Judicial Assistance In Arbitration - Essay Example

Judicial assistance in Arbitration 1 Introduction Arbitration is a private justice born out of the parties' will. If the parties choose to settle the dispute out of court by virtue of in inclusion of arbitration clause in the contract, the parties can go for it. Those disputes will be submitted to arbitrators. This module provides an overview of the agreement by which the parties who decide to submit their disputes to arbitration. This module also discusses the issue known as "separability of the arbitration agreement" and the related principle known as "Kompetenz-Kompetenz". In general, the arbitration agreement provides the basis for arbitration. It is defined as an agreement to submit present or future disputes to arbitration. This concept comprises two basic types: a) A clause in a contract, by which the parties to a contract undertake to submit to arbitration the disputes that may arise in relation to that contract (arbitration clause); or b) An agreement by which the parties to a dispute that has already arisen submit the dispute to arbitration (submission agreement). The arbitration clause therefore refers to disputes not existing when the agreement is executed. Such disputes, it must be noted, might never arise. That is why the parties may define the subject matter of the arbitration by reference to the relationship out of which it derives. The submission agreement refers to conflicts that have already arisen. Hence, it can include an accurate description of the subject matters to be arbitrated.(1) Arbitration is today most commonly used for the resolution of commercial disputes, particularly in the context of international commercial transactions and sometimes used to enforce credit obligations. It is also used in some countries to resolve other types of disputes, such as labour disputes, consumer disputes or family disputes, and for the resolution of certain disputes between states and between investors and states. ------------------------------------------------------------------------------------------------------------ 1. Dispute settlement, International commercial settlement, Geneva, New York Convention 2005 2 Under English law, the first law on arbitration was the Arbitration Act 1697. The first recorded judicial decision relating to arbitration was in England in 1610(2). The noted Elizabethan English legal scholar Sir Edward Coke refers to an earlier decision dating from the reign of Edward IV (which ended in 1483). The English courts have wide connection with the arbitration. It is true that that the arbitration proceedings are conducted outside the court. Obviously one can say that there can not be any relationship with the proceedings between the court and arbitration tribunal. An arbitration agreement precludes judges from resolving the conflicts that the parties have agreed to submit to arbitration. If one of the parties files a lawsuit in relation to those matters, the other may challenge the court's jurisdiction on the grounds that the jurisdiction of the courts has been waived. Once a conflict has arisen over any of the subjects included in the arbitration agreement, the courts will have no jurisdiction to resolve it unless both parties expressly or tacitly agree to waive the arbitration agreement. But this is always not true. In certain circumstances, a person can seek any sort of judicial assistance in connection with the arbitration not only in civil matters like, labour disputes, consumer disputes, family matters etc. but also in the dispute in international nature, particularly in commercial disputes. Thereby the court enjoys unlimited powers on such proceedings. Now we shall discuss when and where the party can seek the assistance of the Judiciary. Role of Courts in arbitration Proceedings Judicial assistance for arbitration by the courts, largely through non intervention, is vital for any major centre for international arbitration. In the Fiona Trust case (3) the ------------------------------------------------------------------------------------------------------------ 2. Vynior's Case (1610) 8 Co Rep 80 3. Fiona Trust case [2007] EWCA Civ 414) 3 Court of Appeal rejected arguments that an arbitration agreement was not effective because the main contract had been rescinded on grounds of bribery: An allegation that a contract is invalid does not prevent that question being determined under the arbitration provision unless this too is directly attacked. The judges a broad view of the words "arising out of", which should cover every dispute except a dispute as to whether there was ever a contract at all. Beside this, the ECJ has recently given judicial assistance in West Tankers case, (4)where an anti suit injunction is sought to enforce an exclusive jurisdiction clause stating that the court first seized should resolve any such issue. The House of Lords was inclined to decide the opposite where an injunction was sought in support of an arbitration clause. Unfortunately they decided that this conclusion was not obvious and so the question should be referred to the ECJ. The starting point for any discussion of the role of courts in arbitration proceedings under the UNCITRAL Model Law on International Commercial Arbitration ("MAL") is article 5 of the Model Law. Even though Article 5 permits the courts to intervene in the proceedings of arbitration it lay down some limitations