Law Arbitration Public
In West Tankers Inc v Ras Riunione Adriatica di Sicurta SpA (The “Front Comor”), English Law is to be administered and contained a clause mentioning that arbitration will take place in London. It was chosen by the parties in contract that English Law to be governing law and seat of the arbitration will be London. It was done on basis of neutrality and availability of legal services.
The principle of autonomy of the parties gives them these options. In choosing the governing law and arbitral seat, parties will choose according to the safe guard of public policy. In the process of arbitration, courts will not intervene. Forum of arbitration is selected because parties want to remain outside of procedures of national courts. They are in favour of privacy and informality. In this case, choice might affect the substantive rights of the parties and give arbitrators the right to act as an amiable compositeurs or can apply broad equitable considerations or lex mercatoria.
Arbitration is used to settle commercial disputes in which parties agree for settling their future disputes and will use arbitration procedure to settle any disagreements among them. They will refer the dispute to the third party which will help them in resolving it and will give his final decision in the form of an award and that third party is called the arbitrator.
There are different types of arbitration domestic, international, ad-hoc, institutional and specialized arbitrations. Domestic arbitration takes place when parties in arbitration belong to same country and sometimes foreign element might be involved. International arbitration can be of three types. First, arbitration can take place between two states. Second, parties in arbitration belong to different states and thirdly, arbitration between person having foreign nationality or residence with a state.
Ad-hoc arbitration is an international arbitration in which parties make an agreement which provides rules for resolution of their disputes without taking help from arbitration institutions. Institutional arbitration is carried out under the institution which keeps the check on the arbitration proceedings. Specialized arbitration takes place in the specialized fields like GAFTA, FOSFA.
Arbitration provisions will be included by the parties in contract for resolving their disputes in an arbitration agreement. This agreement can either be included in the same contract or as a separate contract forming two different contracts. This agreement will form arbitral tribunal to hear and determine the dispute within its jurisdiction.
Arbitration has some advantages. It is a process for resolution of disputes in international commercial contracts. The process is used by companies for the resolution of complex commercial disputes. Arbitration is cheaper and quicker process for dispute resolution. Its award is easier to enforce from one country to another country and process will be neutral to the parties. Arbitration generally takes place in a country which has no connection with the parties in dispute and will be considered that its process is free from bias. It is present in national legal system of the country and enjoys different cultures and traditions.
In arbitration, sometime arbitrator can act as an amiable compositeurs. It is a French word also known as amiable composition. In which an arbitrator decides commercial disputes in fair dealing, good faith and according to the natural justice. He decides the dispute outside the ambit of national legal system which might differ from the national law. Amiable composition is not applicable in England. An arbitrator must decide the dispute according to law. If he acts as an amiable compositeur, the decision by him will not be an award neither it will be enforceable.
Arbitrator sometime can rely upon other equitable considerations. It means that parties might resolve their dispute according to certain laws or by common principles in relation to laws of two countries or along with the public international law or according to commercial law principles or principles of fairness.
It is mentioned in the section 46(1) (b) of the Arbitration Act 1996 in which parties agree or tribunal agrees that disputes will be resolved according to other equitable consideration. If there is absence of choice of law in the agreement by the parties then the tribunal will determine the applicable law according to the choice of law which it considers applicable according to section 46(3) of the Arbitration Act 1996.
Sometime arbitration can work within the ambit of Lex Mercatoria which is a Latin word which means the new law merchant. If parties in contract does not choose law of their own country or country to which they are closely connected. In this case parties might choose lex mercatoria. In it different procedures are used for settling the dispute such as general principles of law, or principles recognised by international tribunal or by civilized nations. It was incorporated into common law which then formed the basis of Uniform Commercial Code.
Arbitrator can act as an amiable compositeurs or can apply broad equitable considerations or lex mercatoria if choices of arbitration affect substantive rights of the parties.
Arbitration is based on the arbitration agreement. They sometime can form submission agreement in which it enters the dispute arisen between the parties in a contract then the parties will the dispute to the arbitration. It will form a legal relationship between the parties.
