Arbitral Immunity in International Dispute Resolution - Essay Example

Arbitral Immunity in International Dispute Resolution number Submitted date of submittal ] 1. Introduction Law acts as a moderating influence in human society. The application of law to all and sundry tends to make society more liveable since it promotes equitable values. Legal philosophers have espoused and supported the equitable application of law to everyone in society since it promotes respect for law and provides man with a framework to regulate life1. The legal frameworks that are utilised for delivering justice do not provide immunity under most circumstances. However, immunity has been prescribed for arbitrators dealing with international arbitration problems under national law regimens. It could be argued that immunity provided to international arbitrators is required in order to ensure that arbitrators are able to deliver without any pressures. On the other hand, such loopholes in the law may also be utilised by international arbitrators to abuse their privilege. Arbitral immunity has been provided by various municipal legal frameworks such as those in the United States and United Kingdom. In addition, certain arbitral institutions such as the International Criminal Court (ICC) also provide arbitral immunity. This paper attempts to look into the fundamentals of such a legal principle and to analyse if such immunity should be provided in order to augment the principle of arbitral immunity. 2. Historical Evolution of Arbitral Immunity and the need for Revaluation In previous centuries arbitration was not a very important method of dispute resolution since international relationships were not as intertwined as today. The contours of the contemporary world see greater international connectivity that requires a significant amount of dispute resolution. Arbitration has emerged over the years as one of the best methods of dispute resolution. The relatively lower importance of arbitration as a dispute resolution method in previous years is reflected by the fact that arbitrators were considered to be honourable gentlemen who did not rely on arbitration fees as a means of living2: “…it was considered an honour to be selected by ones peers. … Arbitrators fees were fairly nominal - the whole approach to arbitration was to pay back the industry in which one had grown up.” The evolution of international arbitration during the seventies did not provide for any possibility of immunity for international arbitrators. This happened since arbitration was not considered a strong means of dispute resolution and other dispute resolution methods could be utilised. However, of late, arbitration has become a serious method of dispute resolution and competition for becoming arbitrators has arisen. In comparison to before, today arbitrators are full time paid professionals. It is rare to find arbitrators working merely for honour but it is commoner to find arbitrators working for fees. The inclusion of pecuniary rewards for arbitration tends to complicate matters since doubts regarding the credibility of arbitrators have increased. The liability of arbitrators has been decreased through the application of immunity for arbitrators and this tends to complicate the issue. 3. Analysis of Immunity for Arbitrators Legal frameworks based on common law jurisdictions tend to treat the arbitrator on equal footings as a judge. Arbitration in these legal frameworks is seen as analogous to delivering judgements under regular municipal law. The manner of equating judges and arbitrators requires that immunities applicable to judges be applied to arbitrators too. There are certain subtle differences in the application of immunity in the common law jurisdiction territories. For example, in the United Kingdom the arbitrator is provided immunity from legal action unless his actions have taken place under bad faith3. This is made clear by the Arbitration Act 1996, Section 29(1) which states that4: “An arbitrator is not liable for anything done or omitted in the discharge or purported discharge of his functions as arbitrator unless the act or omission is shown to have been in bad faith.” On the other hand, the United States provides the arbitrator with overwhelming immunity from legal action that may arise from actions taken under the arbitrator’s course of duty. In a similar manner, Australia has provided wide legal cover for arbitrators through its International Arbitration Act 1974, Section 28(1) which states that5: “An arbitrator is not liable for anything done or omitted to be done by the arbitrator in good faith in his or her capacity as arbitrator.” The primary area of contention in these legal positions is whether considering an arbitrator equal to a judge would provide for immunity against arbitrators. A look into case law such as Bremer Schiffbau v South India Shipping Corp Ltd6 reveals that judges and arbitrators are treated on equal footing given that they are both involved in the delivery of justice. The contention that arbitrators are immune since judges are also immune has been relied on extensively. However, it must be taken to note that there are certain significant differences between judges and arbitrators in terms of both their functions and execution of work. The primal difference between arbitrators and judges arises from the source of legal power provided to each. While judges are provided legal power through the ascension of the government and the state, the arbitrator is provided legal power through the ascension of the disputing parties. Following this line of argument, the appointment and regulation of judges is carried out by the state while arbitrators are chosen and regulated by the disputing parties. Case law supports this position by positing that judges are chosen by the state