Antony Woodhouse: Welcome to the next in our webinar series - European and International Arbitration 101. Let me just introduce the speakers today. I am Antony Woodhouse, I am a lawyer in the commercial litigation group here at Wragge Lawrence Graham and I am joined by Tom Price, also a lawyer in the commercial litigation group here at Wragge Lawrence Graham. We are both experienced practitioners in international arbitration which is why we are giving this talk to you today.
A few words about the system we are using. In front of you, you will see the slides that we are going to go through and talk to as we go through the presentation. There is a box for asking questions. Please do ask questions as we go through and we will try to pick them up as we go through, if we can and it is relevant, but we can pick them up at the end if we have time.
Before we do anything else and before I make any introduction about the presentation itself, we are about to set up four polling questions for you.
We are going to ask you about your experience of US arbitration and a yes/no answer, your experience of a UK arbitration, a yes/no answer, the prime reason for which you might pick arbitration over court procedure with a drop down list of some answers and asking you whether or not you have had any enforcement issues in relation to an arbitration award. Hopefully if we get those answers in the next minute or so as I am doing the introduction, we can then pick up the results of that through the presentation.
So the topics to be covered today - essentially there are seven topics. They are the seven bullet points you can see on the slide there. They are really split out into four sections and we are going to split them between us. The first section deals with the upfront problems. When you are dealing with your contractual documentation with the parties you are dealing with, what are the questions you should be asking yourself. First of all, do I want arbitration or do I want court procedure for any dispute resolution procedure I stipulate in the contract? And, secondly, on the basis you have chosen arbitration, how do I draft the clause? The third and fourth bullet points relate to what happens when you actually have a dispute, what happens when a dispute has arisen under your contract, how do you deal with it? Tom will deal with points three and four and then he will come back to me to deal with points five and six, which are the court's support for the arbitration and how you challenge any award. Finally Tom is going to deal with the important point of enforcement right at the end before we deal with questions.
So let's just start on the arbitration agreement. What is an arbitration agreement? and I thought it was worth looking at this, this is the English law on it, in Section 6 of the Arbitration Act 1996. An agreement to submit to arbitration present or future disputes, whether they are contractual or not. There are two quick points to make there. The words "present" or "future". If you have got in your contract an arbitration clause you are agreeing to submit future disputes to arbitration, but it is perfectly possible to have a contract, no arbitration clause, you fall out and you are sitting on the other side of the table with the opposition party, having a dispute in front of you, you could there and then negotiate and agree to arbitrate rather than submit to court. So it can cover present as well as future disputes, but also it can cover, and this is important, contractual disputes or non-contractual disputes. By that I mean disputes that revolve around the contract, but aren't strictly contractual causes of action or remedies. So you might have tortious questions about duties in tort, duties of care that have been breached that revolve around the contract, but nevertheless can be arbitrated.
Let us look at some of the facts to consider when you are making a decision upfront about whether to have arbitration as your dispute resolution mechanism or the court and these really are just some of the factors. They probably are the most important (hopefully) but they are just some of the ones that people have in their minds. The first two are the most important I think. Confidentiality - at least in the UK arbitrations are impliedly confidential. You don't have to say that they are going to be confidential, they are. In the US they are also generally confidential, but I think you can blow that confidentiality through some of the court procedures for enforcement. In any event, generally, arbitration is confidential and I think that is true of all major arbitration venues around the world, it is one of the primary selling points of arbitration. Secondly, enforcement. Tom will deal with this later, but it is generally easier to enforce an arbitration award than it is to take a court judgment and try to enforce it overseas. So those two are major selling points for arbitration.
The third and fourth bullet point on this slides are neutrality and a choice of tribunal and expertise. I mentioned neutrality. There are a couple of ways that this comes out. You might think that a court is neutral, it is not going to care how it awards or makes judgment between parties, but that is not always true and some parties, sophisticated commercial parties, have different views. I do a lot of international arbitration with insurance companies and there are carriers around the world, insurance carriers, who do not want to be in front of the courts that are local to the policy holders they are dealing with. They think they won't get a neutral fair hearing.
Talking about neutrality within an arbitration. It is worth making the distinction between the UK generally and certain arbitrations in the US. In the UK, we will come on to this, the arbitrators are obliged to be independent and impartial. In the US there are some arbitral procedures whereby the arbitrators, or at least those appointed by the parties, are not. They in fact act as advocates for the parties that have appointed them in the arbitration so you end up with a panel of three, but you have got two party advocates and in essence one final judge.
The third bullet point of neutrality sort of interplays with the fourth here, the choice of tribunal and expertise. Some people think that you will get a more neutral panel, and certainly a panel that you can have a bit more influence and control over, in arbitration. You can stipulate that the panel should have certain expertise. If you have a panel of three you will certainly get active choice over the first one or the second one as your party appointed arbitrator and I mentioned qualification requirements. You can have those in an arbitration clause such that you get a tribunal which you may think is more suited to the type of dispute that you are going to have or are likely to have. If you are in a particular industry, for instance oil and gas, that has a lot of sort of very technical issues. You need to be in the industry for a long time to understand the dynamics of contractual relations, perhaps in the aerospace industry or the construction industry or something like that. You might well think about arbitration as a place and putting in (I will talk about how you might put it into your clause in a minute) having a qualification requirement for tailoring your tribunal.
