The Arbitration in the United Kingdom - Essay Example

UK Arbitration Introduction Arbitration today is commonly used to resolve commercial disputes most specifically in the context of international commercial transactions although labour, consumer, investors, family and even states disputes are encompassed. Whilst the creation of the Court symbolised the development of methods for the peaceful settlement of international disputes, the origins of which can be said to go back to classical times. But specifically, Article 33 of the United Nations Charter listed down the following methods for the pacific settlement of disputes between States: negotiation, enquiry, mediation, conciliation, arbitration, judicial settlement, and resort to regional agencies or arrangements, to which good offices should also be added. Amongst these methods are those that involve use of third parties that include arbitration1. Arbitration has evolved to become one of the more established methods of resolving disputes between parties and many countries or states have adapted it as a legal technique for the resolution of disputes outside the courts, wherein the parties to a dispute refer it to one or more persons called the 'arbitrators' or 'arbitral tribunal', by whose decision called the 'award' the parties agree to be bound. The term is sometimes used in the context of describing alternative dispute resolution or ADR, a category that more commonly refers to mediation or a form of settlement negotiation facilitated by a neutral third party2. In the United Kingdom, the first law on arbitration was the Arbitration Act 1697 although arbitration had been common in England prior to its passing as by 1610, there already was a recorded judicial decision on arbitration, specifically the Vynior's Case3. Today, UK arbitration policies are guided by the Arbitration Act 1996 founded on the principles that: "(a) the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense; (b) the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest; (c) in matters governed by this Part the court should not intervene except as provided by this Part."4 Discussion: It is acknowledged that the institution of arbitration derives its force from the agreement of the parties and from the State as supervisor and enforces of the legal process5. Likewise, the contractual obligation of both parties enables the settlement process to override national differences in law and procedural obstacles that exist in local courts. Historically, arbitration became international and modern in character most notably due to the success of the Jay Treaty of 1794 between the United States and Britain resolving issues regarding debts and boundaries which took seven years6. Nevertheless, it was also claimed that mediation and arbitration preceded judicial settlement as exercised in ancient Greece, China and even among Arabian tribes. The Jay Treaty success re-awakened the practice and has been then adapted by the UK, US, and other European states. Once again, the process is strengthened in the Alabama Claims arbitration in 1872 that had three neutral governments Brazil, Italy and Switzerland appointed as members of the tribunal in a dispute between the UK and the US. The award had the UK pay compensation and duly complied with. The Hague Peace Conference of 1899 that tackled peace and armament a Convention on the Pacific Settlement of International Disputes and the creation of the Permanent Court of Arbitration.7 One of the more recent examples of arbitration proceedings of international character include the case of the European Union and Ecuador's banana dispute of which the World Trade Organisation has appointed an arbitrator to decide on the case. Ecuador is claiming to have lost $450 million dollars due to the restrictive banana import regime of the European Union of which the WTO earlier ruled twice to be discriminatory against Latin American banana producers.8 Another sample case is the "MOX Plant Case" between Ireland and the United Kingdom where Ireland instituted arbitral proceedings against the United Kingdom pursuant to Article 287, and Article 1 of Annex VII of the United Nations Convention on the Law of the Sea for the Dispute Concerning the MOX Plant, International Movements of Radioactive Materials, and the Protection of the Marine Environment of the Irish Sea. The case concerns the discharges into the Irish Sea from a mixed oxide fuel or MOX plant located at Selafield nuclear facility in the United Kingdom as well as movements of radioactive material through the Irish Sea. The Tribunal has since issued orders of suspension of proceedings pending jurisdiction merits and request for further provisional measures9. Arbitral tribunal For every dispute that resorts to arbitration uses the "arbitral tribunal". The term refers to the arbitrator or arbitrators sitting to determine the dispute between parties. Although the composition of the arbitral tribunal may vary, combinations include a sole arbitrator sitting, two or more arbitrators, with or without a chairman or umpire, among others10. In most cases and jurisdictions, the arbitrator is immune from liability for anything done or omitted whilst acting as arbitrator unless the acts in bad faith were established to be committed. Arbitral tribunals in most states or countries are usually divided into two types: ad hoc arbitration tribunals appoints arbitrators approved by the parties involved; or the institutional arbitration tribunals, which