators
The arbitrators “sitting in the driver’s seat” are in ultimate control of the relevance of
evidence and its sufficiency, but only secondarily under a duty to cause the relevant
facts to be established.31 Should the parties either on their own initiative or under the
guidance of the panel fail to bring essential evidence that is available or accessible, the
panel may, in its discretion, take its own initiative and order documents to be produced
or other testimony or evidence to be submitted. This applies to evidence presumably in
possession either of a party or a nonparty to the arbitration. The tribunal may consider
that respecting and protecting the parties’s substantive rights requires taking action
concerning evidence, even when balanced against other relevant arguments, such as
party autonomy, timeliness and impartiality.
Article 3(9) of the IBA Rules provides:
The Arbitral Tribunal, at any time before the arbitration is concluded, may request
a Party to produce to the Arbitral Tribunal and to the other Parties any documents
that it believes to be relevant and material to the outcome of the case.
Article 9(11) further provides:
The Arbitral Tribunal may, at any time before the arbitration is concluded, order
any Party to provide, or to use its best efforts to provide, the appearance for testimony at an Evidentiary Hearing of any witness, including one whose testimony has
not yet been offered.
In addition, the arbitral tribunal may, after due consultations with the parties, appoint
one or more experts to report on issues specified by the panel in addition to those
appointed and presented by the parties.32 Such tribunal-appointed experts have the
same power and authority to request information and to have access to documents and
facts as the panel itself.33
The same principles are codified in the ICC Rules. The main principle does not leave
much room for interpretation as to who is in charge of conducting the proceedings:
The Arbitral Tribunal shall proceed within as short a time as possible to establish
the facts of the case by all appropriate means.34
The requirements of (1) “as short a time as possible” and (2) “by all appropriate
means” do not, however, impose the primary burden on the panel as to establishing the
31
32
33
34
156
Arbitration Act 1996 of England § 34(2) (g) (see Appendices, p. 270).
IBA Rules Art. 5 and 6.
Id. Art. 6(3).
ICC Rules Art. 20(3).
DUE PROCESS RELATED TO FACTS AND EVIDENCE
facts but instead the responsibility of introducing the time schedule and the procedural
framework for this to happen.35
Should the parties not produce satisfactory evidence as to the relevant facts, the
arbitral tribunal may, in line with the IBA Rules:
(i) decide to hear witnesses, experts or any other person;
(ii) appoint one or several experts;36
(iii) summon any party to provide additional evidence.37
6.5.5 Organizing the Evidentiary Hearings
In exceptional cases no evidentiary or other hearings may be necessary or all the communications as submissions may be organized via telecommunications or videoconferences. Despite organizational meetings (including the drafting of terms of reference)
there may be hearings for argumentation and submission of pleadings and for taking
evidence. The latter may prove to be unnecessary:
(i) if there are no facts in dispute;
(ii) if the parties allow the witness statements and other “oral” evidence to be submitted in writing as such without examination of the witnesses or experts before the
tribunal; or
(iii) if the parties so agree for whatever reason.
As to (ii)), ICC Rules Article 20(6) provides:
The Arbitral Tribunal may decide the case solely on the documents submitted by
the parties unless any of the parties requests a hearing. (emphasis added)
The panel may in (ii) and (iii) organize an evidentiary hearing if deemed necessary
in its sole discretion to fully establish the facts or for any other due process purpose.
For instance, the risk of indirect erga omnes effects or enforcement of unlawful or
collusive agreements or conduct may warrant such activity against the will of the
parties. Such discretion is part of the autonomous procedural powers and freedom of
the arbitral tribunal. However, only in exceptional circumstances and for material
grounds should the panel refuse to hold a hearing if one is requested by a party. Major
fact-finding missions against the unanimous will of the parties also should be carefully
considered as the proceedings are based on the agreement of the parties and are conducted at their expense; thus, the parties may at their convenience cause the proceedings to be closed and the panel to resign.
35
36
37
ICC Rules Art. 18(4) and 20 provide for a separate documented timetable for the conducting
of the proceedings.
Id. Art. 20(4).
Id. Art. 20(5).
ENFORCEMENT OF EVIDENTIARY MEASURES
157
The ICC Rules, as a universal code, leave the organizing of the hearings very open:
The Arbitral Tribunal shall be in full charge of the hearings, at which all the parties
shall be entitled to be present.38
This guarantees great flexibility for the parties, or in the absence of their agreement,
to the panel to tailor-make the procedural “costume.”
The IBA Rules give more guidance as provided in Article 8(2):
(1) The Claimant shall ordinarily first present the testimony of its witnesses;
(2) followed by the Respondent presenting testimony of its witnesses, and then;
(3) by the presentation by Claimant of rebuttal witnesses, if any.
(4) Following direct testimony, any other Party may question such witness, in an
order to be determined by the Arbitral Tribunal.
(5) The Party who initially presented the witness shall subsequently have the
opportunity to ask additional questions on the matters raised in the other Parties’
questioning. (original text modified)
Finally, the IBA Rules make it clear that the above is in the discretion of the panel
and may be adjusted on the panel’s own motion or on that of a party. Witnesses may
also be questioned
(i) simultaneously (both or all present at the same time); or
(ii) in confrontation with each other.
Such special arrangements may prove to be necessary or beneficial should witness testimony be contradictory or fail to form a consistent and logical sequence of events. Such
special measures may refresh memories, help the panel to distinguish from facts produced
by failing memory or subjectivity without roots in reality, or in the worst case scenario,
expose false or misleading testimony and eliminate its perhaps fatal consequences.
6.5.6 “Entire Agreement Clauses” and Other Agreements on
Admissibility of Evidence
An entire agreement clause, which is very common in commercial practice and belongs
to almost any collection of standard “boilerplate” language, provides in essence that
everything agreed upon is expressed in the contract document itself and that no evidence
of any other agreements, terms or conditions, intentions, purpose, or meaning is necessary or even permissible.39 It does not require much to raise the counterargument that
38
39
Id. Art. 21(3).
UNIDROIT Art. 2.1.17:
A contract in writing which contains a clause indicating that the writing completely embodies
the terms on which the parties have agreed cannot be contradicted or supplemented by evidence of prior statements or agreements. However, such statements or agreements may be
used to interpret the writing.
158
DUE PROCESS RELATED TO FACTS AND EVIDENCE
there are no exhaustive agreements where anything would be implicit or left open. This
is certainly true. Sometimes this self-evident conclusion is deemed to justify a de facto
disregard of the entire agreement clause. However, it is equally true that the clause originally and often specifically was incorporated for the very purpose of limiting or excluding irrelevant evidence in the interpretation of the agreement by the parties before courts
or an arbitral panel.40 Imperfect as it may be deemed to remain even in its most sophisticated form, the clause attempts to enforce the legitimate purpose of the parties by:
(i) forcing all the parties to the agreement in negotiation at the precontractual stage
to openly express their expectations and intentions and understandings in the
agreement itself;
(ii) facilitating the reading and interpretation of the agreement at a post-signing stage
specifically by those who were not personally involved in the process;
(iii) ensuring cost-effective proceedings in case of a dispute or need to enforce the
agreement; and
(iv) eliminating attempts to introduce new contents to the agreement by way of false
or misleading evidence.
All these interests are fully legitimate, and even though it is impossible to reach
perfection, this does not entitle the panel or parties to disregard the entire agreement
clause as meaningless.
The ideology of the entire agreement clause is closely in line with the tradition and
mechanism of the prevention of fraud in court proceedings and deeply rooted in
common law. The objective is to prevent fraud and a loss of rights by forcing the
parties to express their bargain clearly including all its terms and conditions. The entire
agreement clause is an important or may even be a fundamental element in the panel’s
assessment of relevance and admissibility of evidence or testimony tendered by the
parties and it cannot be overlooked as insignificant. The entire agreement clause is part
of the agreement of the parties and it is to be respected and enforced by them.
However, we have to make certain entire agreement clauses do not limit a party’s
access to justice in a way that would conflict with fair trial principles. In fact, in many
The Comment Section adds:
This Article indirectly confirms the principle set out in Art. 1.2 in the sense that, in the
absence of a merger clause, extrinsic evidence supplementing or contradicting a written contract is admissible.
(International Institute for the Unification of Private Law (UNIDROIT) Principles of
International Commercial Contracts 2004, Rome 2004).
40
Compare UCC § 1-206:
(1) Except in the cases described in subsection (2) of this section a contract for the sale of personal
property is not enforceable by way of action or defense beyond five thousand dollars in amount
or value of remedy unless there is some writing which indicates that a contract for sale has been
made between the parties at a defined or stated price, reasonably identifies the subject matter, and
is signed by the party against whom enforcement is sought or by his authorized agent.
(2) Subsection (1) of this section does not apply to contracts for the sale of goods (Section
2-201) nor of securities (Section 8-319) nor to security agreement (Section 9-203).
ENFORCEMENT OF EVIDENTIARY MEASURES
159
cases the agreement means there would be no legal protection available for some
claims either directly for jurisdictional reasons or factually for evidentiary ones. Even
though agreements with the purposes listed above might seem to be as such legitimate
at least ex ante, it might be that ex post they would not be fair. For example, it might
be that one of the parties has the better possibilities to present evidence for a claim that
originally would have been less legitimate than the claim of the opposite party. It
might be that an entire agreement clause limits this possibility to present his case in a
way that would infringe on due process requirements. Also, we have to consider
whether an ex ante waiver of the right to present evidence in support of a claims would
in fact constitute a waiver of opportunity to be heard and such infringe on the fundamental procedural rights of a party. At least the meaning of such a clause in relation to
procedural due process rights has to be evaluated in casu, bearing in mind that legitimate purposes can and should be protected in terms of fundamental procedural rights
and due process in arbitration.
6.6 QUESTIONS AND ANSWERS
The submissions of the parties may leave room for many questions41 relating to legal
theories or facts. Also, the parties may wish to ask questions and should be allowed
and encouraged to do so if it serves the interest of establishing the facts. The admission
of facts streamlines the proceedings while a denial helps to identify the facts in dispute
and to determine the relevance of the available evidence.
The effectiveness of questions and answers as a vehicle in reconstructing the past
depends on a number of factors:
(i) The attitudes of the parties as to the material truth;
(ii) The silent or express endorsement of the questions by the panel. If the panel is
actively involved in the process, the parties and the proceedings may benefit
because the questions (and in particular the answers) have a higher profile and
may be taken more seriously, resulting in a more complete picture as to what has
transpired and what remains in dispute;
(iii) The refusal to answer satisfactorily or the giving of misleading or false information may, if exposed later on, in many ways reflect both on the assessment of
evidence and the evaluation of legal theories.
By asking questions, the panel may expedite the establishment of the relevant facts.
The right timing of such an intervention may be at the end of the first rounds of submissions in connection with the drafting of the terms of reference (if the rules provide for
such a document) or at a comparable stage of the proceedings.42
41
42
160
Arbitration Act 1996 of England § 34(2)(e) (see Appendices, pp. 269–70).
ICC Rules Art. 18.
DUE PROCESS RELATED TO FACTS AND EVIDENCE
6.7 DISCOVERY
Discovery is the process of learning about facts not yet known. It means obtaining
access to information, most often to the files of the adversary.43 Discovery serves the
objectives of arbitration: establishment of the facts and avoidance of surprises.44 In
addition, it is related with the right to present one’s case and opportunity to be heard as
well as access to justice and protection of substantive rights.
There are some considerable differences in legal tradition relating to the time and
extent of discovery. Discovery, including pretrial discovery, is extensive in American
litigation, but the culture in international arbitration remains very reserved.45 Holtzmann
describes U.S. practices:
Rules requiring submission of documents on the proper demand of a party
(i.e. “document discovery”), which are a typical feature of court litigation in the
United States, are not included in the FAA or the UAA. Most arbitration rules
permit arbitrators to order a party to submit documents. If a party, or other person
having the documents, refuses to submit them, the party seeking discovery may
request a court having jurisdiction to order submission of the documents; generally,
however, courts are reluctant to become involved in arbitral proceedings and will
order discovery only in exceptional circumstances.46
43
44
45
Arbitration Act 1996 of England § 34(2)(d) (see Appendices, p. 270).
IBA Rules Preamble (4) (see Appendices, p. 391).
Hascher, supra note 2, at 90 writes:
Les arbitres ne pourront donc pas présumer la connaissance par les conseils des parties des
règles judiciaires de la discovery en raison de la vraisemblable absence d’homogénéité entre
leurs conceptions juridiques. Aussi afin de ne pas créer des malentendus et surprendre les
parties ou leurs conseils, il faut souhaiter que le tribunal arbitral définisse clairement ce qu’il
entend imposer comme obligations dans le cadre du recours à la discovery.
Gabrielle Kaufmann-Kohler, Globalization of Arbitral Procedure, 36 VANDERBILT J. TRANSNAT’L
L. 127–28 (Oct. 2003), defines the status of compromise:
To bridge the gap between these different traditions international arbitration has developed a
practice embracing elements drawn from both camps. The primary elements of this practice,
as restated in the IBA Rules of Evidence as well as in some other institutional rules, are the
following: There is no broad U.S.-style discovery in international arbitration. Incidentally,
neither is there any right to court-like discovery procedures in U.S. arbitrations, as the extent
of discovery is entirely within the control of the arbitrators. It is now well-accepted, even
among civil-law arbitrators, that the tribunal may grant some level of discovery. It is now
well-accepted, even among civil-law arbitrators, that the tribunal may grant some level of
discovery. The scope of discovery is within the discretion of the tribunal. Unless the parties
expressly agreed to it, and subject to cases where the refusal to order production may constitute a breach of due process, the parties are not entitled to documents production. A tribunal
will allow production of documents, provided the party requesting it makes a prima facie
showing of the following requirements: (1) the documents sought are identified with reasonable specificity, (2) they relate to facts relevant and material to the outcome of the dispute;
(3) they are not protected by some privilege, for instance, attorney-client privilege, confidentiality of business secrets, or protection of sensitive governmental information.
46
Howard M. Holtzmann, Report on U.S. Arbitration Law, in INTERNATIONAL HANDBOOK
COMMERCIAL ARBITRATION 21 (Supp. 13, Sept. 1992).
DISCOVERY
ON
161
Besides access to relevant files, discovery may mean hearing in advance the persons
who are likely to give testimony in the proceedings, in particular those called by the
adversary. Discovery means in practice an opportunity hear a person nominated as a
witness or expert often on the basis of his written statement by way of cross-examination
prior to the evidentiary hearing before the tribunal. The written statement, which may
or may not have been given under oath, serves as an introduction to what the person
knows and intends to testify and as such forms a sound basis for cross-examination in
advance. Although perhaps expensive, all this eliminates the risk of surprise, puts both
parties on an equal footing, may help the parties to settle, fulfills the criterion of audi
alteram partem, and presumably allows the actual hearing before the tribunal to run
more smoothly and be less time-consuming. There will be no (or at least less) need to
narrow down or identify the area of a person’s knowledge by asking questions about
matters the person has no knowledge about in the actual hearing before the tribunal.
The ethics of interviewing witnesses in advance is questioned or even rejected in
some legal systems. However, under the IBA Rules, interviews are endorsed:
It shall not be improper for a Party, its officers, employees, legal advisors or other
representatives to interview its witnesses or potential witnesses.47
If such interviews are conducted properly and professionally, the risk of abuse,
inappropriate behavior, or undue influence can be avoided. In particular, if witnesses
give their statements in writing in advance and the other party is given the opportunity
to cross-examine the witnesses in advance, this would seem to improve the chances of
accurately establishing the relevant facts.
6.8 WITNESSES
6.8.1 Prior to Hearings
To evaluate the merits of a potential case, it is often necessary for a party to hear witnesses
and interview other persons.48 Such an investigation, particularly if its results are recorded
in writing, may encourage the parties to settle out of court and will in any case expedite
the proceedings by allowing the parties and the panel to focus on what is relevant.
However, doing this may raise legal and ethical concerns. Is undue influence being
exercised? What access, if any, does the adversary have to this testimony? How should
the testimony be recorded for future purposes if it should no longer be available at a
later stage? The pros of such advance hearings seem stronger than the cons. This also
seems to be the prevailing tradition.
47
48
162
IBA Rules Art. 4(2).
See Georg Von Segesser, Witness Preparation in International Commercial Arbitration, 20 ASA
BULLETIN (2002). Hascher, supra note 2, at 93–99, discusses when a person is a witness, when a
person is a party representative, and when a person is to be heard as an expert or an expert witness.
DUE PROCESS RELATED TO FACTS AND EVIDENCE
Article 25(6) of the Swiss Rules provides:
It shall not be improper for a party, its officers, employees, legal advisors or counsel
to interview witnesses, potential witnesses or expert witnesses.
The cons can be eliminated by professional behavior and legal safeguards. If and
when possible, these should include the following:
(i) Explaining to the witness his rights and his duties (perhaps also in writing in his
or native language to make sure that any suspicion of undue influence is eliminated). This applies in particular to officers and employees whose position may
be sensitive and who may tend to believe that the testimony should be in favor of
the employer or the company. If this suspicion is eliminated, the results are
better.
(ii) The testimony should preferably be recorded in writing to be submitted in advance
for a number of reasons.49 First, when reduced to writing, accuracy will increase,
and during the drafting exercise the witness may verify dates and matters from
her notebooks, documents, etc. improving and completing the substance thereof.
Second, such a record allows the testimony to be made available to other parties
and to the panel, which serves both due process purposes and improves the efficiency of the proceedings.
(iii) The witness statement may also serve as secondary evidence should the witness
be prevented from appearing at a later stage due to illness, death or for another
such reason.
The preparation for the evidentiary hearing generally includes the measures necessary to avoid surprises, such as listing the evidence of the parties or even informing the
tribunal and the opposite party of the content of the witnesses contribution. According
to the IBA Rules:
The taking of evidence shall be conducted on the principle that each Party shall be
entitled to know, reasonably in advance of any Evidentiary Hearing, the evidence
on which the other Party relies.50
Further:
The Arbitral Tribunal may order each Party to submit within a specified time to
the Arbitral Tribunal and to the other parties a written witness statement by each
witness on whose testimony it relies, . . .51
49
AAA Rules 32 (see Appendices, p. 238); Swiss Rules Art. 25(5) and (6) (see Appendices,
p. 467). Holtzmann, supra note 46, at 20 reports on U.S. practices:
Parties may choose to present a witness’ sworn written statement, called an “affidavit,” and
the arbitral tribunal gives such written statements the weight it considers appropriate in the
circumstances.
50
51
IBA Rules Preamble (3).
Id. Art. 4(4).
WITNESSES
163
Witness statements are not meant to replace or be a substitute fora hearing of the
witness in person before the panel. The main rule still is that the witness should testify
before the tribunal and be cross-examined, as provided in the IBA Rules:
Each witness who has submitted a Witness Statement shall appear for testimony at
an Evidentiary Hearing, unless the Parties agree otherwise.52
The IBA Rules also provide:
If the Parties agree that a witness who has submitted a Witness Statement does not
need to appear for testimony at an Evidentiary Hearing, such an agreement shall not
be considered to reflect an agreement as to the correctness of the content of the
Witness Statement.53
The testimony of the witness before the panel may be organized by way of a
videoconference or by phone as the parties may agree or the panel may decide.
6.8.2 Language
In principle, the witness should testify in his native language unless he gives his consent to doing so in another language. In the former case, interpretation may become
necessary but in the latter, the risk of misunderstanding increases and the reliability
and accuracy of the testimony may suffer to the extent that in the interest of establishing the truth, the panel may need to order the hearing to be conducted in witness’s
native language.54 If a witness testifies and the hearing is conducted in a language other
than that of the proceedings, interpretation of the testimony into the language of the
hearing may be needed to allow the panel and the parties to follow, understand, and ask
questions.55
6.8.3 “Nothing but the Truth”
There are diverse traditions in legal systems as to witness testimony including methods
ensuring the witness understands the importance of telling the truth. In the courts, witnesses are often required to testify under oath or a corresponding assurance.
Administration of an oath may not always be within the authority of the panel, which
means other methods may be in place.56 In the context of international arbitration, all
involved should show respect and understanding as to the background and culture of
the witnesses in particular as giving testimony often has deeply rooted religious or
52
53
54
55
56
164
IBA Rules Art. 4(7).
Id. Art. 4(9).
AAA Rules 27 (see Appendices, p. 237).
Swiss Rules Art. 25(3) (see Appendices, p. 467).
Arbitration Act 1996 of England § 38(5) (see Appendices, p. 271). See also Hascher, supra
note 2, at 99.
DUE PROCESS RELATED TO FACTS AND EVIDENCE
ethical dimensions. This is where the flexibility of the arbitration proceedings may
demonstrate its effectiveness while still showing its sensitivity to different cultures and
persons. The IBA Rules allow this to be organized “as the case may be”:
Any witness providing testimony shall first affirm, in a manner determined appropriate by the Arbitral Tribunal, that he or she is telling the truth. If the witness has
submitted a Witness Statement or an Expert Report, the witness shall confirm it.57
(emphasis added)
The applicable procedural rules may allow a rehearing of the witness under oath
before a court of law should this prove to be beneficial or necessary. It may be advisable to inform the witness in advance if the counsel in charge has not done so.
6.8.4 Hostility, Evasiveness or Psychological or Emotional Ties
Even at its best, witness testimony is always subjective. Very often witnesses have
such ties to the parties or to the matter in the dispute that subjectivity or bias cannot be
eliminated despite good faith attempts by counsel, the panel, and the witness himself.
Such a bias may be based on:
(i) employment or other such relationship creating an economic tie or dependency;
(ii) emotional or family ties;
(iii) fear of losing a position in a company;
(iv) fear of being exposed for unlawful acts or violations of the law or business codes
of ethics;
(v) hostility based on disrespect or hatred;
(vi) fear of violence or coercion;
(vii) misdirected will to please, protect, or help someone;
(viii) evasiveness based on frustration and disinterest in the proceedings and the establishment of facts, etc.
These emotions are part of human nature, but they raise two important legal issues:
(1) how can the correctness of witness statements be evaluated?, and (2) when may the
witness refrain from answering?. The first issue is tackled in the IBA Rules with elegance by leaving the panel with sufficient room to be flexible:
The Arbitral Tribunal shall determine the admissibility, relevance, materiality and
weight of evidence.58
The latter issue is addressed with equal quality:
The Arbitral Tribunal may limit or exclude any question to, answer by or appearance of a witness . . . if it considers such question, answer or appearance to be
57
58
IBA Rules Art. 8(3).
Id. Art. 9(1).
WITNESSES
165
irrelevant, immaterial, burdensome, duplicative or covered by a reason for objection.59 (emphasis added)
Reasons for objection include legal impediments or privileges under the applicable
legal or ethical rules.60 These may include the laws of the place of residence of the
witness or his ethical or religious convictions. The panel may take the necessary action
on its initiative as well as on a motion by a party.61
Article 25(2) of the Swiss Rules indicates a flexible approach:
Any person may be a witness or an expert witness. If witnesses or expert witnesses
are to be heard, at least fifteen days before the hearing each party shall communicate to the arbitral tribunal and to the other party the names and addresses of the
witnesses or expert witnesses it intends to present, the subject upon and the languages in which such witnesses or expert witnesses will give their testimony.
6.8.5 Questioning
Assuming witness statements have been submitted prior to the examination of the witness, the panel needs to determine the order of questioning. In general, the party who
nominated the witness and primarily relies on his testimony shall start (i.e., the claimant will examine her witness first and the respondent his).
The Claimant shall ordinarily first present the testimony of its witnesses, followed
by the Respondent presenting testimony of its witnesses, and then by the presentation by Claimant of rebuttal witnesses.62
If all parties have nominated the same witness or if there are claims by all parties or
for other reasons, the above order may be amended mutatis mutandis by the panel in
its discretion:
The Arbitral Tribunal, upon request of a Party or on its own motion, may vary this
order of proceeding.. . .63
59
60
Id. at Art. 8(1).
Id. at Art. 9(2)(b). See also Arbitration Act 1996 of England § 43(4). On the law applicable to
privilege, see also Kaufmann-Kohler, supra note 23, at 19:
Where the privilege at issue has not achieved the status of a general principle, or where the
issue turns upon a controversial aspect of an otherwise well settled principle, it will become
inevitable to choose the applicable law. For that purpose, it will be necessary to decide
whether privileges are matters of procedure or of substance. Although different national laws
adopt different characterization of privileges, it appears reasonable to say that privileges do
not fit neatly into either category; they carry elements from both. A procedural characterization leads to the law governing the arbitration (but not to the civil procedure rules applicable
in court at the place of arbitration), and a substantive characterization to the law with the closest relationship to the privileged communication or information. In order to take into consideration the dual nature of privileges, one may think of submitting them both to the law of the
arbitration and to the law of the closest relationship to the evidence. In the event of conflict,
the most protective would apply.
61
62
63
166
IBA Rules Art. 9(2).
IBA Rules Art. 8(2).
Id. Art. 8(2); Swiss Rules Art. 25(4) (see Appendices, p. 467).
DUE PROCESS RELATED TO FACTS AND EVIDENCE
The questioning should be in the effective control of the panel. In addition to orthodox questioning (who? when? why? what? how? etc.), which leaves all the facts to be
reported by the witness, some flexibility may be allowed. The panel should intervene
if the questions:
(i)
(ii)
(iii)
(iv)
are leading or misleading;
leave the witness only the choice of responding yes or no;
are irrelevant, immaterial, or duplicative.64
are worded so the witness has no duty to answer or has the right to refrain from
answering;65 or
(v) allow the witness to be unduly harassed, offended, intimidated or unduly interrupted or do not permit him to continue his statement.66
The panel may allow or encourage counsel to assist in establishing the proper discipline by raising objections if any of the above is infringed on by a party.
The panel should also intervene and take appropriate action to make certain that
(vi) the witness answers the questions accurately;
(vii) undue factors of influence or pressure on the witness are eliminated;
(viii) the witness is reminded of her duty to tell the truth if the witness refuses to
answer for no good reason or avoids giving an accurate answer.
The arbitral tribunal may at its discretion wholly assume the role of questioning and
examination, at least at the first stage, and even exclude direct examination or direct
cross-examination by the parties.67 In order not to violate due process, the parties
should be allowed to submit their questions to the panel, and the panel will then ask
those questions unless they find them irrelevant or otherwise objectionable.
Hascher, supra note 2, at 99 writes:
L’ordre de passage des témoins, en alternant ou non les témoins de l’une et de l’autre partie,
ou l’ordre de leur interrogatoire, par la partie qui les a cités en premier, ou par l’adversaire,
n’est pas décisif. Ce qui est constant dans la pratique arbitrale est l’interrogatoire des témoins
par les parties et leurs conseils, puis par les arbitres qui chercheront à éclaircir les points
restés obscurs ou jugés par eux pertinents, sans avoir influencé immédiatement les interrogatoires, avec cette précision qu’un témoin répondra plus volontiers au tribunal arbitral qu’à un
conseil qui aurait fait montre d’aggressivité à son encontre.
64
65
66
IBA Rules Art. 8(1).
Id. Art. 8(2) and 9(2).
Holtzmann, supra note 46, at p. 21:
Arbitrators are expected to control the cross-examination, so that it is not used to harass or
intimidate witnesses. In practice, most examination and cross-examination of witnesses is
conducted by the parties or their lawyers, but the arbitrators may also ask questions that they
feel are necessary to an understanding and determination of the dispute.
67
Gabrielle Kaufmann-Kohler, Beyond Gadgetry—Substantive New Concepts to Improve
Arbitral Efficiency, 5 J. WORLD INVESTMENT & TRADE 71 (Feb. 2004) writes:
You can also provide that the arbitrators will start examining the witnesses before giving the
floor to counsel; some attorneys will think that is natural and others will think it is outrageous.
So, here again, you would have to take their expectations into consideration.
WITNESSES
167
6.8.6 Cross-Examination and Special Arrangements
The opposite party has to have a real possibility to test, question and challenge the
evidence presented by the other party, and provide alternative evidence. This way, the
right to cross-examine a witness is in principle a part of due process. The examination
may be direct in the sense that a party, usually through his counsel, directly asks the
witness the questions, or it may be indirect, in which case the questions are asked by
the members of the panel (e.g., from lists of questions submitted by counsel). In principle, the organization of the examination should be consistent allowing direct examination to all or no parties. This is another principle of due process expressed in the IBA
Rules as being based on:
[C]onsiderations of fairness or equality of the Parties that the Arbitral Tribunal
determines to be compelling.68
The same principles apply if the panel decides not to admit certain testimony.69
Witnesses may be heard simultaneously or in confrontation on a motion of a party
or in the panel’s discretion.70 Special arrangements may be called for to protect confidentiality.71 Hearings by telecommunication or videoconferences can hardly be
regarded as innovative any more.72 A witness may be allowed to have documents or
personal notes with him in support of his memory as giving testimony is not an exercise in memorization.
68
69
70
IBA Rules Art. (2)(g).
Id. Art. 9(2).
Holtzmann, supra note 46, at 21 reports:
Witnesses usually are first questioned by the party or lawyer who introduced them. The questions are designed to elicit relevant facts from the witness’ personal knowledge. The extent to
which so-called “leading questions” are allowed is left to the discretion of the arbitrators,
since formal court procedures governing the examination of witnesses do not apply. During
the questioning of a witness, the opposing side has the opportunity to object to questions on
various grounds, such as that they are not relevant, they are not clearly stated, or they call for
the witness to testify as to facts he or she does not know firsthand (e.g. “hearsay”). After the
party or lawyer who introduced the witness has finished his or her questions, the witness usually then submits to questions by the opposing side. This process is what is known as “crossexamination.” Cross-examination is considered to be the best method for testing the
credibility of a witness. The right to cross-examine witnesses is specifically provided in many
state arbitration statutes (UAA Sect. 5) and, though not expressly mentioned in the FAA, is
nevertheless considered to be an essential element of a fair hearing. In practice, the party that
presented the witness is usually permitted to ask further questions after the cross-examination
(i.e. “re-direct examination”), but the extent of any re-direct or re-cross-examination is within
the discretion of the arbitrators.
71
72
168
IBA Rules Art. 8(2).
IBA Rules Art. 9(3) and ICC Rules Art. 20(7).
In sports arbitration, this is very common to reach the speed required for resolution.
DUE PROCESS RELATED TO FACTS AND EVIDENCE
6.8.7 Timing
In arbitration the parties, their witnesses, and any experts are assumed to adjust their
time schedules to that of the proceedings. The same applies to arbitrators as well.
Effective management of the proceedings often requires agreement on a time schedule
for the submissions, pleadings, evidentiary hearings, and other measures that may be
necessary to accomplish the mission.73
The time schedule should allow a reasonable opportunity for parties to cause
the witnesses to appear and to give them sufficient advance notice. If a witness is
prevented from giving testimony, this does not amount to violation of due process if a
reasonable opportunity for this was given by the panel. However, modern communications in combination with written witness statements make it always possible for the
panel to consider a person’s testimony although the person is not able to be physically
present.
6.8.8 Compensation for Witnesses
Witnesses usually have the right to be compensated for their work and time lost. The
specifics of such a right may depend on lex arbitri or other procedural rules. If a witness has been appointed by his employer, the compensation may be a part of the remuneration paid under the employment relationship. In practice, these issues are usually
settled in advance between the parties and the witness, but they may become problematic in the event of a reluctant witness being compelled to testify or demanding unreasonable fees for doing so.
6.9 EXPERTS
The purpose of hearing from experts is to elucidate issues of a technical, legal, medical, biological, or other discipline of some sophistication to better understand the relevant facts and their significance. Expert testimony does not in general relate to the
direct reconstruction of past facts although it may offer explanations and establish
causes and effects, but it may be used for pure fact-finding or fact-establishing purposes. In most cases, technical experts are looked to for establishing compatibility with
a standard or specification (or a deviation therefrom) and elucidating underlying reasons for this to be true.74
UNCITRAL Model Law Article 26 provides:
(1) Unless otherwise agreed by the parties, the arbitral tribunal
(a) may appoint one or more experts to report to it on specific issues to be
determined by the arbitral tribunal;
73
74
ICC Rules Art. 18(4).
Arbitration Act 1996 of England § 37 (see Appendices, p. 270).
EXPERTS
169
(b) may require a party to give the expert any relevant information or to
produce, or to provide access to, any relevant documents, goods or other
property for his inspection.
(2) Unless otherwise agreed by the parties, if a party so requests or if the arbitral
tribunal considers it necessary, the expert shall, after delivery of his written or
oral report, participate in a hearing where the parties have the opportunity to put
questions to him and to present expert witnesses in order to testify on the points
at issue.
Experts are most often party-appointed. An expert’s role in arbitral hearings is very
close to that of a witness75 except experts are expected to submit a report in writing.
IBA Rules Article 5(2) provides that the Expert Report should contain at least the
following:
(a) the full name and address of the Party-Appointed Expert, his or her present and
past relationship (if any) with any of the Parties, and a description of his or her
background, qualifications, training and experience;
(b) a statement of the facts on which he or she is basing his or her expert opinions
and conclusions;
(c) his or her expert opinions and conclusions, including a description of the method,
evidence and information used in arriving at the conclusions;
(d) an affirmation of the truth of the Expert Report; and
(e) the signature of the Party-Appointed Expert and its date and place.
Experience in legal practice has proved the statements, conclusions, and opinions of
experts vary and tend to favor the position of the party who appointed them. There
are many natural reasons for this, but at the same time, contradictory or inconsistent
statements create a need to strike a balance. Clarity may be obtained by organizing a
“tête-a-tête” conference between the experts.
IBA Rules Article 5(3) provide:
The Arbitral Tribunal in its discretion may order that any Party-Appointed Experts
who have submitted Expert Reports on the same or related issues meet and confer
on such issues. At such meeting, the Party-Appointed Experts shall attempt to reach
agreement on those issues as to which they had differences of opinion in their
Expert Reports, and they shall record in writing any such issues on which they
reach agreement.
Such a situation may call for a nomination of an expert by the panel itself:
The Arbitral Tribunal, after having consulted with the Parties, may appoint one or
more independent Tribunal-Appointed Experts to report to it on specific issues designated by the Arbitral Tribunal. The Arbitral Tribunal shall establish the terms of
reference for any Tribunal-Appointed Expert report after having consulted with the
Parties. A copy of the final terms of reference shall be sent by the Arbitral Tribunal
to the Parties.76
75
76
170
IBA Rules Art. 5 and 6.
Id. Art. 6(1). See also Swiss Rules Art. 27:
DUE PROCESS RELATED TO FACTS AND EVIDENCE
An exchange of opinions between a Party-Appointed Expert and a TribunalAppointed Expert may also be organized. IBA Rules Article 6(5) provides:
The Arbitral Tribunal shall send a copy of such Expert Report to the Parties. The
Parties may examine any document that the Tribunal-Appointed Expert has examined
and any correspondence between the Arbitral Tribunal and the Tribunal-Appointed
Expert. Within the time ordered by the Arbitral Tribunal, any Party shall have the
opportunity to respond to the report in a submission by the Party or through an Expert
Report by a Party-Appointed Expert. The Arbitral Tribunal shall send the submission
or Expert Report to the Tribunal-Appointed Expert and to the other Parties.
The experts should in principle be heard in person before the tribunal just like a
witness.77 A Tribunal-Appointed Expert may be questioned by a party in the same
manner as Party-Appointed Experts.78
6.10 OTHER EVIDENCE
The tribunal may order or conduct a site inspection or take action to preserve assets or
evidence.79 This may relate to property in the possession of a party or of a third party.80
AAA Rule 33 provides:
An arbitrator finding it necessary to make an inspection or investigation in connection with the arbitration shall direct the AAA to so advise the parties. The arbitrator
shall set the date and time and the AAA shall notify the parties. Any party who so
desires may be present at such an inspection or investigation. In the event that one
or all parties are not present at the inspection or investigation, the arbitrator shall
1. The arbitral tribunal, after consulting with the parties, may appoint one or more experts to
report to it, in writing, on specific issues to be determined by the tribunal. A copy of the
expert’s terms of reference, established by the arbitral tribunal, shall be communicated to the
parties.
2. The parties shall give the expert any relevant information or produce for his inspection any
relevant documents or goods that he may require of them. Any dispute between a party and
such expert as to the relevance of the required information or production shall be referred to
the arbitral tribunal for decision.
3. Upon receipt of the expert’s report, the arbitral tribunal shall communicate a copy of the
report to the parties who shall be given the opportunity to express, in writing, their
opinion on the report. A party shall be entitled to examine any document on which the expert
has relied in his report.
4. At the request of either party the expert, after delivery of the report, may be heard at a hearing where the parties shall have the opportunity to be present and to interrogate the expert. At
this hearing either party may present expert witnesses in order to testify on the points at issue.
The provisions of Article 25 shall be applicable to such proceedings.
5. The provisions of Article 9 shall apply by analogy to any expert appointed by the arbitral
tribunal.
77
78
79
80
IBA Rules Art. 5(4)–(6).
Id. Art. 6(6).
World Intellectual Property Organization (”WIPO”) Rules Art. 49 and 50 (see Appendices, p. 528).
Arbitration Act 1996 of England § 38(4) and 38(6) (see Appendices, p. 271).
OTHER EVIDENCE
171
make a verbal or written report to the parties and afford them an opportunity to
comment.
6.11 SUMMARY
Experienced litigators often say that cases are won or lost on facts. Getting the facts
right is a necessary element to getting legal protection for substantive rights. The facts
are right if they are a result of a correct procedure, where the parties present their
claims, theories, and evidence and the tribunal uses its authority to get the best possible
raw material for the award. The key is that the procedure in formulating the factual
premises be fair and efficient.
First, procedural rules have be such that the arbitral procedure is an adequate substitute to general court procedure from an access to justice perspective. The arbitral law
of evidence will have to support and allow legal protection for substantive rights to
make the (implied) waiver of access to court valid. Second, the arbitration procedure
has to be fair. Parties have to be able to present their cases and to have an opportunity
to be heard. These rights include presenting evidence and examining witnesses as well
as challenging the evidence presented by the other party.
When trying to support the parties in protecting their substantive rights in the proceedings, the arbitrators sometimes have to balance between procedural and substantive fairness. Trying to support one of the parties in protecting substantive rights might
easily make the arbitrator look partial or in fact even be partial. However, a certain care
might be necessary to balance the unequal position of the parties and to protect their
substantive rights. This dilemma can never be completely resolved as the arbitrator
will always have to balance between the two important goals.
172
DUE PROCESS RELATED TO FACTS AND EVIDENCE
Chapter 7
The Role of the Panel in the Proceedings
7.1 MANAGING THE PROCEEDINGS
The panel is in many ways in control of and responsible for the proceedings. Control
and responsibility refer to two dimensions of steering the procedure. First, there is the
question of who takes the initiative, manages the procedure, and has an active role in
the proceedings. Second, there is the question of who eventually decides on procedural
matters.
Roles in arbitration vary a lot according to who the arbitrator is and who the parties
are. Both the arbitrators and the parties might come from procedurally different cultural backgrounds and have different personalities. However, in comparison to court
procedure, it is obvious that arbitration is much more communicative in nature, with
the arbitrators not necessarily having the passive role judges might have in the many
different procedural cultures. In most cases, the arbitrators have more discretion in
organizing the procedure compared to courts, but the parties can sometimes even override the decisions of the tribunal, which does not often happen in the courts.
In managing the procedure, the key element is the equal treatment of the parties,
which is a due process requirement and part of lex proceduralia. The tribunal has to
make certain that it does not act in a way that would result in an objective impression
of bias whether or not the tribunal was actually biased. In addition, all the parties have
to be given an equal and sufficient opportunity to present their case. Finally, the tribunal should work toward a correct result.
The power of the panel to manage the proceedings may be divided into its sole
powers and powers it holds in common with the parties as follows:
(1) Power and authority in common with the parties (i.e., if the parties agree on the
issue, the arbitrators shall conduct the proceedings in accordance with the
agreement).1 This power and authority belongs sometimes completely to the panel
1
Arbitration Act 1996 of England § 34 (see Appendices, pp. 269–70).
173
(i.e., all decision making in substantive or procedural issues to the extent procedural or substantive matters are not covered by such an agreement of the parties);
ICC Rules Article 15(1) provides:
The proceedings before the Arbitral Tribunal shall be governed by these Rules and,
where these Rules are silent, by any rules which the parties or, failing them, the
Arbitral Tribunal may settle on, whether or not reference is thereby made to the
rules of procedure of a national law to be applied to the arbitration.
(2) Power and authority that belongs solely to the arbitrators (i) beyond the powers of
the parties to agree on it fully or (ii) that at least requires the panel’s consent;
(3) Power and authority that belongs to an institution or a third party under the
applicable rules (e.g., ICC Court of Arbitration);
(4) Power and authority that belongs to the parties only (e.g., amending the arbitration
agreement);2
(5) Power and authority that belongs to the courts (i.e., elements of control, support,
and enforcement);
(6) Powers that both the panel and the courts have (interim and protective measures).
Finally, in some areas covered by hard core due process neither the parties nor the
arbitrators have power to manage the proceedings in the way they want.
7.2 THE PANEL AND THE FACTS OF THE CASE
To achieve a just result in the dispute, the tribunal must establish the relevant facts.3
Prior to doing so, it needs to determine what is relevant as these two questions are
interrelated. Relevance is primarily determined by the relief sought and the theories
invoked, but this does not necessarily identify all the facts that may be relevant.
The lack or insufficiency of evidence or emerging new facts may change the theories
2
3
Id. § 35 (see Appendices, p. 270).
Tang Houzhi and Wang Shengchang report on the Chinese law in INTERNATIONAL HANDBOOK
ON COMMERCIAL ARBITRATION 39 (Supp. 11, Jan. 1990):
According to Art. 58 of the new Arbitration Law, a party may apply for setting aside an arbitration award to the intermediate People’s Court in the place where the domestic arbitration
commission is located if he can produce evidence which proves that the arbitration award
involves one of the following circumstances:
(1) there is no arbitration agreement;
(2) the matters decided in the award exceed the scope of the arbitration agreement or are
beyond the arbitral authority of the arbitration commission;
(3) the formation of the arbitral tribunal or the arbitration procedure was not in conformity
with statutory procedure;
(4) the evidence on which the award is based was forged;
(5) the other party withheld evidence sufficient to affect the impartiality of the arbitration; or
(6) while arbitrating the case, the arbitrators committed embezzlement, accepted bribes,
practiced graft or made an award that perverted the law.
174
THE ROLE OF THE PANEL IN THE PROCEEDINGS
invoked by the parties and the remedies available to them—and consequently also
change what is deemed to be relevant and what relief they pray for.
In principle, the panel:
(i) may determine with certainty that specific facts and information is (when submitted) or would be (when not yet submitted) relevant to support the relief sought or
the defense invoked;
(ii) cannot always exclude with certainty the relevance of evidence or facts tendered
by the parties or which might be available but not tendered by the parties.
Not admitting evidence may therefore be risky and even amount to a violation of
due process.
There is very little doubt that the parties are primarily responsible for establishing
the facts (i.e., for “reconstructing the past”).4 It is debatable to what extent (if at all) the
arbitral panel has a duty to participate in this exercise should the parties fail to do it
properly by not presenting all available evidence (or even refusing to do so when
requested by the adversary or ordered by the panel),5 even though there is not much
doubt as to the panel’s right to do so.6
4
CIETAC Arbitration Rules Art. 36 provides:
1. Each party shall have the burden of proving the facts relied on to support its claim,
defense or counterclaim.
2. The arbitral tribunal may specify a time period for the parties to produce evidence and
the parties shall produce evidence within the specified time period. The arbitral tribunal
may refuse to admit any evidence produced beyond the period. If a party has difficulties
to produce evidence within the specified time period, it may apply for an extension before
the expiration of the period. The arbitral tribunal shall decide whether or not to extend the
time period.
3. If a party having the burden of proof fails to produce evidence within the specified time
period, or the produced evidence is not sufficient to support its claim or counterclaim, it
shall bear the consequences thereof.
See also article 37 (1):
1. The arbitral tribunal may, on its own initiative, undertake investigations and collect
evidence as it considers necessary.
5
6
(China International Economic and Trade Arbitration Commission (CIETAC), Ethical
Rules for Arbitrators, as Effective May 1, 2005).
Christer Söderlund, A Comparative Overview of Arbitration Laws, 20 LCIA ARB. INT’L 80
(2004) writes:
The Swedish and Russian Acts do not give any specific clue as to the approach to be chosen
by the arbitrators. The tendency toward one or other alternative is certainly an outflow of the
legal background and the arbitration culture of the arbitrators involved in the specific case. In
this respect it is fair to say that, as a broad generalization, Scandinavian arbitrators tend to be
of the adversarial inclination (although in practice an orthodox approach is not pursued.)
However, a more active stance on the part of the arbitrators is certainly accommodated within
the discretion of the arbitrators to shape the proceedings as long as standards of impartiality,
equal treatment and due process are maintained.
AAA Rules 31 (see Appendices, p. 238). Dominique Hascher, Principles et Pratiques de
Procédure dans l’arbitrage Commercial International, in RECUEIL
THE PANEL AND THE FACTS OF THE CASE
DES
COURS: COLLECTED
175
Berdardini writes:
The issue is to determine whether and to what extent the arbitrator’s role is to be
conceived as limited to watching, as a neutral observer, a game played by other
subjects, the disputing parties, to then proclaim the victory of one of them when the
game is over or, rather, if the arbitrator may (or should) enter into the gamefield in
order not only to guarantee the full respect of the rules of the game but also, and
mainly, to ensure that its conviction as to the solution of the dispute be founded on
factual and legal elements which it has contributed to identify as determinant for its
decision. This, by assuming an active role in the conduct of the arbitral proceeding,
particularly in the evidence acquisition process, making sure that the same be
conducted in a fair and expeditious manner.7
Clearly the purpose of the procedure is not to be an obstacle to justified claims or a
labyrinth a party needs to go through to enforce its substantive rights. Rather, the purpose
is to make arbitral proceedings as effective a vehicle as possible to get to and enforce substantive rights. However, as already noted above, this has to be done while respecting the
procedural rights of the parties—which, of course, makes the issue more problematical.
If a party innocently misrepresents the facts, it is primarily up to his adversary to
correct or complete the picture. However, fraudulent misrepresentation (“malrepresentation”) is reproachable as a breach of the duty of good faith imposed by the arbitration
agreement. In the worst case, fraudulent misrepresentation may amount to fraud and
injustice, if not revealed. If it is in the end revealed, it may, in criminal action and the
annulment of any award already given. Thus, misrepresentation is forgivable only
when it is innocent. The duty to tell the truth and disclose the facts is even stricter when
it comes to witnesses.
The establishment of the facts is of paramount importance. As proper adjudication
of disputes indispensably requires establishing of the facts, the arbitrators have at least
a secondary duty:
(i)
(ii)
(iii)
(iv)
to establish what may be relevant;
to determine how the relevant facts will be established;
to give the necessary guidance and orders to the parties to accomplish the same; or
to take action if necessary to accomplish this on its own initiative and action.8
COURSES OF THE HAGUE ACADEMY OF INTERNATIONAL LAW 114, Tome 279 de la Collection (1999)
writes:
Le tribunal arbitral est souverain pour décider des divers actes de la procédure selon un
principe généralement admis en droit processuel, et qui trouve sa justification dans les
fonctions juridictionnelles mêmes des arbitres lors de la conduite de l’instance. Sauf accord
contraire des parties, il est acquis que l’arbitre est libre d’user des mesures d’instruction de
son choix et n’a pas à mettre en œuvre tout ce qui est demandé par une partie.
7
8
Piero Bernardini, The Role of the International Arbitrator, LIBER AMICORUM CLAUDE REYMOND
2 (2004).
Gabrielle Kaufmann-Kohler, Globalization of Arbitral Procedure, 36 VANDERBILT J. TRANSNAT’L
L. 1331 (Oct. 2003) writes:
The common-law system is often described as adversarial in that the court has a passive role
and the presentation of the evidence is left to the parties. By contrast, civil-law systems are
176
THE ROLE OF THE PANEL IN THE PROCEEDINGS
Article 24 of the Swiss Rules provides:
1. Each party shall have the burden of proving the facts relied on to support its
claim or defence.
2. The arbitral tribunal may, if it considers it appropriate, require a party to deliver
to the tribunal and to the other party, within such a period of time as the arbitral
tribunal shall decide, a summary of the documents and other evidence which that
party intends to present in support of the facts in issue set out in its Statement of
Claim or Statement of Defence.
3. At any time during the arbitral proceedings the arbitral tribunal may require the
parties to produce documents, exhibits or other evidence within such a period of
time as the tribunal shall determine.
It is always in the discretion of the panel to request further evidence or pursue
fact-finding when necessary. However, before embarking on fact-finding on its own
initiative, the panel should give the parties an opportunity to comment on the panel’s
review of the status of the evidence and the need for fact-finding (i.e., consultation).
If the parties in such a consultation unanimously object to further fact-finding by the
panel, the panel should in general not proceed on any sua sponte fact-finding mission.
Should the panel nonetheless decide to continue, the parties may de jure terminate
the mandate.9 If sufficient justification exists, the panel’s other alternative is to
resign.10
If a party or parties (as the case may be) after due consultation deliberately choose
not to bring further evidence and express this clearly or demonstrate it by conduct, this
might be deemed to be a material or procedural waiver of rights that a party is fully
entitled to even if the omission is against his interests.11 Such a choice by a party
should perhaps not be deemed to have been made without proper consultation of the
parties as, no matter how obvious it may appear to be, the omission may be based on a
false analysis of evidence, its sufficiency, and/or relevance rather than a deliberate and
conscious choice (false meaning different from that of the panel view as to the status).
Therefore, a consultation is most appropriate before any “waiver” conclusions are
made. Further, normally a party not presenting evidence should not be considered
having waived his substantive claims, although de facto the waiver of procedural right
to present one’s case might lead to losing the substantive right as well.
regarded as inquisitorial with the judge assuming an active rule in the taking of evidence,
sometimes specifying the facts upon which evidence is required, and directing the parties to
produce specific proof. However, this clear-cut divide between inquisitorial and adversarial
concepts is an oversimplification. Important differences exist within the civil-law system.
For instance, a German judge’s approach would be truly inquisitorial, while French civil
procedure is actually much closer to an adversarial system.
9
10
11
Arbitration Act 1996 of England § 23 (see Appendices, pp. 264–65).
Id. § 25(1–3) (see Appendices, pp. 265–66).
Id. § 4(4) (see Appendices, p. 257).