and are hence not answerable to the disputing parties in question, unlike arbitrators who are chosen and remunerated by the disputing parties7. Given the differences outline above, it is essentially not possible to treat judges and arbitrators on the same ground. Logically, if judges were equated to arbitrators, then it would follow that individuals have been equated to state since the source of legal power of both judges and arbitrators must be comparable, even if not the same. In contrast, proponents of immunity for arbitrators contend that arbitrators like judges have to undertake tough decisions during their course of duties that might displease the disputing parties. As a consequence, any disputing party may approach a court of law in order to settle scores with an arbitrator. Given this weakness on the part of the arbitrator, it is argued that arbitrators should be provided legal immunity comparable to judges. Case law provides that arbitrators are at the same risk as judges, solicitors and barristers so arbitrators should be provided with similar legal immunity as a matter of germane public policy8. Carrying this argument further, it has been argued that if the arbitrator were left to the mercy of the disputing parties, it would be very likely that the aggrieved party would pursue legal recourse against the arbitrator. The very fear of being lured into legal disputes would then hamper the work of arbitrators. In order to deal with such a situation, and to allow arbitrators the necessary breathing space to perform their duties without “looking over” their shoulders, it is argued that arbitrators should have legal immunity comparable to that of judges9. This leads to another legal paradox – the judge is in himself answerable and liable before the State that has appointed it. Hence, the judge is liable to the party that has appointed him for such function. Comparably, if the arbitrator were provided with legal immunity, he would no longer be liable to the party / parties who have appointed him since the appointing parties could not pursue legal recourse against the arbitrator. Now, since the judge is liable to the State, there are chances for the aggrieved party / parties to pursue further legal recourse in another higher court of law appointed by the State for such function. Again, in such case the judge’s legal immunity does not impede the delivery of justice or any disagreements with it. In contrast, when arbitrators are provided with legal immunity, there is no chance for the aggrieved party to pursue any other means of justice even if the arbitrator has abused his power and privilege during the decision making process. Therefore, such a course of action on the part of the arbitrator would lead to a denial of justice to the aggrieved party and would not be able to receive justice in its truest sense. Hence, the entire arbitration process would be tantamount to little more than a denial of justice to the aggrieved party. The arbitration process or any methods of appeal against it do not provide cover or protection for the disputing party, which exposes the disputing parties to great risk. The differences in the functions and execution of work by arbitrators and judges have led to a dichotomy between public justice and private justice. It has also been argued that justice tends to have different meanings when delivered from a public forum such as a court and when justice is delivered from a private forum such as an arbitration award. This distinction between the forms of justice has led certain quarters to argue that disputing parties only pursue arbitration when they wish to find a form of justice that suits their purposes better10. This leads to the idea that arbitrators are open to manipulation during the arbitration process and the legal outcomes of arbitration can be dragged in favour of either party depending on the discretion of the arbitrator. This also leads to the idea that the arbitrator is free to do as he pleases since he has been blessed with legal immunity. The question of arbitrator immunity cannot be discussed fully without looking into the liabilities associated with becoming an arbitrator. The English legal approach to arbitration requires that the arbitrator be someone with adept understanding of arbitration and with a reputation of caring exercise in arbitration. Two avenues are provided by English law to deal with any shortcomings on the part of the arbitrator. The aggrieved party could choose to pursue the law of obligations under contract or to pursue tort laws. Certain quarters argue that the liability of the arbitrator under tort law or contract law amount to the same results11. However, other quarters contend that contract law liabilities of the arbitrator are limited since such liabilities are implicit at best. On the other hand, the arbitrator’s liabilities under tort law could only account to negligence of duties or the lack of care exercised during the course of duty. When comparing the relative standing of contract law to tort law, it is revealed that tort law provides better claim to liability on the part of the arbitrator as expressed by relevant case law. The outcomes of Donoghue v Stevenson12 and Hedley Byrne & Co Ltd v Heller & Partners Ltd13 make it abundantly clear that any forms of negligence, even if it is a misstatement are not acceptable practices under law. In a similar manner, negligence has been adapted into legal issues concerning medical practices. Given, the ever growing influence of negligence based laws; there is little justification why negligence during the course of duty should not apply to arbitrators. The outcomes of Lamphier v Phippos14 make it clear that any individual who takes onto a profession needs to deal his professional duties with the utmost care and diligence possible. When