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Law - the congruent and incongruent concept (None of us are without the problem.)
If we do not make a detailed study of a particular law we cannot claim to know what that law states. On the other hand, if we do make a very detailed study of a particular law we are likely to be uncertain about its application to any specific matter. Fortunately, for contractual relationships generally, there lies somewhere between those two extremes an element of certainty in thinking which is derived from less than total knowledge of the law. For the efficacy of dispute resolution we must recognize this important factor.
That element of certainty in thinking that is derived from less than total knowledge of the law exists, to a greater or lesser extent, in everyone. This element of certainty exists to the extent one believes that there is congruence between the law and one's own feelings and beliefs about the law. This factor is important because to the extent that the law is in line with what someone thinks the law is, then that someone will be acting within the law or intentionally acting outside the law; and, to the extent that the law is not in line with what someone thinks the law is, then that someone is likely to be unwittingly acting outside the law.
The reality is that most people rely heavily upon the notion that there is congruence between the law and their own feelings and beliefs about the law. Or, to put it more basically, most people do not think about the law, they just act in a way that seems to be law-abiding based upon their own assumption that it is so (excepting, of course, intentional law breakers who do the opposite). The alternative to such a basic approach to the law is simply not realistic because the only alternative would be for everyone to spend a great part of their time studying the law; with the simple prospect that having done so their certainties would be likely to turn into uncertainties.
Indeed, the degree to which the certainties would turn into uncertainties would be directly related to the depth of the study undertaken, namely: the greater the depth of study, the greater the uncertainty. Which last observation would surely be borne out by anyone who had listened to a legal scholar who was comparing the available case law on any subject, e.g., the case law on adjudication under the Housing Grants Construction and Regeneration Act 1996.
The relevance of this to contractual relationships and to the efficacy of dispute resolution is, in my opinion, important to all of us.
First, let us look at contractual relationships. When people enter into a contractual relationship can we be certain that the parties understand all the laws which govern that relationship and, moreover, do they also understand all those underlying layers of law which have an impact on the means of their fulfilling the contractual obligations? I would suggest that we would be a little foolish if we imagined that such an understanding existed in the minds of the parties. Indeed, would I be challenged if I were bold enough to suggest that even an experienced lawyer would not come forward to claim familiarity with such a wide range of laws?
The simple truth is that most contractual relationships are brought to a successful conclusion simply because the parties do not analyse the contract in any great depth and, moreover, simply because the perceptions of the parties are generally fulfilled. If, however, perceptions are not satisfied and some remedy is demanded, then that is usually the time when an in-depth analysis of the relevant obligations and the applicable law takes place. That is the time when the distinction between those who have to look into the future and those who look back into the past is clearly evident.
Those people who are looking into the future as they step off into a new venture must make predictions and take risks about events that have not yet taken place. In doing so, they are often relying more upon faith, hope and also a belief that the law is in line with their own thinking, than much else. Even when there are acknowledged experts involved in any matter, although it is the case that they are usually more experienced at the task than others, it is still the truth that most are saved from disputes only because perceptions are fulfilled. However, without doubt, it is the case that fulfilment of perceptions is often quite different from the reality of that which has been set out in the documentation governing contractual relationships. In particular, the perceptions about the laws that govern a venture are often wrong.
On the other hand those people who are driven by a dispute or some other reason to look back into the past usually have their attention clearly focused by the thing which has failed to live up to the original perception. Unlike the people facing a new venture, these people will not be plagued with considering the broad uncertain spectrum of future events, rather they will be looking critically through the microscope in whatever depth is thought necessary at a specific matter which has been fixed as a past event. They will usually be able to analyse with reasonable certainty the facts of the identified matter in order to establish the truth.
However, as those who specialize in disputes will know, the more certain the facts, the more likely it is that the law will seem to be uncertain. On this point, I am reminded of one highly respected QC who had been engaged in the early seventies to give an in-house talk to a large foreign civil engineering contractor. This talk was about the I.C.E. Contract Form Conditions, which was used back at that time. In particular, the talk dealt with the meaning of clause 12 (adverse physical conditions and artificial obstructions) of that contract. The executives of the foreign company were so impressed with the talk that when they were involved in a major problem concerning tunnelling rock, they came over to London to consult with the QC. They were confronted with the real difference between asking hypothetical and general questions about speculative future events and asking specific questions based on an actual situation that had occurred. In response to the former, at the in-house talk, the law relating to section 12 was explained with reasonable clarity based upon carefully chosen hypothetical situations that had been fashioned out of the information drawn from judgments of the English courts. In response to the latter, at the meeting in London, the law of England seemed to be most unclear. There is no doubt that the executives of the foreign company left the meeting more perplexed than when they arrived.
Accordingly, as for contractual relationships, in general, it seems to me that the vast majority of activities that take place reach a successful conclusion because those involved have perceptions about things which are generally satisfied and not because those involved really understand the law and the obligations arising out of contractual relationships. Or, to put it another way, society operates generally quite well on the basis of what people believe is the true state of affairs regardless of whether or not the law and the written documentation is in congruity with that belief. In fact, if society did not work on such a basis, it is probably the case that nothing much of importance would ever get started or, if started, would ever get completed. One could say that a general unawareness of the law in totality and of the meaning of contracts generally is what allows the people of the world to keep on the move.