in two cases. They are a) Provisions defining the arbitrations to which the MAL applies ("Substantive Provisions"); and b) Provisions governing the procedure in arbitrations to which the MAL applies ("Procedural Provisions"). It is to be remembered that arbitration is international in the following cases. (a) the parties to an arbitration agreement have, at the time of the conclusion of that agreement, their places of business in different States; or (b) one of the following places is situated outside the State in which the parties have ------------------------------------------------------------------------------------------------------------ 4. West Tankers case [2007] UKHL 4 4 their places of business: (i) the place of arbitration if determined in, or pursuant to, the arbitration agreement ; (ii) any place where a substantial part of the obligations of the commercial relationship is to be performed or the place with which the subject-matter of the dispute is most closely connected; or (c) the parties have expressly agreed that the subject-matter of the arbitration agreement relates to more than one country. (4) if a party has more than one place of business, the place of business is that which has the closest relationship to the arbitration agreement or if a party does not have a place of business, reference is to be made to his habitual residence. (5) This Law shall not affect any other law of this State by virtue of which certain disputes may not be submitted to arbitration or may be submitted to arbitration only according to provisions other than those of this law.(5) Jurisdiction of the regarding the arbitration The court can intervene and assist in deciding the location of the place of arbitration unless the place of arbitration is within a particular state in the circumstances described in articles 8, 9, 35 and 36 of the MAL, ie in the articles providing for the court to refer a matter to arbitration, to grant interim measures of protection, to set aside an award, and to refuse to recognise or enforce an award. If the parties have agreed on the place of arbitration or it has been determined by the tribunal then court must act on the basis of that agreement or determination. If, ------------------------------------------------------------------------------------------------------------ 5. United Nations Conference on Trade and Development, Dispute settlement, International commercial arbitration, 2005 5 however, neither of those events has occurred, it will be necessary for a court which is asked to exercise any power other than those conferred by articles 8, 9, 35 and 36 of the MAL to determine, for the purpose of the application to it, whether the place of arbitration is within the jurisdiction of that court. Section 3 of the English Arbitration Act 1996 provides that, in the absence of agreement or determination by an arbitral institution or by the tribunal, the place of arbitration is to be determined "having regard to the parties' agreement and all the relevant circumstances" , wording very similar to that used by the MAL in relation to the determination of the point by the tribunal. Essentially, the court will identify the jurisdiction with which the arbitration has the closest connection Dubai Islamic Bank PJSC v Paymantech Merchant Services Inc (6). This will be the approach in most jurisdictions, even in the absence of statutory provision. Thus Model Law on International Commercial Arbitration provides certain powers to the courts to intervene in the following circumstances. Article 8 -Where an action is brought in a matter which is the subject of an Arbitration agreement Article 9 -Where a party to an arbitration agreement requests from a court an Interim measure of protection Article 11 -Where a court is requested to appoint an arbitrator Article13 -Where a court is asked to decide a challenge to an arbitrator Article 14 - Where a party requests a court to decide on the termination of the Mandate of an arbitrator Article 16(3) -Where a party requests a court to decide on the jurisdiction of the arbitral tribunal Article 27 - Where the arbitral tribunal, or a party with the approval of the arbitral tribunal, requests from a competent court assistance in taking evidence 6.Dubai Islamic Bank PJSC v Paymantech Merchant Services Inc 2001, 1 Lloyd's Rep 65 6 Article 34 -Where a party applies to a court to set aside an arbitral award Articles 35 and 36 -Where a party seeks recognition or enforcement of an arbitral award. Article 8 Primary responsibility for determining issues of jurisdiction under the MAL is the arbitral tribunals and courts should not assume that responsibility to the exclusion of the tribunal3. In Gulf Canada Resources v Arochem International Ltd(7) the British Columbia Court of Appeal spoke of requiring a clear case that the matter in issue in the proceeding before the court was not the subject matter of an arbitration agreement before it would refuse to grant a stay. The English courts, in interpreting s 9 of the English Arbitration Act (1996) (which is the equivalent of article 8(1) of the MAL), do not give the same primacy to the role of the arbitral tribunal, approaching the matter on a case by case basis having regard to "all the circumstances the dominant matters being the interests of the parties and the avoidance of unnecessary delay or expense. (8) Article 9 Article 11 of the MAL provides for the judicial assistance