Archive for the ‘ADR’ Category

‘Detail’ in Adjudication

In Amey Wye Valley Ltd v The County of Herefordshire District Council [2016] EWHC 2368 (TCC) the learned Judge observed, “Errors of fine detail are part of the process effectively accepted by Parliament as a consequence of the process of adjudication. The `right’ answer is secondary to the parties having a rapid answer.”.

The adjudicator had made a mistake in his spreadsheet.  Amey said it was 2.5 million, HDC 1.9 million.

That’s fine detail?

Read Full Post »

The main part of the title is taken from an article by Nicholas Peacock, Donny Surtani, and Pritika Advani, of Herbert Smith Freehills  – here is a link to the article.   The argument, I suggest, is not restricted to India.  Every time the crime of fraud arises in arbitration, whether in Claim or Counterclaim or even in incidental evidence or argument, an arbitrator has to look into his or her appointment and, indeed, conscience, to know what to do.

I have argued long and often that arbitration is no process at law.  Arbitration has no role to play in criminal law.  An arbitrator’s decision can neither convict a criminal nor can it give effect to truly criminal acts and intentions.

Like any other proposition, any assertion of fraud relevant to the outcome of an arbitration must be tested and assessed according to the balance of probabilities, that is to say that, to succeed,  they must be found more probable than not.  Whether or not there is fraud alleged is a private matter within the arbitration and it is submitted that the mere fact of fraud and its consequences in the arbitration can be decided by the arbitrator or arbitrators,

There is no direct link between the private process of arbitration and the public processes of the criminal courts.  A decision of fraud in an arbitration is private and remains so.  However, an arbitrator who is satisfied, from the evidence, that a fraud may have been committed, may have a duty – either to his own country or another country affected by the offence – to report the suspicion.  Confidentiality, if it exists at all, exists from the nature of the arbitration agreement itself.  It cannot override the public duty to report the crime.

It could be sufficient for an arbitrator to rely upon a party or Counsel to report a fraud.  It is possible, but unlikely, that the parties will be complicit in some fraud against a third party.  It is hard to envisage Counsel as being complicit in such a fraud.  However, arbitrators are not concerned with the regulation of party representatives who may be anyone of a party’s choice.  The representatives may themselves be selected to be privy to the fraud.

In my opinion, an arbitrator should be very reluctant to report a fraud unless he or she is certain beyond a peradventure that a fraud has taken place and the perpetrator can be identified.  If there is no more than a suspicion, however strong, the correct action should be to withdraw from the reference.  It may be necessary to account to the parties with an explanation, but that may have to be very carefully worded,

Having said that, the arbitrator may be compelled to report his suspicions, should he or she consider that the is a risk to the person.

If the arbitrator has a duty to report a fraud, is that duty owed to the seat of the arbitration, to the domicile of one or other or both parties or to the place of performance of the contract (as when constructing a building)?

Read Full Post »

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.

Read Full Post »

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

Read Full Post »

A Paradox of Arbitration

“A paradox, a paradox, a most ingenious paradox!”

(The Pirates of Penzance or the Slave of Duty – Gilbert & Sullivan, Doyly Carte 1911)

Arbitration is not legal but it is legitimate.

In a note, reported by Conventus Law Singapore – The Approach To Scrutiny Of Arbitral Awards , of 7 January, 2015 by Prakash Pillai, a Partner of Clyde & Co, he opens by saying “International arbitration must, out of necessity, rely on the courts to uphold and enforce arbitral awards and to support the arbitral process.”  The article goes on to quote the words of Professor Jan Paulsson, perhaps one of the greatest of les haûts arbitres:  “the great paradox of arbitration is that it seeks the cooperation of the very public authorities from which it wants to free itself.[1]

With sincere respect (I am an Engineer and thus must choose my words carefully), no and no again.