THE PANEL AND THE FACTS OF THE CASE
177
The active role of the tribunal is also visible in receiving the evidence. IBA Rules
Article 8(1) further provides:
The Arbitral Tribunal shall at all times have complete control over the Evidentiary
Hearing. The Arbitral Tribunal may limit or exclude any question to, answer by
or appearance of a witness (which term includes, for the purposes of this Article,
witnesses of fact and any Experts), if it considers such question, answer or appearance to be irrelevant, immaterial, burdensome, duplicative or covered by a reason
for objection set forth in Article 9.2.
The panel is in control of the evidentiary proceedings and may limit or bar evidence
from the proceedings in its discretion or based on an agreement of the parties or the
character of an instrument.12 However, as noted above, to do so may expose the award
to a challenge based on the violation of due process and the party’s right to present its
case if reasonable opportunity to do so is denied by the panel.
7.3 JURA NOVIT ARBITER AND THE “BURDEN OF EDUCATION”
The mission of arbitrators in the great majority of cases is to settle the dispute in lieu
of a court in accordance with the applicable law. This mission also defines the scope of
their authority. Only rarely do arbitrators have wider powers to settle the dispute
ex aequo et bono or according to some other standard. Their decision making is thus
tied to the applicable substantive law.13
The rules as to the “burden of education” attempt to answer how the arbitrators are
to gain the necessary expertise in the applicable material law to fulfill their mission to
resolve the dispute in accordance with it.14 An arbitrator may at the outset already have
12
13
E.g., the entire agreement or merger clauses and on demand bonds.
Tang Houzhi and Wang Shengchang, supra note 3, at 18, report on legal education requirements for domestic arbitrators:
The basic qualifications for an arbitrator in China are impartiality, justice and fairness. Under
Art. 13 of the new Arbitration Law, a Chinese arbitrator must meet one of the conditions set
forth below:
1. have been engaged in arbitration work for eight years;
2. have worked as a lawyer for eight years;
3. have served as a judge for eight years;
4. have been engaged in legal research work or legal education work and have a senior
title; or
5. have acquired knowledge of the law, have engaged in professional work in the field of
economy and trade, etc. and possessed a senior title or attained an equivalent professional
level.
14
The arbitration law allows China’s foreign-related arbitration bodies to invite foreign nationals
as their arbitrators. Foreign arbitrators are not subject to the rigid qualification requirements as
mentioned above but rather a quite flexible requirement (i.e., that they have special knowledge
and practical experience in law, economy, trade, science, technology or other professions.
Charles Jarrosson, L’expertise Juridique, LIBER AMICORUM CLAUDE REYMOND 130 (2004)
writes:
L’expertise juridique peut apparaître comme la negation de l’adage jura novit curia. En effet,
le juge connaît le droit (c’est d’ailleurs notamment pour celaqu’il a été fait juge): c’est lui
178
THE ROLE OF THE PANEL IN THE PROCEEDINGS
sufficient expertise having been educated in the law or even in the particular national
law to be applied. However, this is not always the case. The arbitrator may not be a
lawyer by education or he may have a legal education but in another legal system. How
should we measure which level of expertise in that law is sufficient? Who then bears
the burden of education: the parties or the arbitrators—or both? When the recourse to
a court as to material issues is nonexistent or very limited, an understanding of the
legal issue is of great importance to the parties, who have based their choice of arbitration on the expectation of having the disagreement settled in accordance with the
applicable law. We could say the scope of the substantive mandate is defined thereby.
The answer to the question of who bears the risk and burden of education may
depend on the laws and rules applicable to the arbitration.15 We could presume that in
general, the burden lies primarily on the parties and secondarily on the arbitrators, who
ultimately have the duty to ensure the proper substantive law is known and applied to
the dispute before them. In many cases, this is done by way of a party- or tribunalappointed expert.16 However, the responsibility of the arbitrator to manage the
proceedings as regarding to legal information is bigger than as to factual questions.
l’expert du droit. Les parties n’ont pas le devoir de prouver la règle de droit: elles se contentent de lui donner les faits et, quelles que soient les explications juridiques qu’elles avancent à
cet égard, il « peut et doit d’office examiner la situation sous tous ses aspects juridiques ». Il
garde lamaîtrise du choix des règles de droit comme celle de leur interpretation. Dès lors, il
ne peut ni ne doit avoir besoin de s’adresser à un tiers pour ce faire. Le Code franòais de
procedure civile l’affirme en deux temps: l’article 232 énonce d’abord que « Le juge peut commettre toute personne de son choix pour l’éclairer [. . .] sur une question de fait qui requiert
les lumières d’un technician », puis tire la conclusion qui s’impose à l’article 238 al. 3 en
précisant que ce dernier « ne doit jamais porter d’appréciations d’ordre juridique ». En droit
Suisse, la loi de procédure civile genevoise dispose en son article 255 que le juge peut «
s’éclairer sur une question de fait », et la loi de procedure civile vaudoise (art.220) admet
également l’expertise pour « certifier une circonstance ou un état de fait » (comp. La loi de
procédure civile fédérale qui prévoit en son article 57 l’assistance de l’expert « lorsque le juge
doit être éclairé sur des circonstances de la cause qui exigent des connaissances spéciales »).
15
Gabrielle Kaufmann-Kohler, supra note 8, at 1331:
The status of the substantive law in international arbitration is an issue on which no consensus
has yet emerged. The main question is whether the parties must prove the law in the same
fashion as they prove the facts, or whether the arbitral tribunal is free to establish and assess
the contents of the law. In court, this question only arises with respect to foreign law. In
international arbitration, it arises with respect to any law. An arbitral tribunal has no lex
fori and hence no “foreign” law. Or differently put, it has only foreign law. Whatever the
perspective, the issue is the same.
16
Id. at 1332:
In international arbitration, there appears to be no uniform practice. There may be a trend to
produce the evidence of legal experts, at least when none of the members of the arbitral tribunal is familiar with the applicable law. Beyond this trend the conceptions vary.
Gabrielle Kaufmann-Kohler, Iura Novit Arbiter—est-ce bien raisonnable? Réflections sur le
statut du droit de fond devant l’arbitre international, DE LEGEL FERENDA, RÉFLECTIONS SUR LE
DROIT DÉSIRABLE EN L’HONNEUR DU PROFESSEUR ALAIN HIRSH 142 (2004) writes:
Pour dissiper le flou, la formule suivante semble apte à répondre aux besoins, tout en intégrant
les traditions procedurals opposées qui sont en présence: les parties allèguent et établissent le
droit de fond; l’arbitre a la faculté, mais non l’obligation de faire ses propres recherches; s’il
fait usage de cette faculté, l’arbitre donne aux parties l’occasion de s’exprimer (que l’absence
JURA NOVIT ARBITER AND THE “BURDEN OF EDUCATION”
179
To apply and adopt the jura novit arbiter principle requires the panel to take an
active role in consulting the parties to meet the due process requirement of audi alteram
partem and to avoid ruling ultra petita.17
7.4 ADMINISTRATION OF REMEDIES AND CONSULTATIONS
The powers of the arbitrators to administer and grant relief are to be determined based
on a number of grounds. Primarily, the powers are defined by the mandate in abstracto
and limited to the freedom of contract: the arbitrators may not go beyond what the
parties could have agreed on to settle the dispute. The powers are not limited to what a
court could do or could have done any more than to the formalities of court proceedings.18 These powers are reflected in the jura novit arbiter powers and the mission and
the duty of arbitrators to work toward establishing the facts in accordance with the
mandate in abstracto. An international arbitration agreement as such is often supranational in its character, and as such generally is not subject to any rules other than international due process and the due process of the seat of arbitration that lies beyond the
agreement of the parties.
Secondarily, the powers of the panel are limited by the mandate in concreto (i.e., the
arbitration agreement and any underlying agreement). They define how the proceedings are to be conducted and what are the substantive remedies and the available
relief.19 The mandate in concreto is protected by due process as provided in the
Convention and, as such, within the mandate in abstracto and a part thereof. The mandate in concreto is subject to ordre public in substance and due process as to procedural issues.
Thirdly, the powers of the arbitral panel are limited by the relief sought as reflected
in the ultra petita doctrine. The possible collusion between the jura novit arbiter and
ultra petita doctrines are to be solved by consultations. In order to grant relief (i.e.,
“give justice”), the arbitral panel must know the law and establish the facts. Knowledge
d’une telle occasion donne lieu à recours ou non); si le droit normalement applicable n’est pas
établi sur un point déterminé, l’arbitre applique (sur ce point seulement) un droit proche du
droit normalement applicable ou une règle transnationale. Cette formule peut évidemment
être adaptée et précisée en fonction de l’accessibilité du droit de fond dans un arbitrage
donné. Certains me diront peut-être qu’elle reflète d’ores et déjà la pratique. C’est possible;
n’empêche que si elle est effectivement utilisée, elle est rarement exprimée en toutes letters.
Une articulation plus nette et une diffusion plus large permettront à la formule de s’ancrer
dans les esprits. Une fois établie, elle viendra completer le corps de règles transnationales du
droit de l’arbitrage.
17
18
19
180
See Model Law Decisions: Trustees of Rotoaira Forest Trust v. Attorney-General, High Court
of New Zealand, Auckland Registry (Fisher, J), 30 Nov. 1998, Original in English, unpublished.
If this is not accepted, we should ask what restraints may be imposed on these powers by the
courts or statutory law of a country.
E.g., entire agreement clauses limiting the admissibility of evidence and “sole and exclusive
remedy” clauses limiting the relief available.
THE ROLE OF THE PANEL IN THE PROCEEDINGS
is to be established in accordance with the burden of education rules and the facts in
accordance with the burden of proof rules.
The parties determine in their own right the remedy or relief they seek. The panel
has wide powers to administer remedies or grant relief in deciding interim protection.20
In contractual matters, usually no one other than the parties themselves have any interest in the outcome or remedy sought unless the decision would be in violation of ordre
public (e.g., condoning criminal or unlawful activity).21 In the event of bankruptcy or
reorganization, other interested parties may emerge. As the legal effects of the award
are limited to inter partes, there is, in general, no direct interest by third parties to
intervene or be heard. The right of third parties to intervene or participate as parties or
in any other capacity is very limited on several grounds, including confidentiality.
However, there may be a strong indirect interest by the public or by third parties. These
situations may relate to corruption, tax evasion, violations of antitrust laws, perjury,
infringement of industrial rights, industrial espionage, title to property, or trade secrets.
In such instances, the rules relating to confidentiality may be threatened, and the rules
concerning discovery, production of documents, or third party intervention may collide with the interests of the parties to the arbitral proceedings resulting in the panel
being caught in a “cross-fire.”
Although the relief sought is within the “monopoly powers” of the parties, there
may be situations that require active administration by the panel. For instance, a panel
may conclude that specific performance is not an appropriate remedy, but damages
20
Howard M. Holtzmann, Report on U.S. Arbitration Law, in INTERNATIONAL HANDBOOK
COMMERCIAL ARBITRATION 22 (Supp. 13, Sept. 1992) reports for the United States:
ON
Arbitrators have broad power to order interim measures that they consider necessary with
respect to the subject matter of the arbitration, although the federal and state arbitration statutes generally are silent on this subject. For example, all of the Rules under which the AAA
conducts commercial domestic or international arbitrations provide that arbitrators may issue
orders, inter alia, (i) to conserve goods by ordering their deposit with a third person; (ii) to
sell perishable goods; (iii) to provide due attachment of the defendant’s property to assure
that there will be a source from which damages can be paid if awarded; or (iv) to take other
measures that they consider appropriate in the circumstances of the case. If the arbitral tribunal issues an order for interim measures in the form of an interim award, a party may seek
court enforcement in the same manner as enforcement of other arbitral awards (see Chap.
V.10 below). In connection with the general subject of interim measures of relief, several
judicial decisions relate to the power of courts in international cases to order attachments of
a defendant’s property while the parties await the outcome of an arbitration. The highest court
of the State of New York has ruled that in an international case where the Convention on
the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) applied, the
court should not grant an attachment because the spirit of the Convention “precludes the
courts from acting in any capacity except to order arbitration.” (Cooper v. Ateliers de la
Motobecane, S.A., 57 N.Y. 2d. 408, Ct. of Appeals, 1982, summarized in Yearbook
Commercial Arbitration, Vol. IX (1984) pp. 482–486.) Some federal courts have reached the
same conclusion, but others have permitted judicial attachments in such cases, viewing
attachment as an aid to assuring an effective award and therefore as consistent with the New
York Convention.
21
An exception might be collusive proceedings where the parties to the dispute seek to mislead
or defraud third parties (e.g., creditors or competitors).
ADMINISTRATION OF REMEDIES AND CONSULTATIONS
181
would be available (or vice versa).22 What action, if any, should the panel take if the
claimant has sought only specific performance? If the panel awards damages sua
sponte in lieu of specific performance, would this constitute ultra petita and constitute
a ground for setting aside the award?23 In another situation, if the claim is justified per
se, but found to be premature, is the panel authorized to give a declaratory award in
lieu of the damages prayed for? If the claim for specific performance is simply rejected,
the claimant must then file a new claim in a new arbitration to seek damages. Would
this serve anybody’s interests? Perhaps the interests of the defendant, but even that
might be superficial.
Should the panel not instead present a review of the status of the proceedings (consultation or “a milestone meeting”) as to the relief sought and the remedies available,
and allow the parties to comment?24 This might be a procedural measure to be considered, in particular in complex arbitrations where the facts alleged at the initial stage of
filing the statement of claims do not necessarily fully conform to those established in
the proceedings. New facts may also have emerged in the discovery and other evidence.
The parties may well be very confused as to what is deemed to have been established
and have no reliable way to determine it. This may lead to unfounded optimism or
unnecessary pessimism with obvious consequences as to the continuing proceedings.
Changes and developments between the facts alleged and those established may or
may not reflect the legal theories on which the claims are based and relief sought.
Often modifications and adjustments need to be made. In sum, when necessary or at
least beneficial, in the interests of accomplishing its mission the arbitral tribunal may
arrange a status hearing to give the parties an opportunity to argue and comment, for
example on:
(i) the applicable procedural rules;
(ii) the status of applicable material rules and the division of the burden of education
and the issues under the material laws not clarified to the full satisfaction of the
panel;
(iii) prior to the submission of evidence, an indication what the relevant facts are to be
established in the proceedings, the means and methods to be used by the parties
to establish those in dispute, and the division of the burden of proof;
(iv) after the submission of evidence, the status of relevant facts as established and the
facts and circumstances not established to the satisfaction of the panel;
(v) after the submission of evidence and after closing of the submission thereof, the
status of the remedies and relief sought and their adequacy and accuracy in the
light of the established facts.
22
23
24
182
Arbitration Act 1996 of England § 48 (see Appendices, p. 276).
New York Convention (“the Convention”) Art. V(1)(c)).
The terms of reference in the ICC rules serve a somewhat analogical purpose: establishing the
scope of disputes and relevance of the remedies sought, then helping the parties and arbitrators
to manage the proceedings.
THE ROLE OF THE PANEL IN THE PROCEEDINGS
7.5 SUMMARY
The role of the panel is usually relatively active due to the nature of arbitration as a
dispute resolution mechanism. The panel usually has a great margin of discretion in
choosing the way the procedure will be conducted. However, the panel also has to
work towards achieving a fair and just result in the proceedings while remaining
impartial and keeping up the image of objectivity. Finally, while being active and
effectively managing the procedure, the panel has to remember to reserve to the parties
a fair opportunity to be heard.
SUMMARY
183
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Chapter 8
Fair Arbitration—Opportunity to Present
One’s Case
8.1 FAIR ARBITRATION
Fair trial is a classical concept. It can be classified as a transnational principal that all
people are entitled to a fair trial in determination of their civil rights and obligations.
Arbitration is a substitute for a court trial in state court, but there is no exception to the
application of some transnational procedural safeguards. Thus due process requirements (or lex proceduralia as named above) can also be placed under the concept of
fair arbitration.
Fair arbitration includes the idea that the process should be accessible. The question
of accessibility has been discussed in context of jurisdiction and more specifically with
regards to the arbitration agreement. The idea is that to be valid and enforceable, an
arbitration agreement has to also de facto allow if not guarantee access to arbitration.
Access is the starting point, as it means it is possible for a party to both initiate and go
through the proceedings to enforce its substantive rights in arbitration.
The core of fair arbitration is the fairness of the procedure itself, including equality
of arms (i.e., no party should be at a disadvantage vis-à-vis the other(s)), reasonable
opportunity to present one’s case, and the principle and rule of audiatur altera pars.
This means that access to arbitration is not enough, as the procedure itself has to
also be fair. The fairness of the procedure is an intrinsic value, but it also has an instrumental dimension. If the procedure is fair, substantive rights are more likely to be
enforced.
What kind of arbitration is fair then? It is clear a party has to be able to effectively
participate in the proceedings. This general idea has plenty of practical derivatives in
the way proceedings have to be conducted. Both of the parties have to have equal
opportunities to participate. It is a good question, however, in what extent this means
plain equality or actual factual equality.
In addition, it is clear that independence and impartiality of the tribunal are a part of
the fairness requirement. The meaning of these requirements in arbitration has been
discussed above.
185
8.2 EQUALITY OF ARMS AND REASONABLE OPPORTUNITY TO
PRESENT ONE’S CASE
First, the right to be heard and the opportunity to present one’s case provide for the
parties to be informed of the proceedings. Besides the formal and direct parties to the
arbitration agreement, there may be others in such a position with respect either to
the parties or the dispute that they should be heard or given an opportunity to participate
in some a capacity or at a minimum given notice such proceedings are pending. Such
an action may be compulsory or may require consent by the parties to the dispute.
The following are examples of such situations:
(i) if a contracting party files a claim against a guarantor or indemnitor for the failure
or breach of the principal debtor prior to the initiation of any proceedings against
the principal debtor (or the final decision in such proceedings initiated), the
principal debtor may have to be heard;
(ii) if a guarantor or indemnitor raises a defense or counterclaim for setoff that the
principal debtor would have been entitled to raise or claim, but such a defense or
counterclaim has not yet been raised by the debtor or decided by any court or
arbitral tribunal, the principal debtor may have to be heard;
(iii) if a debtor raises defenses or counterclaims against an assignee of rights, which
defenses or counterclaims relate to the assignor’s failures or breaches under the
assigned agreement prior to the effective date of the assignment or thereafter,
the assignor may have to be heard;1
1
UNIDROIT Art. 9.1.13:
(1) The obligor may assert against the assignee all defences that the obligor could assert
against the assignor.
(2) The obligor may exercise against the assignee any right of set-off available to the obligor
against the assignor up to the time notice of assignment was received.
and UNIDROIT Art. 9.3.5:
(1) The other party may discharge the assignor.
(2) The other party may also retain the assignor as an obligor in case the assignee does not
perform properly.
(3) Otherwise the assignor and the assignee are jointly and severally liable.
(International Institute for the Unification of Private Law (UNIDROIT) Principles of
International Commercial Contracts 2004, Rome 2004).
Argentina Act Art. 749:
1. All arbitral proceedings shall be held in the presence of a secretary who is to be a person
having full legal capacity and exercise of his civil rights and qualified for this position.
2. He shall be appointed by the parties or by the judge as appropriate, unless under the
terms of reference his appointment has been entrusted to the arbitrators. He shall be sworn in
or give promise of faithful and proper fulfilment of his functions before the arbitral
tribunal.
(Argentinian National Code of Civil and Commercial Procedure Law 17.454 of September 19
1967, as reformed by Law 22.434 of March 16 1981, text consolidated according to Decree
1.042 of 1981, as reported in JAN PAULSSON (ED), INTERNATIONAL HANDBOOK ON COMMERCIAL
ARBITRATION, (Kluwer Law International 1984 Last updated: January 1985 Supplement No. 3)
pp. 3–7.).
186
FAIR ARBITRATION—OPPORTUNITY TO PRESENT ONE’S CASE
(iv) if a party to the arbitration agreement and pending arbitration proceedings is
declared bankrupt, put under a reorganization, or becomes a party in any other
such composition with its creditors or is split into two or several new companies,
the trustees or new corporate or administrative bodies may have to be heard or
they may replace the original party.
Fair arbitration also sets standards on the way parties should be able to participate.
The basic rule is the requirement of equality and full opportunity to participate.
As Article 18 of UNCITRAL Model Law on international arbitrations states:
The parties shall be treated with equality and each party shall be given a full opportunity of presenting his case.2
This provision has been called the “Magna Carta of arbitral procedure.”3 It means
inter alia:
1) right to all information in submissions; proper notice of the initiation of the proceedings must be given. Proper notice implies reasonable time to prepare the case
and full disclosure of the parties and the claims made and reference to the rules
applicable, if any;4
2
3
UNCITRAL Model Law on International Commercial Arbitration 1985 (with amendments as
adopted in 2006).
Peter Binder, An International Comparison of the UNCITRAL Model Law on International
Commercial Arbitration, in INTERNATIONAL COMMERCIAL ARBITRATION IN UNCITRAL MODEL LAW
JURISDICTIONS 124–25: (1st ed. 2000):
A violation of one of the above-mentioned principles will enable an award to be set aside
under Article 34(2)(a)(ii) or (iv). According to these provisions, an arbitral award may either
be set aside if “the party making the application was . . . unable to present his case” (which
refers to the second alternative in Article 18), or the court may set aside the award because
the composition of the arbitral tribunal is not in accordance with the parties’ agreement or is
“in conflict with a provision of this Law from which the parties cannot derogate,” (which
refers to the first case in Article 18—that of party equality). Although it is to be expected
that the above-described fundamental principles belong to every State’s constitution or other
fundamental law, a restatement of these principles for arbitration in the Model Law does no
harm. Given that these principles apply for the entire Model Law, their placement in the first
Chapter of the Model Law, “General Provisions,” would perhaps have been more appropriate
in order to avoid possible confusion.
4
Model Law Decisions: Guandong Overseas Shenzhen Co. Ltd. v. Yao Shun Group International
Ltd., High Court of the Hong Kong Special Administrative Region, Court of First Instance
(Findlay, J.) 16 February 1998, published in English: 13(3) International Arbitration Report
H-1 (Mar. 1998):
A court may set aside an award where a party has been unable to present its case on the merits
at the arbitration hearing. There was sufficient evidence of procedural irregularity to justify
setting award aside where the tribunal’s award was issued on the same day as the party
submitted its case on the merits.
Howard M. Holtzmann, Report on U.S. Arbitration Law, in INTERNATIONAL HANDBOOK
COMMERCIAL ARBITRATION 23 (Supp. 13, Sept. 1992):
ON
The FAA does not address the subject of the failure of a party to the arbitration to attend after
due notice, but it is generally recognized that if the party has received sufficient and timely
EQUALITY OF ARMS AND REASONABLE OPPORTUNITY TO PRESENT ONE’S CASE
187
2) full and simultaneous access with other parties and the panel to all communications,
pleadings, arguments, and testimony;
3) right to be present at all physical hearings and at hearings via Internet or by means
of tele- or video conferencing;
4) full access to all written documents, evidence, and reports submitted in the proceedings by the parties, witnesses, experts, or other third parties without undue
delay;
5) right to submit claims and argue in support of them, to raise material and procedural defenses and objections, and to bring new claims and raise new defenses;5
6) right to submit relevant documentary evidence in either defense or support of
claims;
7) right to cross-examine witnesses and experts and other parties heard in the proceedings (including reasonable time to prepare);
8) right to comment on any and all statements made, comments given, and communications and a reasonable time to elaborate on an answer to any of them;6
9) right to bring further evidence and testimony as may be necessary to fully elucidate and defend the party’s position should new facts emerge or new claims be
made;7
notice of the time and place of the arbitration hearing, but nevertheless fails to be present, the
arbitrator may proceed with the hearing in the party’s absence. Most state statutes contain
express provisions on default. The UAA, for example, states that “the arbitrators may hear
and determine the controversy upon the evidence produced notwithstanding the failure of a
party duly notified to appear” (Sect. 5).
5
6
7
Swiss Rules Art. 20 (see Appendices, pp. 465–66).
See Model Law Decisions: Paklito Investments Ltd. v. Klockner East Asia Ltd., High Court of
Hong Kong, 15 January 1993, published in English: [1993] 2 HKLR 39; ICCA Yearbook,
1994 Hong Kong No. 6. “The enforcement of award may be refused where party has not been
given a fair opportunity to present its case.” The Helsinki Court of Appeals did just this in its
decision on 26.6.2003 (S 02/3757) when it set aside an arbitral award because of the arbitrator’s failure to give a party a reasonable opportunity to answer to a plea of prescription (10-year
statute of limitation) on which the arbitrator based his award.
The right to discovery or production of documents is, however, limited in the discretion of the
panel. Gabrielle Kaufmann-Kohler & Philippe Bärtsch, Discovery in International Arbitration:
How Much is Too Much? ZEITSCHRIFT FÜR SCHIEDSVERFAHREN 17 [German Arbitration Journal],
Part 1 (2004) write:
However, one can see two situations in which an award would run a risk of annulment or
non-enforcement for the reason that the arbitrator did not allow discovery. This is so, first, if
the parties have agreed on discovery. Under some national laws an award may be annulled
because the arbitral tribunal did not follow the procedure agreed by the parties. The same is
true with respect to non-enforcement of awards under Article V(d) New York Convention.
Second, one cannot rule out that the refusal to order production of documents may in certain
circumstances be a breach of a party’s opportunity or right to be heard. Such right includes
the right to present evidence in support of one’s case. If a party lacks documents indispensable to establish relevant facts for which it bears the burden of proof and such documents are
demonstrably within the control of its opponent, one could reasonably argue that a refusal to
grant a production request may deprive the party seeking discovery from its opportunity to be
heard.
188
FAIR ARBITRATION—OPPORTUNITY TO PRESENT ONE’S CASE
10) adequate notice of closing of the proceedings given in advance to allow the parties
to fully develop their pleadings and exhaust their testimony.8
The requirement of equality and full opportunity to participate is perhaps the most
fundamental rule of due process and ordre public. A natural comparison to the model
law is the European Human Rights Convention (ECHR) Article 6(1):
In the determination of his civil rights and obligations or of any criminal charge
against him, everyone is entitled to a fair and public hearing within a reasonable
time by an independent and impartial tribunal established by law. Judgment
shall be pronounced publicly but the press and public may be excluded from all or
part of the trial in the interests of morals, public order or national security in
a democratic society, where the interests of juveniles or the protection of the
private life of the parties so require, or to the extent strictly necessary in the opinion
of the court in special circumstances where publicity would prejudice the interests
of justice.
Some of the requirements set in Article 6(1) are irrelevant for arbitration and waived
when a party enters into an arbitration agreement, but the hard core of the opportunity
to participate is the same. It is deeply rooted in the tradition of various systems of justice.
The content of the most fundamental procedural principles is further explained in
ECHR Article 6(3) concerning criminal charges:
Everyone charged with a criminal offence has the following minimum rights:
a. to be informed promptly, in a language which he understands and in detail,
of the nature and cause of the accusation against him;
b. to have adequate time and facilities for the preparation of his defence;
c. to defend himself in person or through legal assistance of his own choosing
or, if he has not sufficient means to pay for legal assistance, to be given it free
when the interests of justice so require;
d. to examine or have examined witnesses against him and to obtain the
attendance and examination of witnesses on his behalf under the same conditions
as witnesses against him;
e. to have the free assistance of an interpreter if he cannot understand or speak
the language used in court.
Even though it is obvious that criminal matters are not resolved in international commercial arbitration, the article opens the idea of participation as a procedural principle.
8
Holtzmann, supra note 4, at 19 reports:
The FAA contains no requirements as to arbitral procedures, except for the procedural standard to be implied from the provision that an award may be set aside if the arbitrators refused
to postpone a hearing when sufficient cause was shown, or refused to hear evidence “pertinent and material” to the controversy (FAA Sect. 10). Although the opportunity for a fair
hearing is not mentioned elsewhere in the FAA, it is generally recognized to be a fundamental right which should not be denied. The parties may waive their right to a hearing, and when
this occurs, the arbitrators can decide on the basis of evidence and argument presented in
writing.
EQUALITY OF ARMS AND REASONABLE OPPORTUNITY TO PRESENT ONE’S CASE
189
The Civil Rights Covenant Article 14(3) sets relatively similar international minimum
requirements for criminal matters.9
It is of course clear that equality does not and cannot mean that rights and duties
would be identical or even similar. Hascher writes:
L’égalité des parties est en arbitrage international le principe le plus fécond parmi
les droits naturels de procédure. Dans un contexte où différentes cultures juridiques
sont en présence, l’équilibre de la justice arbitrale, qui est un sentiment particulièrement fort, se traduit sur le plan procédural par le traitement équitable des
parties.10
The very nature of arbitration as a procedure to settle disputes means that there is a
conflict between the parties and that their interests are adverse: the claimant is in principle praying for a change or declaration and the respondent is opposing it. There may
naturally be claims and counterclaims by both or all parties. There must first be a claim
and then an answer. It is an exception when the issue is already known in advance by
every party (e.g., the price of a security). There must be evidence to support the claims
and an opportunity to bring rebuttal evidence. There is no way to put the parties in an
identical procedural situation—and no need to do so, either.11 It is sufficient that a
party is given a reasonable opportunity to argue and bring evidence. However, the
actions of the tribunal might balance any relative weakness of the other party in procedural skills. The activity of the panel in managing the case is a debated theme, but to
9
3. In the determination of any criminal charge against him, everyone shall be entitled to the
following minimum guarantees, in full equality:
(a) To be informed promptly and in detail in a language which he understands of the nature
and cause of the charge against him;
(b) To have adequate time and facilities for the preparation of his defence and to communicate with counsel of his own choosing;
(c) To be tried without undue delay;
(d) To be tried in his presence, and to defend himself in person or through legal assistance of
his own choosing; to be informed, if he does not have legal assistance, of this right; and to
have legal assistance assigned to him, in any case where the interests of justice so require, and
without payment by him in any such case if he does not have sufficient means to pay for it;
(e) To examine, or have examined, the witnesses against him and to obtain the attendance and
examination of witnesses on his behalf under the same conditions as witnesses against him;
(f) To have the free assistance of an interpreter if he cannot understand or speak the language
used in court;
(g) Not to be compelled to testify against himself or to confess guilt.
10
11
International Covenant on Civil and Political Rights, Adopted and opened for signature, ratification and accession by U.N. General Assembly Resolution 2200A (XXI) of 16 Dec. 1966,
entry into force 23 Mar. 1976, in accordance with Article 49.
See Dominique Hascher, Principles et Pratiques de Procédure dans l’arbitrage Commercial
International, in RECUEIL DES COURS: COLLECTED COURSES OF THE HAGUE ACADEMY OF
INTERNATIONAL LAW 108, Tome 279 de la Collection 126 (1999).
Hascher writes, supra note 10, at 129:
L’égalité procédurale entre les parties n’exige en rien d’étendre à l’une la mesure prise à
l’égard de l’autre. L’insonomie procédurale n’a pas de sens, sinon de contrarier l’efficience
de la procédure.
190
FAIR ARBITRATION—OPPORTUNITY TO PRESENT ONE’S CASE
some extent the communicative nature of the arbitral proceedings quite naturally leads
to balancing the position of the parties.
8.3 RIGHT TO A COUNSEL OF ONE’S CHOICE
It appears to be well-established that a party should have a virtually unlimited choice
as to who represents it as its counsel in international arbitration.12
Swiss Rules, Article 3(13) provides:
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
and the Chambers; such communication must specify whether the appointment is
being made for purposes of representation or assistance.13
Also in China the choice of an “agent” is wide:
1. the parties may appear in person or may be represented by agents;
2. there are no special requirements for the representation of a party before the
arbitral tribunal in China;
3. a power of attorney is required in case a party is represented by his agent;
4. an arbitration agent is not necessarily a lawyer;
5. if the arbitration agent is a lawyer, she is not obliged to be a member of the local
bar in China or a member of the bar of her own country;
6. Chinese and foreign (lawyers and nonlawyers) may act as arbitration agents;
7. the parties may bring legal counsel to the hearing for oral pleadings.
12
Arbitration Act 1996 of England § 36 (see Appendices, p. 270). Holtzmann, supra note 4, at 23
reports:
Although the right to be represented by a lawyer is not expressly mentioned in the FAA, it is
considered to be a fundamental right. Many state arbitration statutes contain specific provisions that a party has a right to be represented by a lawyer and that this right cannot be waived
in advance (UAA, Sect. 6). Reflecting this same principle, all of the rules under which the
AAA conducts commercial domestic or international arbitration expressly provide that any
party may be represented by a lawyer.
13
Arbitration practice contains instances where counsel has in casu been denied the right to be
present unless certain misbehavior was corrected as a disciplinary measure. Nane Oganesyan
writes in Law Firms Again Admitted Before the Russian Arbitrazh Courts to Enforce Arbitral
Awards, 9 IBA ARB.& ADR NEWSLETTER 77 (International BAR Association Section on
Business Law) (Oct. 2004):
On 16 July the Russian Constitutional Court recognised as unconstitutional the provisions of
these laws in respect of the exclusive rights of advocates to appear in court and these provisions were struck out. The Constitutional Court held that the constitutional principle of equal
rights is violated by placing advocates and their associations in a privileged position with
regard to other organizations providing legal services.
RIGHT TO A COUNSEL OF ONE’S CHOICE
191
Legal assistants may help the parties but may not represent them, unless the parties
authorize them to do so with a power of attorney.14
A party being able to choose its own counsel is important in two ways. First, it
allows the party to effectively enforce its substantive and procedural rights to the extent
it decides to do so and in a manner that it wants. Second, there is an intrinsic value in
having the right to choose legal help as trust is important, and the procedure may only
be fair if a party can trust the counsel conducting it on the party’s behalf.
8.4 CONFLICT BETWEEN TIMELINESS AND OPPORTUNITY TO
PRESENT ONE’S CASE
The conflict between the right to present one’s case and the timeliness of the proceedings is probably one of the most difficult problems in many proceedings. In many cases
it is natural to assume the parties know how much time is needed to prepare their presentations in the various phases of the proceedings so as to participate efficiently.
However, in many cases one of the parties (normally the respondent) is not so eager to
get to the award in the case. There might be attempts to abuse procedural rights in
order to stall the proceedings. Even though the tribunal has to allow the parties the
opportunity to present their case so as to work toward a correct resolution, the tribunal
cannot always allow the parties to have all the time they claim necessary for preparation.
Timeliness is also one of the criteria of fair trial, and the tribunal has to control the
proceedings to guarantee it. However, if the tribunal sets strict time limits for participation or excludes certain claims, facts, or evidence after the deadline, a party may at
least claim later that it was not given a reasonable opportunity to present its case.
Expediency has at least two important dimensions. First, getting an award in a reasonable time is an important prerequisite, or better, a part of the effective enforcement
of substantive rights. One of the benefits of arbitration is definitely timeliness, and
other procedural rights cannot lead to this benefit being lost. Timeliness can be seen
not only as a part of the mandate in concreto, but also a part of the mandate in abstracto.
However, the limits set in the practice of the ECHR for state courts are probably not a
reasonable comparison for arbitral proceedings. Thus, the standard of timeliness has to
be taken from other arbitral proceedings. The paradox is that setting limits that are too
strict could put the enforceability of the award at risk. Second, the longer the process
is, the more expensive it generally becomes. This is another good reason to manage the
proceedings effectively. As the IBA Ethics state:
All arbitrators should devote such time and attention as the parties may reasonably
require having regard to all the circumstances of the case, and shall do their best to
14
192
Tang Houzhi and Wang Shengchang in INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION
26 (Supp. 11, Jan. 1990).
FAIR ARBITRATION—OPPORTUNITY TO PRESENT ONE’S CASE
conduct the arbitration in such a manner that costs do not rise to an unreasonable
proportion of the interests at stake.15
However, if the parties are unanimous, they have the right to extend the proceedings
or agree on adjournments or postponements within the limits of reason. At some stage,
if the right is abused, the panel may interfere and impose a deadline for the submission
of evidence or for the proceedings altogether. Thus, the power of the parties is not
unlimited, and the panel may, in its discretion, expedite the proceedings by appropriate
methods (or alternatively put them on hold until further notice unless this may cause
considerable inconvenience or harm to third parties).16 In whatever it does, the panel
has to make certain that the time limit for its jurisdiction is not exceeded.
Hascher writes:
L’arbitrage doit se dérouler dans des conditions de sécurité juridique et de célérité
afin d’assurer la validité de la sentence et de diminuer les coûts que les parties
doivent assumer. Les arbitres font fréquemment référence à ces exigences quand il
leur faut décider de l’opportunité de se prononcer par voie de sentence partielle ou
organiser l’administration de la preuve.17
15
IBA Rules of Ethics for International Arbitrators 7 (1987) (“IBA Rules”); Gabrielle KaufmannKohler. Qui contrôle l’arbitrage? Autonomie des parties pouvoirs des arbitres at principe
d’efficacité, in LIBER AMICORUM CLAUDE REYMOND 164 (2004) writes:
En résumé, tant la mission juridictionelle de l’arbitre que le contrat d’arbitre, compris comme
l’investiture donnant à l’arbitre les moyens de juger, peuvent justifier des pouvoirs accrus de
l’arbitre au service de l’efficacité du processus arbitral. Ces deux fondements se rejoignent
pour donner à l’arbitre un statut renforcé.
16
Gabrielle Kaufmann-Kohler, Beyond Gadgetry—Substantive New Concepts to Improve
Arbitral Efficiency, 5 J. WORLD INVESTMENT & TRADE 70 (Feb. 2004) writes:
The calendar must be realistic. “Le mieux est l’ennemi du bien.” If the calendar is too tight,
if the time limits are too short, if you have no “float time,” as construction people would say,
then it will not work. You will not keep your calendar. If there is just one delay on the critical
path, then it will disrupt the entire course, since you have covered the entire arbitration. The
calendar should be non-extendable. As a rule, no extension. Remember, the calendar is realistic, so this should not be a problem. In any event, no postponement of the hearings dates.
Obviously, force majeure is always expected. Obviously, it would have to be spelled out in
advance very clearly that there will be no extensions, and then people will take the dates
seriously and work accordingly. Efficiency can be gained not only through an all-inclusive,
firm schedule but also through a well-managed hearing. That is my second point. Hearing
management starts at the very outset of the arbitration, at the initial procedural hearing, when
you discuss how the evidentiary hearing will proceed. It then continues with a pre-hearing
conference where you clear the way, you resolve all outstanding organizational and procedural issues in advance. This will save time at the hearing, avoid last-minute surprises and
make sure that everybody prepares with the correct focus.
17
Dominique Hascher, Principles et Pratiques de Procédure dans l’arbitrage Commercial
International, in RECUEIL DES COURS: COLLECTED COURSES OF THE HAGUE ACADEMY OF
INTERNATIONAL LAW 108, Tome 279 de la Collection (1999).
CONFLICT BETWEEN TIMELINESS AND OPPORTUNITY TO PRESENT ONE’S CASE
193
Article 23 of the Swiss Rules provide:
The periods of time set by the arbitral tribunal for the communication of written
statements (including the Statement of Claim and Statement of Defence) should not
exceed forty-five days. However, the arbitral tribunal may extend the time-limits if
it concludes that an extension is justified.
Expediency relates to the duty of good faith, and it is a close relative to the duty to
mitigate under contract law.18 A party is under a duty to mitigate the time and expense
of the arbitral proceedings in good faith. The failure of this duty to mitigate should at
least be reflected in the legal costs awarded.19
Even when the parties do not try and stall the proceedings, an arbitration proceeding
is a dynamic process in that the facts established may differ from what the parties
originally contemplated and alleged. This change may occur in sequence during the
proceedings, and the facts ultimately established may differ dramatically from those
originally alleged. This means theories and claims may have to be modified on one or
both sides, and the parties may wish to offer new evidence. What if the first stage of
the proceedings already took many months to complete? Should the new evidence be
admitted? To what extent should the parties be allowed to modify their claims—and
for how long should or may such changes be permitted? Should a final deadline or
closing of the proceedings be set and declared?20
It seems inevitable that at some point of the proceedings, an exact date needs to
be set and the proceedings closed so that new claims can no longer be made or new
evidence admitted.21 It may be advisable to agree or set such a deadline at the very
20
For an example of an arbitrator’s failure to render an award expeditiously (over 10 years), see
Hong Huat Development Co. (Pte) Ltd. v. Hiap Hong & Co. (Pte) Ltd. [2000] 2 SLR 609.
Swiss Rules Art. 40(2) (see Appendices, p. 473).
ICC Rules Art. 19 (see Appendices, p. 411).
21
Japan Act § 31:
18
19
(1) Within the period of time determined by the arbitral tribunal, the claimant (which hereinafter means the party that carried out the act to commence the arbitral proceedings) shall state
the relief or remedy sought, the facts supporting its claim and the points at issue. In such case,
the claimant may submit all documentary evidence it considers to be relevant or may add a
reference to the documentary evidence or other evidence it will submit.
(2) Within the period of time determined by the arbitral tribunal, the respondent (which hereinafter means any party to the arbitral proceedings other than the claimant) shall state its
defense in respect of the particulars stated according to the provisions of the preceding paragraph. In such case, the provisions of the latter part of the same paragraph shall apply.
(3) Any party may amend or supplement its statement during the course of the arbitral proceedings. Provided, the arbitral tribunal may refuse to allow such amendment or supplementation if made in delay.
(4) The preceding three paragraphs shall not apply when otherwise agreed by the parties.
(Arbitration Law No 138 of 2003 of Japan as reported and translated into English by the Japan
Commercial Arbitration Association and by Professor Yoshimitsu Aoyama et alia). See also
ICC Rules Art. 22(1) (see Appendices, pp. 364–65). See also Dominique Hascher, La Révision
en Arbitrage International, LIBER AMICORUM CLAUDE REYMOND 127 (2004):
La notion de clôture de l’instruction revêt une grande importance puisque, sauf circonstances
exeptionnelles, aucune pièce ne devrait être communiquée au tribunal arbitral après la date
194
FAIR ARBITRATION—OPPORTUNITY TO PRESENT ONE’S CASE
initial stages of the proceedings. The parties may reach such an agreement, but in the
absence of such, it is often within the powers and authority (mandate) of the arbitrator
to set such a deadline, although not perhaps against the will of all the parties.22
Setting such a deadline helps the arbitration proceedings run expeditiously and
reduces the risks of dilatory tactics. The critical aspects of setting the deadline are:
(i) it should not violate due process in the sense of preventing a party from presenting
his case and thereby putting the enforceability of the award at risk. This can often
be avoided by (a) giving sufficient advance notice of the deadline and its legal
consequences (“threats”) and by (b) reserving the panel the right to extend the
deadline if and when the circumstances may warrant, and/or (c) by agreement of
all parties to this effect and perhaps including the panel.
The Swiss Rules have codified the same in Article 29:
1. The arbitral tribunal may inquire of the parties if they have any further proof to
offer or witnesses to be heard or submissions to make and, if there are none, it may
declare the proceedings closed.
2. The arbitral tribunal may, if it considers it necessary owing to exceptional circumstances, decide, in its own motion or upon application of a party, to reopen the
proceedings at any time before the award is made.
(ii) It should not bar or prevent the establishing of the originally alleged relevant facts
in the interests of justice (a) unless sufficient opportunity has been given to the
parties to bring evidence, but they have failed to do so for no good reason; or (b)
unless a party refuses to bring evidence or is otherwise using dilatory practices
and the deadline set is directed against the interest of such a party in breach of his
duty to present his case in good faith under the arbitration agreement; or (c) unless
in light of the claims made and the relief sought, the closing of the proceedings
does not constitute res judicata, which would bar a party or parties from bringing
other claims or seeking other relief based on the facts and evidence offered at a
later stage but not admitted. If partial or interlocutory awards are given during the
proceedings, they may have res judicata effects within the very same proceedings
at later stages.
The deadline may be set on lesser grounds and motivations to bar “subsequent”
evidence and facts if they were not originally alleged but gained relevance as a
consequence of the dynamics of the proceedings and the change of positions of
the parties in the light of the new facts.23
Finally, there may and perhaps should be separate deadlines for closing the taking
of evidence and for closing the pleadings.
de clôture fixée pour les échanges ou les débats afin de respecter l’égalité des droits entre les
parties ainsi qu’un minimum de loyauté.
22
23
Arbitration Act 1996 of England § 34(3) (see Appendices, pp. 269–70).
AAA Rules 35 and 36 (American Arbitration Association, Commercial Arbitration Rules and
Mediation Procedures (Including Procedures for Large, Complex Commercial Disputes), as
Amended and Effective on June 1, 2009) (see Appendices, p. 239).
CONFLICT BETWEEN TIMELINESS AND OPPORTUNITY TO PRESENT ONE’S CASE
195
8.5 AWARD
Both court procedures and arbitration end in a decision by the tribunal. Without such
a decision being reached, the procedure does not perform the task of providing a way
to enforce the substantive rights of the parties. However, the publicity requirements of
court procedures regarding judgments that are fundamental rights of the parties are not
applicable in arbitration.
In arbitration, the proceedings are usually terminated by an award, although some
exceptions may occur that result in there not being a final award. This may be due to
settlement or agreement of the parties or their “veto.”24 UNCITRAL Model Law
Article 32 provides:
(1) The arbitral proceedings are terminated by the final award or by an order of the
arbitral tribunal in accordance with paragraph (2) of this article.
(2) The arbitral tribunal shall issue an order for the termination of the arbitral proceedings when:
(a) the claimant withdraws his claim, unless the respondent objects thereto and
the arbitral tribunal recognizes a legitimate interest on his part in obtaining a
final settlement of the dispute;
(b) the parties agree on the termination of the proceedings;
(c) the arbitral tribunal finds that the continuation of the proceedings has for any
other reason become unnecessary or impossible.
(3) The mandate of the arbitral tribunal terminates with the termination of the arbitral proceedings, subject to the provisions of articles 33 and 34(4).
The award is given after deliberation of the tribunal. The discretion of the panel and
its deliberations belong to the exclusive powers of the arbitrators and there should be
no outside involvement or intervention in this process.25 The mandate and jurisdiction
are given to a specific panel of arbitrators, and they are the ones who have to make the
decision. Outside involvement might seriously hurt the appearance of independence
and impartiality of the tribunal. It might also confuse the relationship of evidence and
decision making in the procedure. The tribunals’s consultation with the parties may,
24
France Act Art. 1464:
Unless the parties have specifically agreed otherwise the arbitral procedure shall end:
1) upon an arbitrator’s removal, death, incapacity or loss of civil rights;
2) upon the withdrawal or challenge of an arbitrator;
3) upon expiration of the time limit for the arbitral procedure.
25
(French Code of Civil Procedure—Book IV—Arbitration, as reported in JAN PAULSSON (ED),
INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION, (Kluwer Law International 1984 Last
updated: February 1998 Supplement No. 26) pp. 26 – 12).
UNCITRAL Model Law Art. 5 (United Nations Commission on International Trade Law
(UNCITRAL) UNCITRAL Model Law on International Commercial Arbitration UN
Resolution on the UNCITRAL Model Law, Dec. 18, 2006) (see Appendices, p. 487); IBA
Rules Art. 9; Hascher, supra note 10, at 155 writes:
Le principe de collégialité que chaque arbitre ait la faculté de débattre de toute décision avec
ses collègues. Il est possible de distinguer la discussion entre arbitres d’une part, le vote
d’autre part et, enfin, la rédaction de la sentence.
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FAIR ARBITRATION—OPPORTUNITY TO PRESENT ONE’S CASE
however, be necessary or at least beneficial. Identification of the material and evidentiary issues and their characterization or classification belong to this exercise.26
The results of exercising the discretion and deliberations are often reported as
motivations to the award.27 However, it is not clear to what extent (if any) the various
decisions or awards rendered need to have motivations. Under the ICC Rules, such a
duty exists as to awards as provided in Article 25(2):
The Award shall state the reasons upon which it is based.28
There are impressive spokesmen both for and against the tribunal delineating motivations. Motivations are said to reduce the risk a party will attempt to set the award
aside, but some argue that the risk grows with the length and sophistication of the
motivations. However, the question whether motivations increase or decrease the risk
the award will be challenged should not be determinative as motivations may increase
the acceptance and understanding of the outcome. They also help the arbitrators to sum
up the case and possibly increase the quality of the decision. Also, if they reveal something that leads to the need to set the award aside, it is only good that the reason is
revealed. However, sometimes it is agreed in advance that motivations are not needed,
which is also acceptable.29
UNCITRAL Model Law Article 31 provides:
(1) The award shall be made in writing and shall be signed by the arbitrator or arbitrators. In arbitral proceedings with more than one arbitrator, the signatures of the
majority of all members of the arbitral tribunal shall suffice, provided that the
reason for any omitted signature is stated.
(2) The award shall state the reasons upon which it is based, unless the parties have
agreed that no reasons are to be given or the award is an award on agreed terms
under article 30.
(3) The award shall state its date and the place of arbitration as determined in accordance with article 20(1). The award shall be deemed to have been made at that
place.
(4) After the award is made, a copy signed by the arbitrators in accordance with
paragraph (1) of this article shall be delivered to each party.
26
27
Mattihieu De Boisséson, L’arbitre International et le Problème de la Qualification, LIBER
AMICORUM CLAUDE REYMOND 29.
France Act, supra note 24, Art. 1471 provides:
The arbitral award shall summarize the parties’ respective claims and the arguments on which
they are based.
The decision of the arbitrators shall give the reasons for which it is given.
28
29
Under ICC Rules, the award is scrutinized in the interests of the parties and to ensure quality
and enforceability. (See Art. 27 in the Appendices, p. 414.)
See Model Law Decisions: Navigation Sonamar Inc. v. Algoma Streamships Limited, Superior
Court of Quebec (Gonthier, J.) 16 April 1987, Published in French: [1987] R.J.Q. 1346.
“Reasons for an award must be appropriate, relevant, and comprehensible, but need not be
expressed in legal terms.”
AWARD
197
The award should be clear and specific so as to allow enforcement.30 Should this not
be the case, the award may need to be interpreted or explained by the panel or alternatively by a court.31
UNCITRAL Model Law provides in Article 33:
(1) Within thirty days of receipt of the award, unless another period of time has
been agreed upon by the parties:
(a) a party, with notice to the other party, may request the arbitral tribunal to
correct in the award any errors in computation, any clerical or typographical
errors or any errors of similar nature;
(b) if so agreed by the parties, a party, with notice to the other party, may
request the arbitral tribunal to give an interpretation of a specific point or part
of the award. If the arbitral tribunal considers the request to be justified, it shall
make the correction or give the interpretation within thirty days of receipt of the
request. The interpretation shall form part of the award.
(2) The arbitral tribunal may correct any error of the type referred to in paragraph
(1)(a) of this article on its own initiative within thirty days of the date of the
award.
(3) Unless otherwise agreed by the parties, a party, with notice to the other party,
may request, within thirty days of receipt of the award, the arbitral tribunal to make
an additional award as to claims presented in the arbitral proceedings but omitted
from the award. If the arbitral tribunal considers the request to be justified, it shall
make the additional award within sixty days.