of the courts to secure the appointment of arbitrators. Clause 5 of the Article empowers the court take a decision in appointing an arbitrator and court shall have due regard to any qualifications required of the arbitrator by the agreement of the parties and to such considerations as are likely to secure the appointment of an independent and impartial arbitrator and, in the case of a sole or third arbitrator, shall take into account as well the advisability of appointing an arbitrator of a nationality other than those of the parties In Sinochem International Oil (London) Co Ltd v Fortune Oil Ltd(9) the English High Court held that in order to ------------------------------------------------------------------------------------------------------------ 7. Gulf Canada Resources v Arochem International Ltd (1992), 66. B.C.L.R. (2d) 113 8. Birse Construction Ltd v St David Ltd [1999] BLR 194) 9. Sinochem International Oil (London) Co Ltd v Fortune Oil Ltd ([1999] EWHC Comm 204) 7 decide the appointment of the arbitrator there should be clearly envisaged a full scale enquiry in appropriate cases into the issue of whether there was an agreement. Article 14 Article 14 of the MAL provides for if an arbitrator becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay, his mandate terminates if he withdraws from his office or if the parties agree on the termination. if a controversy remains concerning any of these grounds, any party may request the court to decide on the termination of the mandate, which decision shall be subject to no appeal. Article 16(3) Where a party requests the court to determine the jurisdiction then the proper approach of the court to an application under article 16(3) "is to reconsider the issue of jurisdiction de novo since the procedure is not by way of appeal and since the issue before me is the threshold issue of jurisdiction. Article 27 The arbitral tribunal or a party with the approval of the arbitral tribunal may request from a competent court of this State assistance in taking evidence. The court may execute the request within its competence and according to its rules on taking Evidence. Since such assistance in taking evidence clearly belongs to the first category of supportive measures ie the ordering of purely procedural steps which cannot be ordered or enforced by the arbitrators, courts have in general been willing to makeuse of their powers to aid arbitration(10) .From above we can see that on the request of the parties the courts are ready to intervene in their arbitration matters if the law ratifies the same. The courts are extremely hospitable to and supportive to the persons who request the assistance of the judiciary in arbitral process. Certainly a number of decisions of the English courts over 10. Lew, Mistelis & Krll: Comparative International Commercial Arbitration 8 the past 12 months have reinforced London's position as one of the world's leading centres for international arbitration. Among other things, the English courts have recently ruled, in a series of robust decisions, that: - A dispute as to whether a contract should be rescinded or set aside for bribery may be determined by an arbitral tribunal pursuant to an arbitration agreement, even if the whole contract in which it is contained is alleged to be invalid. - Even a failure to produce or disclose relevant documents during the course of arbitral proceedings will not necessarily result in an arbitral award being set aside or remitted to the arbitral tribunal for reconsideration. - Given the scope and content of the Arbitration Act 1996, voluntarily concluded agreements to arbitrate disputes are fully compatible with the European Convention on Human Rights (ECHR) and in particular, Article 6 thereof. (Article 6 provides that: "In the determination of his civil rights and obligations...everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law.") - An agreement in an arbitration clause to exclude an appeal to the English courts on a point of law is not incompatible with Article 6 of the ECHR.(11) Even though the English courts have been playing an important role not only in assisting the person to the arbitration but also in rendering that supporting role to, an American Lawyer supplement.) Arbitration, the decisions and the way the court make themselves avail for the assistance paved the way for much criticism. Now let's find out what all the dark side of such function of the Courts which proffers its critical reviews. ------------------------------------------------------------------------------------------------------------ 11. Bird and bird Outside Perspectives - a special section within Focus Europe (summer 2007 edition) 9 Criticism Since the supportive role of the courts in most cases related to the jurisdiction, this area always subjected to the differing opinions. The court has the power to render judicial assistance to a person regarding the jurisdiction by virtue of the section 16(3).But sometimes, due to lack of careful consideration taken by the courts on the requisite methods of dispute resolution and choice of law causes black mark on the court proceedings. This is mainly happens when parties, with ongoing contractual relationships, enter into new agreements. In (1) Loon Energy Inc (2) Loon Brunei Ltd v (1) Integra Mining (B) Sendirian Berhad (2) Bumico Sendirian Berhad [2007] EWCH 1876 (Comm)(12), The claimant and first defendant had signed