International arbitration only relies on the courts in the sense that all agreement must resort to the courts when one or other parity fails to comply with his or her bargain.  There is no paradox.  Arbitration itself is a private process, no more and no less than the transient effect of an agreement between two persons.  It has no existence of its own.  If it has an identifiable intent or desire, it is simply a manifestation of the will of the Parties.  If arbitration can be said to seek cooperation from anyone it looks no further than the Parties, its creators, expecting them, as I have said, to comply with their bargain and honour the Award.

I know of course that there are arbitral institutions who seek a relationship with the courts.  Some, indeed, use the name “Court[2]” to aggrandise themselves as if they had a Sovereign’s authority.  Some may have the backing of the relevant state.  Nevertheless, the only authority they have, except perhaps in China[3] is the authority conferred by the parties themselves.

Of itself, the Award is no more than a statement by the private arbitrator(s) of what the parties ought to do and, by their arbitration agreement (often, of course, a clause in a wider contract, although it survives the contract itself) have agreed to do.  Although, logically, it differs not at all from any other contractual bargain, various legislatures have elected to simplify the application of the Award within the Context of the Court, provided certain more or less obvious procedural requirements have been met by the arbitrator(s).  In English law, for example, the arbitrator(s) have statutory duties to:

(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.[4]

I argue that there is nothing in the relationship between the Courts and the simple process of private decision making that is any more paradoxical than the relationship between the Courts and any other form of binding agreement, such as a construction contract.  Certainly there is nothing about arbitration that seeks to free itself from the appropriate law.  That would be illegal and while arbitration is not legal, it is certainly neither illegal nor antipathetic to the legal systems that it assists and within which it operates.

That arbitration seeks to competes in some way with the legitimate power of the Sovereign within whose jurisdiction it is conducted or, indeed, in any place where a Party may wish the New York Convention 1958 to be upheld is a canard I sought to expose – seemingly without success – in my article: “Arbitration and the Sovereign Power[5] in The Journal of International Arbitration, Vol. 17 No. 2, April 2000, published by Kluwer Law International.

[1]      1 Jan Paulsson, Arbitration in Three Dimensions, LSE Legal Studies Working Paper No. 2/2010 (January 13, 2010), available at http://ssrn.com/abstract=1536093 accessed Wednesday, 07 January 2015.

[2]      The word “Court” need not mean more than  an enclosed area, a yard, see the OED online entry at   http://www.oed.com/view/Entry/43198?rskey=0iMwaP&result=1#eid.  Accessed  Wednesday, 07 January 2015.   The meaning, “A court of judicature, of law, or of administration” is number IV in the etymological list.

[3]      Under Chinese law, arbitration is not enforced unless it is conducted through an authorised body.  I don’t know if private arbitration is permitted.

[4]      S.33(1), Arbitration Act 1996.  Note the use of the words “fairly” and “fair” in the same sentence.

[5]      http://www.hartwell.pwp.blueyonder.co.uk/Arbitration_Power.htm accessed Wednesday, 07 January 2015

Read Full Post »


Lawyers understandably regard the Rule of Law as the Rule of The Law, that is to say the The Law of their nation states or an international consensus – insofar as can be achieved – derived from those states or bodies, such as the ICJ, created by them.

The word “Arbitration” means different things to different folks.  In history there has been various English legislation, of which the Arbitration Act 1996 is but the latest example of a series that may have begun with that of 1698 that followed the report of John Locke a year or two earlier.

The distinguishing feature of those Acts was that they said to disputants, in effect: “You may settle your disputes yourselves and come to the Court only as a last resort.”  Indeed, the current statute speaks in terms: “the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense; the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest;” and notably, “in matters governed by this Part the court should not intervene except as provided by this Part.”

The Act then makes it clear that the so-called tribunal is no more and no less than an extension of the parties themselves.  There are agencies, the ICC arbitration facility is one such, which exist to provide a commercial service.  That service includes administration and the use of a set of rules but, crucially the parties retain the ability to select their arbitrators (save in certain circumstances) and even the presiding arbitrator – often selected by the other two.

That is the arbitration contemplated by the lexicographers of OED when they wrote the definition: “The settlement of a dispute or question at issue by one to whom the conflicting parties agree to refer their claims in order to obtain an equitable decision.”

