It may have been better if I had entitled this article “The Case Against
Institutional Rules Under the 1996 Act” as I intended to argue that the Rules
in their traditional form are unnecessary, undesirable and aid in defeating the
general principles and particularly Section 33. However, I consider that there is a place for Rules as an aid to
the Arbitrator in making procedural orders under Section 34.
The 1950 Act comprised only 44 Sections with limited powers for the
Arbitrator without further agreement between the Parties. The 1979 Act added a further nett seven
Sections. The 1996 Act comprises 110
sections with substantial mandatory and default powers for the Arbitrator plus
further powers which may be given by agreement between the Parties. I will leave it to the reader to decide
whether it is legitimate to compare the total number of Sections or whether I
should have only counted those which contain powers or whether I should have
attempted a direct comparison of the powers available. Whichever way is used, the 1996 Act scores
hands down. What I am trying to
establish is a general principle that the 1950/79 Act was a fairly base
skeleton which begged for flesh and muscle to be provided by Rules.
It is my contention that the 1996 Act already includes sufficient flesh
and muscle, further Rules are generally unnecessary (eg provisions are already
included in the Act) and undesirable (eg can restrict the flexibility for which
the 1996 Act is set to become famous).
While there is no doubt that Arbitration is a consensual process, the
concept of the 1996 Act is that the process is driven by the Arbitrator (see
Section 33), with the Parties having a duty to comply (see Section 40) and the
Arbitrator has been given the appropriate powers, subject only to the right of
the Parties to modify those powers by agreement. While the Arbitrator has wide
powers, he also has considerable discretion as to how or whether to exercise
them.
Rules will usually be incorporated by reference and therefore set out
further agreements between the Parties.
Such agreements could also be included in the contract as part of the
Arbitration agreement. The bulk of the
1996 Act Sections are subject to agreement between the Parties, but most of
these Sections must provide for “default” powers in the absence of
agreement. If (as I would maintain) the
default powers are very suitable for most circumstances, how, I ask, can the
Parties, pre-contract, decide that such powers should be modified or curtailed
for the benefit of the conduct of a future dispute. Even more, how can a rule-making body decide that powers should
be modified or curtailed for the benefit of a future dispute between unknown
Parties in respect of a contract of unknown terms, for unknown subject
matter. Surely, it is more appropriate
to decide on which powers are needed after the dispute has come into existence
and a competent Arbitrator should be relied upon to exercise such powers as and
when required.
I suggest that no case can be made for the production of Rules and
incorporation into standard form contracts.
A case may be made that certain powers should always (or never) be
available under a particular standard form and it may then be appropriate to
word the Arbitration agreement accordingly.
It may also be that a regularly contracting Party finds that certain
powers are always (or never) required in its own contracts in which case it
could make ad hoc amendments to a standard form (or draft its bespoke
conditions accordingly).
To move from the general to the specific, if a case is to be made for
Rules, then what should the Rules contain?
I suggest that an affirmation that the Arbitrator will have the
“default”? powers is otiose as he has such powers unless there is agreement to
the contrary and the incorporation of Rules cannot take away the power of the
Parties to agree otherwise at a later date (even during the reference). There are only two powers which are only
available if the Parties agree and they can be examined individually. Consolidation and concurrent hearings
(Section 35) is only likely to occur if the contract or series of contracts
contain relevant provisions (an ad hoc agreement will necessarily include power
to the Arbitrator) and the power is therefore better conferred under the
contract. I consider that the power to
make provisional awards (Section 39) should have been a default power, to
enable the Arbitrator to award interim relief as CPR r.25.1(1)(k), but I could
not support the use of Rules for the sole object of incorporating this power –
inclusion in the Arbitration agreement would be more appropriate but the most
satisfactory solution in the long-term would be an amendment to the Act.
The other major matter which Rules generally address is the procedure,
timetable and style of pleading but I suggest that such rules would only serve
to restrict the power of the Arbitrator under Section 34 to design a procedure
which is appropriate to the dispute. I
therefore suggest that the appropriate time to decide on procedures is after
the dispute has arisen, when the Parties may agree various matters or make
representations to the Arbitrator for his decision unrestricted by any
pre-contract agreement.
Having examined matters which would normally be included in Rules (and
hopefully demonstrating that they are not needed for those purposes) I now
address matters which have only really arisen because of the 1996 Act.
Section 34 gives broad and largely undefined (and non-exclusive) powers
to determine procedural matters. It is clear,
particularly by reference to Section 34 Civil Procedure Rules, Civil Evidence
Act and the like do not apply to Arbitration.
It is up to the Arbitrator to determine all matters of procedure and
what rules will apply. Unless the
Arbitrator takes a firm lead, this is a recipe for anarchy. It is difficult enough running those small
cases in which Parties represent themselves or use inexperienced advisers, all
of whom may not (and cannot be expected to) comply with generally accepted
procedures. With the 1996 Act Section
34 specifically avoiding rules, may we now see experienced / legally-trained
advisers taking advantage of the Arbitrator’s lack of firm control. If no rules of evidence apply (and there are
precious few left in civil matters) can Parties adduce hearsay evidence without
notice and expect that it will be given full credence and, in the absence of
evidence to the contrary, have to be accepted without being “tested”? Should a Party be deemed to have admitted to
the other’s pleading which he has not specifically denied merely because the
Arbitrator called for formal pleadings?
The presumptions under the Act are that no rules apply and the
Arbitrator must therefore draft his own directions or face a free for all. I suggest that it is in this area that
“Rules”? are needed, performing a similar function to CPR. I further suggested that a standard set of
rules could be procured, for the Arbitrator to distribute with his first Order
for Direction with a “?tick list” on the basis of “Rule 1 will/will not apply”
etc. This should assist Parties who
represent themselves to be more aware of what is required of them and should
stop the legal fraternity (who in any case love rules) from taking advantage of
any shortfall in the Arbitrators directions.
It could also introduce a consistency in Arbitrations while not
inhibiting innovation and specific design.
A number of Arbitrators have expressed a fear of the potential conflict
between Section 33 and 34 where the Parties could agree to a procedure which the
Arbitrator finds unacceptable and in conflict with his mandatory duties under
Section 33. I find this to be a highly
unlikely scenario as any agreement will only occur if both Parties perceive
that it will be beneficial. However,
the solution has seemed to be a lengthy agreement (or reference to Rules) which
would provide a prima facie reason for the Arbitrator to resign if the Parties
subsequently agreed otherwise. I do not
accept that this is a proper use of Rules, nor does it provide a reason for the
use of rules. If the Arbitrator finds
his position untenable then he should have the courage of his convictions in
deciding his course of action, without reference to an earlier agreement.
Peter D Horne