Branch Meeting 14 January 1997

The Arbitration Act : part 1

Roderick O’Driscoll

Previous talks on the new Arbitration Bill/Act have generally given an overview during its gestation , Roderick’s intention is to look in depth at restricted subjects.

In Roderick’s view the Act is simple but there are many areas of discretion which wil cause complications as no-one knows how the discretion will be exercised.

Parties could request an award based on equity not law, exclude appeal and request no reasons but in such a situation could there be a problem with enforcement. It is with considerable regret that the legislature left a discretion with the court as to enforcement of the award with no guidelines on how the discretion should be exercised.. Usually the courts would enforce an award but they can and sometimes do exercise their discretion.

Roderick had handed out an agenda which he would follow comprising the powers and duties of Parties, Court and Arbitrator; the principal differences in the Acts; preliminary procedures and agreements between Parties.

Powers and Duties

Roderick handed out a very useful schedule (in plastic laminate protection) in which he had set out the powers and duties of the Parties and the Arbitrator, identifying whether they are mandatory or subject to agreement, and the powers of the Courts.

The first thing to note is that the Parties are only restricted by public interest and that they cannot exclude the mandatory provisions, otherwise control is in the power of the Parties (not the Arbitrator).

The Arbitrator’s powers are generally subject to the parties agreement but two powers are mandatory (cannot be removed by the parties):

(a) power to stay, pending an application (but the parties can jointly demand that he must stay proceedings

(b) power to withold the award until payment (but subject to Court’s power to to order issue, with payment into court)

Most of the Arbitrator’s duties are mandatory.

To summarise, the Parties can agree to anything they want to except where mandatory or against public policy, must pay the arbitrator and do everything necessary for the conduct of the proceedings. The Court should not intervene except as provided under the Act and may be left with very little (especially if the Parties exclude powers). The Arbitrator must act fairly, adopt suitable procedures, avoid unnecessary expense and proceed with due dispatch.

Differences between Acts

Agreement to be in writing. Prior to 1996 Act, had to be written agreement. Now, the meaning of a written agreement is set out in detail and extended. This means that oral agreements can be regarded as written under certain circumstances.

Failure of one party to appoint, other party appoints as sole arbitrator: Now, other party may apply for relief.

Arbitrator himself: Prior to 1966 Act, had to be unbiased - was there a connection close enough that a reasonable person would suspect bias. Now, the arbitrator has to act fairly and impartially - there may be doubt as to what impartially means and this may have to be resolved by the courts.

Disqualification: Pre 1996 Act - partiallity. Now, doubts as to partiallity, not qualified, failed properly to conduct the proceedings, failed to use despatch and substantial injustice caused.

Retirement: Prior to 1996 Act he can’t retire. Now he can resign if it is reasonable for him to do so.

Removal: Prior to 1996 Act - only inordinate delay or misconduct. Now, partiallity, not properly qualified, misconduct and injustice and if parties agreed system

Compliance with law: Prior to 1996 Act, if an award was made not in accordance with law, it would not be enforced. Now, an award on any basis may be enforced.

Manner of Trial: Prior to 1996 Act the arbitrator could not act inquisitorially. Now, s.34(g) gives power for the arbitrator to carry out on an inquisitorial basis (unless excluded by the parties). There is a danger, if the parties or arbitrator decide that the trial is to be on documents only and there is an issue of fact on which the case depends. If the issue needs to be tested as to who is telling the truth then an oral hearing may be necessary to test the veracity of witnesses and to give a fair trial.

Arbitrator’s powers: Now spelt out in detail. Can be changed by the parties but must be in writing under s.5.

Evidence: Now evidence can be given on affidavit. Under s.34 the Arbitrator has power to decide on whether questions can be put and when and in what form answers are to be given.

Experts: Prior to 1996 Act there was a power to take advice and incorporate into award. Now (s.37) the Arbitrator must tell the parties of the content of advice received and invite comment by the parties.

Power to award costs: Prior to 1996 Act the power to award costs was discretionary. Now, costs must follow the event unless inappropriate in the circumstances, on any basis which the Arbitrator thinks fit but must be a reasonable amount, reasonably incurred.

Interest: Prior to 1996 Act only simple interest could be awarded. Now compound interest can be awarded if the Arbitrator wishes.

Appeals: Court should not intervene except as provided under the Act and only after the arbitration process is exhausted.

Subpoenas: Need leave of the arbitrator

We have to alter totally as a result of the Act.

At any time during the arbitration, the parties can agree cahnges in procedure and can override the arbitrator. It is therefore important to have a preliminary tripartite agreement for the parties not to agree anything further without the arbitrator’s agreement. When should such agreement be made?

(a) In the original arbitration agreement. Possible but has disadvantages - not knowing the dispute, agreement cannot be tailored to the dispute.

(b) Parties to agree before appointment of the Arbitrator.

Can the parties agree to overcome powers given under the Act?

Check list:

(a) define dispute

(b) what is basis of award (law, equity,etc)

(d) remuneration of arbitrator (judges now charge £1,800 per day)

(e) costs (limits for arbitration and parties)

(f) procedure (documents only, oral, etc)

(g) limits on arbitrator’s powers

The parties should agree not to make subsequent variations.

Is the arbitrator under any duty to advise the parties on what they should and should not do?

Questions and clarifications

• Note that, during Bernstein Lecture 1, Saville LJ noted that, if the parties representatives wanted to go one way and the arbitrator wanted to go another, it would be appropriate for the arbitrator to contact the parties direct.

• S.12 of the 1950 Act appeared to give the arbitrator inquisitorial powers. The county court rules spell out in detail the powers of the judges and should give inquisitorial powers. Is s.34 significantly different from the county court rules and may the courts therefore not read the 1996 Act as giving inquisitorial powers.

ROD Court procedures are all based on an adversarial system. S.34(g) gives possible powers to the tribunal to take the initiative. Arbitration in the county court is not really different but has some procedural differences.

• Under s.37, may a’grey area’ develop - obtaining advice from an ‘unappointed’ adviser.

ROD It is probable that even ‘friendly’ advice counts as an appointment and should be disclosed

• Could ‘appointment’ be dependent upon advice for a fee. If the parties pay a fee then should obtainthe advice

ROD I would look on it as obtaining evidence which is not before the parties.

• Regret leaving the court with discretion on whether to enforce the award - if we don’t have a binding award then we may as well pack up now. Emphasis in the Act is placed on the parties but this in practice is the advisers and you have to get round them. It is going to be impossible to work this Act unless you have rules before you start, in writing.

• Would like to hear about security for costs. The county court is taking on more business and apparently they do not deal with security for costs.

ROD Illustrates a problem with the Act, the Arbitrator has the power but there is no direction on use of discretion and no power by the court.

• Is the apprehension expressed earlier still applicable if rules are incorporated into the contract

• This seems to be akin to an issue of sovereignty - can the parties contract out of any powers they have been given by the Act