Journal Article

ARBITRATION

The International Journal of Arbitration, Mediation and Dispute Management Volume 83 Issue 2 May 2017

ISSN: 0003–7877 Editorial Board Dr Michael O’Reilly Editor Professor Derek Roebuck Editor Emeritus Senior Research Fellow, Institute of Advanced Legal Studies, University of London Dr Gordon Blanke, Book Review Editor Partner, DWF (Middle East) LLP (International Commercial and Investment Arbitration), DIFC, Dubai, UAE Dominique Brown-Berset Attorney-at-Law, Partner, Brown and Page, Geneva Hew R. Dundas Chartered Arbitrator Arthur Harverd Chartered Accountant and Chartered Arbitrator, London Julio César Betancourt Academic Visitor, University of Oxford and University of Salamanca Dr Colin Y.C. Ong QC Barrister; Dr Colin Ong Legal Services, Brunei and Associate Member, Stone Chambers, London This volume should be cited as (2017) 83 Arbitration. The International Journal of Arbitration, Mediation and Dispute Management is published by Thomson Reuters (Professional) UK Limited, trading as Sweet & Maxwell. Registered in England & Wales, Company No.1679046. Registered Office and address for service: 5 Canada Square, Canary Wharf, London, E14 5AQ. For further information on our products and services, visit: http://www.sweetandmaxwell.co.uk. Computerset by Sweet & Maxwell. Printed and bound in Great Britain by Hobbs the Printers Ltd, Totton, Hampshire. No natural forests were destroyed to make this product; only farmed timber was used and replanted. Copies of articles from The International Journal of Arbitration, Mediation and Dispute Management, and other articles, cases and related materials, can be obtained from DocDel at Sweet & Maxwell’s Yorkshire office. Current rates are: £7.50 + copyright charge + VAT per item for orders by post, DX and email. Fax delivery is guaranteed within 15 minutes of request and is charged at an additional £1.25 per page (£2.35 per page outside the UK). For full details, and how to order, please contact DocDel on Tel: 01422 888 019. Fax: 01422 888 001. Email: [email protected]. Go to: http://www.sweetandmaxwell.co.uk/our-businesses/docdel.aspx. Please note that all other enquiries should be directed to Customer Support (Email: [email protected]; Tel: 0345 600 9355). Orders by email to: [email protected]. Thomson Reuters and the Thomson Reuters Logo are trademarks of Thomson Reuters. Sweet & Maxwell® is a registered trademark of Thomson Reuters (Professional) UK Limited. European Union material in this publication is acknowledged as © European Union, 1998–2017. Only EU legislation published in the electronic version of the Official Journal of the European Union is deemed authentic. Crown copyright material is reproduced with the permission of the Controller of HMSO and the Queen’s Printer for Scotland. All rights reserved. No part of this publication may be reproduced, or transmitted in any form, or by any means, or stored in any retrieval system of any nature, without prior written permission, except for permitted fair dealing under the Copyright, Designs and Patents Act 1988, or in accordance with the terms of a licence issued by the Copyright Licensing Agency in respect of photocopying and/or reprographic reproduction. Application for permission for other use of copyright material, including permission to reproduce extracts in other published works, shall be made to the publishers. Full acknowledgement of the author, publisher and source must be given. Published in association with Sweet & Maxwell. © 2017 Chartered Institute of Arbitrators Table of Contents

Editorial Editorial Michael O’Reilly 131 Articles Apologies, Apology Legislation and Civil Disputes: The Practical Implications of Apology Legislation for Dispute Resolution Practitioners and their Clients Andrew Agapiou and Sai On Cheung 133 Current Focus on Family Mediation in the UK: How Relevant? Sahana Pal 141 Public Policy and Indian Arbitration: Can the Judiciary and the Legislature Rein in the “Unruly Horse”? Jahnavi Sindhu 147 Recent Developments of (International) Commercial Arbitration in the UAE (Part II) Gordon Blanke 164 Presentations Keynote Address of the Chartered Institute of Arbitrators (Malaysia Branch) Inaugural Presidential Lecture, Kuala Lumpur, 25 November 2016 Sundaresh Menon 185 The Alexander Lecture, London, 16 November 2016 Bernardo M. Cremades 203 Keynote Speech at the Chartered Institute of Arbitrators DAS Convention 2 December 2016 Peter Goldsmith 212 Presentation given at the University of West London, 8 March 2016 Julio César Betancourt 219 Cases The Enforcement of Adjudicators’ Awards under the Housing Grants, Construction and Regeneration Act 1996: Part 62 Kenneth T. Salmon 228 Conflicts of Interest in Expert Determination Hew R. Dundas 238 Book Reviews Gordon Blanke 249 Gordon Blanke 250 Elina Zlatanska 251 Contributors

ANDREW AGAPIOU: Department of Architecture, Strathclyde University, Glasgow, Scotland

JULIO CÉSAR BETANCOURT: Academic Visitor, University of Oxford and University of Salamanca

GORDON BLANKE: Partner, DWF (Middle East) LLP (International Commercial and Investment Arbitration), DIFC, Dubai, UAE

SAI ON CHEUNG: Department of Architecture and Civil Engineering, City University of Hong Kong, Hong Kong

BERNARDO M. CREMADES: PhD, FCIArb, is founding partner of B. Cremades y Asociados, Madrid

HEW R. DUNDAS: Chartered Arbitrator; DipICArb; CEDR-Accredited Mediator; International Arbitrator, Mediator and Expert Determiner

LORD PETER GOLDSMITH QC, PC: London Co-Managing Partner and Chair of European and Asian Litigation, Debevoise & Plimpton LLP

SUNDARESH MENON: Chief Justice, Singapore

SAHANA PAL: LLM, Queen Mary University of London

KENNETH T. SALMON: MCIArb, Solicitor, CIArb Accredited Mediator

JAHNAVI SINDHU: BA, LLB (Hons), National Law School of India University, Bangalore, Law Clerk, Supreme Court of India

ELINA ZLATANSKA: FCIArb, CIArb Visiting Research Fellow Editorial

This Editorial comprises two parts: first, an introduction to the contents of the issue and, secondly, an announcement, concerning the future of the Journal.

Introduction to the Contents In the articles section of this issue of Arbitration we begin with a paper by Andrew Agapiou and Sai On Cheung dealing with an area of dispute management which is less well known than it should be: apologies, related legislation and the relevance for civil disputes. Sahana Pal considers aspects of family mediation in the UK, asking, somewhat controversially, whether the current focus on mediation is really helping couples to separate peacefully or is just an extension of the judicial process. Jahnavi Sindhu addresses the question of public policy in the context of arbitration in India. And Dr Gordon Blanke continues his investigation into developments in respect of international commercial arbitration in the UAE. In our presentations section, we lead with the keynote address by Sundaresh Menon, the outgoing Patron of the Chartered Institute, to the Malaysia Branch’s Inaugural Presidential Lecture in November 2016; this addresses the important topic of the role of the party-appointed arbitrator. We present the Alexander Lecture delivered in November 2016 by Bernardo M. Cremades on the subject of “due process” in international arbitration, followed by Lord Peter Goldsmith’s keynote speech to the Chartered Institute of Arbitrators’ DSAS Convention in December 2016. And finally, we include Julio César Betancourt’s presentation to the University of West London in March 2016 on the subject of ADR and access to justice. In the cases section Kenneth Salmon presents his continuing review of enforcement of construction adjudication under the UK legislation, which, as always, raises themes of wider international interest. Hew Dundas deals with a rare case on the topic of conflicts of interest in expert determination. We include also a number a book reviews. As always, we are grateful to all authors and reviewers and greatly appreciate the time they spend ensuring that the Journal continues to be a key reference in this field.

The Future of the Journal The Journal has for a century reflected the best in arbitration practice. For about three decades the editorial direction has been led by just three Editors—Alan Shilston, Derek Roebuck and myself. While this stability has been beneficial in many ways, the Chartered Institute is now emerging as the leading inclusive professional body for dispute resolution worldwide and it is appropriate that a new approach is adopted. From 2018 there will be a reconstituted Editorial Board. We shall be asking for nominations shortly, but the intention is that members will be leading practitioners, scholars and thought leaders in the field. This will ensure that the standing and credibility of the Journal will be unquestioned. In line with my personal plans—I have been Editor for eight years in two different periods—I will step down from what is a demanding role following the November issue 2017 and the new Board will assume control. Although I will serve on the Editorial Board to provide continuity, the editorial work will be carried out by the Board through the Secretariat. Greater clarity will be introduced between invited contributions and refereed articles and for the latter a new and more transparent system of refereeing will be introduced. In the August issue of the Journal we shall also set out proposals for our list of referees, so

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators 131 132 Arbitration that those who are of the appropriate calibre and agree to take on this role can be properly acknowledged. In the August 2017 issue we will include details of submission arrangements and will also be promoting this to the wider intellectual and academic community and effectively inviting high-quality innovative or review contributions. I hope that you will agree that the time has come to move into the next phase of development for the Journal, which will seal the Chartered Institute’s reputation and standing.

Michael O’Reilly Editor

Apologies, Apology Legislation and Civil Disputes: The Practical Implications of Apology Legislation for Dispute Resolution Practitioners and their Clients

Andrew Agapiou

Sai On Cheung

1. Introduction An apology is arguably the most effective way for a defendant, or other alleged violator of an accepted legal standard, duty or obligation, to demonstrate their assumed responsibility for a wrong committed.1 Whether an apology is heartfelt, or more calculated and pro forma, there is little question that when an apology is delivered, its maker has assumed at least moral responsibility for the act or omission in question.2 Societies tend to respect individuals who “own up” to their faults, admit mistakes, take responsibility for their conduct and offer an appropriate apology to any affected innocent persons.3 Radzik and Murphy explain that apologising is the most likely explicit means through which human errors of any kind are acknowledged; “well-formed” apologies implicitly acknowledge wrongdoing, responsibility and an expression of regret or remorse.4 However, as the following critical discussions tend to confirm, apologies can also create a legal liability minefield for Dispute Resolution (DR) practitioners and their clients alike. Made too early in a legal dispute, i.e. before all relevant facts have been ascertained, an apology may encourage a claimant to exploit an apology to its legal advantage.5 Withheld for fear that an apology might increase ultimate liability exposure, a potential defendant or arbitration respondent may inadvertently reduce the prospects of securing an early and more satisfactory DR outcome.6 Drawing on various high-level international sources, the reported research and related discussion points developed below focus on the development of apology legislation across different jurisdictions. The key proposition advanced is that to encourage individual responsibility fairly, whilst ensuring that the receiving party does not improperly exploit a morally correct position, clear legislation governing how an apology may be treated for DR and related civil litigation purposes is an essential DR system requirement.7

1 M. Nardo and R. Francis, “Morality and the prevention of corruption: action or intent—a new look at an old problem” (2012) 19(2) J.F.C. 128, 131. 2 E. Cole, “Apology, Forgiveness, and Moral Repair” (2008) 22(4) Ethics & International Affairs 1, 4. 3 L. Radzik and C. Murphy, “Reconciliation” in E. Zalta (ed.), The Stanford Encyclopedia of Philosophy (Summer 2015 Edition), https://plato.stanford.edu/archives/sum2015/entries/reconciliation/ [Accessed 19 March 2017]. 4 Radzik and Murphy, “Reconciliation” in E. Zalta (ed.), The Stanford Encyclopedia of Philosophy (Summer 2015 Edition), [3.1], https://plato.stanford.edu/archives/sum2015/entries/reconciliation/ [Accessed 19 March 2017]. 5 P. Vines, “Apologising to Avoid Liability: Cynical Civility or Practical Morality?” (2005) 27(3) Sydney Law Review 483, 485. 6 R. Carroll, “When ‘Sorry’ is the Hardest Word to Say, How Might Apology Legislation Assist?” (2014) 44(2) Hong Kong Law Journal 491, 499. 7 A position collectively inspired by a number of sources; see e.g. V. Corbett, “Why It’s Better to Be Sorry than Safe: The Case for Apology Protection Legislation” (2013) 36 Dublin University Law Journal 127, 130–134.

Three common law civil jurisdictions are given particular attention in this discussion: (i) the UK, with attention directed to apology approaches in both Scotland and England and Wales; (ii) British Columbia (BC), Canada; and (iii) Massachusetts, US. These civil justice systems’ shared legal heritage assists in giving the comparative discussions appropriate focus, particularly with respect to how apology legislation has influenced tort law evolution within each jurisdiction.8

2. Apologies: Key Benefits The key benefits most often attributable to an apology forming part of a larger DR strategy have various dimensions. It is acknowledged that “strategy”, as used here with its calculating and dispassionate DR-driven connotations, and the warmer human associations often associated with “apology”, may seem antithetical on initial consideration.9 Fiske reinforces this impression with her stark advice that in any business DR setting, a reputation “blow” requires “a clear, strategic message, explaining two things: (1) what went wrong, and (2) what you are doing to rectify the situation”.10 From a combined moral-legal DR perspective, an apology will often contribute to better relations between parties estranged by a wrongful act or a prolonged course of conduct. An apology is akin to an act of contrition, where the offending party acknowledges that a precipitating event was morally wrong.11 Goldberg et al. observe that “… the first lesson of DR many of us learn as children is the importance of apologising”.12 In conflict or tort claim circumstances, such as insulting, demeaning or other anti-social behaviour causing emotional upset to the offended person, an apology will often signal a potential new beginning in the parties’ relationship.13 From an admission of wrongful behaviour, the parties may be able to establish a foundation from which they can move forward; alternatively, if the relationship cannot be restored to its former strength, then an apology is an effective clean break. Each person can move forward with a better sense that the problem giving rise to the apology is no longer problematic.14 These moral attributes create an effective bridge to more fully appreciating the legal issues generated by apology concepts and related apology legislation. Vines observes that apologies play a dual social and legal role,15 noting that the collective psychological, sociological, philosophical and anthropological literature illustrates that apologies can often satisfy a “healing and re-balancing function for both victim and relationship, and often for an offender as well”.16 Interpersonal DR procedures confirm the central position apologies occupy within all modern mediation mechanisms.17 Criminal law apologies have long occupied a primary place in the “re-integrative shaming” processes widely accepted as essential to criminal

8 P. Vines, “The protected apology as the modern response to the moral question at the heart of Donoghue v Stevenson: what if Stevenson had apologised? (Case Comment)” (2013) 3 Jur. Rev. 438, 497–498. 9 R. Fiske, “Smart Apologies Should Be Strategic” (2011) Harvard Business Review, https://hbr.org/2011/10 /admitting-a-mistake-isnt-enoug [Accessed 30 March 2017]. 10 Fiske, “Smart Apologies Should Be Strategic” (2011) Harvard Business Review, https://hbr.org/2011/10/admitting -a-mistake-isnt-enoug [Accessed 30 March 2017]. 11 C. Myers, “Knowing When It’s Legally Safe to Say ‘I’m Sorry’: The Legal Effects of Mortification Strategy” (2015) Institute for Public Relations, http://www.instituteforpr.org/knowing-legally-safe-say-im-sorry-legal-effects -mortification-strategy/ [Accessed 19 March 2017]. 12 S. Goldberg et al., Dispute Resolution: Negotiation, Mediation and Other Processes, 6th edn (Alphen aan den Rijn: Aspen, 2012), p.12. 13 P. Lavens, “Negotiation and Apologies: The Role of an Apology, the Role of the Law and the Role of the Lawyer” (2013) Bond University, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2473234 [Accessed 19 March 2017], 9, 10. 14 Lavens, “Negotiation and Apologies: The Role of an Apology, the Role of the Law and the Role of the Lawyer” (2013) Bond University, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2473234 [Accessed 19 March 2017], 4–5, re apology outcomes. 15 P. Vines, “Apologies and civil liability in the UK: a view from elsewhere” (2008) 12(2) Edin. L.R. 200, 203. 16 Vines, “Apologies and civil liability in the UK: a view from elsewhere” (2008) 12(2) Edin. L.R. 200, 208. 17 J. Brown, “The Role of Apology in Negotiation” (2003–2004) 87 Marq L.R. 665, 668.