There is a difference between the arbitration I have considered so far and the arbitration beloved of my lawyer friends.  Their approach seems to appeal to authority, not the Judges but the arbitrations arranged, shall I say authoritatively.  The thread seems to run through the argument.  John Mortimer, in the context of his Rumpole stories named it as the golden thread of The Law.  The Law of states because what other Law can there be?

Now isn’t the time to seek an answer to that question.  Aristotle seems to have come close to it but I won’t try lest, like Icarus, I fall.

Sadly, there seems to be a difference that cannot be resolved.  Laymen (and those who drafted the legislation, in England and elsewhere – vide the UNCITRAL Model Law) expect the arbitrators to be their peers (as still they are, e.g. in trade associations).  Lawyers expect to clothe arbitrators with authority, even if it only a notional authority.

I have come to the conclusion, reluctantly, that the debate, if it is still a live debate cannot be resolved.  There is a street in the ancient city of Chester, where the upper stories of the houses overhang the pavement so that the occupants can converse from one side of the street to another.  Sadly, we like they, will never resolve our difference while we argue from different premises.

Perhaps, if we can think of an arbitrator – but of which kind?

Read Full Post »

The Society of Construction Arbitrators, [President: Ian Salisbury MA DiplArch RIBA FCIArb] www.constructionarbitrators.org is to host a topical debate SCA logoshortly,  on the motion:

The advice of construction consultants should be privileged, as it is for lawyers.

The proposer is Mr John Riches, Chartered Surveyor, Henry Cooper Consultants

John L Riches is a Chartered Quantity Surveyor and Chartered Builder with more than 30 years’ experience in the construction industry. He started his career as a surveyor for building contractors and having become a chief surveyor left contracting in 1982 to work in consultancy. This move enabled him to develop his interests in dispute resolution in all facets of the construction industry. His experience covers all types of construction works including large and medium scale building works, power stations, nuclear and process engineering installations, roadworks, riverworks and sea defences.

He is opposed by: Mr James Bowling, Counsel, 4 Pump Court

James’s construction and engineering practice encompasses the full range of construction disputes. He appears regularly in the TCC and in domestic arbitrations. He also has extensive experience of acting in adjudications, as well as having been involved in the TCC in a number of the leading reported cases on adjudication enforcement. James’s practice also encompasses construction-related professional negligence disputes. Previous and current clients include major contractors, development firms, as well as private clients and a range of construction professionals.

The Chairman will be our President Mr Ian Salisbury .  (I acknowledge that the above details were taken from the SCA flyer for the event.)

I thought it would be fun to propose an amendment along these lines:-

As you know, I do not profess law and I do not presume to comment upon what may or may not constitute legal privilege.  However, I do assert two propositions that I verily believe. 

The first is that the paramount duty of an arbitrator or arbitrators is dictated to us by the principle audi alteram partem the necessary corollary of which is that the parties be treated equally. 

The second is that the Arbitration Act 1996 provides, at s.34:

Procedural and evidential matters.

(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—

(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;

Now, I suggest that the Rules of the Court and other rules as to privilege are rules within the meaning of Subsection 2(f).

If that is right then whether or not a document or other information is required is a matter for the tribunal alone.

My own personal practice of forty years or so is to respond to a request, that I order a lay advocate or adviser to disclose consultation information, by suggesting that I direct both advisers to disclose their advice and consultation materials.  Always so far the application has been withdrawn.

In arbitration, I argue, everything that is necessary for a fair decision is disclosable.  S.1 refers. 

Mr President, I beg to submit that the motion be amended to add the words “in arbitration” after “. . . privileged”.  What is done in Court is none of our concern.

I post my suggestion here for comment, preferably before the day so I may consider it.

Read Full Post »

But it didn’t –

Arbitration, as I have said many times before, is the settlement of a dispute or question at issue by one to whom the conflicting parties agree to refer their claims in order to obtain an equitable decision. That’s the OED definition and, allowing that this is the English language, and I’m writing in England, on the outskirts of its capital, that ought to be good enough for anyone. Certainly it’s good enough for me.