(4) The arbitral tribunal may extend, if necessary, the period of time within which
it shall make a correction, interpretation or an additional award under paragraph (1)
or (3) of this article.
(5) The provisions of article 31 shall apply to a correction or interpretation of the
award or to an additional award.
In complex arbitration proceedings there may be numerous rulings, orders, decisions, and awards in sequence as opposed to a proceeding where only a single final
award is required. If the panel issues interim or partial awards, time may be gained and
costs saved, but the panel may become tied to something that it wishes to amend in
light of facts emerging later in the proceedings. The earlier award may, however, constitute res judicata and bar such a remedy. Traditionally interim awards are perhaps
30
31
ICC Rules Art. 35 (see Appendices, p. 416). See also Martin Platte, An Arbitrator’s Duty to
Render Enforceable Awards, 20 J. INT’L ARB. (June 2003).
See Section 6.7(a) Control by the Parties. Holtzmann, supra note 4, at 29 reports:
The FAA provides that, upon application of a party, the federal court in the district where the
award was made may make an order modifying or correcting the award (i) where there was a
miscalculation of figures or mistake in the description of a person or thing referred to in the
award; (ii) where the arbitrators have awarded upon a matter not submitted to them; or
(iii) where the award is imperfect in a matter of form not affecting the merits of the controversy (Sect. 11). Similar provisions are contained in many state arbitration statutes (UAA
Sect. 13). The limited circumstances in which courts are permitted to modify awards in
certain cases involving patents are discussed in Chap.II.3.a.i above.
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FAIR ARBITRATION—OPPORTUNITY TO PRESENT ONE’S CASE
best suited for determining the existence of a ground for relief or violation leaving the
amount of damages to be decided at a second stage if necessary.
The powers of arbitrators to grant relief in various stages of the proceedings and in
the final award are often broader or at least there is more flexibility than in proceedings
before courts of law. An interim or partial award should preferably be independent
from the issues remaining to be decided. Even when this is the case, as indicated above
there may be new facts emerging from various sources demonstrating that the interim
or partial award, although perhaps fully correct in light of the facts known at the time,
is dubious, erroneous, or even grossly unjust in light of new facts. The interim or partial award apparatus is thus an instrument requiring great sophistication and caution in
order not to create more problems while solving them. The emphasis should always be
on giving a final “single” award in exhaustive and expeditious proceedings. In ideal
circumstances, there is no or very little need for any other types of awards than the
final.
Different traditions exist as to the right or duty of the panel to interpret or explain
the award if a party so requests. Some legal cultures have been very hostile to this,
but a more modern approach is more common as demonstrated by the ICC Rules
Article 29(2):
Any application of a party for the correction of an error of the kind referred to in
Article 29(1), or for the interpretation of an Award, must be made to the Secretariat
within 30 days of the receipt of the Award by such party, in a number of copies as
stated in Article 3(1). After transmittal of the application to the Arbitral Tribunal,
the latter shall grant the other party a short time limit, normally not exceeding 30
days, from the receipt of the application by that party, to submit any comments
thereon. If the Arbitral Tribunal decides to correct or interpret the Award, it shall
submit its decision in draft form to the Court not later than 30 days following the
expiration of the time limit for the receipt of any comments from the other party or
within such other period as the Court may decide.
If the lack of clarity or ambiguity cannot be remedied, the award cannot be enforced,
and in the worst case, even a voluntary enforcement thereof may be problematic or
even impossible. If the parties cannot settle their conflict in the light of an ambiguous
award, the award may be set aside, in which case the original issues either partly or
wholly remain to be resolved. An ambiguous award cannot constitute a res judicata
bar to a new action.
8.6 SUMMARY
Fair arbitration is a fair trial with a twist of ADR. The concepts of fair trial and fair
hearing are deeply rooted in the legal and procedural traditions of various countries.
Despite arbitration being different, it still shares the same deep-level structures as court
procedures. Of all the ADR methods, arbitration is the closest to ordinary procedure,
so sometimes it is not even counted as an alternative method. Essential is the idea that
one or more neutral third persons resolves the dispute. That is why the parties have to
be guaranteed inter alia a right to inform the dispute resolvers properly, take part in the
SUMMARY
199
procedure effectively, and make certain the dispute resolvers are impartial. The structure
of arbitration as a dispute resolution method leads to the need for legal protection at the
deepest level being basically the same as in court procedures, and partly maybe being
even more effective to address some arbitration-specific problems.
A strong tradition of fair trial in many legal cultures makes the fair arbitration
requirements a strong set of norms. It is in part difficult to construct a transnational due
process of law in areas which are very arbitration-specific and in some cases even
technical. But leaning on the shared basic ideology of what a fair procedure in a court,
whether private or state run, should be like ought to provide good guidance even with
the most difficult problems.
Fair arbitration means that parties need to have access to the tribunal, and the procedure itself has to follow the fundamental ideas of fairness, equality of arms, reasonable opportunity to present one’s case and the principle and rule of audiatur alteram
pars. Fairness of the procedure is an intrinsic value, but it also has an instrumental
dimension. If the procedure is fair, substantive rights are more likely to be enforced.
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FAIR ARBITRATION—OPPORTUNITY TO PRESENT ONE’S CASE
Chapter 9
Due Process, Lex Proceduralia, Fair
Arbitration—Procedural Foundation of
Arbitration
9.1 THE THREE FACETS: DUE PROCESS, FAIR ARBITRATION AND
LEX PROCEDURALIA
Arbitration as a dispute resolution method is basically very similar to procedure in
State courts. In arbitration, one neutral third person or a group of neutral third persons
resolves legal disputes between parties. The key difference from court procedure is
that arbitration is private dispute resolution based on agreement of the parties. The parties have very much control over the procedure, and they can agree on many procedural questions as well.
However, arbitration is not entirely private. Arbitral awards are final and binding
determinations of parties’ rights and obligations that are widely enforceable, including
internationally. Thus, States delegate jurisdictional power to arbitral tribunals (mandate in abstracto), with this delegation of power resulting in a trade-off in the form of
quality standards applicable to arbitration. If the arbitral tribunal wants to issue an
enforceable award, the process has to meet certain quality standards.
In addition to the delegation of power argument in justification of due process
requirements, a second reason exists requiring minimum quality standards in arbitration. An arbitration agreement not only entitles the parties to initiate arbitral procedures according to the agreement and relevant laws, but normally also prevents a party
from starting a procedure in a general court. In this way, an arbitration agreement
limits access to court and thus access to justice, and arbitration as a substitute way of
access has to justify limiting a right that is constitutional in many countries.
The procedural quality standards are called due process requirements, just like the
minimum standards in ordinary court procedure. They can also be seen as derivatives
of the principle of fair arbitration and called lex proceduralia as a comparison to lex
mercatoria in international commercial law. All of these terms refer to the same phenomenon, but they might have a bit different approach or perspective.
201
Due process requirements can be seen to refer especially to all the more or less
black letter law minimum requirements in arbitration, perhaps more specifically the
international minimum requirements. The analysis focuses on the requirements explicitly relevant for enforcement, specifically using the Convention as a starting point (as
occurs in Chapter 2 of this book). We might also pay attention to the possibly applicable human rights conventions, especially the European Convention on Human Rights
(ECHR). In the analysis, we would discover that an arbitration agreement may validly
limit access to courts and the right to a court hearing may be waived. However, the
quality standards of a fair trial are still applicable indirectly unless waived, as the
States have to provide for protection of the rights guaranteed in the ECHR. So, human
right conventions and their related interpretations could be a second source for
minimum rules concerning arbitration procedure. Clear rules such as minimum
requirements can also be found in the international soft law regarding arbitration
(e.g., guidelines).
The principle of fair arbitration basically refers to the same set of norms and requirements as due process. However, a minor difference in the approach might be constructed into the terminology. Fair arbitration might be seen more as a principle
referring to quality standards in the procedure. This way, the idea of fair arbitration
would not refer to just the utter minimum limits for the procedure, but to the maximum
of fairness in the proceedings. Thus, the term would refer more to the idea that procedural standards have to be taken seriously and that ignoring the procedural standards
might lead to problems as opposed to being concerned with the exact content of the
minimum requirements. As principles, fairness requirements would penetrate basically all the decisions in the proceedings.
Lex proceduralia, on the other hand, would refer more to the legal theoretical nature
of due process requirements and fair arbitration. The international procedural requirements discussed in this book share the nature of lex mercatoria in that they are a set of
norms that floats above national jurisdictions and various systems of soft law. The
binding force of the lex proceduralia is not based on its formal authority, but rather on
its effect as an interpretive framework for other norms and the filling in of gaps in the
law, along with the more directly binding force of other legal institutions. Also, lex
proceduralia refers to the international and customary nature of the body of law in
question instead of being just a part of the national formally valid system of norms.
All three of these concepts are facets of the same phenomena: transnational law on
good procedure. They all illustrate the idea that in arbitral proceedings as well, the parties have procedural rights that have to be taken seriously, even if it might seem at first
glance that arbitral tribunals and the agreements of the parties are very independent.
A natural comparison to arbitration in many ways is also the wide field of ADR
(alternative dispute resolution). However, in arbitration it is not the parties but the
arbitrator who resolves the dispute. This means the parties need to be able to have
reasonable input into the proceedings. They also need to be able to trust the panel to be
fair and the award to be legitimate.
Procedural aspects are important for the same reasons as in ordinary procedure,
which go beyond enhancing the substantive correctness of the decision. The better the
opportunities the parties have to provide a basis for the decision are, the more
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correct the substantive outcome is likely to be. Also, a good procedure legitimizes the
result: the award. If the procedure is good, the parties are more likely to accept
the result. Finally, a fair procedure has intrinsic value, in commercial arbitration as
well. The arbitral proceedings need to fair for no other reason beyond the parties having
a right to have their disputes decided in a fair proceeding. Even a good and correct
result does not compensate for a bad and unfair procedure.
9.2 HOW TO FORMULATE A DUE PROCESS ARGUMENT
It is essential from both a practical and theoretical perspective to consider what due
process requirements mean and what kind of legal arguments they inspire. The above
analysis of three facets of due process already partly explains the models of argumentation or at least opens the discussion. How should the fundamental procedural requirements be constructed and applied as norms?
In this book, the core of procedural minimum standards was first approached by
studying the New York Convention on the Recognition and Enforcement of Foreign
Arbitration Awards (“the Convention”). The meaning of due process was seen to be
bound with the international unenforceability of the award. Later on, national legislation and different kinds of international soft law as well as human rights conventions
were used in defining the content of due process in commercial arbitration.
Application of the law in arbitration is sufficiently difficult without having to explain
how to use lex proceduralia (or norms of due process and/or fair arbitration) in argumentation. First, we have to determine the applicable law, which may be quite complicated indeed. Second, and at least theoretically more importantly, we have to deal with
different kinds of sets of soft law. Neither the national arbitration laws nor the agreements of the parties normally provide very specific rules of how to conduct the proceedings, although different sets of institutional rules, guidelines, and model laws are
available to fill in the gaps. Accordingly, the application of law in arbitral proceedings
is not very simple unless we believe the margin of discretion granted to the decision
makers is not only free of exact rules but of any normative impulses.
Lex proceduralia arguments in a way form a third layer of applicable norms. They
partly share the normative character of soft law by not being (at least directly) formally
binding, or better, formally applicable (at least when it comes to using them as principles of fair arbitration). But they also share an authoritative and institutional basis
similar to fundamental rights in national legislation. Naturally, their normative nature
has consequences on how the arguments function.
Some norms in the body of law regarding fair arbitration are very much rule-like and
thus in fact easily formulated as due process minimum requirements. For example, a
party cannot act as an arbitrator in his own case. That is an absolute rule, even if a national
arbitration law of some country would accept it. The rule is also easily definable.
However, much more often this is not the case, but principles of fair arbitration are
still relevant for deciding about the procedure and interpreting the different kinds of
norms and rules applicable. For example, whether an arbitrator is considered impartial
despite a minor business contact years before the proceedings depends very much of the
HOW TO FORMULATE A DUE PROCESS ARGUMENT
203
entire setting of the procedure. If the method of selecting the arbitrators is balanced and
there is no other objective reason to suspect partiality, these factors might have relevance
in the evaluation. Also, we might have to compare the weight of procedural fairness
against other values such as timeliness. Basically, everybody has a reasonable right to
present his case. However, when considering when it is possible to declare procedural
preclusion and deny a party the right to present new evidence, the right to present one’s
case might have to balanced against the need for a timely decision. For example, the
right to present new evidence might be more limited if a party’s substantive right is
about to lose its relevance because of the passage of time, like when a company is
about to go into bankruptcy due to a financing-related dispute.
Because of these reasons (namely the contextuality and relative importance of
fairness-based arguments), due process norms can seldom (or at least not always) be
rule-like. This is also true even if enforceability is the starting point in defining due
process criteria. Even enforceability often depends on the relative importance of the
procedural aspect in the context of the specific case, and the balancing of different
kinds of procedural principles.
This means it is difficult to define exact and rule-like limits set by international due
process requirements. Perhaps that is not even necessary, as they are not directly
enforceable anyway, but only indirectly though the incentive and duty set by the norms
that order the tribunal to give an enforceable award. However, the normative foundation of enforceability is wide including national laws, arbitral conventions, human
rights conventions, and finally the interpretative material. This “intermediate” structure also supports a certain fuzziness in the imperative structure of the norms. In addition, the relative openness of the normative foundation (i.e., opportunity to present
one’s case) leads to case-by-case interpretation and application being the key factor.
However, due process requirements would have a quite limited meaning if they
were only discussed when deciding on the enforceability of an award. The threshold of
unenforceability is relatively high, and the procedure often has to be truly terrible
before it leads to the award being unenforceable. Thus, due process and principles of
fair arbitration should always be given an interpretative function as well. The fairness
of the proceedings should be maximized (optimized) as to the limits of other criteria.
Thus the maxims of fair arbitration would be useful in interpreting the national law and
filling the normative gaps in arbitration. Also, in the principle-oriented way of understanding due process norms, the question of the applicability of human rights conventions (especially ECHR) in arbitration diminishes in relevance as compared to the
rule-oriented approach. Human rights would have relevance even if they were not
formally applicable in a direct way.
9.3 FAIRNESS OR FINALITY? CONFLICTS OF PRINCIPLES AND
GOALS
Fairness and finality could easily be set in conflict with each other. As the procedural
rights of the parties can be enforced mostly only after the proceedings by challenging
the arbitral award, enforcing procedural rights means compromising the finality of
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the award. Such a conflict has also been constructed between substantive correctness
(justness) and finality.1 It is probably fair to say that finality has been used as a rather
dominating argument in international arbitration, as of course it is one of the competitive edges of arbitration as a dispute resolution method. However, fairness should not
be seen as a threat, but rather as a potential.
The perceived conflict between fairness and finality is partly false. If approached
ex ante, fairness of the proceeding enhances also the finality of the award. At least
theoretically, fairness of the procedure legitimates the award and makes the party trust
the tribunal’s discretion and application of the law in substantive issues as well. A
party is more likely to accept a negative decision if it feels it had a proper chance to
present its case and the tribunal has been impartial. Also, a fair procedure might
enhance the possibilities of future business relations among the parties.
Of course, in commercial dispute resolution the case might often be that trying to
lengthen the procedure and challenging the award is only strategic behavior that would
not be diminished by trying to make the procedure more fair. However, if this is the
case, taking procedural rights seriously and trying to maximize fairness of the proceedings would also enhance finality, as it would be more likely that the award would not
and could not be set aside.
Increasing fairness does not mean diminishing flexibility of the proceedings as a
flexible procedure can be just as fair as an inflexible one. Flexibility does not necessarily exclude foreseeability or opportunity to be heard or to present one’s case. Also,
flexible procedures are often affordable and thus increase access to justice.
Procedural fairness might also be seen in conflict with efficiency. Does an arbitrator
need to be impartial if substantive expertise is more important might very well be the
question. Sometimes it may at first seem efficient to “forget the formalities” and focus
on the substance. However, separating the procedural from the substantive is not all
that easy, and often the quality of the procedure may reflect on the quality of the award.
In addition, the efficiency benefits achieved via a compromised procedure might be
unreal. For example, even if the arbitrator would be a recognized expert in the field in
question and thus able to give an educated opinion of the case, the possible partiality
might also make it more difficult to manage the proceedings and result in extra work
for the parties (e.g., on the evidentiary side of the case).
Costs are important to all the parties in all kinds of dispute resolution methods. Does
fairness increase costs? Possibly sometimes. In addition, increasing costs limits access
to arbitration and to justice and thus reduces the fairness of the proceedings. Just as the
above examples show, if and when conflicts between fairness on the one hand and
finality, efficiency, flexibility, efficiency, or timeliness on the other exist, they really
cannot be discussed at a general level, but should rather be dealt with case by case
when a need for balancing appears.
1
See inter alia, Sarosh Zaiwalla, Challenging Arbitral Awards: Finality is Good but Justice is
Better, J. INT’L ARB. 199 (2004).
FAIRNESS OR FINALITY? CONFLICTS OF PRINCIPLES AND GOALS
205
9.4 ACCESS TO ARBITRATION AND FAIR HEARING
With a bit of effort, due process requirements could be divided into two groups. First,
there are requirements related to the jurisdiction of the tribunal, the arbitration agreement, and the guarantee of adequate access to justice. This means that in interpreting
normative material and applying it to a case in arbitration, we have to remember that
as a usually exclusive method of dispute resolution, arbitration has to be available
(access to arbitration). Arbitration also has to be of such nature that it de facto makes
it possible for a party to enforce his substantive rights. In addition, it has to be a reasonable substitute for normally available court proceedings. As arbitration limits access to
ordinary courts, it is important the limitation be lawful. The requirements related to
arbitration agreement and jurisdiction, as well as in part the requirements related to the
composition of the tribunal, are control of the limitations of access to courts. The more
inexpensive, certain, timely, and fair the proceedings are, the better they guarantee
access to justice.
Second, there are more direct procedural requirements. The core of fair arbitration
is the fairness of the procedure itself, equality of arms, reasonable opportunity to present one’s case, and the principle and rule of audiatur altera pars. This means that
access to arbitration is not enough—the procedure itself has to be fair as well. Fairness
of the procedure has to be respected as an intrinsic value, but it also has an instrumental dimension. If the procedure is fair, substantive rights are often more likely enforced
in the procedure. Also, fairness means that a party has to be able to effectively and
equally participate in the proceedings.
Basically, fairness requirements in arbitration are very similar to those in general
court procedure, and a lot could be learned about fair arbitration by further analysis of
fair trial. The two relatively separate disciplines should be brought closer together.
However arbitration naturally sets the norms in quite a different context compared to
state courts. Yet, fair arbitration should not be seen as a poor man’s version of fair
procedure. The flexibility of arbitration should not be understood as resulting in there
being no restraints on using the margin of discretion on procedural decisions. Due
process principles should be seen as guidelines of interpretation to fill in the gaps and
direct the application of procedural norms. In this scenario, flexibility of arbitration
could result in a procedure that could actually guarantee access and fairness better than
its well-established comparison: the court procedure.
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Appendices
AAA Rules
Act 1996 of England
CIETAC Arbitration Rules
COMI Rules
FCCC Expedited Rules
IBA Ethics
IBA Guidelines
IBA Rules
ICC Rules
LCIA Rules
ILA Recommendations
Swiss Rules
UNCITRAL Model Law
WIPO Rules
American Arbitration Association, Commercial
Arbitration Rules and Mediation Procedures (Including
Procedures for Large, Complex Commercial Disputes),
as Amended and Effective on June 1, 2009
Arbitration Act 1996 of England
China International Economic and Trade Arbitration
Commission (CIETAC), Ethical Rules for Arbitrators,
as Effective on May 1, 2005
University of Helsinki Conflict Management Institute—
Rules
Central Chamber of Commerce of Finland Arbitration
Rules and Rules and Rules for Expedited Arbitration of
the Arbitration Institute of the Central Chamber of
Commerce of Finland, as Effective on June 1, 2004
IBA Rules of Ethics for International Arbitrators (1987)
IBA Guidelines on Conflicts of Interest in International
Arbitration (May 2004)
IBA Rules on Taking of Evidence in International
Commercial Arbitration
ICC Rules of Arbitration in force as from January 1,
1998 (ICC Publication No 808), as Amended January
1, 2008
London Court of International Arbitration (LCIA) Rules
ILA Resolution on Public Policy as a Bar to Enforcement
of International Awards, 2002
Swiss Rules of International Arbitration (2006)
United Nations Commission on International Trade
Law (UNCITRAL) UNCITRAL Model Law on
International Commercial Arbitration UN Resolution
on the UNCITRAL Model Law, December 18, 2006
WIPO Arbitration Rules (see, e.g., www.arbiter.wipo.int)
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AAA Rules
1
American Arbitration Association
COMMERCIAL ARBITRATION RULES AND MEDIATION
As Amended and Effective June 1, 2009
IMPORTANT NOTICE
These rules and any amendment of them shall apply in the form in effect at the time the
administrative filing requirements are met for a demand for arbitration or submission
agreement received by the AAA. To ensure that you have the most current information, see our Web Site at www.adr.org.
INTRODUCTION
Each year, many millions of business transactions take place. Occasionally, disagreements develop over these business transactions. Many of these disputes are resolved
by arbitration, the voluntary submission of a dispute to an impartial person or persons
for final and binding determination. Arbitration has proven to be an effective way to
resolve these disputes privately, promptly, and economically.
The American Arbitration Association (AAA), a not-for-profit, public service organization, offers a broad range of dispute resolution services to business executives, attorneys, individuals, trade associations, unions, management, consumers, families,
communities, and all levels of government. Services are available through AAA headquarters in New York and through offices located in major cities throughout the United
States. Hearings may be held at locations convenient for the parties and are not limited
1
© 2009 American Arbitration Association, Inc. All rights reserved. These Rules are the copyrighted property of the American Arbitration Association (AAA) and are intended to be used
in conjunction with the AAA’s administrative services. Any unauthorized use or modification
of these Rules may violate copyright laws and other applicable laws. Please contact
800.778.7879 or websitemail@adr.org for additional information.
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to cities with AAA offices. In addition, the AAA serves as a center for education
and training, issues specialized publications, and conducts research on all forms of
out-of-court dispute settlement.
STANDARD ARBITRATION CLAUSE
The parties can provide for arbitration of future disputes by inserting the following
clause into their contracts:
Any controversy or claim arising out of or relating to this contract, or the breach
thereof, shall be settled by arbitration administered by the American Arbitration
Association under its Commercial Arbitration Rules, and judgment on the award
rendered by the arbitrator(s) may be entered in any court having jurisdiction
thereof.
Arbitration of existing disputes may be accomplished by use of the following:
We, the undersigned parties, hereby agree to submit to arbitration administered by
the American Arbitration Association under its Commercial Arbitration Rules
the following controversy: (describe briefly) We further agree that the above controversy be submitted to (one) (three) arbitrator(s). We further agree that we will
faithfully observe this agreement and the rules, that we will abide by and perform
any award rendered by the arbitrator(s), and that a judgment of any court having
jurisdiction may be entered on the award.
In transactions likely to require emergency interim relief, the parties may wish to add
to their clause the following language:
The parties also agree that the AAA Optional Rules for Emergency Measures of
Protection shall apply to the proceedings.
These Optional Rules may be found below.
The services of the AAA are generally concluded with the transmittal of the award.
Although there is voluntary compliance with the majority of awards, judgment on the
award can be entered in a court having appropriate jurisdiction if necessary.
ADMINISTRATIVE FEES
The AAA charges a filing fee based on the amount of the claim or counterclaim. This
fee information, which is included with these rules, allows the parties to exercise control over their administrative fees.
The fees cover AAA administrative services; they do not cover arbitrator compensation or expenses, if any, reporting services, or any post-award charges incurred by the
parties in enforcing the award.
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MEDIATION
The parties might wish to submit their dispute to mediation prior to arbitration. In
mediation, the neutral mediator assists the parties in reaching a settlement but does not
have the authority to make a binding decision or award. Mediation is administered by
the AAA in accordance with its Commercial Mediation Procedures. There is no additional administrative fee where parties to a pending arbitration attempt to mediate their
dispute under the AAA’s auspices.
If the parties want to adopt mediation as a part of their contractual dispute settlement
procedure, they can insert the following mediation clause into their contract in conjunction with a standard arbitration provision:
If a dispute arises out of or relates to this contract, or the breach thereof, and if the
dispute cannot be settled through negotiation, the parties agree first to try in good
faith to settle the dispute by mediation administered by the American Arbitration
Association under its Commercial Mediation Procedures before resorting to arbitration, litigation, or some other dispute resolution procedure.
If the parties want to use a mediator to resolve an existing dispute, they can enter into
the following submission:
The parties hereby submit the following dispute to mediation administered
by the American Arbitration Association under its Commercial Mediation
Procedures. (The clause may also provide for the qualifications of the mediator(s),
method of payment, locale of meetings, and any other item of concern to the
parties.)
LARGE, COMPLEX CASES
Unless the parties agree otherwise, the procedures for Large, Complex Commercial
Disputes, which appear in this pamphlet, will be applied to all cases administered by
the AAA under the Commercial Arbitration Rules in which the disclosed claim or
counterclaim of any party is at least $500,000 exclusive of claimed interest, arbitration
fees and costs.
The key features of these procedures include:
• a highly qualified, trained Roster of Neutrals;
• a mandatory preliminary hearing with the arbitrators, which may be conducted
by teleconference;
• broad arbitrator authority to order and control discovery, including depositions;
• presumption that hearings will proceed on a consecutive or block basis.
AAA RULES
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COMMERCIAL MEDIATION PROCEDURES
M-1. AGREEMENT OF PARTIES
Whenever, by stipulation or in their contract, the parties have provided for mediation
or conciliation of existing or future disputes under the auspices of the American
Arbitration Association (AAA) or under these procedures, the parties and their representatives, unless agreed otherwise in writing, shall be deemed to have made these
procedural guidelines, as amended and in effect as of the date of filing of a request for
mediation, a part of their agreement and designate the AAA as the administrator of
their mediation.
The parties by mutual agreement may vary any part of these procedures including, but
not limited to, agreeing to conduct the mediation via telephone or other electronic or
technical means.
M-2. INITIATION OF MEDIATION
Any party or parties to a dispute may initiate mediation under the AAA’s auspices by
making a request for mediation to any of the AAA’s regional offices or case management centers via telephone, email, regular mail or fax. Requests for mediation may
also be filed online via WebFile at www.adr.org.
The party initiating the mediation shall simultaneously notify the other party or parties
of the request. The initiating party shall provide the following information to the AAA
and the other party or parties as applicable:
i. A copy of the mediation provision of the parties’ contract or the parties’ stipulation to mediate.
ii. The names, regular mail addresses, email addresses, and telephone numbers of
all parties to the dispute and representatives, if any, in the mediation.
iii. A brief statement of the nature of the dispute and the relief requested.
iv. Any specific qualifications the mediator should possess.
Where there is no preexisting stipulation or contract by which the parties have provided
for mediation of existing or future disputes under the auspices of the AAA, a party may
request the AAA to invite another party to participate in “mediation by voluntary
submission”. Upon receipt of such a request, the AAA will contact the other party or
parties involved in the dispute and attempt to obtain a submission to mediation.
M-3. REPRESENTATION
Subject to any applicable law, any party may be represented by persons of the party’s
choice. The names and addresses of such persons shall be communicated in writing to
all parties and to the AAA.
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M-4. APPOINTMENT OF THE MEDIATOR
Parties may search the online profiles of the AAA’s Panel of Mediators at www.aaamediation.com in an effort to agree on a mediator. If the parties have not agreed to the
appointment of a mediator and have not provided any other method of appointment,
the mediator shall be appointed in the following manner:
• Upon receipt of a request for mediation, the AAA will send to each party a list
of mediators from the AAA’s Panel of Mediators. The parties are encouraged
to agree to a mediator from the submitted list and to advise the AAA of their
agreement.
• If the parties are unable to agree upon a mediator, each party shall strike unacceptable names from the list, number the remaining names in order of preference, and return the list to the AAA. If a party does not return the list within the
time specified, all mediators on the list shall be deemed acceptable. From among
the mediators who have been mutually approved by the parties, and in accordance with the designated order of mutual preference, the AAA shall invite a
mediator to serve.
• If the parties fail to agree on any of the mediators listed, or if acceptable mediators are unable to serve, or if for any other reason the appointment cannot be
made from the submitted list, the AAA shall have the authority to make the
appointment from among other members of the Panel of Mediators without the
submission of additional lists.
M-5. MEDIATOR’S IMPARTIALITY AND DUTY TO DISCLOSE
AAA mediators are required to abide by the Model Standards of Conduct for Mediators
in effect at the time a mediator is appointed to a case. Where there is a conflict between
the Model Standards and any provision of these Mediation Procedures, these Mediation
Procedures shall govern. The Standards require mediators to (i) decline a mediation if
the mediator cannot conduct it in an impartial manner, and (ii) disclose, as soon as
practicable, all actual and potential conflicts of interest that are reasonably known to
the mediator and could reasonably be seen as raising a question about the mediator’s
impartiality.
Prior to accepting an appointment, AAA mediators are required to make a reasonable
inquiry to determine whether there are any facts that a reasonable individual would
consider likely to create a potential or actual conflict of interest for the mediator. AAA
mediators are required to disclose any circumstance likely to create a presumption of
bias or prevent a resolution of the parties’ dispute within the time-frame desired by the
parties. Upon receipt of such disclosures, the AAA shall immediately communicate
the disclosures to the parties for their comments.
The parties may, upon receiving disclosure of actual or potential conflicts of interest of
the mediator, waive such conflicts and proceed with the mediation. In the event that a
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225
party disagrees as to whether the mediator shall serve, or in the event that the mediator’s conflict of interest might reasonably be viewed as undermining the integrity of
the mediation, the mediator shall be replaced.
M-6. VACANCIES
If any mediator shall become unwilling or unable to serve, the AAA will appoint
another mediator, unless the parties agree otherwise, in accordance with section M-4.
M-7. DUTIES AND RESPONSIBILITIES OF THE MEDIATOR
• The mediator shall conduct the mediation based on the principle of
party self-determination. Self-determination is the act of coming to a
voluntary, uncoerced decision in which each party makes free and
informed choices as to process and outcome.
• The mediator is authorized to conduct separate or ex parte meetings and other
communications with the parties and/or their representatives, before, during,
and after any scheduled mediation conference. Such communications may be
conducted via telephone, in writing, via email, online, in person or otherwise.
• The parties are encouraged to exchange all documents pertinent to the relief
requested. The mediator may request the exchange of memoranda on issues,
including the underlying interests and the history of the parties’ negotiations.
Information that a party wishes to keep confidential may be sent to the mediator,
as necessary, in a separate communication with the mediator.
• The mediator does not have the authority to impose a settlement on the parties
but will attempt to help them reach a satisfactory resolution of their dispute.
Subject to the discretion of the mediator, the mediator may make oral or written
recommendations for settlement to a party privately or, if the parties agree, to all
parties jointly.
• In the event a complete settlement of all or some issues in dispute is not achieved
within the scheduled mediation session(s), the mediator may continue to communicate with the parties, for a period of time, in an ongoing effort to facilitate
a complete settlement.
• The mediator is not a legal representative of any party and has no fiduciary duty
to any party.
M-8. RESPONSIBILITIES OF THE PARTIES
The parties shall ensure that appropriate representatives of each party, having authority
to consummate a settlement, attend the mediation conference.
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AAA RULES
Prior to and during the scheduled mediation conference session(s) the parties and their
representatives shall, as appropriate to each party’s circumstances, exercise their best
efforts to prepare for and engage in a meaningful and productive mediation.
M-9. PRIVACY
Mediation sessions and related mediation communications are private proceedings.
The parties and their representatives may attend mediation sessions. Other persons
may attend only with the permission of the parties and with the consent of the mediator.
M-10. CONFIDENTIALITY
Subject to applicable law or the parties’ agreement, confidential information disclosed
to a mediator by the parties or by other participants (witnesses) in the course of the
mediation shall not be divulged by the mediator. The mediator shall maintain the confidentiality of all information obtained in the mediation, and all records, reports, or other
documents received by a mediator while serving in that capacity shall be confidential.
The mediator shall not be compelled to divulge such records or to testify in regard to
the mediation in any adversary proceeding or judicial forum.
The parties shall maintain the confidentiality of the mediation and shall not rely on, or
introduce as evidence in any arbitral, judicial, or other proceeding the following, unless
agreed to by the parties or required by applicable law:
• Views expressed or suggestions made by a party or other participant with respect
to a possible settlement of the dispute;
• Admissions made by a party or other participant in the course of the mediation
proceedings;
• Proposals made or views expressed by the mediator; or
• The fact that a party had or had not indicated willingness to accept a proposal for
settlement made by the mediator.
M-11. NO STENOGRAPHIC RECORD
There shall be no stenographic record of the mediation process.
M-12. TERMINATION OF MEDIATION
The mediation shall be terminated:
• By the execution of a settlement agreement by the parties; or
• By a written or verbal declaration of the mediator to the effect that further efforts
at mediation would not contribute to a resolution of the parties’ dispute; or
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227
• By a written or verbal declaration of all parties to the effect that the mediation
proceedings are terminated; or
• When there has been no communication between the mediator and any party or
party’s representative for 21 days following the conclusion of the mediation
conference.
M-13. EXCLUSION OF LIABILITY
Neither the AAA nor any mediator is a necessary party in judicial proceedings relating to
the mediation. Neither the AAA nor any mediator shall be liable to any party for any error,
act or omission in connection with any mediation conducted under these procedures.
M-14. INTERPRETATION AND APPLICATION OF PROCEDURES
The mediator shall interpret and apply these procedures insofar as they relate to the
mediator’s duties and responsibilities. All other procedures shall be interpreted and
applied by the AAA.
M-15. DEPOSITS
Unless otherwise directed by the mediator, the AAA will require the parties to deposit
in advance of the mediation conference such sums of money as it, in consultation with
the mediator, deems necessary to cover the costs and expenses of the mediation and
shall render an accounting to the parties and return any unexpended balance at the
conclusion of the mediation.
M-16. EXPENSES
All expenses of the mediation, including required traveling and other expenses or
charges of the mediator, shall be borne equally by the parties unless they agree otherwise. The expenses of participants for either side shall be paid by the party requesting
the attendance of such participants.
M-17. COST OF THE MEDIATION
There is no filing fee to initiate a mediation or a fee to request the AAA to invite parties
to mediate.
The cost of mediation is based on the hourly mediation rate published on the mediator’s AAA profile. This rate covers both mediator compensation and an allocated
portion for the AAA’s services. There is a four-hour minimum charge for a mediation
conference. Expenses referenced in Section M-16 may also apply.
If a matter submitted for mediation is withdrawn or cancelled or results in a settlement
after the agreement to mediate is filed but prior to the mediation conference the cost is
$250 plus any mediator time and charges incurred.
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AAA RULES
The parties will be billed equally for all costs unless they agree otherwise.
If you have questions about mediation costs or services visit our website at www.adr.
org or contact your local AAA office.
• Conference Room Rental
The costs described above do not include the use of AAA conference rooms. Conference
rooms are available on a rental basis. Please contact your local AAA office for availability and rates.
COMMERCIAL ARBITRATION RULES
R-1. AGREEMENT OF PARTIES2,3
(a) The parties shall be deemed to have made these rules a part of their arbitration
agreement whenever they have provided for arbitration by the American Arbitration
Association (hereinafter AAA) under its Commercial Arbitration Rules or for arbitration by the AAA of a domestic commercial dispute without specifying particular rules.
These rules and any amendment of them shall apply in the form in effect at the time
the administrative requirements are met for a demand for arbitration or submission
agreement received by the AAA. The parties, by written agreement, may vary the procedures set forth in these rules. After appointment of the arbitrator, such modifications
may be made only with the consent of the arbitrator.
(b) Unless the parties or the AAA determines otherwise, the Expedited Procedures
shall apply in any case in which no disclosed claim or counterclaim exceeds $75,000,
exclusive of interest and arbitration fees and costs. Parties may also agree to use these
procedures in larger cases. Unless the parties agree otherwise, these procedures will
not apply in cases involving more than two parties. The Expedited Procedures shall be
applied as described in Sections E-1 through E-10 of these rules, in addition to any
other portion of these rules that is not in conflict with the Expedited Procedures.
(c) Unless the parties agree otherwise, the Procedures for Large, Complex Commercial
Disputes shall apply to all cases in which the disclosed claim or counterclaim of any
2
3
The AAA applies the Supplementary Procedures for Consumer-Related Disputes to arbitration
clauses in agreements between individual consumers and businesses where the business has a
standardized, systematic application of arbitration clauses with customers and where the terms
and conditions of the purchase of standardized, consumable goods or services are nonnegotiable or primarily non-negotiable in most or all of its terms, conditions, features, or choices.
The product or service must be for personal or household use. The AAA will have the discretion to apply or not to apply the Supplementary Procedures and the parties will be able to bring
any disputes concerning the application or non-application to the attention of the arbitrator.
Consumers are not prohibited from seeking relief in a small claims court for disputes or claims
within the scope of its jurisdiction, even in consumer arbitration cases filed by the business.
A dispute arising out of an employer promulgated plan will be administered under the AAA’s
National Rules for the Resolution of Employment Disputes.
AAA RULES
229
party is at least $500,000, exclusive of claimed interest, arbitration fees and costs.
Parties may also agree to use the Procedures in cases involving claims or counterclaims under $500,000, or in nonmonetary cases. The Procedures for Large, Complex
Commercial Disputes shall be applied as described in Sections L-1 through L-4 of
these rules, in addition to any other portion of these rules that is not in conflict with the
Procedures for Large, Complex Commercial Disputes.
(d) All other cases shall be administered in accordance with Sections R-1 through R-54
of these rules.
R-2. AAA AND DELEGATION OF DUTIES
When parties agree to arbitrate under these rules, or when they provide for arbitration
by the AAA and an arbitration is initiated under these rules, they thereby authorize the
AAA to administer the arbitration. The authority and duties of the AAA are prescribed
in the agreement of the parties and in these rules, and may be carried out through such
of the AAA’s representatives as it may direct. The AAA may, in its discretion, assign
the administration of an arbitration to any of its offices.
R-3. NATIONAL ROSTER OF ARBITRATORS
The AAA shall establish and maintain a National Roster of Commercial Arbitrators
(“National Roster”) and shall appoint arbitrators as provided in these rules. The term
“arbitrator” in these rules refers to the arbitration panel, constituted for a particular
case, whether composed of one or more arbitrators, or to an individual arbitrator, as the
context requires.
R-4. INITIATION UNDER AN ARBITRATION PROVISION IN A
CONTRACT
(a) Arbitration under an arbitration provision in a contract shall be initiated in the
following manner:
(i) The initiating party (the “claimant”) shall, within the time period, if any,
specified in the contract(s), give to the other party (the “respondent”) written
notice of its intention to arbitrate (the “demand”), which demand shall contain
a statement setting forth the nature of the dispute, the names and addresses of
all other parties, the amount involved, if any, the remedy sought, and the hearing
locale requested.
(ii) The claimant shall file at any office of the AAA two copies of the demand and
two copies of the arbitration provisions of the contract, together with the appropriate
filing fee as provided in the schedule included with these rules.
(iii) The AAA shall confirm notice of such filing to the parties.
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AAA RULES
(b) A respondent may file an answering statement in duplicate with the AAA within
15 days after confirmation of notice of filing of the demand is sent by the AAA. The
respondent shall, at the time of any such filing, send a copy of the answering statement
to the claimant. If a counterclaim is asserted, it shall contain a statement setting forth
the nature of the counterclaim, the amount involved, if any, and the remedy sought. If
a counterclaim is made, the party making the counterclaim shall forward to the AAA
with the answering statement the appropriate fee provided in the schedule included
with these rules.
(c) If no answering statement is filed within the stated time, respondent will be deemed
to deny the claim. Failure to file an answering statement shall not operate to delay the
arbitration.
(d) When filing any statement pursuant to this section, the parties are encouraged to
provide descriptions of their claims in sufficient detail to make the circumstances of
the dispute clear to the arbitrator.
R-5. INITIATION UNDER A SUBMISSION
Parties to any existing dispute may commence an arbitration under these rules by filing
at any office of the AAA two copies of a written submission to arbitrate under these
rules, signed by the parties. It shall contain a statement of the nature of the dispute, the
names and addresses of all parties, any claims and counterclaims, the amount involved,
if any, the remedy sought, and the hearing locale requested, together with the appropriate filing fee as provided in the schedule included with these rules. Unless the parties
state otherwise in the submission, all claims and counterclaims will be deemed to be
denied by the other party.
R-6. CHANGES OF CLAIM
After filing of a claim, if either party desires to make any new or different claim or
counterclaim, it shall be made in writing and filed with the AAA. The party asserting
such a claim or counterclaim shall provide a copy to the other party, who shall have
15 days from the date of such transmission within which to file an answering statement
with the AAA. After the arbitrator is appointed, however, no new or different claim
may be submitted except with the arbitrator’s consent.
R-7. JURISDICTION
(a) The arbitrator shall have the power to rule on his or her own jurisdiction, including
any objections with respect to the existence, scope or validity of the arbitration
agreement.
(b) The arbitrator shall have the power to determine the existence or validity of a
contract of which an arbitration clause forms a part. Such an arbitration clause shall be
treated as an agreement independent of the other terms of the contract. A decision by
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the arbitrator that the contract is null and void shall not for that reason alone render
invalid the arbitration clause.
(c) A party must object to the jurisdiction of the arbitrator or to the arbitrability of a
claim or counterclaim no later than the filing of the answering statement to the
claim or counterclaim that gives rise to the objection. The arbitrator may rule on such
objections as a preliminary matter or as part of the final award.
R-8. MEDIATION
At any stage of the proceedings, the parties may agree to conduct a mediation conference under the Commercial Mediation Procedures in order to facilitate settlement. The
mediator shall not be an arbitrator appointed to the case. Where the parties to a pending
arbitration agree to mediate under the AAA’s rules, no additional administrative fee is
required to initiate the mediation.
R-9. ADMINISTRATIVE CONFERENCE
At the request of any party or upon the AAA’s own initiative, the AAA may conduct
an administrative conference, in person or by telephone, with the parties and/or their
representatives. The conference may address such issues as arbitrator selection, potential mediation of the dispute, potential exchange of information, a timetable for hearings and any other administrative matters.
R-10. FIXING OF LOCALE
The parties may mutually agree on the locale where the arbitration is to be held. If any
party requests that the hearing be held in a specific locale and the other party files no
objection thereto within 15 days after notice of the request has been sent to it by the
AAA, the locale shall be the one requested. If a party objects to the locale requested by
the other party, the AAA shall have the power to determine the locale, and its decision
shall be final and binding.
R-11. APPOINTMENT FROM NATIONAL ROSTER
(a) If the parties have not appointed an arbitrator and have not provided any other
method of appointment, the arbitrator shall be appointed in the following manner:
The AAA shall send simultaneously to each party to the dispute an identical list of
10 (unless the AAA decides that a different number is appropriate) names of persons
chosen from the National Roster. The parties are encouraged to agree to an arbitrator
from the submitted list and to advise the AAA of their agreement.
(b) If the parties are unable to agree upon an arbitrator, each party to the dispute shall
have 15 days from the transmittal date in which to strike names objected to, number
the remaining names in order of preference, and return the list to the AAA. If a party
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does not return the list within the time specified, all persons named therein shall be
deemed acceptable. From among the persons who have been approved on both lists,
and in accordance with the designated order of mutual preference, the AAA shall invite
the acceptance of an arbitrator to serve. If the parties fail to agree on any of the persons
named, or if acceptable arbitrators are unable to act, or if for any other reason the
appointment cannot be made from the submitted lists, the AAA shall have the power
to make the appointment from among other members of the National Roster without
the submission of additional lists.
(c) Unless the parties agree otherwise when there are two or more claimants or two or
more respondents, the AAA may appoint all the arbitrators.
R-12. DIRECT APPOINTMENT BY A PARTY
(a) If the agreement of the parties names an arbitrator or specifies a method of appointing an arbitrator, that designation or method shall be followed. The notice of appointment, with the name and address of the arbitrator, shall be filed with the AAA by the
appointing party. Upon the request of any appointing party, the AAA shall submit a list
of members of the National Roster from which the party may, if it so desires, make the
appointment.
(b) Where the parties have agreed that each party is to name one arbitrator, the arbitrators so named must meet the standards of Section R-17 with respect to impartiality and
independence unless the parties have specifically agreed pursuant to Section R-17(a)
that the party-appointed arbitrators are to be non-neutral and need not meet those
standards.
(c) If the agreement specifies a period of time within which an arbitrator shall be
appointed and any party fails to make the appointment within that period, the AAA
shall make the appointment.
(d) If no period of time is specified in the agreement, the AAA shall notify the party to
make the appointment. If within 15 days after such notice has been sent, an arbitrator
has not been appointed by a party, the AAA shall make the appointment.
R-13. APPOINTMENT OF CHAIRPERSON BY PARTY-APPOINTED
ARBITRATORS OR PARTIES
(a) If, pursuant to Section R-12, either the parties have directly appointed arbitrators,
or the arbitrators have been appointed by the AAA, and the parties have authorized
them to appoint a chairperson within a specified time and no appointment is made
within that time or any agreed extension, the AAA may appoint the chairperson.
(b) If no period of time is specified for appointment of the chairperson and the partyappointed arbitrators or the parties do not make the appointment within 15 days from
the date of the appointment of the last party-appointed arbitrator, the AAA may appoint
the chairperson.
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(c) If the parties have agreed that their party-appointed arbitrators shall appoint the
chairperson from the National Roster, the AAA shall furnish to the party-appointed
arbitrators, in the manner provided in Section R-11, a list selected from the National
Roster, and the appointment of the chairperson shall be made as provided in that
Section.
R-14. NATIONALITY OF ARBITRATOR
Where the parties are nationals of different countries, the AAA, at the request of any
party or on its own initiative, may appoint as arbitrator a national of a country other
than that of any of the parties. The request must be made before the time set for the
appointment of the arbitrator as agreed by the parties or set by these rules.
R-15. NUMBER OF ARBITRATORS
If the arbitration agreement does not specify the number of arbitrators, the dispute
shall be heard and determined by one arbitrator, unless the AAA, in its discretion,
directs that three arbitrators be appointed. A party may request three arbitrators in the
demand or answer, which request the AAA will consider in exercising its discretion
regarding the number of arbitrators appointed to the dispute.
R-16. DISCLOSURE
(a) Any person appointed or to be appointed as an arbitrator shall disclose to the AAA
any circumstance likely to give rise to justifiable doubt as to the arbitrator’s impartiality or independence, including any bias or any financial or personal interest in the
result of the arbitration or any past or present relationship with the parties or their representatives. Such obligation shall remain in effect throughout the arbitration.
(b) Upon receipt of such information from the arbitrator or another source, the AAA
shall communicate the information to the parties and, if it deems it appropriate to do
so, to the arbitrator and others.
(c) In order to encourage disclosure by arbitrators, disclosure of information pursuant
to this Section R-16 is not to be construed as an indication that the arbitrator considers
that the disclosed circumstance is likely to affect impartiality or independence.
R-17. DISQUALIFICATION OF ARBITRATOR
(a) Any arbitrator shall be impartial and independent and shall perform his or her
duties with diligence and in good faith, and shall be subject to disqualification for
(i) partiality or lack of independence,
(ii) inability or refusal to perform his or her duties with diligence and in good faith,
and
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(iii) any grounds for disqualification provided by applicable law. The parties may
agree in writing, however, that arbitrators directly appointed by a party pursuant to
Section R-12 shall be nonneutral, in which case such arbitrators need not be impartial or independent and shall not be subject to disqualification for partiality or lack
of independence.
(b) Upon objection of a party to the continued service of an arbitrator, or on its own
initiative, the AAA shall determine whether the arbitrator should be disqualified under
the grounds set out above, and shall inform the parties of its decision, which decision
shall be conclusive.
R-18. COMMUNICATION WITH ARBITRATOR
(a) No party and no one acting on behalf of any party shall communicate ex parte with
an arbitrator or a candidate for arbitrator concerning the arbitration, except that a party,
or someone acting on behalf of a party, may communicate ex parte with a candidate for
direct appointment pursuant to Section R-12 in order to advise the candidate of the
general nature of the controversy and of the anticipated proceedings and to discuss the
candidate’s qualifications, availability, or independence in relation to the parties or to
discuss the suitability of candidates for selection as a third arbitrator where the parties
or party-designated arbitrators are to participate in that selection.
(b) Section R-18(a) does not apply to arbitrators directly appointed by the parties who,
pursuant to Section R-17(a), the parties have agreed in writing are non-neutral. Where
the parties have so agreed under Section R-17(a), the AAA shall as an administrative
practice suggest to the parties that they agree further that Section R-18(a) should nonetheless apply prospectively.
R-19. VACANCIES
(a) If for any reason an arbitrator is unable to perform the duties of the office, the AAA
may, on proof satisfactory to it, declare the office vacant. Vacancies shall be filled in
accordance with the applicable provisions of these rules.
(b) In the event of a vacancy in a panel of neutral arbitrators after the hearings have
commenced, the remaining arbitrator or arbitrators may continue with the hearing and
determination of the controversy, unless the parties agree otherwise.
(c) In the event of the appointment of a substitute arbitrator, the panel of arbitrators
shall determine in its sole discretion whether it is necessary to repeat all or part of any
prior hearings.
R-20. PRELIMINARY HEARING
(a) At the request of any party or at the discretion of the arbitrator or the AAA, the
arbitrator may schedule as soon as practicable a preliminary hearing with the parties
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and/or their representatives. The preliminary hearing may be conducted by telephone
at the arbitrator’s discretion.
(b) During the preliminary hearing, the parties and the arbitrator should discuss the
future conduct of the case, including clarification of the issues and claims, a schedule
for the hearings and any other preliminary matters.
R-21. EXCHANGE OF INFORMATION
(a) At the request of any party or at the discretion of the arbitrator, consistent with the
expedited nature of arbitration, the arbitrator may direct
i) the production of documents and other information, and
ii) the identification of any witnesses to be called.
(b) At least five business days prior to the hearing, the parties shall exchange copies of
all exhibits they intend to submit at the hearing.
(c) The arbitrator is authorized to resolve any disputes concerning the exchange of
information.
R-22. DATE, TIME, AND PLACE OF HEARING
The arbitrator shall set the date, time, and place for each hearing. The parties shall
respond to requests for hearing dates in a timely manner, be cooperative in scheduling
the earliest practicable date, and adhere to the established hearing schedule. The AAA
shall send a notice of hearing to the parties at least 10 days in advance of the hearing
date, unless otherwise agreed by the parties.
