The Architecture of Arbitration
THE INTERACTION OF COURTS AND ARBITRATORS IN ENGLAND*
A. Introduction
Replacing several centuries of piecemeal legislation and random judicial decisions, the English Arbitration Act 19961 (hereinafter the Act) provides the first truly systematic and comprehensive legal framework for arbitration of commercial disputes in England.2
The legislation caps almost two decades of flirting with (and skirmishing around) arbitration law reform,3 beginning with the abolition, in 1979, of the procedure by which awards had been subject to systematic review on their legal merits.4 Some had felt that these statutory changes did not go far enough, and so a committee5 was appointed to consider adoption of the Model Arbitration Law drafted by the United Nations Commission on International Trade Law. Although a decision was made not to import the Model Law into England,6 its language and structure did exert a strong influence on the legislation that ultimately emerged from this reform process.7
The Act brings no radical departures from the sound basic principles that have governed arbitration in England since 1979. England’s split-level approach to judicial review of awards continues to offer an optional right to appeal points of English law, coupled with a non-waivable opportunity to seek judicial review of an arbitration’s fundamental procedural regularity. Rather, the Act’s most significant achievement relates to form instead of substance, having put old wine into new and more user-friendly wineskins.8 This repackaging is no small feat, since practical application of even the best norms and traditions will depend on matters of language, organization, and structure.9
The Act does introduce several important substantive innovations, however. Most notably, challenge of arbitrator misbehavior on the broad basis of “misconduct” has been replaced by detailed provisions for judicial review of arbitral excess of jurisdiction and lack of procedural integrity. In addition, the Act ends restrictions on the right to exclude judicial review of awards in admiralty, insurance, and commodity market disputes. Finally, under the Act judges may no longer order security for costs in arbitration.
B. Backdrop to the 1996 Arbitration Act
General approach
The most interesting hermeneutic novelty of the 1996 Arbitration Act10 is its articulation of three fundamental precepts to guide interpretation of the Act: procedural fairness, party autonomy, and judicial restraint.11 The first canon for construction of the Act calls for “fair resolution of disputes by an impartial tribunal without unnecessary delay or expense.” The practical application of this worthy objective will not always be self-evident, since fairness sometimes marries ill with speed and economy. What appears as undue delay to a claimant expecting an easy win may be dressed as essential due process or natural justice to a defendant anxious to present its case more fully. Indeed, how arbitrators and judges determine when delay and expense are warranted remains one of the most vital and elusive parts of any arbitration system.
The second of the Act’s doctrinal foundations gives the parties freedom to agree how their disputes are resolved. Litigants will generally be held to their bargains on the mode for resolution of their controversies. Nevertheless certain mandatory rules, designed to safeguard both the public interest and the integrity of the arbitration, will sometimes trump the parties’ desires. In particular, the Act requires an arbitrator to act impartially and to avoid unnecessary expense,12 a dual mandate with an internal tension similar to that inherent in the first principle’s aspiration toward fairness without delay.
The statute’s third interpretative principle admonishes judges against excessive zeal when dealing with arbitration-related matters. Judicial intervention is normally to be limited to measures prescribed in the Act. This does not, however, prohibit courts from exercising their inherent jurisdiction to relieve injustice in appropriate circumstances.13
Scope
Generally the Act governs arbitrations whenever the juridical seat of the arbitration is in England, Wales or Northern Ireland.14 The seat of the arbitration (often but not always the place of the proceedings15) will be designated by the parties, the relevant arbitral institution, or the arbitral tribunal itself if so empowered.16 Except with respect to certain consumer protection measures, the Act does not extend to Scotland, which has long had its own arbitration law.17
Some provisions of the Act may apply even if the seat of the arbitration is outside England. Judicial proceedings will be stayed in deference to arbitration abroad,18 and in connection with foreign arbitration courts may secure assets by injunction and order the taking of evidence.19 Moreover, when English law governs the arbitration agreement itself (as contrasted with the principal contract obligations), two rules apply regardless of the arbitral situs: an arbitration clause will be “separable” from the main contract, and the arbitration agreement will continue in effect even after the death of a party.
Institutional rules as an “agreement otherwise”
In line with the principle of party autonomy, the litigants may choose to accept or to reject many of the Act drafters’ preferences. Provisions hedged with qualifications such as “unless agreed otherwise” or “subject to any agreement of the parties” constitute default rules only.
Whether reference to institutional arbitration rules will constitute an “agreement otherwise” for purposes of the Act depends on the particular question presented. For example, under Article 28 of the Arbitration Rules of the International Chamber of Commerce (hereinafter ICC Rules) the parties waive “any form of recourse [against the award] insofar as such waiver can validly be made.” There should be no problem seeing this rule as an “agreement otherwise” for purposes of excluding merits review.20
The situation is less clear, however, with respect to other matters, particularly when the institutional rules are silent. Imagine, for example, that during the proceedings one side requests a court determination of a preliminary point of law as allowed by Section 45 of the Act. The waiver of “recourse” in Article 28 of the ICC Rules deals with awards rather than interlocutory questions. What the ICC Rules would mean for preliminary points of law will probably derive from invocation of the spirit of the rules rather than any concrete provision. Certainly the overall scheme of the rules contemplates that questions of law will be determined by the arbitral tribunal, subject to judicial review (if at all) only when encompassed in an interim or final award.21
Another illustration might be found Section 57 of the Act, which permits the arbitrators to correct an award’s clerical errors if the parties have not agreed otherwise. Clearly, many institutional rules contemplate the arbitrators’ right to deal with such accidental mistakes.22 Section 57 does not, however, end with reference to minor slips and omissions. It goes on to allow arbitrators to make an “additional award” on matters not dealt with in the initial award.23 Such supplementary awards are not dealt with in most institutional arbitration rules.24 Some have suggested that silence on arbitrator powers constitutes an “agreement otherwise” on such matters only if the relevant rules indicate that the arbitrators have no powers other than those expressly mentioned.25 Since few institutional rules state that the arbitrators’ enumerated powers are exhaustive, this approach would lead to application of the Act’s default rule on “additional awards,” a result not free from doubt as a matter of policy.
Ambiguity in terminology may also prove problematic. The Act allows arbitrators to decide in accordance with “such considerations,” other than applicable law, as are agreed by the parties.26 Article 17 of the ICC Rules, for example, provides that the arbitrators shall in all cases take account of “relevant trade usages.” Could an arbitrator apply the principles (or alleged principles) of the so-called lex mercatoria27 on the theory that these are subsumed under “trade usages?” The answer would seem to depend on the particular issue, context, and alleged principle.