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators Apologies, Apology Legislation and Civil Disputes 135 rehabilitation.18 Similarly, defamation law has long given express recognition to apologies (and the failure to apologise) in determining an appropriate remedy.19 Distilled to their essential qualities, apologies are well-entrenched justice system elements, both in traditional litigation and in other DR settings. They reduce barriers to resolution, whilst encouraging emotional healing and relationship reconstruction in many cases.20 The more recent role assumed by apology legislation in DR procedures is now considered.

3. Apology Legislation: Aims, Scope and Operation The common law jurisdictions’ movement to embrace various forms of apology legislation has its roots in the much-debated and often hotly disputed late twentieth-century tort liability “crisis”.21 A combined force of insurance industry experts, policy-makers, and some academic commentators advanced the proposition that often-exorbitant tort liability claims were encouraging a “compensation culture”,22 where lawyers, tame expert witnesses and overly sympathetic judges were contributing to excessive civil liability awards.23 In turn, these were regarded as contributing to “out of control” insurance premiums, amongst other negative social and economic consequences.24 For many commentators apology concepts were crucial contributors to the growth of a “compensation culture”.25 This schematic succinctly summarises the linear relationship blamed by compensation culture theorists: (i) tortfeasors that apologise in a timely way for their “at fault” actions reduce the emotional tensions created by wrongful acts; but (ii) lawyers (and insurers) frequently advise these parties not to apologise, in order to protect against future liability claims; (iii) those claims likely to have been more readily settled if a timely apology had been made now have barriers, making efficient DR more difficult; and finally, (iv) the total, and partially preventable total DR costs (damages, legal, related expert witnesses, and systemic expense) correspondingly increase.26 Spencer describes how the claimed international compensation culture expansion was symbolised by “ambulance-chasing” US tort lawyers. This persuasive, if highly distorted, image of unethical, cynical civil justice system manipulation summarises a problem that appeared to demand legislative response.27 In contrast, the 2006 House of Commons Committee studying tort law trends concluded that “the evidence does not support the view that increased litigation has created a [UK] ‘compensation culture’”.28 Consequently, apology legislation must be considered with these conflicting views in mind. It is noted that, whilst the positive effects apologies often have in promoting settlement are widely accepted, a significant concern has been highlighted that “crafted” apologies do not generate the same benefits as ones provided without legal prompting. Taft describes apologies made in connection with legal proceedings as having their “fundamental moral character…dramatically, if not irrevocably, altered”.29 This is a powerful comment, as it

18 Vines, “Apologies and civil liability in the UK: a view from elsewhere” (2008) 12(2) Edin. L.R., 205. 19 Cooke and Midland Heart Ltd v MGN Ltd and Trinity Mirror Midlands Ltd [2014] EWHC 2831 (QB); [2015] 1 W.L.R. 895, [21], [22]. 20 Lavens, “Negotiation and Apologies: The Role of an Apology, the Role of the Law and the Role of the Lawyer” (2013) Bond University, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2473234 [Accessed 19 March 2017]. 21 See F. Furedi, Courting Mistrust: The Hidden Growth of a Culture of Litigation in Britain (Oxord: Oxford University Press, 1999); and J. Spigelman, “Negligence: the last outpost of the welfare state” (2002) ALJ 432. 22 J. Goudkamp, “The Young Report: An Australian perspective on the latest response to Britain’s ‘compensation culture’” (2012) 28(1) P.N. 4, 7. 23 J. Spencer, “An unethical personal injury sector” (2014) 4 J.P.I. 226. 24 J. Robbennolt, “Apologies and settlement levers” (2006) 3(2) J.E.L.S. 333, 335–338. 25 Z. Awaiz-Bilal, “The duty of candour and apologies as a legal remedy” (2015) 1 J.P.I. Law 7, 10. 26 Vines, “The protected apology as the modern response to the moral question at the heart of Donoghue v Stevenson: what if Stevenson had apologised? (Case Comment)” (2013) 3 Jur. Rev. 438, 488. 27 J. Spencer, “An unethical personal injury sector” (2014) 4 J.P.I. 226, 228. 28 House of Commons Constitutional Affairs Committee, Compensation Culture: Third Report of Session 2005–2006, Vol.1, HC 754-I (London: TSO, 2006), [13.1]. 29 L. Taft, “Apology subverted: the commodification of apology” (2000) 109 Yale L.J. 1135, 1136.

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators 136 Arbitration calls into question whether an apology delivered in the course of legal proceedings actually meets the definition set out above. If, as Taft describes this particular apology process, an apology is simply “commodified”,30 and is given to reduce the compensation payable to the innocent party, then there is merit in the proposition that such apologies are a triumph of form over substance. It becomes difficult to determine from some apologies drafted or heavily influenced by lawyers whether the party is actually apologising at all.31 The selected comparative legislative examples are now examined with these apology features, effects and limitations understood.

4. Comparative Jurisdiction Examples

Scotland The Apologies (Scotland) Act 2016 represents a concerted Scottish effort to encourage a “culture of apologising”.32 The Scottish government endorsed this Private Members’ Bill as legislation that will contribute to the pursuit of fair redress for wrongs, and greater victim closure.33 The 2016 Act succinctly defines the legal effect an apology must be given in any legal proceedings.34 As a general rule: (i) an apology made outside of the proceedings in any context is not admissible evidence with respect to determining liability; and (ii), the apology cannot be used “in any other way to the prejudice of the person by or on behalf of whom the apology was made”.35 The main civil proceedings excepted from the Act are public inquiries, children’s hearings, and defamation proceedings, thus giving the Act wide-ranging, but not retrospective effect.36 The Act also defines “apologies” in precise terms; these are any statements made by or on behalf of a person indicating that “the person is sorry about, or regrets, an act, omission or outcome”.37 Apologies also include any part of such statements containing an undertaking “to look at the circumstances” giving rise to the apology-triggering event, with a view to preventing its recurrence.38 From a literal meaning perspective, the Scottish approach appears to satisfy two important DR apology criteria, as the Act encourages apologies to be made without additional liability risk. As importantly, the s.3 definition ensures that a prospective defendant (“defender”)39 can remedy a dangerous circumstance without their remedial efforts being relied upon as an admission of liability.40 Its relative newness (the Act was given Royal Assent on 23 February 2016) means that the apology provisions have not yet been extensively considered in contested legal proceedings. However, Scots and international commentators have generally praised how the Act provides straightforward, unequivocal direction regarding apologies, and how their

30 Taft, “Apology subverted: the commodification of apology” (2000) 109 Yale L.J. 1135, 1136. 31 Sean Ryan J, “Child Commission” (13 February 2012) Irish Times, http://www.irishtimes.com/news/clerical -child-abuse-an-irish-timeline-1.880042 [Accessed 19 March 2017]. 32 Core Solutions, “Success for the Apologies (Scotland) Act 2016” (2016), http://www.core-solutions.com/blog /success-for-the-apologies-scotland-act-2016/ [Accessed 19 March 2017]. 33 Core Solutions, “Success for the Apologies (Scotland) Act 2016” (2016), http://www.core-solutions.com/blog /success-for-the-apologies-scotland-act-2016/ [Accessed 19 March 2017]. 34 Apologies (Scotland) Act 2016 s.1(a). 35 Apologies (Scotland) Act 2016, s.1(b). 36 Apologies (Scotland) Act 2016, s.2(1), s.4. 37 Apologies (Scotland) Act 2016, s.3. 38 Apologies (Scotland) Act 2016, s.3; L. Harrington, “Is it too late now to say sorry?—the Apologies (Scotland) Act 2016”, http://www.tltsolicitors.com/news-and-insights/insight/is-it-too-late-now-to-say-sorry---the-apologies -scotland-act-2016/ [Accessed 19 March 2017]. 39 The term employed in Scottish civil procedure. 40 Society of Solicitor Advocates, “Apologies (Scotland) Bill passed” (2016), http://www.solicitoradvocates.org /news_article/385.aspx [Accessed 19 March 2017].

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators Apologies, Apology Legislation and Civil Disputes 137 conversion into a tactical DR weapon is prohibited.41 Irvine, a practising mediator, suggests that care must be taken with respect to how the Act is applied in practice. He endorses apologies as powerful and positive when “delivered at the right moment and in the right manner”.42 Irvine, consistent with the commentaries cited above, recognises the practical and emotional impact a proper apology can deliver, consequently unlocking long-standing conflicts.43 Irvine’s qualification regarding apologies’ actual effect is applicable to each of the legislative examples cited here, and is echoed by other scholars. Apologies are ineffective, and potentially counter-productive to effective DR where they are only “partial”.44 The rejected apology will also potentially raise, and not reduce, DR barriers to settlement. Where the recipient does not accept a sincere and unreserved apology, the climate for further resolution is often substantially chilled.45 In this important sense the Act has a single-direction character. Section 1 of the apology provisions clearly set out the legal consequences flowing when an apology is made, but it is equally apparent that neither this Act (nor any legislation) can compel forgiveness, the apology’s mirror image.46

England and Wales The England and Wales Compensation Act 2006 provides an even more succinct treatment of an apology’s legal effect than the Scottish legislation described above. The Act states: “An apology, an offer of treatment or other redress, shall not of itself amount to an admission of negligence or breach of statutory duty.”47 The term “apology” is not defined, and this fact has attracted significant commentary suggesting that the Act encourages the various partial apology forms that are often regarded as damaging, and not conducive to DR success.48 Adopting the same literal meaning approach to the England and Wales provision as taken by the Scottish Act, one might readily conclude that the phrase “shall not in itself” constitutes a liability admission is ambiguous. For example, if an apology was made concurrently with a commitment to investigate the possible causes of an event leading to the other party’s injuries, s.2 might permit the commitment and apology to be given combined liability admission effect.49 The law in England and Wales has made other strides regarding apologies and their legal meaning that are more focused, and thus strongly contribute to DR effectiveness. A prominent example is the emerging “duty of candour” now promoted under the Care Act 2014.50 This Act imposes a specific duty on the Government to provide for a “duty of candour” applicable in any case where specified incidents (such as substandard healthcare quality) affecting a person’s safety occur in the course of the person being provided with a service.51 Awaiz-Bilal notes that the England and Wales duty objective is to ensure that

41 See D. Maxwell, “The Apologies (Scotland) Act 2016: an innovative opportunity in the twenty first century or an unnecessary development?” (2016) 2 J.P.I. Law 79; and C. Irvine, “The Proposed Apologies Act for Scotland: Good Intentions with Unforeseeable Consequences (Legislative Comment)” (2013) 17(1) Edin. L.R. 84, 90. 42 Irvine, “The Proposed Apologies Act for Scotland: Good Intentions with Unforeseeable Consequences (Legislative Comment)” (2013) 17(1) Edin. L.R. 84, 85. 43 Irvine, “The Proposed Apologies Act for Scotland: Good Intentions with Unforeseeable Consequences (Legislative Comment)” (2013) 17(1) Edin. L.R. 84, 85. 44 Irvine, “The Proposed Apologies Act for Scotland: Good Intentions with Unforeseeable Consequences (Legislative Comment)” (2013) 17(1) Edin. L.R. 84, 85; see also L.E. Jesson and P.B. Knapp, “My lawyer told me to say I’m sorry: lawyers, doctors and medical apologies” (2009) 35 William Mitchell Law Review 33, 36. 45 Irvine, “The Proposed Apologies Act for Scotland: Good Intentions with Unforeseeable Consequences (Legislative Comment)” (2013) 17(1) Edin. L.R. 84, 86; Maxwell, “The Apologies (Scotland) Act 2016: an innovative opportunity in the twenty first century or an unnecessary development?” (2016) 2 J.P.I. Law 79, 81, 82. 46 Irvine, “The Proposed Apologies Act for Scotland: Good Intentions with Unforeseeable Consequences (Legislative Comment)” (2013) 17(1) Edin. L.R. 84, 87. 47 Compensation Act 2006 s.2. 48 Lord Young, Common Sense, Common Safety (London: Cabinet Office, 2010)https://www.gov.uk/government /publications/common-sense-common-safety-a-report-by-lord-young-of-graffham [Accessed 19 March 2017]. 49 A point taken from J. Robins, “Saying sorry” (July 2008) Law Society Gazette, http://www.lawgazette.co.uk /analysis/saying-sorry/47101.fullarticle [Accessed 19 March 2017]. 50 Care Act 2014 s.81. 51 Care Act 2014 s.81.

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators 138 Arbitration health and social care providers are “open when things go wrong”, and an explanation is accordingly provided to the victim and any affected family members.52 A duty of candour does not necessarily have the same meaning as an apology, as “candour” may reasonably include the responsible party offering justifications for their actions that encourage resistance, resentment, or outright hostility in the recipient. On balance, the duty of candour and express language in s.2 of the Compensation Act 2006 suggest that in the England and Wales health and social care spheres, an apology culture appears to be taking root.

British Columbia The 2006 BC apology legislation has received international scholarly praise for its breadth, detail and generally comprehensive nature.53 The Act defines an apology as “an expression of sympathy or regret, a statement that one is sorry or any other words or actions indicating contrition or commiseration”.54 This definition expressly excludes any apologies from being later relied upon as a liability admission in any manner.55 Unlike the other apology enactments examined here, the BC provisions include the following additional features: (i) the apology does not constitute a confirmation of a cause of action in relation to the relevant matter for the purposes of the Limitation Act 2012 (BC); and (ii), notwithstanding any language to the contrary as included in an insurance contract, the apology made does not “void, impair or otherwise affect” any available insurance coverage that would, but for the apology, be available to the apologising person.56 The clear BC legislative language removes all legal ambiguity surrounding the apology process; consequently, it removes a major obstacle to the delivery of apologies.57 The BC definition thus strikes directly at the heart of the policy concerns expressed above, namely apologies as potentially undermining a later legal defence advanced by an insurer (most often in motor vehicle accident claims).58 It also strikes a useful balance between the respective parties’ rights in the event of subsequent litigation. By ensuring that an apology does not constitute confirmation of a cause of action for limitation period purposes, the apology is given an appropriate boundary. The innocent party must still comply with applicable limitation period rules, and such persons are precluded from saying, in the event of a missed limitation, “But the other side apologised!”59

Massachusetts This US state apology legislation is selected for this comparative discussion because it was the first (1986) apology enactment designed to deal with the growth of the “compensation culture”.60 The Massachusetts law provides that any: “[S]tatements, writings or benevolent gestures expressing sympathy or a general sense of benevolence relating to the pain, suffering or death of a person involved in an accident and made to such person or to the family of such person shall be inadmissible as evidence of an admission of liability in a civil action”(emphasis added).61

52 Z. Awaiz-Bilal, “The duty of candour and apologies as a legal remedy” (2015) 1 J.P.I. Law 7, 9. 53 Apology Act 2006 (BC). 54 Apology Act 2006 (BC) s.1. 55 Apology Act 2006 (BC) s.2. 56 Apology Act 2006 (BC) s.2. 57 Corbett, “Why It’s Better to Be Sorry than Safe: The Case for Apology Protection Legislation” (2013) 36 Dublin University Law Journal 127, 148. 58 Corbett, “Why It’s Better to Be Sorry than Safe: The Case for Apology Protection Legislation” (2013) 36 Dublin University Law Journal 127, 148. 59 See e.g. Vance v Cartwright, 2013 BCSC 2120, affirmed 2014 BCCA 362 (BCCA). 60 Vines, “Apologies and civil liability in the UK: a view from elsewhere” (2008) 12(2) Edin. L.R. 200, 201, 202. 61 Massachusetts General Laws (1986) Title II, Chapter 233, s.23D.

The emphasised words in the extract from this legislation attract specific attention within this discussion. Unlike the fulsome BC legislative effect outlined above, the Massachusetts version constitutes what Corbett describes as an unsatisfactory “halfway house” approach.62 This criticism is valid, as this law only excludes the defendant’s “expressions of sympathy” as inadmissible evidence. There is power in the contention that the partial apology protection of the Massachusetts law does not advance the objective of encouraging the greater use of apologies, and thus reducing DR barriers.63 This legislation carries the clear danger that through limiting apology protection to expressions of sympathy, a claimant will be angered and not placated where the potential defendant’s sympathy does not include an admission of wrongdoing.64 The Massachusetts law is also likely to make determining the boundary between expressing concern or sympathy and liability admissions very difficult.