The second block of factors to consider - flexibility of procedure. In general terms in arbitration procedure is entirely up for grabs. We will deal in a minute with institutional rules - Tom will talk you through those - and they may stipulate certain procedures. You might have background statutes that stipulate certain procedures, but in the end everything is up for agreement between the parties or to be ordered by the tribunal. In terms of evidence, if you pick a local court or you think you are going to end up in a particular local court you will have to deal with the evidence in accordance with the procedures adopted in that court whereas in arbitration it is much more flexible. If for instance you are American and you like depositions as a way of collating evidence prior to the hearing, you could have an arbitration in England or France, or indeed anywhere you want, and stipulate that the evidence gathering is done by way of deposition.
Costs and speed. These are always factors that were mentioned and bandied around when arbitration first came to the fore, saying arbitration could be much speedier and much less costly. That is certainly true, it certainly has the flexibility to be both, but in large international arbitrations between big commercial entities there is the scope for costs actually to be more than the court's alternative. If nothing else you have got a panel of arbitrators, eminent arbitrators, you will be having to pay for rather than your own court procedure.
Multi-party issues. These may be a factor. If I mention insurance again, quite often you have got a broker and quite often the dispute will be between the insurer and the insured, but the broker really ought to be in the final hearing. Because arbitration is essentially a private agreement between two or more parties you cannot usually bring in a third party or a fourth party or a fifth party into that arbitration. You certainly can't do it without everyone's consent and although some of the arbitration rules, Tom will talk about some of them later, for instance the LCIA, have introduced clauses that specifically allow for third parties to come into arbitrations, none of the rules yet allow someone to be forced into an arbitration between two parties who are only there because of an agreement between them.
Summary determination. You can get strike out, summary judgment and preliminary issues in court. I think it would be very difficult to get strike out and summary judgment type orders in arbitration. The court is much more amenable to doing that sort of thing. Most courts around the world are overworked, want to reduce their docket or their list of cases and are very amenable to striking out things if they think there is no argument really to be had. The arbitration procedure is a much different beast, with different dynamics. You don't usually get those sort of orders. Preliminary issues, though, you can and do get arbitration tribunals to pick those up.
This is the final page of factors to consider when you are thinking about your dispute resolution clause. As I say these 13 that I am picking out today are not exhaustive but they should cover most of the factors that people talk about. Recalcitrant parties. If you think you are going to be dealing with someone who is going to not co-operate at all in a dispute and evade everything, take every point possible and every sort of technical way out, you probably don't want to be in arbitration. You won't get the benefit of things like default judgments, unless orders and contempt orders to the same extent as you would do in a court procedure - you really need to look to court for that. But if you are dealing with a party you might have an ongoing business relationship with them despite this dispute, it may be one of many things you are doing with them, you might fall out over this, you might fall out in a very big way, but equally you want to keep an ongoing relationship with them and you can work with them to a certain extent and they can see sense, then of course arbitration is probably much more the way forward.
The availability of an appeal. Most court procedures around the world allow you an appeal on a point of law. In arbitration in the UK you have as a basic fundamental point an appeal on a point of law. We will talk through that a bit later on. You can of course exclude it under English law. In the US generally there isn't such a right. There is a minimal right under the Federal Arbitration Act I think to challenge an award. We will talk a little bit more about that later, but certainly if you want to exclude an appeal, you are much safer being in arbitration.
And finally the precedential value of any award that you get. This flows from the confidentiality of the award. If you have for instance, if you are a commercial entity that has lots of trading partners, and you roll out a sort of standard form contract with each of those trading partners and for some reason it all goes wrong, you end up in arguments in relation to each of those contracts, with each of those customers, if you arbitrate with them all, you might win hands down against the biggest one, you might pick the biggest one first, arbitrate that, win hands down, but you can't use that, you can't go and take that to the other customers and say, or parties, and say look you have got no hope of running this argument. There is no precedential value to the arbitration award. You might show it to them in breach of the confidentiality clause, but of course it is not going to be relevant in your arbitration with them.
Just a few quick points on drafting the clause. What are the minimum requirements for drafting an arbitration clause? Well under English law, at least, it can be a very minimal clause. Again in insurance in a slip policy, which is basically a short form contract, you could have something as simple as saying arbitration in England and that will be taken to be arbitrating all disputes between the parties in England with the seat of arbitration as England. In general commercial contracts you would have a slightly longer clause, but at its very basic it would say the parties agree that all disputes between them will be dealt with by arbitration with the seat of the arbitration in blank, England or wherever you want to have it. That is the basic minimum requirement. Everything else is prescription that you may or may not want to put in.