R-23. ATTENDANCE AT HEARINGS
The arbitrator and the AAA shall maintain the privacy of the hearings unless the law
provides to the contrary. Any person having a direct interest in the arbitration is entitled
to attend hearings. The arbitrator shall otherwise have the power to require the exclusion of any witness, other than a party or other essential person, during the testimony
of any other witness. It shall be discretionary with the arbitrator to determine the propriety of the attendance of any other person other than a party and its representatives.
R-24. REPRESENTATION
Any party may be represented by counsel or other authorized representative. A party
intending to be so represented shall notify the other party and the AAA of the name
and address of the representative at least three days prior to the date set for the hearing
at which that person is first to appear. When such a representative initiates an arbitration or responds for a party, notice is deemed to have been given.
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R-25. OATHS
Before proceeding with the first hearing, each arbitrator may take an oath of office and,
if required by law, shall do so. The arbitrator may require witnesses to testify under
oath administered by any duly qualified person and, if it is required by law or requested
by any party, shall do so.
R-26. STENOGRAPHIC RECORD
Any party desiring a stenographic record shall make arrangements directly with a stenographer and shall notify the other parties of these arrangements at least three days in
advance of the hearing. The requesting party or parties shall pay the cost of the record.
If the transcript is agreed by the parties, or determined by the arbitrator to be the
official record of the proceeding, it must be provided to the arbitrator and made available to the other parties for inspection, at a date, time, and place determined by the
arbitrator.
R-27. INTERPRETERS
Any party wishing an interpreter shall make all arrangements directly with the interpreter and shall assume the costs of the service.
R-28. POSTPONEMENTS
The arbitrator may postpone any hearing upon agreement of the parties, upon request
of a party for good cause shown, or upon the arbitrator’s own initiative.
R-29. ARBITRATION IN THE ABSENCE OF A PARTY OR
REPRESENTATIVE
Unless the law provides to the contrary, the arbitration may proceed in the absence of
any party or representative who, after due notice, fails to be present or fails to obtain a
postponement. An award shall not be made solely on the default of a party. The arbitrator shall require the party who is present to submit such evidence as the arbitrator may
require for the making of an award.
R-30. CONDUCT OF PROCEEDINGS
(a) The claimant shall present evidence to support its claim. The respondent shall then
present evidence to support its defense. Witnesses for each party shall also submit to
questions from the arbitrator and the adverse party. The arbitrator has the discretion to
vary this procedure, provided that the parties are treated with equality and that each
party has the right to be heard and is given a fair opportunity to present its case.
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(b) The arbitrator, exercising his or her discretion, shall conduct the proceedings with
a view to expediting the resolution of the dispute and may direct the order of proof,
bifurcate proceedings and direct the parties to focus their presentations on issues the
decision of which could dispose of all or part of the case.
(c) The parties may agree to waive oral hearings in any case.
R-31. EVIDENCE
(a) The parties may offer such evidence as is relevant and material to the dispute and
shall produce such evidence as the arbitrator may deem necessary to an understanding
and determination of the dispute. Conformity to legal rules of evidence shall not be
necessary. All evidence shall be taken in the presence of all of the arbitrators and all of
the parties, except where any of the parties is absent, in default or has waived the right
to be present.
(b) The arbitrator shall determine the admissibility, relevance, and materiality of the
evidence offered and may exclude evidence deemed by the arbitrator to be cumulative
or irrelevant.
(c) The arbitrator shall take into account applicable principles of legal privilege, such
as those involving the confidentiality of communications between a lawyer and
client.
(d) An arbitrator or other person authorized by law to subpoena witnesses or documents may do so upon the request of any party or independently.
R-32. EVIDENCE BY AFFIDAVIT AND POST-HEARING FILING OF
DOCUMENTS OR OTHER EVIDENCE
(a) The arbitrator may receive and consider the evidence of witnesses by declaration or
affidavit, but shall give it only such weight as the arbitrator deems it entitled to after
consideration of any objection made to its admission.
(b) If the parties agree or the arbitrator directs that documents or other evidence be
submitted to the arbitrator after the hearing, the documents or other evidence shall be
filed with the AAA for transmission to the arbitrator. All parties shall be afforded an
opportunity to examine and respond to such documents or other evidence.
R-33. INSPECTION OR INVESTIGATION
An arbitrator finding it necessary to make an inspection or investigation in connection
with the arbitration shall direct the AAA to so advise the parties. The arbitrator shall
set the date and time and the AAA shall notify the parties. Any party who so desires
may be present at such an inspection or investigation. In the event that one or all parties
are not present at the inspection or investigation, the arbitrator shall make an oral or
written report to the parties and afford them an opportunity to comment.
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R-34. INTERIM MEASURES4
(a) The arbitrator may take whatever interim measures he or she deems necessary,
including injunctive relief and measures for the protection or conservation of property
and disposition of perishable goods.
(b) Such interim measures may take the form of an interim award, and the arbitrator
may require security for the costs of such measures.
(c) A request for interim measures addressed by a party to a judicial authority shall not be
deemed incompatible with the agreement to arbitrate or a waiver of the right to arbitrate.
R-35. CLOSING OF HEARING
The arbitrator shall specifically inquire of all parties whether they have any further
proofs to offer or witnesses to be heard. Upon receiving negative replies or if satisfied
that the record is complete, the arbitrator shall declare the hearing closed. If briefs are
to be filed, the hearing shall b e declared closed as of the final date set by the arbitrator
for the receipt of briefs. If documents are to be filed as provided in Section R-32 and
the date set for their receipt is later than that set for the receipt of briefs, the later date
shall be the closing date of the hearing. The time limit within which the arbitrator is
required to make the award shall commence, in the absence of other agreements by the
parties, upon the closing of the hearing.
R-36. REOPENING OF HEARING
The hearing may be reopened on the arbitrator’s initiative, or upon application of a
party, at any time before the award is made. If reopening the hearing would prevent the
making of the award within the specific time agreed on by the parties in the contract(s)
out of which the controversy has arisen, the matter may not be reopened unless the
parties agree on an extension of time. When no specific date is fixed in the contract,
the arbitrator may reopen the hearing and shall have 30 days from the closing of the
reopened hearing within which to make an award.
R-37. WAIVER OF RULES
Any party who proceeds with the arbitration after knowledge that any provision or
requirement of these rules has not been complied with and who fails to state an objection in writing shall be deemed to have waived the right to object.
R-38. EXTENSIONS OF TIME
The parties may modify any period of time by mutual agreement. The AAA or the
arbitrator may for good cause extend any period of time established by these
4
The Optional Rules may be found below
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rules, except the time for making the award. The AAA shall notify the parties of any
extension.
R-39. SERVING OF NOTICE
(a) Any papers, notices, or process necessary or proper for the initiation or continuation of an arbitration under these rules, for any court action in connection therewith, or
for the entry of judgment on any award made under these rules may be served on a
party by mail addressed to the party, or its representative at the last known address or
by personal service, in or outside the state where the arbitration is to be held, provided
that reasonable opportunity to be heard with regard to the dispute is or has been granted
to the party.
(b) The AAA, the arbitrator and the parties may also use overnight delivery or electronic facsimile transmission (fax), to give the notices required by these rules. Where
all parties and the arbitrator agree, notices may be transmitted by electronic mail
(E-mail), or other methods of communication.
(c) Unless otherwise instructed by the AAA or by the arbitrator, any documents
submitted by any party to the AAA or to the arbitrator shall simultaneously be provided to the other party or parties to the arbitration.
R-40. MAJORITY DECISION
When the panel consists of more than one arbitrator, unless required by law or by the
arbitration agreement, a majority of the arbitrators must make all decisions.
R-41. TIME OF AWARD
The award shall be made promptly by the arbitrator and, unless otherwise agreed by
the parties or specified by law, no later than 30 days from the date of closing the hearing, or, if oral hearings have been waived, from the date of the AAA’s transmittal of
the final statements and proofs to the arbitrator.
R-42. FORM OF AWARD
(a) Any award shall be in writing and signed by a majority of the arbitrators. It shall be
executed in the manner required by law.
(b) The arbitrator need not render a reasoned award unless the parties request such an
award in writing prior to appointment of the arbitrator or unless the arbitrator determines that a reasoned award is appropriate.
R-43. SCOPE OF AWARD
(a) The arbitrator may grant any remedy or relief that the arbitrator deems just and
equitable and within the scope of the agreement of the parties, including, but not limited to, specific performance of a contract.
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(b) In addition to a final award, the arbitrator may make other decisions, including
interim, interlocutory, or partial rulings, orders, and awards. In any interim, interlocutory, or partial award, the arbitrator may assess and apportion the fees, expenses, and
compensation related to such award as the arbitrator determines is appropriate.
(c) In the final award, the arbitrator shall assess the fees, expenses, and compensation
provided in Sections R-49, R-50, and R-51. The arbitrator may apportion such fees,
expenses, and compensation among the parties in such amounts as the arbitrator determines is appropriate.
(d) The award of the arbitrator(s) may include:
(i) interest at such rate and from such date as the arbitrator(s) may deem appropriate; and
(ii) an award of attorneys’ fees if all parties have requested such an award or it is
authorized by law or their arbitration agreement.
R-44. AWARD UPON SETTLEMENT
If the parties settle their dispute during the course of the arbitration and if the parties
so request, the arbitrator may set forth the terms of the settlement in a “consent award.”
A consent award must include an allocation of arbitration costs, including administrative fees and expenses as well as arbitrator fees and expenses.
R-45. DELIVERY OF AWARD TO PARTIES
Parties shall accept as notice and delivery of the award the placing of the award or a
true copy thereof in the mail addressed to the parties or their representatives at the last
known addresses, personal or electronic service of the award, or the filing of the award
in any other manner that is permitted by law.
R-46. MODIFICATION OF AWARD
Within 20 days after the transmittal of an award, any party, upon notice to the other
parties, may request the arbitrator, through the AAA, to correct any clerical, typographical, or computational errors in the award. The arbitrator is not empowered to
redetermine the merits of any claim already decided. The other parties shall be given
10 days to respond to the request. The arbitrator shall dispose of the request within 20
days after transmittal by the AAA to the arbitrator of the request and any response
thereto.
R-47. RELEASE OF DOCUMENTS FOR JUDICIAL PROCEEDINGS
The AAA shall, upon the written request of a party, furnish to the party, at the party’s
expense, certified copies of any papers in the AAA’s possession that may be required
in judicial proceedings relating to the arbitration.
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R-48. APPLICATIONS TO COURT AND EXCLUSION OF LIABILITY
(a) No judicial proceeding by a party relating to the subject matter of the arbitration
shall be deemed a waiver of the party’s right to arbitrate.
(b) Neither the AAA nor any arbitrator in a proceeding under these rules is a necessary
or proper party in judicial proceedings relating to the arbitration.
(c) Parties to an arbitration under these rules shall be deemed to have consented that
judgment upon the arbitration award may be entered in any federal or state court having
jurisdiction thereof.
(d) Parties to an arbitration under these rules shall be deemed to have consented that
neither the AAA nor any arbitrator shall be liable to any party in any action for damages or injunctive relief for any act or omission in connection with any arbitration
under these rules.
R-49. ADMINISTRATIVE FEES
As a not-for-profit organization, the AAA shall prescribe an initial filing fee and a case
service fee to compensate it for the cost of providing administrative services. The fees
in effect when the fee or charge is incurred shall be applicable. The filing fee shall be
advanced by the party or parties making a claim or counterclaim, subject to final apportionment by the arbitrator in the award. The AAA may, in the event of extreme hardship on the part of any party, defer or reduce the administrative fees.
R-50. EXPENSES
The expenses of witnesses for either side shall be paid by the party producing such
witnesses. All other expenses of the arbitration, including required travel and other
expenses of the arbitrator, AAA representatives, and any witness and the cost of any
proof produced at the direct request of the arbitrator, shall be borne equally by the parties, unless they agree otherwise or unless the arbitrator in the award assesses such
expenses or any part thereof against any specified party or parties.
R-51. NEUTRAL ARBITRATOR’S COMPENSATION
(a) Arbitrators shall be compensated at a rate consistent with the arbitrator’s stated rate
of compensation.
(b) If there is disagreement concerning the terms of compensation, an appropriate rate
shall be established with the arbitrator by the AAA and confirmed to the parties.
(c) Any arrangement for the compensation of a neutral arbitrator shall be made through
the AAA and not directly between the parties and the arbitrator.
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R-52. DEPOSITS
The AAA may require the parties to deposit in advance of any hearings such sums of
money as it deems necessary to cover the expense of the arbitration, including the
arbitrator’s fee, if any, and shall render an accounting to the parties and return any
unexpended balance at the conclusion of the case.
R-53. INTERPRETATION AND APPLICATION OF RULES
The arbitrator shall interpret and apply these rules insofar as they relate to the arbitrator’s powers and duties. When there is more than one arbitrator and a difference arises
among them concerning the meaning or application of these rules, it shall be decided
by a majority vote. If that is not possible, either an arbitrator or a party may refer the
question to the AAA for final decision. All other rules shall be interpreted and applied
by the AAA.
R-54. SUSPENSION FOR NONPAYMENT
If arbitrator compensation or administrative charges have not been paid in full, the
AAA may so inform the parties in order that one of them may advance the required
payment. If such payments are not made, the arbitrator may order the suspension or
termination of the proceedings. If no arbitrator has yet been appointed, the AAA may
suspend the proceedings.
EXPEDITED PROCEDURES
E-1. LIMITATION ON EXTENSIONS
Except in extraordinary circumstances, the AAA or the arbitrator may grant a party no
more than one seven-day extension of time to respond to the demand for arbitration or
counterclaim as provided in Section R-4.
E-2. CHANGES OF CLAIM OR COUNTERCLAIM
A claim or counterclaim may be increased in amount, or a new or different claim or
counterclaim added, upon the agreement of the other party, or the consent of the arbitrator. After the arbitrator is appointed, however, no new or different claim or counterclaim may be submitted except with the arbitrator’s consent. If an increased claim or
counterclaim exceeds $75,000, the case will be administered under the regular procedures unless all parties and the arbitrator agree that the case may continue to be processed under the Expedited Procedures.
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E-3. SERVING OF NOTICES
In addition to notice provided by Section R-39(b), the parties shall also accept notice
by telephone. Telephonic notices by the AAA shall subsequently be confirmed in
writing to the parties. Should there be a failure to confirm in writing any such oral
notice, the proceeding shall nevertheless be valid if notice has, in fact, been given by
telephone.
E-4. APPOINTMENT AND QUALIFICATIONS OF ARBITRATOR
(a) The AAA shall simultaneously submit to each party an identical list of five proposed arbitrators drawn from its National Roster from which one arbitrator shall be
appointed.
(b) The parties are encouraged to agree to an arbitrator from this list and to advise the
AAA of their agreement. If the parties are unable to agree upon an arbitrator, each
party may strike two names from the list and return it to the AAA within seven days
from the date of the AAA’s mailing to the parties. If for any reason the appointment of
an arbitrator cannot be made from the list, the AAA may make the appointment from
other members of the panel without the submission of additional lists.
(c) The parties will be given notice by the AAA of the appointment of the arbitrator,
who shall be subject to disqualification for the reasons specified in Section R-17. The
parties shall notify the AAA within seven days of any objection to the arbitrator
appointed. Any such objection shall be for cause and shall be confirmed in writing to
the AAA with a copy to the other party or parties.
E-5. EXCHANGE OF EXHIBITS
At least two business days prior to the hearing, the parties shall exchange copies of all
exhibits they intend to submit at the hearing. The arbitrator shall resolve disputes concerning the exchange of exhibits.
E-6. PROCEEDINGS ON DOCUMENTS
Where no party’s claim exceeds $10,000, exclusive of interest and arbitration costs,
and other cases in which the parties agree, the dispute shall be resolved by submission
of documents, unless any party requests an oral hearing, or the arbitrator determines
that an oral hearing is necessary. The arbitrator shall establish a fair and equitable procedure for the submission of documents.
E-7. DATE, TIME, AND PLACE OF HEARING
In cases in which a hearing is to be held, the arbitrator shall set the date, time, and place
of the hearing, to be scheduled to take place within 30 days of confirmation of the arbitrator’s appointment. The AAA will notify the parties in advance of the hearing date.
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E-8. THE HEARING
(a) Generally, the hearing shall not exceed one day. Each party shall have equal opportunity to submit its proofs and complete its case. The arbitrator shall determine the
order of the hearing, and may require further submission of documents within two
days after the hearing. For good cause shown, the arbitrator may schedule additional
hearings within seven business days after the initial day of hearings.
(b) Generally, there will be no stenographic record. Any party desiring a stenographic
record may arrange for one pursuant to the provisions of Section R-26.
E-9. TIME OF AWARD
Unless otherwise agreed by the parties, the award shall be rendered not later than 14 days
from the date of the closing of the hearing or, if oral hearings have been waived, from the
date of the AAA’s transmittal of the final statements and proofs to the arbitrator.
E-10. ARBITRATOR’S COMPENSATION
Arbitrators will receive compensation at a rate to be suggested by the AAA regional
office.
PROCEDURES FOR LARGE, COMPLEX COMMERCIAL DISPUTES
L-1. ADMINISTRATIVE CONFERENCE
Prior to the dissemination of a list of potential arbitrators, the AAA shall, unless the
parties agree otherwise, conduct an administrative conference with the parties and/or
their attorneys or other representatives by conference call. The conference will take
place within 14 days after the commencement of the arbitration. In the event the parties
are unable to agree on a mutually acceptable time for the conference, the AAA may
contact the parties individually to discuss the issues contemplated herein. Such administrative conference shall be conducted for the following purposes and for such additional purposes as the parties or the AAA may deem appropriate:
(a) to obtain additional information about the nature and magnitude of the dispute
and the anticipated length of hearing and scheduling;
(b) to discuss the views of the parties about the technical and other qualifications of
the arbitrators;
(c) to obtain conflicts statements from the parties; and
(d) to consider, with the parties, whether mediation or other non-adjudicative methods of dispute resolution might be appropriate.
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L-2. ARBITRATORS
(a) Large, Complex Commercial Cases shall be heard and determined by either one or
three arbitrators, as may be agreed upon by the parties. If the parties are unable to
agree upon the number of arbitrators and a claim or counterclaim involves at least
$1,000,000, then three arbitrator(s) shall hear and determine the case. If the parties are
unable to agree on the number of arbitrators and each claim and counterclaim is less
than $1,000,000, then one arbitrator shall hear and determine the case.
(b) The AAA shall appoint arbitrator(s) as agreed by the parties. If they are unable to
agree on a method of appointment, the AAA shall appoint arbitrators from the Large,
Complex Commercial Case Panel, in the manner provided in the Regular Commercial
Arbitration Rules. Absent agreement of the parties, the arbitrator(s) shall not have
served as the mediator in the mediation phase of the instant proceeding.
L-3. PRELIMINARY HEARING
As promptly as practicable after the selection of the arbitrator(s), a preliminary hearing
shall be held among the parties and/or their attorneys or other representatives and the
arbitrator(s). Unless the parties agree otherwise, the preliminary hearing will be conducted by telephone conference call rather than in person. At the preliminary hearing
the matters to be considered shall include, without limitation:
(a) service of a detailed statement of claims, damages and defenses, a statement of
the issues asserted by each party and positions with respect thereto, and any legal
authorities the parties may wish to bring to the attention of the arbitrator(s);
(b) stipulations to uncontested facts;
(c) the extent to which discovery shall be conducted;
(d) exchange and premarking of those documents which each party believes may be
offered at the hearing;
(e) the identification and availability of witnesses, including experts, and such
matters with respect to witnesses including their biographies and expected testimony as may be appropriate;
(f) whether, and the extent to which, any sworn statements and/or depositions may
be introduced;
(g) the extent to which hearings will proceed on consecutive days;
(h) whether a stenographic or other official record of the proceedings shall be
maintained;
(i) the possibility of utilizing mediation or other non-adjudicative methods of
dispute resolution; and
(j) the procedure for the issuance of subpoenas.
By agreement of the parties and/or order of the arbitrator(s), the pre-hearing activities
and the hearing procedures that will govern the arbitration will be memorialized in a
Scheduling and Procedure Order.
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AAA RULES
L-4. MANAGEMENT OF PROCEEDINGS
(a) Arbitrator(s) shall take such steps as they may deem necessary or desirable to avoid
delay and to achieve a just, speedy and cost-effective resolution of Large, Complex
Commercial Cases.
(b) Parties shall cooperate in the exchange of documents, exhibits and information
within such party’s control if the arbitrator(s) consider such production to be consistent
with the goal of achieving a just, speedy and cost-effective resolution of a Large,
Complex Commercial Case.
(c) The parties may conduct such discovery as may be agreed to by all the parties provided, however, that the arbitrator(s) may place such limitations on the conduct of such
discovery as the arbitrator(s) shall deem appropriate. If the parties cannot agree on
production of documents and other information, the arbitrator(s), consistent with the
expedited nature of arbitration, may establish the extent of the discovery.
(d) At the discretion of the arbitrator(s), upon good cause shown and consistent with
the expedited nature of arbitration, the arbitrator(s) may order depositions of, or the
propounding of interrogatories to, such persons who may possess information determined by the arbitrator(s) to be necessary to determination of the matter.
(e) The parties shall exchange copies of all exhibits they intend to submit at the hearing
10 business days prior to the hearing unless the arbitrator(s) determine otherwise.
(f) The exchange of information pursuant to this rule, as agreed by the parties and/or
directed by the arbitrator(s), shall be included within the Scheduling and Procedure
Order.
(g) The arbitrator is authorized to resolve any disputes concerning the exchange of
information.
(h) Generally hearings will be scheduled on consecutive days or in blocks of consecutive days in order to maximize efficiency and minimize costs.
OPTIONAL RULES FOR EMERGENCY MEASURES OF PROTECTION
O-1. APPLICABILITY
Where parties by special agreement or in their arbitration clause have adopted these
rules for emergency measures of protection, a party in need of emergency relief prior
to the constitution of the panel shall notify the AAA and all other parties in writing of
the nature of the relief sought and the reasons why such relief is required on an emergency basis. The application shall also set forth the reasons why the party is entitled to
such relief. Such notice may be given by facsimile transmission, or other reliable
means, but must include a statement certifying that all other parties have been notified
or an explanation of the steps taken in good faith to notify other parties.
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O-2. APPOINTMENT OF EMERGENCY ARBITRATOR
Within one business day of receipt of notice as provided in Section O-1, the AAA shall
appoint a single emergency arbitrator from a special AAA panel of emergency arbitrators designated to rule on emergency applications. The emergency arbitrator shall
immediately disclose any circumstance likely, on the basis of the facts disclosed in the
application, to affect such arbitrator’s impartiality or independence. Any challenge to
the appointment of the emergency arbitrator must be made within one business day of
the communication by the AAA to the parties of the appointment of the emergency
arbitrator and the circumstances disclosed.
O-3. SCHEDULE
The emergency arbitrator shall as soon as possible, but in any event within two business days of appointment, establish a schedule for consideration of the application for
emergency relief. Such schedule shall provide a reasonable opportunity to all parties to
be heard, but may provide for proceeding by telephone conference or on written submissions as alternatives to a formal hearing.
O-4. INTERIM AWARD
If after consideration the emergency arbitrator is satisfied that the party seeking the
emergency relief has shown that immediate and irreparable loss or damage will result
in the absence of emergency relief, and that such party is entitled to such relief, the
emergency arbitrator may enter an interim award granting the relief and stating the
reasons therefore.
O-5. CONSTITUTION OF THE PANEL
Any application to modify an interim award of emergency relief must be based on
changed circumstances and may be made to the emergency arbitrator until the panel is
constituted; thereafter such a request shall be addressed to the panel. The emergency
arbitrator shall have no further power to act after the panel is constituted unless the
parties agree that the emergency arbitrator is named as a member of the panel.
O-6. SECURITY
Any interim award of emergency relief may be conditioned on provision by the party
seeking such relief of appropriate security.
O-7. SPECIAL MASTER
A request for interim measures addressed by a party to a judicial authority shall not be
deemed incompatible with the agreement to arbitrate or a waiver of the right to arbitrate. If the AAA is directed by a judicial authority to nominate a special master to
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AAA RULES
consider and report on an application for emergency relief, the AAA shall proceed as
provided in Section O-1 of this article and the references to the emergency arbitrator
shall be read to mean the special master, except that the special master shall issue a
report rather than an interim award.
O-8. COSTS
The costs associated with applications for emergency relief shall initially be apportioned by the emergency arbitrator or special master, subject to the power of the panel
to determine finally the apportionment of such costs.
ADMINISTRATIVE FEES
The administrative fees of the AAA are based on the amount of the claim or counterclaim. Arbitrator compensation is not included in this schedule. Unless the parties
agree otherwise, arbitrator compensation and administrative fees are subject to allocation by the arbitrator in the award.
In an effort to make arbitration costs reasonable for consumers, the AAA has a separate fee schedule for consumer-related disputes. Please refer to Section C-8 of the
Supplementary Procedures for Consumer-Related Disputes when filing a consumerrelated claim.
The AAA applies the Supplementary Procedures for Consumer-Related Disputes to
arbitration clauses in agreements between individual consumers and businesses where
the business has a standardized, systematic application of arbitration clauses with customers and where the terms and conditions of the purchase of standardized, consumable goods or services are non-negotiable or primarily non-negotiable in most or all of
its terms, conditions, features, or choices. The product or service must be for personal
or household use. The AAA will have the discretion to apply or not to apply the
Supplementary Procedures and the parties will be able to bring any disputes concerning the application or non-application to the attention of the arbitrator. Consumers are
not prohibited from seeking relief in a small claims court for disputes or claims within
the scope of its jurisdiction, even in consumer arbitration cases filed by the business.
PILOT FLEXIBLE FEE SCHEDULE
Recognizing the continued fragility of the business environment and wishing to provide cost-saving alternatives to parties filing an arbitration case, the American
Arbitration Association is offering an optional fee payment schedule that parties may
choose instead of the Standard Fee Schedule. It is a pilot that will be available on cases
filed through May 30, 2010,5 and is intended to give parties added flexibility in both
5
The Pilot Flexible Fee Schedule is subject to change or cancellation at any time prior to the
date of May 30, 2010.
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249
filing and in selection of arbitrators. Please call 1-800-778-7879 or your nearest office
if you have questions.
A non-refundable Initial Filing Fee is payable in full by a filing party when a claim,
counterclaim, or additional claim is filed. Upon receipt of the Demand for Arbitration,
the AAA will promptly initiate the case and notify all parties as well as establish the
due date for filing of an Answer, which may include a Counterclaim. In order to proceed with the further administration of the arbitration and appointment of the
arbitrator(s), the appropriate, non-refundable Proceed Fee outlined below must be
paid. If a Proceed Fee is not submitted within ninety (90) days of the filing of the
Claimant’s Demand for Arbitration, the Association will administratively close the file
and notify all parties. No refunds or refund schedule will apply to the Filing or Proceed
Fees once received.
Savings for Mutual Arbitrator Appointment by Parties: Proceed Fees may be reduced
by fifty (50) percent where parties mutually select and appoint their arbitrator(s) without the AAA providing a list of arbitrators and an appointment process. Parties must
provide the Case Manager with the appropriate stipulations and information pertaining
to arbitrator(s) that have been mutually selected and have accepted their appointment(s).
Forms for confirmation of arbitrators mutually selected and appointed by the parties
are available through the Case Manager or AAA regional office.
The Flexible Fee Schedule below also may be utilized for the filing of counterclaims.
However, as with the Claimant’s claim, the counterclaim will not be presented to the
arbitrator until the Proceed Fee is paid.
A Final Fee will be incurred for all claims and/or counterclaims that proceed to their
first hearing. This fee will be payable in advance when the first hearing is scheduled,
but will be refunded at the conclusion of the case if no hearings have occurred.
However, if the Association is not notified of a cancellation at least 24 hours before the
time of the scheduled hearing, the Final Fee will remain due and will not be
refunded.
All fees will be billed in accordance with the following schedule:
All fees are subject to increase if the amount of a claim or counterclaim is modified
after the initial filing date. Fees are subject to decrease if the amount of a claim or
counterclaim is modified before the first hearing.
The minimum fees for any case having three or more arbitrators are $1,000 for the
Initial Filing Fee; $3,750 for the Proceed Fee; and $1,750 for the Final Fee.
Under the Flexible Fee Schedule, a party’s obligation to pay the Proceed Fee shall
remain in effect regardless of any agreement of the parties to stay, postpone or otherwise modify the arbitration proceedings. Parties that, through mutual agreement, have
held their case in abeyance for one year will be assessed an annual abeyance fee of
$300. If a party refuses to pay the assessed fee, the other party or parties may pay the
entire fee on behalf of all parties, otherwise the matter will be closed.
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AAA RULES
Amount of Claim
Above $0 to $10,000
Initial Filing Fee
$300
Proceed Fee
$550*
Final Fee
$200
Above $10,000 to
$75,000
$500
$600*
$300
Above $75,000 to
$150,000
$500
$1,500*
$750
Above $150,000 to
$300,000
$500
$2,525*
$1,250
Above $300,000 to
$500,000
$1,000
$3,750*
$1,750
Above $500,000 to
$1,000,000
$1,000
$5,600*
$2,500
Above $1,000,000 to
$5,000,000
$1,000
$7,800*
$3,250
Above $5,000,000 to
$10,000,000
$2,000
$9,000*
$4,000
Above $10,000,000
$2,500
$11,500* plus. 01%
of claim amount over
$10,000,000 up to
$65,000
$6,000
Non-Monetary**
$1,000
$2,750*
$1,250
Consent Award***
*Where an arbitrator has been pre-selected and appointed by the parties, the Proceed Fee
will be reduced by fifty percent (50%).
**This fee is applicable only when a claim or counterclaim is not for a monetary amount.
Where a monetary claim amount is not known, parties will be required to state a range
of claims or be subject to the highest possible filing fee (see fee range for claims above
$10,000,000.00).
***The AAA may assist the parties with the appointment of an arbitrator for the sole
purpose of having their Consent Award signed. For more information, please contact
your local AAA office, case management center, or our Customer Service desk at
1-800-778-7879.
Note: The date of receipt by the AAA of the demand/notice for arbitration will be used
to calculate the ninety(90)-day time limit for payment of the Proceed Fee.
STANDARD FEE SCHEDULE
An initial filing fee is payable in full by a filing party when a claim, counterclaim, or
additional claim is filed. A case service fee will be incurred for all cases that proceed
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251
to their first hearing. This fee will be payable in advance at the time that the first hearing is scheduled. This fee will be refunded at the conclusion of the case if no hearings
have occurred. However, if the Association is not notified at least 24 hours before the
time of the scheduled hearing, the case service fee will remain due and will not be
refunded.
These fees will be billed in accordance with the following schedule:
Amount of Claim
Above $0 to $10,000
Initial Filing Fee
$750
Case Service Fee
$200
Above $10,000 to $75,000
$950
$300
Above $75,000 to $150,000
$1,800
$750
Above $150,000 to $300,000
$2,750
$1,250
Above $300,000 to $500,000
$4,250
$1,750
Above $500,000 to $1,000,000
$6,000
$2,500
Above $1,000,000 to $5,000,000
$8,000
$3,250
Above $5,000,000 to $10,000,000
$10,000
$4,000
Above $10,000,000
*
*
Nonmonetary Claims**
$3,250
$1,250
*For information regarding the fee schedule for claims in excess of $10 million, see
below.
**This fee is applicable when a claim or counterclaim is not for a monetary amount.
Where a monetary claim amount is not known, parties will be required to state a range
of claims or be subject to the highest possible filing fee.
STANDARD FEE SCHEDULE FOR CLAIMS IN EXCESS
OF $10 MILLION.
The following is the fee schedule for use in disputes involving claims in excess of $10
million. If you have any questions, please consult your local AAA office or case management center.
Claim Size
$10 million and
above
Fee
Base fee of $ 12,500 plus. 01% of the
amount of claim above $ 10 million.
Case Service Fee
$6,000
Filing fees capped at $65,000
Fees are subject to increase if the amount of a claim or counterclaim is modified after
the initial filing date. Fees are subject to decrease if the amount of a claim or counterclaim is modified before the first hearing.
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AAA RULES
The minimum fees for any case having three or more arbitrators are $2,750 for the
filing fee, plus a $1,250 case service fee. Expedited Procedures are applied in any case
where no disclosed claim or counterclaim exceeds $75,000, exclusive of interest and
arbitration costs.
Parties on cases filed under either the Pilot Flexible Fee Schedule or the Standard Fee
Schedule that are held in abeyance for one year will be assessed an annual abeyance
fee of $300. If a party refuses to pay the assessed fee, the other party or parties may pay
the entire fee on behalf of all parties, otherwise the matter will be administratively
closed.
REFUND SCHEDULE
The AAA offers a refund schedule on filing fees connected with the Standard Fee
Schedule. For cases with claims up to $75,000, a minimum filing fee of $300 will not
be refunded. For all other cases, a minimum fee of $500 will not be refunded. Subject
to the minimum fee requirements, refunds will be calculated as follows:
• 100% of the filing fee, above the minimum fee, will be refunded if the case is
settled or withdrawn within five calendar days of filing.
• 50% of the filing fee will be refunded if the case is settled or withdrawn between
six and 30 calendar days of filing.
• 25% of the filing fee will be refunded if the case is settled or withdrawn between
31 and 60 calendar days of filing.
No refund will be made once an arbitrator has been appointed (this includes one arbitrator on a three-arbitrator panel). No refunds will be granted on awarded cases.
Note: The date of receipt of the demand for arbitration with the AAA will be used to
calculate refunds of filing fees for both claims and counterclaims.
HEARING ROOM RENTAL
The fees described above do not cover the cost of hearing rooms, which are available
on a rental basis. Check with the AAA for availability and rates.
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Arbitration Act 1996 of England
Arbitration Act 1996 of England
An Act to restate and improve the law relating to arbitration pursuant to an arbitration
agreement; to make other provision relating to arbitration and arbitration awards; and
for connected purposes.
[17th June 1996]
BE IT ENACTED by the Queen’s most Excellent Majesty, by and with the advice and
consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament
assembled, and by the authority of the same, as follows:
PART I
ARBITRATION PURSUANT TO AN ARBITRATION AGREEMENT
Introductory
General principles.
1. The provisions of this Part are founded on the following principles, and shall be
construed accordingly—
(a) the object of arbitration is to obtain the fair resolution of disputes by an impartial
tribunal without unnecessary delay or expense;
(b) the parties should be free to agree how their disputes are resolved, subject only
to such safeguards as are necessary in the public interest;
(c) in matters governed by this Part the court should not intervene except as provided by this Part.
255
Scope of application of provisions.
2. (1) The provisions of this Part apply where the seat of the arbitration is in England
and Wales or Northern Ireland.
(2) The following sections apply even if the seat of the arbitration is outside England
and Wales or Northern Ireland or no seat has been designated or determined—
(a) sections 9 to 11 (stay of legal proceedings, &c.), and
(b) section 66 (enforcement of arbitral awards).
(3) The powers conferred by the following sections apply even if the seat of the arbitration is outside England and Wales or Northern Ireland or no seat has been designated
or determined—
(a) section 43 (securing the attendance of witnesses), and
(b) section 44 (court powers exercisable in support of arbitral proceedings);
but the court may refuse to exercise any such power if, in the opinion of the court, the
fact that the seat of the arbitration is outside England and Wales or Northern Ireland,
or that when designated or determined the seat is likely to be outside England and
Wales or Northern Ireland, makes it inappropriate to do so.
(4) The court may exercise a power conferred by any provision of this Part not mentioned in subsection (2) or (3) for the purpose of supporting the arbitral process
where—
(a) no seat of the arbitration has been designated or determined, and
(b) by reason of a connection with England and Wales or Northern Ireland the court
is satisfied that it is appropriate to do so.
(5) Section 7 (separability of arbitration agreement) and section 8 (death of a party)
apply where the law applicable to the arbitration agreement is the law of England and
Wales or Northern Ireland even if the seat of the arbitration is outside England and
Wales or Northern Ireland or has not been designated or determined.
The seat of the arbitration.
3. In this Part “the seat of the arbitration” means the juridical seat of the arbitration
designated—
(a) by the parties to the arbitration agreement, or
(b) by any arbitral or other institution or person vested by the parties with powers in
that regard, or
(c) by the arbitral tribunal if so authorised by the parties,
or determined, in the absence of any such designation, having regard to the parties’
agreement and all the relevant circumstances.
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ARBITRATION ACT 1996 OF ENGLAND
Mandatory and non-mandatory provisions.
4. (1) The mandatory provisions of this Part are listed in Schedule 1 and have effect
notwithstanding any agreement to the contrary.
(2) The other provisions of this Part (the “non-mandatory provisions”) allow the parties
to make their own arrangements by agreement but provide rules which apply in the
absence of such agreement.
(3) The parties may make such arrangements by agreeing to the application of institutional rules or providing any other means by which a matter may be decided.
(4) It is immaterial whether or not the law applicable to the parties’ agreement is the
law of England and Wales or, as the case may be, Northern Ireland.
(5) The choice of a law other than the law of England and Wales or Northern Ireland
as the applicable law in respect of a matter provided for by a non-mandatory provision
of this Part is equivalent to an agreement making provision about that matter. For this
purpose an applicable law determined in accordance with the parties’ agreement, or
which is objectively determined in the absence of any express or implied choice, shall
be treated as chosen by the parties.
Agreements to be in writing.
5. (1) The provisions of this Part apply only where the arbitration agreement is in writing, and any other agreement between the parties as to any matter is effective for the
purposes of this Part only if in writing. The expressions “agreement,” “agree” and
“agreed” shall be construed accordingly.
(2) There is an agreement in writing—
(a) if the agreement is made in writing (whether or not it is signed by the parties),
(b) if the agreement is made by exchange of communications in writing, or
(c) if the agreement is evidenced in writing.
(3) Where parties agree otherwise than in writing by reference to terms which are in
writing, they make an agreement in writing.
(4) An agreement is evidenced in writing if an agreement made otherwise than in writing is recorded by one of the parties, or by a third party, with the authority of the parties
to the agreement.
(5) An exchange of written submissions in arbitral or legal proceedings in which the
existence of an agreement otherwise than in writing is alleged by one party against
another party and not denied by the other party in his response constitutes as between
those parties an agreement in writing to the effect alleged.
(6) References in this Part to anything being written or in writing include its being
recorded by any means.
ARBITRATION ACT 1996 OF ENGLAND
257
The arbitration agreement
Definition of arbitration agreement.
6. (1) In this Part an “arbitration agreement” means an agreement to submit to arbitration
present or future disputes (whether they are contractual or not).
(2) The reference in an agreement to a written form of arbitration clause or to a
document containing an arbitration clause constitutes an arbitration agreement if the
reference is such as to make that clause part of the agreement.
Separability of arbitration agreement.
7. Unless otherwise agreed by the parties, an arbitration agreement which forms or was
intended to form part of another agreement (whether or not in writing) shall not be
regarded as invalid, non-existent or ineffective because that other agreement is invalid,
or did not come into existence or has become ineffective, and it shall for that purpose
be treated as a distinct agreement.
Whether agreement discharged by death of a party.
8. (1) Unless otherwise agreed by the parties, an arbitration agreement is not discharged
by the death of a party and may be enforced by or against the personal representatives
of that party.
(2) Subsection (1) does not affect the operation of any enactment or rule of law by
virtue of which a substantive right or obligation is extinguished by death.
Stay of legal proceedings
Stay of legal proceedings.
9. (1) A party to an arbitration agreement against whom legal proceedings are brought
(whether by way of claim or counterclaim) in respect of a matter which under the
agreement is to be referred to arbitration may (upon notice to the other parties to
the proceedings) apply to the court in which the proceedings have been brought to stay
the proceedings so far as they concern that matter.
(2) An application may be made notwithstanding that the matter is to be referred to
arbitration only after the exhaustion of other dispute resolution procedures.
(3) An application may not be made by a person before taking the appropriate procedural step (if any) to acknowledge the legal proceedings against him or after he has
taken any step in those proceedings to answer the substantive claim.
(4) On an application under this section the court shall grant a stay unless satisfied that
the arbitration agreement is null and void, inoperative, or incapable of being performed.
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ARBITRATION ACT 1996 OF ENGLAND
(5) If the court refuses to stay the legal proceedings, any provision that an award is a
condition precedent to the bringing of legal proceedings in respect of any matter is of
no effect in relation to those proceedings.
Reference of interpleader issue to arbitration.
10. (1) Where in legal proceedings relief by way of interpleader is granted and any
issue between the claimants is one in respect of which there is an arbitration agreement
between them, the court granting the relief shall direct that the issue be determined in
accordance with the agreement unless the circumstances are such that proceedings
brought by a claimant in respect of the matter would not be stayed.
(2) Where subsection (1) applies but the court does not direct that the issue be determined in accordance with the arbitration agreement, any provision that an award is a
condition precedent to the bringing of legal proceedings in respect of any matter shall
not affect the determination of that issue by the court.
Retention of security where Admiralty proceedings stayed.
11. (1) Where Admiralty proceedings are stayed on the ground that the dispute in
question should be submitted to arbitration, the court granting the stay may, if in those
proceedings property has been arrested or bail or other security has been given to
prevent or obtain release from arrest—
(a) order that the property arrested be retained as security for the satisfaction of any
award given in the arbitration in respect of that dispute, or
(b) order that the stay of those proceedings be conditional on the provision of equivalent security for the satisfaction of any such award.
(2) Subject to any provision made by rules of court and to any necessary modifications,
the same law and practice shall apply in relation to property retained in pursuance of
an order as would apply if it were held for the purposes of proceedings in the court
making the order.
Commencement of arbitral proceedings
Power of court to extend time for beginning arbitral
proceedings, &c.
12. (1) Where an arbitration agreement to refer future disputes to arbitration provides
that a claim shall be barred, or the claimant’s right extinguished, unless the claimant
takes within a time fixed by the agreement some step—
(a) to begin arbitral proceedings, or
(b) to begin other dispute resolution procedures which must be exhausted before arbitral
proceedings can be begun, the court may by order extend the time for taking that step.
ARBITRATION ACT 1996 OF ENGLAND
259
(2) Any party to the arbitration agreement may apply for such an order (upon notice to
the other parties), but only after a claim has arisen and after exhausting any available
arbitral process for obtaining an extension of time.
(3) The court shall make an order only if satisfied—
(a) that the circumstances are such as were outside the reasonable contemplation of the
parties when they agreed the provision in question, and that it would be just to extend
the time, or
(b) that the conduct of one party makes it unjust to hold the other party to the strict
terms of the provision in question.
(4) The court may extend the time for such period and on such terms as it thinks fit, and
may do so whether or not the time previously fixed (by agreement or by a previous
order) has expired.
(5) An order under this section does not affect the operation of the Limitation Acts (see
section 13).
(6) The leave of the court is required for any appeal from a decision of the court under
this section.
Application of Limitation Acts.
13. (1) The Limitation Acts apply to arbitral proceedings as they apply to legal
proceedings.
(2) The court may order that in computing the time prescribed by the Limitation Acts
for the commencement of proceedings (including arbitral proceedings) in respect of a
dispute which was the subject matter—
(a) of an award which the court orders to be set aside or declares to be of no effect, or
(b) of the affected part of an award which the court orders to be set aside in part,
or declares to be in part of no effect, the period between the commencement of
the arbitration and the date of the order referred to in paragraph (a) or (b) shall be
excluded.
(3) In determining for the purposes of the Limitation Acts when a cause of action
accrued, any provision that an award is a condition precedent to the bringing of legal
proceedings in respect of a matter to which an arbitration agreement applies shall be
disregarded.
(4) In this Part “the Limitation Acts” means—
(a) in England and Wales, the Limitation Act 1980, the Foreign Limitation Periods
Act 1984 and any other enactment (whenever passed) relating to the limitation of
actions;
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ARBITRATION ACT 1996 OF ENGLAND
(b) in Northern Ireland, the Limitation (Northern Ireland) Order 1989, the Foreign
Limitation Periods (Northern Ireland) Order 1985 and any other enactment (whenever passed) relating to the limitation of actions.
Commencement of arbitral proceedings.
14. (1) The parties are free to agree when arbitral proceedings are to be regarded as
commenced for the purposes of this Part and for the purposes of the Limitation Acts.
(2) If there is no such agreement the following provisions apply.
(3) Where the arbitrator is named or designated in the arbitration agreement, arbitral
proceedings are commenced in respect of a matter when one party serves on the other
party or parties a notice in writing requiring him or them to submit that matter to the
person so named or designated.
(4) Where the arbitrator or arbitrators are to be appointed by the parties, arbitral
proceedings are commenced in respect of a matter when one party serves on the other
party or parties notice in writing requiring him or them to appoint an arbitrator or to
agree to the appointment of an arbitrator in respect of that matter.
(5) Where the arbitrator or arbitrators are to be appointed by a person other than a
party to the proceedings, arbitral proceedings are commenced in respect of a matter
when one party gives notice in writing to that person requesting him to make the
appointment in respect of that matter.
The arbitral tribunal
The arbitral tribunal.
15. (1) The parties are free to agree on the number of arbitrators to form the tribunal
and whether there is to be a chairman or umpire.
(2) Unless otherwise agreed by the parties, an agreement that the number of arbitrators
shall be two or any other even number shall be understood as requiring the appointment of an additional arbitrator as chairman of the tribunal.
(3) If there is no agreement as to the number of arbitrators, the tribunal shall consist of
a sole arbitrator.
Procedure for appointment of arbitrators.
16. (1) The parties are free to agree on the procedure for appointing the arbitrator or
arbitrators, including the procedure for appointing any chairman or umpire.
(2) If or to the extent that there is no such agreement, the following provisions apply.
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(3) If the tribunal is to consist of a sole arbitrator, the parties shall jointly appoint the
arbitrator not later than 28 days after service of a request in writing by either party to
do so.
(4) If the tribunal is to consist of two arbitrators, each party shall appoint one arbitrator
not later than 14 days after service of a request in writing by either party to do so.
(5) If the tribunal is to consist of three arbitrators—
(a) each party shall appoint one arbitrator not later than 14 days after service of a
request in writing by either party to do so, and
(b) the two so appointed shall forthwith appoint a third arbitrator as the chairman of
the tribunal.
(6) If the tribunal is to consist of two arbitrators and an umpire—
(a) each party shall appoint one arbitrator not later than 14 days after service of a
request in writing by either party to do so, and
(b) the two so appointed may appoint an umpire at any time after they themselves
are appointed and shall do so before any substantive hearing or forthwith if they
cannot agree on a matter relating to the arbitration.
(7) In any other case (in particular, if there are more than two parties) section 18
applies as in the case of a failure of the agreed appointment procedure.
Power in case of default to appoint sole arbitrator.
17. (1) Unless the parties otherwise agree, where each of two parties to an arbitration
agreement is to appoint an arbitrator and one party (“the party in default”) refuses to
do so, or fails to do so within the time specified, the other party, having duly appointed
his arbitrator, may give notice in writing to the party in default that he proposes to
appoint his arbitrator to act as sole arbitrator.
(2) If the party in default does not within 7 clear days of that notice being given—
(a) make the required appointment, and
(b) notify the other party that he has done so, the other party may appoint his arbitrator as sole arbitrator whose award shall be binding on both parties as if he had been
so appointed by agreement.
(3) Where a sole arbitrator has been appointed under subsection (2), the party in default
may (upon notice to the appointing party) apply to the court which may set aside the
appointment.
(4) The leave of the court is required for any appeal from a decision of the court under
this section.
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Failure of appointment procedure.
18. (1) The parties are free to agree what is to happen in the event of a failure of the
procedure for the appointment of the arbitral tribunal. There is no failure if an appointment is duly made under section 17 (power in case of default to appoint sole arbitrator), unless that appointment is set aside.
(2) If or to the extent that there is no such agreement any party to the arbitration agreement may (upon notice to the other parties) apply to the court to exercise its powers
under this section.
(3) Those powers are—
(a) to give directions as to the making of any necessary appointments;
(b) to direct that the tribunal shall be constituted by such appointments (or any one
or more of them) as have been made;
(c) to revoke any appointments already made;
(d) to make any necessary appointments itself.
(4) An appointment made by the court under this section has effect as if made with the
agreement of the parties.
(5) The leave of the court is required for any appeal from a decision of the court under
this section.
Court to have regard to agreed qualifications.
19. In deciding whether to exercise, and in considering how to exercise, any of
its powers under section 16 (procedure for appointment of arbitrators) or section 18
(failure of appointment procedure), the court shall have due regard to any agreement
of the parties as to the qualifications required of the arbitrators.
Chairman.
20. (1) Where the parties have agreed that there is to be a chairman, they are free
to agree what the functions of the chairman are to be in relation to the making of
decisions, orders and awards.
(2) If or to the extent that there is no such agreement, the following provisions apply.
(3) Decisions, orders and awards shall be made by all or a majority of the arbitrators
(including the chairman).
(4) The view of the chairman shall prevail in relation to a decision, order or award in
respect of which there is neither unanimity nor a majority under subsection (3).
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Umpire.
21. (1) Where the parties have agreed that there is to be an umpire, they are free to
agree what the functions of the umpire are to be, and in particular—
(a) whether he is to attend the proceedings, and
(b) when he is to replace the other arbitrators as the tribunal with power to make
decisions, orders and awards.
(2) If or to the extent that there is no such agreement, the following provisions apply.
(3) The umpire shall attend the proceedings and be supplied with the same documents
and other materials as are supplied to the other arbitrators.
(4) Decisions, orders and awards shall be made by the other arbitrators unless and
until they cannot agree on a matter relating to the arbitration. In that event they shall
forthwith give notice in writing to the parties and the umpire, whereupon the umpire
shall replace them as the tribunal with power to make decisions, orders and awards as
if he were sole arbitrator.
(5) If the arbitrators cannot agree but fail to give notice of that fact, or if any of them
fails to join in the giving of notice, any party to the arbitral proceedings may (upon
notice to the other parties and to the tribunal) apply to the court which may order
that the umpire shall replace the other arbitrators as the tribunal with power to make
decisions, orders and awards as if he were sole arbitrator.
(6) The leave of the court is required for any appeal from a decision of the court under
this section.
Decision-making where no chairman or umpire.
22. (1) Where the parties agree that there shall be two or more arbitrators with no
chairman or umpire, the parties are free to agree how the tribunal is to make decisions,
orders and awards.
(2) If there is no such agreement, decisions, orders and awards shall be made by all or
a majority of the arbitrators.
Revocation of arbitrator’s authority.
23. (1) The parties are free to agree in what circumstances the authority of an arbitrator
may be revoked.