Summary When the four selected examples of apology legislation are collectively evaluated, the BC provisions are better aligned with DR efficiency and effectiveness objectives, and its well-crafted apology definition, combined with express insurance contract and limitation period references, supports this conclusion. Conversely, the older Massachusetts law shows its age, and corresponding lesser apology legal effects than any of the other three examples. Laws such as this do not promote highly prized legal certainty and predictability, a point that contributes to apology’s practical DR implications.

5. Practical Implications for DR Practitioners and Clients When taken together, general apology principles, specific academic commentaries and the legislative examples confirm that significant practical implications inevitably flow when an apology is made. These are often highly positive, so long as the apology content and its delivery are sincere. The authorities confirm that a weak, partial or otherwise qualified apology may do more harm than good in a DR setting. This observation is linked to the earlier comments regarding DR strategy, the cold word that implies apologies offered during any DR proceeding (spanning negotiation, mediation, arbitration and litigation) may not be sincere. DR practitioners and clients must recognise that proper apologies have tremendous potential value from moral and legal perspectives. As the UK commentators particularly have noted, an apology “culture” is acceptance that making an apology in appropriate circumstances is simply the “right thing to do”.65 Tactical decision-making is unavoidable in any DR setting, and the parties are participating to achieve an outcome, either litigated or adjudicated or one resolved through settlement. The legislation, cases and commentaries discussed throughout this article strongly support the proposition that where DR practitioners and their clients are not fully alive to an apology’s importance in the overall DR process, their position risks being badly

62 Corbett, “Why It’s Better to Be Sorry than Safe: The Case for Apology Protection Legislation” (2013) 36 Dublin University Law Journal 127, 147. 63 Insurance Journal, “Mass. Embraces ‘Disclosure, Apology, Offer’ Approach for Med Mal Cases” (2014) Insurance Journal, http://www.insurancejournal.com/news/east/2012/08/07/258509.htm [Accessed 19 March 2017]. 64 Corbett, “Why It’s Better to Be Sorry than Safe: The Case for Apology Protection Legislation” (2013) 36 Dublin University Law Journal 127, 148. 65 Vines, “The protected apology as the modern response to the moral question at the heart of Donoghue v Stevenson: what if Stevenson had apologised? (Case Comment)” (2013) 3 Jur. Rev. 438, 499; Corbett, “Why It’s Better to Be Sorry than Safe: The Case for Apology Protection Legislation” (2013) 36 Dublin University Law Journal 127, 150; Irvine, “The Proposed Apologies Act for Scotland: Good Intentions with Unforeseeable Consequences (Legislative Comment)” (2013) 17(1) Edin. L.R. 84,190.

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators 140 Arbitration compromised. Alternatively, such inattention to how an apology can contribute to effective DR will possibly make the entire process more costly, stressful and ineffective.66

6. Future Research Directions The wealth of high-level academic research conducted to date with respect to apologies and related legislative initiatives in many international jurisdictions suggests the following likely future research directions will be taken. Scholars will continue to explore how apologies impact DR from both legal and sociological perspectives, as by their nature, apologies are proven to exert influence over both legal and non-legal aspects of many disputes. Further research will almost certainly examine important issues of cause and effect related to the timing and content of apologies, for example settlement rates observed in disputes as measures against when or if an apology was offered.

7. Conclusions The various discussion threads developed in this article support these vital conclusions, and the first is driven by the weight of the various authorities cited. Apologies are an important element, but how an apology affects DR progress and outcomes is largely dependent upon its quality, full, partial or qualified, and its apparent sincerity; the four examples of apology legislation confirm this proposition. The BC enactments are a comprehensive apology code, one that brings obvious clarity and certainty to circumstances where an apology is offered to an innocent party, while the Massachusetts example illustrates how ambiguous, opaque language that fails to accurately define both apologies and their actual legal effect may not contribute meaningfully to better DR outcomes. No matter how a particular jurisdiction defines an apology’s legal effect, there is a powerful practical obligation imposed on all DR stakeholders to carefully study the implications of apologies discussed above. Employed correctly, there is little doubt that an apology’s strengths with respect to contributing to DR effectiveness far outweigh the weaknesses. An apology, even one tendered because its maker seeks to gain a tactical advantage over an opposing party, is almost always preferred to not taking this step. It seems certain that an expanding “apology culture”, as explicitly encouraged by the Scottish legislation, will ultimately contribute to better DR outcomes. There is now seemingly universal recognition that, when provided appropriately, DR settlement barriers are reduced, and societal harmony is the biggest beneficiary.

66 Vines, “The protected apology as the modern response to the moral question at the heart of Donoghue v Stevenson: what if Stevenson had apologised? (Case Comment)” (2013) 3 Jur. Rev. 438, 500–501.

Sahana Pal

1. Introduction It has long been a source of debate whether the state should interfere in a person’s private life and to what extent. There has been a series of divorce laws in the UK, from the Matrimonial Causes Act 1857, to the Acts of 1923, 1937, and 1973 and lastly the Family Law Act 1996. In the attempts to formulate an ideal divorce law, the focus shifted from guilt and innocence to cause and effect, up to a point where, under s.10(1) of the Children and Families Act 2014, it has been mandatory, as from 22 April 2014, for a person to attend a Mediation Information Assessment Meeting (MIAM) before making a relevant family application, including that for divorce. Family mediation is a process in which an impartial third person, the mediator, assists couples considering separation or divorce to meet to deal with the arrangements which need to be made for the future.1 Now mediation is envisaged as an effective way to increase co-operation between the opposing parties and reduce the pressure on court systems;2 it is not “regarded as a poorer alternative to judicial proceedings”.3 All couples intending to divorce are required to attend a MIAM, which is conducted by a qualified mediator and which highlights mediation as the best possible approach to resolving family disputes. This brings us to the central point of this article—whether the current focus on mediation is really helping couples to separate peacefully or is just an extension of the judicial process. In order to evaluate this same, let us analyse the concept of family mediation in greater detail.

2. Mediation: Panacea or Utopia? If we focus on the underlying principle of an ideal divorce law as set out in the Family Law Act 1996,4 we see that the legislators have attempted to formulate something which will help to end an irretrievably broken-down marriage: • with minimum distress to the parties and to the children affected; • with questions dealt with in a manner designed to promote as good a continuing relationship between the parties and any children affected as is possible in the circumstances; and • without costs being unreasonably incurred in connection with the procedures to be followed in bringing the marriage to an end. Mediation, to many, is an answer to all of these matters and more. As Lord Gill rightly emphasised in his review of the civil justice system in Scotland, mediation could provide parties with more potential outcomes and more importantly, a

1 White Paper, Looking to the Future: Mediation and the Ground for Divorce (Lord Chancellor’s Department, 1995) Cm.27990, para.5.4. 2 T. Goriely et al., “More Civil Justice? The Impact of the Woolf Reforms on Pre-Action Behaviour” (2002) 43 Law Society and Civil Justice Council Research Paper, p.2. 3 Directive 2008/52 on mediation in civil and commercial matters of the European Parliament and of the Council of 21 May 2008 art.19. 4 Family Law Act 1996 Pt I s.1(c).

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators 141 142 Arbitration desired outcome.5 Some argue that this means the mediator is not absolutely impartial in his role6 and that the settlement procedure takes the mediator’s views into account more than those of the couple themselves. However, this argument was negated by the statistics of Professor Davis’s Family Mediation Pilot Project, where from a pool of 4,593 couples who opted for mediation as an alternative to litigation, 82 per cent felt that the mediator was impartial and 70 per cent found the process helpful.7 While the legal route to divorce is time consuming, rigid and irreversible, and is required to fall within a given set of “five facts”,8 mediation has none of these drawbacks, and some additional advantages that attempt “to buttress rather than to undermine the stability of marriage”9 with unwanted bitterness. Besides, in view of the fact that there is an increasing tendency to prefer Alternative Dispute Resolution (ADR) in almost all other areas of civil law, divorce law perhaps should be no exception. As for the time and cost factors, statistics show mediated family cases take an average of 110 days to complete, compared to 435 days for non-mediated litigated cases. Similarly, Legal Services Commission figures for private family law children and finance cases funded through Legal Aid show an average cost per client of £535 in mediated cases compared to £2,823 in court cases.10 In some cases, however, mediation may actually increase the cost and the time taken to resolve the matter, if the sessions are unproductive and the couples decide to proceed to court nevertheless. In relation to children, court-assisted divorce proceedings place the welfare of minor children at the forefront11and intervene accordingly, whereas in mediation the scenario could be detrimental to the children, as the settlement procedure is based entirely on the parents’ preferences. However, a child’s welfare is only the first, not the paramount, consideration12 and, as Mnookin13 asserts, court procedures could send inappropriate signals to parents, suggesting that they are no longer trusted with their children’s arrangements upon the breakdown of their marriage, whereas mediation provides couples with a sense of security. Many scholars feel that mediation’s flexibility, informality and consensual nature open up the full dimension of the problem facing the parties.14 It decreases the likelihood of a hostile outcome by de-escalating the conflict15 and helps the judiciary to achieve its “core aim … to support delivery of the best possible outcomes for children who come into contact with the family justice system, with a particular focus on reducing delay”.16 In short, it “represents private, co-operative decision-making by responsible equals concerned to promote the welfare of children and families”.17 Since there is no legal obligation to adhere to rules of evidence and the like, the parties may express their concerns in a more open manner and arrive at results that are much more closely tailored to their specific needs. In

5 Report of the Scottish Civil Courts Review, 2 Vols (Court of Session, 2009) (Gill Review) para.5.18. 6 F. Myers and F. Wasoff, “Meeting in the Middle: A Study of Solicitors’ and Mediators’ Divorce Practice” (2000) SLT (News) 259, 263–265. 7 G. Bevan and G. Davis, Monitoring Publicly Funded Family Mediation: Report to the Legal Services Commission (Legal Services Commission, 2000). 8 Matrimonial Causes Act 1973 (MCA) s.1(2)(a)–(e). 9 As suggested by the Law Commission, Facing the Future: A Discussion Paper on the Grounds for Divorce (HMSO, 1988), Law Com. No.170, HC Paper No.479. 10 Ministry of Justice, “New headquarters for Kent Family Mediation Service” (2011), https://www.gov.uk /government/news/new-headquarters-for-kent-family-mediation-service [Accessed 19 March 2017]. 11 Matrimonial Causes Act 1973 s.25(1). 12 Suter v Suter (1987) Fam 111, 123–4; [1987] 3 W.L.R. 9; [1987] 2 All E.R. 336. 13 R. Mnookin and L. Kornhauser, “Bargaining in the Shadow of the Law: The Case of Divorce” (1979) 88(5) Yale Law Journal 950–997. 14 A. Tidwell, A Conflict Resolved: A Critical Assessment of Conflict Resolution (London: Continuum, 1998), p.157. 15 D. Ellis and N. Stuckless, Mediating and Negotiating Marital Conflicts (Thousand Oaks CA: Sage, 1996), p.7. 16 Ministry of Justice, Family Justice Review: Final Report (London: Ministry of Justice, the Department for Education and the Welsh Government, 2011), p.7. 17 A. Diduck, Law’s Families (Cambridge: Cambridge University Press, 2003), p.103.

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators Current Focus on Family Mediation in the UK: How Relevant? 143 fact research18 has shown that the couples who can work through their broken relationship are more successful in mediating their differences and focusing on their children’s needs.19 The counter-arguments hold that mediation is a “dangerously idealised”20 process, which hinders the organic development of law and leads to coerced settlements, taking advantage of the vulnerability of the weaker spouse.21 Some believe an agreement to mediate falls foul of the law at the very outset, since effectively it is an “agreement to agree”—something considered unenforceable under the laws of contract and in view of the Court of Appeal decision in Courtney and Fairbairn Ltd v Tolaini Bros (Hotels) Ltd.22 The point that they seem to miss, however, is that mandatory mediation does not oblige the couples to continue with the exercise, or to unwillingly accept a discriminatory settlement. This author feels mediation is a process about which many are dubious, mostly because they are not fully aware of its procedure and potential. For example, as seen in the 1997 Pilot Scheme,23 out of the 4,500 people monitored, only 10 per cent went to mediation and, of those, only 37 per cent reached agreement. On the other hand, a commendable 73 per cent went to solicitors who, they felt, were a more legitimate and authoritative source of advice. Although 75 per cent of the people who did go on to mediation found the process helpful, considering that solicitors claimed a far higher satisfaction rating, mediation did not have a sufficiently positive outcome. Probably this also explains the modern trend of lawyer-assisted mediation, where both parents are accompanied by an attorney during the process of mediation, especially in cases where complex questions of custody or finance are involved, so that they can receive immediate personalised legal advice and representation without losing out on the informality and flexibility of mediation. By this amalgamation of mediation and legal advice, the couple feel they can assert their rights to self-determination and can make informed decisions about their children’s future, instead of surrendering themselves to vague and uncertain judicial notions like “best interests of the child”.

3. Current Focus Examined Family law has experienced a transformation over the past two decades in many Western countries such as UK, Canada, the US and Australia, and this has produced trends that sometimes appear to be at odds with one another.24 The current position of UK law on the issue of mandatory divorce mediation is not very clear,25 as attempts are still being made to harmonise the government measures, civil procedure rules and judicial pronouncements in a single direction. Even on a fundamental question as to whether the UK civil justice system accepts mandatory mediation at all, scholars such as Ahmed and Quek seem to agree to the proposition whereas Brunsdon-Tully

18 J. Walker et al. Picking up the Pieces: marriage and divorce two years after information provision (London: Department for Constitutional Affairs, 2004), p.323. 19 J. Walker, “A Brave New World for Family Mediation in England and Wales? Challenges and opportunities following the Norgrove Review”, paper presented to the 6th World Congress on Family Law and Children’s Rights, Sydney, 2013. 20 J. Brown and S. Day Sclater, “Divorce: A Psychodynamic Perspective”, in S. Day Sclater and C. Piper (eds), Undercurrents of Divorce (Aldershot: Ashgate, 1999), p.158. 21 J. Pearson and N. Thoennes, Divorce Mediation Research Results (New York: Guilford Press, 1998), pp.431–432. 22 Courtney and Fairbairn Ltd v Tolaini Bros (Hotels) Ltd [1975] 1 W.L.R. 297 (CA); [1975] 1 All E.R. 716. 23 Following the Family Law Act 1996, a series of information meeting pilot schemes was launched in June 1997. 24 S. Boyd, Review essay (2005) 1(2) International Journal of Law in Context 199–206. 25 J. Nolan-Haley, “Is Europe Headed Down the Primrose Path with Mandatory Mediation?” (2012) 37 N.C.J. Int’l L. & Com. Reg. 981, 1002–1003.