What is the breadth of that clause, what would it cover? Well in English law again, at least, there was a House of Lords decision back in 2007 that made it abundantly clear, and in fact swept away a whole load of sometimes conflicting authorities, made it abundantly clear that the English commercial court is very pro-arbitration, any clause will be read very broadly, it does not really matter what sort of words you use, "arising out of", "arising under", "relating to", they are going to read that clause widely unless you make it absolutely clear that you want to take a particular cause of action or a particular thing out of your arbitration agreement.
What else can you stipulate in the clause? The number of arbitrators, that is a clear one. Normally speaking you would have an odd number, one or three, you don't want to go any bigger than that or it can be expensive. Sometimes the institutional rules that you may or may not refer to might have an impact on the number of arbitrators.
The method of appointment. If you are going for a single arbitrator, you will need to stipulate a method of appointment. That might be going, for instance, to an institutional body that will appoint it, going to the English commercial court, who might appoint it. If you have got a panel of three you will want a procedure for somehow the other two to appoint a third or a back-up procedure if there is a failure to appoint.
Again you can have qualification requirements for the tribunal. You have to be slightly careful about these. The insurance industry tried to do this in England by saying that you had to be ten years' qualified in the industry and by doing that they discounted all lawyers. Now that may be a good thing, you might say, but generally speaking someone in the panel most people want to have some sort of legal qualifications so that they keep the thing running in a sort of legal and logical way so you have to be slightly careful about the qualification requirements you stick into your clause.
And then finally you have the question of how prescriptive do you want to be on procedure? I have seen arbitration clauses that are very long and set out pretty much every stage, but they don't need to be, as I say the minimal requirement is simply that you agree to arbitrate and pick a country to do it in, or a seat to do it in, but it really depends on whether you can foresee what type of dispute it is going to be and whether you can see some advantage in being prescriptive about the procedure that will help you most in that arbitration.
And then the last few points on drafting the clause. The seat of the arbitration. This is in fact, although I have put it on the second slide, the most important part of the clause. This is what will dictate the supervisory court and the procedural law of the arbitration in the absence of anything else. Section 2 of the Arbitration Act over here 1996 stipulates that if the seat of the arbitration is in England, Wales or Northern Ireland, the Arbitration Act would apply to it and this seat should be contrasted with venue. Venue is just simply where you run the arbitration, where is convenient for everyone to turn up, where is there a suitable hotel, where is there a suitable arbitration room. This could be anywhere. You could seat the arbitration in England or Paris or somewhere like that and decide to go off to the Seychelles to do the arbitration. So the venue in a sense is totally irrelevant and that should just be something that the parties agree or the tribunal dictates nearer the time so that it is convenient with the particular witnesses, the particular experts, the particular counsel, that sort of thing.
There is a quick mention here for institutional rules but this will be picked up by Tom. If you are going to adopt institutional rules, they should certainly be in the clause that you are drafting. The ad-hoc point is also picked up because the ad-hoc in a sense is that where the institutional rules have not been chosen but Tom will explain that in greater detail and the final point here is the relevance of local court procedure.
You might pick the seat of the arbitration to be in England because you think that that will mean if nothing else you will get some English court style procedure in your arbitration. Well don't think that. It really is much more driven by the tribunal. The venue of the arbitration, where you actually hold it is totally irrelevant. The seat of the arbitration, there is an argument that somehow carries some weight in terms of what procedure should apply, but in the end unless the institutional rules make it clear, it is up to the tribunal.
It is worth mentioning here, not to complicate things too much, but you decide to have an arbitration clause, you have got to the end of the drafting of your commercial contract, right at the end your lawyer says well we need to think about jurisdiction and choice of law. If you are going to make a positive choice of law and a positive choice of jurisdiction, there is an interplay between them and if you decide to make the choice of law a law that is different to the law of the jurisdiction you are going to argue your dispute in, you should do that with your eyes open because there may be problems ahead and I say that because there are a lot of laws that revolve around a contract and a contract that has an arbitration agreement. Partly because the arbitration agreement itself is a separable contract so that there are in a sense two contracts and each of those contracts might have different laws revolving around it for different purposes and there is a few of them on the slide there. You might say why does this all matter?
It matters because of these sort of issues. I have come across all of these in international arbitrations where the choice of law has been separate from the jurisdiction where they decide to have a dispute. Waiver, estoppel and privilege. Dealing with the first two. Waiver and estoppel are very, very common arguments made in contractual disputes. So and so has waived the right to rely upon that clause. So and so is estopped from denying something or whatever. They sound interchangeable and they are largely pleaded interchangeably by US lawyers and UK lawyers alike, but they are quite different and waiver, at least under English law, is a question of a substantive right and it is question of the substantive law of the contract as to whether or not you have waived a right under that contract. In contrast an estoppel is a procedural issue, at least under English law. So the procedural law of a contract is the one that will dictate whether or not you are estopped from relying on something. So although you might plead waiver and estoppel or you might have pled against you waiver and estoppel interchangeably in the example where you split the law, for instance having New York applicable law but an arbitration or a court procedure in England, you are going to end up with different laws applying to those concepts, and also privilege. Privilege is the law that protects your lawyers' documents from being shown to the other side. If you have a dispute where, for instance, for the sake of argument you have a client in one country, they instruct a lawyer in another country or another state in the US, you then choose a different country as your applicable law and you decide to go and arbitrate in a fourth country. You have got potentially four different laws there that may or may not dictate whether or not those documents should be produced in that arbitration and I don't necessarily think there is one right answer. In the arbitration where I dealt with, I defended the non-production of the privileged documents on the basis of each of four different laws simply to just get around it and avoid the argument, but these are the sort of issues you get if you are trying to be cute with jurisdiction and choice of law.