are professional bodies providing arbitration services, such as the London Court of International Arbitration11. As the institutionalisation, permanent tribunals are more likely to have their own rules and procedures, and tend to be much more formal. They are also expected to be more expensive, and, for procedural reasons, slower12. Duties of the Arbitration tribunal The duties of a tribunal will be determined by a combination of the provisions of the arbitration agreement and by the procedural laws which apply in the seat of the arbitration. The extent to which the laws of the seat of the arbitration permit "party autonomy" or the ability of the parties to set out their own procedures and regulations, determines the interplay between the two. However, in almost all countries the tribunal owes several non-derogable duties: to act fairly and impartially between the parties, and to allow each party a reasonable opportunity to put their case and to deal with the case of their opponent sometimes shortened to complying with the rules of "natural justice"; and to adopt procedures suitable to the circumstances of the particular case, so as to provide a fair means for resolution of the dispute. In other instances for some states, permanent concerned or arbitral groups may outline codes that are followed by designated arbitrators13. One sample proceeding undertaken by the PCA tribunal include the dispute concerning access to information under Article 9 of the Ospar Convention of which Ireland filed a case against the United Kingdom of Great Britain and Northern Ireland, of which the Tribunal decided to reject UK's position that the tribunal lacked jurisdiction over the dispute, Ireland's claim were inadmissible, implementation of Article 9(1) was assigned exclusively to the competent authorities in the United Kingdom and not to a tribunal established under the OSPAR Convention, among others, of which the tribunal has its International Bureau serve as registry, providing three arbitral tribunal members, conducted hearings open to the public as agreed by the disputing parties, and provision of written pleadings14. Procedure of the tribunal The most essential matters of the arbitral procedure including but not limited to any disagreement over the appointment or replacement of arbitrators, the jurisdiction of the tribunal itself, or the validity of an arbitration award, are determined by the procedural law of the seat of the arbitration, and may be decided by recourse to the courts of the place that is the seat of the arbitration. But in most instances written and agreements by the disputing parties are honoured15. All other matters of procedure are generally determined by the arbitral tribunal itself under its own inherent jurisdiction and may be depending on national law and respect for due process as well as the preferences of the arbitrators, the parties, and their counsel. The arbitrators'' power to determine procedural matters normally includes: mode of submitting or challenging evidence; time and place of any hearings; language and translations; disclosure of documents and other evidence; use of pleadings and/or interrogatories; request for witnesses, and the appointment of experts and assessors16. Advantages of arbitration The two bases of autonomy of the parties as well as the judicial supervision of the State as sources of authority made arbitration given varying weight in national legal systems in relation to domestic arbitrations.17 Arbitration has become popular especially in commercial disputes due to the element of time, simpler rules to follow that are dependent on both parties involved, and for the following reasons: 1. Expert arbitrators may be appointed if subject matter of the dispute is highly technical 2. Faster than litigation in court 3. Often times cheaper 4. Generally, arbitral proceedings and an arbitral award are very private 5. Flexibility of the arbitral process as compared to court proceedings 6. Arbitration awards are generally easier to enforce abroad than court judgments as provided for by New York Convention 1958 7. Limited avenues for appeal of an arbitral award mean swifter enforcement and less scope for a party to delay matters18. Nevertheless, the disadvantages of arbitration can be that: 1. Disputing parties need to pay for the arbitrators that adds up on the layer of legal cost 2. In cases where there are multiple arbitrators on the panel, juggling their schedules for hearing dates in long cases can lead to delays 3. Some legal systems have fewer enforcement remedies than judgments in arbitral awards 4. Lack of stricter legal binds that have arbitrators unable to order interlocutory measures against a party make it easier for a party to take steps to avoid enforcement of an award such as the relocation of assets offshore. As has been noted, a key weakness in the dispute settlement procedure is the lack of compulsory character19. It was proposed that compulsory binding arbitration in a convention offers added security to parties considering accession to a convention in terms of presence of recourse to arbitration at the request of any party 20 5. Rule of applicable law is not binding, and that arbitrators not subject to overturn on appeal may rule according to their personal notions or biases21. Court Involvement in Arbitration It has been discussed that theoretical dispute as to the legal possibility of a floating supranational arbitral award produces tension due to its independence