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators 144 Arbitration and del Ceno argue in the negative.26 In comparison, other European countries seem to have a more stable law, with well-defined boundaries.27 Spain was one of the pioneers in introducing mediation to resolve family disputes: by the end of the 1980s, there were family mediation services set up throughout the Basque Country and in cities like Madrid and Barcelona.28 In Norway family mediation is now mandatory where children under 16 are involved,29 and inspired by this example Denmark has followed suit.30 The Finnish Marriage Act 1929 devotes a full chapter to family mediation31 and specifically lays down that: “[d]isputes and legal matters arising in a family should primarily be settled in negotiations between the family members and decided by agreement”.32 However, it may be noted here that this does not make mediation compulsory. In Australia, after the 2006 legislative reforms, it is now mandatory for parties to make a “genuine effort” to resolve their disputes through mediation before they can apply for a court order.33 Africa is not far behind, with the Zimbabwe High Court34 ruling that the adversarial system of litigation is often inimical to the interests of children when questions of divorce, custody and access are involved.35 Thus, with the exception of Norway, most other countries focus on the promotion of mediation, and not on the enforcement of mediation per se. Indeed, mandatory mediation is nothing but an oxymoron,36 merely acting as an “extension of the coercive power of the judicial system”37 and no longer retains the consensual or “alternative” approach, which is essentially the cornerstone of mediation. Unfortunately, in the UK the focus seems to have shifted from monitoring and urging people to explore ADR methods to forcefully judicialising the entire ADR process itself. In order for mediation proceedings to be successful, it is crucial to ensure that mediation retains its fundamental characteristic of a “peace-seeking, transformative conflict resolving and human problem solving”38 process, but at the same time, care should be taken that it is required and/or promoted when it is appropriate to the circumstances of the dispute.39 This delicate balance is well established in the EU Mediation Directive which explicitly says that: “Member States shall encourage, by any means which they consider appropriate, the development of, and adherence to, voluntary codes of conduct by mediators and

26 M. Ahmed, “Implied compulsory mediation” (2012) 31 C.J.Q. 151; D. Quek, “Mandatory Mediation: An Oxymoron? Examining the Feasibility of Implementing a Court-Mandated Mediation Program” (2010) 11 Cardozo Journal of Conflict Resolution 479; M. Brunsdon-Tully, “There is an A in ADR but does anyone know what it means anymore?” (2009) 28 C.J.Q. 218; J. Sidoli del Ceno and P. Barrett, “Part 36 and mediation: an offer to settle will not suffice—PGF II SA v (1) OMFS Co and (2) Bank of Scotland Plc” (2012) 78 Arbitration 401. 27 J. Nolan-Haley, “Is Europe Headed Down the Primrose Path with Mandatory Mediation?” (2012) 37 N.C.J. Int’l L. & Com. Reg. 981, 1002–1003. 28 M. Martin-Casals, “Divorce Mediation in Europe: An Introductory Outline” (2005) 9 Electronic Journal of Comparative Law 7. 29 Marriage Act 1991(as amended) s.26. 30 L. Parkinson, “Family Mediation and Mixed Messages Across Europe” (2010) International Family Law Journal, 193n 2, 196. 31 Marriage Act 1929 (as amended) Ch.5. 32 Marriage Act 1929 (as amended) s.20(1). 33 Family Law Act 1975 (as amended by the Family Law Amendment (Shared Responsibility) Act 2006) s.60I. 34 G v G 2003 (5) SA 396 (Z). 35 G v G 2003 (5) SA 396 (Z) at [412A]. 36 Quek, “Mandatory Mediation: An Oxymoron? Examining the Feasibility of Implementing a Court-Mandated Mediation Program” (2010) 11 Cardozo Journal of Conflict Resolution 479. 37 A. Agapiou, “The co-optation of the techniques and languages of alternative dispute resolution: a critical assessment of developments in the UK” (2016) 82 Arbitration 129–134. 38 H. Genn, Judging Civil Justice (Cambridge: Cambridge University Press, 2010), p.81. 39 D. Greatbatch and R. Dingwall, “The Marginalization of Domestic Violence in Divorce Mediation” (1999) 13 International Journal of Law Policy and the Family 174, 176.

organisations providing mediation services, as well as other effective quality control mechanisms concerning the provision of mediation services”.40 Rule 3.2 of the UK Family Procedure Rules (FPR) 2010 also adopts the same approach, and requires the courts to examine whether the ADR process is more appropriate than use of judicial processes. This is supported by FPR 2010 r.3.3, which requires the courts to consider whether: • dispute resolution is appropriate in the given context41; • there has been fair and proper information given in regard to the ADR process42; and • the parties agree.43 However, the balance gets completely disrupted in the Norgrove Report, in which UK policy-makers seem to have misinterpreted “encouragement” as “compulsion” and recommended that mediation “should become the norm [so] that where parents need additional support to resolve disputes they would first attempt mediation or another dispute resolution service”.44 This also happens to directly contradict the Court of Appeal decision in Halsey45 where obliging litigants to attempt ADR was held to restrict the right to access to court under art.6(1) of the European Convention on Human Rights (ECHR). But then the judiciary itself seemed to be unsure of the ideal approach, as Ward LJ proposed a review of the ruling in 201346 and Sir Gavin Lightman criticised the decision as “clearly wrong and unreasonable”.47 It certainly was not helpful when in Rosalba Alassini and Others48 the European Court of Justice (ECJ) held that compulsory mediation does not breach EU laws either. Summing up, there seems to be no uniformity in the so-called “focus” on mandatory divorce mediation in the UK, as the legislative, judiciary and executive wings all seem to have their own different perspectives. Nevertheless, “in the context of judicially mandated ADR, the state’s involvement argues strongly for—if not compels—prioritizing the protection of constitutional rights”49 and that is what ultimately matters.

4. Conclusion As we see, mediation is just an attempt to compel people to take a step back and review their decision and possible chances of reconciliation before they jump in to take the final plunge. Of course, there is no “one size fits all” solution and divorce mediation may not be appropriate for everybody, especially when considering serious issues like domestic violence or child protection.50 Promoting compulsory mediation may not solve the root cause of the problem. But what can and will help may be promoting the complete procedure of mediation;

40 Directive 2008/52 on mediation in civil and commercial matters of the European Parliament and of the Council of 21 May 2008 art.4(1). 41 Family Procedure Rules 2010 r.3.3.1. 42 Family Procedure Rules 2010 r.3.3.1.a. 43 Family Procedure Rules 2010 r.3.3.1.b. 44 Ministry of Justice, Family Justice Review Final Report (London: Ministry of Justice, the Department for Education and the Welsh Government, 2011) para.115. 45 Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576; [2004] 1 W.L.R. 2003 at [9]. 46 Wright v Wright [2013] EWCA Civ 234. 47 Sir Gavin Lightman, “Mediation: An Approximation to Justice”, speech given at S. Berwin, 28 June 2007. 48 Rosalba Alassini v Telecom Italia SpA (C-317/08). 49 E. Ryan, “ADR, the Judiciary and Justice: Coming to Terms with the Alternatives” (2000) Harvard Law Review 1851, 1871. 50 See Family Procedure Rules 2010 r.3.8(1) MIAM exemptions.

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators 146 Arbitration or making the session itself mandatory, rather than simply sharing general information in the form of a MIAM.51 Currently by attending the compulsory MIAM, the couple simply get an overview of the process, but with little or no personal suggestions. Admittedly, it is logistically impossible to provide customised solutions in such a short time frame, but due to their lack of awareness, most couples feel that their MIAM session was not effective and go back to consult solicitors instead. Court procedures and mediation can be equally successful (or unsuccessful) in their outcome, as the result is entirely dependent on how the concerned parties deal with the matter. Mediation can work in harmony with a judicial system, the one complementing and supporting the other. This achievement may well show a direction in which a reform of the whole family law system might proceed.52

51 L. Borthwick, “Mandatory Mediation: Not Mandatory Enough”, Halsbury Law Exchange, 10 February 2014, http://www.halsburyslawexchange.co.uk/mandatory-mediation-not-mandatory-enough/ [Accessed 19 March 2017]. 52 J. Westcott, unpublished correspondence quoted in L. Parkinson, Conciliation in Separation and Divorce: Finding Common Ground (London: Croom Helm, 1986), p.78.

Jahnavi Sindhu

1. Introduction There are many advantages for parties who opt for arbitration rather than litigation of their commercial disputes—the autonomy to determine the scope and nature of the dispute to be referred, the arbitrators, and the consequent speedy resolution of their dispute are the foremost in this long list. However, such an agreement between parties also includes an implicit agreement to forgo the right to subject the award to a traditional appeal before courts of any jurisdiction so as to preserve the expediency of the process. Even so, minimal judicial oversight has been considered permissible to ensure that decisions rendered through this private mode of adjudication do not create obligations that are divorced from and contrary to the legal order of which they are considered a part. This is necessary because arbitral tribunals being creatures of consent have limited powers and no power at all to compel a party to implement an award by way of sanctions. Thus parties must approach a court to enforce the award and a court has exclusive power to recognise or enforce the award within that jurisdiction. Thus, arbitral awards must measure up against all aspects of the essential legal order of a jurisdiction and in no way harm the larger public interest. Internationally, this benchmark is considered to be best encapsulated in the term public policy.1 The term, though intuitive and familiar, is also incredibly dynamic and subjective in its interpretation; it hinges on the field of law in which it is sought to be applied, e.g. administrative law or contractual law or the jurisdiction in which it is applied: civil or criminal. What was agreed, however, was that its application in the context of arbitration was not meant to be confused with a review of the merits of the award; the decision of an arbitrator or arbitral tribunal was meant to be the final word on law and facts.2 This is precisely why an application under s.34 of the Arbitration and Conciliation Act 1996 for setting aside an award is considered a challenge to an award and not an appeal. During the drafting of the UNCITRAL Model Law, which serves as a template for national arbitration laws, the delegate of India was one of a sizeable minority who cautioned that the term was too vague.3 However, the international community chose to retain the term for this very flexibility, enabling each national jurisdiction to expound the term in light of its unique legal order. Indeed in India the losing parties in an arbitration, regretting and willing to renege on the initial agreement to forgo an appeal on the merits, have convinced courts that overlooking an incorrect application of law to the facts or a misreading of facts by arbitral tribunals would amount to their acceptance, and this must be considered contrary to the fundamentals of any legal order, and thus also contrary to public policy. In India, precedent has developed in precisely this manner, so as to give credence to the predictions of the

1 For instance, see the United Nations Commission on International Trade Law’s Model Law on International Commercial Arbitration (UNCITRAL Model Law) art.34 and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention) art.V(2)(b). 2 Report of The Working Group on International Contract Practices on The Work of its Third Session (New York, 1982), UNCITRAL, A/CN.9/216, https://www.uncitral.org/pdf/english/travaux/arbitration/ml-arb/acn9-233-e.pdf [Accessed 19 March 2017]. 3 See Analytical Compilation of Comments by Governments and International Organizations on the Draft Text of a Model Law on International Commercial Arbitration, A/CN.9/263, http://www.uncitral.org/uncitral/en/commission /sessions/18th.html at [14] [Accessed 30 March 2017], signed by India on 10 June 1958.

Indian delegate voiced during the drafting of the UNCITRAL Model Law. The decisions of the judiciary have had an adverse impact on India’s eligibility to serve as a seat for international commercial arbitrations and have thus required a course correction by both the judiciary and the legislature. This course correction has most recently culminated in the Arbitration and Conciliation (Amendment) Act 2015. Through the amendment, the Act now contains detailed prescriptions of what the judiciary can or cannot review while encountering a challenge to an award, yet it leaves the judiciary free to interpret these standards. The problem has never been confined solely to interpretation but also concerns the attitude of the judiciary to arbitration: the fate of the legislation is still with the judiciary. Thus, apart from interpreting these amendments, it is necessary to understand how the problem has been remedied, developed and sustained over time. The aim of this article is to identify the stream of precedent that best represents this issue and identify the task still left for the judiciary to deal with, even after the legislative amendments. This inquiry derives from the decision of the Supreme Court in Renusagar4 in 1994 and concludes with the decision in Associate Builders.5 At the same time, it is also necessary to understand the international standard of the court’s jurisdiction in reviewing an award that serves as the most important benchmark.

2. The International Benchmark Not only does the unbridled widening of the scope for courts to intervene and review an award make India unattractive as an arbitral seat, it also results in India violating international obligations under the New York Convention. The Convention’s primary objective was to promote a pro-enforcement bias in respect of foreign arbitral awards6 across jurisdictions and this was ensured in a number of ways. First, the requirement of double exequatur has been removed, in that the award does not have to be initially made a rule of the court, in other words be validated in the country in which it was made, before it can be enforced in another country.7 Secondly, the scope of objections to enforcement was to be exhaustive and narrow. In particular, the term public policy was to be interpreted in its narrowest sense, more like the French notion of ordre public that pertains only to fundamental notions of morality and justice.8 The term public policy was chosen in preference to ordre public since it was felt that the latter term was unknown to most jurisdictions.9 That public policy was meant to be used in the narrowest sense is also evident from a reading of the provision in pari materia in the Geneva Convention as to which awards could be set aside for being “contrary to the public policy or to the principles of the law of the country”.10 The reference to the principles of law of the country was intentionally dropped,11 thus confirming that a

4 Renusagar Power Co Ltd v General Electric Co AIR 1994 SC 860. 5 Associate Builders v Delhi Development Authority (2015) 3 SCC 49. 6 The New York Convention art.I applies to arbitral awards made in the territory of a state other than the state where the recognition and enforcement of such awards are sought, and arising out of differences between persons, whether physical or legal, and to arbitral awards not considered to be domestic awards in the state where their recognition and enforcement are sought. 7 M. Paulsson, The 1958 New York Convention in Action (Alphen aan den Rijn: Kluwer Law International, 2016), p.8. 8 Recognition and Enforcement of Foreign Arbitral Awards—Travaux, Summary Record of the Fifth Meeting, at 3–5, U.N. Doc E/AC.42/SR. 7; Recognition and Enforcement of Foreign Arbitral Awards, Report by the Secretary-General, at 22, U.N. Doc E/2822, Annex II (31 Jan 1956); Paulsson, The 1958 New York Convention in Action (Alphen aan den Rijn: Kluwer Law International, 2016), p.221. 9 Recognition and Enforcement of Foreign Arbitral Awards—Travaux, Summary Record of the Fifth Meeting, at 3–5, U.N. Doc E/AC.42/SR. 7 (29 Mar 1955); Recognition and Enforcement of Foreign Arbitral Awards, Report by the Secretary-General, at [22], U.N. Doc E/2822, Annex II (31 Jan 1956); Paulsson , The 1958 New York Convention in Action (Alphen aan den Rijn: Kluwer Law International, 2016), p.221. 10 Convention on the Execution of Foreign Arbitral Awards 1927 art.1(e): “That the recognition or enforcement of the award is not contrary to the public policy or to the principles of the law of the country in which it is sought to be relied upon.” 11 United Nations Conference on International Commercial Arbitration, Summary Record of the Seventeenth Meeting, UN DOC E/CONF.26/SR.17 (12 September 1958) at [15]–[16].

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators Public Policy and Indian Arbitration 149 review of the merits was not permissible.12 Further, it was specified that what would be considered was whether the enforcement of the award and not the award itself would result in the violation of the public policy of the enforcing country.13 The UNCITRAL Model Law was drafted in 1985 with a view to providing a template for jurisdictions to follow. While drafting art.34, i.e. the application for setting aside an award, on which s.34 of the Arbitration and Conciliation Act 1996 is modelled, the committee expressly rejected the addition of new grounds apart from those enumerated in the New York Convention, and public policy was intended to have the same meaning as under the New York Convention. However, the delegate of the UK cautioned that the term ordre public was broader in its ambit than “public policy”, for the former also included procedural injustices. Therefore, in its final report, the Commission clarified that the term “public policy”, which was used in the 1958 New York Convention and many other treaties, covered fundamental principles of law and justice in substantive as well as procedural respects. Thus, instances such as corruption, bribery or fraud and similar serious cases would constitute a ground for setting aside.14 It is only in this sense of the inclusion of procedural injustices that public policy was used in a broader sense. In fact, it was also understood that public policy was not used in the traditional sense that it is in common law countries as being equivalent to the political stance or international policies of a state but instead comprised the fundamental notions and principles of justice.15 The Commission was unanimously of the view that the ground was not intended to permit a review on the merits of the award.16 This interpretation has largely been maintained.17 Most jurisdictions largely converge on the buzzwords and concepts that attract the public policy charge. These are decisions that are considered “unconscionable or reprehensible”,18 contrary to “essential morality”19 or to “the most basic and explicit principles of justice and fairness”20 and “clearly injurious to the public good or wholly offensive to the ordinary reasonable and fully informed member of the public”.21 Even in India, the term public policy was intended to consist of the fundamental policy of India, the interests of India, and morality and justice and did so until a broader approach was taken. The story for India begins with Renusagar Power Co Ltd v General Electric Co.22

3. The Indian Experience

The Indian judiciary’s exemplary approach in Renusagar In Renusagar,23 faced with an enforcement application for an award rendered in New York under the ICC Rules pursuant to a dispute between an Indian company and an American company, a three-judge bench of the Supreme Court clarified the interpretation of s.7(1)(b)(ii)

12 P. Nacimiento et al., Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on the New York Convention (Alphen aan den Rijn: Kluwer Law International, 2010), p.364. 13 Nacimiento et al., Recognition and Enforcement of Foreign Arbitral Awards (Alphen aan den Rijn: Kluwer Law International, 2010), p.364. 14 See H. Holtzmann and J. Neuhaus, A Guide to the UNCITRAL Model Law on International Commercial Arbitration: Legislative History and Commentary (Alphen aan den Rijn: Kluwer Law International, 1989), p.913. 15 Holtzmann and Neuhaus, A Guide to the UNCITRAL Model Law on International Commercial Arbitration (1989), p.914. 16 Report Of The Working Group On International Contract Practices On The Work Of Its Third Session (New York, 16–26 February 1982), A/CN.9/216 available at https://www.uncitral.org/pdf/english/yearbooks/yb-1984-en /vol15-p189-212-e.pdf at [107] [Accessed 19 March 2017]. 17 UNCITRAL 2012 Digest of Case Law on the Model Law on International Commercial Arbitration, available at http://www.uncitral.org/pdf/english/clout/MAL-digest-2012-e.pdf, pp.141–142 [Accessed 19 March 2017]. 18 Protech Projects Construction (Pty) Ltd v Al-Kharafi & Sons [2005] EWHC 2165 (Comm); [2005] Arb. L.R. 50. 19 United Mexican States v Marvin Roy Feldman Karpa File No.03-CV-23500, p.87 (Canada). 20 TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd (2014) 311 ALR 387 (Australia). 21 PT Asuransi Jasa Indonesia (Persero) v Dexia Bank SA [2007] 1 SLR(R) 597 (Singapore). 22 Renusagar Power Co Ltd v General Electric Co AIR 1994 SC 860. 23 Renusagar Power Co Ltd v General Electric Co AIR 1994 SC 860.

