ARBITRATION The submission of a dispute to an unbiased third person designated by the - PowerPoint Presentation

Slide1

ARBITRATION

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The submission of a dispute to an unbiased third person designated by the parties to the controversy, who agree in advance to comply with the award – a decison to be issued after a hearing at which both parties have an opportunity to be heard. The submission for determination of disputed matter to private unofficial persons selected in manner provided by law or agreement.

ARBITRATION

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J. Paulson thinks that arbitration represents a political philosophy based on the assumption that citizens should be free to shape their private relations as they see fit, provided that they do not offend public policy or mandatory law (ius cogens).

ARBITRATION

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When parties have agreed to refer their dispute to arbitration, that implies, they want their dispute decided:by a tribunal they have chosenin a neutral location and with neutral arbitratorsin privacyspeedily and efficientlywith light but efficient supervison by the courts

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PrivacyConfidentialityAutonomy and control over the processNeutral forumFlexibility of being able to tailor the dispute resolution process to the needs of the partiesThe oportunity to select arbitrators who are knowledgable in the subject matter of the dispute

ADVANTAGES OF ARBITRATION

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Arbitration is a private initiative.Arbitration takes place by mutual and free consent of the parties who trust in chosen decision makers.It is based on an agreement between the parties to refer their dispute to arbitration, so called arbitration agreement or agreement to arbitrate.

ARBITRATION

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The object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expenseThe parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interestThe court should not intervene except as provided by national law

FUNDAMENTAL CONCEPTS IN ARBITRATION

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The appointment, challenge and dismissal of arbitratorsThe jurisdiction of an arbitral tribunalThe annulment of an arbitral awardThe provision of aid by the court in the course of examining evidenceThe assessment of an arbitration contractThe recognition and enforcement of interim measures awarded by an arbitral tribunalThe award of interim measures prior to the commencement of arbitration proceedings or in the course thereofThe recognition and enforcement of arbitration awards

Intervention

of

common

courts

in

the

course

of

arbitration

proceedings

:

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Agreement to arbitrateThe arbitral process Post-award proceedings (recognition and enforcement of the arbitral award)

THE THREE PHASES OF

ARBITRATION

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Usually must be in writingParties must have legal capacity to enter into arbitration agreementMay be entered into before as well as after the dispute arises

ARBITRATION AGREEMENT

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If arbitration agreement is entered into before the dispute has arisen, it usually is a separate clause in a contract, so called arbitration clause.It is separable from the rest of the substantive contract and so continues to apply even if the substantive contract is avoided.

ARBITRATION AGREEMENT

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Arbitration agreement may also be made after the dispute has arisen.This is so called submission agreement.

ARBITRATION AGREEMENT

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TRY TO WRITE ARBITRATION CLAUSE

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Arbitration clause must specify the disputes that are to be referred to arbitration. The parties cannot validly agree to refer any dispute arising between them to arbitration. Arbitration clause may concern all or certain disputes that have arisen or which may arise between parties of the agreement to arbitrate in respect of defined legal relationship.Arbitration clause should specify arbitrators, or arbitration tribunal (usually institution that administers the arbitration) or way of appointing arbitrators.

What

must

an

arbitration

clause

contain

?

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If paries choose to have ad hoc arbitration they need to spell out more specifics in their arbitration clause.

What

must

an

arbitration

clause

contain

?

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the law governing the contract;the number of arbitrators;the place of arbitration; and/orthe language of the arbitration.

The parties may also wish to stipulate in the arbitration clause:

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Arbitration. All claims and disputes arising under or relating to this Agreement are to be settled by binding arbitration in the state of [insert state in which parties agree to arbitrate] or another location mutually agreeable to the parties. An award of arbitration may be confirmed in a court of competent jurisdiction.

Example 1

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Arbitration. All claims and disputes arising under or relating to this Agreement are to be settled by binding arbitration in the state of [insert state in which parties agree to arbitrate] or another location mutually agreeable to the parties. The arbitration shall be conducted on a confidential basis pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Any decision or award as a result of any such arbitration proceeding shall be in writing and shall provide an explanation for all conclusions of law and fact and shall include the assessment of costs, expenses, and reasonable attorneys' fees. Any such arbitration shall be conducted by an arbitrator experienced in [insert industry or legal experience required for arbitrator] and shall include a written record of the arbitration hearing. The parties reserve the right to object to any individual who shall be employed by or affiliated with a competing organization or entity. An award of arbitration may be confirmed in a court of competent jurisdiction.

Example 2

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All disputes arising out of or in connection with the present contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules.

ICC SAMPLE ARBITRATION CLAUSE

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Can

each

dispute

be

refered

to

arbitration

?