(2) If or to the extent that there is no such agreement the following provisions apply.
(3) The authority of an arbitrator may not be revoked except—
(a) by the parties acting jointly, or
(b) by an arbitral or other institution or person vested by the parties with powers in
that regard.
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(4) Revocation of the authority of an arbitrator by the parties acting jointly must be
agreed in writing unless the parties also agree (whether or not in writing) to terminate
the arbitration agreement.
(5) Nothing in this section affects the power of the court—
(a) to revoke an appointment under section 18 (powers exercisable in case of failure
of appointment procedure), or
(b) to remove an arbitrator on the grounds specified in section 24.
Power of court to remove arbitrator.
24. (1) A party to arbitral proceedings may (upon notice to the other parties, to the
arbitrator concerned and to any other arbitrator) apply to the court to remove an
arbitrator on any of the following grounds—
(a) that circumstances exist that give rise to justifiable doubts as to his impartiality;
(b) that he does not possess the qualifications required by the arbitration agreement;
(c) that he is physically or mentally incapable of conducting the proceedings or there
are justifiable doubts as to his capacity to do so;
(d) that he has refused or failed
(i) properly to conduct the proceedings, or
(ii) to use all reasonable despatch in conducting the proceedings or making an
award, and that substantial injustice has been or will be caused to the applicant.
(2) If there is an arbitral or other institution or person vested by the parties with power to
remove an arbitrator, the court shall not exercise its power of removal unless satisfied
that the applicant has first exhausted any available recourse to that institution or person.
(3) The arbitral tribunal may continue the arbitral proceedings and make an award
while an application to the court under this section is pending.
(4) Where the court removes an arbitrator, it may make such order as it thinks fit with
respect to his entitlement (if any) to fees or expenses, or the repayment of any fees or
expenses already paid.
(5) The arbitrator concerned is entitled to appear and be heard by the court before it
makes any order under this section.
(6) The leave of the court is required for any appeal from a decision of the court under
this section.
Resignation of arbitrator.
25. (1) The parties are free to agree with an arbitrator as to the consequences of his
resignation as regards—
(a) his entitlement (if any) to fees or expenses, and
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(b) any liability thereby incurred by him.
(2) If or to the extent that there is no such agreement the following provisions apply.
(3) An arbitrator who resigns his appointment may (upon notice to the parties) apply
to the court—
(a) to grant him relief from any liability thereby incurred by him, and
(b) to make such order as it thinks fit with respect to his entitlement (if any) to fees
or expenses or the repayment of any fees or expenses already paid.
(4) If the court is satisfied that in all the circumstances it was reasonable for the arbitrator to resign, it may grant such relief as is mentioned in subsection (3)(a) on such terms
as it thinks fit.
(5) The leave of the court is required for any appeal from a decision of the court under
this section.
Death of arbitrator or person appointing him.
26. (1) The authority of an arbitrator is personal and ceases on his death.
(2) Unless otherwise agreed by the parties, the death of the person by whom an arbitrator was appointed does not revoke the arbitrator’s authority.
Filling of vacancy, &c.
27. (1) Where an arbitrator ceases to hold office, the parties are free to agree—
(a) whether and if so how the vacancy is to be filled,
(b) whether and if so to what extent the previous proceedings should stand, and
(c) what effect (if any) his ceasing to hold office has on any appointment made by
him (alone or jointly).
(2) If or to the extent that there is no such agreement, the following provisions apply.
(3) The provisions of sections 16 (procedure for appointment of arbitrators) and 18
(failure of appointment procedure) apply in relation to the filling of the vacancy as in
relation to an original appointment.
(4) The tribunal (when reconstituted) shall determine whether and if so to what extent
the previous proceedings should stand. This does not affect any right of a party to
challenge those proceedings on any ground which had arisen before the arbitrator
ceased to hold office.
(5) His ceasing to hold office does not affect any appointment by him (alone or jointly)
of another arbitrator, in particular any appointment of a chairman or umpire.
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Joint and several liability of parties to arbitrators for fees
and expenses.
28. (1) The parties are jointly and severally liable to pay to the arbitrators such reasonable fees and expenses (if any) as are appropriate in the circumstances.
(2) Any party may apply to the court (upon notice to the other parties and to the arbitrators) which may order that the amount of the arbitrators’ fees and expenses shall be
considered and adjusted by such means and upon such terms as it may direct.
(3) If the application is made after any amount has been paid to the arbitrators by way
of fees or expenses, the court may order the repayment of such amount (if any) as is
shown to be excessive, but shall not do so unless it is shown that it is reasonable in the
circumstances to order repayment.
(4) The above provisions have effect subject to any order of the court under section
24(4) or 25(3)(b) (order as to entitlement to fees or expenses in case of removal or
resignation of arbitrator).
(5) Nothing in this section affects any liability of a party to any other party to pay all
or any of the costs of the arbitration (see sections 59 to 65) or any contractual right of
an arbitrator to payment of his fees and expenses.
(6) In this section references to arbitrators include an arbitrator who has ceased to act
and an umpire who has not replaced the other arbitrators.
Immunity of arbitrator.
29. (1) An arbitrator is not liable for anything done or omitted in the discharge or
purported discharge of his functions as arbitrator unless the act or omission is shown
to have been in bad faith.
(2) Subsection (1) applies to an employee or agent of an arbitrator as it applies to the
arbitrator himself.
(3) This section does not affect any liability incurred by an arbitrator by reason of his
resigning (but see section 25).
Jurisdiction of the arbitral tribunal
Competence of tribunal to rule on its own jurisdiction.
30. (1) Unless otherwise agreed by the parties, the arbitral tribunal may rule on its own
substantive jurisdiction, that is, as to—
(a) whether there is a valid arbitration agreement,
(b) whether the tribunal is properly constituted, and
(c) what matters have been submitted to arbitration in accordance with the arbitration agreement.
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(2) Any such ruling may be challenged by any available arbitral process of appeal or
review or in accordance with the provisions of this Part.
Objection to substantive jurisdiction of tribunal.
31. (1) An objection that the arbitral tribunal lacks substantive jurisdiction at the outset
of the proceedings must be raised by a party not later than the time he takes the first
step in the proceedings to contest the merits of any matter in relation to which he
challenges the tribunal’s jurisdiction. A party is not precluded from raising such an
objection by the fact that he has appointed or participated in the appointment of an
arbitrator.
(2) Any objection during the course of the arbitral proceedings that the arbitral tribunal
is exceeding its substantive jurisdiction must be made as soon as possible after the
matter alleged to be beyond its jurisdiction is raised.
(3) The arbitral tribunal may admit an objection later than the time specified in subsection (1) or (2) if it considers the delay justified.
(4) Where an objection is duly taken to the tribunal’s substantive jurisdiction and the
tribunal has power to rule on its own jurisdiction, it may—
(a) rule on the matter in an award as to jurisdiction, or
(b) deal with the objection in its award on the merits. If the parties agree which of
these courses the tribunal should take, the tribunal shall proceed accordingly.
(5) The tribunal may in any case, and shall if the parties so agree, stay proceedings
whilst an application is made to the court under section 32 (determination of preliminary point of jurisdiction).
Determination of preliminary point of jurisdiction.
32. (1) The court may, on the application of a party to arbitral proceedings (upon notice
to the other parties), determine any question as to the substantive jurisdiction of the
tribunal. A party may lose the right to object (see section 73).
(2) An application under this section shall not be considered unless—
(a) it is made with the agreement in writing of all the other parties to the proceedings, or
(b) it is made with the permission of the tribunal and the court is satisfied
(i) that the determination of the question is likely to produce substantial savings
in costs,
(ii) that the application was made without delay, and
(iii) that there is good reason why the matter should be decided by the court.
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(3) An application under this section, unless made with the agreement of all the other
parties to the proceedings, shall state the grounds on which it is said that the matter
should be decided by the court.
(4) Unless otherwise agreed by the parties, the arbitral tribunal may continue the
arbitral proceedings and make an award while an application to the court under this
section is pending.
(5) Unless the court gives leave, no appeal lies from a decision of the court whether the
conditions specified in subsection (2) are met.
(6) The decision of the court on the question of jurisdiction shall be treated as a
judgment of the court for the purposes of an appeal. But no appeal lies without the
leave of the court which shall not be given unless the court considers that the question
involves a point of law which is one of general importance or is one which for some
other special reason should be considered by the Court of Appeal.
General duty of the tribunal.
33. (1) The tribunal shall—
(a) act fairly and impartially as between the parties, giving each party a reasonable
opportunity of putting his case and dealing with that of his opponent, and
(b) adopt procedures suitable to the circumstances of the particular case, avoiding
unnecessary delay or expense, so as to provide a fair means for the resolution of the
matters falling to be determined.
(2) The tribunal shall comply with that general duty in conducting the arbitral proceedings, in its decisions on matters of procedure and evidence and in the exercise of all
other powers conferred on it.
Procedural and evidential matters.
34. (1) It shall be for the tribunal to decide all procedural and evidential matters, subject
to the right of the parties to agree any matter.
(2) Procedural and evidential matters include—
(a) when and where any part of the proceedings is to be held;
(b) the language or languages to be used in the proceedings and whether translations
of any relevant documents are to be supplied;
(c) whether any and if so what form of written statements of claim and defence are
to be used, when these should be supplied and the extent to which such statements
can be later amended;
(d) whether any and if so which documents or classes of documents should be
disclosed between and produced by the parties and at what stage;
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(e) whether any and if so what questions should be put to and answered by the
respective parties and when and in what form this should be done;
(f) whether to apply strict rules of evidence (or any other rules) as to the admissibility,
relevance or weight of any material (oral, written or other) sought to be tendered on
any matters of fact or opinion, and the time, manner and form in which such material
should be exchanged and presented;
(g) whether and to what extent the tribunal should itself take the initiative in
ascertaining the facts and the law;
(h) whether and to what extent there should be oral or written evidence or submissions.
(3) The tribunal may fix the time within which any directions given by it are to be
complied with, and may if it thinks fit extend the time so fixed (whether or not it has
expired).
Consolidation of proceedings and concurrent hearings.
35. (1) The parties are free to agree—
(a) that the arbitral proceedings shall be consolidated with other arbitral proceedings, or
(b) that concurrent hearings shall be held, on such terms as may be agreed.
(2) Unless the parties agree to confer such power on the tribunal, the tribunal has no
power to order consolidation of proceedings or concurrent hearings.
Legal or other representation.
36. Unless otherwise agreed by the parties, a party to arbitral proceedings may be
represented in the proceedings by a lawyer or other person chosen by him.
Power to appoint experts, legal advisers or assessors.
37. (1) Unless otherwise agreed by the parties—
(a) the tribunal may—
(i) appoint experts or legal advisers to report to it and the parties, or
(ii) appoint assessors to assist it on technical matters, and may allow any such
expert, legal adviser or assessor to attend the proceedings; and
(b) the parties shall be given a reasonable opportunity to comment on any information, opinion or advice offered by any such person.
(2) The fees and expenses of an expert, legal adviser or assessor appointed by the tribunal for which the arbitrators are liable are expenses of the arbitrators for the purposes of this Part.
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General powers exercisable by the tribunal.
38. (1) The parties are free to agree on the powers exercisable by the arbitral tribunal
for the purposes of and in relation to the proceedings.
(2) Unless otherwise agreed by the parties the tribunal has the following powers.
(3) The tribunal may order a claimant to provide security for the costs of the arbitration. This power shall not be exercised on the ground that the claimant is—
(a) an individual ordinarily resident outside the United Kingdom, or
(b) a corporation or association incorporated or formed under the law of a country
outside the United Kingdom, or whose central management and control is exercised
outside the United Kingdom.
(4) The tribunal may give directions in relation to any property which is the subject of
the proceedings or as to which any question arises in the proceedings, and which is
owned by or is in the possession of a party to the proceedings—
(a) for the inspection, photographing, preservation, custody or detention of the
property by the tribunal, an expert or a party, or
(b) ordering that samples be taken from, or any observation be made of or experiment conducted upon, the property.
(5) The tribunal may direct that a party or witness shall be examined on oath or affirmation, and may for that purpose administer any necessary oath or take any necessary
affirmation.
(6) The tribunal may give directions to a party for the preservation for the purposes of
the proceedings of any evidence in his custody or control.
Power to make provisional awards.
39. (1) The parties are free to agree that the tribunal shall have power to order on a
provisional basis any relief which it would have power to grant in a final award.
(2) This includes, for instance, making—
(a) a provisional order for the payment of money or the disposition of property as
between the parties, or
(b) an order to make an interim payment on account of the costs of the arbitration.
(3) Any such order shall be subject to the tribunal’s final adjudication; and the tribunal’s
final award, on the merits or as to costs, shall take account of any such order.
(4) Unless the parties agree to confer such power on the tribunal, the tribunal has no
such power. This does not affect its powers under section 47 (awards on different
issues, &c.).
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General duty of parties.
40. (1) The parties shall do all things necessary for the proper and expeditious conduct
of the arbitral proceedings.
(2) This includes—
(a) complying without delay with any determination of the tribunal as to procedural
or evidential matters, or with any order or directions of the tribunal, and
(b) where appropriate, taking without delay any necessary steps to obtain a decision
of the court on a preliminary question of jurisdiction or law (see sections 32 and 45).
Powers of tribunal in case of party’s default.
41. (1) The parties are free to agree on the powers of the tribunal in case of a party’s failure to do something necessary for the proper and expeditious conduct of the arbitration.
(2) Unless otherwise agreed by the parties, the following provisions apply.
(3) If the tribunal is satisfied that there has been inordinate and inexcusable delay on
the part of the claimant in pursuing his claim and that the delay—
(a) gives rise, or is likely to give rise, to a substantial risk that it is not possible to
have a fair resolution of the issues in that claim, or
(b) has caused, or is likely to cause, serious prejudice to the respondent, the tribunal
may make an award dismissing the claim.
(4) If without showing sufficient cause a party—
(a) fails to attend or be represented at an oral hearing of which due notice was
given, or
(b) where matters are to be dealt with in writing, fails after due notice to submit
written evidence or make written submissions, the tribunal may continue the proceedings in the absence of that party or, as the case may be, without any written
evidence or submissions on his behalf, and may make an award on the basis of the
evidence before it.
(5) If without showing sufficient cause a party fails to comply with any order or
directions of the tribunal, the tribunal may make a peremptory order to the same effect,
prescribing such time for compliance with it as the tribunal considers appropriate.
(6) If a claimant fails to comply with a peremptory order of the tribunal to provide
security for costs, the tribunal may make an award dismissing his claim.
(7) If a party fails to comply with any other kind of peremptory order, then, without
prejudice to section 42 (enforcement by court of tribunal’s peremptory orders), the
tribunal may do any of the following—
(a) direct that the party in default shall not be entitled to rely upon any allegation or
material which was the subject matter of the order;
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(b) draw such adverse inferences from the act of non-compliance as the circumstances justify;
(c) proceed to an award on the basis of such materials as have been properly provided to it;
(d) make such order as it thinks fit as to the payment of costs of the arbitration
incurred in consequence of the non-compliance.
Powers of court in relation to arbitral proceedings
Enforcement of peremptory orders of tribunal.
42. (1) Unless otherwise agreed by the parties, the court may make an order requiring
a party to comply with a peremptory order made by the tribunal.
(2) An application for an order under this section may be made—
(a) by the tribunal (upon notice to the parties),
(b) by a party to the arbitral proceedings with the permission of the tribunal (and
upon notice to the other parties), or
(c) where the parties have agreed that the powers of the court under this section shall
be available.
(3) The court shall not act unless it is satisfied that the applicant has exhausted any
available arbitral process in respect of failure to comply with the tribunal’s order.
(4) No order shall be made under this section unless the court is satisfied that the
person to whom the tribunal’s order was directed has failed to comply with it within
the time prescribed in the order or, if no time was prescribed, within a reasonable
time.
(5) The leave of the court is required for any appeal from a decision of the court under
this section.
Securing the attendance of witnesses.
43. (1) A party to arbitral proceedings may use the same court procedures as are available in relation to legal proceedings to secure the attendance before the tribunal of a
witness in order to give oral testimony or to produce documents or other material evidence.
(2) This may only be done with the permission of the tribunal or the agreement of the
other parties.
(3) The court procedures may only be used if—
(a) the witness is in the United Kingdom, and
(b) the arbitral proceedings are being conducted in England and Wales or, as the
case may be, Northern Ireland.
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(4) A person shall not be compelled by virtue of this section to produce any document
or other material evidence which he could not be compelled to produce in legal proceedings.
Court powers exercisable in support of arbitral proceedings.
44. (1) Unless otherwise agreed by the parties, the court has for the purposes of and in
relation to arbitral proceedings the same power of making orders about the matters
listed below as it has for the purposes of and in relation to legal proceedings.
(2) Those matters are—
(a) the taking of the evidence of witnesses;
(b) the preservation of evidence;
(c) making orders relating to property which is the subject of the proceedings or as
to which any question arises in the proceedings—
(i) for the inspection, photographing, preservation, custody or detention of the
property, or
(ii) ordering that samples be taken from, or any observation be made of or experiment conducted upon, the property; and for that purpose authorising any person
to enter any premises in the possession or control of a party to the arbitration;
(d) the sale of any goods the subject of the proceedings;
(e) the granting of an interim injunction or the appointment of a receiver.
(3) If the case is one of urgency, the court may, on the application of a party or
proposed party to the arbitral proceedings, make such orders as it thinks necessary for
the purpose of preserving evidence or assets.
(4) If the case is not one of urgency, the court shall act only on the application of a
party to the arbitral proceedings (upon notice to the other parties and to the tribunal)
made with the permission of the tribunal or the agreement in writing of the other
parties.
(5) In any case the court shall act only if or to the extent that the arbitral tribunal,
and any arbitral or other institution or person vested by the parties with power in that
regard, has no power or is unable for the time being to act effectively.
(6) If the court so orders, an order made by it under this section shall cease to
have effect in whole or in part on the order of the tribunal or of any such arbitral or
other institution or person having power to act in relation to the subject-matter of the
order.
(7) The leave of the court is required for any appeal from a decision of the court under
this section.
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Determination of preliminary point of law.
45. (1) Unless otherwise agreed by the parties, the court may on the application of a
party to arbitral proceedings (upon notice to the other parties) determine any question
of law arising in the course of the proceedings which the court is satisfied substantially
affects the rights of one or more of the parties. An agreement to dispense with reasons
for the tribunal’s award shall be considered an agreement to exclude the court’s jurisdiction under this section.
(2) An application under this section shall not be considered unless—
(a) it is made with the agreement of all the other parties to the proceedings, or
(b) it is made with the permission of the tribunal and the court is satisfied—
(i) that the determination of the question is likely to produce substantial savings
in costs, and
(ii) that the application was made without delay.
(3) The application shall identify the question of law to be determined and, unless
made with the agreement of all the other parties to the proceedings, shall state the
grounds on which it is said that the question should be decided by the court.
(4) Unless otherwise agreed by the parties, the arbitral tribunal may continue the
arbitral proceedings and make an award while an application to the court under this
section is pending.
(5) Unless the court gives leave, no appeal lies from a decision of the court whether the
conditions specified in subsection (2) are met.
(6) The decision of the court on the question of law shall be treated as a judgment of
the court for the purposes of an appeal. But no appeal lies without the leave of the court
which shall not be given unless the court considers that the question is one of general
importance, or is one which for some other special reason should be considered by the
Court of Appeal.
The award
Rules applicable to substance of dispute.
46. (1) The arbitral tribunal shall decide the dispute—
(a) in accordance with the law chosen by the parties as applicable to the substance
of the dispute, or
(b) if the parties so agree, in accordance with such other considerations as are agreed
by them or determined by the tribunal.
(2) For this purpose the choice of the laws of a country shall be understood to refer to
the substantive laws of that country and not its conflict of laws rules.
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(3) If or to the extent that there is no such choice or agreement, the tribunal shall apply
the law determined by the conflict of laws rules which it considers applicable.
Awards on different issues, &c.
47. (1) Unless otherwise agreed by the parties, the tribunal may make more than one
award at different times on different aspects of the matters to be determined.
(2) The tribunal may, in particular, make an award relating—
(a) to an issue affecting the whole claim, or
(b) to a part only of the claims or cross-claims submitted to it for decision.
(3) If the tribunal does so, it shall specify in its award the issue, or the claim or part of
a claim, which is the subject matter of the award.
Remedies.
48. (1) The parties are free to agree on the powers exercisable by the arbitral tribunal
as regards remedies.
(2) Unless otherwise agreed by the parties, the tribunal has the following powers.
(3) The tribunal may make a declaration as to any matter to be determined in the proceedings.
(4) The tribunal may order the payment of a sum of money, in any currency.
(5) The tribunal has the same powers as the court—
(a) to order a party to do or refrain from doing anything;
(b) to order specific performance of a contract (other than a contract relating to
land);
(c) to order the rectification, setting aside or cancellation of a deed or other document.
Interest.
49. (1) The parties are free to agree on the powers of the tribunal as regards the award
of interest.
(2) Unless otherwise agreed by the parties the following provisions apply.
(3) The tribunal may award simple or compound interest from such dates, at such rates
and with such rests as it considers meets the justice of the case—
(a) on the whole or part of any amount awarded by the tribunal, in respect of any
period up to the date of the award;
(b) on the whole or part of any amount claimed in the arbitration and outstanding at
the commencement of the arbitral proceedings but paid before the award was made,
in respect of any period up to the date of payment.
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(4) The tribunal may award simple or compound interest from the date of the award
(or any later date) until payment, at such rates and with such rests as it considers meets
the justice of the case, on the outstanding amount of any award (including any award
of interest under subsection (3) and any award as to costs).
(5) References in this section to an amount awarded by the tribunal include an amount
payable in consequence of a declaratory award by the tribunal.
(6) The above provisions do not affect any other power of the tribunal to award interest.
Extension of time for making award.
50. (1) Where the time for making an award is limited by or in pursuance of the
arbitration agreement, then, unless otherwise agreed by the parties, the court may in
accordance with the following provisions by order extend that time.
(2) An application for an order under this section may be made—
(a) by the tribunal (upon notice to the parties), or
(b) by any party to the proceedings (upon notice to the tribunal and the other parties),
but only after exhausting any available arbitral process for obtaining an extension of
time.
(3) The court shall only make an order if satisfied that a substantial injustice would
otherwise be done.
(4) The court may extend the time for such period and on such terms as it thinks fit, and
may do so whether or not the time previously fixed (by or under the agreement or by a
previous order) has expired.
(5) The leave of the court is required for any appeal from a decision of the court under
this section.
Settlement.
51. (1) If during arbitral proceedings the parties settle the dispute, the following
provisions apply unless otherwise agreed by the parties.
(2) The tribunal shall terminate the substantive proceedings and, if so requested by the
parties and not objected to by the tribunal, shall record the settlement in the form of an
agreed award.
(3) An agreed award shall state that it is an award of the tribunal and shall have the
same status and effect as any other award on the merits of the case.
(4) The following provisions of this Part relating to awards (sections 52 to 58) apply to
an agreed award.
(5) Unless the parties have also settled the matter of the payment of the costs of the
arbitration, the provisions of this Part relating to costs (sections 59 to 65) continue to
apply.
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Form of award.
52. (1) The parties are free to agree on the form of an award.
(2) If or to the extent that there is no such agreement, the following provisions apply.
(3) The award shall be in writing signed by all the arbitrators or all those assenting to
the award.
(4) The award shall contain the reasons for the award unless it is an agreed award or
the parties have agreed to dispense with reasons.
(5) The award shall state the seat of the arbitration and the date when the award is
made.
Place where award treated as made.
53. Unless otherwise agreed by the parties, where the seat of the arbitration is in
England and Wales or Northern Ireland, any award in the proceedings shall be treated
as made there, regardless of where it was signed, despatched or delivered to any of the
parties.
Date of award.
54. (1) Unless otherwise agreed by the parties, the tribunal may decide what is to be
taken to be the date on which the award was made.
(2) In the absence of any such decision, the date of the award shall be taken to be the
date on which it is signed by the arbitrator or, where more than one arbitrator signs the
award, by the last of them.
Notification of award.
55. (1) The parties are free to agree on the requirements as to notification of the award
to the parties.
(2) If there is no such agreement, the award shall be notified to the parties by service
on them of copies of the award, which shall be done without delay after the award is
made.
(3) Nothing in this section affects section 56 (power to withhold award in case of nonpayment).
Power to withhold award in case of non-payment.
56. (1) The tribunal may refuse to deliver an award to the parties except upon full
payment of the fees and expenses of the arbitrators.
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(2) If the tribunal refuses on that ground to deliver an award, a party to the arbitral
proceedings may (upon notice to the other parties and the tribunal) apply to the court,
which may order that—
(a) the tribunal shall deliver the award on the payment into court by the applicant of
the fees and expenses demanded, or such lesser amount as the court may specify,
(b) the amount of the fees and expenses properly payable shall be determined by
such means and upon such terms as the court may direct, and
(c) out of the money paid into court there shall be paid out such fees and expenses
as may be found to be properly payable and the balance of the money (if any) shall
be paid out to the applicant.
(3) For this purpose the amount of fees and expenses properly payable is the amount
the applicant is liable to pay under section 28 or any agreement relating to the payment
of the arbitrators.
(4) No application to the court may be made where there is any available arbitral process for appeal or review of the amount of the fees or expenses demanded.
(5) References in this section to arbitrators include an arbitrator who has ceased to act
and an umpire who has not replaced the other arbitrators.
(6) The above provisions of this section also apply in relation to any arbitral or
other institution or person vested by the parties with powers in relation to the delivery
of the tribunal’s award. As they so apply, the references to the fees and expenses of the
arbitrators shall be construed as including the fees and expenses of that institution or
person.
(7) The leave of the court is required for any appeal from a decision of the court under
this section.
(8) Nothing in this section shall be construed as excluding an application under section
28 where payment has been made to the arbitrators in order to obtain the award.
Correction of award or additional award.
57. (1) The parties are free to agree on the powers of the tribunal to correct an award
or make an additional award.
(2) If or to the extent there is no such agreement, the following provisions apply.
(3) The tribunal may on its own initiative or on the application of a party—
(a) correct an award so as to remove any clerical mistake or error arising from an
accidental slip or omission or clarify or remove any ambiguity in the award, or
(b) make an additional award in respect of any claim (including a claim for interest
or costs) which was presented to the tribunal but was not dealt with in the award.
These powers shall not be exercised without first affording the other parties a reasonable opportunity to make representations to the tribunal.
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(4) Any application for the exercise of those powers must be made within 28 days of
the date of the award or such longer period as the parties may agree.
(5) Any correction of an award shall be made within 28 days of the date the application
was received by the tribunal or, where the correction is made by the tribunal on its own
initiative, within 28 days of the date of the award or, in either case, such longer period
as the parties may agree.
(6) Any additional award shall be made within 56 days of the date of the original award
or such longer period as the parties may agree.
(7) Any correction of an award shall form part of the award.
Effect of award.
58. (1) Unless otherwise agreed by the parties, an award made by the tribunal pursuant
to an arbitration agreement is final and binding both on the parties and on any persons
claiming through or under them.
(2) This does not affect the right of a person to challenge the award by any available
arbitral process of appeal or review or in accordance with the provisions of this Part.
Costs of the arbitration
Costs of the arbitration.
59. (1) References in this Part to the costs of the arbitration are to—
(a) the arbitrators’ fees and expenses,
(b) the fees and expenses of any arbitral institution concerned, and
(c) the legal or other costs of the parties.
(2) Any such reference includes the costs of or incidental to any proceedings to
determine the amount of the recoverable costs of the arbitration (see section 63).
Agreement to pay costs in any event.
60. An agreement which has the effect that a party is to pay the whole or part of the
costs of the arbitration in any event is only valid if made after the dispute in question
has arisen.
Award of costs.
61. (1) The tribunal may make an award allocating the costs of the arbitration as
between the parties, subject to any agreement of the parties.
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(2) Unless the parties otherwise agree, the tribunal shall award costs on the general
principle that costs should follow the event except where it appears to the tribunal
that in the circumstances this is not appropriate in relation to the whole or part of the
costs.
Effect of agreement or award about costs.
62. Unless the parties otherwise agree, any obligation under an agreement between
them as to how the costs of the arbitration are to be borne, or under an award allocating
the costs of the arbitration, extends only to such costs as are recoverable.
The recoverable costs of the arbitration.
63. (1) The parties are free to agree what costs of the arbitration are recoverable.
(2) If or to the extent there is no such agreement, the following provisions apply.
(3) The tribunal may determine by award the recoverable costs of the arbitration on
such basis as it thinks fit. If it does so, it shall specify—
(a) the basis on which it has acted, and
(b) the items of recoverable costs and the amount referable to each.
(4) If the tribunal does not determine the recoverable costs of the arbitration, any party
to the arbitral proceedings may apply to the court (upon notice to the other parties)
which may—
(a) determine the recoverable costs of the arbitration on such basis as it thinks
fit, or
(b) order that they shall be determined by such means and upon such terms as it may
specify.
(5) Unless the tribunal or the court determines otherwise—
(a) the recoverable costs of the arbitration shall be determined on the basis that there
shall be allowed a reasonable amount in respect of all costs reasonably incurred,
and
(b) any doubt as to whether costs were reasonably incurred or were reasonable in
amount shall be resolved in favour of the paying party.
(6) The above provisions have effect subject to section 64 (recoverable fees and
expenses of arbitrators).
(7) Nothing in this section affects any right of the arbitrators, any expert, legal adviser
or assessor appointed by the tribunal, or any arbitral institution, to payment of their
fees and expenses.
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Recoverable fees and expenses of arbitrators.
64. (1) Unless otherwise agreed by the parties, the recoverable costs of the arbitration
shall include in respect of the fees and expenses of the arbitrators only such reasonable
fees and expenses as are appropriate in the circumstances.
(2) If there is any question as to what reasonable fees and expenses are appropriate in
the circumstances, and the matter is not already before the court on an application
under section 63(4), the court may on the application of any party (upon notice to the
other parties)—
(a) determine the matter, or
(b) order that it be determined by such means and upon such terms as the court may
specify.
(3) Subsection (1) has effect subject to any order of the court under section 24(4) or
25(3)(b) (order as to entitlement to fees or expenses in case of removal or resignation
of arbitrator).
(4) Nothing in this section affects any right of the arbitrator to payment of his fees and
expenses.
Power to limit recoverable costs.
65. (1) Unless otherwise agreed by the parties, the tribunal may direct that the recoverable costs of the arbitration, or of any part of the arbitral proceedings, shall be limited
to a specified amount.
(2) Any direction may be made or varied at any stage, but this must be done sufficiently in advance of the incurring of costs to which it relates, or the taking of any steps
in the proceedings which may be affected by it, for the limit to be taken into account.
Powers of the court in relation to award
Enforcement of the award.
66. (1) An award made by the tribunal pursuant to an arbitration agreement may, by
leave of the court, be enforced in the same manner as a judgment or order of the court
to the same effect.
(2) Where leave is so given, judgment may be entered in terms of the award.
(3) Leave to enforce an award shall not be given where, or to the extent that, the person
against whom it is sought to be enforced shows that the tribunal lacked substantive
jurisdiction to make the award. The right to raise such an objection may have been lost
(see section 73).
(4) Nothing in this section affects the recognition or enforcement of an award under
any other enactment or rule of law, in particular under Part II of the Arbitration Act
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1950 (enforcement of awards under Geneva Convention) or the provisions of Part III
of this Act relating to the recognition and enforcement of awards under the New York
Convention or by an action on the award.
Challenging the award: substantive jurisdiction
67. (1) A party to arbitral proceedings may (upon notice to the other parties and to the
tribunal) apply to the court—
(a) challenging any award of the arbitral tribunal as to its substantive jurisdiction; or
(b) for an order declaring an award made by the tribunal on the merits to be of no
effect, in whole or in part, because the tribunal did not have substantive jurisdiction.
A party may lose the right to object (see section 73) and the right to apply is subject
to the restrictions in section 70(2) and (3).
(2) The arbitral tribunal may continue the arbitral proceedings and make a further
award while an application to the court under this section is pending in relation to an
award as to jurisdiction.
(3) On an application under this section challenging an award of the arbitral tribunal as
to its substantive jurisdiction, the court may by order—
(a) confirm the award,
(b) vary the award, or
(c) set aside the award in whole or in part.
(4) The leave of the court is required for any appeal from a decision of the court under
this section.
Challenging the award: serious irregularity.
68. (1) A party to arbitral proceedings may (upon notice to the other parties and to
the tribunal) apply to the court challenging an award in the proceedings on the ground
of serious irregularity affecting the tribunal, the proceedings or the award. A party
may lose the right to object (see section 73) and the right to apply is subject to the
restrictions in section 70(2) and (3).
(2) Serious irregularity means an irregularity of one or more of the following
kinds which the court considers has caused or will cause substantial injustice to the
applicant—
(a) failure by the tribunal to comply with section 33 (general duty of tribunal);
(b) the tribunal exceeding its powers (otherwise than by exceeding its substantive
jurisdiction: see section 67);
(c) failure by the tribunal to conduct the proceedings in accordance with the procedure agreed by the parties;
(d) failure by the tribunal to deal with all the issues that were put to it;
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(e) any arbitral or other institution or person vested by the parties with powers in
relation to the proceedings or the award exceeding its powers;
(f) uncertainty or ambiguity as to the effect of the award;
(g) the award being obtained by fraud or the award or the way in which it was
procured being contrary to public policy;
(h) failure to comply with the requirements as to the form of the award; or
(i) any irregularity in the conduct of the proceedings or in the award which is
admitted by the tribunal or by any arbitral or other institution or person vested by the
parties with powers in relation to the proceedings or the award.
(3) If there is shown to be serious irregularity affecting the tribunal, the proceedings or
the award, the court may—
(a) remit the award to the tribunal, in whole or in part, for reconsideration,
(b) set the award aside in whole or in part, or
(c) declare the award to be of no effect, in whole or in part. The court shall not
exercise its power to set aside or to declare an award to be of no effect, in whole or
in part, unless it is satisfied that it would be inappropriate to remit the matters in
question to the tribunal for reconsideration.
(4) The leave of the court is required for any appeal from a decision of the court under
this section.
Appeal on point of law.
69. (1) Unless otherwise agreed by the parties, a party to arbitral proceedings may
(upon notice to the other parties and to the tribunal) appeal to the court on a question
of law arising out of an award made in the proceedings. An agreement to dispense with
reasons for the tribunal’s award shall be considered an agreement to exclude the court’s
jurisdiction under this section.
(2) An appeal shall not be brought under this section except—
(a) with the agreement of all the other parties to the proceedings, or
(b) with the leave of the court. The right to appeal is also subject to the restrictions
in section 70(2) and (3).
(3) Leave to appeal shall be given only if the court is satisfied—
(a) that the determination of the question will substantially affect the rights of one or
more of the parties,
(b) that the question is one which the tribunal was asked to determine,
(c) that, on the basis of the findings of fact in the award—
(i) the decision of the tribunal on the question is obviously wrong, or
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(ii) the question is one of general public importance and the decision of the
tribunal is at least open to serious doubt, and
(d) that, despite the agreement of the parties to resolve the matter by arbitration, it is
just and proper in all the circumstances for the court to determine the question.
(4) An application for leave to appeal under this section shall identify the question of
law to be determined and state the grounds on which it is alleged that leave to appeal
should be granted.
(5) The court shall determine an application for leave to appeal under this section
without a hearing unless it appears to the court that a hearing is required.
(6) The leave of the court is required for any appeal from a decision of the court under
this section to grant or refuse leave to appeal.
(7) On an appeal under this section the court may by order—
(a) confirm the award,
(b) vary the award,
(c) remit the award to the tribunal, in whole or in part, for reconsideration in the light
of the court’s determination, or
(d) set aside the award in whole or in part. The court shall not exercise its power
to set aside an award, in whole or in part, unless it is satisfied that it would be
inappropriate to remit the matters in question to the tribunal for reconsideration.
(8) The decision of the court on an appeal under this section shall be treated as a
judgment of the court for the purposes of a further appeal. But no such appeal lies
without the leave of the court which shall not be given unless the court considers that
the question is one of general importance or is one which for some other special reason
should be considered by the Court of Appeal.
Challenge or appeal: supplementary provisions.
70. (1) The following provisions apply to an application or appeal under section 67, 68
or 69.
(2) An application or appeal may not be brought if the applicant or appellant has not
first exhausted—
(a) any available arbitral process of appeal or review, and
(b) any available recourse under section 57 (correction of award or additional
award).
(3) Any application or appeal must be brought within 28 days of the date of the award
or, if there has been any arbitral process of appeal or review, of the date when the
applicant or appellant was notified of the result of that process.
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(4) If on an application or appeal it appears to the court that the award—
(a) does not contain the tribunal’s reasons, or
(b) does not set out the tribunal’s reasons in sufficient detail to enable the court
properly to consider the application or appeal, the court may order the tribunal to
state the reasons for its award in sufficient detail for that purpose.
(5) Where the court makes an order under subsection (4), it may make such further
order as it thinks fit with respect to any additional costs of the arbitration resulting from
its order.
(6) The court may order the applicant or appellant to provide security for the costs of
the application or appeal, and may direct that the application or appeal be dismissed
if the order is not complied with. The power to order security for costs shall not be
exercised on the ground that the applicant or appellant is—
(a) an individual ordinarily resident outside the United Kingdom, or
(b) a corporation or association incorporated or formed under the law of a country
outside the United Kingdom, or whose central management and control is exercised
outside the United Kingdom.
(7) The court may order that any money payable under the award shall be brought into
court or otherwise secured pending the determination of the application or appeal, and
may direct that the application or appeal be dismissed if the order is not complied
with.
(8) The court may grant leave to appeal subject to conditions to the same or similar
effect as an order under subsection (6) or (7). This does not affect the general discretion of the court to grant leave subject to conditions.
Challenge or appeal: effect of order of court.
71. (1) The following provisions have effect where the court makes an order under
section 67, 68 or 69 with respect to an award.
(2) Where the award is varied, the variation has effect as part of the tribunal’s award.
(3) Where the award is remitted to the tribunal, in whole or in part, for reconsideration,
the tribunal shall make a fresh award in respect of the matters remitted within three
months of the date of the order for remission or such longer or shorter period as the
court may direct.
(4) Where the award is set aside or declared to be of no effect, in whole or in part, the
court may also order that any provision that an award is a condition precedent to the
bringing of legal proceedings in respect of a matter to which the arbitration agreement
applies, is of no effect as regards the subject matter of the award or, as the case may
be, the relevant part of the award.
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Miscellaneous
Saving for rights of person who takes no part in proceedings.
72. (1) A person alleged to be a party to arbitral proceedings but who takes no part in
the proceedings may question—
(a) whether there is a valid arbitration agreement,
(b) whether the tribunal is properly constituted, or
(c) what matters have been submitted to arbitration in accordance with the arbitration agreement, by proceedings in the court for a declaration or injunction or other
appropriate relief.
(2) He also has the same right as a party to the arbitral proceedings to challenge an
award—
(a) by an application under section 67 on the ground of lack of substantive jurisdiction in relation to him, or
(b) by an application under section 68 on the ground of serious irregularity (within
the meaning of that section) affecting him; and section 70(2) (duty to exhaust arbitral
procedures) does not apply in his case.
Loss of right to object.
73. (1) If a party to arbitral proceedings takes part, or continues to take part, in the
proceedings without making, either forthwith or within such time as is allowed by the
arbitration agreement or the tribunal or by any provision of this Part, any objection—
(a) that the tribunal lacks substantive jurisdiction,
(b) that the proceedings have been improperly conducted,
(c) that there has been a failure to comply with the arbitration agreement or with any
provision of this Part, or
(d) that there has been any other irregularity affecting the tribunal or the proceedings, he may not raise that objection later, before the tribunal or the court, unless he
shows that, at the time he took part or continued to take part in the proceedings, he
did not know and could not with reasonable diligence have discovered the grounds
for the objection.
(2) Where the arbitral tribunal rules that it has substantive jurisdiction and a party to
arbitral proceedings who could have questioned that ruling—
(a) by any available arbitral process of appeal or review, or
(b) by challenging the award, does not do so, or does not do so within the time
allowed by the arbitration agreement or any provision of this Part, he may not object
later to the tribunal’s substantive jurisdiction on any ground which was the subject
of that ruling.
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Immunity of arbitral institutions, &c.
74. (1) An arbitral or other institution or person designated or requested by the parties
to appoint or nominate an arbitrator is not liable for anything done or omitted in the
discharge or purported discharge of that function unless the act or omission is shown
to have been in bad faith.
(2) An arbitral or other institution or person by whom an arbitrator is appointed or
nominated is not liable, by reason of having appointed or nominated him, for anything
done or omitted by the arbitrator (or his employees or agents) in the discharge or
purported discharge of his functions as arbitrator.
(3) The above provisions apply to an employee or agent of an arbitral or other institution or person as they apply to the institution or person himself.
Charge to secure payment of solicitors’ costs.
75. The powers of the court to make declarations and orders under section 73 of the
Solicitors Act 1974 or Article 71H of the Solicitors (Northern Ireland) Order 1976
(power to charge property recovered in the proceedings with the payment of solicitors’
costs) may be exercised in relation to arbitral proceedings as if those proceedings were
proceedings in the court.
Supplementary
Service of notices, &c.
76. (1) The parties are free to agree on the manner of service of any notice or other
document required or authorised to be given or served in pursuance of the arbitration
agreement or for the purposes of the arbitral proceedings.
(2) If or to the extent that there is no such agreement the following provisions apply.
(3) A notice or other document may be served on a person by any effective means.
(4) If a notice or other document is addressed, pre-paid and delivered by post—
(a) to the addressee’s last known principal residence or, if he is or has been carrying
on a trade, profession or business, his last known principal business address, or
(b) where the addressee is a body corporate, to the body’s registered or principal
office, it shall be treated as effectively served.
(5) This section does not apply to the service of documents for the purposes of legal
proceedings, for which provision is made by rules of court.
(6) References in this Part to a notice or other document include any form of communication in writing and references to giving or serving a notice or other document shall
be construed accordingly.
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Powers of court in relation to service of documents.
77. (1) This section applies where service of a document on a person in the manner
agreed by the parties, or in accordance with provisions of section 76 having effect in
default of agreement, is not reasonably practicable.
(2) Unless otherwise agreed by the parties, the court may make such order as it thinks
fit—
(a) for service in such manner as the court may direct, or
(b) dispensing with service of the document.
(3) Any party to the arbitration agreement may apply for an order, but only after
exhausting any available arbitral process for resolving the matter.
(4) The leave of the court is required for any appeal from a decision of the court under
this section.
Reckoning periods of time.
78. (1) The parties are free to agree on the method of reckoning periods of time for the
purposes of any provision agreed by them or any provision of this Part having effect in
default of such agreement.
(2) If or to the extent there is no such agreement, periods of time shall be reckoned in
accordance with the following provisions.
(3) Where the act is required to be done within a specified period after or from a
specified date, the period begins immediately after that date.
(4) Where the act is required to be done a specified number of clear days after a specified date, at least that number of days must intervene between the day on which the act
is done and that date.
(5) Where the period is a period of seven days or less which would include a Saturday,
Sunday or a public holiday in the place where anything which has to be done within
the period falls to be done, that day shall be excluded. In relation to England and Wales
or Northern Ireland, a “public holiday” means Christmas Day, Good Friday or a day
which under the Banking and Financial Dealings Act 1971 is a bank holiday.
Power of court to extend time limits relating to arbitral
proceedings.
79. (1) Unless the parties otherwise agree, the court may by order extend any time limit
agreed by them in relation to any matter relating to the arbitral proceedings or specified
in any provision of this Part having effect in default of such agreement. This section
does not apply to a time limit to which section 12 applies (power of court to extend
time for beginning arbitral proceedings, &c.).
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(2) An application for an order may be made—
(a) by any party to the arbitral proceedings (upon notice to the other parties and to
the tribunal), or
(b) by the arbitral tribunal (upon notice to the parties).
(3) The court shall not exercise its power to extend a time limit unless it is satisfied—
(a) that any available recourse to the tribunal, or to any arbitral or other institution
or person vested by the parties with power in that regard, has first been exhausted,
and
(b) that a substantial injustice would otherwise be done.
(4) The court’s power under this section may be exercised whether or not the time has
already expired.
(5) An order under this section may be made on such terms as the court thinks fit.
(6) The leave of the court is required for any appeal from a decision of the court under
this section.
Notice and other requirements in connection with legal
proceedings.
80. (1) References in this Part to an application, appeal or other step in relation to legal
proceedings being taken “upon notice” to the other parties to the arbitral proceedings,
or to the tribunal, are to such notice of the originating process as is required by rules of
court and do not impose any separate requirement.
(2) Rules of court shall be made—
(a) requiring such notice to be given as indicated by any provision of this Part, and
(b) as to the manner, form and content of any such notice.
(3) Subject to any provision made by rules of court, a requirement to give notice to the
tribunal of legal proceedings shall be construed—
(a) if there is more than one arbitrator, as a requirement to give notice to each of
them; and
(b) if the tribunal is not fully constituted, as a requirement to give notice to any arbitrator who has been appointed.
(4) References in this Part to making an application or appeal to the court within a
specified period are to the issue within that period of the appropriate originating process in accordance with rules of court.
(5) Where any provision of this Part requires an application or appeal to be made to the
court within a specified time, the rules of court relating to the reckoning of periods,
the extending or abridging of periods, and the consequences of not taking a step within
the period prescribed by the rules, apply in relation to that requirement.
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(6) Provision may be made by rules of court amending the provisions of this Part—
(a) with respect to the time within which any application or appeal to the court must
be made,
(b) so as to keep any provision made by this Part in relation to arbitral proceedings
in step with the corresponding provision of rules of court applying in relation to
proceedings in the court, or
(c) so as to keep any provision made by this Part in relation to legal proceedings in
step with the corresponding provision of rules of court applying generally in relation
to proceedings in the court.
(7) Nothing in this section affects the generality of the power to make rules of court.
Saving for certain matters governed by common law.
81. (1) Nothing in this Part shall be construed as excluding the operation of any rule of
law consistent with the provisions of this Part, in particular, any rule of law as to—
(a) matters which are not capable of settlement by arbitration;
(b) the effect of an oral arbitration agreement; or
(c) the refusal of recognition or enforcement of an arbitral award on grounds of
public policy.
(2) Nothing in this Act shall be construed as reviving any jurisdiction of the court to set
aside or remit an award on the ground of errors of fact or law on the face of the award.
Minor definitions.
82. (1) In this Part “arbitrator,” unless the context otherwise requires, includes an
umpire; “available arbitral process,” in relation to any matter, includes any process of
appeal to or review by an arbitral or other institution or person vested by the parties
with powers in relation to that matter; “claimant,” unless the context otherwise requires,
includes a counterclaimant, and related expressions shall be construed accordingly;
“dispute” includes any difference; “enactment” includes an enactment contained in
Northern Ireland legislation; “legal proceedings” means civil proceedings in the High
Court or a county court; “peremptory order” means an order made under section 41(5)
or made in exercise of any corresponding power conferred by the parties; “premises”
includes land, buildings, moveable structures, vehicles, vessels, aircraft and hovercraft; “question of law” means (a) for a court in England and Wales, a question of
the law of England and Wales, and (b) for a court in Northern Ireland, a question of the
law of Northern Ireland; “substantive jurisdiction,” in relation to an arbitral tribunal,
refers to the matters specified in section 30(1)(a) to (c), and references to the tribunal
exceeding its substantive jurisdiction shall be construed accordingly.
(2) References in this Part to a party to an arbitration agreement include any person
claiming under or through a party to the agreement.
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Index of defined expressions: Part I.
83. In this Part the expressions listed below are defined or otherwise explained by the
provisions indicated agreement, agree and agreed section 5(1) agreement in writing
section 5(2) to (5) arbitration agreement sections 6 and 5(1) arbitrator section 82(1)
available arbitral process section 82(1) claimant section 82(1) commencement (in relation to arbitral proceedings) section 14 costs of the arbitration section 59 the court
section 105 dispute section 82(1) enactment section 82(1) legal proceedings section
82(1) Limitation Acts section 13(4) notice (or other document) section 76(6) party in
relation to an arbitration agreement section 82(2) where section 106(2) or (3) applies
section 106(4) peremptory order section 82(1) (and see section 41(5)) premises section
82(1) question of law section 82(1) recoverable costs sections 63 and 64 seat of
the arbitration section 3 serve and service (of notice or other document) section 76(6)
substantive jurisdiction (in relation to an arbitral tribunal) section 82(1) (and see
section 30(1)(a) to (c)) upon notice (to the parties or the tribunal) section 80 written
and in writing section 5(6).
Transitional provisions.
84. (1) The provisions of this Part do not apply to arbitral proceedings commenced
before the date on which this Part comes into force.
(2) They apply to arbitral proceedings commenced on or after that date under an arbitration agreement whenever made.
(3) The above provisions have effect subject to any transitional provision made by an
order under section 109(2) (power to include transitional provisions in commencement
order).
PART II
OTHER PROVISIONS RELATING TO ARBITRATION
Domestic arbitration agreements
Modification of Part I in relation to domestic arbitration
agreement.
85. (1) In the case of a domestic arbitration agreement the provisions of Part I are
modified in accordance with the following sections.
(2) For this purpose a “domestic arbitration agreement” means an arbitration agreement to which none of the parties is—
(a) an individual who is a national of, or habitually resident in, a state other than the
United Kingdom, or
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(b) a body corporate which is incorporated in, or whose central control and management is exercised in, a state other than the United Kingdom, and under which the
seat of the arbitration (if the seat has been designated or determined) is in the United
Kingdom.
(3) In subsection (2) “arbitration agreement” and “seat of the arbitration” have the
same meaning as in Part I (see sections 3, 5(1) and 6).
Staying of legal proceedings.
86. (1) In section 9 (stay of legal proceedings), subsection (4) (stay unless the arbitration
agreement is null and void, inoperative, or incapable of being performed) does not
apply to a domestic arbitration agreement.
(2) On an application under that section in relation to a domestic arbitration agreement
the court shall grant a stay unless satisfied—
(a) that the arbitration agreement is null and void, inoperative, or incapable of being
performed, or
(b) that there are other sufficient grounds for not requiring the parties to abide by the
arbitration agreement.
(3) The court may treat as a sufficient ground under subsection (2)(b) the fact that the
applicant is or was at any material time not ready and willing to do all things necessary
for the proper conduct of the arbitration or of any other dispute resolution procedures
required to be exhausted before resorting to arbitration.
(4) For the purposes of this section the question whether an arbitration agreement is a
domestic arbitration agreement shall be determined by reference to the facts at the time
the legal proceedings are commenced.
