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Archive for June, 2015

On June 25, 2015 there is a talk in the Upper Lecture Theatre of the King’s Inns from 6–7pm on the dispute process known as med/arb. Many law students and practitioners will be familiar with the individual use of mediation or arbitration as an alternative to the court system. Ms Justice Laffoy, of the Supreme Court, chairs the event where Scotland’s leading mediator John Sturrock QC will discuss with well known Irish barrister John Gordon as to the circumstances where allowing for the use of arbitration after an unsuccessful mediation has already occurred may be helpful.
Arran Dowling-Hussey, a friend of mine with whom I share the distinction of being a Consultant with the Kolkata-based legal boutique arbitration specialists, KoVe Global, called my attention to this event, still anticipated at the time of writing.
As a layman, I wondered why lawyers thought the matter in need of study when nothing seemed simpler than for two parties in conflict to say, to a friend, “We have a problem. Would you please be so kind as to help us find an agreement and, if an agreement isn’t possible, please decide the issues for us? We’ll abide by your decision.”

What more was there to say? Well, I don’t suppose the word ‘friend’ would be very welcome to my lawyer colleagues. Although the Commerçants of yore would appeal to one of their own, sometimes but not always a doyen of the trade or profession, to resolve their differences – at the traders in the commodity markets of London still do – the law works very differently. Ignorance is not merely bliss; it’s a prime qualification. Think of the wonderful dicta of London Judges. Folk of a certain age will recall the Judge who asked “Who are the Beatles?” at the very height of their fame.

The Canon Law regarding who may and who may not marry is embodied in a Table of Kindred and Affinity in the Book of Common Prayer. A man may not marry, for example, his wife’s daughter’s daughter; a woman may not marry her father’s mother’s husband. It’s a complex enough list but is as nothing compared with the International Bar Association’s Guidelines on Conflicts of Interest in International Arbitration, of 27 pages. The idea of appointing as arbitrator someone you both know and trust horrifies the IBA, as does, by implication, the idea of seeking the judgement someone whom you know to understand your business.

That Justice is blindfolded, everybody knows. Except that she isn’t. There are statues of a blindfolded justice, of course. I haven’t attempted a formal census, but there seem to be as many representations of Justice sighted as there are blindfolded. Sometimes she wields the great sword of state, almost always the symbolic scales that share her name. Symbolic, of course, of Jus, of what is right and true, while the sword symbolises the Imperium, the coercive power, of the State.

Two important examples of statues of a Sighted Justice are the Statue of Peace through Justice at the Peace Palace in The Hague and the Statue of Justice in London atop the dome which caps the Central Criminal Court in Old Bailey. I’ll return to the value of sighted Justice later. For now, I am concerned with those two symbols – the scales, Jus and the sword, Imperium. Together, they represent the decision-making power of the state and its coercive authority. Power and authority that are vested in the Court.

It is not unusual to see it said that arbitration exercises Jus and not Imperium. I’ve said as much myself, but it oversimplifies the matter. Jus is the product of public judicial reasoning and, depending upon the competent jurisdiction, binds all who fall within that jurisdiction. Where the doctrine of stare decisis is observed, it becomes a part of the system; where stare decisis is not the rule, it yet will be persuasive.  Arbitrators have no coercive power and no public authority. An Arbitrator’s Award is merely a statement of what a private person has said should be done, no more and no less. Unlike a decision of the Court the Award binds no-one but the parties. Even the parties are bound only by their own agreement.

Arbitrators have no coercive power and no public authority. An Arbitrator’s Award is merely a statement of what a private person has said should be done, no more and no less. Unlike a decision of the Court the Award binds no-one but the parties. Even the parties are bound only by their own agreement.  Interestingly, because the logical effect of the Award is not a product of the legal process of any state, it has no territorial limits. It is in the same words and says the same things wherever it is taken.