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The dispute between parties must be ‘arbitrable’.Arbitrability is the feature of a given dispute which determines whether the dispute in question may be resolved by an arbitral tribunal.

Arbitrability

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What

types

of

cases

are

arbitrable

?

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There needs to be a private law dispute rather than a dispute relating to public law or legal status.According to the Model Law if a dispute is commercial in nature (between entrepreneurs) it can be referred to arbitration, regardless whether it arises from contract or not.

What

types

of

cases

are

arbitrable

?

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The limitation of the scope of arbitrability is left at the discretion of individual states.There is no general international rule as regards which disputes are arbitrable and which are not.Model Law states that the countries may define categories of issues which shall not be arbitrable, i.e. shall be placed beyond the jurisdiction arbitral tribunals.

Arbitrability

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the settleability of the dispute – if the dispute is at the discretion of the parties, it can be referred to arbitrationthe case does not involve maintenance or alimony claimsthe case is not excluded form arbitration under specific provisions

Under

Polish

law

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Both disputes pertaining to property rights and disputes pertaining to non-property rights are considered to be arbitrable. Labour law disputes and consumer disputes are also arbitrable, but in order to ensure protection of the weaker party there is a requirement that an arbitration agreement in such cases must be made in writing and may only be made after the dispute in question has arisen.

Under

Polish

law

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The nature of the dispute must come within the terms of the arbitration agreement.The dispute must come within the terms of the particular reference to arbitration.

What

else

except

arbitrability

?

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Phase I – before the constitution (formation) of the tribunalPhase II – after the constitution (formation) of the tribunal

THE ARBITRAL PROCESS

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up to the partiesnotice of arbitration statement of claimproceedings generally commence when the respondent receives plaintiff’s submission of claim for arbitration.appointing the arbitrators

COMMENCEMENT OF ARBITRATION

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The parties are free to agree the procedure for appointing the arbitrator or arbitrators, including the procedure for appointing any chairman or umpire (if they agreed on panel of arbitrators).Party autonomy in relation to arbitration dictates that an arbitral tribunal is lawfully constituted only when the person of the arbitrators has been approved by parties.

APPOINTMENT OF ARBITRATORS

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Party-chosen-arbitratorsArbitrators chosen by appointing authorityArbitrators chosen by court

APPOINTMENT OF ARBITRATORS

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Usually there is an odd number of arbitrators adjudicating the case - one or three – in order to avoid unnecessary impasses in situations of disagreement between arbitrators

APPOINTMENT OF ARBITRATORS

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Parties may rely on the appointment rules of their chosen arbitral institutionParties may condition their appointment to specific criteria such as expertise, nationality, etc.

APPOINTMENT OF ARBITRATORS

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If parties decided to have three arbitrators the most common method of selection is for each party to select one arbitrator and for the two party-selected arbitrators to pick a third arbitrator, who will be the chair of the tribunalIn general, if any party fails to appoint an arbitrator within the time frame agreed to by the parties or set forth in the arbitral rules, the institution selected by the parties in their arbitration clause has the authority to choose the arbitrators

APPOINTMENT OF ARBITRATORS

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In ad hoc arbitration parties need to be particularly careful to specify their method of arbitrator selection because there is no institution to intervene. The selection method should be therefore clear. It is recommended to set a time frame for making the selectionStatement of how the issue will be resolved if parties cannot agree on a sole arbitrator or if they do not make their choice of a party selected arbitrator within the alloted timeframeUsually parties choose an appoiting authority who will select the arbitrator if the parties were unable to do so

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bright and knowledgeableimpartialcommon sensecommunication skillsability to listen carefullythoughtful (hesitates), but is able to decide

Features

of an

ideal

arbitrator

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Obligation to be impartial and independentIf an arbitrator has a serious conflict he or she should not accept an appointment as arbitratorIf there is some possible conflict, which may not be serious, the arbitrator is supposed to disclose this to the parties, so that they can decide whether they wish to challenge the arbitrators’ appointment

OBLIGATIONS OF ARBITRATORS

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The UNCITRAL Model Law and a number of arbitration rules require that an arbitrator disclose without delay any circumstances likely to give rise to justifiable doubts as to his/her impartiality or independence

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IMPARTIALITY – arbitrator is not biased because of any preconceived notions about the issues and has no reason to favour one party over another INDEPENDENCE – arbitrator has no financial interest in the case or its outcomel arbitrator is not dependent on one of the parties for any benefit, such as employent or client referral’ arbitrator does not have a close business or professional relationship with

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Arbitrator has a duty to make best efforts to render an award that is enforceable.Parties may impose on arbitrators specific obligations.Obligation to decide ex aequo et bono