a confidentiality agreement which provided for any disputes arising out of or in relation to the confidentiality agreement to be determined by Texan law and arbitration. The parties subsequently entered into a series of agreements subject to English law and jurisdiction. A dispute arose and the claimant sought declaratory relief in the English courts. The defendants commenced arbitration in Texas under the confidentiality agreement. The claimant submitted that the English law agreements superseded the confidentiality agreement. It was held that the English law agreements did not supersede the arbitration clause in the confidentiality agreement. There was no dispute that the confidentiality agreement was part of the context in which the English law agreements fell to be interpreted. The arbitration clause was in wide terms and therefore the court had no jurisdiction to grant relief in respect of "any dispute arising out of or in relation to" the confidentiality agreement. ------------------------------------------------------------------------------------------------------------ 12.(1) Loon Energy Inc (2) Loon Brunei Ltd v (1) Integra Mining (B) Sendirian Berhad (2) Bumico Sendirian Berhad [2007] EWCH 1876 (Com 10 If one of the parties files a lawsuit in relation to those matters, the other may challenge the court's jurisdiction on the grounds that the jurisdiction of the courts has been waived. The judge's lack of jurisdiction is not automatic, nor can it be declared ex officio. That is so because arbitral jurisdiction is waivable, and the waiver would be presumed if the plaintiff filed a complaint and the defendant failed to challenge the court's jurisdiction. i.e. once a conflict has arisen over any of the subjects included in the arbitration agreement, the courts will have no jurisdiction to resolve it unless both parties expressly or tacitly agree to waive the arbitration agreement. Secondly, it is considered that complying with requests of international judicial assistance is considered to be obligatory to the extent as regulated by treaty. But for small countries (13), taking of evidence abroad, having bilateral treaties of mutual legal assistance with some countries, are difficult in negotiating a large amount of bilateral treaties finding .The question is even more complicated in the case of enforcement of foreign judgments.(14) Thirdly, normally the judicial assistance is being requested in the interests of an individual by the state. Here the issue arises regarding the protection of the interest of the grieved since the action on the request to serve summons is taken by the one state and court procedure is taking place in another state. There is a lot of probabilities to curbing of the rights of an individual in another country. Moreover, in the conflict of laws there can be a situation where a law of another country can be contrary to public policy or unfair or conflicting with some important values that ------------------------------------------------------------------------------------------------------------ 13. Hague Convention of 15 November 1965 on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters 14. Eg:-Estonia, Estonia is a party to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, (New York, 10 June 1958). 11 are recognized in the country. A similar situation can arise with a request for international judicial assistance from another country. Conclusion It is true that that judiciary will assist the persons in the issues arisen from the arbitration .In the same way the court may seek the assistance of the arbitration tribunal in certain cases. In Econet Wireless Ltd. v. Vee Networks Ltd. & Others (15) the English High Court recently clarified the scope of injunctive relief available in support of arbitration under 44 of England's Arbitration Act 1996 .Whatever it is, the notion of civil and commercial matters should be widened, to give judicial assistance in more cases, thereby , the protection of rights and obligations of the parties can be assured. ******************************* 15. Econet Wireless Ltd. v. Vee Networks Ltd. & Others [2006] All ER (D) 331 (Jun) Bibliography Books and Authors 1. Harris, Planterose & Tecks: The Arbitration Act 1996 A Commentary (3rd ed, 2003) paragraph 9D. 2. Kuehn, Practical experiences with the English Arbitration Proceedings, commercial arbitration in the Federal republic of Germany and in England1987, Publ. Kln: Boeckstigel 3. Lew, Mistelis & Krll: Comparative International Commercial Arbitration Publisher: Kluwer Law International; 1 edition (August 2003), ISBN-10: 9041115684 4. Petrovi Milena, Role of courts in English arbitration procedure 2000, Vol. 37, No. 9-10, pp. 44-58 Statutes 5. English arbitration Act 1950 6. English arbitration Act 1979 7. English arbitration Act 1996 Journals and publications 8. Bird and bird Outside Perspectives - a special section within Focus Europe (summer 2007 edition) 9. Dispute settlement, International commercial settlement, Geneva, New York Convention 2005 10. Hague Convention of 15 November 1965 on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters 11. Report on the UNCITRAL Model law on International Commercial Arbitration, p.34 Some Private International Law Aspects of the Arbitration Act 1996, vol. 46, April 1997 12. United Nations Conference on Trade and Development, Dispute settlement, International commercial arbitration, 2005 Read More