Interestingly, because the logical effect of the Award is not a product of the legal process of any state, it has no territorial limits. It is in the same words and says the same things wherever it is taken.That simple fact is celebrated in the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York 1958 (NYC or NYC 1959). This Convention, to which 155 Nations have subscribed at the time of writing, does not alter the Awards, which remain true wherever they are found. What it does

That simple fact is celebrated in the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York 1958 (NYC or NYC 1959). This Convention, to which 155 Nations have subscribed at the time of writing, does not alter the Awards, which remain true wherever they are found. What it does is ensure that an arbitration agreement or an arbitral Award will be recognised and, more importantly, that the process for enforcement will be no more onerous than it would be for a domestic Award.This last provision if important because enforcement is the link between the Award and the Law. Often, parties will comply with the Award of their own volition. No Convention, no law is necessary. However,

This last provision is important because enforcement is the link between the Award and the Law. Often, parties will comply with the Award of their own volition. No Convention, no law is necessary. However, most legislation provides that, provided certain essential requirements are met, an Award will be given the authority of a Court judgment and enforced by the Court. Courts will respect the private agreement of the parties as the source of the Award and will not seek to reopen the arbitrator’s fact-finding decision.

The great difficulty of connecting mediation with arbitration is not the inadvertent remark of the neutral during the discussion. Professional care should prevent that. The prime difficulty is the so-called caucus when the mediator moves between the two (not more, please!) consulting them each on a without-prejudice basis.  It is argued that the mediator, having learned privately what the two parties are expecting, hoping, or prepared to achieve, would apply that knowledge if later required to act as arbitrator.

This argument ignores two factors: first that nothing revealed without prejudice can be evidence in the matter; secondly that nothing capable of being evidence may be concealed knowingly.  In addition, modern arbitrators generally have to support their Awards by logical reasons.

I suggest that there is little difficulty if caucusing is not to be attempted; if it is, however, it would be as well to have the written agreement of the parties to the detailed procedure.

Of course, arbitration can be used to settle the entire dispute when mediation has failed. It can also be used in the course of mediation to determine a knotty point – perhaps of law but possibly of fact – to enable the mediation to progress.  Good luck to all my friends in Dublin.

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Removal of Arbitrators : Case Note

G.M.Beresford Hartwell

The following two cases, at about the same time, may be useful in considering why the DAC decided to adopt the word “impartial” for the Arbitration Act 1996, in preference to the word “independent”.   They are good examples of an ethical point which has practical implications and which the Court has considered with care.

Bremer GmbH v. ets Soules et Cie and Anthony G Scott [1985] 1 Lloyd’s Rep 160

Disputes arose in connection with Bremer’s sale of US soya bean meal to Soules. The parties opted for arbitration. The arbitrators published their award ordering Bremer to pay Soules $65,129 plus interest. Bremer gave notice of appeal to the GAFTA. A Board of Appeal was subsequently constituted, the members of which included a Mr Anthony Scott. However, Bremer objected to Mr Scott’s appointment and applied to remove him on the ground that: “. . . he is not in a position to act judicially and without any bias, and that accordingly he is guilty of misconduct in the said appeal proceedings.”

Mr Scott was a director of European Grain & Shipping Ltd, a London company which was the wholly-owned subsidiary of Andre et Cie of Lausanne. Bremer alleged that Andre had previously been involved in the unfulfilled transaction as an intermediate trader. This transaction was the subject of the present disputes between Bremer and Soules. Thus, any decision in the Soules arbitration in favour of the Sellers would set a precedent favourable to Andre’s chances in future arbitrations. Accordingly, there was a risk that Mr Scott would lean towards a finding of fact in the Soules arbitration (and those down the string) favourable to the respective buyers. Mustill J held that on the facts and evidence before him, Bremer had totally failed to prove their case. He dismissed the application. In the course of his judgment, Mustill J stated the principles for the removal of arbitrator for misconduct.