from any local forum or law.22 Other problems occur in conflicts between local courts and the arbitral tribunal as to jurisdiction and the applicable law to determine the capacity of the parties to agree to arbitrate as well as the validity of arbitration agreement, powers of revision, and annulment or appeal exercised by local courts over the arbitral award23. Nevertheless, most arbitration legislations in various states or countries including the United Kingdom, seeks to address presented lapses in order to facilitate better proceedings. Under the general principles of the Arbitration Act 1996, it was clearly stated that: "The court may exercise a power conferred by any provision of this Part not mentioned in subsection (2) or (3) for the purpose of supporting the arbitral process where- (a) no seat of the arbitration has been designated or determined, and (b) by reason of a connection with England and Wales or Northern Ireland the court is satisfied that it is appropriate to do so."24 Likewise, the Court may extend time for the beginning of the arbitral proceedings, revoke arbitrator's authority if "the parties are free to agree in what circumstances the authority of an arbitrator may be revoked," and remove arbitrator as provided for by the Arbitration Act 1996 stating that: "A party to arbitral proceedings may (upon notice to the other parties, to the arbitrator concerned and to any other arbitrator) apply to the court to remove an arbitrator on any of the following grounds- (a) that circumstances exist that give rise to justifiable doubts as to his impartiality; (b) that he does not possess the qualifications required by the arbitration agreement; (c) that he is physically or mentally incapable of conducting the proceedings or there are justifiable doubts as to his capacity to do so; (d) that he has refused or failed- (i) properly to conduct the proceedings, or (ii) to use all reasonable despatch in conducting the proceedings or making an award, and that substantial injustice has been or will be caused to the applicant.".25 Other instances where the court of the United Kingdom may intervene in the arbitration process include but not limited to making an order requiring a party to comply with a pre-emptory order made by the tribunal, when an application for an order under section 42 is made, by the arbitration tribunal upon notice to the parties, and by a party to the arbitral proceedings with the permission of the tribunal and upon notice to the other parties. In addition, the court may also make an order where parties have agreed that the powers of the court under section 42 shall be available. Likewise, the court shall also act once it is satisfied that the applicant has exhausted any available arbitral process in respect of the failure to comply with the tribunal's order, or when the person whom the tribunal's order was directed has failed to comply with it within the time prescribed in the order, or if no time was prescribed, the person failed to act within a reasonable time26. In support of the arbitral proceedings, the court may secure the attendance of witnesses. Any party to the arbitral proceedings may use the same court procedures as are available in relation to legal proceedings to secure attendance before the tribunal of a witness in order to give oral testimony or to produce documents and other material evidence when necessary. But this is subject to the permission of the tribunal or the agreement of the other parties. Likewise, the court procedure may also be used in this instance if the witness is in the United Kingdom and the arbitral process is conducted in England and Wales, or Northern Ireland. Nevertheless, a person serving as witness shall not be compelled to produce any document or other material evidence which he or she could not be compelled to produce in legal proceedings27. Other court support for the arbitral process may also include the same power of making orders about the taking of the evidence of witnesses, preservation of evidence, make orders relating to property which is the subject of the proceedings or as to which any question arises in the proceedings for inspection, photographing, preservation, custody or detention. The court may also order that samples be taken from or any observation be made of or experiment conducted upon the property and for the same purpose, authorise any person to enter any premises in the possession or control of a party to the arbitration. The court may also order the sale of any goods subject to the proceedings, and the granting of interim injunction or the appointment of a receiver. On the application of a party or proposed party to the arbitral proceedings, the court may make urgent orders necessary for the purpose of preserving evidence or assets, but in case of lack of urgency, the court shall act only on the application of a party to the arbitral proceedings upon notice to the other parties and to the tribunal following permission of the tribunal or the agreement in writing of the other parties. Arbitration has their own judicial merits that courts respect as these have been considered as legal means to settle disputes. As provided for by the Arbitartion Act 1996, the court may on the application of a party to the arbitral proceedings and upon notice to the other parties, determine any question of law arising in the course of the proceedings which the court is satisfied substantially affects the rights of one or more of the parties. Nevertheless, an