The above question boarders around one of the techniques used to resolve disputes out of the court, known as Arbitration. Though, there is no statutory definition, Arbitration as a form of Alternative Dispute Resolution, is a method in which “parties voluntarily refer their disputes to a neutral third person, an arbitrator, selected by them for a decision based on evidence and arguments to be presented before the arbitration tribunal”. The decision may be binding or nonbinding, depending on the parties advance agreement for the arbitral award to be final and binding upon them. The primary source of English arbitration law is the Arbitration Act 1996, and the major legal instrument in international arbitration, is the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also referred to as the ‘New York Convention’. Though, The New York Convention was not enforced until 1975 in England and Wales, the New York Convention covers foreign enforcement and recognition of Arbitral Awards. It was the Arbitration Act of 1975 that implemented the New York Convention into English Law.
This essay aims to address Arbitration as a form of ADR in England and Wales, as well as its commercial and confidential nature, as well as the finality of the arbitral tribunal. I will also address the possibility of an arbitral award challenge and weigh with Human Rights, why a party may want to challenge an award.
Arbitration is frequently adopted in resolving disputes within commercial situations, such as between consumer and employment matters, trade transactions, Joint ventures and Investment. It is ideal for commercial disputes because of its international enforceability, as the New York Convention has been endorsed by 142 of the 192 United Nations Member States, which goes to show the accepted obligation by member states, to adopt and enforce Arbitral Awards and international commercial arbitration agreements.
In contrast with national courts, Arbitration is seemingly more attractive for commercial dispute resolution, because Arbitration is usually not a national court process, being that parties who agree to participate in arbitration take their relationships and disputes away from the jurisdiction of national courts. This in turn takes out the risk of a perceived ‘national prejudice’ that National courts have, as in reality, National court Judges are appointed from the Nationality, and have little to no ability to handle international commercial transactions between parties from other countries, because national courts follow and act in line with rigid rules and laws set out by the state; as opposed to Arbitration where the structure and procedure varies according to the nature of the case or dispute to be resolved. This flexibility, neutrality and independence of the Arbitration makes it very attractive for commercial disputes, because a special procedure for each arbitration process will encourage an international forum where parties have autonomy and control, and their interests are protected and respected in a manner where the best way to resolve their disputes are also determined.
Arbitration is also attractive for commercial disputes because of the finality of the decision made by the arbitrator or arbitral tribunal; though, there are limited grounds where arbitral awards can be challenged appealed to courts on the basis arbitrator conclusion was wrong.
The underlying and most attractive reason why Arbitration is used for commercial disputes, is because of its confidentiality. Because of the privacy of the proceedings, and confidentiality of the process, companies are more open and attracted to this form of dispute resolution, as opposed to litigation, as this in turn reduces reputational risk and keeps their financial health private in a less belligerent manner. The confidentiality is important in relation to commercial organizations also because of image, as share prices could go down and share holders will not get back as much money if the company because of dispute exposure, suffers from an attack on its image.
In essence, the privacy refers to the fact that the process concerns and involves (physically) only persons involved in the dispute, such as the Parties and the arbitrators. Just as litigation is public, arbitration proceedings are private and not exposed to the public or accessible by the public. Confidentiality however refers to the duty and commitment that are imposed on the parties in disputes, not to disclose anything involving the proceedings (such as documents, statements and observation), to the public. A confirmation of this position can be seen in the leading case of Ali Shipping Corporation v Shipyard Trogir , where the court stated that confidentiality was to be kept respective to the arbitration proceedings, observations, documentation and other information produced during the proceedings. The confidentiality of arbitration is more so endorsed by the UNCITRAL Arbitration Rules, which also affords that the arbitral award can be made public by the consent of both parties in dispute.
This non-disclosure duty that is imposed on parties in the arbitration process, all depends on the rules of arbitration of the country. Countries such as Venezuela, England, Dominican Republic, Hong Kong, and Scotland have provisions prohibiting disclosure of arbitration proceedings to the public, while there is no provision like such in the American Arbitration Association.
Even though the Arbitration Act says nothing about confidentiality, case law begs to differ. The body of case law in England shows the seriousness of the duty of confidentiality, and supporting case law below shows that this duty is implied in the arbitration agreement.