Per Mustill J at p. 164: “There are three material situations in which the High Court has power to remove an arbitrator for ‘misconduct’, under section 23 of the Arbitration Act 1950. (1) Where it is proved that the arbitrator suffers from what may be called ‘actual bias’. In this situation, the complaining party satisfies the court that the arbitrator is predisposed to favour one party, or, conversely, to act unfavourably towards him, for reasons peculiar to that party, or to a group of which he is a member. Proof of actual bias entails proof that the arbitrator is in fact incapable of approaching the issues with the impartiality which his office demands. (2) Where the relationship between the arbitrator and the parties, or between the arbitrator and the subject-matter of the dispute, is such as to create an evident risk that the arbitrator has been, or will in the future be, incapable of acting impartially. To establish a case of misconduct in this category, proof of actual bias is unnecessary. The misconduct consists of assuming or remaining in office in circumstances where there is a manifest risk of partiality. This may be called a case of ‘imputed bias’. (3) Where the conduct of the arbitrator is such as to show that, questions of partiality aside, he is, through lack of talent, experience or diligence, incapable of conducting the reference in a manner which the parties are entitled to expect.”

 

Tracomin SA v. Gibbs Nathaniel (Canada) Ltd & George Jacob Bridge [1985] 1 Lloyd’s Rep 586

Tracomin entered into two contracts to buy peanuts from Gibbs, who would ship the goods in monthly instalments. When one shipment was never made, disputes having arisen, were referred to arbitration. Tracomin appointed their arbitrator. Gibbs also appointed theirs — one Mr George Jacob Bridge. Tracomin objected to Mr Bridge’s appointment. They made efforts to persuade Gibbs to replace Mr Bridge with some other arbitrator, but in vain. Pursuant to section 23(1) of the Arbitration Act 1950, Tracomin applied for an order that Mr Bridge be removed, on the ground of imputed bias; that they had been involved with Mr Bridge on three separate arbitrations and that Mr Bridge had not been shown to have acted in an impartial manner.

Per Staughton J at p. 595: “There are, in my judgment, three points of importance to the present case which emerge from the authorities. First, the test is objective, as to what a reasonable man would think; it is not an enquiry into what the party alleging bias thinks, or as to the actual views of the arbitrator who is challenged (Metropolitan Properties Co (FGC) Ltd v. Lannon, [1969] 1 QB 577, Hannam v. Bradford Corporation, [1970] 1 WLR 937, Hagop Ardahalian v. Unifert International SA, [ 1984] 2 Lloyd’s Rep 84). Secondly, the reasonable man forms his view ‘with no inside knowledge’ (per Lord Justice Cross in Hannam’s case at p. 949). In its context, that statement was directed at inside knowledge of the character of the persons who were accused of bias: see the judgment of Mr Justice Mustill in Bremer Handelsgesellschaft mbH v. Ets Soules et Cie, [1985] 1 Lloyd’s Rep 160, at p. 168. But the principle must, in my view, be wider than that, since the court looks at appearances, ‘at the impression which would be given to other people’ (per Lord Denning, MR, in the Metropolitan Properties case at p. 599).

While I respectfully agree with Mr Justice Mustill that, in some circumstances, the Court may take into account an innocent explanation of facts which at first sight were suspicious, particularly when the challenge to an arbitrator is made before rather than after he has adjudicated, I do not think that this is always the case. Suppose that a reasonable man would have grounds for believing that the arbitrator was the majority shareholder in one of the parties; I do not see why it should not be established by evidence that the shareholder was not the arbitrator, but another person of the same name, or why the Court should not allow the reasonable man to revise his opinion with the benefit of that knowledge.

By contrast, if an arbitrator is proved to have conferred with one of the parties about the dispute in circumstances which appear improper, I do not think that the reasonable man’s view should be revised by reference to subsequent evidence of what was in fact said. Given that there is a reasonable inference of impropriety in the first place, it would be wrong in my judgment that an application to remove the arbitrator should thereafter fail if the inference is displaced by inside knowledge which was not available to all at the time. Lord Hewart’s famous observation is still the law. I am conscious that there must be a dividing line between the two examples that I have given, and a test to determine on which side of that line a particular case lies. With the greatest respect to what may have been the view of Mr Justice Mustill, I cannot accept that the test is solely whether the application for relief is made before or after the arbitrator has adjudicated.