this position is superimposed with the evolving character of modern arbitration, that is a full time profession in itself, it becomes clear that the entire argument carries a lot of weight. Moreover, since tort claims bear great historical validity as an established practice and since tort claims against professions cover a wide umbrella, it would not be unreasonable to suggest that arbitrators should be removed from the ambit of legal immunity. On another note, it must be taken into account that arbitration is a relatively nascent profession and would require time and space for growth. In comparable terms, if the medical profession had been constrained in infancy by legal requirements, it would not have been possible to see the medical profession proliferate at the pace it did. In addition, the character of arbitrators is treated differently between various territories and the actions of arbitrators could not be equated similarly when operating in different areas around the globe. For example, an arbitrator would be considered a professional and would be subject to liability in the United Kingdom but on the other hand an arbitrator would not be considered a professional in the United States and would be clear of all liability. Case law against arbitrators in the United States provides that arbitrators are cleared of liability in the course of duty since it tends to hamper their ability to function as expressed in Tamari v P Conrad15. The contention that arbitrators are well protected under various kinds of contract, tort or other legal liabilities is well established in most parts of the world. The contention that arbitrators are not liable in tort law or under contractual obligations is supported by the judgement of Chambers v Goldthorpe16. Another strongly accepted case in point is the Pappa v Rose17 judgement that makes it abundantly clear that the arbitrator is under no legal liability even if a tort rule applies or any such claim arises. The Pappa v Rose case judgement is often cited to establish arbitrator immunity against tort rules. On another note, the contention that arbitrator immunity is a well recognised legal practice / tradition the Sport Mask Inc v Zittrer18 case is often cited. The judgement of this case makes a strong point by expressing that that arbitrator is under legal immunity, otherwise the work of the arbitrator is expected to be hampered. However, it must be related that the judgement of this case does not outline the exact scope of the immunity applicable to the arbitrator since its major focus lies in augmenting arbitrator immunity and not its overall scope, as stated in the judgement19: “In the absence of fraud or bad faith, an arbitrator enjoys the immunity from civil liability.” 4. Conclusion When arbitrators are considered to have legal immunity because their work functions and execution is similar to judges, it must be borne in mind that such propositions provide greater impetus for the abuse of immunity provided to arbitrators. It can be argued that any system of justice delivery would only function on a non-State level if it were providing enough people with justice, so that more disputing parties would choose such a form of justice. In the case of arbitration, unless most disputing parties do not come to satisfactory conclusions of their disputes, there is little chance that other disputing parties would want to pursue arbitration. The argument that legal immunity for arbitrators tends to invite an abuse of provided privilege is undeniable but superimposing this idea to the majority of arbitration awards is unreasonable. Similarly, if the arbitrator would not be provided with legal immunity, there would be little chance that disputing parties would be able to find someone to arbitrate for them. The growing popularity of arbitrators, especially in international commercial disputes, signals that the actual state of events lies somewhere in between the two aforementioned extremities. The legal cover for arbitrators is a necessity that must be upheld if arbitration is to be utilised as a viable means of delivering justice on a sustainable basis. Moreover, on another practicable note, arbitration tends to simplify the delivery of justice and also relives the pressure of work on international courts of commercial justice. Hence, there is a need to promote arbitration as a viable means of alternative dispute resolution. This cannot be achieved unless the legal immunity of arbitrators is maintained. In the future, it may be the case that arbitrator’s abuse of power and privilege goes far enough to warrant legal action against arbitrators but this does not apply to the current scenario. For contemporary purposes, the legal immunity of arbitrators should be maintained but comparisons to judges for justifying immunity should be avoided since the functions and work execution of judges and arbitrators are distinct. 5. Bibliography Books Ronald Dworkin, Law’s Empire (1st, Harvard University Press, 1986) Case Law Arenson v Arenson [1977] AC 405 Bremer Vulkan Schiffbau und Maschinenfabrik v South India Shipping Corporation Ltd [1981] AC 909 Chambers v Goldthorpe [1901] 1 KB 624 (QB) Donoghue v Stevenson [1932] UKHL 100 Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 Lamphier v Phipos (1838) 8 C&P 475 Pappa v Rose (1872) LR 7 CP 525 Sports Mask Inc v Zittrer [1988] 1 SCR 564 (SCC) Sutcliffe v Thackrah [1974] AC 727 Tamari v P Conrad [1977] 552 F 2d 778 Journal Articles Pierre Laliv, Irresponsibility in International Commercial Arbitration [1999] Asia Pacific Law Review 7(2) 161-176. Laws and Acts Government of Australia, International Arbitration Act 1974 Government of United Kingdom, Arbitration Act 1996 Websites Manfred A., What price immunity of arbitrators? (Maritime Advocate 2014) accessed 14 March 2014 Read More