Lawyers, however, have their own way of doing things and, sure enough, the English Arbitration Act 1996 tries to put it’s own gloss on the perfectly sound definition. In s.1(a), we are told that, “the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense.”. To be fair (there’s that word again) that is a gloss rather than a definition, You may care to call it a purposive definition but the idea is the same, unless you care to argue that the words “fair” and “equitable” have a different meaning.

Some of my lawyer friends seek to argue that s.1(a) provides for a fair process and go on to argue that the result of a fair process must, ipso facto (engineers aren’t forbidden to use Latin, but, if you’re a lawyer read “necessarily”) be a fair outcome. They go on to say for that reason that, even if a legally correct outcome is unfair in the particular case, the section is not breached. To that the short answer must be, “Get real – read the words.”. There is a longer answer – isn’t there always? – but I’ll come to that later.

I am writing from London, but I realise that we’re not the sole arbiters of the language, even if the OED has been the authority for Britain and the Commonwealth for over a century. However, in the nineteenth century Noah Webster Jr. (October 16, 1758 – May 28, 1843) created his variant for political as well as orthographical reasons. His name became synonymous with “dictionary” in the United States, especially that published in 1828 as An American Dictionary of the English Language. (I would argue that it would have been more correct to call it A Dictionary of the American Language but that’s by the way.)

Merriam-Webster Online gives for “arbitration” the definition: “the action of arbitrating; especially : the hearing and determination of a case in controversy by an arbiter”, which doesn’t take us a lot further. The M-W Learner’s Dictionary, however gives “arbitrate” the meaning, “: to settle an argument between two people or groups after hearing the opinions and ideas of both” which seems fair enough to me.

While I am writing about glosses, Rule 3 of the Scottish Arbitration Rules, referenced in s.7 of the Arbitration (Scotland) Act 2010 reads, “Only an individual may act as an arbitrator.”. Arguably, such a rule is otiose, since any body corporate can act only through delegating to a natural person and an arbitral appointment is personal and cannot be delegated (delegatus non potest delegare).

That is an important issue, a crucial issue, for this essay. An arbitrator is an individual and the arbitral panels, typically three, more commonly seen in international disputes, comprise individuals making independent decisions in a collegiate context. Various bodies have come into being to administer or organise arbitration for an additional fee; a slice off the top, if you will, of the arbitrators’ fees. Often they use the word “Court” for reasons about which I will not speculate. Many derive their being from Chambers of Commerce as did the now autonomous LCIA, the London Court of International Arbitration, which has branches in India and, I believe, other places. The probable leader of the world of international arbitration is the Arbitration Court of the International Chamber of Commerce (ICC), based in Paris, also an autonomous non-government organisation.

The important feature of these bodies is that they don’t decide the issues that are in dispute. They may organise the panels who do but they don’t (or shouldn’t) interfere with the outcome. In passing, I note the Rule of the ICC that the panel’s Award must be scrutinised by the Court (read “Management”) before it can be published. Representatives of the ICC point out, if asked, that the Court’s concern is with the form and presentation of the Award. They argue that to call a panel’s attention to the logic of the Award and to note omissions is an administrative service and not a matter of substance. The point is debatable, it is the one individual or the panel that makes the decision – no-one else.

These arbitral institutions – and in recent years they have sprung up in many countries and cities around the world – are not necessary for an arbitration, except in China where CIETAC, the China International Economic and Trade Arbitration Commission is, at the time of writing, in difference with its former branches or agents. Generally, an arbitrator can be appointed, or a panel convened by choice without reference to them. Even in China, where Awards must be issued on behalf of CIETAC (or perhaps one of its authorised successors) the Awards are prepared by an arbitral panel of individuals chosen by the Parties, chaired by an appointee of the Commission but still acting personally.

The question arises: “If the arbitral institution merely administers the arbitration, doing what the arbitral panel could do itself, what value is added for that often substantial additional fee?”.