If there is a clause in the agreement for arbitration then it will create a separate self-contained contract which will be subordinate to the principal contract. it is called doctrine of separability and the common law adopts this doctrine. It is explained in Harbour Assurance Co (UK) Ltd v Kansa General International Insurance Co Ltd; common law gradually adopted the doctrine of separability and was place in section 7 of Arbitration Act 1996.
Commercial arbitration can take place between companies, joint ventures, corporations, individuals or other legal recognized entities. If parties have ability to enter into a contract having arbitration agreement then arbitration agreement will be kept. Then parties have to adopt certain arbitration rules to govern the arbitration process. Many companies have their own arbitration rules under which they solve their disputes.
Small companies look for a forum which is single and exclusive for resolving disputes concerning different matters including matters of business transaction. They use arbitration as a forum for fulfilling their needs which are independent and neutral. It is also independent from the influence of local courts and gives parties in dispute equal ground and asks the parties not to think that they have an unfair home field advantage. Arbitration is helpful in negotiating commercial transactions providing flexibility and autonomy to the parties.
Autonomy to the party means that parties can solve their dispute and can make their own rules for solving the dispute. They can select an arbitrator who can resolve their dispute. This doctrine of party autonomy was introduced by academic writers. It was then implemented in national courts and was accepted by national system of law. International conventions like Rome Convention have the provisions of this doctrine of autonomy of party.
It is also described in choice of law clauses which are also mentioned in most of the modern arbitration legislation. It is also recognized with respect to choice of law for the merits of disputes, arbitration agreement and the arbitration procedure. As mentioned in XL Insurance Ltd v Owens Corning, in which Toulson J held that “it is a general principle of English private international law that it is for the parties to choose the law which is to govern their agreement to arbitrate and the arbitration proceedings, and that English law will respect their choice.”
Majority of the arbitrators selected by the small companies are aware of their business activities. Party’s autonomy helps them in choosing the arbitral seat or place where arbitration will take place. It is important to decide because dispute resolution mechanism will be most effective there and it can be any country even in one of the parties’ home country.
Small companies should decide it carefully because it can either help them or obstruct them in a way in which they are not expecting it. In order to be on safer side they should select a place which is signatory to the New York Convention because award can be enforced under that convention.
Conventional arbitral seat are New York, London, Paris, and Zurich which have established track records of effectively handling international arbitration issues. Places which are not signatories to New York Convention, local law can affect the opportunities for the local court to assist in them or might interfere with the arbitration proceedings.
Arbitral seat is a place where arbitration proceedings are conducted. It is also possible that different parts of arbitration proceedings are conducted in different countries. Parties should decide the seat of arbitration by their agreement.
If parties have not designated the seat of arbitration either expressly or impliedly then it will be referred according to the law of arbitration agreement. For example, if arbitration agreement is governed by English law and parties choose English law as a curial law without expressly designating the seat it is then implied that England is intended to be the seat for arbitration.
In doctrine of party autonomy, parties are free to determine the seat of the arbitration and free to change the seat mentioned in arbitration agreement after the dispute has arisen. If parties fail to designate the seat either expressly or impliedly then it is selected by arbitral institution or tribunal. It will be fixed and will be according to the arbitration agreement and other relevant circumstances.
Arbitration cannot work without court’s support. It is dependent on the support of the court that can protect the arbitration process if one party tries to destroy it. According to Lord Mustill in Coppee Levalin NV v Ken-Ren Fertilisers and Chemicals, “there is plainly a tension here.
On the one hand the concept of arbitration as a consensual process reinforced by the ideas of transnationalism leans against the involvement of the mechanisms of state through the medium of a municipal court. On the other side there is a plain fact, palatable or not, that it is only court possessing coercive powers which could rescue the arbitration if it is in danger of foundering.”
The court gives assistance, support, supervision and control over arbitration if parties agree to resolve their dispute according to it. It only works when arbitral procedure and resulting award meets certain requirements.
When parties in dispute choose arbitration for resolving their disputes they themselves raise issues of public policy. The state has restricted the arbitration so that arbitration process does not go against public policy and enforces this restriction through courts.
