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Archive for May, 2013

I don’t know how friendly they are at Le Canard or anywhere else in the French printing industry.  Compositors in London are a pally sort of lot.  Perhaps it’s because they often work in the evening or at night.  I don’t know because this is a blog post about arbitration.  Isn’t that a surprise!

Arguments abound as to whether arbitrators are obliged to follow the black letter law – and if so what black letter law.  Are we talking about the arbitration law of the place of arbitration; what if the arbitration isn’t taking place at the seat?  And what about that Court decision handed down as you sat down to write the Award?  Does the law of the Contract prevail – or the Lex Mercatoria, the law Merchant.  Where does the Natural Law fit in – or the National law of the Claimant or the Respondent?

There’s enough there to make yet another arbitration manual, perhaps even a tome of 1000 pages.  Arbitration certainly isn’t the simple product of an agreement any more but who is a layman to challenge the great intellects of the law?

After three paragraphs, I have avoided my subject long enough.  Today, I am discussing arbitration agreements that permit the arbitrators to decide ex aequo et bono or as amiable compositeur(s).  I debated in my mind whether to italicise these two expressions as words foreign to English and decided against it.  In the context of  my subject they have become part of the language.

To put these terms into perspective, I would start with what seems to me a good point of reference, Article 28. of the UNCITRAL Model Law on International Commercial Arbitration,  “Rules applicable to substance of dispute”.  I know that the Model Law may not be law where you come from, or your jurisdiction may have adopted a variant or legislated on a frolic of its own, but I need a starting point and Article 28 is as good as any!

(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.
(4) 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.

Most modern arbitration statutes and most institutional Rules have broadly similar arrangements.  The 2010 UNCITRAL Arbitration Rules read, at Article 35:

Applicable law, amiable compositeur
Article 35
1. The arbitral tribunal shall apply the rules of law designated by the parties as applicable to the substance of the dispute. Failing such designation by the parties, the arbitral tribunal shall apply the law which it determines to be appropriate.
2. The arbitral tribunal shall decide as amiable compositeur or ex aequo et bono only if the parties have expressly authorized the arbitral tribunal to do so.
3. In all cases, the arbitral tribunal shall decide in accordance with the terms of the contract, if any, and shall take into account any usage of trade applicable to the transaction.

I noticed UNCITRAL themselves put the words under discussion into italics; some amiable compositor, no doubt.  Enfin, je reste sur mes positions.

No doubt you all will be delighted at (2) of the Model Law.  Why conflict of laws rules are preferable to the arbitral tribunal simply applying the rules of law which it considers applicable (I think that’s called the voie directe)  rather than going via the conflict of laws rules (the voie indirecte) I shall never know.  Conflict of laws is an unnecessarily complex field of circular arguments whose principal purpose seems to be as an area of academic study (and possibly a source of fees, unless that’s just a layman’s cynical view).  I note that the CoR rules are excluded specifically in (1) and that the Rules adopt the voie direct.  Isn’t law fun?  The whole business of CoR might be said to be dicey (a joke about English jurisprudence – my apologies to all you serious teachers!).

The principle that can be distilled from these formulations is simply that an arbitrator or a panel of arbitrator shall do as the parties expect – or rather as the parties must be deemed to have expected when they made their agreement.  That’s an argument to be developed another day, however.   It is the provision relating to “. . .  as amiable compositeur or ex aequo et bono.” that I discuss (italics as I quote – I wish I hadn’t started this!).

The two terms are so often together, often, as in the UNCITRAL texts, in the same sentence the distinction becomes blurred.  Both imply some departure from law but Articles 25(1) of the Model Law and 35.1 of the Rules already provide for rules of law which need not be the black letter law of a nation state.  Religious laws such as the Islamic or Jewish laws, UNIDROIT, Lex Mercatoria, all are rules of law, however uncertain of interpretation, but these two terms must mean something different.  Not only are they different from law or rules of law, they must be different from one another.  Otherwise why would the draughtsman (who may, of course be a woman – let’s not go there) use two terms rather than one?

Something to be decided ex aequo et bono (I give up. the italics are handy) is something that is to be decided by principles of what is fair and just without any constraint of law.  If a decision is to be made according to extra-legal principles it is as well to explain them in the reasons for an award.  There is, however, no obvious reason for departure from the process of evidence and argument.  Indeed argument may be of value in developing the necessary principles and appealing to the arbitrator’s sense of Justice.

To make an award as amiable compositeur (I’ll live with it now!) may take us out of our legal comfort zone but in a different way.  The usual French meaning is that of conciliator, a word which is used by many lawyers interchangeably but, I think, wrongly with mediator.  I haven’t found much in the  jurisprudence to help with this meaning so I am flying blind.  Professor A F M Maniruzzaman, in his commentary, The Arbitrator’s Prudence In Lex Mercatoria: Amiable Composition And Ex Aequo Et Bono In Decision Making (Mealey’s Arbitration Reporter, December 2003)  discusses the application of Lex Mercatoria in Amiable Composition but, I would argue with great respect,  is less concerned with the sense of conciliation which the French usage seems to imply.   I suggest that the role of the Amiable Compositeur involves more than the decision making itself and includes the steps inherent in conciliation.   Conciliation leading to a decision.  Lex Mercatoria, after all, can be the rules of law which 25(1) and 35.1 permit.  Insofar as there is a law merchant peculiar to the matters in hand, perhaps the references in 25(4) and 35.1 point to something more than black letter law.

If I am right then an Amiable Compositeur proceeds differently from the usual arbitrator.  He or she conciliates and records, if successful, the eventual agreement of the parties as an arbitral  award.  If the conciliation is not successful, the arbitrator makes an award based on the conciliation process the decision the parties couldn’t make.  To my mind it is axiomatic that the conciliation of an amiable compositeur should not include caucusing or anything else that excludes either party.  On the other hand, the very word amiable implies that the arbitrator will be down among the parties as a friend.

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