But wherever else the test is to be found, it need not be determined on this motion: I am convinced that in the present case, so far as it concerns the conduct of Mr Bridge in court during the SOS case, Tracomin SA v. Sudan Oil Seeds Co Ltd [1983] 2 Lloyd’s Rep 384 (Mr Bridge was said to have sat beside Counsel for SOS in that case and to have been advising Counsel with visible enthusiasm.), the view of the reasonable man ought not to be revised in the light of subsequent evidence which was not available to an observer at any time. It will be noted that, in considering another of Tracomin’s complaints (the writing of Mr Bridge’s letter to Maitre Wanner) I have paid heed to Mr Bridge’s evidence that he did not know that the letter was going to be used as evidence in Switzerland. But I express no view as to whether it is right to take that evidence into account.

Before leaving that point, I would accept that the reasonable man must have some knowledge of the trade. Mr Justice Mustill held that he must be put in the position of the complainant, having ascribed to him all the complainant’s knowledge and experience of the trade, and the manner in which disputes are habitually resolved, I would be prepared if necessary to go further, and attribute to him all that is common knowledge in the trade even if not known to the complainant. But there is no reason to suppose that the point is of any importance in the present case.

Thirdly, there is some difference of view in the cases as to the precise degree of probability needed to found a charge of imputed bias. In the Metropolitan Properties case Lord Denning, MR (at p. 599) favoured real likelihood of bias, Lord Justice Danckwerts (at p. 602) reasonable doubt as to the chairman’s impartiality. Lord Justice Edmund Davies (at p. 606) rejected real likelihood, and adopted, as a less stringent test, reasonable suspicion of bias. In Hannam’s case Lord Justice Sachs (at pp. 941-942) preferred real danger to real likelihood. In Ardahalian’s case (at p. 89) the Court of Appeal accepted real likelihood; but I do not think that there was any contest as to the standard of probability in that case. Indeed, Lord Justice Ackner referred to the case of R v. Liverpool City Justices ex parte Topping, [1983] 1 WLR 119, where he himself had adopted reasonable suspicion as a test.

In many, if not most cases, it will make no difference which test is applied. That is so in the present case, and I am content to adopt real likelihood, which appears to lay the heaviest burden on the person alleging bias. But I do not, with great respect, share the view of Lord Justice Cross (in Hannam’s case) and Lord Justice Ackner (in the Liverpool City Justices case) that there is little if any difference between the two tests. If it had been necessary to decide the point, I would have followed what was said by Lord Justice Edmund-Davies in the Metropolitan Properties case (1969) 1 QB, at p. 606:

‘With profound respect to those who have propounded the “real likelihood” test, I take the view that the requirement that justice must manifestly be done operates with undiminished force in cases where bias is alleged and that any development of the law which appears to emasculate that requirement should be strongly resisted. That the different tests, even when applied to the same facts, may lead to different results is illustrated by Reg. v. Barnsley Licensing Justices itself, as Devlin LJ made clear in the passage I have quoted. But I cannot bring myself to hold that a decision may properly be allowed to stand even although there is reasonable suspicion of bias on the part of one or more members of the adjudicating body.’

In my judgment a reasonable man, acquainted with the practice at FOSFA, would conclude that there was a real likelihood of bias on the part of Mr Bridge from the appearance of his conduct during the hearing of the 505 case in this court. That impression would not be dispelled, but rather slightly fortified, by the letter to Maitre Wanner, the reference to taking instructions from his principals, and the two occasions on which application was made to remove him. But it is on the appearance of Mr Bridge’s conduct during the SOS case in this Court that my conclusion is founded. Accordingly, I am prepared to make the order sought.” [The parties later came to terms. No order was made because Mr Bridge agreed to resign.]

 as first posted to http://www.nadr.co.uk/ by GMBH

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