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators 150 Arbitration of the Foreign Awards (Recognition and Enforcement) Act 1961 on the scope of the term public policy used therein.24 This Act was repealed with the coming into force of the Arbitration and Conciliation Act 1996 but the relevance of the decision has endured. The appellant made a number of objections to the award—that the award contravened provisions of the Foreign Exchange Regulation Act 1973 for permitting the payment of interest in arrears, allowing the charging of damages on damages or the recovery of compoundable interest on interest and that the award would result in the unjust enrichment of the respondent. Acknowledging the “narrow” and “broad” views of public policy that exist,25 the Supreme Court made it clear that its choice of the standard applicable was dictated by the context and purpose of the provision. The court opined that “a distinction is drawn while applying the said rule of public policy between a matter governed by domestic law and a matter involving conflict of laws”.26 It was accepted that the courts are slower to rely on the broader notion of public policy when a foreign element is involved.27 In its reasoning, the court was mindful of the pro-enforcement bias and the need to give disputes finality by achieving a quick resolution. These goals were also the main impetus behind both the New York Convention and the Foreign Awards (Recognition and Enforcement) Act, which held that the ground of public policy in this context could not include a review of the merits of the award such that the stage of challenge serves as a stage of appeal.28 The court held that neither the Foreign Awards (Recognition and Enforcement) Act nor the New York Convention indicates that the term public policy includes a mere violation of the laws of India or the provisions of the contract under consideration.29 Instead, the Supreme Court laid down that the enforcement of the award would only be refused if the award is contrary to (i) the fundamental policy of Indian law, (ii) the interests of India or (iii) justice or morality.30 The court did not define these terms; eventually it found a rather troubling definition in 2014, which will be discussed later in this article. Even so, in Renusagar, the court made it amply clear that this definition of public policy or its components did not permit a review of the merits of the award. When the appellant argued that the award amounted to a violation of the provisions of the Foreign Exchange Regulation Act 1973, the court reasoned that the statute was enacted to preserve national economic interests and that a violation of these provisions would amount to a violation of public policy.31 Even so, the court was careful to make a distinction in the appellant’s submission. The court held that it could not look into the award of interest in arrears for violations of the Foreign Exchange Regulation Act 1973 by the arbitral tribunal since it would amount to a review of the merits of the award—which was impermissible.32 The court did, however, consider the submission of the appellant that the payment under the award would amount to a violation of s.9 and s.47 of the Foreign Exchange Regulation Act 1973 since the payment could not have been made without the prior permission of the Reserve Bank of India, the Central Bank of India.33 The court held, in light of its previous judgments interpreting these

24 The Foreign Awards (Recognition and Enforcement) Act 1961 s.7(1)(ii)(b) states that “(1) A foreign award may not be enforced under this Act—(b) If the Court dealing with the case is satisfied that— (ii) The enforcement of the award will be contrary to public policy.” Article 5(2)(b) states that “Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that: The recognition or enforcement of the award would be contrary to the public policy of that country” [Emphasis added]. 25 According to the narrow view courts cannot create new heads of public policy whereas the broad view countenances judicial law making in this area, see Renusagar Power Co Ltd v General Electric Co AIR 1994 SC 860 at [48]. 26 Renusagar Power Co Ltd v General Electric Co AIR 1994 SC 860 at [51]. 27 Renusagar Power Co Ltd v General Electric Co AIR 1994 SC 860 at [51]. 28 Renusagar Power Co Ltd v General Electric Co AIR 1994 SC 860 at [61]. 29 Renusagar Power Co Ltd v General Electric Co AIR 1994 SC 860 at [63]. 30 Renusagar Power Co Ltd v General Electric Co AIR 1994 SC 860 at [65]. 31 Renusagar Power Co Ltd v General Electric Co AIR 1994 SC 860 at [71–[72]. 32 Renusagar Power Co Ltd v General Electric Co AIR 1994 SC 860 at [73]. The court thereafter examined the issue and held that in any case the Supreme Court had approved the same decision in previous orders passed in the same dispute. 33 Renusagar Power Co Ltd v General Electric Co AIR 1994 SC 860 at [77].

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators Public Policy and Indian Arbitration 151 provisions, that they could not be used by defendants to avoid making payments in legal proceedings and thus found that there had been no violation of the legislation or endangering of the economic interest of the country.34 The dictum of the Supreme Court in Renusagar has been rightly lauded internationally.35 In fact, the case is considered seminal authority on the point that a court cannot review an award on its merits.36 Indeed, the court’s analysis is nuanced and recognises the distinction that was discussed during the drafting of the New York Convention, namely, whether the enforcement of the award would result in the violation of India’s public policy and not the award itself. The question the court answered in this case was whether the payment under the award would contravene provisions of the Foreign Exchange Regulation Act 1973 and not whether the decisions on the merits such as payment of interest amounted to a violation of the Foreign Exchange Regulation Act 1973. In the opinion of the author, this is the most ingenious abstraction of the test that can be articulated—one must look at the effect of the enforcement as opposed to different aspects of the award to test them against the standard of the award. Indeed, this would not always mean that the merits would be insulated from such an enquiry, as they were in this case where the court could make a clear demarcation. Take, for instance, a contract made for solicitation or offering a bribe as a consideration. The enforcement of an award that enforces such a contract would imply that India recognises prostitution or bribery as legal and permissible. Thus, here, the public policy implications of an award are inextricably linked with and will carry forward to the enforcement of the award. But this distinction would not always be present. In situations where the enforcement of the award would not lead to a violation of public policy but a component of the ruling on the merits of the award may be taken to be a violation of public policy, the latter would have to be ignored in most situations. Of course, this test in abstract terms is susceptible to extrapolation. It could always be contended that the enforcement of an award using incorrect reasoning and conclusions on the merits of the award would render India a legal order which permits the incorrect application of the law and is contrary to the notions of justice fundamental to India. Thus, it was necessary for the judiciary to be careful and true to the ratio of Renusagar. Whether the judges were able to dig their heels in to prevent sliding down the slippery slope is examined later in this article. With the enactment of the Arbitration and Conciliation Act 1996 the Foreign Awards (Recognition and Enforcement) Act 1961 was repealed. The Arbitration and Conciliation Act was supposed to serve as all-embracing legislation that would deal with the conduct of arbitrations in India and the awards rendered therein under Pt I37 and the enforcement of foreign awards and other attendant provisions under Pt II. In addition, the amendment was intended to bring India’s arbitration regime in line with the UNCITRAL Model Law and was largely based on it.38 Sections 34 and 36 in Pt I dealt with the setting aside and enforcement of a domestic award whereas s.48 in Pt II dealt with the enforcement of a foreign award. Public policy was retained as a ground in both s.34 and s.48. The continued applicability of Renusagar,39 however, was not certain until it received judicial endorsement in respect of awards under the new legislation. The Supreme Court first had such an opportunity in the context of an application to set aside a domestic award under s.34 of the Arbitration and Conciliation Act in ONGC v Saw Pipes.40

34 Renusagar Power Co Ltd v General Electric Co AIR 1994 SC 860 at [80]. 35 L. Ebb, “Reflections on the Indian Enforcement of the GE/Renusagar Award” (1994)10 Arbitration International 141, 149. 36 N. Blackaby et al., Redfern & Hunter on International Arbitration 6th edn (Oxford: Oxford University Press, 2015), Ch.11, fn.159. 37 Under s.2(2) of the Act as it then was; Pt I applies where the place of arbitration is in India. 38 See Statement of Objects and Reasons of the Arbitration and Conciliation Act 1996. 39 Renusagar Power Co Ltd v General Electric Co AIR 1994 SC 860. 40 Oil and Natural Gas Co v Saw Pipes AIR 2003 SC 2629.

Saw Pipes and the eclipse of Renusagar

Domestic awards The question framed in Saw Pipes was “whether the court would have jurisdiction under s.34 of the 1996 Act to set aside an award passed by the Arbitral Tribunal which is patently illegal or in contravention of the provisions of the Act or any other substantive law governing the parties or is against the terms of the contract”.41 In other words, could the court sit in appeal over the award to re-examine its merits? The court’s short answer was yes, a decision which it attempted to arrive at through meticulous, albeit flawed, reasoning. The court first noted that since an arbitral tribunal was a creation of the Arbitration and Conciliation Act, the arbitral tribunal would be acting beyond its jurisdiction by passing an award that violated provisions of the Act and whether, therefore, it would be appropriate for the court to interfere. To hold otherwise would negate the provisions of the Arbitration and Conciliation Act since there would be no way to ensure their enforcement.42 The reasoning of the court, in that every right must have a remedy, clearly ignores the global acceptance of the notion that parties have the autonomy to contract out of an appeal-like remedy against arbitral awards. Further, the Arbitration and Conciliation Act already provides for a specific ground on which an award can be set aside if it exceeds its jurisdiction. However, jurisdiction on that ground refers to jurisdiction in its truest sense, i.e. on the nature of the scope of reference, the validity of the arbitration agreement, arbitrability, etc. The court in Saw Pipes conflates jurisdiction with procedural violations by holding that every violation of the Arbitration and Conciliation Act would amount to a jurisdictional violation by the arbitral tribunal. Further still, the court ingeniously invokes the Arbitration and Conciliation Act s.28 under which it is the duty of the tribunal to decide disputes in accordance with the terms of contract between the parties and the substantive provisions of the law they have chosen (Indian law if it is a non-international commercial arbitration) to hold that if an arbitral tribunal’s award violates provisions of the contract or substantive law, it would amount to a violation of the Arbitration and Conciliation Act. Admittedly, the court seems conscious of the possible ramifications of characterising these contraventions as jurisdictional violations and thus characterises them as patently illegal. It is necessary to discuss two points here. First, the very basis for the court’s reasoning was that the tribunal having been given jurisdiction as a result of the Act cannot act outside this jurisdiction and the court must step in to set aside jurisdictional violations, and not patent illegalities. Secondly, the fact that an award is patently illegal is not an express ground for setting aside the award under s.34 of the Arbitration and Conciliation Act. The court avoids this second hurdle by accepting the submission of the counsel for the appellant that patent illegality must be considered an additional public policy ground under s.34 beyond what was set out in Renusagar by contending that the scope of s.34 is distinct from that of s.48. The appellant argued that, at the stage of an s.34 application, the award has not attained finality and therefore could be subjected to a broader review. Whereas in an s.48 application, the award would be subject to double exequatur, first being subjected to setting aside proceedings in the jurisdiction in which the award was made and then made final after these proceedings were concluded.43 The author submits that this reasoning is extremely flawed. With the coming into force of the New York Convention, the requirement of double exequatur was removed, in that the award no longer needed to be declared as enforceable in the country of origin and was considered to be final on the date of its making and could be automatically enforced in a country where the assets were located.44 This was further reiterated in the travaux

41 Oil and Natural Gas Co v Saw Pipes AIR 2003 SC 2629 at [1]. 42 Oil and Natural Gas Co v Saw Pipes AIR 2003 SC 2629 at [11]–[13]. 43 Oil and Natural Gas Co v Saw Pipes AIR 2003 SC 2629 at [19]–[21]. 44 See G. Born, International Commercial Arbitration (Alphen aan den Rijn: Kluwer Law International, 2009), p.721.

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators Public Policy and Indian Arbitration 153 préparatoires of the UNCITRAL Model Law which finally held that the award would become final on the day the award is rendered and not after it survived the test under s.34.45 The legislative history of the Arbitration and Conciliation Act also does not mention any need to interpret s.35 in any other way. Therefore, the counsel was incorrect to contend that the award would not have become final at the stage of setting aside proceedings. The case has been rightly assailed as a step back in the arbitration world for India.46 Whether Renusagar’s rational approach would be obliterated altogether was dependent on the interpretation accorded to Saw Pipes. The most troublesome interpretation argued that the Saw Pipes decision brought about a blanket expansion of the scope of the term public policy so as to apply even to s.48. It has also been argued that the decision is not contrary to what was expounded in Renusagar since Renusagar only cautioned that a mere violation of the laws of India would not be contrary to public policy. The decision in Saw Pipes too referred to patent illegality as illegality or contraventions that go to the root of the matter and are not of a trivial nature, thus merely re-stating, in positive terms, what Renusagar said in negative terms. However, a careful reading of Renusagar clearly indicates that any sort of review of the merits of the award, except where incidental to analysing the effects of enforcement of the award, is not permissible. A more compelling interpretation recognises that the Supreme Court clearly stated that the interpretation of public policy was dependent on its context.47 The context in Saw Pipes was the setting aside of a domestic award. Therefore, instead of an unqualified adoption of a wider meaning, it is reasonable to contend that the counsel for the appellant sought to distinguish Renusagar on the basis of its own context. Renusagar if read closely reveals that the court adopted a narrower conception of public policy not only because the proceedings were at the stage of enforcement but also because the case involved a foreign element. The court noted that, “the application of the doctrine of public policy in the field of conflict of laws is more limited than that in domestic law and the courts are slower to invoke public policy in a case involving a foreign element than when a purely municipal legal issue is involved”.48 Thus, it could be contended that the applicability of the Saw Pipes decision would be limited to setting aside awards made in purely domestic disputes. Indeed, any contrary interpretation of s.48 would also be inconsistent with India’s international obligations under the New York Convention and international consensus evinced through the UNCITRAL Model Law. Unfortunately, the court in Saw Pipes did not seek to distinguish the case from Renusagar on these grounds. This distinction should have been made in the case itself since s.34 too can have an impact on the international obligations of India given the unique scheme of the Arbitration and Conciliation Act. Part I applies only when the place of arbitration is in India.49 On this basis, many argue that the basis of differentiation in the Act is the place of

45 Analytical Commentary on Draft Text of a Model Law on International Commercial Arbitration. Report of The Secretary-General, A/CN.9/264, 25 March 1985, http://www.uncitral.org/uncitral/en/commission/sessions/18th.html [Accessed 30 March 2017]. 46 S. Hilmer, “Did Arbitration Fail India or did India Fail Arbitration?” (2007) 10 International Arbitration Law Reporter 33. See also Law Commission of India, 246th Report: Amendments to the Arbitration and Conciliation Act 1996, (2014), http://lawcommissionofindia.nic.in/reports/Report246.pdf [Accessed 19 March 2017]. 47 “Therefore, in our view, the phrase ‘Public Policy of India’ used in s.34 in context is required to be given a wider meaning”: Oil and Natural Gas Co v Saw Pipes AIR 2003 SC 2629 at [30]. 48 “A distinction is drawn while applying the said rule of public policy between a matter governed by domestic law and a matter involving conflict of laws The application of the doctrine of public policy in the field of conflict of laws is more limited than that in the domestic law and the courts are slower to invoke public policy in a case involving a foreign element than when a purely municipal legal issue is involved”: Renusagar Power Co Ltd v General Electric Co AIR 1994 SC 860 at [51]. 49 This can now be claimed with certainty owing to the decision of the Supreme Court in Bharat Aluminium Co Ltd v Kaiser Aluminium Technical Service Inc (2012) 9 SCC 552. But after the amendment certain provisions have been made applicable to arbitrations outside India. Section 34 however is still applicable only to Pt I arbitrations.