OBLIGATIONS OF ARBITRATORS

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A party can challenge the appointment of an arbitrator and seek his removal at the time the tribunal is constituted – or later, if new facts come to light.Conflict of interestImproper conduct

CHALLENGES TO THE ARBITRATOR

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If challenge is not successful, in many jurisdictions the party that brought the challenge may take issue to a courtIf the particular jurisdiction does not provide for review of a rejected challenge to an arbitrator, a party may have to wait until final award to obtain court review of the decision

CHALLENGES TO THE ARBITRATOR

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If an arbitrator is successfully challenged, or if one resigns or withdraws for any reason, it will be necessary to choose a replacement.Therefore parties need to specify the method for replacement

REPLACEMENT OF ARBITRATORS

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Criminal liability Tortious liability, usually for gross negligence and intentional wrongdoingContract liability, only in some jurisdictionsArbitrator is having a contract of services with the parties

LIABILITY OF ARBITRATORS

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Right to arbitrators’ fee (remuneration)Right to reimbursement for expenses

RIGHTS OF ARBITRATORS

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The substantive contract on which the dispute is basedThe agreement to arbitrateThe agreement between the parties and arbitral institution the parties are reffering thei dipute to. Often the parties agree that the institution’s arbitration rules will apply to the arbitral proceedingsAgreement appointing the arbitrators, made between the parties and/or the arbitral institution and the individual arbitrators.

4

contracts

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1) notice of arbitration2) response to notice of arbitration3) appointment of arbitrators4) organizational meeting5) further written submissions 6) pre-hearing disclosure including exchange of documentary evidence and witness statements7) oral hearings8) post-hearing submissions9) deliberation and rendering the decision in the form of final award

THE ARBITRAL PROCEEDINGS

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motion to secure claimcan be filed in both – arbitral tribunal and national courtinterim award or interim court order have effect only for the time the case is being heard

SECURING OF CLAIM

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The rules state that the statement of claim should include the following:A demand for arbitrationContact information for the partiesReference to the arbitration agreementReference to the contract which gave rise to the disputeA description of the claim, as well as the facts which support itThe relief sought

Statement

of

claim

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Optionally, the statement may also include a proposal about the method of choosing arbitrators, the number of arbitrators, the place of arbitration, and the language of arbitration, if those issues have not been decided earlier

Statement

of

claim

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If parties have not already agreed on rules, law, language, or place of arbitration, these will have to be discussed.Administration of arbitration, use of technology, confidentiality, a schedule for exchanging written submissions, documentary evidence, witness names and statements, expert witness details, dates and length of future hearings, whether there will be a record of the hearings, certain time limits for parties and arbitrators, etc.

Preliminary

meeting

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One meeting that lasts several days or a number of multiday hearings that may occur over weeks or months1) opening statements2) oral testimony3) submission of documentary evidence4) usually legal argument on ceratin points5) closing statements

COURSE OF AN ORAL HEARING

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The complexity of the procedure adopted in an arbitration will depend on what the parties have agreed, which will be influenced by the nature and importance of the dispute.Parties decide whether the arbitration will be administered by an international arbitral institution, or will be ad hoc, which means no institution is involved.

PROCEDURE IN ARBITRATION

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Rules of an arbitral institution orRules agreed by parties how to proceed In the absence of agreement the provisions of national law stipulating the course of arbitral proceedings will apply.

PROCEDURE IN ARBITRATION

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The majority of arbitral institutions have developed their own procedural rules which are binding on the parties when they are desiganted as their chosen institution for the administration of arbitral proceedings.Exception: London Maritime Arbitrators Association (LMAA) conducts arbitrations in London under English AA.

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Procedural lawLex arbitri, which governs the proceedings is almost always the law of the place of arbitration

The

law

governing

arbitral

proceedings

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Parties usually choose a law to govern construction and interpretation of the contract. Very often it is the substantive national law of one of the parties or national law of the country where the contract is being performed. Sometimes it is national law of neutral country. If parties are unable to reach agreement on a choice of national or international law, or if they simply do not want either of choices, they can choose the lex mercatoria to govern their contract, e.g. general principles of international law, the UNIDROIT Principles of International Commercial Contracts or transnational commercial lawUsually parties use some aspects of lex mercatoria to assist them in contract negotiations or to supplement the law of their contract

The

choice

of

substantial

law

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Parties may instruct the tribunal to decide the matter ex aequo et bono  (latin for "according to the right and good" or "from equity and conscience")It’s the power of arbitrators to dispense with consideration of the law but consider solely what they consider to be fair and equitable in the case at hand.

