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Posts Tagged ‘international commercial arbitration’

No, it isn’t.  This is not a Note of Proposed Findings; it’s a note about the Note.  I’d better call it the NPF hereinafter.  It’s probably not best to have finished the last sentence with a preposition – if preposition it is – be it never so long but, as I often quote, “the moving finger writes and having writ moves on; nor all your piety nor wit can lure it back to cancel half a line, nor all your tears wash out one word of it” [the Rubaiyat of Omar Khayyam].

That’s especially true of Arbitral Awards, which is why I have a disinterested friend – in confidence of course – read mine before they are published to the Parties.  But perhaps it is literally true when the keyboard is replaced with a touchscreen.  Did Omar Khayyam anticipate the age of the tablet and smartphone when he wrote the verse?

Be that as it may, the NPF originated in the practice of Scottish arbitration.  When Parties desired to have an arbitration award that could be reviewed by the Court, they could ask for the award to be made in the form of a case stated for consideration.  It was helpful if the arbitrator or arbitrators produced an NPF so that Parties could ask for the award to take that due form.

A useful feature of the NPF was that it enabled a party to correct any mistaken impression of the evidence or argument.  Not that if drafted with care it would allow aspects of the matter to be reheard.

There seems to be no legal reason why an arbitrator should use the NPF more widely in most jurisdictions.  I suggest that it could be especially useful where one Party, perhaps tactically or through lack of understanding, has absented itself from the process and the Arbitrator has been appointed by default.  After all the details the recalcitrant or ill-advised Party will have been given, the NPF will become a final warning that absence will have consequences.

Some may object that an NPF would be giving a recalcitrant Party a second bite of the cherry and that would be unfair to the participating Party.  Arbitration isn’t a Court, however, where he who plays the better game wins.  Of course, in Court a Default Judgment may be overturned if an Appeal is successful.  Arbitration, however, is the product of an agreement in which one implication is that both parties intend the arbitrator or arbitrators to find the right solution to their mutual problem.  The Award, once written, is final, it might as well be carved in stone.  In the premises, what can be wrong with giving that absentee one last chance to say his piece before the die is cast – and the metaphor well and truly mixed?

It’s not a situation with which I have had to deal, but I would expect to consider a reasoned application before permitting the absentee to present evidence and argument.  That evidence and argument would be confined to that needed to deal with the NPF.  The compliant Party would be entitled to a rejoinder before the Award was made.

There is a possibility that a late Counterclaim might arise.  I don’t think that should delay the Award, which could be a Partial Award, final as to the matters with which it deals.  Directions for disposing of the Counterclaim could be added to the Partial Award.  I think that a Dispositive section in the Partial Award could well be so separated that it was clear what had been decided finally and what remains to be settled.

In an International context, I think it might be as well to give directions for settling the late counterclaimed matters in a separate document.  The Partial Award would then be final for the purposes of the New York Convention 1958 [http://www.hartwell.pwp.blueyonder.co.uk/ nyc_text.htm] of which Article V.1(e) provides, inter alia, that:

  1. 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.

The first subclause of this provision is the basis for the assertion that an interim decision will not be legally enforced but it should be noted a) that the burden of proof is upon the party against whom recognition and enforcement of an Award is invoked and b) that even then the word “may” suggests that the Court has to be satisfied that its discretion should be exercised.  The curious wording of the Article is worthy of attention.  Scholars argue the distinction between recognition and enforcement, but I think it noteworthy that the Convention uses the singular phrases “it is” and “is sought”, denoting the two as a singular practical concept.

My argument is that, in the context of arbitration – or, for that matter, adjudication or expertise – it remains perfectly proper for the decision-maker to say to the Parties, and particularly any absentee, “On the basis of what you have told me I am minded to find thus and so”, making it clear that his or her mind remains open and flexible.  The NPF is a formal representation of that principle.

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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.

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These are some webpages with Tiny links

GMBH Front Page and Caricature  http://tiny.tw/cXQ

Dispute Closure Theory  http://wp.me/pZlBS-2X

Who Shall be the Arbitrators?  http://tiny.tw/cXR

Geoffrey’s CV http://tiny.tw/cXS

Experience as an Expert Witness http://tiny.tw/cXT

From Liber Amicorum Eric Bergsten – The Commercial Way to Justice  http://tiny.tw/cXU

An Introduction to International Commercial Arbitration http://tiny.tw/cXV

The Reasoned Award in International Arbitration. http://tiny.tw/cXW

Arbitration and the Sovereign Power  http://tiny.tw/cXX

Specimen Award  http://tiny.tw/cY2

Arbitration in Context Legal, Contractual or Ethical?  http://tiny.tw/cY3

The New York Convention of 1958, A Basis for a Supra-National Code?  http://tiny.tw/cY4

Tower Bridge, London  http://tiny.tw/cY5

A Section through one Bascule  http://tiny.tw/cY6

Ariel Steam Engine  http://tiny.tw/cY7

Use of Experts in the Service of the Tribunal  http://tiny.tw/cXY

Sighted Justice: the Ethical and Practical Role of the Expert  http://tiny.tw/cXZ

Construction Disputes http://tiny.tw/cY8

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