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators 154 Arbitration arbitration, in other words the territoriality principle.50 Admittedly, the territoriality principle is admitted to ensure certainty; however the UNCITRAL Model Law makes the basis of distinction the nationality of the parties, to focus on “international” and “non-international” awards instead of the traditional demarcation between foreign and domestic awards.51 Hence, the purpose of the Model Law was to provide for a uniform policy regarding international arbitral awards irrespective of the place of arbitration.52 Even though the New York Convention is confined to foreign awards, the UNCITRAL provisions are modelled on the New York Convention in such a way that it supplements, without conflicting with, the regime of the Convention.53 By that logic the Renusagar standard of public policy should apply to international commercial arbitrations under the Arbitration and Conciliation Act Pt I. Thus, by distinguishing Saw Pipes merely on the basis of the stage the award has reached, as opposed to the nature of the award, also endangers India’s international obligations.

Foreign awards Foreign awards to which the Arbitration and Conciliation Act Pt II applies could have been shielded from the vice of Saw Pipes since s.34 ordinarily does not apply to foreign awards. An Indian party cannot file an application to set aside the award in India but can only file objections to an application for enforcement of the award.54 Unfortunately, subsequent decisions of the Supreme Court rendered this sense of security a pipe dream. The then infamous judgment of Bhatia International v Bulk Trading generally extended the application of the Arbitration and Conciliation Act Pt I to arbitrations seated outside India unless the parties had expressly or impliedly excluded Pt I by agreement between them.55 The ramifications of the judgment could have been confined to the context in which the holding of the court was necessitated, i.e. interim measures provided under s.9 of the Arbitration and Conciliation Act where the court held that by deviating from the model law and not making s.9 of the Arbitration and Conciliation Act applicable to foreign arbitrations, the legislature had left parties virtually without remedy in situations where assets were located only in India. However, in 2008 the Supreme Court extended the application of the ratio of Bhatia International to an application for setting aside a foreign arbitral award under s.34 of the Arbitration and Conciliation Act.56 To make matters worse, the case went on to accept the definition of public policy as expounded in Saw Pipes.57 It is pertinent to note that in a foreign arbitration, the applicable law would be (in most cases) a foreign law. In such a case the Indian courts would have to test the conformity of the award with that foreign

50 See, generally, Bharat Aluminium Co Ltd v Kaiser Aluminium Technical Service Inc (2012) 9 SCC 552. 51 Explanatory Note by the UNCITRAL Secretariat on the Model Law on International Commercial Arbitration, http://www.uncitral.org/pdf/english/texts/arbitration/ml-arb/MLARB-explanatoryNote20-9-07.pdf at [11] [Accessed 19 March 2017]. 52 In fact, the UNCITRAL report at the time of adoption of the Model Law rejected a proposal to provide for two different articles for foreign and domestic awards in international commercial arbitrations. See Justice R. Bachawat, Law of Arbitration & Conciliation in A. Wadhwa and A. Krishnan (eds) (Haryana: LexisNexis India, 2010), p.2045. 53 Explanatory Note by the UNCITRAL Secretariat on the Model Law on International Commercial Arbitration, http://www.uncitral.org/pdf/english/texts/arbitration/ml-arb/MLARB-explanatoryNote20-9-07.pdf at [51] [Accessed 19 March 2017]. 54 Jindal Drugs v Noy Vallesina (2002) 3 RAJ 46; see also Force Shipping Ltd v Ashapura Minechem Ltd, a company incorporated under the Companies Act, 1956 2003 (6) Bom C.R. 328. With the decision of the Constitutional Bench in Bharat Aluminium Co Ltd v Kaiser Aluminium Technical Services Inc (2012) 9 SCC 552, these decisions are once again good law. 55 Bhatia International v Bulk Trading S.A. (2002) 4 SCC 105 at [32]. More commentary on the judgment can be found in F. Nariman, “India and International Arbitration” (2009) 41 George Washington. International Law Review 367; R. Sharma, “Bhatia International v Bulk Trading S.A.: Ambushing International Commercial Arbitration Outside India?” (2009) 26 Journal of International Arbitration 357; M. Kapur, “Judicial Interference and Arbitral Autonomy: An Overview of Indian Arbitration Law” (2009) Contemporary Asia Arbitration Journal 325. 56 Venture Global Engineering v Satyam Computer Services Ltd AIR 2008 SC 1061. For more commentary on the judgment see A. Robello, “Of Impossible Dreams and Recurring Nightmares: The Set Aside of Foreign Awards in India” (2010) 6 Cambridge Student Law Review 274. 57 Venture Global Engineering v Satyam Computer Services Ltd AIR 2008 SC 1061 at [19].

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators Public Policy and Indian Arbitration 155 law. This concern was aptly expressed in Penn Racquets,58 but blatantly ignored in Saw Pipes and Satyam. Proponents of this decision would adopt the interpretation discussed above, that the Supreme Court in Saw Pipes made a distinction between the scope of jurisdiction at the stage of setting aside and enforcement of awards and not in the nature of the award. However, the court in Venture Global v Satyam held that there was no conflict between s.48 and s.34 and instead seemed to justify the decision on the ground that a judgment debtor who has properties situated in India is entitled to defend the award on the basis of the public policy of India.59 Therefore, a protectionist attitude is all that seems to have misguided the court.60 Indeed, this is a slippery slope, and a protectionist rationale could easily be applied to enforcement proceedings of a foreign award against an Indian party requiring the judgment creditor to withstand a wider notion of Indian public policy. High Courts diverged on the issue.61 Unfortunately, in Phulchand Exports Ltd v OOO Patriot,62 the Supreme Court in 2011 fell prey to this protectionist attitude. Proceedings were brought under s.48 of the Arbitration and Conciliation Act in respect of a foreign award, and the respondents objected to the proceedings on the grounds of public policy. Relying on Renusagar, both the single judge and the Divisional Bench of the Bombay High Court rejected the contentions of the appellants. The Supreme Court, none the wiser, agreed with the submission of the counsel for the respondents and did not provide any reasons either for accepting the wider definition of public policy as proposed in Saw Pipes or for ignoring the underlying objective behind s.48 (and India’s obligation under the New York Convention to enforce a foreign arbitral award without hindrance or delay).63 This Supreme Court decision has been met with significant criticism and hence must be remedied.64 The author is of the opinion that a decision such as Phulchand would not have come about in isolation but instead can be attributed solely to the trajectory that Indian arbitration took, with Saw Pipes and Bhatia International serving as the first significant cracks in the dam, and the dam eventually burst with Satyam and Phulchand. This trajectory reveals that the problem is not one of a difference of opinion about the interpretation and scheme of the Act but is rooted in the attitude of the judiciary and other stakeholders towards arbitration and their reluctance to accord finality to an arbitrator’s findings and conclusions. That the judiciary is willing to reconsider this view would best be signalled through a series of decisions moving in that direction.

58 Penn Racquet Sports v Mayor International Ltd (2011) DLT 474 at [40]: “In the present case, the task of the judgment debtor is even more onerous inasmuch, as, this Court is dealing with a foreign award, and the agreement of the parties was that the agreement would be governed by the Austrian law. Consequently, the interpretation of the contract cannot be done by application of Indian law. As to what is the Austrian law has not even [been] cited before me. No expert opinion has been led in evidence to controvert the opinion of the learned arbitrator. The endeavour of the judgment debtor has been to interpret the contractual clause in question by application of the Indian law, which is not permissible”. 59 Venture Global Engineering v Satyam Computer Services Ltd AIR 2008 SC 1061 at [19]. 60 See D. Sabharwal, “Another Setback for Indian Arbitration (and Foreign Investors)”, (2008) International Disputes Quarterly, Spring. 61 In Penn Racquets, the court correctly noted the impracticality of analysing a foreign award passed under Austrian Law for patent illegality of a violation of Indian law since an arbitrator was never bound to consider the law. Admittedly, by way of an arguendo, the court also examined the award on patent illegality. Similarly, in Glencore Grain Rotterdam B.V. v Shivnath Rai Harnarain Co 2008 (4) ARB LR 497 (Del), the Delhi High Court maintained the distinction between s.34 and s.48 proceedings, as did the Bombay High Court in Noy Vallesina Engineering SpA A Corporation Organized and Existing Under the Laws of Italy v Jindal Drugs Ltd, a Company Incorporated under the Companies Act, 1956 2006 (5) Bom C R 155. However, the Calcutta High Court fell prey to this protectionist attitude in KTC Korea Co Ltd v Hobb International Private Ltd (2005) 2 CALLT 556 (HC) where the Saw Pipes standard was applied to an award in an enforcement application under s.48 of the Arbitration and Conciliation Act. 62 Phulchand Exports Ltd v OOO Patriot (2011) 10 SCC 300. 63 New York Convention art.III, a concern aptly recognised in Penn Racquets Sports v Mayor International Ltd (2011) DLT 474 at [28]. 64 K. Mahajan and M. Anand, “Heralding a new Dawn for Arbitration in India: is there reason to be circumspect anymore?” (2013) Arbitration 28.

4. Course Correction by the Judiciary The judiciary did largely deliver on this promise in two decisions. First, in Bharat Aluminium v Kaiser Aluminium65 a five-judge bench overruled the decision in Bhatia International to hold that the Arbitration and Conciliation Act Pt I would no longer apply to foreign arbitrations. A year later, there was more good news in Shree Lal Mahal v Progetto Grano66 where Lodha J, while dealing with the enforcement of an award passed in London, reconsidered his own decision in Phulchand to hold that the term public policy in s.48 of the Arbitration and Conciliation Act must be given the same interpretation as in Renusagar and the enforcement of a foreign award could not be objected to on the ground that it was patently illegal. While the problem may have been remedied for foreign-seated arbitrations, Saw Pipes still posed a problem in the following respects. First, Bhatia International has only been prospectively overruled in Bharat Aluminium v Kaiser Aluminium (2012) 9 SCC 552 from the date of the decision in that case in such a way that Bhatia International would continue to apply to agreements entered into between 13 March 2002 and 6 September 2012. Thus, Satyam will continue to be good law for awards rendered in respect of these arbitrations so that an s.34 application can be made to set aside a foreign award and the awards be tested for patent illegality. Secondly, Saw Pipes also applies to international commercial arbitrations seated in India.67 Thus, either a judicial or a legislative reconsideration of Saw Pipes was needed. The answer was to some extent found in legislative intervention but not until the judiciary made some more mistakes.

Veering off-course correction: some “fundamental” mistakes The improvements that the court made on the ground of patent illegality were offset by two decisions of the Supreme Court rendered in 2014. In ONGC v Western Geco,68 the Supreme Court dealt with an application to set aside an award in an international commercial arbitration seated in India. The parties had entered into a contract for the upgrading of the appellant’s seismic survey vessel, in particular the installation of streamers fitted with hydrophones. The contract could not be performed since the respondent company was unable to obtain a licence from authorities in the US for the sale of hydrophones. The respondent invoked the force majeure clause on this account. While the tribunal held that the respondent was not entitled to invoke the force majeure clause since the delay was not solely attributable to the action of the licensing authorities, it also concluded that the entire period of delay was also not attributable to the respondent.69 The appellant sought to assail the finding of the arbitral tribunal that the delay in supply under the contract was not attributable to the respondent. As expected, the respondent contended that the court’s jurisdiction under s.34 of the Arbitration and Conciliation Act did not permit such an enquiry into the merits of the award.70 The court noted that the decision of Saw Pipes, while enumerating different grounds of public policy including “fundamental policy of India”, had not expanded on their scope and meaning71 and took the opportunity to exposit the boundaries of these terms in this case. The court held that the duty of a judicial authority to adopt a judicial approach, apply principles of natural justice and be reasonable is fundamental enough and sufficiently deeply embodied in our jurisprudence to comprise the fundamental policy of India. It is pertinent to note that the grounds of natural justice and bias are already set out as specific grounds under ss.34 and 48, thus there is now duplication

65 Bharat Aluminium Co Ltd v Kaiser Aluminium Technical Service Inc (2012) 9 SCC 552. 66 Shree Lal Mahal v Progetto Grano (2014) 2 SCC 433. 67 Discussed in Pt 3 of this article under the subheading, “The Indian judiciary’s exemplary approach in Renusagar”. 68 Oil and Natural Gas Corp Ltd v Western Geco International Ltd (2014) 9 SCC 263. 69 Oil and Natural Gas Corp Ltd v Western Geco International Ltd (2014) 9 SCC 263 at [13]. 70 Oil and Natural Gas Corp Ltd v Western Geco International Ltd (2014) 9 SCC 263 at [24]. 71 Oil and Natural Gas Corp Ltd v Western Geco International Ltd (2014) 9 SCC 263 at [26].

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators Public Policy and Indian Arbitration 157 under the ground of public policy.72 In any case, the court’s holding seems to permit a deeper enquiry into the merits of the award, as is evident from the manner in which the aforementioned terms were explained in the judgment. To quote: “1. A judicial approach: ensures that the authority acts bona fide and deals with the subject in a fair, reasonable and objective manner and that its decision is not actuated by any extraneous consideration. Judicial approach in that sense acts as a check against flaws and faults that can render the decision of a Court, Tribunal or Authority vulnerable to challenge [emphasis added].73 2. Principles of natural justice: Besides the celebrated ‘audi alteram partem’ rule one of the facets of the principles of natural justice is that the Court/authority deciding the matter must apply its mind to the attendant facts and circumstances while taking a view one way or the other. Application of mind is best demonstrated by disclosure of the mind and disclosure of mind is best done by recording reasons in support of the decision which the Court or authority is taking.74 3. Wednesbury principle of reasonableness: decision which is perverse or so irrational that no reasonable person would have arrived at the same will not be sustained in a Court of law. The Court notes that in writ jurisdiction of the Superior courts but no less in statutory processes where ever the same are available. One cannot equate the jurisdiction of a court over an arbitral award to that of a court in writ jurisdiction.”75 Thereafter, the court notes that while an exhaustive exposition on what amounts to the fundamental policy of India was impossible, an award could be successfully challenged “if on facts proved before them the arbitrators fail to draw an inference which ought to have been drawn or if they have drawn an inference which is on the face of it, untenable resulting in miscarriage of justice [emphasis added].”76 Recall that on the facts, the arbitral tribunal had held that the delay from the point when the respondents informed the appellant that the licence could not be obtained from the US authorities and offered to supply Canadian hydrophones was not attributable to the respondent and disallowed the deduction made for this period. However, the court was of the opinion that this period would have to be divided into four different components: 1) the time taken by the appellant to decide that an application should nonetheless be made to the US authorities; 2) the time taken by the respondent to make the application; 3) the time expended by the US authorities to finally reject the application; and 4) the time taken by the respondent to convey the rejection of the application to the appellant. The court found itself unable to agree with the view of the tribunal that the delay in respect of the second and fourth intervals should be attributable to the respondent, characterising it as an error resulting in the miscarriage of justice apart from the fact that it failed to appreciate and draw inferences that logically flow from such proved facts.77 There are several reasons to be dissatisfied with this judgment. First, the court has expanded the term “fundamental policy of India” to include a review of the merits of the award. “Fundamental policy of India” was a component of the narrow

72 See the Arbitration and Conciliation Act s.34(2)(a)(iii) and s.48(1)(b). 73 Oil and Natural Gas Corp Ltd v Western Geco International Ltd (2014) 9 SCC 263 at [26]. 74 Oil and Natural Gas Corp Ltd v Western Geco International Ltd (2014) 9 SCC 263 at [28]. 75 Oil and Natural Gas Corp Ltd v Western Geco International Ltd (2014) 9 SCC 263 at [29]. 76 Oil and Natural Gas Corp Ltd v Western Geco International Ltd (2014) 9 SCC 263 at [30]. 77 Oil and Natural Gas Corp Ltd v Western Geco International Ltd (2014) 9 SCC 263 at [31].