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Arbitrator does not necessarily have to apply the law; the obligation is simply to do justiceThe arbitrators have more flexibility than a judge to soften the impact of law that appears to work too harshly against one of the parties

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The parties consent limits an arbitrator’s power because ha can decide only issues within the scope of the parties’ agreement

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There are 4 different types of awards and orders that are available to arbitrators:Procedural ordersInterim awardsFinal awardsCosts awards

DECISIONS OF ARBITRAL TRIBUNAL

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provide procedural directions and measures designated to preserve evidence or the subject matter of the disputemay be reviewed by tribunalDo not constitute awards

Procedural

orders

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They do not resolve all the issues in dispute between the partiesUsually interim awards are issued prior to the issuance of final award in order to order a party to maintain the status quo or preserve assets out of which subsequent award could be satisfied

Interim

awards

/

partial

awards

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Are challengable by losing party, which may attempt to have it annulled or vacated under the laws of the seat of the arbitrationIssuance of the award terminates the duties of the tribunal

Final

awards

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Monetary damagesInterestOther remedies, e.g. specific performance, declaratory award stating the rights of the parties, injunctive relief

Final

awards

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provide for the payment of the costs incurred in arbitration between the parties

Costs

awards

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Default award

Is

issued

when

the

respondent

chooses

not to

appear

and

respond

to

claims

,

despite

beeing

duly

notified

of

the

commencement

of

the

arbitration

proceedings

In

default

proceedings

,

the

arbitral

tribunal

may

not

simply

grant

all

prayers

for relief of

the

claimant

.

Ifirst

must

examine

whether

the

facts

of

talleged

by

the

claimant

support

its

legal

clams

and

whether

those

facts

are

reasonably

established

on

the

claimant’s

evidence

Note

!

When

common

courts

issue

judgments

in

default

it

is

usually

presumed

taht

the

allegations

of

the

claimant

are

true

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To be valid an award must conform with the parties’ agreement, the chosen rules and applicable lawUnder the UNCITRAL Rules an award must be:In writing Final and bindingSupported by reasonsSigned by the arbitratorsDated and with place of arbitration namedCommunicated to both partiesMade public only with consent of both parties or if required by a legal duty or to protect a legal right

Validity

of

the

award

Slide69

If the award has errors or is incomplete, most institutional rules provide that a tribunal may take steps to correct typographical or clerical errors, or errors of computationThe tribunal is not permitted to correct any substantive error such as a misinterpretation of a document or of witness testimony

Slide70

An award might be refused enforcement if it exceeds the scope of the arbitration, as defined by the parties in the arbitration agreement

ENFORCEMENT OF AWARDS

Slide71

Most international awards ultimately need to be recognised and enforced in jurisdictions other than the seat in order for the winning party to satisfy its awardWhere the winning party seeks to enforce its award in a third jurisdiction it is implicitly also seeking recognition of the award in that country

ENFORCEMENT OF AWARDS

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A request for recognition is meant to ensure that the foreign award is recognised as valid in country other than the seat

RECOGNITION

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Arbitrator’s award usually cannot be reversed for a mistake of law but it can be challenged if it is against the public policy of a jurisdiction, or if the arbitrator has acted in a way that exceeds his or her powers

CHALLENGING OF THE AWARDS

Slide74

Arbitral awards cannot be challenged on the merits, but only on procedural grounds or grounds of arbitrator misconduct or bias

Challenging

of

the

awards

Slide75

Foreign award may be refused recognition and enforcement only if the party challenging the award furnishes proof that:The parties to the arbitration agreement were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; orThe party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his caseThe award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, provided that, if the decision matters submitted to arbitration can be separated from those not submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced; orThe composition of the arbitral authority or arbitral procedure was not in accordance with the agreement of the parties, or failing such agreement, was not in accordance with the law of the country where the arbitration took place; orThe 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 which, the award was made.

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Recognition

and

enforcement

of an

arbitral

award

may

also

be

refused

if

the

competent

authority

in

the

country

where

recognition

and

enforcement

is

sought

finds

that

:

The

subject

matter

of

the

difference

is

not

capable

of

settlement

by

arbitration

under

the

law of

taht

country;

or

The

recognition

or

enforcement

of

the

award

would

be

contary

to public

policy

if

that

country.

Slide77

Action to annul the awardAction to set aside the awardAction to vacate the award

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Jurisdictional challenges when tribunal exceeded its powers Procedural challenges

Grounds

of challenge

Slide79

The award is null and void, having no further effectThe question is whether the case will be remitted to arbitratorsDepends on the circumstances of the vacation and the will of the parties

Effects

of

successful

challenge