Now let's turn over to Tom to deal with what happens when you actually have an active dispute.
Tom Price: Thanks Antony. Antony has dealt very fully and extensively with what you should be thinking about before your dispute arises, indeed way before that even, when you are drafting the relevant contract and what should go into the relevant clause.
I am turning now to the point in time where the disputes have arisen and whether you are the claimant or the respondent in the particular dispute, the first thing that you need to understand is the legal structure of the arbitration that you are going to be embarking on and that breaks down into essentially two parts.
The first is; are you dealing with an institutional arbitration and, if so, what institution or is it an ad-hoc arbitration? Antony has touched on this earlier, I just want to, without repeating what he has said, expand slightly on that. An institutional arbitration is one where the parties have chosen an arbitral institution such as the International Chamber of Commerce, the ICC, or the LCIA, there are a number of other ones listed on the slide, the SCC, Stockholm Chamber of Commerce, or the Vienna International Arbitration Centre to give the key European arbitration centres and then Singapore and China are also mentioned there. So if you have an institutional arbitration it is because you have chosen an institution which will do two things.
The first thing it will do is administer the arbitration, not run it - that is obviously for the tribunal, but it will deal with the administrative matters.
The second thing it does is it will have a set of rules and it is by those rules that the arbitration will proceed. Now Antony said quite rightly that in arbitration much is down to the tribunal and the parties to agree their procedure and that is ultimately the case although they need to do so in the context of the relevant institutional rules so the institutional rules are the starting point and they broadly set out what is going to happen and then they do indeed leave some matters for discussion between the parties and agreement.
For example, in relation to disclosure of documents which is not actually set out in any institutional rules about how that is dealt with, that is a point of detail for the tribunal.
So that is the second thing that an institutional arbitration will deal with.
I also should note that there are specialist bodies and rules and if you are in a particular industry, for example the insurance industry which has its own arbitral rules or in relation to for example the LMA, the London Maritime Association, or GAFTA in relation to grain disputes, then it is sensible to put in your contract a reference to arbitration by reference to that trade body's rules and that they indeed will run the arbitration and that makes sense for all sorts of reasons around expertise and efficiency.
Institutional arbitrations are to be distinguished from an ad-hoc arbitration which is an arbitration where the parties have agreed to arbitrate but they have simply decided, usually by intention, but sometimes by omission, that they do not want it to be run by an institution, they will run it themselves and that is what is meant by an ad-hoc arbitration.
There is a hybrid situation which is that you could have an ad-hoc arbitration so no institution running it but there is a set of rules by which you could at least run the arbitration and the most common rules that are used in that situation are the UNCITRAL Rules. That is a sort of hybrid where you have an ad hoc arbitration but you do use a set of rules. A true ad hoc arbitration is where the parties run the arbitration themselves and they do so making the rules up as they go along.
What is the respective advantage or disadvantage of ad-hoc against institutional? It is a question of a trade-off between expense and hassle either paying more for having an institution run it as you inevitably do but you also then have the hassle of having to run the arbitration removed, or run the process yourself but there is much more scope for disputes between the parties over matters or procedure.
The second area of the framework that you need to understand that you are getting into at the outset is the supervisory jurisdiction of the arbitration that you have got and Antony touched on this. That is going to be determined by the seat of the arbitration and as Antony rightly said the seat is probably the single most, perhaps the second most, important thing to include in your clause after actually referring the dispute to arbitration but the clause should say what is the seat of the arbitration, it is the legal home and it is determined by the parties choosing it in the arbitration agreement. If they don't choose it, it will be determined by the tribunal if necessary.
One of the consequences of the seat, is it determines the relevant over-arching legislation that will apply to the arbitration and what is very important to get across here, as Antony touched on, is that this legislation is not legislation that deals with matters of procedure, it is more around the way the court of that particular jurisdiction can interfere, if that is the way you want to look at it, or to supervise the arbitration so, for example, if a party decides that it wants to challenge something that is going on or believes that an arbitrator is not impartial but won't remove himself, applications can be made to the court and so on and so forth. The extent to which parties can do that, and the court to which they go, is determined by that supervising jurisdiction.
Turning now, once we understand the structure of the arbitration that we are dealing with, to some of the matters of procedure, you will be delighted to know that I am not going to take you through every step of the arbitration, time does not permit and probably not necessary. I am going to touch on two or three important areas.