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators 158 Arbitration conception of public policy put forward in Renusagar that specifically precluded a review of the merits of the award. It may be contended that certain violations of public policy may be violations rooted in the merits of the award. Indeed, this is possible but, as discussed above, the test is whether the enforcement of the award and not the award or the merits would result in the violation of public policy, thus the merits could only be looked at to the extent that the issue is intertwined and inextricably linked with the enforcement of the award. In sum, it is an effects-based test. It is for this reason that the court in Renusagar did not review the award for the grant of interest in arrears as a violation of the Foreign Exchange Regulation Act 1973, or an unjust enrichment of the respondent or a grant of compound interest on compound interest. It is possible to argue that the court in Western Geco too adopted an effects-based test to hold that enforcing an award that did not pass the test of judicial approach, natural justice and Wednesbury reasonableness would render India a legal order which turns a blind eye to these errors and thus accepts such errors as a valid part of India’s legal order. However, this is precisely the slippery slope that the author warned against in Pt 1 of this article. Indeed, every country would like to avoid being considered as a nation with a casual attitude to justice where expediency is preferred over correct reasoning. The effects-based test cannot be stretched to a blanket permission to review the merits of the award as has been done in Western Geco. Secondly and in any case, Renusagar made it clear that a court cannot set aside an award merely because it disagrees with the reasoning of the arbitrator on law and facts. However, the court in Western Geco does precisely this by taking an approach different from the arbitrator—dividing the delay into four different intervals and holding that certain periods of delay are attributable to the respondent. What is even more troubling is that the court conflates an erroneous inference of logic with a miscarriage of justice, which can now only open further floodgates for appeal, such as challenges to awards on a ground other than patent illegality.78 The next relevant judgment was the decision of Associate Builders79 where the arbitral tribunal had held that the delay in the construction of a colony [housing project] by the petitioner builder for the respondent (Delhi Development Authority) was not attributable to them but to the respondent itself. But a Divisional Bench of the High Court set aside this finding. The Supreme Court held that a review of the merits of the award was precluded except on the ground of public policy, and only in limited circumstances.80 Tracing the history of the expansion and contraction of the term public policy from Renusagar to Saw Pipes and Western Geco, the court sought to exposit the meaning of each sub-term under public policy.81 Admittedly, there was no need for the court to go into this exposition. A reading of the case appears to indicate that the Bench was well intentioned and was seeking to undo the damage done by these earlier judgments. For instance, in respect of the ground of patent illegality, the court, burdened by precedent, had to concede that violations of the substantive law of India, including the Arbitration and Conciliation Act, would amount to the award being patently illegal. But the court tactfully managed to quote only the dicta of McDermott International Inc82 and Rashtriya Ispat Nigam Ltd,83 which represent two rare prior instances of judicial restraint where the court cautioned that merely because the court is of the opinion that a contract can be interpreted in a particular way, it would not be a ground to overrule the interpretation by the tribunal. However, the burden of precedent was felt most while interpreting the “fundamental policy of India”. The two-judge bench of Nariman J and Gogoi J could not overrule the three-judge bench decision in Western Geco. The decision of Western Geco confirms Wednesbury reasonableness as a tool for assessing the validity of arbitral awards

78 Further, it is extremely well established that a mere disagreement with the result of an arbitration on a reappraisal of facts and evidence does not constitute a valid exercise of the supervisory jurisdiction of the courts over an arbitration. 79 Associate Builders v Delhi Development Authority (2015) 3 SCC 49. 80 Associate Builders v Delhi Development Authority (2015) 3 SCC 49 at [17]. 81 Associate Builders v Delhi Development Authority (2015) 3 SCC 49 at [27]. 82 McDermott International Inc v Burn Standard Co Ltd (2006) 11 SCC 181. 83 Rashtriya Ispat Nigam Ltd v Dewan Chand Ram Saran (2012) 5 SCC 306.

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators Public Policy and Indian Arbitration 159 so that an award can be set aside for being arbitrary and capricious. The test of Wednesbury reasonableness evolved in the field of administrative law and was to be used in exceptional circumstances where the reasoning of a judicial authority was so unreasonable that no person acting reasonably could have arrived at the decision. It is clear that what needs to be tested is the process of reasoning.84 Unfortunately, the effects-based test identifies an incorrect application here, in that a court judges the process of reasoning by judging the result it reaches and thus works backwards to presume a disagreement with the reasoning if there is disagreement with the result.85 However, the process of adjudication must take into account the possibility of more than one plausible and reasonable result. The result-based approach is flawed for eliminating this possibility. Indeed, the facts in Western Geco serve as the easiest illustration of this issue. Over and above the manner of application of the Wednesbury principle is its very importation into arbitration; this now means that a court will have to look into the merits and use its discretion and wisdom to decide if the result and reasoning warrant interference. The uneasiness of the court in Associate Builders about the importing of the Wednesbury principle into arbitration law is palpable even though it is not express: the court holds that those findings which are based on no evidence or irrelevant evidence and/or where it is ignorant of vital evidence are liable to be set aside.86 The court then tries to remedy this by warning that courts cannot sit in appeal of the arbitral award to correct errors of fact to hold “an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score”.87 At first sight, this seems inconsistent with its holding in the earlier paragraph. What the court is trying to do is prevent a result-based approach that has become endemic to administrative law. This emphasis is evident from the following exposition: “once it is found that the arbitrator[’s] approach is not arbitrary or capricious, then he is the last word on facts”.88 In all, the decision of Associate Builders must be lauded for being a conscientious decision that could only do so much under binding precedent. A careful reading of the judgment would provide enough guidance for the High Courts to take a more restrained approach, provided that the courts are careful to pick up the cues left in the judgment. Unfortunately, not every subsequent decision after Associate Builders has toed the line as succinctly as Associate Builders. Yet solace can be found in a majority of decisions where the court has cited Associate Builders at [33] of the judgment to hold that an arbitral tribunal must be considered the last word on facts even if the finding is based on little or no evidence unless it is shown to be perverse or illegal.89 Thus courts have refused to interfere in respect of possible errors by the arbitral tribunal in the calculation of the value of work done under a contract,90 the calculation of compensation,91 loss of profit,92 and so on. Even so, the larger problem—that the courts were now permitted to review the merits of an award still remained in need of a remedy. The problem was exacerbated by those decisions of High Courts which

84 Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1947] EWCA Civ 1; [1948] 1 K.B. 223; [1947] 2 All E.R. 680; Council of Civil Service Unions v Minister for the Civil Service [1984] UKHL 9; [1984] 3 All E.R. 935; [1985] I.C.R. 14; [1985] A.C. 374. 85 See concerns expressed in R. (on the application of Bloggs 61) v Secretary of State for the Home Department [2003] EWCA Civ 686; [2003] 1 W.L.R. 2724; R. (on the application of Wilkinson) v Broadmoor Special Hospital [2001] EWCA Civ 1545; [2002] Lloyd’s Rep. Med. 41; [2002] W.L.R. 419, as to how the Wednesbury test is being used for a merits-based review. 86 Associate Builders v Delhi Development Authority (2015) 3 SCC 49 at [31]. 87 Associate Builders v Delhi Development Authority (2015) 3 SCC 49 at [33]. 88 Associate Builders v Delhi Development Authority (2015) 3 SCC 49 at [33]. 89 Puri Construction P. Ltd v Larsen and Toubro Ltd MANU/DE/1316/2015; Silver Resorts Hotel India Pvt Ltd v Wimberly Allison Tong & Goo (UK) MANU/DE/1650/2016; Rajesh V. Choudhary v Kshitij Rajiv Torka MANU/MH/2436/2015; Valecha Engineering Ltd v Airports Authority of India (I.A.D.) MANU/MH/2375/2015. 90 Mariners Buildcon India Ltd v K.V. Makkar Contracts 2015(1) ARBLR 289 (Delhi). 91 National Highways Authority of India v Oriental Pathways (Nagpur) Pvt Ltd MANU/DE/1237/2016. 92 Delhi State Industrial Infrastructure & Development Corporation v Roshan Real Estates Pvt MANU/DE/1371/2015.

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators 160 Arbitration did not notice the tapering of the dicta of Western Geco in Associate Builders and went into an unabashed enquiry into the merits of the award and set aside awards where there was no agreement between the tribunal’s and the court’s opinion on law and evidence.93 Unfortunately, the Supreme Court did not differentiate either between the dicta of Western Geco and Associate Builders. In National Highways Authority of India v ITD. Cementation India Ltd,94 the court cited the decisions in Associate Builders95 and McDermott96 to hold that the interpretation given by the arbitral tribunal to the price escalation clause in a contract for laying a five-lane highway and payments thereunder was a plausible interpretation and thus did not warrant interference.97 However, the direction of the arbitral tribunal to refund a royalty was set aside on the ground that it was not covered by any clause of the contract and was therefore considered beyond the scope of the contract jurisdiction of the arbitrator.98 Once again, the court conflated a finding on the merits as an error of jurisdiction. In State of Orissa v Samantary Construction Pvt Ltd,99 the Supreme Court cited the decisions of Western Geco and Associate Builders to set aside the arbitral award as it did not agree with the calculation of compensation for wrongful seizure of the vehicle merely on the basis of hire charges exclusive of the value of the machinery, thus choosing to ignore the holding of Associate Builders that the errors of the arbitral tribunal in this respect would be final. Indeed, it is astonishing that these judgments came at a point when the judiciary was already pursuing a proactive course correction to rectify the damage done by the judgments discussed above. In fact, Saw Pipes was perhaps the only blot left to be erased. In any case, the judiciary was well aware of the prevailing sentiment in favour of judicial restraint in reviewing the merits of an award. Interestingly, these mixed signals came at a time when the legislature had embarked on its own course correction through the Law Commission, which culminated in the Commission’s 246th Report.100 These two judgments prompted the Law Commission to issue an urgent addendum to clarify the scope of the phrase “fundamental policy of India” and caution that it did not entail a review on the merits of an award.

5. Legislative Course Correction In passing the Arbitration and Conciliation (Amendment) Act 2015101 the legislature accepted the recommendations of the Law Commission Report. In particular, an explanation of s.34 was introduced that states, “for the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute”.102 The tenor of this amendment is interesting, as it is almost a proscription to the judiciary from the legislature on what it is no longer empowered to do and appears to be unprecedented in this respect. Indeed, even the Law Commission’s report reeks of exasperation at the fact that the judiciary had allowed appeal-like challenges to awards on the ground of the

93 See Seemaben v Motibhai K. Patel Manguben 2015(3) BomCR 288, B.E. Billimoria & Co Ltd v Raheja Universal Pvt Ltd MANU/MH/2917/2015. 94 National Highways Authority of India v ITD. Cementation India Ltd MANU/SC/0490/2015. 95 Associate Builders v Delhi Development Authority (2015) 3 SCC 49. 96 McDermott International Inc v Burn Standard Co Ltd (2006) 11 SCC 181. 97 National Highways Authority of India v ITD. Cementation India Ltd MANU/SC/0490/2015 at [21]. 98 National Highways Authority of India v ITD. Cementation India Ltd MANU/SC/0490/2015 at [36]. 99 State of Orissa v Samantary Construction Pvt Ltd (2015) SCC OnLine SC 856. 100 Law Commission of India, Report No. 246: Amendments to the Arbitration and Conciliation Act 1996, (2014), http://lawcommissionofindia.nic.in/reports/Report246.pdf [Accessed 19 March 2017]. 101 See http://www.indiacode.nic.in/acts-in-pdf/2016/201603.pdf [Accessed 9 March 2017]. 102 Law Commission of India, Supplementary to Report No.246: Amendments to the Arbitration and Conciliation Act 1996, (2015), http://lawcommissionofindia.nic.in/reports/Supplementary_to_Report_No._246.pdf [Accessed 19 March 2107].

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators Public Policy and Indian Arbitration 161 fundamental policy of India.103 The small number of cases considering and applying the amendment, however, shows that the judiciary has not treated this amendment as a complete prohibition of enquiring into the merits. While the amendment, in effect, overrules the decisions of Western Geco and Associate Builders, only one decision has treated it so: the Delhi High Court in Royal Sundaram Alliance Insurance Co Ltd v CEPCO Industries Pvt Ltd104 unequivocally held that the award could not be reviewed on the merits. However, in Silver Resorts Hotel India Pvt Ltd v Wimberly Allison Tong & Goo (UK),105 the court still enquired into the merits of the award and then adopted a restrained approach to hold that the court could not sit in appeal of the award, thus merely toeing the line of Associate Builders. Worse was the decision of the Madras High Court in S.K.S. Logistic Ltd v Oil & Natural Gas Corporation Ltd.106 Despite reproducing the amendment in its judgment the court reviewed the merits and disagreed with the findings on evidence to hold that the award was patently illegal and against the fundamental policy of India. If these decisions are to serve as a clue, the legislature should have laid down more restrictive covenants by expressly overruling Western Geco and Associate Builders to rein in and ensure uniformity from the judiciary. In this vein, the amount of leeway given to the courts under the amendment allowing patent illegality is troubling. Section 34 of the Arbitration and Conciliation (Amendment) Act 2015 provides that: “[An] arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the court, if the court find that the award is vitiated by patent illegality appearing on the face of the award; [p]rovided that an award shall not be set aside merely on the ground of an erroneous application of the law or by re-appreciation of evidence.” The following points need to be considered. First, the legislature has now recognised the difference between a domestic award rendered in a non-international commercial arbitration and an award rendered in an international commercial arbitration and the standard of public policy applicable to each. Similarly, s.48 of the new Act now specifies the heads of public policy and does not mention patent illegality as a ground, in line with Shree Lal Mahal.107 The Law Commission reasoned that the courts would have greater legitimacy in intervening in a purely domestic arbitration than in a domestic arbitration with certain international features. However, it does not clarify how the judiciary has such legitimacy.108 The only distinction that perhaps exists between the two awards is that intervening in domestic awards does not violate international obligations. The Law Commission recognised that there is no principled basis for intervening in arbitral awards, just as it recognised that the standard in Saw Pipes was quite unwarranted. Yet the legislature needed to allay the fears of the judiciary and other stakeholders in the quality of arbitral awards rendered domestically. This signals that the courts are still reluctant to give arbitration the parity it deserves with other judicial processes. While there is great room for improvement in the domestic arbitration landscape, a signal of confidence from the legislature and the judiciary should

103 Law Commission of India, Supplementary to Report No.246: Amendments to the Arbitration and Conciliation Act 1996, (2015), http://lawcommissionofindia.nic.in/reports/Supplementary_to_Report_No._246.pdf [Accessed 19 March 2107] at [10.4–10.6]. 104 Royal Sundaram Alliance Insurance Co Ltd v CEPCO Industries Pvt Ltd MANU/DE/4111/2015. 105 Silver Resorts Hotel India Pvt Ltd v Wimberly Allison Tong & Goo (UK) MANU/DE/1650/2016. 106 S.K.S. Logistic Ltd v Oil & Natural Gas Corp Ltd MANU/TN/1379/2016 107 The Arbitration and Conciliation (Amendment) Act 2015 s.48 states, “Explanation 1.—For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,— (i) the making of the award was induced or affected by fraud or corruption or was in violation of s.75 or s.81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice. Explanation 2.—For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.” 108 Law Commission Report No.246 at [34] and [35].