Arbitration is based on the agreement between parties and to make it effective nationally and internationally it is based on laws. There is a partnership between arbitration and court. Courts can operate without arbitration but arbitration cannot work or exist without the courts.
National courts enforce the agreement to arbitrate if one party tries to withdraw from it and also enforce arbitral award if losing party is not prepared for it. The disputes are solved according to the safeguards which are necessary as a matter of public policy. Arbitrators are free to decide their own jurisdiction subject to final decision by the relevant national court.
In a case where small company is in negotiations with the large multinational company for a valuable contract. The large multinational company is insisting on clauses referring all disputes under the contract for arbitration in London and multinational is forcing my client without leaving any option for him regarding autonomy of party. If my client does not agree to all the terms suggested by multinational he will lose the valuable contract and might become insolvent.
My client should consider the statement regarding autonomy to be correct. If parties agree to arbitrate in England then English law will prevail and dispute will be dealt by English law. In circumstances where when one company is multinational then the law will be public international law instead of national law of the country. Arbitrators should respect the autonomy of parties.
Section 46 of Arbitration Act 1996 is about autonomy of parties. It says that the tribunal will decide the dispute in accordance with the law chosen by the parties on certain considerations agreed by them or determined by the tribunal.
Choice of the laws of a country will be understood as substantive laws of that country and will not conflict laws rules. If there is no choice or agreement regarding choice of law then tribunal will apply the law determined by the conflict of laws rules which it considers applicable.
If section 46 of the 1996 Act does not say anything regarding the conflict between the mandatory rules of English law and the law applicable to the merits of the dispute, this does not mean that arbitral tribunal will chose the law chosen by the parties. Tribunal should keep in mind the statutory provisions relating to public policy.
An Arbitration Act 1996 gives the permission to enforce an award in England; it does not mean that the act will also give permission for the enforcement of an award which is against the public policy. If it is considered that an award is against the public policy then it should be set aside.
On the other hand if arbitration proceedings are conducted in England and an arbitrator does not apply the mandatory rules of English law then award will not be allowed to enforce in England and will be set aside by the court. If an award is set aside by the court where there is an arbitration seat then it cannot be enforced in any another country under the New York Convention.
It should also be kept in mind that the grounds on which award is not enforced under the New York Convention and is against the public policy of the country in which it was being sought.
One commentator said “the award is the raison d’etre of every arbitration; if the award is unenforceable the whole arbitration proceeding is waste of time and money. If the arbitrator’s award is not enforceable because it violates the public policy of the place of performance, the arbitrator will have failed in the responsibility vested in him.”
In short it is the general duty of the arbitrator to enforce an award. Arbitrator tribunal must keep in mind the public policy of the country where the award will be enforced and tribunal fails an award will be unenforceable.
The support of the courts is available under Arbitration Act 1996 redressing any inequalities that my client might suffer. According to section 44 of the Act 1996 court exercise its power in support of arbitral proceedings. He can take the evidence of witnesses, he can preservation it. He can make the orders relating to property which is the subject of the proceedings.
It is the property for which question arises in the proceedings. He has the power to inspect, photograph, preserve, take custody or detent the property and can order to take samples or conduct any observation or experiment on the property. Court can authorize any person to enter any premises which is in control of the party to the arbitration. He also has the power to sale the goods relating to proceedings and can grant interim injunctions and can appoint the receiver. If court thinks fit he can preserve the evidence and assets on the request of the party or proposed party in the arbitral proceedings.
If it is not important, then the court will only preserve the evidence and assets on the request by the parties in arbitral proceedings with the permission of the tribunal or written agreement by the other parties. The court will use its power while staying in a certain limit which has been vested by the arbitral tribunal or any arbitral or other institution or person in regard to arbitral proceedings and if no other power is acting successfully.
If the court orders then an order made by it under this section will cease to have effect in whole or in part on the order of the tribunal or of any such arbitral or other institution or person having power to act in relation to the subject-matter of the order. The leave of the court is required for any appeal from a decision of the court under this section.
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