The first is the Request for Arbitration - the first step in the arbitral process in which the claimant kicks the arbitration off. The document contains certain prescribed information; details of the claim and the parties and so on and so forth. It is a relatively short document and is generally supplemented subsequently with a fuller detailed claim. It is an important document because it stops the limitation clock ticking so if that is an issue it needs the Request for Arbitration, the date that that is served is the important point to keep in mind.
The other thing that is worth noting about the Request for Arbitration in the sense that it kicks the arbitration off is one of the reasons why arbitration might be distinguished from court proceedings and I think is sometimes overlooked which is that in court proceedings, as people will I am sure appreciate, there are detailed rules about getting proceedings served on parties outside the jurisdiction of that court and indeed, certainly as far as the English court is concerned, those rules are very strict and the service provisions to ensure that they come to the attention of the defendant are likewise strict and indeed certainly service of legal proceedings into other countries can take many months if not years to serve. Not so with arbitration. A Request for Arbitration will be validly served usually by simply sending it by email to the respondent, it having been sent there by the institution - another reason why an institutional arbitration is important and perhaps advantageous and that can cut out an immense amount of hassle and time.
Finally the Request for Arbitration requires the payment of a fee which is usually modest - several thousand pounds or dollars but it is a flag for me to tell you a little bit more about costs in a moment and how they operate in arbitration.
The next step is the constituting of the tribunal and this probably is one of the most important aspects of the process in the sense of at least distinguishing it from the court process because this is where the parties really do have the ability in certain circumstances to influence the make-up of the tribunal and that breaks down into a number of factors.
The first point is a point that Antony talked about which is the number of arbitrators - it hopefully goes without saying that you should have an odd number and indeed it is very difficult to think of circumstances in which you might want to have more than three but the question that comes up a great deal is should you have one or three. I do appreciate this is venturing a bit back into the territory of what do you decide when you have your clause because of course I am talking about the point when you have already got the dispute and got the agreement in front of you but broadly speaking it is again a little bit of a trade-off between expense - of course it is more expensive having three and it is going to take longer to deal with the arbitration.
The difficulty of having one arbitrator is that certainly as far as the LCIA and ICC rules are concerned those rules preclude rights of appeal that would otherwise exist to the English Court and so if you have one arbitrator and an ICC or LCIA arbitration you do run the risk of a rogue decision by an arbitrator who has simply got it wrong and no right of recourse which could be ameliorated by three members where at the least the other two might spot the error.
There is also of course the opportunity for parties to make provisions about having people who are expert in their field as those arbitrators.
What is the position, what is the process in relation to constituting the tribunal? Well this is not the right forum to go through the almost infinite number of permutations that exist as to how all of this works in practice because the position is that how you appoint the tribunal is the result of a combination of what you agree in your arbitration clause and what the relevant rules say and the institutional rules basically pick up on dealing with the situation if the parties don't agree in their clause, so one way of dealing with this is to set out in minute detail in the clause how the panel should be appointed. The other way is to say nothing and to entirely rely on the institutional rules.
Usually what people do is a bit of a mixture and if you are going to have one arbitrator and that is what the parties agree on you need to, as Antony said, make sure that you have set out a provision to decide who is going to appoint that arbitrator. If it is three then usually both parties are given the opportunity to nominate somebody and then with an institution that institution formally appoints the arbitrators and then those two appoint the third or sometimes the institution appoints the third arbitrator.
What happens if you do not say anything about this and you don't say anything about the number of arbitrators? The answer is that both the LCIA and the ICC, if that is the institution that you have referred to, will give you one arbitrator unless they think there were very good reasons to the contrary.
Appointing the tribunal takes longer than you might think and in my experience takes between 3 to 4 months, it can be done more quickly but from start to finish that can be a likely time period. Parties may require, the Claimant may require, something to be done rather more quickly than that on a substantive basis they may be wanting some sort of emergency relief in the form of maybe something to preserve evidence or a freezing injunction although query whether those are more appropriate to be granted by the court and Antony will deal with that but in any event there are a number of situations where a party does want to get things moving more quickly and can now do so under what are known as the emergency arbitrator provisions which are appearing in an ever increasing number of rules in particular the LCIA and the ICC rules and what these rules allow is that in certain circumstances where the claimant makes out the case the relevant institution will appoint an arbitrator within say three or four days and that arbitrator will then hear whatever the emergency application is and deal with that appropriately and then make the relevant order or award and then the parties can move on to constitute their full tribunal in the normal way so the emergency arbitration route is an important one and it is gathering momentum.
The flip side to the parties having the ability to influence their make-up of their tribunal is that the question of conflict of interest that the respective arbitrators might have becomes an issue for the parties which of course in court proceedings is pretty rare - for a Judge at the outset or for the parties to suggest that a Judge has a conflict of interest. Of course it is not unheard of and indeed applications can be made to recuse Judges but in arbitration the risk is much greater because of the appointments being made at the behest of the clients.
