Branch Meeting 11 February 1997
President’s Forum -
The Arbitration Act and the judiciaries view thereon
Lord Mustill
No doubt there are problems with the Act but there are problems inherent in arbitration which are now revealed by the Act.
It was recognised by ministers that something must be done about English Arbitration, particularly as we did not want UNCITRAL. Also, you could not find out about arbitration by referring to the Act.
It could not be done internally and there was therefore a marriage between public and private sectors. The first draft (by Arthur Marriott) was not written by Parliamentary draftsmen but was in plain language and followed the Model Law. This draft got a universal thumbs down and the Act was near to being abandoned. It was accepted that parliamentary drafting was necessary to get Government time and resulted in four rounds of consultation before the first public view of the Act. Then Saville LJ got hold of the project with good parliamentary draftsmen and government support and it is this small group which led to the Act. It was a happy coincidence that the Act was slowed as it now coincided with worldwide discontent about arbitration in general and with litigation, leading to Lord Woolf’s report, which came out within 6 weeks of the Act and went into cost effectiveness of resolving disputes.
There was dissatisfaction with the two ways of resolving disputes - by adversarial process which had fallen into the hands of the lawyers and was falling into a culture of delay. This produced an interesting contrast between litigation and arbitration. Woolf’s solution was to take matters out of the hands of the parties and into the hands of the Court, making sure that lawyers (speaking for the parties) do not control procedures. The Arbitration Act has done the opposite and has taken the dispute out of the hands of the tribunal and into the hands of the parties. This is not new - arbitration always was a consensual process and the courts had always backed party autonomy. What the Act does is to make this explicit and move in the opposite direction to Woolf.
I think the Act is a masterpiece of drafting and insofar as it contains contradictions this is because there are conflicts in arbitration which cannot fully live together.
The presentation is exactly as the committee had wanted - it reflects the Model Form and the Act has its own logic from start to finish and it is written in easy English. It may not all seem relevant to English practitioners but it will be attractive to foreigners.
Section 1 is a message to the arbitration community which recurs throughout the Act and is addressed to all involved and expresses the spirit in which arbitration is to be carried out.
The Arbitration Act is also unique in that it covers all aspects where the Model Law did not as it was not possible to get agreement. Perhaps it is too long but I don’t see how this could be avoided.
Section 33(1) sets out the duties of the tribunal and section 40 requires that the parties do all things necessary for the proper and expeditious conduct of the proceedings. This reverses Bremer Vulcan and restores the contractual nature of arbitration. This is an incursion by the state into the private world of Arbitration. Previously all the state has done is to give effect to the agreement between the parties. Sections 33 and 40 now say ‘do it this way’ a move into the field of public law, reinforced by the new statutory immunity of arbitrators.
Usually, if you breach a statutory duty the answer lies in damages but the arbitrator is immune. There is no immunity for a party who is too slow - could they be sued in damages for breach of section 40?
Sections 33 and 40 are signals that the state expects them to get on with it - it is in the public interest that there are effective arbitration procedures and this is the way in which these procedures are to be carried out.
Arbitrators have been regarded as weak kneed. They then blame the courts as they are liable to be put aside or remitted. The message is now that the Arbitrator has the support of the state.
It is crucial that, in the first year or two of life of the Act, everyone takes the opportunity to use the Act, otherwise it will sink.
The Act also puts emphasis on judicial minimalism - there is a very attenuated right of jurisdiction - only really following an irregularity which causes substantial injustice.
Problem: If you emphasise party autonomy, how can the Arbitrator enforce rights in the light of judicial minimalism. Courts will have to identify a serious deviation from agreed procedures - if they don’t intervene then they will weaken the Arbitrator.
There are three main points which arise from the Act:
Questions and clarifications
• Will there be problems of enforceability when the award is obtained e.g. by inquisitorial means?
LM: The fact that procedures were not followed has never been a ground for refusing enforcement - there may be grounds for a remittal if there was procedural injustice. Arbitration has always had problems if one party will not play ball and there has always been a need for support from the courts but they could not back anything which was contrary to law. Now the courts may not take a point of law and will have to enforce awards.
• Do similar comments apply to ‘equitable’ awards?
LM: I am opposed to the ‘amiable compositeur’ (can’t fully understand it) - the only appeal may be on gross procedural irregularity. No party should agree to it!
• Will parties who have agreed to an equitable award be able to complain if the award is made on strict law?
LM: Nobody yet knows the answer
• Looking at forms of arbitration in Italy - one gives the possibility of the arbitrator introducing additional clauses into the contract.
LM: Business people want to know where they are. You can’t work on the basis that the arbitrator may decide e.g. change of dates. Business men need to predict the outcome. Many theorists have been concerned with how to resolve long running disputes and there is a case to allow the arbitrator to make adjustments to keep progress.
• Does Lord Mustill think that there will be a flood of litigation. Had their lordships decided that problems would be resolved by litigation rather in the public bills committee.
LM: There is bound to be litigation - it’s a balancing exercise and you can’t get the balance in the Act. The public bills committee was inappropriate for this particular Act. There had been 5 rounds of consultation, anything that anyone had to say must have been gone into fully. The public bills committee takes evidence and would therefore repeat earlier processes and we would have lost the parliamentary slot. The committee stage was therefore taken back onto the floor of the House, it was felt that enough was enough.
• It seems that we may not be able to refer only to the Act - still need to refer to law reports.
LM: You can’t get away from Law Reports - you have to find out what the Act means. There has been a Practice Direction to the Commercial Court. It appears that all arbitration litigation will be taken by the Commercial Court and it appears that there will be some sort of database recording all judicial decisions of arbitration. Particularly in the early days I will be pleased to see matters in the hands of one court.
• Will case law under the old Acts go away as the language is now so different?
LM: Case law will go on applying for years, in any case for on-running arbitrations. The old case will not go away altogether. For new provisions the old cases will not do much good but there is quite a lot which will go on and judges will refer to old cases to help with the new. Remember that the main heading is ‘An Act to restate and improve the law relating to arbitration pursuant to an arbitration agreement; to make other provision relating to arbitration and arbitration awards; and for connected purposes’ not a codification and not an entirely new concept. Re-statement to me means that the law continues.
• Under the old Act, the arbitrator would go along with the consensus of the parties. Under the new Act it needs a bold arbitrator to go against the parties. Is s.40 an angle for saying that the parties cannot contract out and the Arbitrator does not have to accept it if the parties are in conflict with s.40.
LM: It will help the Arbitrator in telling the parties that they are in breach of s.40. In the last resort the Arbitrator has to bite the bullet or go. There is a weakness in the Act - how does he go? There is no provision for retirement and this would be repudiation but the only sanction by the Arbitrator is resignation. It’s very important for the courts to get it right and support Arbitrators.
• Parties representatives seem to accept extensions to programme as a matter of course so programme always drifts.
LM: The Arbitrator should insist that there will be no automatic acceptance of agreement by the parties to an extension.
• Are we talking ourselves into problems for example for security for costs if it is so infrequent in litigation.
LM: Security for costs is largely a non-problem except in respect of overseas parties
• On the question of enforcing awards. The Act gives the parties the power to have the award decided on any basis. If one party then asks the courts to enforce, the court has a discretion. Are the courts likely to jibe at enforcing awards which are not made in accordance with law.
LM: Discretionary enforcement is only for summary enforcement. Under the new Act it will be difficult even to put together an affidavit which would give the court a reason for hearing objections. Judges should always enforce awards - that’s arbitration.