agreement to dispense with reasons for the tribunal's awards shall be considered an agreement to exclude the court's jurisdiction under this section, unless an agreement of all the parties to the proceedings is made, or that it is made with the permission of the tribunal and the court is satisfied that the determination of the question is likely to produce substantial savings in costs and that the application was made without delay. One notable example of an exchange of procedure, where arbitration was sought after a court ruling was on the case against former Chile military ruler General Augusto Pinochet on torture charges. In March, 1999, the UK's House of Lords ruled that Pinochet could only face extradition proceedings of torture carried out after 1998 when Britain incorporated the convention into law in 1988. UK Home Secretary Jack Straw allowed extradition proceedings brought by Spain against Pinochet. Chilean Foreign Minister Jose Miguel Insulza representing the government of Chile called on the International Court of Justice in The Hague to rule on whether Chile or Spain is competent to try the former military leader. The ICJ is a United Nations agency and sought as the proper forum to arbitrate the case since Spain, Chile and the UK are all signatories to the United Nations' Convention Against Torture in 1988. Pinochet was arrested at the request of Spanish prosecutors who allege he had been responsible for more than 3,000 deaths and disappearances during his rule between 1973 and 1990 and has been held in the UK. Chile 28has insisted that it has the right to try General Pinochet as the crimes were committed in that country. National court or arbitration tribunal In instances where an arbitration award is contested and brought to court, a decision may only be overturned or revised in cases where arbitrator was established to have committed an act of bad faith such as bias. One example is the arbitration case in the National Football League between player Ricky Williams and the Miami Dolphins. The award had Williams ordered to repay the team $8.6 million in bonus money after severing his contract. The case, contested in Federal Court had the Federal Judge upheld the arbitration ruling showed that arbitration is paying close heed to neutrality and impartiality as well as capability to handle cases 29 as provided for by the Code of Ethics of Arbitrators prepared by the American Arbitration Association or AMA. Another acknowledged role of the court in the arbitration proceeding involves the Rena K backing up the effectiveness of the arbitration process30 Which national courts are relevant to arbitration At which stage Most legal systems including the UK recognise the "seat" of the arbitration of which geographical and legal jurisdiction determines the procedural rules which the arbitration follows, and the court which exercise jurisdiction over the seat have a supervisory role over the conduct of the arbitration31 in instances as mentioned earlier. For supranational proceedings, international bodies may be sought to intervene for which the International Court of Justice may be referred to as the highest considering its close ties with the United Nations, although it is still considered an independent and separate body. Since arbitration has taken on a private role in most instances, there are also other "governing" bodies that include among others the Permanent Court of Arbitration that has 94 member states including Argentina, Australia, Austria, Belarus, Belgium, Bolivia, Brazil, Bulgaria, Burkina Faso, Cambodia, Cameroon, Canada, Chile, China, Colombia, Democratic Republic of Congo, Costa Rica, Croatia, Cuba, Cyprus, Czech Republic, Denmark, Dominican Republic, Ecuador, Egypt, El Salvador, Eritrea, Fiji, Finland, France, Germany, Greece, Guatemala, Guyana, Haiti, Honduras, Hungary, Iceland, India, Iran, Iraq, Israel, Italy, Japan, Jordan, Republic of Korea, Kyrghyz Republic, Laos, Latvia, Lebanon, Great Socialist People's LibyanArab Jamahiriya, Liechtenstein, Luxembourg, Mecedonia, Malta, Mauritius, Mexico, Morocco, Netherlands, New Zealand, Nicaragua, Nigeria, Norway, Pakistan, Panama, Paraguay, Peru, Poland, Portugal, Romania, Russia, Senegal, Singapore, Slovak Republic, Slovenia, South Africa, Spain, Sri Lanka, Sudan, Suriname, Swaziland, Sweden, Switzerland, Thailand, Turkey, Uganda, Ukraine, United Kingdom, United States, Uruguay, Venezuela, Yugoslavia, Zambia, and Zimbabwe. Conclusion: Arbitration is a simpler form to resolve disputes, basically commercial in nature. This should not be confused with alternative dispute resolution (ADR) where middle-ground is sought between parties as arbitration decides which party wins and loses. Impartiality of arbitrators as well as implementation of the award could prove to be an advantage of the system but questionable awards and questionable implementation could deter the progress of the arbitration practice, and lead to more damages to parties, costs and legal proceedings in court. In this age of globalisation, arbitration is proving to be more important and indispensable as there is a growing interdependence of nations and individuals from many nations for most international goods and services between providers as well as consumers. Legal systems and international governing bodies should continue the process of enhancing existing arbitral procedures in order to protect not only United Kingdom citizens but their associates and customers overseas. Read More