Now let us look at dispute resolution. When people are in a dispute that has arisen out of a contractual relationship there are many good ways of seeking a resolution, but I am primarily dealing with arbitration in the context of this article. My reason for concentrating on arbitration is that none of the non-binding procedures for resolving disputes are in any way dependent upon the strict application of law. In fact, most of them are based on the point that a settlement is driven by the individual needs of the parties as they decide whether or not a settlement is achievable and, of course, such needs may positively lead to laws being ignored. I am not suggesting that arbitration is always dependent upon the strict application of the law, but in the absence of any agreement to the contrary under section 46(1)(b) of the Arbitration Act 1996, the arbitrator must decide the dispute in accordance with the law.
If what I have stated in this article is correct, when parties choose arbitration as their way of resolving disputes they are likely to come to the arbitration with concepts of law which are not totally the same as the actual law. They may also come before an arbitrator whose concepts about all of the laws applicable to the dispute are out of line with the actual law. That situation seems to me to be quite normal and gives me no cause for concern; save where the arbitrator may be in self-denial about the situation.
If we analyse the arbitral process, it seems to me that an arbitration agreement is, in effect, an agreement by the parties to give someone else a licence to decide matters of fact based on less than adequate information, namely: on the balance of probabilities, and to apply the law to the decided facts all in accordance with the law applicable to the contract between the parties, unless agreed otherwise by the parties.
With regard to the facts, a decision is not necessary where the causes and the effects are known; perhaps an explanation is necessary, but not a decision. The decision making is only about the degree of inadequacy of information and the extent to which an arbitrator is of the opinion that the balance of probability leads to a decision in favour of one side or the other. Thus, the arbitrator has to decide between the contentions of the parties on all matters where absolute proof does not exist. It is a self-contained exercise that exists simply between the parties and the arbitrator.
With regard to the law, arbitration it is not a self-contained exercise and an arbitrator'?s sole duty is to apply the law properly unless, of course, the parties have specifically agreed otherwise by an agreement under section 46(1)(b).
It is obvious that an arbitrator does not have the power to decide matters of law. That power rests solely with the judiciary and arbitrators must simply follow what judges have declared the law to be. It was Blackstone who said that law was a rule of action prescribed by some superior, which an inferior is bound to obey. As for me, that is the logic when it comes to the law, the judge is for practical purposes the superior and the arbitrator the inferior. By way of endorsement of my point, I also refer to the late Lord Reid who said that the practical answer to the jurist who asks what I mean by law is that the law is what the judge says it is. ((1997) 63, JCI Arb.3, 180)
Thus, in the context of this article, because both the parties and the arbitrator are likely to have less than total knowledge of the laws that have to be applied, the duty of the arbitrator has to be exercised very carefully. However, providing an arbitrator is not in self-denial about his or her ability to know all the laws governing the matters in dispute, the task to be undertaken is simple enough, at least, simple enough in the method, namely: it is one of research, detailed research. Once the particular aspects of the law have been brought into focus, the arbitrator must study the current law as applicable and make the final award in accordance with the law.
There is no shortcut, the arbitrator must not simply decide between the contentions of the parties on points of law. Even where the parties are represented by skilled lawyers, the arbitrator is still bound to apply the law as it is and not what others think it to be. Of course, no one can deny the great benefit of listening to the valuable opinion of lawyers representing the parties, but when those lawyers are not agreed on the law, it is not the arbitrator's duty simply to choose between them. The valuable part of the opinions of the lawyers representing the parties is that those opinions help greatly in the arbitrator's duty to research the law, but they are not a substitute for that duty. It is the same even when the lawyers are agreed upon the law, save that the arbitrator's route to understanding will no doubt be greatly simplified.
If on reading the above, you share my opinion about the task of the arbitrator when it comes to applying the law to the matters in dispute, then you may also think that it is a good idea for the arbitrator to suggest that the parties consider reaching an agreement once the facts have been decided.
If the parties are not prepared to reach an agreement after a decision on the facts, then, if the parties are represented by lawyers, the arbitrator could make the point that the process of seeking to arrive at the correct law and its application is not, and never was, an adversarial matter. Hence, the arbitrator could stress that for the benefit of the parties and their costs, it would be best if, by discussion, the arbitrator and the lawyers could agree upon the law and its application and save unnecessary research time. Of course, it would still be wise for the parties to enter into an agreement under section 46(1)(b) in order to avoid the possibility of any subsequent appeal.
If the parties are unrepresented, the arbitrator could also make the same point, but the parties should be made aware that by making an agreement under section 46(1)(b) all rights of appeal on law would be lost. Where it is necessary to consider the law before deciding matters of fact, then a similar action could take place at the beginning. However, if the parties are not prepared to enter into an agreement under section 46(1)(b), then the arbitrator cannot shirk the duty to research the relevant law and decide the dispute accordingly.
As I see it, providing one can recognize the obvious problems arising out of the congruent and incongruent concepts as discussed above and providing it is discussed openly between the arbitrator and the parties, then arbitration is sufficiently flexible to facilitate the means of finding the best route to a binding award which is fully in accordance with the arbitration agreement.
Francis Miller
Editor's note: I would like to thank Francis for another thought-provoking article, and would hope that it would stimulate debate from the members. For example, I would welcome member'?s opinions on Francis's contention that "the arbitrator must not simply decide between the contentions of the parties on points of law", but should instead investigate what the law is for himself. If he reaches a conclusion that is different from that contended for by either party should he tell the parties and request further submissions before publishing his award?