Administration itself is a consideration. Some Institutions handle all or most of the formal documents helping to keep the arbitrators and the Parties (and their lawyers) at arm’s length. Although contact shouldn’t be a problem it is not unknown, during a telephone call about some administrative matter, such as arrangements for a meeting, for an unrepresented party (and sometimes even a lawyer, who should know better), to start discussion of some substantive issue that should be discussed only in the presence of both Parties. An experienced Arbitrator will know how to avoid that, perhaps by three-way recording, but the buffer of a panel secretary or Counsel at an Institution is a protection.

Another benefit, not often used, is that Counsel at an Institution can be of great assistance to a new arbitrator. A neophyte may be a layman, perhaps a scientist, a technical specialist, or perhaps a lawyer who understands the issues but has no experience of international arbitration. Counsel charged with administering the case can, and do, advise such a neophyte as to the procedure and the rules. They will know how to avoid straying into the substantive matters that are for the arbitrator(s) alone. In this way a new arbitrator may develop.

My personal opinion, however, is that those responsible for drafting the arbitration provisions in a contract, the management of a company or the officers of a public concern, seek the public relations protection of being able to say, “This decision came from the Arbitration Court of . . .”. So much more convincing than, “This decision came from Dr A, Professor B and Mr C”. The grander the title of the Institution, or the better its reputation, the more credible is that protection, for the arbitrators and for the lawyers concerned.

It’s misleading, of course. The decision may be issued and perhaps approved by the Institution but it isn’t a decision of the Institution. It’s the collegiate decision of Mr C, Dr A and Professor B, and as sound or unsound as those three may be. The fact of the Institution’s involvement certainly should not have, and probably did not influence the substantive decision in any way. Only the perception of the decision is changed by the use of the Institution. And that, I suggest, is its added value.

I said there was a longer answer to the lawyer’s interpretation of the English AA 1996 s.1(a), “the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense”. It isn’t very long because it was encapsulated by the late Sir Michael Kerr in his Keating lecture of 1997. He said words to the effect of “There are times when an international arbitrator can do justice where a Judge can not”. That is because a Judge might be constrained by the national law he applies to reach a decision that may be unjust – or unfair – in all the circumstances of the matter.

Thus, an entirely fair and correct procedure, applying the law, might still fail to achieve the object of arbitration (to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense).

But this is the opinion of an Engineer who is not, and does not hold himself out as, licensed or qualified to practise law or give legal advice in any jurisdiction.

Eur Ing Professor Geoffrey M Beresford Hartwell
Chartered Engineer and Chartered Arbitrator.

Read Full Post »

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.

Read Full Post »

Note of an intervention in a recent discussion

“If a Layman may comment on what seems an esoteric legal debate.  I suggest that ordinary arbitration is not a process at law.  Nor are arbitrators judges; Equally they are not delegates.  The word tribunal is misleading; arbitrators form a panel or ad hoc committee.
To justify by Natural Law the duty of each member to form his own opinion while seeking to achieve a collegiate finding would perhaps take too long, (I expect that I will try that one day.)  Suffice to say that the duty of the empanelled members to seek common ground is well-founded in custom; remember the two arbitrators who used to refer to an umpire only if they could not find that common ground.
If the three arbitrators cannot, in all conscience, sign the award, or if someone cannot sign it without expressing reservations, then the Collegiate process has failed.
But these arbitrators are paid by the parties alone.  With the most sincere respect to the Supreme Court in Jivraj v Hishwani, they are still servants of the parties if not employees.  The parties are entitled to know what went wrong.  Just as they have a right to the reasons for the Award, they have a right to the reasons for dissent.
The danger, we are told, is that the memorandum of dissent will be taken into account by a Court in proceedings for setting aside or for enforcement.  The answer to that, I suggest, is simple.  The dissenter is either wrong or right.  If the dissent is wrong, the Court will discard it; no harm done.
If, on the other hand the dissenter is right, then the Court will no doubt find accordingly and harm, possibly serious harm will be averted.
It seems entirely logical, but then I’m an Engineer and no Lawyer.​”

Read Full Post »

Older Posts »