How is this dealt with? It is largely dealt with, certainly in Europe and I believe in the United States, by the IBA Guidelines on Conflicts of Interest in International Arbitration. The IBA developed these guidelines ten years ago and revisited them last year on their 10th anniversary and have refined them. They set out a series of general principles on conflicts and then most helpfully a series of non-exhaustive examples broken down into categories of seriousness of potential conflicts and this is a useful guide for not just challenging arbitrators but making decisions about whether indeed your particular choice of arbitrator should indeed be put forward at all. The general principles include pretty obvious points that the arbitrator should be impartial and independent or should decline an appointment if he doubts his ability to be independent. It states that if facts exist suggesting a doubt as to his independence the arbitrator shall disclose that fact and parties must object to it within 30 days unless is relates to a matter in the non-waivable red list which I will come to in just a second, so you can see that this is all about the arbitrators making disclosures about their own fears, if you like, of potential conflicts which of course raises the interesting question; does that generate spurious challenges by the other party as to the opponent's choice of arbitrator.
As I said, the guidelines set out these various categories and I am just going to take you through these very quickly - it breaks the categories down into three; the red list which itself is broken down into non-waivable and waivable examples or features so a non-waivable conflict is one where it is obviously so serious that the arbitrator when he is being put forward and who thinks he is in this category, it is not a question of disclosure, he must simply decline to act. Examples are, you might say, rather obvious; if he is a legal representative of the party, he is a director of the party, he has a significant interest in the outcome of the dispute or regularly advises the parties or one of the parties. Perhaps more realistic, the waivable red list contains serious cases about doubts as to the arbitrator's impartiality but less serious than ones I have just mentioned and here they can be waived, so the other side can say "that is fine I am happy for the arbitrator to go forward" and examples of that would be that the arbitrator has advised or opined to one of the parties on this dispute or holds shares in one of the parties. There are other ones that you can see there on the slide.
Next, the orange list; again serious matters in that these may give rise to doubt about impartiality but here the point is that the arbitrator must disclose those so he puts the ball in play by saying "look, within the last three years, I have acted as counsel for one of the parties" or "I have been appointed as an arbitrator by one of the parties on at least two occasions". It then allows the other side to make a challenge if they want to (the onus is on the challenging party in distinction to the waivable red list). You will also see the example there where the arbitrator is in the same firm as another tribunal member - you might not think that that necessarily gives rise to a conflict but it is there in the orange list.
Finally the green list - no appearance of actual conflict, no appearance of or actual conflict means no duty to disclose.
So that's the position on conflicts of interest.Very briefly there are opportunities for a party to challenge an arbitrator that has been put forward if there were doubts as to his impartiality and other reasons as well for example violations of the arbitration agreement or that the arbitrator is not conducting the matter with due efficiency or diligence. Usually applications to challenge are made to the tribunal and often the member will step down him or herself but if they do not, then an application to the court, and that would be the supervising court, would be necessary. You see there that is the reference to the court, the converse of that is that sometimes a trip to the court is necessary to appoint an arbitrator if indeed the rules or the clause don't provide.
Very quickly on costs, costs are, as Antony said, sometimes cited as a reason that arbitration is more attractive than court proceedings although that is sometimes not the case in arbitration and obviously you have to pay for your tribunal and institution. The ways of charging vary, the ICC charges an ad valorem rate, the LCIA's costs are based on time and each party usually has to pay half of the costs that are levied by the institution at the outset. An issue that comes along quite frequently is that the respondent when faced with a bill for the advance on costs which arises at a very early stage in the proceedings, it is at the point that the tribunal is constituted, may decide not to pay his share knowing that the arbitration will then come to a halt, misguided because the claimant will be asked to substitute his payment which the claimant will generally do to keep the arbitration alive. The claimant will then seek an award from the respondent for that payment and indeed the respondent has then probably alienated itself from the tribunal. The parties cannot agree that the costs should be borne by either one of the parties in advance of the dispute arising.
I am going to take this extremely quickly just dealing with tribunal powers. Antony is going to deal with court powers. What powers does the tribunal have? Certainly these powers as far as English seated arbitrations are concerned have their genesis in the English Arbitration Act so the powers are broadly set out there and then effectively replicated and expanded in the relevant rules and I am just going to take three quick examples; some that are unique to common law countries others not.
Security for costs is unique to common law countries I believe, this is where a claimant must provide security for the costs that it will have to pay to the respondent if it loses and the power exists as given by Section 38 of the Arbitration Act that the tribunal can order a claimant to pay that money by way of a bank guarantee so that the respondent is protected and that is on the basis that the claimant has effectively no money - that would be the ground that the respondent must make out.
Secondly injunctions, this is a question that is asked many times which is what powers do the tribunal have to grant injunctions? The answer is they have the same powers that the court has but the question is one of practically - would you want to go to the tribunal for a freezing injunction for example which you may find difficult to enforce because its an arbitration order - you would probably be better going to the supervising court. Antony will deal in more detail.