Effectiveness of agreement to exclude court’s jurisdiction.
87. (1) In the case of a domestic arbitration agreement any agreement to exclude the
jurisdiction of the court under—
(a) section 45 (determination of preliminary point of law), or
(b) section 69 (challenging the award: appeal on point of law), is not effective unless
entered into after the commencement of the arbitral proceedings in which the
question arises or the award is made.
(2) For this purpose the commencement of the arbitral proceedings has the same
meaning as in Part I (see section 14).
(3) For the purposes of this section the question whether an arbitration agreement is a
domestic arbitration agreement shall be determined by reference to the facts at the time
the agreement is entered into.
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293
Power to repeal or amend sections 85 to 87.
88. (1) The Secretary of State may by order repeal or amend the provisions of sections
85 to 87.
(2) An order under this section may contain such supplementary, incidental and
transitional provisions as appear to the Secretary of State to be appropriate.
(3) An order under this section shall be made by statutory instrument and no such order
shall be made unless a draft of it has been laid before and approved by a resolution of
each House of Parliament.
Consumer arbitration agreements
Application of unfair terms regulations to consumer arbitration
agreements.
89. (1) The following sections extend the application of the Unfair Terms in Consumer
Contracts Regulations 1994 in relation to a term which constitutes an arbitration
agreement. For this purpose “arbitration agreement” means an agreement to submit to
arbitration present or future disputes or differences (whether or not contractual).
(2) In those sections “the Regulations” means those regulations and includes any
regulations amending or replacing those regulations.
(3) Those sections apply whatever the law applicable to the arbitration agreement.
Regulations apply where consumer is a legal person.
90. The Regulations apply where the consumer is a legal person as they apply where
the consumer is a natural person.
Arbitration agreement unfair where modest amount sought.
91. (1) A term which constitutes an arbitration agreement is unfair for the purposes of
the Regulations so far as it relates to a claim for a pecuniary remedy which does not
exceed the amount specified by order for the purposes of this section.
(2) Orders under this section may make different provision for different cases and for
different purposes.
(3) The power to make orders under this section is exercisable—
(a) for England and Wales, by the Secretary of State with the concurrence of the
Lord Chancellor,
(b) for Scotland, by the Secretary of State with the concurrence of the Lord Advocate,
and
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(c) for Northern Ireland, by the Department of Economic Development for Northern
Ireland with the concurrence of the Lord Chancellor.
(4) Any such order for England and Wales or Scotland shall be made by statutory
instrument which shall be subject to annulment in pursuance of a resolution of either
House of Parliament.
(5) Any such order for Northern Ireland shall be a statutory rule for the purposes of the
Statutory Rules (Northern Ireland) Order 1979 and shall be subject to negative resolution, within the meaning of section 41(6) of the Interpretation Act (Northern Ireland)
1954.
Small claims arbitration in the county court
Exclusion of Part I in relation to small claims arbitration in the
county court.
92. Nothing in Part I of this Act applies to arbitration under section 64 of the County
Courts Act 1984.
Appointment of judges as arbitrators
Appointment of judges as arbitrators.
93. (1) A judge of the Commercial Court or an official referee may, if in all the circumstances he thinks fit, accept appointment as a sole arbitrator or as umpire by or by
virtue of an arbitration agreement.
(2) A judge of the Commercial Court shall not do so unless the Lord Chief Justice has
informed him that, having regard to the state of business in the High Court and the
Crown Court, he can be made available.
(3) An official referee shall not do so unless the Lord Chief Justice has informed
him that, having regard to the state of official referees’ business, he can be made
available.
(4) The fees payable for the services of a judge of the Commercial Court or official
referee as arbitrator or umpire shall be taken in the High Court.
(5) In this section “arbitration agreement” has the same meaning as in Part I; and
“official referee” means a person nominated under section 68(1)(a) of the Supreme
Court Act 1981 to deal with official referees’ business.
(6) The provisions of Part I of this Act apply to arbitration before a person appointed
under this section with the modifications specified in Schedule 2.
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295
Statutory arbitrations
Application of Part I to statutory arbitrations.
94. (1) The provisions of Part I apply to every arbitration under an enactment (a
“statutory arbitration”), whether the enactment was passed or made before or after
the commencement of this Act, subject to the adaptations and exclusions specified in
sections 95 to 98.
(2) The provisions of Part I do not apply to a statutory arbitration if or to the extent that
their application—
(a) is inconsistent with the provisions of the enactment concerned, with any rules or
procedure authorised or recognised by it, or
(b) is excluded by any other enactment.
(3) In this section and the following provisions of this Part “enactment”—
(a) in England and Wales, includes an enactment contained in subordinate legislation within the meaning of the Interpretation Act 1978;
(b) in Northern Ireland, means a statutory provision within the meaning of section
1(f) of the Interpretation Act (Northern Ireland) 1954.
General adaptation of provisions in relation to statutory
arbitrations.
95. (1) The provisions of Part I apply to a statutory arbitration—
(a) as if the arbitration were pursuant to an arbitration agreement and as if the
enactment were that agreement, and
(b) as if the persons by and against whom a claim subject to arbitration in pursuance
of the enactment may be or has been made were parties to that agreement.
(2) Every statutory arbitration shall be taken to have its seat in England and Wales or,
as the case may be, in Northern Ireland.
Specific adaptations of provisions in relation to statutory
arbitrations.
96. (1) The following provisions of Part I apply to a statutory arbitration with the
following adaptations.
(2) In section 30(1) (competence of tribunal to rule on its own jurisdiction), the reference
in paragraph (a) to whether there is a valid arbitration agreement shall be construed as
a reference to whether the enactment applies to the dispute or difference in question.
(3) Section 35 (consolidation of proceedings and concurrent hearings) applies only so as
to authorise the consolidation of proceedings, or concurrent hearings in proceedings,
under the same enactment.
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(4) Section 46 (rules applicable to substance of dispute) applies with the omission of
subsection (1)(b) (determination in accordance with considerations agreed by parties).
Provisions excluded from applying to statutory arbitrations.
97. The following provisions of Part I do not apply in relation to a statutory
arbitration—
(a) section 8 (whether agreement discharged by death of a party);
(b) section 12 (power of court to extend agreed time limits);
(c) sections 9(5), 10(2) and 71(4) (restrictions on effect of provision that award
condition precedent to right to bring legal proceedings).
Power to make further provision by regulations.
98. (1) The Secretary of State may make provision by regulations for adapting or
excluding any provision of Part I in relation to statutory arbitrations in general or
statutory arbitrations of any particular description.
(2) The power is exercisable whether the enactment concerned is passed or made
before or after the commencement of this Act.
(3) Regulations under this section shall be made by statutory instrument which shall be
subject to annulment in pursuance of a resolution of either House of Parliament.
PART III
RECOGNITION AND ENFORCEMENT OF CERTAIN FOREIGN AWARDS
Enforcement of Geneva Convention awards
Continuation of Part II of the Arbitration Act 1950.
99. Part II of the Arbitration Act 1950 (enforcement of certain foreign awards) continues to apply in relation to foreign awards within the meaning of that Part which are not
also New York Convention awards.
Recognition and enforcement of New York Convention awards
New York Convention awards.
100. (1) In this Part a “New York Convention award” means an award made, in
pursuance of an arbitration agreement, in the territory of a state (other than the United
Kingdom) which is a party to the New York Convention.
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(2) For the purposes of subsection (1) and of the provisions of this Part relating to such
awards—
(a) “arbitration agreement” means an arbitration agreement in writing, and
(b) an award shall be treated as made at the seat of the arbitration, regardless of
where it was signed, despatched or delivered to any of the parties. In this subsection
“agreement in writing” and “seat of the arbitration” have the same meaning as in
Part I.
(3) If Her Majesty by Order in Council declares that a state specified in the Order is a
party to the New York Convention, or is a party in respect of any territory so specified,
the Order shall, while in force, be conclusive evidence of that fact.
(4) In this section “the New York Convention” means the Convention on the Recognition
and Enforcement of Foreign Arbitral Awards adopted by the United Nations Conference
on International Commercial Arbitration on 10th June 1958.
Recognition and enforcement of awards.
101. (1) A New York Convention award shall be recognised as binding on the persons
as between whom it was made, and may accordingly be relied on by those persons by
way of defence, set-off or otherwise in any legal proceedings in England and Wales or
Northern Ireland.
(2) A New York Convention award may, by leave of the court, be enforced in the same
manner as a judgment or order of the court to the same effect. As to the meaning of
“the court” see section 105.
(3) Where leave is so given, judgment may be entered in terms of the award.
Evidence to be produced by party seeking recognition or
enforcement.
102. (1) A party seeking the recognition or enforcement of a New York Convention
award must produce—
(a) the duly authenticated original award or a duly certified copy of it, and
(b) the original arbitration agreement or a duly certified copy of it.
(2) If the award or agreement is in a foreign language, the party must also produce
a translation of it certified by an official or sworn translator or by a diplomatic or
consular agent.
Refusal of recognition or enforcement.
103. (1) Recognition or enforcement of a New York Convention award shall not be
refused except in the following cases.
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(2) Recognition or enforcement of the award may be refused if the person against
whom it is invoked proves—
(a) that a party to the arbitration agreement was (under the law applicable to him)
under some incapacity;
(b) that the arbitration agreement was not valid under the law to which the parties
subjected it or, failing any indication thereon, under the law of the country where the
award was made;
(c) that he was not given proper notice of the appointment of the arbitrator or of the
arbitration proceedings or was otherwise unable to present his case;
(d) that the award deals with a difference not contemplated by or not falling within
the terms of the submission to arbitration or contains decisions on matters beyond
the scope of the submission to arbitration (but see subsection (4));
(e) that the composition of the arbitral tribunal or the arbitral procedure was not in
accordance with the agreement of the parties or, failing such agreement, with the
law of the country in which the arbitration took place;
(f) that the award has not yet become binding on the parties, or has been set aside or
suspended by a competent authority of the country in which, or under the law of
which, it was made.
(3) Recognition or enforcement of the award may also be refused if the award is in
respect of a matter which is not capable of settlement by arbitration, or if it would be
contrary to public policy to recognise or enforce the award.
(4) An award which contains decisions on matters not submitted to arbitration may be
recognised or enforced to the extent that it contains decisions on matters submitted to
arbitration which can be separated from those on matters not so submitted.
(5) Where an application for the setting aside or suspension of the award has been
made to such a competent authority as is mentioned in subsection (2)(f), the court
before which the award is sought to be relied upon may, if it considers it proper,
adjourn the decision on the recognition or enforcement of the award. It may also on the
application of the party claiming recognition or enforcement of the award order the
other party to give suitable security.
Saving for other bases of recognition or enforcement.
104. Nothing in the preceding provisions of this Part affects any right to rely upon or
enforce a New York Convention award at common law or under section 66.
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PART IV
GENERAL PROVISIONS
Meaning of “the court:” jurisdiction of High Court and county
court.
105. (1) In this Act “the court” means the High Court or a county court, subject to the
following provisions.
(2) The Lord Chancellor may by order make provision—
(a) allocating proceedings under this Act to the High Court or to county courts; or
(b) specifying proceedings under this Act which may be commenced or taken only
in the High Court or in a county court.
(3) The Lord Chancellor may by order make provision requiring proceedings of any
specified description under this Act in relation to which a county court has jurisdiction
to be commenced or taken in one or more specified county courts. Any jurisdiction so
exercisable by a specified county court is exercisable throughout England and Wales
or, as the case may be, Northern Ireland.
(4) An order under this section—
(a) may differentiate between categories of proceedings by reference to such criteria
as the Lord Chancellor sees fit to specify, and
(b) may make such incidental or transitional provision as the Lord Chancellor considers necessary or expedient.
(5) An order under this section for England and Wales shall be made by statutory
instrument which shall be subject to annulment in pursuance of a resolution of either
House of Parliament.
(6) An order under this section for Northern Ireland shall be a statutory rule for the
purposes of the Statutory Rules (Northern Ireland) Order 1979 which shall be subject
to annulment in pursuance of a resolution of either House of Parliament in like manner
as a statutory instrument and section 5 of the Statutory Instruments Act 1946 shall
apply accordingly.
Crown application.
106. (1) Part I of this Act applies to any arbitration agreement to which Her Majesty,
either in right of the Crown or of the Duchy of Lancaster or otherwise, or the Duke of
Cornwall, is a party.
(2) Where Her Majesty is party to an arbitration agreement otherwise than in right of the
Crown, Her Majesty shall be represented for the purposes of any arbitral proceedings—
(a) where the agreement was entered into by Her Majesty in right of the Duchy of
Lancaster, by the Chancellor of the Duchy or such person as he may appoint, and
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(b) in any other case, by such person as Her Majesty may appoint in writing under the
Royal Sign Manual.
(3) Where the Duke of Cornwall is party to an arbitration agreement, he shall be represented for the purposes of any arbitral proceedings by such person as he may
appoint.
(4) References in Part I to a party or the parties to the arbitration agreement or to arbitral proceedings shall be construed, where subsection (2) or (3) applies, as references
to the person representing Her Majesty or the Duke of Cornwall.
Consequential amendments and repeals.
107. (1) The enactments specified in Schedule 3 are amended in accordance with that
Schedule, the amendments being consequential on the provisions of this Act.
(2) The enactments specified in Schedule 4 are repealed to the extent specified.
Extent.
108. (1) The provisions of this Act extend to England and Wales and, except as mentioned below, to Northern Ireland.
(2) The following provisions of Part II do not extend to Northern Ireland section 92
(exclusion of Part I in relation to small claims arbitration in the county court), and section 93 and Schedule 2 (appointment of judges as arbitrators).
(3) Sections 89, 90 and 91 (consumer arbitration agreements) extend to Scotland and
the provisions of Schedules 3 and 4 (consequential amendments and repeals) extend to
Scotland so far as they relate to enactments which so extend, subject as follows.
(4) The repeal of the Arbitration Act 1975 extends only to England and Wales and
Northern Ireland.
Commencement.
109. (1) The provisions of this Act come into force on such day as the Secretary of
State may appoint by order made by statutory instrument, and different days may be
appointed for different purposes.
(2) An order under subsection (1) may contain such transitional provisions as appear
to the Secretary of State to be appropriate.
Short title.
110. This Act may be cited as the Arbitration Act 1996.
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CIETAC Arbitration Rules
China International Economic and Trade Arbitration Commission
CIETAC
Arbitration Rules
(Revised and Adopted by the China Council for the Promotion of International
Trade/China Chamber of International Commerce on January 11, 2005.
Effective as from May 1, 2005.)
Chapter I General Provisions
Article 1 The Rules
These Rules are formulated in accordance with the Arbitration Law of the People’s
Republic of China and the provisions of other relevant laws, as well as the “Decision”
of the former Administration Council of the Central People’s Government and the
“Notice” and the “Official Reply” of the State Council.
Article 2 Name and Structure
1. The China International Economic and Trade Arbitration Commission (originally
named the Foreign Trade Arbitration Commission of the China Council for the
Promotion of International Trade, later renamed the Foreign Economic and Trade
Arbitration Commission of the China Council for the Promotion of International Trade,
and currently called the China International Economic and Trade Arbitration
Commission, hereinafter referred to as the “CIETAC”) independently and impartially
resolves, by means of arbitration, disputes arising from economic and trade transactions of a contractual or non-contractual nature.
2. The CIETAC concurrently uses the “Court of Arbitration of the China Chamber of
International Commerce” as its name.
303
3. Where an arbitration agreement or an arbitration clause contained in a contract
provides for arbitration by the CIETAC or one of its Sub-Commissions or by the
CIETAC using one of its prior names, the parties shall be deemed to have unanimously
agreed that the arbitration shall be administered by the CIETAC or by one of its
Sub-Commissions.
4. Where an arbitration agreement or an arbitration clause contained in a contract
provides for arbitration by the China Council for the Promotion of International Trade/
China Chamber of International Commerce or by the Arbitration Commission or the
Court of Arbitration of the China Council for the Promotion of International Trade/
China Chamber of International Commerce, the parties shall be deemed to have unanimously agreed that the arbitration shall be administered by the CIETAC.
5. The Chairman of the CIETAC shall perform the functions and duties vested in him/
her by these Rules while a Vice-Chairman may perform the Chairman’s functions and
duties with the Chairman’s authorization.
6. The CIETAC has a Secretariat, which handles its day-to-day work under the direction of its Secretary-General.
7. The CIETAC is based in Beijing, and has a South China Sub-Commission (formerly known as Shenzhen Sub-Commission) in Shenzhen Special Economic Zone and
a Shanghai Sub-Commission in Shanghai. These Sub-Commissions are integral parts
of the CIETAC. The Sub-Commissions have their respective secretariats, which handle
their day-to-day work under the direction of the Secretaries-General of the respective
Sub-Commissions.
8. The parties may agree to have their disputes arbitrated by the CIETAC in Beijing,
the South China Sub-Commission in Shenzhen or the Shanghai Sub-Commission in
Shanghai. In the absence of such an agreement, the Claimant shall have the option to
submit the case for arbitration by the CIETAC in Beijing, the South China SubCommission in Shenzhen or the Shanghai Sub-Commission in Shanghai. When such
option is exercised, the first choice by the party shall prevail. In case of any dispute, the
final decision shall be made by the CIETAC.
9. The CIETAC may, in its discretion, establish arbitration centers for specific business sectors and issue arbitration rules therefor.
10. The CIETAC shall establish a Panel of Arbitrators, and may, in its discretion,
establish Panels of Arbitrators for specific business sectors.
Article 3 Jurisdiction
The CIETAC accepts cases involving:
1. international or foreign-related disputes;
2. disputes related to the Hong Kong Special Administrative Region or the Macao
Special Administrative Region or the Taiwan region; and
3. domestic disputes.
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CIETAC ARBITRATION RULES
Article 4 Scope of Application
1. These Rules uniformly apply to the CIETAC and its Sub-Commissions. When arbitration proceedings are administered by a Sub-Commission, the functions and duties
under these Rules allocated to the Chairman, the secretariat and the Secretary-General
of the CIETAC shall be performed, respectively, by a Vice-Chairman authorized by
the Chairman, a secretariat and a Secretary-General of the relevant Sub-Commission
except for the power to make decisions on challenges to arbitrators.
2. The parties shall be deemed to have agreed to arbitrate in accordance with these
Rules whenever they have provided for arbitration by the CIETAC. Where the parties
have agreed on the application of other arbitration rules, or any modification of these
Rules, the parties’ agreement shall prevail except where such agreement is inoperative
or in conflict with a mandatory provision of the law of the place of arbitration.
3. Where the parties agree to refer their disputes to arbitration under these Rules without providing the name of an arbitration institution, they shall be deemed to have
agreed to refer the dispute to arbitration by the CIETAC.
4. Where the parties agree to refer their dispute to arbitration under the CIETAC’s
arbitration rules for a specific business sector or profession and the dispute falls within
the scope of such rules, the parties’ agreement shall prevail; otherwise, these Rules
shall apply.
Article 5 Arbitration Agreement
1. The CIETAC shall, upon the written application of a party, accept a case in accordance with an arbitration agreement concluded between the parties, either before or
after the occurrence of the dispute, in which it is provided that disputes are to be
referred to arbitration by the CIETAC.
2. An arbitration agreement means an arbitration clause in a contract concluded
between the parties or any other form of written agreement providing for the settlement of disputes by arbitration.
3. The arbitration agreement shall be in writing. An arbitration agreement is in writing
if it is contained in a tangible form of a document such as a contract, letter, telegram,
telex, facsimile, EDI, or Email. An arbitration agreement shall be deemed to exist
where its existence is asserted by one party and not denied by the other during the
exchange of the Request for Arbitration and the Statement of Defense.
4. An arbitration clause contained in a contract shall be treated as a clause independent
and separate from all other clauses of the contract, and an arbitration agreement
attached to a contract shall also be treated as independent and separate from all other
clauses of the contract. The validity of an arbitration clause or an arbitration agreement
shall not be affected by any modification, rescission, termination, transfer, expiry,
invalidity, ineffectiveness, revocation or non-existence of the contract.
CIETAC ARBITRATION RULES
305
Article 6 Objection to an Arbitration Agreement and/or Jurisdiction
1. The CIETAC shall have the power to determine the existence and validity of an
arbitration agreement and its jurisdiction over an arbitration case. The CIETAC may,
if necessary, delegate such power to the arbitral tribunal.
2. Where the CIETAC is satisfied by prima facie evidence that an arbitration agreement providing for arbitration by the CIETAC exists, it may make a decision based on
such evidence that it has jurisdiction over the arbitration case, and the arbitration shall
proceed. Such a decision shall not prevent the CIETAC from making a new decision
on jurisdiction based on facts and/or evidence found by the arbitral tribunal during the
arbitration proceedings that are inconsistent with the prima facie evidence.
3. An objection to an arbitration agreement and/or jurisdiction over an arbitration case
shall be raised in writing before the first oral hearing is held by the arbitral tribunal.
Where a case is to be decided on the basis of documents only, such an objection shall
be raised before the submission of the first substantive defense.
4. The arbitration shall proceed notwithstanding an objection to the arbitration agreement and/or jurisdiction over the arbitration case.
5. The aforesaid objections to and/or decisions on jurisdiction by the CIETAC shall include
objections to and/or decisions on a party’s standing to participate in the arbitration.
Article 7 Bona Fide Cooperation
The parties shall proceed with the arbitration in bona fide cooperation.
Article 8 Waiver of Right to Object
A party shall be deemed to have waived its right to object where it knows or should
have known that any provision of, or requirement under, these Rules has not been
complied with and yet participates in or proceeds with the arbitration proceedings
without promptly and explicitly submitting its objection in writing to such noncompliance.
Chapter II Arbitral Proceedings
Section 1 Request for Arbitration, Defense and Counterclaim
Article 9 Commencement of Arbitration
The arbitral proceedings shall commence on the date on which the CIETAC or one of
its Sub-Commissions receives a Request for Arbitration.
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Article 10 Application for Arbitration
A party applying for arbitration under these Rules shall:
1. Submit a Request for Arbitration in writing signed by and/or affixed with the seal
of the Claimant and/or its authorized representative(s), which shall, inter alia,
include:
(a) the names and addresses of the Claimant and the Respondent, including
the zip code, telephone, telex, fax and telegraph numbers, Email addresses
or any other means of electronic telecommunications;
(b) a reference to the arbitration agreement that is invoked;
(c) a statement of the facts of the case and the main issues in dispute;
(d) the claim of the Claimant; and
(e) the facts and grounds on which the claim is based.
2. Attach to the Request for Arbitration the relevant evidence supporting the facts on
which the Claimant’s claim is based.
3. Make payment of the arbitration fee in advance to the CIETAC according to its
Arbitration Fee Schedule.
Article 11 Acceptance of a Case
1. Upon receipt of the Request for Arbitration and its attachments, if the CIETAC after
examination finds the formalities required for arbitration application to be incomplete,
it may request the Claimant to complete them. Where the formalities are found to be
complete, the CIETAC shall send a Notice of Arbitration to both parties together with
one copy each of the CIETAC Arbitration Rules, the Panel of Arbitrators and the
Arbitration Fee Schedule. The Request for Arbitration and its attachments submitted
by the Claimant shall be sent to the Respondent under the same cover.
2. The CIETAC or its Sub-Commission shall, after accepting a case, appoint a staffmember of its secretariat to assist the arbitral tribunal in the procedural administration
of the case.
Article 12 Statement of Defense
1. Within forty-five (45) days from the date of receipt of the Notice of Arbitration, the
Respondent shall file a Statement of Defense in writing with the Secretariat of the
CIETAC or its Sub-Commission. The arbitral tribunal may extend that time period if
it believes that there are justified reasons. The Statement of Defense shall be signed by
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and/or affixed with the seal of the Respondent and/or its authorized representative(s),
and shall, inter alia, include:
(a) the names and addresses of the Respondent, including the zip code, telephone,
telex, fax and telegraph numbers, Email addresses or any other means of electronic telecommunications;
(b) the defense to the Request for Arbitration setting forth the facts and grounds on
which the defense is based; and
(c) the relevant evidence supporting the defense.
2. The arbitral tribunal has the power to decide whether to accept a Statement of
Defense submitted after expiration of the above time limit.
3. Failure of the Respondent to file a Statement of Defense shall not operate to affect
the arbitral proceedings.
Article 13 Counterclaim
1. Within forty-five (45) days from the date of receipt of the Notice of Arbitration, the
Respondent shall file with the CIETAC its counterclaim in writing, if any. The arbitral
tribunal may extend that time period if it believes that there are justified reasons.
2. When filing a counterclaim, the Respondent shall specify its counterclaim in its
written Statement of Counterclaim and state the facts and grounds upon which its
counterclaim is based with relevant evidence attached thereto.
3. When filing a counterclaim, the Respondent shall pay an arbitration fee in advance
according to the Arbitration Fee Schedule of the CIETAC within a specified time
period.
4. Where the formalities required for filing a counterclaim are found to be complete,
the CIETAC shall send the Statement of Counterclaim and its attachments to the
Claimant. The Claimant shall, within thirty (30) days from the date of receipt of the
Statement of Counterclaim and the attachment, submit in writing its Statement of
Defense to the Respondent’s counterclaim.
5. The arbitral tribunal has the power to decide whether to accept a Statement of
Defense submitted after expiration of the above time limit.
6. Failure of the Claimant to file a Statement of Defense to the Respondent’s counterclaim shall not operate to affect the arbitral proceedings.
Article 14 Amendments to the Claim or Counterclaim
The Claimant may amend its claim and the Respondent may amend its counterclaim.
However, the arbitral tribunal may not permit any such amendment if it considers that
the amendment is too late and may delay the arbitral proceedings.
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Article 15 Copies of Submissions
When submitting the Request for Arbitration, the Statement of Defense, the Statement
of Counterclaim, evidence and other documents, the parties shall make the submissions in quintuplicate. Where there are more than two parties, additional copies shall
be provided accordingly. Where the arbitral tribunal is composed of a sole arbitrator,
the number of copies submitted may be reduced by two. Where the preservation of
property or protection of evidence is applied for, the party shall forward one additional
copy accordingly.
Article 16 Representation
1. A party may be represented by its authorized representative(s) in handling matters
relating to the arbitration. In such a case, a Power of Attorney shall be forwarded to the
CIETAC by the party or its authorized representative(s).
2. Either Chinese or foreign citizens may be authorized by a party to act as its
representative(s).
Article 17 Preservation of Property
When any party applies for the preservation of property, the CIETAC shall forward the
party’s application for a ruling to the competent court at the place where the domicile
of the party against whom the preservation of property is sought is located or where the
property of the said party is located.
Article 18 Protection of Evidence
When a party applies for the protection of evidence, the CIETAC shall forward the
party’s application for a ruling to the competent court at the place where the evidence
is located.
Section 2 The Arbitral Tribunal
Article 19 Duties of Arbitrator
An arbitrator shall not represent either party and shall remain independent of the
parties and treat them equally.
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Article 20 Number of Arbitrators
1. The arbitral tribunal shall be composed of one or three arbitrators.
2. Unless otherwise agreed by the parties or provided by these Rules, the arbitral tribunal shall be composed of three arbitrators.
Article 21 Panel of Arbitrators
1. The parties shall appoint arbitrators from the Panel of Arbitrators provided by the
CIETAC.
2. Where the parties have agreed to appoint arbitrators from outside of the CIETAC’s
Panel of Arbitrators, the arbitrators so appointed by the parties or nominated according
to the agreement of the parties may act as co-arbitrator, presiding arbitrator or sole
arbitrator after the appointment has been confirmed by the Chairman of the CIETAC
in accordance with the law.
Article 22 Three Arbitrators
1. Within fifteen (15) days from the date of receipt of the Notice of Arbitration, the
Claimant and the Respondent shall each appoint one arbitrator or entrust the Chairman
of the CIETAC to make such appointment. Where a party fails to appoint or to entrust
the Chairman of the CIETAC to appoint an arbitrator within the specified time period,
the arbitrator shall be appointed by the Chairman of the CIETAC.
2. Within fifteen (15) days from the date of the Respondent’s receipt of the Notice of
Arbitration, the presiding arbitrator shall be jointly appointed by the parties or appointed
by the Chairman of the CIETAC upon the parties’ joint authorization.
3. The parties may each recommend one to three arbitrators as candidates for the presiding arbitrator and shall submit the list of recommended candidates to the CIETAC
within the time period specified in paragraph 2. Where there is only one common candidate in the lists, such candidate shall be the presiding arbitrator jointly appointed by
the parties. Where there are more than one common candidate in the lists, the Chairman
of the CIETAC shall choose a presiding arbitrator from among the common candidates
based on the specific nature and circumstances of the case, who shall act as the presiding arbitrator jointly appointed by the parties. Where there is no common candidate in
the lists, the presiding arbitrator shall be appointed by the Chairman of the CIETAC
from outside of the lists of recommended candidates.
4. Where the parties have failed to jointly appoint the presiding arbitrator according to
the above provisions, the presiding arbitrator shall be appointed by the Chairman of
the CIETAC.
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Article 23 Sole Arbitrator
Where the arbitral tribunal is composed of one arbitrator, the sole arbitrator shall be
appointed pursuant to the procedure stipulated in Paragraphs 2, 3 and 4 of Article 22.
Article 24 Multi-Party
1. Where there are two or more Claimants and/or Respondents in an arbitration case,
the Claimant side and/or the Respondent side each shall, through consultation, jointly
appoint or jointly entrust the Chairman of the CIETAC to appoint one arbitrator from
the CIETAC’s Panel of Arbitrators.
2. Where the Claimant side and/or the Respondent side fail to jointly appoint or jointly
entrust the Chairman of the CIETAC to appoint one arbitrator within fifteen (15) days
from the date of receipt of the Notice of Arbitration, the arbitrator shall be appointed
by the Chairman of the CIETAC.
3. The presiding arbitrator or the sole arbitrator shall be appointed in accordance with
the procedure stipulated in Paragraphs 2, 3 and 4 of Article 22. When appointing the
presiding arbitrator or the sole arbitrator pursuant to Paragraph 3 of Article 22, the
Claimant side and/or the Respondent side each shall, through consultation, submit a
list of their jointly agreed candidates to the CIETAC.
Article 25 Disclosure
1. An arbitrator appointed by the parties or by the Chairman of the CIETAC shall sign
a Declaration and disclose to the CIETAC in writing any facts or circumstances likely
to give rise to justifiable doubts as to his/her impartiality or independence.
2. If circumstances that need to be disclosed arise during the arbitral proceedings, the
arbitrator shall promptly disclose such circumstances in writing to the CIETAC.
3. The CIETAC shall communicate the Declaration and/or the disclosure of the arbitrator to the parties.
Article 26 Challenge of Arbitrators
1. Upon receipt of the Declaration and/or written disclosure of an arbitrator communicated by the CIETAC, a party who intends to challenge the arbitrator on the grounds
of the facts or circumstances disclosed by the arbitrator shall forward the challenge in
writing to the CIETAC within ten (10) days from the date of such receipt. If a party
fails to file a challenge within the above time limit, it shall not challenge an arbitrator
later on the basis of matters disclosed by the arbitrator.
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2. A party who has justifiable doubts as to the impartiality or independence of an
appointed arbitrator may make a request in writing to the CIETAC for that arbitrator’s
withdrawal. In the request, the facts and reasons on which the request is based shall be
stated with supporting evidence.
3. A party may challenge an arbitrator in writing within fifteen (15) days from the date
of its receipt of the Notice of Formation of the Arbitral Tribunal. Where a party
becomes aware of the reasons for a challenge after the said receipt, the party may challenge the arbitrator in writing within fifteen (15) days after such reasons become
known, but no later than the conclusion of the last oral hearing.
4. The CIETAC shall promptly communicate the challenge to the other party, the arbitrator being challenged and the other members of the arbitral tribunal.
5. Where an arbitrator is challenged by one party and the other party agrees to the challenge, or the arbitrator being challenged withdraws from his/her office, such arbitrator
shall no longer be on the arbitral tribunal. Neither case implies that the challenge made
by the party is sustainable.
6. In circumstances other than those specified in Paragraph 5, the Chairman of the
CIETAC shall make a final decision on the challenge with or without stating the
reasons therefor.
7. An arbitrator who has been challenged shall continue to fulfill the functions of
arbitrator until a decision on the challenge has been made by the Chairman of the
CIETAC.
Article 27 Replacement of Arbitrator
1. In the event that an arbitrator is prevented de jure or de facto from fulfilling his/her
functions, or he/she fails to fulfill his/her functions in accordance with the requirements of these Rules or within the time period specified in these Rules, the Chairman
of the CIETAC shall have the power to decide whether the arbitrator shall be replaced.
The arbitrator may also withdraw form his/her office.
2. In the event that an arbitrator is unable to fulfill his/her functions owing to his/her
demise, removal from the CIETAC’s Panel of Arbitrators, withdrawal, resignation or
any other reasons, a substitute arbitrator shall be appointed within a time period specified by the CIETAC pursuant to the procedure applied to the appointment of the arbitrator being replaced.
3. After the replacement of the arbitrator, the arbitral tribunal shall decide whether the
whole or a part of the previous proceedings of the case shall be repeated.
4. The Chairman of the CIETAC shall make a final decision on whether an arbitrator
should be replaced or not with or without stating the reasons therefor.
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Article 28 Majority to Continue Arbitration
In the event that, after the conclusion of the last oral hearing, an arbitrator on a threemember arbitral tribunal is unable to participate in the deliberation and/or render the
award owing to his/her demise or removal from the CIETAC’s Panel of Arbitrators,
the other two arbitrators may request the Chairman of the CIETAC to replace the arbitrator pursuant to Article 27. After consulting with the parties and upon the approval
of the Chairman of the CIETAC, the other two arbitrators may continue the arbitration
and make decisions, rulings or the award. The Secretariat of the CIETAC shall notify
the parties of the above circumstances.
SECTION 3 HEARING
Article 29 Conduct of Hearing
1. The arbitral tribunal shall examine the case in any way that it deems appropriate
unless otherwise agreed by the parties. Under any circumstance, the arbitral tribunal
shall act impartially and fairly and shall afford reasonable opportunities to all parties
for presentations and debates.
2. The arbitral tribunal shall hold oral hearings when examining the case. However,
oral hearings may be omitted and the case shall be examined on the basis of documents
only if the parties so request or agree and the arbitral tribunal also deems that oral hearings are unnecessary.
3. Unless otherwise agreed by the parties, the arbitral tribunal may adopt an inquisitorial or adversarial approach when examining the case, having regard to the circumstances of the case.
4. The arbitral tribunal may hold deliberation at any place or in any manner that it
considers appropriate.
5. The arbitral tribunal may, if it considers it necessary, issue procedural directions and
lists of questions, hold pre-hearing meetings and preliminary hearings, and produce
terms of reference, etc., unless otherwise agreed by the parties.
Article 30 Notice of Oral Hearings
1. The date of the first oral hearing shall be fixed by the arbitral tribunal and notified to
the parties by the Secretariat of the CIETAC at least twenty (20) days in advance of the
oral hearing date. A party having justified reasons may request a postponement of the
oral hearing. However, such request must be communicated to the arbitral tribunal at
least ten (10) days in advance of the oral hearing date. The arbitral tribunal shall decide
whether to postpone the oral hearing or not.
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2. A notice of oral hearing subsequent to the first oral hearing and a notice of a postponed oral hearing shall not be subject to the twenty (20)-day time limit provided for
in the foregoing paragraph.
Article 31 Place of Arbitration
1. Where the parties have agreed on the place of arbitration in writing, the parties’
agreement shall prevail.
2. Where the parties have not agreed on the place of arbitration, the place of arbitration
shall be the domicile of the CIETAC or its Sub-Commission.
3. The arbitral award shall be deemed as being made at the place of arbitration.
Article 32 Place of Oral Hearing
1. Where the parties have agreed on the place of oral hearings, the case shall be heard
at that agreed place except for circumstances stipulated in Paragraph 3 of Article 69 of
these Rules.
2. Unless the parties agree otherwise, a case accepted by the CIETAC shall be heard in
Beijing, or if the arbitral tribunal considers it necessary, at other places with the
approval of the Secretary-General of the CIETAC. A case accepted by a SubCommission of the CIETAC shall be heard at the place where the Sub-Commission is
located, or if the arbitral tribunal considers it necessary, at other places with the
approval of the Secretary-General of the Sub-Commission.
Article 33 Confidentiality
1. Hearings shall be held in camera. Where both parties request an open hearing, the
arbitral tribunal shall make a decision.
2. For cases heard in camera, the parties, their representatives, witnesses, interpreters,
arbitrators, experts consulted by the arbitral tribunal and appraisers appointed by the
arbitral tribunal and the relevant staff-members of the Secretariat of the CIETAC shall
not disclose to any outsiders any substantive or procedural matters of the case.
Article 34 Default
1. If the Claimant fails to appear at an oral hearing without showing sufficient cause for
such failure, or withdraws from an on-going oral hearing without the permission of the
arbitral tribunal, the Claimant may be deemed to have withdrawn its Request for
Arbitration. In such a case, if the Respondent has filed a counterclaim, the arbitral tribunal shall proceed with the hearing of the counterclaim and make a default award.
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2. If the Respondent fails to appear at an oral hearing without showing sufficient cause
for such failure, or withdraws from an on-going oral hearing without the permission of
the arbitral tribunal, the arbitral tribunal may proceed with the arbitration and make a
default award. In such a case, if the Respondent has filed a counterclaim, the Respondent
may be deemed to have withdrawn its counterclaim.
Article 35 Record of Oral Hearing
1. During the oral hearing, the arbitral tribunal may arrange a stenographic and/or
audio-visual record. The arbitral tribunal may, when it considers it necessary, take
minutes stating the main points of the oral hearing and request the parties and/or their
representatives, witnesses and/or other persons involved to sign and/or affix their seals
to the minutes.
2. The stenographic and/or audio-visual record of the oral hearing shall be available for
the use and reference by the arbitral tribunal.
Article 36 Evidence
1. Each party shall have the burden of proving the facts relied on to support its claim,
defense or counterclaim.
2. The arbitral tribunal may specify a time period for the parties to produce evidence
and the parties shall produce evidence within the specified time period. The arbitral
tribunal may refuse to admit any evidence produced beyond the period. If a party has
difficulties to produce evidence within the specified time period, it may apply for an
extension before the expiration of the period. The arbitral tribunal shall decide whether
or not to extend the time period.
3. If a party having the burden of proof fails to produce evidence within the specified
time period, or the produced evidence is not sufficient to support its claim or counterclaim, it shall bear the consequences thereof.
Article 37 Investigation by the Arbitral Tribunal
1. The arbitral tribunal may, on its own initiative, undertake investigations and collect
evidence as it considers necessary.
2. When investigating and collecting evidence by itself, the arbitral tribunal shall
promptly notify the parties to be present at such investigation if it considers it necessary. In the event that one or both parties fail to be present, the investigation and collection shall proceed without being affected.
3. The arbitral tribunal shall, through the Secretariat of the CIETAC, transmit the evidence collected by itself to the parties and afford them an opportunity to comment.
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Article 38 Expert’s Report and Appraiser’s Report
1. The arbitral tribunal may consult or appoint experts and appraisers for clarification
on specific issues of a case. Such an expert or appraiser may either be a Chinese or
foreign organization or citizen.
2. The arbitral tribunal has the power to request the parties to deliver or produce to the
expert or appraiser any relevant materials, documents, or property and goods for checking, inspection and/or appraisal. The parties shall be obliged to comply.
3. Copies of the expert’s report and the appraiser’s report shall be communicated to the
parties, who shall be given an opportunity to comment on the report. At the request of
either party and with the approval of the arbitral tribunal, the expert and appraiser may
be heard at an oral hearing where, if considered necessary and appropriate by the arbitral tribunal, they may give explanations on their reports.
Article 39 Examination of Evidence
1. All evidence submitted by a party shall be filed with the Secretariat of the CIETAC
for transmission to the other party.
2. Where a case is examined by way of an oral hearing, the evidence shall be exhibited
at the hearing and examined by the parties.
3. In the event that evidence is submitted after the hearing and the arbitral tribunal
decides to admit the evidence without holding further hearings, the arbitral tribunal
may require the parties to submit their opinions thereon in writing within a specified
time period.
Article 40 Combination of Conciliation with Arbitration
1. Where the parties have reached a settlement agreement by themselves through negotiation or conciliation without involving the CIETAC, either party may, based on an
arbitration agreement concluded between them that provides for arbitration by the
CIETAC and the settlement agreement, request the CIETAC to constitute an arbitral
tribunal to render an arbitral award in accordance with the terms of the settlement
agreement. Unless the parties agree otherwise, the Chairman of the CIETAC shall
appoint a sole arbitrator to form such arbitral tribunal, which shall examine the case in
the procedure it considers appropriate and render an award in due course. The specific
procedure and the time limit for rendering the award shall not be subject to other provisions of these Rules.
2. Where both parties have the desire for conciliation or one party so desires and the
other party agrees when approached by the arbitral tribunal, the arbitral tribunal may
conciliate the case during the course of the arbitration proceedings.
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3. The arbitral tribunal may conciliate the case in the manner it considers appropriate.
4. The arbitral tribunal shall terminate the conciliation and continue the arbitration
proceedings if one of the parties requests a termination of the conciliation or if the
arbitral tribunal believes that further efforts to conciliate will be futile.
5. A settlement agreement reached between the parties during the course of conciliation by the arbitral tribunal but without the involvement of the arbitral tribunal shall be
deemed as one reached through the conciliation by the arbitral tribunal.
6. Where settlement is reached through conciliation by the arbitral tribunal, the parties
shall sign a written settlement agreement. Unless otherwise agreed by the parties, the
arbitral tribunal will close the case and render an arbitral award in accordance with the
terms of the settlement agreement.
7. Where conciliation fails, the arbitral tribunal shall proceed with the arbitration and
render an arbitral award.
8. Where conciliation fails, any opinion, view or statement and any proposal or
proposition expressing acceptance or opposition by either party or by the arbitral tribunal in the process of conciliation shall not be invoked as grounds for any claim, defense
or counterclaim in the subsequent arbitration proceedings, judicial proceedings or any
other proceedings.
Article 41 Withdrawal and Dismissal
1. A party may file a request with the CIETAC to withdraw its claim or counterclaim
in its entirety. In the event that the Claimant withdraws its claim in its entirety, the
arbitral tribunal shall proceed with its examination of the counterclaim and render an
arbitral award thereon. In the event that the Respondent withdraws its counterclaim in
its entirety, the arbitral tribunal shall proceed with the examination of the claim and
render an arbitral award thereon.
2. Where a case is to be dismissed before the formation of the arbitral tribunal, the
decision shall be made by the Secretary-General of the CIETAC. Where the case is to
be dismissed after the formation of the arbitral tribunal, the decision shall be made by
the arbitral tribunal.
3. Where a party files with the CIETAC a request for arbitration for a claim which has
been withdrawn, the CIETAC shall decide whether or not to accept the request anew.
Chapter III Arbitral Award
Article 42 Time Limits
1. The arbitral tribunal shall render an arbitral award within six (6) months as from the
date on which the arbitral tribunal is formed.
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2. Upon the request of the arbitral tribunal, the Chairman of the CIETAC may extend
said time period if he/she considers it truly necessary and the reasons for the extension
truly justified.
Article 43 Making Award
1. The arbitral tribunal shall independently and impartially make its arbitral award on
the basis of the facts, in accordance with the law and the terms of the contracts, with
reference to international practices and in compliance with the principle of fairness and
reasonableness.
2. The arbitral tribunal shall state in the award the claims, the facts of the dispute, the
reasons on which the award is based, the result of the award, the allocation of the arbitration costs and the date on which and the place at which the award is made. The facts
of the dispute and the reasons on which the award is based may not be stated in the
award if the parties have agreed so, or if the award is made in accordance with the
terms of a settlement agreement between the parties. The arbitral tribunal has the power
to determine in the arbitral award the specific time period for the parties to execute the
award and the liabilities to be borne by a party failing to execute the award within the
specified time.
3. The CIETAC’s stamp shall be affixed to the award.
4. Where a case is examined by an arbitral tribunal composed of three arbitrators, the
award shall be rendered by all three arbitrators or a majority of the arbitrators. A written dissenting opinion shall be docketed into the file and may be attached to the award,
but it shall not form a part of the award.
5. Where the arbitral tribunal cannot reach a majority opinion, the award shall be rendered in accordance with the presiding arbitrator’s opinion. The written opinion of
other arbitrators shall be docketed into the file and may be attached to the award, but it
shall not form a part of the award.
6. Unless the award is made in accordance with the opinion of the presiding arbitrator or
the sole arbitrator, the arbitral award shall be signed by a majority of arbitrators. An
arbitrator who has a dissenting opinion may or may not sign his/her name on the award.
7. The date on which the award is made shall be the date on which the award comes
into legal effect.
8. The arbitral award is final and binding upon both parties. Neither party may bring a suit
before a law court or make a request to any other organization for revising the award.
Article 44 Interlocutory Award and Partial Award
An interlocutory arbitral award or partial award may be made by the arbitral tribunal
on any issue of the case at any time during the arbitration before the final award is
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made if considered necessary by the arbitral tribunal, or if the parties request and the
arbitral tribunal accepts. Either party’s failure to perform the interlocutory award will
not affect the continuation of the arbitration proceedings, nor will it prevent the arbitral
tribunal from making a final award.
Article 45 Scrutiny of Draft Award
The arbitral tribunal shall submit its draft award to the CIETAC for scrutiny before
signing the award. The CIETAC may remind the arbitral tribunal of issues in the award
on condition that the arbitral tribunal’s independence in rendering the award is not
affected.
Article 46 Fees
1. The arbitral tribunal has the power to determine in the arbitral award the arbitration
fee and other expenses to be paid by the parties to the CIETAC.
2. The arbitral tribunal has the power to decide in the award, according to the specific
circumstances of the case, that the losing party shall compensate the winning party for
the expenses reasonably incurred by it in pursuing its case. In deciding whether the
winning party’s expenses incurred in pursuing its case are reasonable, the arbitral tribunal shall consider such factors as the outcome and complexity of the case, the workload of the winning party and/or its representative(s), and the amount in dispute, etc.
Article 47 Correction of Award
Within thirty (30) days from its receipt of the arbitral award, either party may request
in writing for a correction of any clerical, typographical, or calculation errors or any
errors of a similar nature contained in the award; if such an error does exist in the
award, the arbitral tribunal shall make a correction in writing within thirty (30) days
from the date of receipt of the written request for the correction. The arbitral tribunal
may likewise correct any such errors in writing on its own initiative within a reasonable time after the award is issued. Such correction in writing shall form a part of the
arbitral award.
Article 48 Additional Award
Within thirty (30) days from the date on which the arbitral award is received, either
party may request the arbitral tribunal in writing for an additional award on any claim
or counterclaim which was advanced in the arbitration proceedings but was omitted
from the award. If such omission does exist, the arbitral tribunal shall make an
additional award within thirty (30) days from the date of receipt of the written request.
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The arbitral tribunal may also make an additional award on its own initiative within a
reasonable period of time after the arbitral award is issued. Such additional award shall
form a part of the arbitral award previously rendered.
Article 49 Execution of Award
1. The parties must automatically execute the arbitral award within the time period
specified in the award. If no time limit is specified in the award, the parties shall execute the arbitral award immediately.
2. Where one party fails to execute the award, the other party may apply to a competent
Chinese court for enforcement of the award pursuant to Chinese laws, or apply to a
competent court for enforcement of the award according to the 1958 United Nations
Convention on Recognition and Enforcement of Foreign Arbitral Awards or other
international treaties that China has concluded or acceded to.
Chapter IV Summary Procedure
Article 50 Application
1. Unless otherwise agreed by the parties, this Summary Procedure shall apply to any
case where the amount in dispute does not exceed RMB 500, 000 yuan, or to any case
where the amount in dispute exceeds RMB 500, 000 yuan, yet one party applies for
arbitration under this Summary Procedure and the other party agrees in writing.
2. Where no monetary claim is specified or the amount in dispute is not clear, the
CIETAC shall determine whether or not to apply the Summary Procedure after a
full consideration of such factors as the complexity of the case and the interests
involved, etc.
Article 51 Notice of Arbitration
Where a Request for Arbitration is submitted to the CIETAC and is found to be acceptable for arbitration under the Summary Procedure, the Secretariat of the CIETAC or its
Sub-Commission shall send a Notice of Arbitration to the parties.
Article 52 Formation of Arbitral Tribunal
An arbitral tribunal of a sole arbitrator shall be formed in accordance with Article 23
of these Rules to hear a case under the Summary Procedure.
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Article 53 Statement of Defense and Counterclaim
1. Within twenty (20) days from the date of receipt of the Notice of Arbitration, the
Respondent shall submit its Statement of Defense and relevant evidence to the
Secretariat of the CIETAC; counterclaims, if any, shall also be filed with supporting
evidence within the said time period. The arbitral tribunal may extend this time period
if it considers it justified.
2. Within twenty (20) days from the date of receipt of the counterclaim and its attachments, the Claimant shall file its Statement of Defense to the Respondent’s counterclaim.
Article 54 Conduct of Hearing
The arbitral tribunal may examine the case in the manner it considers appropriate. The
arbitral tribunal may in its full discretion decide to examine the case only on the basis
of the written materials and evidence submitted by the parties or to hold oral hearings.
Article 55 Oral Hearing
1. For a case examined by way of an oral hearing, the Secretariat of the CIETAC shall,
after the arbitral tribunal has fixed a date for the oral hearing, notify the parties of the
date at least fifteen (15) days in advance of the oral hearing date. A party having justified reasons may request the arbitral tribunal for a postponement of the oral hearing.
However, such request must be communicated to the arbitral tribunal at least seven (7)
days in advance of the oral hearing date. The arbitral tribunal shall decide whether to
postpone the oral hearing or not.
2. Where the arbitral tribunal decides to hear the case orally, only one oral hearing
shall be held unless it is otherwise truly necessary.
3. A notice of oral hearing subsequent to the first oral hearing and a notice of a postponed oral hearing shall not be subject to the fifteen (15)-day time limit provided for
in the foregoing Paragraph 1.
Article 56 Time Limits for Rendering Award
1. The arbitral tribunal shall render an arbitral award within three (3) months from the
date on which the arbitral tribunal is formed.
2. Upon the request of the arbitral tribunal, the Chairman of the CIETAC may extend
the time period if he/she considers it truly necessary and the reasons for the extension
truly justified.
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Article 57 Change of Procedure
The application of the Summary Procedure shall not be affected by any amendment to
the claim or by the filing of a counterclaim. Where the amount in dispute of the
amended claim or that of the counterclaim exceeds RMB 500,000 Yuan, the procedure
of the case shall be changed from the Summary Procedure to the general procedure
unless the parties have agreed to the continuous application of the Summary
Procedure.