In Dolling-Baker v Merrett this implied duty of confidentiality was said to have a risen from the “private nature of arbitration”. Commercial wise, in the case of Hassneh Insurance Co of Israel v Mew, the implied duty of confidentiality was said to have risen from the commercial documents and agreements used for the effectiveness of the business.
The duty of confidentiality in England and Wales is highly preserved and maintained in arbitration, especially because the information in proceedings have an impact on the efficiency of arbitration. It will also help matters, save time and tailor individual arbitrator proceedings, if parties expressly state in their arbitration agreement, the nature and extent of their confidentiality.
Nonetheless, there are some exceptions to this broad principle and duty of confidentiality. If the arbitration documents have been ordered by courts to be disclosed to the public, or the disclosure is in the public’s interest (or interests of justice), then the principle of confidentiality will not suffice. This will also be the case if the disclosure has been agreed upon by the parties to the arbitration. The Civil Procedural Rules give the courts flexibility to determine the scope of disclosure.
The decision of the arbitrator is a final decision, and so is the arbitral award. This is very unlikely to be followed by a series of appeals to superior courts, because the parties in dispute use express wordings to exclude the right to appeal under Section 69. The parties don’t just agree to the finality of the arbitral award, but they must explicitly exclude and waiver their rights of appeal or legal recourse. This restriction of party rights to appeal, goes to show that the decision of the arbitrator is far from a recommendation, and is conclusive and binding. This decision is enforceable nationally and internationally, and this is one of the perceived advantages of arbitration. This seemingly poses to be a Human Rights issue, as an exclusion of an individuals rights of appeal (if mandatory) may be an infringement on Article 6 ECHR due process and fair hearing rights.
Sections 67, 68 and 69 of the Arbitration Act provides parties with a three-ground statutory privilege to challenge an arbitration award that has been made under certain circumstances.
The Section 67 challenge is concerned with if there was a valid arbitration agreement, if the tribunal was properly conducted, and if the problems submitted to the tribunal were in line with the arbitration agreement. If a party does not raise these objections under this section quickly, the party may not stand a chance to win, because there are very strict time limits to adhere to. A party challenging an award under section 67 is entitled to a complete hearing and not a mere review of the decision arrived by the tribunal (Azov Shipping Co v Baltic Shipping Co (No 1) [1999] 1 Lloyd’s Rep 550) After grantil this full hearing, the court may either confirm the award, modify the award, or set it aside.
There are nine specified circumstances in section 68(2), which constitute The high threshold for challenges under section 68.
The serious irregularity challenge is narrowed to disputes which will cause or have caused a “substantial injustice to the applicant”. This challenge is more concerned with the procedural nature in the arbitration proceeding, and not the reasoning given in the award. “serious irregularity” must be shown with relation to the “substantial injustice to the applicant).
In the case of CNH Global NV v PGN Logistics Limited [2009] EWHC 977 (Comm), a serious irregularity occurred in the arbitral tribunal, and it tried to rectify its award to soothe the claimant interest, even though it had no power to do so. The court declined to set aside the award based on the fact that the interest was due to the claimant, and the party ordered to pay the interest had suffered no “substantial injustice”.
Challenging under section 69 (Error of law challenge) can only be brought if leave has been given by the court (section 69(2)). The court may grant leave if the purpose of the question will substantially affect the rights of one or more of the parties; if the question was thrown at the tribunal to determine; if the decision of the tribunal was wrong, and if notwithstanding the agreement of the parties to resolve the matter through arbitration, proper for the court to determine the question. After the appeal hearing under section 69, the courts may send confirmation, modification or refuse the award. Though a successful challenge is possible, The challenge for arbitral awards under sections 67, 68 and 69 are complicated. And this is why the binding and finality of arbitral decisions is over emphasized.
Ultimately, dissatisfied parties should be able to challenge arbitral awards, espescially because of s68 of the AAact, and because of the initial waiver of right to appeal.
These two stipulations put a heavy strain on A6 right to fair trial and due process.
Consequently, arbitration is the most suitable and appropriate method for commercial dispute resolution, because asides its finality and confidentiality, it would save companies a lot of money and time compared with National Courts.