Finally, third party evidence - no power given to the tribunal to order documents from or get evidence from third parties.
Now back to Antony for some information about court support.
Antony Woodhouse: Thank you Tom.
Lets deal with this quite quickly. So you have got the court sitting behind the arbitration and in pro-arbitration centres it is supporting an arbitration. In the UK that is the English Commercial Court. The court can do many different things to try to support and assist the process of the arbitration either during or after the award. During the award or while the arbitration is in process it can extend time for the commencement of the arbitration if there some time dictated in the arbitration agreement. It can appoint arbitrators as Tom has itemised either if there is a default of an appointment or as part of a prescribed procedure.
Again the letter to the Head of Commercial Court gets you an answer and an appointed arbitrator. It can remove arbitrators particularly for impartiality as Tom has been talking about. It can enforce the orders, interlocutory orders, of the tribunal and it can compel witnesses and it does compellability of witnesses in the same way as it would its own court cases so if a witness is in England and Wales and you have got an arbitration in England the commercial court can, if you ask them, compel a witness to attend your arbitration. If that witness is not in England and Wales you have to go through a bit more of a procedure, it is not about compellability, but more about how you take their evidence and there is a procedure that many jurisdictions use, letters rogatory, where the court will issue letters to another court asking it to take evidence from particular witnesses and that is fully available in arbitration in England and indeed elsewhere.
The court will also if asked make orders to help you in your arbitration process in terms of evidence so preservation of evidence and bringing documents to the arbitration. It will make orders preserving assets, freezing orders, it can make orders relating to property, search and seizure orders, and it can make determinations of preliminary points of law. In essence it can do anything that it would do for its own court procedure if the arbitration needs it or if the arbitration has somehow failed. So it really is there to make sure that arbitration is a sensible and useful procedure for commercial parties.
The other thing that the court does assist in is what happens when you have got an award and you don't like it. There are three ways under English law to challenge an award. The first and most obvious one is the appeal on a point of law and as I have already talked about that is not true of the US for instance, or at least there is a more limited right of appeal in the US. Under English Law normally speaking there is a right of appeal under Section 69 of the Arbitration Act, but it can be excluded and there is a point here to be made about reasoned awards. In England most arbitrators are fully conversant and used to coming up with an award and giving reasons for it. Obviously if they are a lawyer they come up with a very long verbose one, but arbitrators generally come up with a reasoned award in the UK. In the US they don't. In my experience they typically don't want to or aren't expecting to and if you do want a reasoned award you have to ask for it specifically and probably make sure that you ask for that when you clear with the arbitrator whether he wants to be appointed or not. In the UK if you don't ask for a reasoned award and make it clear you don't want a reasoned award you are thereby necessarily excluding your right to appeal. You cannot have an appeal from an unreasoned award in England.
Whether or not you have excluded the right to appeal is a matter for construction and context and I just put up one example case here because it might be slightly surprising. In that commercial court case six years ago the parties used the words in their arbitration agreement "the award shall be final, conclusive and binding as between the parties". Well that was not sufficient to exclude the right to appeal and it is an interesting case well worth reading. Essentially "final" meant there was no further step in this particular proceeding, "conclusive" meant you are not going to get the answer anywhere else and it is conclusive as to that answer we are giving and "binding" meant you better go off and do it, but that did not mean that there wasn't the right of appeal under the Arbitration Act.
You might question the desirability of an appeal given the cost of that and the uncertainty. It depends on whether or not you want finality. It depends in part as Tom has highlighted the make-up of your panel and there are some people out there who think having an appeal, whether or not you want to exercise it in the end, does keep your panel more honest. I don't mean honest in terms of dishonesty and honesty but intellectually honest in terms of the reasons for the award that they come up with.
The second way that you can challenge an award is a challenge to the jurisdiction of the tribunal. I am not going to dwell on this very long. This is something you cannot exclude unlike the appeal on a point of law, under Section 67 it is mandatory. It is quite limited, you will see some of the restrictions on it, but you cannot exclude it. What you can do is try to make it absolutely clear in your arbitration agreement what the jurisdiction of the tribunal is going to be so you avoid this challenge.
The final one again is a mandatory provision of the Arbitration Act. If you site your arbitration in England, Wales or Northern Ireland you cannot avoid this. You can challenge an award for serious irregularity, again its restrictive in the sense of when you might be able to bring it and how you might lose the right. The irregularity that you are complaining of must be one which has caused or will cause substantial injustice so there is quite a high hurdle. It can be something like the award has been obtained by fraud, that sort of thing, and the court can do whatever it likes with the award if it finds that there has been an irregularity. Now I will just pass you back to Tom to talk about enforcement.
Tom Price: Thank you Anthony. Enforcement is often cited as certainly in the top two of the reasons for having an arbitration as opposed to court proceedings and not withstanding the fact that it is that important I can deal with that in a very short period of time which is lucky since that is all we have.