Article 58 Context Reference
As to matters not covered in this Chapter, the relevant provisions in the other Chapters
of these Rules shall apply.
Chapter V Special Provisions for Domestic Arbitration
Article 59 Application
1. The provisions of this Chapter shall apply to domestic arbitration cases accepted by
the CIEATC.
2. The provisions of the Summary Procedure of Chapter IV shall apply if a domestic
arbitration case falls within the scope of Article 50 of these Rules.
Article 60 Acceptance
1. Where a Request for Arbitration is found to meet the formality requirements specified in Article 10 of these Rules, the CIETAC shall accept the Request and notify the
parties accordingly within five (5) days from its receipt of the Request or immediately
upon its receipt of the Request. Where a Request for Arbitration is found not in conformity with the formality requirements, the CIETAC shall notify the party in writing
of its refusal of the Request with reasons stated.
2. Upon receipt of a Request for Arbitration, the CIETAC may request the party to
make corrections within a specified time period if it finds the Request is not in conformity with the provisions of Article 10 of these Rules.
Article 61 Formation of Arbitral Tribunal
The arbitral tribunal shall be formed in accordance with the provisions of Articles 21,
22, 23 and 24 of these Rules.
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Article 62 Statement of Defense and Counterclaim
1. Within twenty (20) days from the date of receipt of the Notice of Arbitration, the
Respondent shall submit its Statement of Defense and relevant evidence to the
CIETAC; counterclaims, if any, shall also be filed with supporting evidence within
the said time period. The arbitral tribunal may extend this time period if it considers it
justified.
2. Within twenty (20) days from the date of receipt of the counterclaim and its attachments, the Claimant shall file its Statement of Defense to the Respondent’s counterclaim.
Article 63 Notice of Oral Hearing
1. For a case examined by way of an oral hearing, the Secretariat of the CIETAC or its
Sub-Commission shall notify the parties of the date of oral hearing at least fifteen (15)
days in advance of the oral hearing date. The arbitral tribunal may hold the oral hearing
ahead of the schedule with consent from both parties. A party having justified reasons
may request the arbitral tribunal for a postponement of the oral hearing. However, such
request must be communicated to the arbitral tribunal seven (7) days in advance of the
oral hearing date. The arbitral tribunal shall decide whether to postpone the oral hearing or not.
2. A notice of oral hearing subsequent to the first oral hearing and a notice of a postponed oral hearing shall not be subject to the fifteen (15)-day time limit provided in the
foregoing Paragraph 1.
Article 64 Record of Oral Hearing
1. The arbitral tribunal shall make a brief written record of the oral hearing. Any party
or participant in the arbitration may apply for a correction of the record if any omission
or mistake is found in the record regarding its own statement. If the application is
refused by the arbitral tribunal, it shall nevertheless be recorded into the file.
2. The written record shall be signed or sealed by the arbitrator(s), the recorder, the
parties, and other participants in the arbitration, if any.
Article 65 Time Limits for Rendering Award
1. The arbitral tribunal shall render an award within four (4) months from the date on
which the arbitral tribunal is formed.
2. Upon the request of the arbitral tribunal, the Chairman of the CIETAC may extend
this time period if he/she considers it truly necessary and the reasons truly justified.
CIETAC ARBITRATION RULES
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Article 66 Context Reference
As to matters not covered in this Chapter, the relevant provisions in the other Chapters
of these Rules shall apply.
Chapter IV Supplementary Provisions
Article 67 Language
1. Where the parties have agreed on the arbitration language, their agreement shall
prevail. Absent such agreement, the Chinese language shall be the official language to
be used in the arbitration proceedings.
2. At an oral hearing, if a party or its representative(s) or witness requires language
interpretation, the Secretariat of the CIETAC or its Sub-Commission may provide an
interpreter, or the party may bring its own interpreter.
3. The arbitral tribunal and/or the Secretariat of the CIETAC or its Sub-Commission
may, if it considers necessary, request the parties to submit a corresponding version of
the documents and evidence by the parties in Chinese or in other languages.
Article 68 Service of Documents
1. All documents, notices and written materials in relation to the arbitration may be
sent to the parties and/or their representatives in person, or by registered mail or express
mail, facsimile, telex, cable, or by any other means considered proper by the Secretariat
of the CIETAC or its Sub-Commission.
2. Any written correspondence to a party and/or its representative(s) shall be deemed
to have been properly served on the party if delivered to the addressee or delivered at
his place of business, registration, domicile, habitual residence or mailing address, or
where, after reasonable inquiries by the other party, none of the aforesaid addresses
can be found, the written correspondence is sent by the Secretariat of the CIETAC or
its Sub-Commission to the addressee’s last known place of business, registered address,
domicile, habitual residence or mailing address by registered mail or by any other
means that provides a record of the attempt of delivery.
Article 69 Arbitration Fees and Actual Expenses
1. Apart from charging arbitration fees to the parties according to the Fee Schedule of
the CIETAC, the CIETAC may collect from the parties other extra, reasonable and
actual expenses including arbitrators’ special remuneration and their travel and accommodation expenses incurred in dealing with the case, as well as the costs and expenses
of experts, appraisers and interpreters appointed by the arbitral tribunal, etc.
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2. Where a party has appointed an arbitrator who will incur extra expenses, such as
travel and accommodation expenses, and fails to pay in advance as a deposit within a
time period specified by the CIETAC, the party shall be deemed not to have appointed
the arbitrator. In such event, the Chairman of the CIETAC may appoint an arbitrator
for the party pursuant to Article 22 or Article 23 of these Rules.
3. Where the parties have agreed to hold an oral hearing at a place other than the
CIETAC’s domicile, extra expenses including travel and accommodation expenses
incurred thereby shall be paid in advance as a deposit by the parties. In the event that
the parties fail to do so, the oral hearing shall be held at the domicile of the CIETAC.
Article 70 Interpretation
1. The headings of the articles in these Rules shall not serve as interpretations of the
contents of the provisions contained herein.
2. These Rules shall be interpreted by the CIETAC.
Article 71 Coming into Force
These Rules shall be effective as from May 1st, 2005. For cases accepted by the
CIETAC or by its Sub-Commissions before these Rules become effective, the
Arbitration Rules effective at the time of acceptance shall apply, or these Rules shall
apply where both parties agree.
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Comi Rules
COMI RULES OF ARBITRATION
University of Helsinki Conflict Management Institute
INTRODUCTION
COMI arbitration rules are designed for disputes, which do not require extensive
presentation of evidence and where financial interests are not substantial.
When evaluating the applicability of small claims arbitration to an actual dispute,
deciding the exact procedure and interpreting these rules, the following objectives
should be taken into consideration:
(i) timeliness and fairness of the procedure;
(ii) enforceability of the arbitration award;
(iii) minimisation of costs.
COMI is governed by the board. The members of the board shall receive no compensation for their work. The board shall appoint a responsible arbitrator and a secretary for
each arbitration assignment.
ARTICLE 1. INSTITUTION OF PROCEEDINGS
1.1 Two or more parties may submit their judicial dispute to be settled in arbitration
proceedings in accordance with these rules.
A sole party may submit a dispute to be settled in these proceedings, if the parties have
so agreed in writing (for example in correspondence) or if other parties notify in writing that they agree on the proceedings.
The board has the right to decide that the dispute will not be heard in these proceedings, if it considers that these proceedings are not suitable for the dispute.
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1.2 The proceedings shall become pending, when a party or the parties have transmitted a written request to COMI in a way described above for commencing the proceedings, and when the processing charge, referred to in article 1.3, has been paid.
1.3 The processing charge is 5 000 € including a 1 500 € administration fee and a
3 500 € fee of the arbitrator. With the consent of the parties the board may decide to
raise the fee of the arbitrator before the commencement of the proceedings due to, inter
alia, the workload estimated to be unusually high (over 60 hours), an exceptionally
high interest relating to the dispute or both of the aforementioned. The fee of the arbitrator may be increased by 2 000 € maximum.
1.4 The written request on commencing the proceedings shall include:
(i) The names of the parties and of possible representatives, powers of attorneys and
contact information;
(ii) A preliminary description of the dispute;
(iii) A preliminary notice of the claims of the claimant;
(iv) The copies of the documents upon which the claims are based; and
(v) A copy of the arbitration agreement.
ARTICLE 2. APPOINTMENT OF THE ARBITRATOR AND
COMMENCEMENT OF THE PROCEEDINGS
2.1 After receiving the written request, COMI appoints an arbitrator, a secretary and a
supervisor without delay. The appointment shall take place no later than within 14
days after the receipt of the written request. COMI shall then inform the parties and
their representatives in such manner, as it considers appropriate.
The secretary is responsible for all the practicalities such as the correspondence and
the arrangements for the oral hearings as well as inquiries and other tasks assigned to
him or her by the arbitrator. The secretary may not participate in the decision-making.
The secretary shall principally be a lawyer. Nevertheless, the board may decide to
appoint a law student in advanced studies to act as a secretary.
The supervisor shall revise the draft award of the arbitrator before it be given but he or
she does not have any decision-making power. The supervisor shall decide the amount
of particular compensation of expenses, which may be charged by an exception. The
supervisor shall be a lawyer who has achieved a doctoral degree.
2.2 An arbitrator shall be an impartial and independent lawyer who has full legal
capacity.
2.3 Before the appointment COMI requests a prospective arbitrator to disclose whether
he or she is, in his or her discretion, disqualified as described in the Act on Arbitration.
The prospective arbitrator shall also disclose any circumstances, which might give rise
to justifiable doubt as to the arbitrator’s impartiality and independence.
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COMI RULES
A party shall provide his or her comments on the appointment and disqualification of
the arbitrator within 7 days after being notified of the appointment of the arbitrator and
the aforementioned disclosed circumstances. At any stage of the arbitration, the arbitrator is obliged to disclose to the parties all the circumstances, which are likely to
compromise his or her impartiality or independence or to raise justifiable doubts as to
them. A party may, at any time during the proceedings, challenge the arbitrator on the
grounds of circumstances he or she becomes aware of. The challenge shall be made
within 7 days after becoming aware of the grounds on which the challenge is based.
If the challenge is not made within 7 days as described above, the party shall lose his
or her right to make a claim as to the disqualification of the arbitrator.
Within 7 days of the challenge made, the board shall give a decision on the challenge
after having heard the arbitrator and appoint a new arbitrator if necessary.
2.4 The proceedings shall take place in Helsinki but oral hearings, for example, may
be arranged elsewhere if so agreed upon. The language of the proceedings shall be
Finnish if all the parties are domiciled in Finland. The proceedings may be conducted
in Swedish if the parties so collectively request. Otherwise the language of the proceedings shall be English. The parties may, with the consent of the arbitrator, agree on
any other language to be used in the proceedings.
2.5 Once the arbitrator has been appointed, he or she shall give the parties written
instructions on the stages and the timetable of the proceedings. The arbitrator may, if
necessary, amend or supplement his or her instructions. In addition to the time limits
for the statement of claim and the statement of defence the instructions may include
orders on the following issues:
(i) The applicable procedural and material provisions;
(ii) The oral hearings and their locations, technical arrangements and timetables;
(iii) The presentation of evidence;
(iv) The closing date, after which no new claims may be presented or new facts or
evidence referred to (preclusion).
2.6 Unless all the parties have received the application (written request) and the appendices, the arbitrator or the secretary shall provide them with the said documents.
ARTICLE 3. STATEMENT OF CLAIM AND STATEMENT OF DEFENCE
3.1 As soon as the arbitrator is appointed, he or she shall set the time limit, by which
the claimant shall communicate the statement of claim and the respondent the statement of defence to the arbitrator. This time limit shall generally be 21 days from the
appointment of the arbitrator if he or she does not decide otherwise. A potential challenge of the arbitrator does not affect the time limit.
COMI RULES
329
3.2 The statement of claim shall contain:
(i) The comprehensive claim of the claimant;
(ii) The facts supporting the claim;
(iii) The evidence upon which the claimant relies and the notification of what shall be
proved by the evidence
3.3 The statement of defence shall disclose:
(i) To what extent the respondent will contradict and to what extent admit the claim
in the written request;
(ii) On which grounds the claim is objected;
(iii) The counter claim of the respondent, which shall contain the claims, their grounds
and the evidence in the same way and to the same extent as in an independent
claim;
(iv) The evidence upon which the claimant relies and the notification of what shall be
proved by the evidence.
3.4 The claim and the defence shall be submitted to the secretary who shall immediately forward them to the arbitrator and the parties. The parties may, in their discretion,
respond to the claim or to the defence within 14 days after the secretary has forwarded
the claim and the defence.
ARTICLE 4. HEARING
4.1 After the statements referred to in article 3.4 have been submitted to the parties,
new claims, grounds and evidence may be presented only with the consent of the arbitrator and provided that there are important reasons of procedural economy or other
important reasons. The arbitrator may, after receiving the statements referred to above,
request the parties to further clarify or supplement their statements.
4.2 An oral hearing is conducted only if the arbitrator considers it necessary in order to
take the evidence or to establish the judicial facts or at the request of at least one of the
parties.
4.3 The oral hearing will be organised in 4 to 6 weeks from the time limit referred to
in article 3.4, at a date decided by the arbitrator.
4.4 If necessary, the arbitrator may reserve the parties an opportunity to present written
closing arguments within 7 days after the end of the oral hearing and an opportunity to
respond to the closing arguments of other parties within 7 days after the time limit set
for the closing arguments.
4.5 The proceedings shall be declared closed when the closing arguments have been
made and responded to, or if an oral hearing has not been conducted, after the written
statements referred to in article 3.4 have been submitted. The arbitrator may re-open
the proceedings he or she declared to be closed owing to important reasons of procedural economy.
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4.6 The parties have burden of claim and burden of proof as to the facts of the dispute
and the relevant norms.
4.7 The arbitrator may on his or her own motion examine both the questions of fact and
the questions of norms, if the information given by the parties has not been sufficient
or completely satisfactory. Before the award is given, each party shall be reserved an
opportunity to comment on the issues introduced by the arbitrator.
4.8 Overdue statements are not taken into account in the decision-making unless the
arbitrator decides otherwise owing to an important reason.
4.9 Excepting the oral hearing, all the contacts, communications and material between
the parties and the arbitrator shall be submitted to the secretary, who is responsible
for informing other parties. Written material shall be submitted to all parties
simultaneously.
4.10 The arbitrator shall determine the details of the proceedings and the deviations
from the default procedure of these rules. The arbitrator may on his or her own motion
take into account, specifically as to presenting evidence and to disqualification, the
International Bar Association Guidelines on Conflict of Interest in Commercial
Arbitration 2004 and International Bar Association Rules of the Taking of Evidence in
Commercial Arbitration 1999 or the arbitration rules of the United Nations Commission
on International Trade Law (UNCITRAL Arbitration Rules).
ARTICLE 5. WITNESSES, EXPERTS AND OTHER EVIDENCE
5.1 Witness and expert statements shall be submitted in writing unless an oral hearing
is conducted.
5.2 In an oral hearing each party shall give a short statement after which the evidence
is presented. The oral hearing shall conclude with the closing arguments.
5.3 The arbitrator has the authority to restrict the presenting of the evidence, if the
evidence is irrelevant, if the evidence could be obtained more inexpensively or with
less effort otherwise or if the presenting of the evidence would be against the arbitrator’s procedural instruction. The arbitrator may ask questions and order the parties to
provide additional evidence. Witnesses may be heard by telephone or using other technical means.
5.4 If necessary, a witness may be heard outside the hearing in the court of first
instance in accordance with the law.
5.5 Failure to answer the arbitrators’ questions or responding to his or her requests of
information may be considered as a detriment to the defaulter in evaluating the evidence. The proceedings may be continued and the dispute settled despite the passivity
or the absence of a party. Failure to comply with the procedural instruction or timetables shall be taken into account in deciding on the allocation of the liability for the
expenses between parties.
COMI RULES
331
5.6 The arbitrator may, with the consent and expense of the parties, order an expert to
give a statement on a specific issue, which is significant as to the decision-making and
requires special expertise.
ARTICLE 6. THE AWARD
6.1 The award or the ruling shall be given within 4 weeks after the closure of the proceedings. The board or the supervisor appointed by the board shall revise the draft
award before it be given. The award shall be reasoned only at the parties’ request presented in the written statements referred to in article 3.4 or if the arbitrator considers it
to be otherwise justifiable and reasonable. If necessary, the arbitrator may supplement
or clarify the award.
6.2 At the request of the parties, the arbitrator may record the settlement between parties in the form of an arbitral award.
6.3 At the request of the parties, the arbitrator may also give a partial award.
ARTICLE 7. COSTS
7.1 The parties are collectively liable for the processing charge, which includes the
administration fee and the fee of the arbitrator, provided to initiate the proceedings.
Compensation for expenses is generally not charged. By the decision of the board or
the supervisor, the parties may be obliged to compensate collectively the unusually
high expenses arising in the course of the proceedings. Certain expenses, such as travel
expenses and unusually high costs for the arrangements of the oral hearing shall be
compensated. The processing charge shall be confirmed in the arbitral award. It shall
be charged even if the dispute is settled in the course of the proceedings.
7.2 The arbitrator shall order the unsuccessful party to bear the processing charge. The
fee may be apportioned between parties owing to a particular reason such as ambiguity
of the issue.
7.3 The parties shall bear their own legal expenses unless the arbitrator orders, owing
to a particular reason, one party to bear the expenses of the other party entirely or in
part.
ARTICLE 8. OTHER PROVISIONS
8.1 COMI, the supervisor, the arbitrator or the secretary are not liable towards the parties for the damage or loss resulting from the proceedings referred to in these rules
unless the damage or loss is caused deliberately or by gross negligence.
8.2 The party shall lose his or her right to claim that the procedural error has taken
place unless he or she makes such a claim without undue delay.
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COMI RULES
ARTICLE 9. VALIDITY OF THE RULES
9.1 These rules are in force until the board approves new rules and declares the date of
their entry into force. If the rules are amended during the proceedings, it shall be conducted according to the rules that were in force when the proceedings were initiated.
COMI RULES
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FCCC Rules
ARBITRATION INSTITUTE
Finland
RULES OF THE ARBITRATION INSTITUTE OF THE CENTRAL CHAMBER
OF COMMERCE OF FINLAND
ARBITRATION RULES
The Arbitration Institute of the Central Chamber of Commerce of Finland
Adopted by the Central Chamber of Commerce of Finland on 16 December 1992
and in force as of 1 January 1993.
RECOMMENDED ARBITRATION CLAUSE: Any dispute, controversy or claim
arising out of or relating to this contract, or the breach, termination or validity thereof
shall be finally settled by arbitration in accordance with the Arbitration Rules of the
Finnish Central Chamber of Commerce.
The Arbitration Institute of the Central Chamber of Commerce of Finland
Aleksanterinkatu 17
P.O. Box 1000
FI-00101 Helsinki
Finland
tel +358 9 4242 6200
fax+358 9 4242 6257
www.arbitration.fi
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ARBITRATION RULES
The Arbitration Institute of the Central Chamber of Commerce of Finland
TABLE OF CONTENTS
I DUTIES AND COMPOSITION OF THE ARBITRATION
INSTITUTE
§ 1 Duties of the Institute
§ 2 Composition of the Board of the Institute
§ 3 Working Committee of the Board
§ 4 Secretariat of the Institute
§ 5 Quorum and Voting Procedure
II COMPOSITION OF AN ARBITRAL TRIBUNAL
§ 6 Number of Arbitrators and the Appointment Procedure
§ 7 Replacement of an Arbitrator
§ 8 Qualifications of an Arbitrator
§ 9 Challenge of an Arbitrator
§ 10 Discharge of an Arbitrator
III COMMENCEMENT OF THE ARBITRATION
§ 11 Request for Arbitration
§ 12 Dismissal of a Claim
§ 13 Commencement of the Arbitral Proceedings
§ 14 Hearing of the Respondent
§ 15 Respondent’s Answer
§ 16 Respondent’s Claims
§ 17 Supplementing the Claim or the Answer
§ 18 Security for Costs
§ 19 Appointment of the Arbitral Tribunal
IV ARBITRAL PROCEEDINGS
§ 20 Procedure
§ 21 Language of Arbitration
§ 22 Place of Arbitration
§ 23 Claim
§ 24 Defence
§ 25 Alteration and Amendment of Claim
§ 26 Oral Hearing
§ 27 Production of Evidence
§ 28 Use of an Expert
§ 29 Failure of a Party to Appear
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§ 30 Objecting to Procedural Deviations
§ 30 a Interim measures
§ 31 Termination of Arbitration
V ARBITRAL AWARD
§ 32 Rules Applicable to the Substance of the Dispute
§ 33 Voting
§ 34 Settlement
§ 35 Partial Award
§ 36 Interim Award
§ 37 Form and Place of Rendering the Award
§ 38 Rendering the Award
§ 39 Correction of the Award
§ 40 Additional Award
VI COSTS OF ARBITRATION AND OTHER PROVISIONS
§ 41 Arbitrators’ Fees and Other Costs of Arbitration
§ 42 Charges Due to the Central Chamber of Commerce
§ 43 Deposition of Documents and Secrecy
§ 43 a Exclusion of Liability
VII ENTRY INTO FORCE AND TRANSITION
I DUTIES AND COMPOSITION OF THE ARBITRATION INSTITUTE
§ 1 Duties of the Institute
The Arbitration Institute of the Central Chamber of Commerce of Finland is an impartial body the purpose of which is:
1) to provide for the settlement by arbitration of business disputes of an international
or domestic character in accordance with these Rules in cases where their application
is provided for in an arbitration clause or agreement, articles of association or otherwise;
2) to provide for the settlement by arbitration of business disputes of an international
or domestic character in cases where duties related to the arbitration, such as the
appointment of arbitrators, are provided for in an arbitration clause or agreement, articles of association or otherwise1;
3) to act as the Arbitration Institute of a Chamber of Commerce in Finland when the
rules of the Chamber of Commerce in question thus provide;
4) to provide information concerning arbitration matters; and
1
Pursuant to this subparagraph, the Institute can act as the appointing authority pursuant to,
among others, the UNCITRAL Arbitration Rules.
FCCC RULES
337
5) to appoint impartial persons to conciliate disputes arisen in the conduct of business
when the parties have so agreed. (New subsection 27.4.2005)
The provisions of Chapter III of these Rules must be complied with, where applicable, when arbitrators are to be appointed pursuant to subparagraph 2) hereto and
when appointing conciliators. (Amended 27.4.2005)
§ 2 Composition of the Board of the Institute
The Board shall be composed of no less than 7 and no more than 9 members. The
Central Chamber of Commerce shall elect the members for a period of three years and
shall appoint one member to be the Chairman of the Board and another member to be
the Vice-Chairman of the Board. The members shall be persons of good repute who
are familiar with the business community. The Chairman, the Vice-Chairman and at
least two other members shall be lawyers two of whom shall be qualified to serve as a
judge.
In arbitral proceedings governed by these Rules, a member of the Board may not act
as an arbitrator or be appointed as arbitrator by the Board. However, a member of the
Board may act and be appointed as a sole arbitrator or chairman of an arbitral tribunal
where so requested by the parties or by the arbitrators appointed by the parties.
(Amended 29.11.2000)
§ 3 Working Committee of the Board
The Board may appoint a Working Committee and a Chairman of such committee.
§ 4 Secretariat of the Institute
The Central Chamber of Commerce shall appoint the Secretary of the Institute in
charge of the Secretariat of the Institute. The Secretary shall be a lawyer who is sufficiently experienced and versed in languages.
§ 5 Quorum and Voting Procedure
Three members in addition to either the Chairman or the Vice-Chairman shall form a
quorum of the Board. In the event both the Chairman and the Vice-Chairman of the
Board are unable to attend or to act in a case, the Board will have a quorum when at
least four members of the Board are present. These members shall appoint a member
who is a lawyer to be the Chairman of the meeting. The Board will make its decisions
on a simple majority. In the case of a tie-vote, the Chairman shall cast the deciding
vote.
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II COMPOSITION OF AN ARBITRAL TRIBUNAL
§ 6 Number of Arbitrators and the Appointment Procedure
If the parties have not agreed on the number of arbitrators, there shall be three arbitrators, unless the Institute considers it to be appropriate to appoint a sole arbitrator taking
into account the nature of the dispute, the amount in dispute or other circumstances. If
a sole arbitrator is to be appointed, the appointment shall be made by the Institute. In
other cases, each party shall appoint an equal number of arbitrators and the Institute
shall appoint the Chairman of the arbitral tribunal unless the parties have agreed otherwise.
If a party does not comply with his duty of appointment, the Institute may require
him to do so within a fixed period of time of no less than 30 days. If a party fails to
notify the Institute of the appointment of the arbitrator within such time limit, then the
Institute shall make the appointment.
If there are more than two parties involved in the arbitration, the Institute, notwithstanding the provisions of subsection 1, may appoint all arbitrators. (New subsection
29.11.2000)
§ 7 Replacement of an Arbitrator
In the event of death of a party-appointed arbitrator or an arbitrator appointed by the
Institute, a substitute arbitrator shall be appointed by such party or by the Institute,
respectively.
In the event of the resignation or discharge of an arbitrator, the Institute shall appoint
a substitute arbitrator to replace him. A party is, however, once entitled to appoint a
substitute arbitrator to replace a resigned or discharged arbitrator who was appointed
by such party.
§ 8 Qualifications of an Arbitrator
An arbitrator appointed by the Institute must be independent and impartial and possess
full legal capacity and sufficient knowledge in the field at issue in the arbitration.
Only a lawyer is qualified to be appointed as the Chairman of the arbitral tribunal or
as the sole arbitrator, unless the Institute decides otherwise due to special reasons.
§ 9 Challenge of an Arbitrator
A prospective arbitrator shall immediately disclose to the party approaching him in
connection with his possible appointment, unless he refuses to accept the appointment,
any circumstances likely to give rise to justifiable doubts as to his impartiality or
independence.
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An arbitrator is obliged to disclose to the parties, until the end of the arbitral proceedings all such circumstances referred to above unless they have already been
informed of these circumstances.
If a party wishes to challenge an arbitrator, the challenge shall be made to the
Institute in writing. The challenge shall state the grounds therefor and must be made
within 30 days from the date these grounds became known to the party making the
challenge, failing which such party shall be deemed to have waived his right to make
such a challenge.
§ 10 Discharge of an Arbitrator
At the request of a party, the Institute shall discharge an arbitrator found to be unqualified to his position by the Institute. The Institute shall also discharge an arbitrator who
fails to fulfill his duties or, without valid reasons, delays the proceedings.
Before a decision on the discharge of an arbitrator is made, the Institute shall whenever possible provide an opportunity for the parties and the arbitrators to be heard on
this issue.
III COMMENCEMENT OF THE ARBITRATION
§ 11 Request for Arbitration
The claimant initiating the arbitration proceedings shall file with the Institute a request
for arbitration in duplicate, including enclosures. The request shall, inter alia, include
the following:
1) the names, profession, postal address, telephone number, facsimile number and
e-mail address of the parties and the counsel; (Amended 29.11.2000)
2) an account of the dispute;
3) a preliminary statement of the claimant’s claim;
4) the arbitrator appointed by the claimant;
5) a copy of any documents on which the claim is based and, unless incorporated in the
former, a copy of the arbitration agreement; and
6) an appropriate power of attorney.
§ 12 Dismissal of a Claim
If it is obvious that the Institute lacks jurisdiction over the dispute, the request for arbitration shall be dismissed by the Institute.
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§ 13 Commencement of the Arbitral Proceedings
The arbitral proceedings shall be deemed to be commenced when the request mentioned in § 11 or a copy thereof has been served on the respondent in the matter.
§ 14 Hearing of the Respondent
In response to the request for arbitration, the Institute shall hear the respondent and
request the respondent to submit a written reply.
Where necessary, the claimant may be required to ensure the communication to the
respondent by verifiable means of the documents necessary for such hearing.
§ 15 Respondent’s Answer
The respondent’s answer with regard to the request for arbitration shall include:
1) a response to the statements included in the request for arbitration as well as on the
number of arbitrators;
2) the arbitrator appointed by the respondent; and
3) an appropriate power of attorney.
If the respondent desires to raise any objection concerning the validity of the arbitration agreement or its applicability to the dispute specified in the request, such objection
and the grounds therefor shall be included in the answer.
§ 16 Respondent’s Claims
If the respondent wishes to make a counterclaim or demand a set-off, he shall present
the grounds therefor and a preliminary notice of his claims in the answer.
A counterclaim can be made and a set-off demanded only in the event that the arbitration agreement covers such counterclaim or demand for set-off.
§ 17 Supplementing the Claim or the Answer
The Institute may require the parties to supplement the request or the answer, as the
case may be. In the event a party fails to comply with such a requirement, the case may
be wholly or partly dismissed. The failure of a respondent to supplement his answer as
required above shall not, however, prevent the arbitral tribunal from proceeding in
respect of the claimant’s claims.
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§ 18 Security for Costs
The Institute may fix a sum which shall be paid by the parties into an account designated by the Central Chamber of Commerce, which, together with interest accrued
thereon, shall constitute a security for the fees and costs of the proceedings including
the fees of the arbitrators. If the arbitration is of an international character, such sum
shall be fixed, unless the Institute based upon special reasons shall deem it appropriate
to leave the fixing of the amount of such security to the discretion of the arbitral tribunal. Security other than a cash deposit may also be accepted.
If the Institute has not required the parties to provide a security for costs, the arbitral
tribunal shall have a similar right. Each party shall pay half of the amount of the security, but the parties shall be jointly and severally liable for the entire amount. If a party
fails to pay his share of the security, the other party shall be afforded an opportunity to
pay the unpaid share. If the unpaid amount shall still remain unpaid, the case shall be
wholly or partly dismissed, stayed or suspended.
§ 19 Appointment of the Arbitral Tribunal
When the respondent has submitted his answer or the time limit fixed for this purpose
has expired, the Institute shall:
a) appoint, in accordance with § 6, the Chairman of the arbitral tribunal, the sole arbitrator or the arbitrators, as the case may be;
b) determine, at the request of a party, the place of arbitration, unless the parties have
agreed on the place; and
c) where necessary, fix the amount of the security mentioned in § 18 and the time limit
within which it shall be paid.
Any Board member who under the provisions of the Finnish Arbitration Act (967/92)
could be disqualified to act as an arbitrator in the case, must refrain from participating
in the decision and in the discussions of the Board concerning the appointment.
(Amended 29.11.2000)
As soon as the arbitral tribunal has been appointed, and, where applicable, the
security has been provided, the Institute shall transmit the file to the arbitral tribunal.
IV ARBITRAL PROCEEDINGS
§ 20 Procedure
Each party shall be given a sufficient opportunity of presenting his case. In other
respects, the provisions in the arbitration agreement regarding the arbitration procedure shall be complied with.
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To the extent the parties have not agreed on procedural matters in the arbitration agreement, the arbitral tribunal shall determine the manner in which the proceedings will be
conducted in accordance with these Rules having regard to the requirements of impartiality and promptness. Where possible, the wishes of the parties shall be complied with.
The arbitral tribunal may, when necessary, employ a secretary. The arbitral tribunal
may authorize the Chairman decide questions of procedure.
§ 21 Language of Arbitration
Unless the parties have agreed on the language or languages to be used in the proceedings, such language or languages shall be determined by the arbitral tribunal.
The arbitral tribunal may request that each document presented in a case must be
accompanied with a translation into a language of the arbitration.
§ 22 Place of Arbitration
If requested by a party, the Institute may, at the time it appoints the arbitrators, determine the place of arbitration if the parties have not agreed on such place. Otherwise the
place of arbitration shall be determined by the arbitral tribunal.
§ 23 Claim
The arbitral tribunal shall request the claimant to submit within a specified time a statement of claim, which shall include:
a) a description of the specified claim in the dispute;
b) a statement of facts supporting the claim; and
c) to the extent possible, the evidence the claimant intends to adduce in the matter.
§ 24 Defence
The respondent shall, within a time specified by the arbitral tribunal, submit a defence,
which shall include:
a) a statement as to whether and to what extent the respondent accepts or contests the
claim;
b) grounds for the contesting the claim;
c) where applicable, a counterclaim or demand for a set-off and the grounds therefor;
and
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d) to the extent possible, the evidence the respondent intends to adduce in the
matter.
§ 25 Alteration and Amendment of Claim
During the course of the arbitral proceedings, a party may amend or supplement his
claims or grounds therefor and also make a counterclaim or demand for a set-off,
unless this would cause undue delay of the proceedings.
§ 26 Oral Hearing
As a rule, an oral hearing shall be held during the arbitral proceedings in a manner
determined by the arbitral tribunal and taking into consideration the reasonable wishes
of the parties.
If an arbitrator is replaced during the course of the arbitral proceedings, the newly
composed arbitral tribunal shall decide whether and to what extent a prior oral hearing
shall be repeated.
§ 27 Production of Evidence
At the request of the arbitral tribunal, the parties shall state the evidence on which they
wish to rely, specifying what they wish to prove with each item of evidence.
The arbitral tribunal shall determine to what extent written affidavits may be submitted as evidence.
The arbitral tribunal may refuse to accept evidence that relates to a fact that is
irrelevant or that has already been established or if the evidence can be produced by
other means in a considerably less burdensome fashion or at a considerably lesser
expense.
After having conscientiously scrutinized and evaluated all evidence produced during
the proceedings, the arbitral tribunal shall determine what shall be deemed proven in
the matter.
§ 28 Use of an Expert
Unless the parties have otherwise agreed, after hearing the parties, the arbitral tribunal
may appoint an expert to investigate and to give an opinion on a material fact relevant
to the determination of the case, if special professional knowledge is needed to evaluate such fact.
The arbitral tribunal may also require a party to give the expert any information
necessary for him in the performance of his task and to give the expert an opportunity
to inspect documents, goods or other property.
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§ 29 Failure of a Party to Appear
If a party, without a sufficient cause, fails to appear at a hearing or to comply otherwise
with an order of the arbitral tribunal, such failure will not prevent the arbitral tribunal
from proceeding with and deciding the case.
§ 30 Objecting to Procedural Deviations
If a party, after attaining knowledge that the rules applicable to arbitral proceedings
have not been complied with, fails to promptly state his objection with regard thereto,
he shall be deemed to have waived his right to object.
§ 30 a Interim measures (29.11.2000)
At the request of either party the arbitral tribunal may during the course of the arbitral
proceedings issue an injunction or order any other interim measure it deems necessary
in respect of the subject matter of the dispute. The arbitral tribunal may order the
requesting party to provide security for damage in such form as the arbitral tribunal
considers appropriate for any costs and damages caused by the measure to the party
against whom it is directed.
A court or another competent authority may, however, before or during the course
of arbitral proceedings, despite the arbitration agreement grant such interim measure,
which the authority has the power to grant.
§ 31 Termination of Arbitration
If the parties agree that the proceedings will be discontinued, or if the arbitral tribunal
comes to a conclusion that the proceedings cannot be continued, the arbitral tribunal
shall issue an order for the termination of the arbitral proceedings. A copy of this order
shall be submitted to the Institute.
If the claimant withdraws his claim, the arbitral tribunal shall issue an order for the
termination of the proceedings. If, however, the respondent demands that an arbitral
award be issued, and the arbitral tribunal determines that the respondent has a sufficient reason to have the dispute finally settled, the proceedings can be continued in
order to settle the dispute through the issuance of an arbitral award.
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V ARBITRAL AWARD
§ 32 Rules Applicable to the Substance of the Dispute
The arbitral tribunal shall decide the dispute in accordance with the rules of law applicable to the substance of the dispute.
If the parties have designated the law of a given state as applicable to the substance
of the dispute, the arbitral tribunal shall apply that law. Failing such designation by the
parties and if the dispute is international, the arbitral tribunal shall apply the rules of
law which it deems to be appropriate. (Amended 29.11.2000)
The arbitral tribunal may, however, decide the dispute ex aequo et bono only if the
parties have expressly authorised it to do so.
§ 33 Voting
Any decisions of the arbitral tribunal shall be made by a majority of all its members. If
such a majority is not attained, the opinion of the Chairman shall prevail.
§ 34 Settlement
If during the arbitral proceeding the parties settle the dispute, the arbitral tribunal may
record the settlement in the form of an arbitral award on agreed terms.
§ 35 Partial Award
The arbitral tribunal may, at the request of a party, render a partial arbitral award on an
independent claim in a dispute where several claims have been made. The arbitral tribunal may also, at the request of a party, render a partial award on that part of the claim
that has been admitted by the respondent.
A claim and a demand for a set-off with regard thereto shall, however, be determined jointly.
§ 36 Interim Award
The arbitral tribunal may, if the parties have so agreed, decide by an interim arbitral
award a separate issue in dispute, if rendering an award on other matters in dispute is
dependent on rendering such an interim award.
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§ 37 Form and Place of Rendering the Award
The award shall be made in writing and shall be signed by the arbitrators. If an arbitrator’s signature is missing, the award shall state the reason for the absence of the signature. A dissenting opinion of an arbitrator, if any, shall be attached to the award.
The award shall state the date on which and the place where the award was made.
The award shall be deemed to be made at the place which has been agreed or determined to be the place of arbitration.
§ 38 Rendering the Award
The arbitral award shall be rendered no later than one year after the Institute has sent
the file in the case to the arbitral tribunal.
The Board may, due to special reasons, grant an extension to such period set out in
subsection 1 as a result of an application by the arbitral tribunal or the Chairman of the
arbitral tribunal. The Secretary of the Institute may grant an extension to the period
until the next Board meeting.
A duly signed copy of the award shall be given to each party at a session of the
arbitral tribunal or it shall be delivered to the parties by other verifiable means.
(Amended 22.11.2001)
§ 39 Correction of the Award
A party may request the arbitral tribunal to correct in the award any errors in computation or any clerical or typographical errors, or any other errors of a similar nature. A
party must, after notification to the other party, request for such correction within 30
days from his receipt of a copy of the award.
If the arbitral tribunal considers the request to be justified, the arbitral tribunal shall
make the requested correction without delay and, if possible, within 30 days after the
receipt of the request by the Chairman of the arbitral tribunal.
The arbitral tribunal may, at their own initiative, within 30 days after the rendering
of the award, correct any error of the type referred to in paragraph 1 of this section.
Before such correction is made, the parties shall, when necessary, be provided an
opportunity to be heard with regard to the correction to be made.
§ 40 Additional Award
Either party, with notice to the other party, may request the arbitral tribunal to make an
additional award as to claims presented in the arbitral proceedings but omitted from
the award. If the arbitral tribunal considers the request for an additional award to be
justified, they shall complete the award as soon as possible. Before rendering the additional award, the parties shall be heard.
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VI COSTS OF ARBITRATION AND OTHER PROVISIONS
§ 41 Arbitrators’ Fees and Other Costs of Arbitration
The parties are jointly and severally liable for compensating the arbitrators for their
work and expenses.
The arbitral tribunal may in the award fix and order to be paid the remuneration due
to the arbitrators.
When deciding on the fees of the arbitrators the time required to resolve the dispute,
the complexity of the subject matter, the amount in dispute and other relevant circumstances shall be taken into account.
The losing party in the matter shall be ordered to pay the costs of the arbitration as
well as the costs of the arbitration of the winning party, unless there is a justifiable
reason to decide otherwise.
If the parties settle the dispute or if the dispute is dismissed for some other reason
before arbitral proceedings in respect of the dispute shall have commenced, the Institute
shall decide on the fees to compensate the Central Chamber of Commerce for its costs
and on the possible fees and compensation for expenses payable to the arbitrators.
If the settlement or the dismissal of a dispute takes place after the arbitral proceedings shall have commenced, the arbitral tribunal may fix and order to be paid the arbitrators’ fees and compensation for expenses.
The Central Chamber of Commerce of Finland may establish a schedule for the
proposed arbitrators’ fees. (Amended 13.12.1994)
§ 42 Charges Due to the Central Chamber of Commerce
The claimant shall pay a registration fee when filing a request, and the respondent shall
pay a fee when presenting any counterclaim. The amount of the registration fee shall
be determined by the Central Chamber of Commerce.
An arbitral award shall include an order concerning any costs and charges of the
arbitration payable to the Central Chamber of Commerce.
§ 43 Deposition of Documents and Secrecy
The documents presented to the Institute and any award or final order issued in order
to terminate the proceedings shall, after issuance, be filed in the archives of the
Institute.
No information concerning the documents or the award referred to above may be
disclosed to anyone other than the parties, the arbitrators involved in the proceedings
and the members of the Board, unless all parties concerned explicitly consent to such
a disclosure.
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§ 43 a Exclusion of Liability (29.11.2000)
The Central Chamber of Commerce or any member of the Board of the Institute or the
Secretary of the Institute shall not be liable for any loss incurred by the parties in any
arbitration under the Rules of the Institute, save for loss resulting from their wilful
misconduct or gross negligence. An arbitrator shall not be liable for any loss incurred
by the parties in such arbitral proceedings, save for loss resulting from wilful misconduct or gross negligence.
VII ENTRY INTO FORCE AND TRANSITION
These rules shall enter into force on January 1, 1993 and will replace the Rules of the
Institute confirmed on May 16, 1979.
These rules are to be applied to any arbitral proceedings which are commenced after
the effective date of these rules.
(Some linguistic corrections have been made on January 12, 2004.)
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FCCC Expedited Rules
RULES FOR EXPEDITED ARBITRATION OF THE ARBITRATION
INSTITUTE OF THE CENTRAL CHAMBER OF COMMERCE OF FINLAND
(Adopted by the Central Chamber of Commerce of Finland on 28 April 2004 and in
force as of 1 June 2004.)
RECOMMENDED ARBITRATION CLAUSE: Any dispute, controversy or claim
arising out of or relating to this contract, or the breach, termination or validity thereof,
shall be finally settled by arbitration in accordance with the Rules for Expedited
Arbitration of the Arbitration Institute of the Central Chamber of Commerce of
Finland.
The Arbitration Institute of the Central Chamber of Commerce of Finland
Aleksanterinkatu 17
P.O. Box 1000
FI-00101 Helsinki
Finland
tel +358 9 4242 6200
fax+358 9 4242 6257
www.arbitration.fi
I Commencement of the Arbitration
§ 1 Request for Arbitration
The claimant initiating the arbitration proceedings shall file with the Institute a request
for arbitration in duplicate, including enclosures. The request shall, inter alia, include
the following:
1) the names, profession, postal address, telephone number, facsimile number and
e-mail address of the parties and the counsel;
2) an account of the dispute;
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3) a preliminary statement of the claimant’s claim;
4) a copy of any documents on which the claim is based and, unless incorporated in the
former, a copy of the arbitration agreement; and
5) an appropriate power of attorney.
§ 2 Registration Fee
The claimant shall pay a registration fee when filing a request, and the respondent shall
pay a fee when presenting any counterclaim. The amount of the registration fee shall
be determined by the Central Chamber of Commerce.
An arbitral award shall include an order concerning any costs and charges of the arbitration payable to the Central Chamber of Commerce.
§ 3 Dismissal of a Claim
If it is obvious that the Institute lacks jurisdiction over the dispute, the request for arbitration shall be dismissed by the Institute.
§ 4 Commencement of the Arbitral Proceedings
The arbitral proceedings shall be deemed to be commenced when the request mentioned in § 1 or a copy thereof has been served on the respondent in the matter.
§ 5 Hearing of the Respondent
In response to the request for arbitration, the Institute shall hear the respondent and
request the respondent to submit a written reply.
Where necessary, the claimant may be required to ensure the communication to the
respondent by verifiable means of the documents necessary for such hearing.
§ 6 Respondent’s Answer
The respondent’s answer with regard to the request for arbitration shall include:
1) a response to the statements included in the request for arbitration; and
2) an appropriate power of attorney.
If the respondent desires to raise any objection concerning the validity of the arbitration agreement or its applicability to the dispute specified in the request, such objection
and the grounds therefor shall be included in the answer.
§ 7 Respondent’s Claims
If the respondent wishes to make a counterclaim or demand a set-off, he shall present
the grounds therefor and a preliminary notice of his claims in the answer.
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A counterclaim may be made or a set-off demanded only in the event that the arbitration agreement covers such counterclaim or demand for set-off.
§ 8 Supplementing the Claim or the Answer
The Institute may require the parties to supplement the request or the answer, as the
case may be. In the event that a party fails to comply with such a requirement, the case
may be wholly or partly dismissed. The failure of a respondent to supplement his
answer as required above shall not, however, prevent the arbitrator from proceeding in
respect of the claimant’s claims.
§ 9 Security for Costs
The Institute may fix a sum which shall be paid by the parties into an account designated by the Central Chamber of Commerce, which, together with interest accrued
thereon, shall constitute a security for the fees and costs of the proceedings including
the fee of the arbitrator. If the arbitration is of an international character, such sum
shall be fixed, unless the Institute based upon special reasons shall deem it appropriate
to leave the fixing of the amount of such security to the discretion of the arbitrator.
Security other than a cash deposit may also be accepted.
If the Institute has not required the parties to provide a security for costs, the arbitrator
shall have a similar right. Each party shall pay half of the amount of the security, but
the parties shall be jointly and severally liable for the entire amount. If a party fails to
pay his share of the security, the other party shall be afforded the opportunity to pay
the unpaid share. If the unpaid amount shall still remain unpaid, the case shall be
wholly or partly dismissed, stayed or suspended.
§ 10 Appointment of the Arbitrator and Related Provisions
When the respondent has submitted the answer or the time limit fixed for this purpose
has expired, the Institute shall:
a) appoint the arbitrator;
b) determine, at the request of a party, the place of arbitration, unless the parties have
agreed on the place; and
c) where necessary, fix the amount of the security referred to in § 9 and the time limit
within which it shall be paid.
Any Board member who under the provisions of the Finnish Arbitration Act (967/1992)
could be disqualified to act as an arbitrator in the case, must refrain from participating
in the decision and in the discussions of the Board concerning the appointment.
A member of the Institute may be appointed as the arbitrator under these rules only if
the parties so request.
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As soon as the arbitrator has been appointed and, where applicable, the security has
been provided, the Institute shall transmit the file to the arbitrator.
II ARBITRATOR
§ 11 Arbitrator
If the parties have agreed on arbitration under these rules, the dispute shall be resolved
by one arbitrator appointed by the Arbitration Institute of the Central Chamber of
Commerce of Finland.
§ 12 Replacement of the Arbitrator
In the event of the resignation, discharge or death of the arbitrator, the Institute shall
appoint a substitute arbitrator to replace him.
§ 13 Qualifications of the Arbitrator
An arbitrator appointed by the Institute must be independent and impartial and possess
full legal capacity and sufficient knowledge in the field at issue in the arbitration.
Only a lawyer is qualified to be appointed as the arbitrator, unless the Institute decides
otherwise due to special reasons.
§ 14 Challenge of the Arbitrator
When a person is approached in connection with his possible appointment as an
arbitrator, he shall immediately disclose any circumstances likely to give rise to justifiable doubts as to his impartiality or independence, unless he refuses to accept the
appointment.
The arbitrator is obliged to disclose to the parties, until the end of the arbitral proceedings all such circumstances referred to above unless they have already been informed
of these circumstances.
If a party wishes to challenge the arbitrator, the challenge shall be made to the Institute in
writing. The challenge shall state the grounds therefor and must be made within 30 days
from the date these grounds became known to the party making the challenge, failing
which such party shall be deemed to have waived his right to make such a challenge.
§ 15 Discharge of the Arbitrator
At the request of a party, the Institute shall discharge the arbitrator found to be unqualified to his position by the Institute. The Institute shall discharge the arbitrator who
fails to fulfil his duties or, without valid reasons, delays the proceedings.
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Before a decision on the discharge of the arbitrator is made, the Institute shall whenever possible provide an opportunity for the parties and the arbitrator to be heard on
this issue.
ILL ARBITRAL PROCEEDINGS
§ 16 Procedure
Each party shall be given a sufficient opportunity to present his case.
The arbitrator shall prepare a provisional schedule for the arbitral proceedings and
send it to the parties.
Unless the arbitrator for a special reason decides otherwise, the following rules apply
to the proceedings:
a) besides the claim and a counterclaim, each party is entitled to submit at most
one statement in the case;
b) the statements shall be brief; and
c) the time limit for the submission of a statement is at most fourteen days from the
date when a party has been exhorted to submit a statement.
Also a party’s statement of evidence and specification of what is to be proven with the
evidence shall be considered a statement as referred to in paragraph 3, subparagraph
(a) above.
The arbitrator may require a party to make a final statement of his claim and of
the facts and evidence on which the party wishes to rely. Once the time limit for
the submission of such a statement has expired, the party cannot alter the claim nor
invoke a new fact or new evidence, unless the arbitrator for a special reasons allows
the same.
The arbitrator may, where necessary, employ a secretary.
§ 17 Claim
The arbitrator shall request the claimant to submit within a specified time a statement
of claim, which shall include:
a) a description of the specified claim in the dispute;
b) a statement of facts supporting the claim; and
c) the evidence the claimant intends to adduce in the matter.
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§ 18 Defence
The respondent shall, within a time specified by the arbitrator, submit a defence, which
shall include:
a) a statement as to whether and to what extent the respondent accepts or contests
the claim;
b) grounds for contesting the claim;
c) where applicable, a counterclaim or demand for a set-off and the grounds therefor; and
d) the evidence the respondent intends to adduce in the matter.
§ 19 Language of Arbitration
Unless the parties have agreed on the language or languages to be used in the proceedings, such language or languages shall be determined by the arbitrator.
The arbitrator may request that each document presented in the case must be accompanied with a translation into the language of the arbitration.
§ 20 Place of Arbitration
If requested by a party, the Institute may, at the time it appoints the arbitrator, determine the place of arbitration if the parties have not agreed on such place. Otherwise the
place of arbitration shall be determined by the arbitrator.
§ 21 Oral Hearing
An oral hearing shall be held only if a party so requests and the arbitrator deems this
necessary. The arbitrator shall take note of the wishes of the parties when setting the
time, duration and form of the oral hearing, the manner of its arrangement and the
procedure for accepting evidence.
§ 22 Production of Evidence
At the request of the arbitrator, the parties shall state the evidence, and produce the
written evidence, on which they wish to rely, specifying what they wish to prove with
each item of evidence.
The arbitrator shall determine to what extent written affidavits may be submitted as
evidence.
The arbitrator may refuse to accept evidence that relates to a fact that is irrelevant or
that has already been established or if the evidence can be produced by other means in
a considerably less burdensome fashion or at a considerably lesser expense.
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After having conscientiously scrutinized and evaluated all evidence produced during
the proceedings, the arbitrator shall determine what shall be deemed proven in the
matter.