By way of contrast, enforcing a court judgment from any country into another country is always subject to whatever conventions there may be between those two respective countries and so around Europe, English court judgments can actually be enforced very easily because of the EU Judgment Regulation, recast five days ago, to make it even easier in that now you don't even have to take a step in the receiving country, you can simply enforce an English judgment in, say, France, immediately. Outside Europe and outside the commonwealth it is more difficult to enforce an English judgment and indeed you will need to take it and start a new enforcement action elsewhere or indeed you may not even be able to enforce it at all.
Contrast that to arbitration which is different because under the New York Convention 1958 for the Enforcement of International Arbitration Awards; nearly 160 countries are parties to that Convention which provides that an award rendered in a convention state may be enforced in another convention state subject to only very limited challenges and can be enforced by transferring it into a local judgment.
I have just put on the slide perhaps the four most important ones (there are several others but they are all very limited) and even these in the end practically speaking turn out to be limited so for example that the arbitration agreement is invalid ie in some way one of the parties perhaps didn't have authority or in some way, may be there was a problem in relation to the formation of the contract. Secondly the award deals with matters outside the agreement. This is important and this goes to Antony's point of the extent of the agreement - does it for example include non-contractual claims, is it in fact a contractual claim that you have got an award on but is not one that perhaps relates to this agreement for example.
May be the award is not yet binding for some reason not necessarily because it is subject to appeal as usually that will still make it binding but perhaps it is subject to some application for being set aside as a result perhaps of serious misconduct.
Or finally the enforcement is contrary to public policy and as always with public policies that is an extremely narrow ground, one that is easy to say but difficult to actually make out.
There is as far English Law is concerned remarkably little law on the New York Convention which actually is probably testament to the fact that it is a very workable Convention, it is very clear and it is pretty obvious whether an award is going to be enforceable or not and I suspect that is the reason why there is relatively little case law on it.
That brings us to the end of our session on arbitration.
Antony Woodhouse: OK. We did talk about having questions at the end and I think we have got time to deal with a couple of them. One of you have asked what determines the extent of disclosure in arbitration. Disclosure is the production of documents, Tom why don't you deal with that one.
Tom Price: Thanks Antony, very quickly and it was a point eluded to. Something like procedure and something as detailed as that you have to sort of go down the various levels so it is not going to be determined by the supervisory jurisdiction in fact even something like disclosure is not probably going to even be dealt with in the institutional rules, it will be a matter for agreement between the parties and partly it can be a matter of how the tribunal itself feels about disclosure.
A very common way of dealing with disclosure I have to say in international arbitration are the IBA Rules on the Taking of Evidence in International Arbitration which are now pretty uniformly used certainly in arbitrations based in England and I won't go into those but they are again a set of rules that the parties choose so it is ultimately I would say a matter for agreement between the parties as affected by the make-up of the tribunal and if you end up with a tribunal with three civil lawyers on it from France you will have very limited disclosure, if you have three lawyers from England or possibly the US, you will have broader disclosure.
I am going to ask you one now - somebody else has asked, what you do about injunctions, this is when you are drafting your clause, what do you do if you know that you might want to run off to the court if you have an arbitration clause? Are you stopping yourself going to court?
Antony Woodhouse: Right that is a bit of a tough one because it sort of depends on what you are envisaging. If there is a particular relief that you think you are going to need and you are drafting your clause and you are picking your seat of arbitration and your institutional rules. If you have done your research and you see that that supervisory court will or is likely to give you the injunctive relief you need and you can take that where you want to take it, then you probably don't need to say anything else. But if you in fact you see something a bit more complicated and a bit more sophisticated directed precisely to your dispute, then of course it is entirely up to you to stick it in your clause. I think that is probably the best way I can answer that.
I think it is worth just picking up very briefly the polling questions. The large majority of you, probably not surprisingly given that most of you are based in the US, have had some experience of arbitration in the US and we really haven't tried to teach anything about that today. Then again most of you, in fact almost all of you, have not had experience of the UK so hopefully we have dealt with some interesting points.
You do say, a lot of you anyway, that speed and costs are the reason you choose arbitration and I hope we haven't put you off by some of the comments that we have made today. It can and should be flexible. It can be speedy, it can be cost effective. It certainly should be, but it isn't always. Finally, most of you indeed have not had to enforce an award. You may be in that happy position, but at least if you do ever have to do it Tom has helped you and assuaged any problems and concerns that you might have had about that.
Finally just to say we are going to circulate after this a recording of this event. It will appear as a link on the website. Please do ask us questions if you have them, we really don't mind answering by email a quick question or give us a ring, it really doesn't matter. When we have finished with you there will be a quick feedback form. We would love you to fill that in, it will help us improve these series of webinars and on that note when you fill that form in, there is a webinar coming up in about a month's time in this series about European Patent Litigation Strategy. If that is your bag or if it is any of your colleagues' bag, please sign up to that - it's a similar time of day in a month's time, 26 February, and that will be given by one of our German colleagues, Michael Schneider, and one of our other colleagues in London, Alexandra Brodie.
Thank you very much.