§ 23 Use of an Expert
Unless the parties have otherwise agreed, after hearing the parties, the arbitrator may
appoint an expert to investigate and to give an opinion on a material fact relevant to the
determination of the case, if special professional knowledge is needed to evaluate such
fact.
The arbitrator may also require a party to give the expert any information necessary for
him in the performance of his task and to give the expert an opportunity to inspect
documents, goods or other property.
§ 24 Failure of a Party to Appear
If a party, without sufficient cause, fails to appear at a hearing or to comply otherwise
with an order of the arbitrator, such failure will not prevent the arbitrator from proceeding with and deciding the case.
§ 25 Objecting to Procedural Deviations
If a party, after attaining knowledge that the rules applicable to arbitral proceedings
have not been complied with, fails to promptly state his objection with regard thereto,
he shall be deemed to have waived his right to object.
§ 26 Interim Measures
At the request of either party the arbitrator may during the course of the arbitral proceedings issue an injunction or order any other interim measure it deems necessary in
respect of the subject matter of the dispute. The arbitrator may order the requesting
party to provide security for damage in such form as the arbitrator considers appropriate for any costs and damages caused by the measure to the party against whom it is
directed.
A court or other competent authority may, however, before or during the course of
arbitral proceedings, despite the arbitration agreement grant such interim measure,
which the authority has the power to grant.
§ 27 Termination of Arbitration
If the parties agree that the proceedings will be discontinued, or if the arbitrator comes
to a conclusion that the proceedings cannot be continued, the arbitrator shall issue an
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order for the termination of the arbitral proceedings. A copy of this order shall be submitted to the Institute.
If the claimant withdraws his claim, the arbitrator shall issue an order for the termination of the proceedings. If, however, the respondent demands that an arbitral award be
issued, and the arbitrator determines that the respondent has a sufficient reason to have
the dispute finally settled, the proceedings can be continued in order to settle the dispute through the issuance of an arbitral award.
IV ARBITRAL AWARD
§ 28 Rules Applicable to the Substance of the Dispute
The arbitrator shall decide the dispute in accordance with the rules of law applicable to
the substance of the dispute.
If the parties have designated the law of a given state as applicable to the substance of
the dispute, the arbitrator shall apply that law. Failing such designation by the parties
and if the dispute is international, the arbitrator shall apply the rules of law which he
deems to be appropriate.
The arbitrator may, however, decide the dispute ex aequo et bono only if the parties
have expressly authorised him to do so.
§ 29 Settlement
If during the arbitral proceedings the parties settle the dispute, the arbitrator may record
the settlement in the form of an arbitral award on agreed terms.
§ 30 Partial Award
The arbitrator may, at the request of a party, render a partial arbitral award on an independent claim in a dispute where several claims have been made. The arbitrator may
also, at the request of a party, render a partial award on that part of the claim that has
been admitted by the respondent.
A claim and a demand for a set-off with regard thereto shall, however, be determined
jointly.
§ 31 Interim Award
The arbitrator may, if the parties have so agreed, decide by an interim arbitral award a
separate issue in dispute, if rendering an award on other matters in dispute is dependent
on rendering such an interim award.
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§ 32 Form and Place of Rendering the Award
The award shall be made in writing and shall be signed by the arbitrator.
The award shall state the date on which and the place where the award was made. The
award shall be deemed to be made at the place which has been agreed or determined to
be the place of arbitration.
The arbitral award shall not contain reasons, unless a party has no later than in his closing statement requested a statement of reasons.
§ 33 Rendering the Award
The arbitral award shall be rendered no later than three months after the Institute has
sent the file in the case to the arbitrator.
The Board, or in urgent cases the secretary of the Institute, may grant an extension of
at most three months to the period referred to in paragraph 1.
A duly signed copy of the award shall be given to each party at a session of the arbitral
tribunal or it shall be delivered to the parties by other verifiable means.
§ 34 Correction of the Award
A party may request the arbitrator to correct in the award any errors in computation or
any clerical or typographical errors, or any other errors of a similar nature. A party
must, after notification to the other party, request for such correction within 30 days
from his receipt of a copy of the award.
If the arbitrator considers the request to be justified, the arbitrator shall make the
requested correction without delay and, if possible, within 30 days after the receipt of
the request by the arbitrator.
The arbitrator may, at his own initiative, within 30 days after the rendering of the
award, correct any error of the type referred to in paragraph 1 of this section. Before
such correction is made, the parties shall, where necessary, be provided an opportunity
to be heard with regard to the correction to be made.
§ 35 Additional Award
Either party, with notice to the other party, may request the arbitrator to make an additional award as to claims presented in the arbitral proceedings but omitted from the
award. If the arbitrator considers the request for an additional award to be justified, he
shall complete the award as soon as possible. Before rendering the additional award,
the parties shall be heard.
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V COSTS OF ARBITRATION AND OTHER PROVISIONS
§ 36 Arbitrator’s Fee and Other Costs of Arbitration
The parties are jointly and severally liable for compensating the arbitrator for his work
and expenses.
The arbitrator may in the award fix and order to be paid the remuneration due to the
arbitrator.
When deciding on the fee of the arbitrator the time required to resolve the dispute, the
complexity of the subject matter, the amount in dispute and other relevant circumstances shall be taken into account.
The losing party in the matter shall be ordered to pay the costs of the arbitration as well
as the costs of the arbitration of the winning party, unless there is a justifiable reason
to decide otherwise.
If the parties settle the dispute before the arbitral tribunal has taken any measures in
the proceedings or if the dispute is dismissed for some other reason before the arbitral
tribunal has taken any measures in the proceedings, the Institute shall decide on the
fees to compensate the Central Chamber of Commerce for its costs and on the possible
fee and compensation for expenses payable to the arbitrator.
If the settlement or the dismissal of the dispute takes place after the arbitral tribunal has
taken any measures in the proceedings, the arbitrator may fix and order to be paid the
arbitrator’s fee and compensation for expenses.
The Central Chamber of Commerce of Finland may establish a schedule for the
proposed arbitrator’s fees.
§ 37 Charges Due to the Central Chamber of Commerce
An arbitral award shall include an order concerning any costs and charges of the arbitration payable to the Central Chamber of Commerce.
§ 38 Deposition of Documents and Secrecy
The documents presented to the Institute and any award or final order issued in order
to terminate the proceedings shall, after issuance, be filed in the archives of the
Institute.
No information concerning the documents or the award referred to above may be disclosed to anyone other than the parties, the arbitrator involved in the proceedings and
the members of the Board, unless all parties concerned explicitly consent to such a
disclosure.
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FCCC EXPEDITED RULES
§ 39 Exclusion of Liability
The Central Chamber of Commerce or any member of the Board of the Institute or the
Secretary of the Institute shall not be liable for any loss incurred by the parties in any
arbitration under these rules, save for loss resulting from their wilful misconduct or
gross negligence. The arbitrator shall not be liable for any loss incurred by the parties
in the arbitral proceedings, save for loss resulting from wilful misconduct or gross
negligence.
VI ENTRY INTO FORCE
These rules shall enter into force on June 1, 2004. These rules are applied to any
arbitral proceedings in respect of which the request for arbitration has been received
by the Institute after the effective date of these rules.
FCCC EXPEDITED RULES
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IBA Ethics
IBA RULES OF ETHICS FOR INTERNATIONAL ARBITRATORS11
Introductory Note
International arbitrators should be impartial, independent, competent, diligent and discreet. These rules seek to establish the manner in which these abstract qualities may be
assessed in practice. Rather than rigid rules, they reflect internationally acceptable
guidelines developed by practising lawyers from all continents. They will attain their
objectives only if they are applied in good faith.
The rules cannot be directly binding either on arbitrators, or on the parties themselves,
unless they are adopted by agreement. Whilst the International Bar Association hopes
that they will be taken into account in the context of challenges to arbitrators, it is
emphasised that these guidelines are not intended to create grounds for the setting
aside of awards by national courts.
If parties wish to adopt the rules they may add the following to their arbitration clause
or arbitration agreement:
The parties agree that the Rules of Ethics for International Arbitrators established
by the International Bar Association, in force at the date of the commencement of
any arbitration under this clause, shall be applicable to the arbitrators appointed in
respect of such arbitration.
The International Bar Association takes the position that (whatever may be the case in
domestic arbitration) international arbitrators should in principle be granted immunity
from suit under national laws, except in extreme cases of wilful or reckless disregard
of their legal obligations. Accordingly, the International Bar Association wishes to
make it clear that it is not the intention of these rules to create opportunities for
aggrieved parties to sue international arbitrators in national courts. The normal
sanction for breach of an ethical duty is removal from office, with consequent loss of
1
This document is reproduced by kind permission of the International Bar Association, London.
© International Bar Association.
363
entitlement to remuneration. The International Bar Association also emphasises that
these rules do not affect, and are intended to be consistent with, the International Code
of Ethics for lawyers, adopted at Oslo on 25 July 1956, and amended by the General
Meeting of the International Bar Association at Mexico City on 24 July 1964.
1 Fundamental Rule
Arbitrators shall proceed diligently and efficiently to provide the parties with a just and
effective resolution of their disputes, and shall be and shall remain free from bias.
2 Acceptance of Appointment
2.1 A prospective arbitrator shall accept an appointment only if he is fully satisfied that
he is able to discharge his duties without bias.
2.2 A prospective arbitrator shall accept an appointment only if he is fully satisfied that
he is competent to determine the issues in dispute, and has an adequate knowledge of
the language of the arbitration.
2.3 A prospective arbitrator should accept an appointment only if he is able to give to the
arbitration the time and attention which the parties are reasonably entitled to expect.
2.4 It is inappropriate to contact parties in order to solicit appointment as arbitrator.
3 Elements of Bias
3.1 The criteria for assessing questions relating to bias are impartiality and independence. Partiality arises when an arbitrator favours one of the parties, or where he is
prejudiced in relation to the subject-matter of the dispute. Dependence arises from
relationships between an arbitrator and one of the parties, or with someone closely
connected with one of the parties.
3.2 Facts which might lead a reasonable person, not knowing the arbitrator’s true state
of mind, to consider that he is dependent on a party create an appearance of bias. The
same is true if an arbitrator has a material interest in the outcome of the dispute, or if
he has already taken a position in relation to it. The appearance of bias is best overcome by full disclosure as described in Article 4 below.
3:3 Any current direct or indirect business relationship between an arbitrator and a
party, or with a person who is known to be a potentially important witness, will normally give rise to justifiable doubts as to a prospective arbitrator’s impartiality or independence. He should decline to accept an appointment in such circumstances unless
the parties agree in writing that he may proceed. Examples of indirect relationships are
where a member of the prospective arbitrator’s family, his firm, or any business partner has a business relationship with one of the parties.
3.4 Past business relationships will not operate as an absolute bar to acceptance of
appointment, unless they are of such magnitude or nature as to be likely to affect a
prospective arbitrator’s judgment.
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IBA ETHICS
3.5 Continuous and substantial social or professional relationships between a prospective arbitrator and a party, or with a person who is known to be a potentially important
witness in the arbitration, will normally give rise to justifiable doubts as to the impartiality or independence of a prospective arbitrator.
4 Duty of Disclosure
4.1 A prospective arbitrator should disclose all facts or circumstances that may give
rise to justifiable doubts as to his impartiality or independence. Failure to make such
disclosure creates an appearance of bias, and may of itself be a ground for disqualification even though he non-disclosed facts or circumstances would not of themselves
justify disqualification.
4.2 A prospective arbitrator should disclose:
(a) any past or present business relationship, whether direct or indirect as illustrated in Article 3.3, including prior appointment as arbitrator, with any party to
the dispute, or any representative of a party, or any person known to be a potentially important witness in the arbitration. With regard to present relationships, the
duty of disclosure applies irrespective of their magnitude, but with regard to past
relationships only if they were of more than a trivial nature in relation to the arbitrator’s professional or business affairs. Non-disclosure of an indirect relationship
unknown to a prospective arbitrator will not be a ground for disqualification unless
it could have been ascertained by making reasonable enquiries;
(b) the nature and duration of any substantial social relationships with any party or
any person known to be likely to be an important witness in the arbitration;
(c) the nature of any previous relationship with any fellow arbitrator (including
prior joint service as an arbitrator);
(d) the extent of any prior knowledge he may have of the dispute;
(e) the extent of any commitments which may affect his availability to perform his
duties as arbitrator as may be reasonably anticipated.
4.3 The duty of disclosure continues throughout the arbitral proceedings as regards
new facts or circumstances.
4.4 Disclosure should be made in writing and communicated to all parties and arbitrators. When an arbitrator has been appointed, any previous disclosure made to the parties should be communicated to the other arbitrators.
5 Communications with Parties
5.1 When approached with a view to appointment, a prospective arbitrator should
make sufficient enquiries in order to inform himself whether there may be any justifiable doubts regarding his impartiality or independence; whether he is competent to
determine the issues in dispute; and whether he is able to give the arbitration the time
and attention required. He may also respond to enquiries from those approaching him,
IBA ETHICS
365
provided that such enquiries are designed to determine his suitability and availability
for the appointment and provided that the merits of the case are not discussed. In the
event that a prospective sole arbitrator or presiding arbitrator is approached by one
party alone, or by one arbitrator chosen unilaterally by a party (a ‘party, nominated
‘arbitrator), he should ascertain that the other party or parties, or the other arbitrator,
has consented to the manner in which he has been approached. In such circumstances
he should, in writing or orally, inform the other party or parties, or the other arbitrator,
of the substance of the initial conversation.
5.2 If a party-nominated arbitrator is required to participate in the selection of a third
or presiding arbitrator, it is acceptable for him (although he is not so required) to obtain
the views of the party who nominated him as to the acceptability of candidates being
considered.
5.3 Throughout the arbitral proceedings, an arbitrator should avoid any unilateral communications regarding the case with any party, or its representatives. If such communication should occur, the arbitrator should inform the other party or parties and
arbitrators of its substance.
5.4 If an arbitrator becomes aware that a fellow arbitrator has been in improper communication with a party, he may inform the remaining arbitrators and they should
together determine what action should be taken. Normally, the appropriate initial
course of action is for the offending arbitrator to be requested to refrain from making
any further improper communications with the party. Where the offending arbitrator
fails or refuses to refrain from improper communications, the remaining arbitrators
may inform the innocent party in order that he may consider what action he should
take. An arbitrator may act unilaterally to inform a party of the conduct of another
arbitrator in order to allow the said party to consider a challenge of the offending arbitrator only in extreme circumstances, and after communicating his intention to his
fellow arbitrators in writing.
5.5 No arbitrator should accept any gift or substantial. hospitality, directly or indirectly, from any party to the arbitration. Sole arbitrators and presiding arbitrators
should be particularly meticulous in avoiding significant social or professional contacts with any party to the arbitration other than in the presence of the other parties.
6 Fees
Unless the parties agree otherwise or a party defaults, an arbitrator shall make no unilateral arrangements for fees or expenses.
7 Duty of Diligence
All arbitrators should devote such time and attention as the parties may reasonably
require having regard to all the circumstances of the case, and shall do their best to
conduct the arbitration in such a manner that costs do not rise to an unreasonable proportion of the interests at stake.
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IBA ETHICS
8 Involvement in Settlement Proposals
Where the parties have so requested, or consented to a suggestion to this effect by the
arbitral tribunal, the tribunal as a whole (or the presiding arbitrator where appropriate),
may make proposals for settlement to both parties simultaneously, and preferably in
the presence of each other. Although any procedure is possible with the agreement of
the parties, the arbitral tribunal should point out to the parties that it is undesirable that
any arbitrator should discuss settlement terms with a party in the absence of the other
parties since this will normally have the result that any arbitrator involved in such
discussions will become disqualified from any future participation in the arbitration.
9 Confidentiality of the Deliberations
The deliberations of the arbitral tribunal, and the contents of the award itself, remain
confidential in perpetuity unless the parties release the arbitrators from this obligation.
An arbitrator should not participate in, or give any information for the purpose of assistance in, any proceedings to consider the award unless, exceptionally, he considers it his
duty to disclose any material misconduct or fraud on the part of his fellow arbitrators.
IBA ETHICS
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IBA Guidelines
On Conflicts Of Interest In International Arbitrations*
22 May 2004
Introduction
1. Problems of conflicts of interest increasingly challenge international arbitration.
Arbitrators are often unsure about what facts need to be disclosed, and they may make
different choices about disclosures than other arbitrators in the same situation. The
growth of international business and the manner in which it is conducted, including
interlocking corporate relationships and larger international law firms, have caused
more disclosures and have created more difficult conflict of interest issues to determine. Reluctant parties have more opportunities to use challenges of arbitrators to
delay arbitrations or to deny the opposing party the arbitrator of its choice. Disclosure
of any relationship, no matter how minor or serious, has too often led to objections,
challenge and withdrawal or removal of the arbitrator.
2. Thus, parties, arbitrators, institutions and courts face complex decisions about what
to disclose and what standards to apply. In addition, institutions and courts face difficult decisions if an objection or a challenge is made after a disclosure. There is a tension between, on the one hand, the parties’ right to disclosure of situations that may
reasonably call into question an arbitrator’s impartiality or independence and their
right to a fair hearing and, on the other hand, the parties’ right to select arbitrators of
their choosing. Even though laws and arbitration rules provide some standards, there
is a lack of detail in their guidance and of uniformity in their application. As a result,
quite often members of the international arbitration community apply different standards in making decisions concerning disclosure, objections and challenges.
3. It is in the interest of everyone in the international arbitration community that international arbitration proceedings not be hindered by these growing conflicts of interest
*
This document is reproduced by kind permission of the International Bar Association, London.
© International Bar Association.
369
issues. The Committee on Arbitration and ADR of the International Bar Association
appointed a Working Group of 19 experts1 in international arbitration from 14 countries to study, with the intent of helping this decision-making process, national laws,
judicial decisions, arbitration rules and practical considerations and applications
regarding impartiality and independence and disclosure in international arbitration.
The Working Group has determined that existing standards lack sufficient clarity and
uniformity in their application. It has therefore prepared these Guidelines, which set
forth some General Standards and Explanatory Notes on the Standards. Moreover, the
Working Group believes that greater consistency and fewer unnecessary challenges
and arbitrator withdrawals and removals could be achieved by providing lists of specific situations that, in the view of the Working Group, do or do not warrant disclosure
or disqualification of an arbitrator. Such lists—designated Red, Orange and Green (the
‘Application Lists’)—appear at the end of these Guidelines.2
4. The Guidelines reflect the Working Group’s understanding of the best current international practice firmly rooted in the principles expressed in the General Standards.
The Working Group has based the General Standards and the Application Lists upon
statutes and case law in jurisdictions and upon the judgment and experience of members of the Working Group and others involved in international commercial arbitration. The Working Group has attempted to balance the various interests of parties,
representatives, arbitrators and arbitration institutions, all of whom have a responsibility for ensuring the integrity, reputation and efficiency of international commercial
arbitration. In particular, the Working Group has sought and considered the views of
many leading arbitration institutions, as well as corporate counsel and other persons
involved in international arbitration. The Working Group also published drafts of the
Guidelines and sought comments at two annual meetings of the International Bar
Association and other meetings of arbitrators. While the comments received by the
Working Group varied, and included some points of criticisms, the arbitration community generally supported and encouraged these efforts to help reduce the growing
problems of conflicts of interests. The Working Group has studied all the comments
received and has adopted many of the proposals that it has received. The Working
Group is very grateful indeed for the serious considerations given to its proposals by
so many institutions and individuals all over the globe and for the comments and proposals received.
1
2
370
The members of the Working Group are: (1) Henri Alvarez, Canada; (2) John Beechey,
England; (3) Jim Carter, United States; (4) Emmanuel Gaillard, France, (5) Emilio Gonzales
de Castilla, Mexico; (6) Bernard Hanotiau, Belgium; (7) Michael Hwang, Singapore; (8) Albert
Jan van den Berg, Belgium; (9) Doug Jones, Australia; (10) Gabrielle Kaufmann-Kohler,
Switzerland; (11) Arthur Marriott, England; (12) Tore Wiwen Nilsson, Sweden; (13) Hilmar
Raeschke-Kessler, Germany; (14) David W. Rivkin, United States; (15) Klaus Sachs, Germany;
(16) Nathalie Voser, Switzerland (Rapporteur); (17) David Williams, New Zealand; (18) Des
Williams, South Africa; (19); Otto de Witt Wijnen, The Netherlands (Chair).
Detailed Background Information to the Guidelines has been published in Business Law
International at BLI Vol 5, No 3, September 2004, pp 433-458 and is available at the IBA
website www.ibanet.org
IBA GUIDELINES
5. Originally, the Working Group developed the Guidelines for international commercial arbitration. However, in the light of comments received, it realized that the
Guidelines should equally apply to other types of arbitration, such as investment arbitrations (insofar as these may not be considered as commercial arbitrations).3
6. These Guidelines are not legal provisions and do not override any applicable national
law or arbitral rules chosen by the parties. However, the Working Group hopes that
these Guidelines will find general acceptance within the international arbitration community (as was the case with the IBA Rules on the Taking of Evidence in International
Commercial Arbitration) and that they thus will help parties, practitioners, arbitrators,
institutions and the courts in their decision-making process on these very important
questions of impartiality, independence, disclosure, objections and challenges made in
that connection. The Working Group trusts that the Guidelines will be applied with
robust common sense and without pedantic and unduly formalistic interpretation.
The Working Group is also publishing a Background and History, which describes
the studies made by the Working Group and may be helpful in interpreting the
Guidelines.
7. The IBA and the Working Group view these Guidelines as a beginning, rather than
an end, of the process. The Application Lists cover many of the varied situations that
commonly arise in practice, but they do not purport to be comprehensive, nor could
they be. Nevertheless, the Working Group is confident that the Application Lists provide better concrete guidance than the General Standards (and certainly more than
existing standards). The IBA and the Working Group seek comments on the actual use
of the Guidelines, and they plan to supplement, revise and refine the Guidelines based
on that practical experience.
8. In 1987, the IBA published Rules of Ethics for International Arbitrators. Those
Rules cover more topics than these Guidelines, and they remain in effect as to subjects
that are not discussed in the Guidelines. The Guidelines supersede the Rules of Ethics
as to the matters treated here.
Part I:
General Standards Regarding Impartiality,
Independence and Disclosure
(1) General Principle
Every arbitrator shall be impartial and independent of the parties at the time of accepting an appointment to serve and shall remain so during the entire arbitration proceeding until the final award has been rendered or the proceeding has otherwise finally
terminated.
3
Similarly, the Working Group is of the opinion that these Guidelines should apply by analogy
to civil servants and government officers who are appointed as arbitrators by States or State
entities that are parties to arbitration proceedings.
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371
Explanation to General Standard 1:
The Working Group is guided by the fundamental principle in international arbitration
that each arbitrator must be impartial and independent of the parties at the time he or
she accepts an appointment to act as arbitrator and must remain so during the entire
course of the arbitration proceedings. The Working Group considered whether this
obligation should extend even during the period that the award may be challenged but
has decided against this. The Working Group takes the view that the arbitrator’s duty
ends when the Arbitral Tribunal has rendered the final award or the proceedings have
otherwise been finally terminated (eg, because of a settlement). If, after setting aside or
other proceedings, the dispute is referred back to the same arbitrator, a fresh round of
disclosure may be necessary.
(2) Conflicts of Interest
(a) An arbitrator shall decline to accept an appointment or, if the arbitration has
already been commenced, refuse to continue to act as an arbitrator if he or she has any
doubts as to his or her ability to be impartial or independent.
(b) The same principle applies if facts or circumstances exist, or have arisen since the
appointment, that, from a reasonable third person’s point of view having knowledge of
the relevant facts, give rise to justifiable doubts as to the arbitrator’s impartiality or
independence, unless the parties have accepted the arbitrator in accordance with the
requirements set out in General Standard (4).
(c) Doubts are justifiable if a reasonable and informed third party would reach the
conclusion that there was a likelihood that the arbitrator may be influenced by factors
other than the merits of the case as presented by the parties in reaching his or her decision.
(d) Justifiable doubts necessarily exist as to the arbitrator’s impartiality or independence if there is an identity between a party and the arbitrator, if the arbitrator is a
legal representative of a legal entity that is a party in the arbitration, or if the arbitrator has a significant financial or personal interest in the matter at stake.
Explanation to General Standard 2:
(a) It is the main ethical guiding principle of every arbitrator that actual bias from the
arbitrator’s own point of view must lead to that arbitrator declining his or her appointment. This standard should apply regardless of the stage of the proceedings. This principle is so self-evident that many national laws do not explicitly say so. See eg Article
12, UNCITRAL Model Law. The Working Group, however, has included it in the
General Standards because explicit expression in these Guidelines helps to avoid confusion and to create confidence in procedures before arbitral tribunals. In addition, the
Working Group believes that the broad standard of ‘any doubts as to an ability to be
impartial and independent’ should lead to the arbitrator declining the appointment.
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(b) In order for standards to be applied as consistently as possible, the Working Group
believes that the test for disqualification should be an objective one. The Working
Group uses the wording ‘impartiality or independence’ derived from the broadly
adopted Article 12 of the UNCITRAL Model Law, and the use of an appearance test,
based on justifiable doubts as to the impartiality or independence of the arbitrator, as
provided in Article 12(2) of the UNCITRAL Model Law, to be applied objectively (a
‘reasonable third person test’). As described in the Explanation to General Standard
3(d), this standard should apply regardless of the stage of the proceedings.
(c) Most laws and rules that apply the standard of justifiable doubts do not further
define that standard. The Working Group believes that this General Standard provides
some context for making this determination.
(d) The Working Group supports the view that no one is allowed to be his or her own
judge; ie, there cannot be identity between an arbitrator and a party. The Working
Group believes that this situation cannot be waived by the parties. The same principle
should apply to persons who are legal representatives of a legal entity that is a party in
the arbitration, like board members, or who have a significant economic interest in the
matter at stake. Because of the importance of this principle, this nonwaivable situation
is made a General Standard, and examples are provided in the non-waivable Red
List.
The General Standard purposely uses the terms ‘identity’ and ‘legal representatives.’
In the light of comments received, the Working Group considered whether these terms
should be extended or further defined, but decided against doing so. It realizes that
there are situations in which an employee of a party or a civil servant can be in a position similar, if not identical, to the position of an official legal representative. The
Working Group decided that it should suffice to state the principle.
(3) Disclosure by the Arbitrator
(a) If facts or circumstances exist that may, in the eyes of the parties, give rise to doubts
as to the arbitrator’s impartiality or independence, the arbitrator shall disclose such
facts or circumstances to the parties, the arbitration institution or other appointing
authority (if any, and if so required by the applicable institutional rules) and to the
co-arbitrators, if any, prior to accepting his or her appointment or, if thereafter, as
soon as he or she learns about them.
(b) It follows from General Standards 1 and 2(a) that an arbitrator who has made a
disclosure considers himself or herself to be impartial and independent of the parties
despite the disclosed facts and therefore capable of performing his or her duties as
arbitrator. Otherwise, he or she would have declined the nomination or appointment
at the outset or resigned.
(c) Any doubt as to whether an arbitrator should disclose certain facts or circumstances should be resolved in favour of disclosure.
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(d) When considering whether or not facts or circumstances exist that should be disclosed, the arbitrator shall not take into account whether the arbitration proceeding is
at the beginning or at a later stage.
Explanation to General Standard 3:
(a) General Standard 2(b) above sets out an objective test for disqualification of an
arbitrator. However, because of varying considerations with respect to disclosure, the
proper standard for disclosure may be different. A purely objective test for disclosure
exists in the majority of the jurisdictions analyzed and in the UNCITRAL Model Law.
Nevertheless, the Working Group recognizes that the parties have an interest in being
fully informed about any circumstances that may be relevant in their view. Because of
the strongly held views of many arbitration institutions (as reflected in their rules and
as stated to the Working Group) that the disclosure test should reflect the perspectives
of the parties, the Working Group in principle accepted, after much debate, a subjective approach for disclosure. The Working Group has adapted the language of Article
7(2) of the ICC Rules for this standard.
However, the Working Group believes that this principle should not be applied without limitations. Because some situations should never lead to disqualification under the
objective test, such situations need not be disclosed, regardless of the parties’ perspective. These limitations to the subjective test are reflected in the Green List, which lists
some situations in which disclosure is not required. Similarly, the Working Group
emphasizes that the two tests (objective test for disqualification and subjective test for
disclosure) are clearly distinct from each other, and that a disclosure shall not automatically lead to disqualification, as reflected in General Standard 3(b).
In determining what facts should be disclosed, an arbitrator should take into account
all circumstances known to him or her, including to the extent known the culture and
the customs of the country of which the parties are domiciled or nationals.
(b) Disclosure is not an admission of a conflict of interest. An arbitrator who has made
a disclosure to the parties considers himself or herself to be impartial and independent
of the parties, despite the disclosed facts, or else he or she would have declined the
nomination or resigned. An arbitrator making disclosure thus feels capable of performing his or her duties. It is the purpose of disclosure to allow the parties to judge whether
or not they agree with the evaluation of the arbitrator and, if they so wish, to explore
the situation further. The Working Group hopes that the promulgation of this General
Standard will eliminate the misunderstanding that disclosure demonstrates doubts sufficient to disqualify the arbitrator. Instead, any challenge should be successful only if
an objective test, as set forth above, is met.
(c) Unnecessary disclosure sometimes raises an incorrect implication in the minds of
the parties that the disclosed circumstances would affect his or her impartiality or independence. Excessive disclosures thus unnecessarily undermine the parties’ confidence
in the process. Nevertheless, after some debate, the Working Group believes it important to provide expressly in the General Standards that in case of doubt the arbitrator
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should disclose. If the arbitrator feels that he or she should disclose but that professional secrecy rules or other rules of practice prevent such disclosure, he or she should
not accept the appointment or should resign.
(d) The Working Group has concluded that disclosure or disqualification (as set out in
General Standard 2) should not depend on the particular stage of the arbitration. In
order to determine whether the arbitrator should disclose, decline the appointment or
refuse to continue to act or whether a challenge by a party should be successful, the
facts and circumstances alone are relevant and not the current stage of the procedure or
the consequences of the withdrawal. As a practical matter, institutions make a distinction between the commencement of an arbitration proceeding and a later stage. Also,
courts tend to apply different standards. Nevertheless, the Working Group believes it
important to clarify that no distinction should be made regarding the stage of the arbitral procedure. While there are practical concerns if an arbitrator must withdraw after
an arbitration has commenced, a distinction based on the stage of arbitration would be
inconsistent with the General Standards.
(4) Waiver by the Parties
(a) If, within 30 days after the receipt of any disclosure by the arbitrator or after a
party learns of facts or circumstances that could constitute a potential conflict of interest for an arbitrator, a party does not raise an express objection with regard to that
arbitrator, subject to paragraphs (b) and (c) of this General Standard, the party is
deemed to have waived any potential conflict of interest by the arbitrator based on
such facts or circumstances and may not raise any objection to such facts or circumstances at a later stage.
(b) However, if facts or circumstances exist as described in General Standard 2(d),
any waiver by a party or any agreement by the parties to have such a person serve as
arbitrator shall be regarded as invalid.
(c) A person should not serve as an arbitrator when a conflict of interest, such as those
exemplified in the waivable Red List, exists. Nevertheless, such a person may accept
appointment as arbitrator or continue to act as an arbitrator, if the following conditions are met:
(i) All parties, all arbitrators and the arbitration institution or other appointing
authority (if any) must have full knowledge of the conflict of interest; and
(ii) All parties must expressly agree that such person may serve as arbitrator despite
the conflict of interest.
(d) An arbitrator may assist the parties in reaching a settlement of the dispute at any
stage of the proceedings. However, before doing so, the arbitrator should receive an
express agreement by the parties that acting in such a manner shall not disqualify the
arbitrator from continuing to serve as arbitrator. Such express agreement shall be
considered to be an effective waiver of any potential conflict of interest that may
arise from the arbitrator’s participation in such process or from information that the
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375
arbitrator may learn in the process. If the assistance by the arbitrator does not lead to
final settlement of the case, the parties remain bound by their waiver. However, consistent with General Standard 2(a) and notwithstanding such agreement, the arbitrator shall resign if, as a consequence of his or her involvement in the settlement process,
the arbitrator develops doubts as to his or her ability to remain impartial or independent in the future course of the arbitration proceedings.
Explanation to General Standard 4:
(a) The Working Group suggests a requirement of an explicit objection by the parties
within a certain time limit. In the view of the Working Group, this time limit should
also apply to a party who refuses to be involved.
(b) This General Standard is included to make General Standard 4(a) consistent with
the non-waivable provisions of General Standard 2(d). Examples of such circumstances are described in the non-waivable Red List.
(c) In a serious conflict of interest, such as those that are described by way of example
in the waivable Red List, the parties may nevertheless wish to use such a person as an
arbitrator. Here, party autonomy and the desire to have only impartial and independent
arbitrators must be balanced. The Working Group believes persons with such a serious
conflict of interests may serve as arbitrators only if the parties make fully informed,
explicit waivers.
(d) The concept of the Arbitral Tribunal assisting the parties in reaching a settlement
of their dispute in the course of the arbitration proceedings is well established in some
jurisdictions but not in others. Informed consent by the parties to such a process
prior to its beginning should be regarded as effective waiver of a potential conflict of
interest. Express consent is generally sufficient, as opposed to a consent made in
writing which in certain jurisdictions requires signature. In practice, the requirement of
an express waiver allows such consent to be made in the minutes or transcript of a
hearing. In addition, in order to avoid parties using an arbitrator as mediator as a means
of disqualifying the arbitrator, the General Standard makes clear that the waiver should
remain effective if the mediation is unsuccessful. Thus, parties assume the risk of
what the arbitrator may learn in the settlement process. In giving their express consent,
the parties should realize the consequences of the arbitrator assisting the parties in
a settlement process and agree on regulating this special position further where
appropriate.
(5) Scope
These Guidelines apply equally to tribunal chairs, sole arbitrators and party-appointed
arbitrators. These Guidelines do not apply to non-neutral arbitrators, who do not have
an obligation to be independent and impartial, as may be permitted by some arbitration rules or national laws.
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Explanation to General Standard 5:
Because each member of an Arbitral Tribunal has an obligation to be impartial and
independent, the General Standards should not distinguish among sole arbitrators,
party-appointed arbitrators and tribunal chairs. With regard to secretaries of Arbitral
Tribunals, the Working Group takes the view that it is the responsibility of the arbitrator to ensure that the secretary is and remains impartial and independent.
Some arbitration rules and domestic laws permit party-appointed arbitrators to be
non-neutral. When an arbitrator is serving in such a role, these Guidelines should not
apply to him or her, since their purpose is to protect impartiality and independence.
(6) Relationships
(a) When considering the relevance of facts or circumstances to determine whether a
potential conflict of interest exists or whether disclosure should be made, the activities
of an arbitrator’s law firm, if any, should be reasonably considered in each individual
case. Therefore, the fact that the activities of the arbitrator’s firm involve one of the
parties shall not automatically constitute a source of such conflict or a reason for disclosure.
(b) Similarly, if one of the parties is a legal entity which is a member of a group with
which the arbitrator’s firm has an involvement, such facts or circumstances should be
reasonably considered in each individual case. Therefore, this fact alone shall not
automatically constitute a source of a conflict of interest or a reason for disclosure.
(c) If one of the parties is a legal entity, the managers, directors and members of a
supervisory board of such legal entity and any person having a similar controlling
influence on the legal entity shall be considered to be the equivalent of the legal
entity.
Explanation to General Standard 6:
(a) The growing size of law firms should be taken into account as part of today’s reality in international arbitration. There is a need to balance the interests of a party to use
the arbitrator of its choice and the importance of maintaining confidence in the impartiality and independence of international arbitration. In the opinion of the Working
Group, the arbitrator must in principle be considered as identical to his or her law firm,
but nevertheless the activities of the arbitrator’s firm should not automatically constitute a conflict of interest. The relevance of such activities, such as the nature, timing
and scope of the work by the law firm, should be reasonably considered in each individual case. The Working Group uses the term ‘involvement’ rather than ‘acting for’
because a law firm’s relevant connections with a party may include activities other
than representation on a legal matter.
(b) When a party to an arbitration is a member of a group of companies, special questions regarding conflict of interest arise. As in the prior paragraph, the Working Group
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believes that because individual corporate structure arrangements vary so widely an
automatic rule is not appropriate. Instead, the particular circumstances of an affiliation
with another entity within the same group of companies should be reasonably considered in each individual case.
(c) The party in international arbitration is usually a legal entity. Therefore, this General
Standard clarifies which individuals should be considered effectively to be that party.
(7) Duty of Arbitrator and Parties
(a) A party shall inform an arbitrator, the Arbitral Tribunal, the other parties and the
arbitration institution or other appointing authority (if any) about any direct or indirect relationship between it (or another company of the same group of companies) and
the arbitrator. The party shall do so on its own initiative before the beginning of the
proceeding or as soon as it becomes aware of such relationship.
(b) In order to comply with General Standard 7(a), a party shall provide any information already available to it and shall perform a reasonable search of publicly available
information.
(c) An arbitrator is under a duty to make reasonable enquiries to investigate any
potential conflict of interest, as well as any facts or circumstances that may cause his
or her impartiality or independence to be questioned. Failure to disclose a potential
conflict is not excused by lack of knowledge if the arbitrator makes no reasonable
attempt to investigate.
Explanation to General Standard 7:
To reduce the risk of abuse by unmeritorious challenge of an arbitrator’s impartiality
or independence, it is necessary that the parties disclose any relevant relationship with
the arbitrator. In addition, any party or potential party to an arbitration is, at the outset,
required to make a reasonable effort to ascertain and to disclose publicly available
information that, applying the general standard, might affect the arbitrator’s impartiality and independence. It is the arbitrator or putative arbitrator’s obligation to make
similar enquiries and to disclose any information that may cause his or her impartiality
or independence to be called into question.
PART II:
Practical Application of the General Standards
1. The Working Group believes that if the Guidelines are to have an important practical influence, they should reflect situations that are likely to occur in today’s arbitration practice. The Guidelines should provide specific guidance to arbitrators, parties,
institutions and courts as to what situations do or do not constitute conflicts of interest
or should be disclosed.
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For this purpose, the members of the Working Group analyzed their respective case
law and categorized situations that can occur in the following Application Lists. These
lists obviously cannot contain every situation, but they provide guidance in many circumstances, and the Working Group has sought to make them as comprehensive as
possible. In all cases, the General Standards should control.
2. The Red List consists of two parts: ‘a non-waivable Red List’ (see General Standards
2(c) and 4(b)) and ‘a waivable Red List’ (see General Standard 4(c)). These lists are a
non-exhaustive enumeration of specific situations which, depending on the facts of a
given case, give rise to justifiable doubts as to the arbitrator’s impartiality and independence; ie, in these circumstances an objective conflict of interest exists from the point
of view of a reasonable third person having knowledge of the relevant facts (see
General Standard 2(b)). The nonwaivable Red List includes situations deriving from
the overriding principle that no person can be his or her own judge. Therefore, disclosure of such a situation cannot cure the conflict. The waivable Red List encompasses
situations that are serious but not as severe. Because of their seriousness, unlike circumstances described in the Orange List, these situations should be considered
waivable only if and when the parties, being aware of the conflict of interest situation,
nevertheless expressly state their willingness to have such a person act as arbitrator, as
set forth in General Standard 4(c).
3. The Orange List is a non-exhaustive enumeration of specific situations which
(depending on the facts of a given case) in the eyes of the parties may give rise to justifiable doubts as to the arbitrator’s impartiality or independence. The Orange List thus
reflects situations that would fall under General Standard 3(a), so that the arbitrator has
a duty to disclose such situations. In all these situations, the parties are deemed to have
accepted the arbitrator if, after disclosure, no timely objection is made. (General
Standard 4(a)).
4. It should be stressed that, as stated above, such disclosure should not automatically
result in a disqualification of the arbitrator; no presumption regarding disqualification
should arise from a disclosure. The purpose of the disclosure is to inform the parties
of a situation that they may wish to explore further in order to determine whether
objectively—ie, from a reasonable third person’s point of view having knowledge of
the relevant facts—there is a justifiable doubt as to the arbitrator’s impartiality or independence. If the conclusion is that there is no justifiable doubt, the arbitrator can act.
He or she can also act if there is no timely objection by the parties or, in situations
covered by the waivable Red List, a specific acceptance by the parties in accordance
with General Standard 4(c). Of course, if a party challenges the appointment of the
arbitrator, he or she can nevertheless act if the authority that has to rule on the challenge decides that the challenge does not meet the objective test for disqualification.
5. In addition, a later challenge based on the fact that an arbitrator did not disclose such
facts or circumstances should not result automatically in either non-appointment, later
disqualification or a successful challenge to any award. In the view of the Working
Group, non-disclosure cannot make an arbitrator partial or lacking independence; only
the facts or circumstances that he or she did not disclose can do so.
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6. The Green List contains a non-exhaustive enumeration of specific situations where
no appearance of, and no actual, conflict of interest exists from the relevant objective
point of view. Thus, the arbitrator has no duty to disclose situations falling within the
Green List. In the opinion of the Working Group, as already expressed in the Explanation
to General Standard 3(a), there should be a limit to disclosure, based on reasonableness; in some situations, an objective test should prevail over the purely subjective test
of ‘the eyes of the parties.’
7. Situations falling outside the time limit used in some of the Orange List situations
should generally be considered as falling in the Green List, even though they are not
specifically stated. An arbitrator may nevertheless wish to make disclosure if, under
the General Standards, he or she believes it to be appropriate. While there has been
much debate with respect to the time limits used in the Lists, the Working Group has
concluded that the limits indicated are appropriate and provide guidance where none
exists now. For example, the three-year period in Orange List 3.1 may be too long in
certain circumstances and too short in others, but the Working Group believes that
the period is an appropriate general criterion, subject to the special circumstances of
any case.
8. The borderline between the situations indicated is often thin. It can be debated
whether a certain situation should be on one List instead of another. Also, the Lists
contain, for various situations, open norms like ‘significant’. The Working Group has
extensively and repeatedly discussed both of these issues, in the light of comments
received. It believes that the decisions reflected in the Lists reflect international principles to the best extent possible and that further definition of the norms, which should
be interpreted reasonably in light of the facts and circumstances in each case, would be
counter-productive.
9. There has been much debate as to whether there should be a Green List at all and
also, with respect to the Red List, whether the situations on the Non-Waivable Red List
should be waivable in light of party autonomy. With respect to the first question, the
Working Group has maintained its decision that the subjective test for disclosure
should not be the absolute criterion but that some objective thresholds should be added.
With respect to the second question, the conclusion of the Working Group was that
party autonomy, in this respect, has its limits.
1. Non-Waivable Red List
1.1. There is an identity between a party and the arbitrator, or the arbitrator is a legal
representative of an entity that is a party in the arbitration.
1.2. The arbitrator is a manager, director or member of the supervisory board, or has a
similar controlling influence in one of the parties.
1.3. The arbitrator has a significant financial interest in one of the parties or the outcome of the case.
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1.4. The arbitrator regularly advises the appointing party or an affiliate of the appointing party, and the arbitrator or his or her firm derives a significant financial income
therefrom.
2. Waivable Red List
2.1. Relationship of the arbitrator to the dispute
2.1.1 The arbitrator has given legal advice or provided an expert opinion on the
dispute to a party or an affiliate of one of the parties.
2.1.2 The arbitrator has previous involvement in the case.
2.2. Arbitrator’s direct or indirect interest in the dispute
2.2.1 The arbitrator holds shares, either directly or indirectly, in one of the parties
or an affiliate of one of the parties that is privately held.
2.2.2 A close family member44 of the arbitrator has a significant financial interest
in the outcome of the dispute.
2.2.3 The arbitrator or a close family member of the arbitrator has a close relationship with a third party who may be liable to recourse on the part of the unsuccessful party in the dispute.
2.3. Arbitrator’s relationship with the parties or counsel
2.3.1 The arbitrator currently represents or advises one of the parties or an affiliate
of one of the parties.
2.3.2 The arbitrator currently represents the lawyer or law firm acting as counsel
for one of the parties.
2.3.3 The arbitrator is a lawyer in the same law firm as the counsel to one of the
parties.
2.3.4 The arbitrator is a manager, director or member of the supervisory board, or
has a similar controlling influence, in an affiliate55 of one of the parties if the
affiliate is directly involved in the matters in dispute in the arbitration.
2.3.5 The arbitrator’s law firm had a previous but terminated involvement in the
case without the arbitrator being involved himself or herself.
2.3.6 The arbitrator’s law firm currently has a significant commercial relationship
with one of the parties or an affiliate of one of the parties.
2.3.7 The arbitrator regularly advises the appointing party or an affiliate of the
appointing party, but neither the arbitrator nor his or her firm derives a significant
financial income therefrom.
4
5
Throughout the Application Lists, the term ‘close family member’ refers to a spouse, sibling,
child, parent or life partner.
Throughout the Application Lists, the term ‘affiliate’ encompasses all companies in one group
of companies including the parent company.
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2.3.8 The arbitrator has a close family relationship with one of the parties or with
a manager, director or member of the supervisory board or any person having a
similar controlling influence in one of the parties or an affiliate of one of the parties or with a counsel representing a party.
2.3.9 A close family member of the arbitrator has a significant financial interest in
one of the parties or an affiliate of one of the parties.
3. Orange List
3.1. Previous services for one of the parties or other involvement in the case
3.1.1 The arbitrator has within the past three years served as counsel for one of the
parties or an affiliate of one of the parties or has previously advised or been consulted by the party or an affiliate of the party making the appointment in an unrelated matter, but the arbitrator and the party or the affiliate of the party have no
ongoing relationship.
3.1.2 The arbitrator has within the past three years served as counsel against one
of the parties or an affiliate of one of the parties in an unrelated matter.
3.1.3 The arbitrator has within the past three years been appointed as arbitrator on
two or more occasions by one of the parties or an affiliate of one of the parties.66
3.1.4 The arbitrator’s law firm has within the past three years acted for one of the
parties or an affiliate of one of the parties in an unrelated matter without the
involvement of the arbitrator.
3.1.5 The arbitrator currently serves, or has served within the past three years, as
arbitrator in another arbitration on a related issue involving one of the parties or an
affiliate of one of the parties.
3.2. Current services for one of the parties
3.2.1 The arbitrator’s law firm is currently rendering services to one of the parties
or to an affiliate of one of the parties without creating a significant commercial
relationship and without the involvement of the arbitrator.
3.2.2 A law firm that shares revenues or fees with the arbitrator’s law firm renders
services to one of the parties or an affiliate of one of the parties before the arbitral
tribunal.
3.2.3 The arbitrator or his or her firm represents a party or an affiliate to the arbitration on a regular basis but is not involved in the current dispute.
3.3. Relationship between an arbitrator and another arbitrator or counsel.
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It may be the practice in certain specific kinds of arbitration, such as maritime or commodities
arbitration, to draw arbitrators from a small, specialized pool. If in such fields it is the custom
and practice for parties frequently to appoint the same arbitrator in different cases, no disclosure of this fact is required where all parties in the arbitration should be familiar with such
custom and practice.
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3.3.1 The arbitrator and another arbitrator are lawyers in the same law firm.
3.3.2 The arbitrator and another arbitrator or the counsel for one of the parties are
members of the same barristers’ chambers.77
3.3.3 The arbitrator was within the past three years a partner of, or otherwise
affiliated with, another arbitrator or any of the counsel in the same arbitration.
3.3.4 A lawyer in the arbitrator’s law firm is an arbitrator in another dispute involving the same party or parties or an affiliate of one of the parties.
3.3.5 A close family member of the arbitrator is a partner or employee of the law
firm representing one of the parties, but is not assisting with the dispute.
3.3.6 A close personal friendship exists between an arbitrator and a counsel of one
party, as demonstrated by the fact that the arbitrator and the counsel regularly
spend considerable time together unrelated to professional work commitments or
the activities of professional associations or social organizations.
3.3.7 The arbitrator has within the past three years received more than three
appointments by the same counsel or the same law firm.
3.4. Relationship between arbitrator and party and others involved in the arbitration
3.4.1 The arbitrator’s law firm is currently acting adverse to one of the parties or
an affiliate of one of the parties.
3.4.2 The arbitrator had been associated within the past three years with a party or
an affiliate of one of the parties in a professional capacity, such as a former
employee or partner.
3.4.3 A close personal friendship exists between an arbitrator and a manager or
director or a member of the supervisory board or any person having a similar controlling influence in one of the parties or an affiliate of one of the parties or a witness or expert, as demonstrated by the fact that the arbitrator and such director,
manager, other person, witness or expert regularly spend considerable time
together unrelated to professional work commitments or the activities of professional associations or social organizations.
3.4.4 If the arbitrator is a former judge, he or she has within the past three years
heard a significant case involving one of the parties.
3.5. Other circumstances
3.5.1 The arbitrator holds shares, either directly or indirectly, which by reason of
number or denomination constitute a material holding in one of the parties or an
affiliate of one of the parties that is publicly listed.
3.5.2 The arbitrator has publicly advocated a specific position regarding the case
that is being arbitrated, whether in a published paper or speech or otherwise.
7
Issues concerning special considerations involving barristers in England are discussed in the
Background Information issued by the Working Group.
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3.5.3 The arbitrator holds a position in an arbitration institution with appointing
authority over the dispute.
3.5.4 The arbitrator is a manager, director or member of the supervisory board, or
has a similar controlling influence, in an affiliate of one of the parties, where the
affiliate is not directly involved in the matters in dispute in the arbitration.
4. Green List
4.1. Previously expressed legal opinions
4.1.1 The arbitrator has previously published a general opinion (such as in a law
review article or public lecture) concerning an issue which also arises in the arbitration (but this opinion is not focused on the case that is being arbitrated).
4.2. Previous services against one party
4.2.1 The arbitrator’s law firm has acted against one of the parties or an affiliate of
one of the parties in an unrelated matter without the involvement of the arbitrator.
4.3. Current services for one of the parties
4.3.1 A firm in association or in alliance with the arbitrator’s law firm, but which
does not share fees or other revenues with the arbitrator’s law firm, renders services
to one of the parties or an affiliate of one of the parties in an unrelated matter.
4.4. Contacts with another arbitrator or with counsel for one of the parties
4.4.1 The arbitrator has a relationship with another arbitrator or with the counsel
for one of the parties through membership in the same professional association or
social organization.
4.4.2 The arbitrator and counsel for one of the parties or another arbitrator have
previously served together as arbitrators or as co-counsel.
4.5. Contacts between the arbitrator and one of the parties
4.5.1 The arbitrator has had an initial contact with the appointing party or an
affiliate of the appointing party (or the respective counsels) prior to appointment,
if this contact is limited to the arbitrator’s availability and qualifications to serve
or to the names of possible candidates for a chairperson and did not address the
merits or procedural aspects of th