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators 162 Arbitration be simultaneous. The judiciary can still send this signal since the legislature has effectively left the decision to the judiciary: under the amended s.34, the judiciary can still review a purely domestic award on the ground of patent illegality. However, it is made express that an award cannot be set aside “merely on the ground of an erroneous application of the law or by reappreciation of evidence”.109 Thus it seems that the legislature intends to go back to the interpretation given to Saw Pipes that patent illegality must go to the very root of the matter and a mere violation of the merits of the award is not sufficient to merit a review. Deciding what reasons or facts may contribute to an incorrect reading of the law or facts to render the award patently illegal is still the prerogative of the judiciary. It is hoped that the lease of life given to arbitration in India through the Arbitration and Conciliation (Amendment) Act 2015 will not be short-lived.

6. Course Correction: Current Status At the time of writing, the status of the course correction of the judiciary and the legislature is summarised in Table 1.

Table 1: Course correction trajectory of the judiciary and the legislature Ground Domestic award aris- Domestic award aris- Foreign awards ing out of non-interna- ing out of international tional commercial arbi- commercial arbitra- trations tions Patent illegality Presently applicable ex- No longer applicable Setting aside: applicable only cept law and evidence under the Arbitration in respect of arbitrations cannot be re-evaluat- and Conciliation commenced before 23 Octo- ed—course correction (Amendment) Act 2015 ber 2015 in respect of arbitra- awaited. tion agreements entered into between 13 March 2002 and 6 September 2012 Enforcement: not applicable following the decision in Shree Lal Mahal. Fundamental poli- Merits of the award Merits of the award Merits of the award cannot cy of India cannot be reviewed as cannot be reviewed as be reviewed as the decision the Arbitration and the Arbitration and of Renusagar was confirmed Conciliation (Amend- Conciliation (Amend- by the Arbitration and Concil- ment) Act 2015 over- ment) Act 2015 over- iation (Amendment) Act ruled Western Geco but ruled Western Geco. 2015. see Silver Resorts Hotel India Pvt Ltd v Wimber- ly Allison Tong & Goo (UK).

While Table 1 encapsulates the concerted corrections made by the judiciary and legislature, it also prompts us to think about the numerous judicial errors that were made in the first place and further, the erratic nature in which they were committed—the errors cannot be compartmentalised into a span of time but are interspersed between the amendments that took place. As in a game of whack-a-mole, every time the ground of patent illegality or an aspect of it was satisfactorily dealt with, another aspect of public policy such as the fundamental policy of India was treated in the same careless manner. This points to the conclusion that legislative amendments in isolation will not suffice until attitudinal amendments are made by the judiciary, the legislature and all other stakeholders. The picture that emerges, as captured in this article, is not perfect. Domestic awards can still be reviewed

109 Arbitration and Conciliation (Amendment) Act 2015 proviso to s.34(2A).

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators Public Policy and Indian Arbitration 163 on the merits since not enough stakeholder support could be gathered for a complete overruling of Saw Pipes by legislation. Further, the complicated interplay of BALCO, Satyam and the Arbitration and Conciliation (Amendment) Act means that a certain number of foreign awards and agreements are not immune from the Saw Pipes standard and require special attention. Despite the detailed and specific proscriptions provided in the Arbitration and Conciliation (Amendment) Act, the final word on the finality of arbitral awards is still with the judiciary to be the “good man in the saddle”110 to tame the “unruly horse”111 that is public policy.

110 Enderby Town Football Club Ltd v Football Assn Ltd (1971) Ch. 591; [1970] 3 W.L.R. 1021; [1971] 1 All E.R. 215. 111 Richardson v Mellish (1824) 2 Bing 229; 130 E.R. 294; [1824–34] All E.R. 258 per Burrough J.

Gordon Blanke

Introduction This article is Part II of an article, Part I of which was published in the preceding issue of Arbitration.1 It provides a running update on the latest notable developments of (international) commercial arbitration in the UAE. The diversity of these developments, including the co-existence of a full-blown civil and common law legal system in the form of the on- and offshore jurisdictions of the UAE2 and the financial free zones of the Dubai International Financial Centre (DIFC) as well as the more recent Abu Dhabi Global Market (ADGM), each with its own stand-alone arbitration law,3 bears testimony to the creativity of the UAE as a place of arbitration, which has earned it the reputation of an “arbitration laboratory”.4 In the following pages, we will trace a number of additional recent developments spanning the past year or so in the hope that this might engender a better understanding of the continuous contribution the UAE have been making to the growth of arbitration into a mature dispute resolution mechanism as an alternative to the courts both within and beyond their borders.5

1. The DIAC Soon to Adopt Revised Rules With a consultation exercise in full swing, the DIAC is soon to adopt its newly revised set of rules. It is not yet certain precisely what changes will be made to the existing 2007 version of the DIAC Rules,6 but it is anticipated that the DIAC will seize the opportunity to ensure that the revised rules will equal other international sets of arbitration rules that are leading in the region, such as the Rules of the International Chamber of Commerce (ICC) and the DIFC-London Court of International Arbitration (LCIA) Rules of Arbitration. It will therefore hardly come as a surprise that apart from seeking to enhance some of the language of the older version of the rules, the revised DIAC Rules will most likely introduce a provision on emergency arbitrators, who deal with urgent applications by the arbitrating parties prior to establishment of the arbitral tribunal, and an expedited arbitration process for disputes that are of exceptional urgency and that do not exceed a particular claim value. Rumour also has it that the DIAC is contemplating adopting an alternative default-appointment process that allows parties to be involved in the default appointment of presiding arbitrators through the use of a preferential list nomination process.

1 G. Blanke, “Recent Developments of (International) Commercial Arbitration in the UAE (Part I)” (2016) 82 Arbitration 427–437. 2 In particular the Emirates of Dubai and Abu Dhabi. 3 To wit, the DIFC Arbitration Law and the 2015 ADGM Arbitration Regulations, both of them modelled on the UNCITRAL Model Law. 4 See G. Blanke, “Recent Developments of (International) Commercial Arbitration in the UAE (Part I)” (2016) 82 Arbitration 427. 5 Given the prevailing constraints of space, and the volume of developments that are worth reporting, this article will be followed by a Part III, to be published in the next issue of Arbitration. 6 Which is available online on the official website of the DIAC at http://www.diac.ae/idias/rules/ [Accessed 19 March 2017].

2. The DIAC and DRA Sign MoU to Promote Enforcement of DIAC Awards by the DIFC Courts7 On 20 September 2016, in a somewhat unanticipated move, the DIAC and the DIFC Dispute Resolution Authority (DRA)—which comprises both the DIFC Academy of Law and the DIFC courts, the autonomous common law judiciary based in the DIFC—signed a Memorandum of Understanding (MoU) to promote their mutual co-operation, including in particular the recognition and enforcement of DIAC awards by the DIFC courts.8 The MoU envisages different forms of co-operation between the DIAC and the DRA at a number of levels, including more specifically the development and dispensation of joint training programmes to the legal profession in the Middle East, the joint marketing of their services, the organisation of joint conferences and seminars on matters of common interest to both institutions, joint research and academic writing.9 Given DIAC’s main focus on arbitration as an alternative form of dispute resolution, the MoU’s focus is equally on arbitration. As its title suggests, the main objective of the MoU is to enhance the recognition and enforcement of DIAC awards by the DIFC courts. In the words of the MoU: “The Parties have agreed to enter into this MOU in order to execute, consult, cooperate and exchange information with each other in areas of mutual interest that will further enhance their respective strategic interests and objectives, specifically: a. the expedited recognition, ratification and/or enforcement of DIAC arbitration awards by the DIFC Courts. For this purpose, the Parties will exchange information regarding the applicable procedures, rules, regulations and laws (including the DIFC Courts’ Rules Pt 45) relevant to the recognition, ratification and/or enforcement of a DIAC award by the DIFC Courts. The [P]arties will work together to identify ways to ensure parties electing to arbitrate under the DIAC rules/deciding to include the model clause in a contract, are aware of the options available to them in Dubai when determining the seat of arbitration. In addition, the Parties will discuss with each other the possibility of amending the current DIAC rules for consideration by the Board of Trustees of DIAC to include provisions for the expedited recognition, ratification and enforcement of DIAC arbitral awards by the DIFC Courts.”10 At first glance, it is not clear from the wording of the MoU what shape the enhancement of the recognition and enforcement of DIAC awards by the DIFC courts is intended to take. Given that the choice of a jurisdiction for enforcement of an arbitral award usually depends

7 Based on G. Blanke, “DIAC and DRA sign MoU to promote enforcement of DIAC awards by the DIFC Courts: A second look”, (Kluwer Arbitration Blog, 2016), http://kluwerarbitrationblog.com/2016/11/12/diac-and-dra-sign-mou-to-promote-enforcement-of-diac-awards-by-the-difc-courts-a-second-look/ [Accessed 19 March 2017]. See also G. Blanke, “Memorandum of Understanding between the DIAC and the DRA”, MENA Newsletter (London: Thomson Reuters, 2016). 8 See Memorandum of Understanding Between Dubai International Financial Centre And DIFC Dispute Resolution Authority For Mutual Cooperation Including Enhancing the Recognition and Enforcement of DIAC Arbitration Awards by the DIFC Courts and regarding Training, Research and Developments of Programmes, For the benefit of the Legal Community in the Middle East, dated 20 September 2016, see the official website of the DIFC Courts at http://difccourts.ae/memorandum-understanding-diac-dra/mou-between-dra-and-diac-20-september-2016/ [Accessed 19 March 2017]. 9 See in particular Memorandum of Understanding Between Dubai International Financial Centre And DIFC Dispute Resolution Authority For Mutual Cooperation Including Enhancing the Recognition and Enforcement of DIAC Arbitration Awards by the DIFC Courts and regarding Training, Research and Developments of Programmes, For the benefit of the Legal Community in the Middle East, dated 20 September 2016 at para.II.A.b, http://difccourts .ae/memorandum-understanding-diac-dra/mou-between-dra-and-diac-20-september-2016/ [Accessed 19 March 2017]. 10 See Memorandum of Understanding Between Dubai International Financial Centre And DIFC Dispute Resolution Authority For Mutual Cooperation Including Enhancing the Recognition and Enforcement of DIAC Arbitration Awards by the DIFC Courts and regarding Training, Research and Developments of Programmes, For the benefit of the Legal Community in the Middle East, dated 20 September 2016 at para.II.A.a, http://difccourts.ae/memorandum -understanding-diac-dra/mou-between-dra-and-diac-20-september-2016/ [Accessed 19 March 2017].

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators 166 Arbitration on the location of the award debtor’s assets, it is questionable whether there is any sense at all in aiming for enhancing the co-operation in enforcement by the DIFC courts unless a significant proportion of award debtors were to have assets in the DIFC, which—in our experience—is simply not the case. Further, the suggestion that this may all be down to the drafting of the arbitration clause is misdirected. A simple amendment of the existing DIAC Rules to make provision for the expedited recognition and enforcement of DIAC awards by the DIFC courts would go beyond the powers accorded to the DIAC in administering arbitration services as well as the powers accorded to the contracting parties in their submission to arbitration. The DIFC courts have established a discernible track record as a host or conduit jurisdiction, entertaining actions for the recognition and enforcement of both domestic and foreign arbitral awards in mainland Dubai for onward execution elsewhere onshore, even absent any geographic nexus to the DIFC.11 Such awards have more specifically included awards rendered under the DIAC Arbitration Rules in arbitrations seated in onshore Dubai.12 It is worth mentioning in this context that the DIFC courts’ recently acquired status as a host jurisdiction has been criticised by some as a form of creeping jurisdiction, acquired through the increasingly expansive scope of DIFC judge-made law. The expansion of the DIFC courts’ jurisdiction has, in turn, given rise to considerations of conflicts of jurisdiction between the onshore Dubai and offshore DIFC courts. So far, any such conflicts had been understood to have been resolved in favour of the court first seised, in terms promotive of and facilitated by the free movement of judgments, orders and ratified awards between the Dubai and the DIFC courts by virtue of the regime of mutual recognition established by the Judicial Authority Law as amended art.7. In order to meet any residual jurisdictional concerns, the Ruler of Dubai has recently established the Dubai–DIFC Judicial Committee, which is entrusted with the determination of conflicts of jurisdiction between the Dubai and DIFC courts.13 Importantly, it has been reported that one such jurisdictional conflict is presently pending for consideration by the Committee. With this background in mind, it remains questionable how co-operation between the DIAC and the DRA could possibly contribute to the recognition and enforcement of DIAC awards, other than to confirm and hence strengthen the DIFC courts’ acquired status as a host jurisdiction for domestic DIAC awards. The DIAC itself does not have the power to direct the recognition and/or enforcement of its awards by any courts. Nor can the choice of DIAC arbitration affect the discretion of an enforcing court to recognise and/or enforce a resultant award or indeed pre-determine the ultimate court of enforcement of a resultant award. The only court that may be pre-determined by choice of arbitration is the curial court in charge of supportive measures of the arbitration or actions for nullification: this, however, will typically be the court at the seat of arbitration. For the avoidance of doubt, choice of mainland Dubai as the seat of the arbitration will import the curial competence of the onshore Dubai courts, choice of the DIFC that of the offshore DIFC courts. There is also little more sense to be gained from the intended expedition of the DIFC recognition and enforcement process. As far as we are aware, on previous occasions, the DIFC courts have readily ratified and enforced DIAC awards, no particular (time-consuming) obstacles having been identified as slowing down, let alone impeding the enforcement process.

11 See Case No.ARB 002/2013: (1) X1, (2) X2 v (1) Y1, (2) Y2, ruling of the DIFC Court of First Instance, undated, 2014; and Case No.ARB 003/2013: Banyan Tree Corporate Pte Ltd v Meydan Group LLC, ruling of the DIFC Court of First Instance of 27 May 2014; and my previous reporting at http://kluwerarbitrationblog.com/2014/06/07/difc -court-of-first-instance-confirms-its-status-as-host-jurisdiction-for-recognition-of-both-domestic-and-foreign-awards / [Accessed 19 March 2017]. 12 See Case No.ARB 003/2013: Banyan Tree Corporate Pte Ltd v Meydan Group LLC, ruling of the DIFC Court of First Instance of 27 May 2014; and my previous reporting at http://kluwerarbitrationblog.com/2015/07/19/arb -0032013-the-difc-court-of-first-instances-sequel-in-banyan-v-meydan/ [Accessed 19 March 2017]. 13 See Decree No.(19) of 2016 forming the Judicial Committee of the Dubai Court and the DIFC Courts, dated 9 June 2016.

This discussion brings to mind the recent decision of the DIAC to open a branch in the DIFC14 on the pretext that awards rendered in a DIFC DIAC forum would be more easily enforceable before the DIFC courts (although interestingly, there is no mention in the MoU of the opening of the DIAC in the DIFC). As has been seen above, neither the seat of the arbitration nor the seat of the arbitration institution will affect the enforceability of a resultant award. If anything, given the arbitration-friendliness of the DIFC courts and the arbitration maturity of the DIFC judiciary, the designation of the DIFC as the seat of arbitration may assist in protecting a resultant award from frivolous challenges. With this objective in mind, DIAC may wish to amend its model arbitration clause for use in the DIFC by making the DIFC a mandatory seat of the arbitration. Bearing in mind the wording of the MoU on the subject, a like-worded DIAC DIFC Model Arbitration Clause may be a viable proposition. Taken in the round, the MoU is predicted to have positive effects on the relations between onshore and offshore Dubai in matters of arbitration. It is to be hoped that the various forms of co-operation undertaken by the DIAC and the DRA will promote the complementarity of a civil and common law arbitration offering in the UAE, for choice by the contracting parties. For the reasons discussed above, it is, however, unlikely that it will have any impact on the enforceability of DIAC awards before the DIFC courts, a subject matter that, in any event, has already been decided in the affirmative.

3. Dubai Courts Recognise Application of Apparent Authority to Formation of Arbitration Agreements15 In a sequence of recent rulings starting in 2015, the Dubai courts have confirmed that the doctrine of apparent authority does, after all, apply to the formation of arbitration agreements. The former prevailing position was that apparent authority did not have a place in arbitration, which requires a special—rather than just a general—power of attorney for an attorney’s agreement to arbitrate to bind the original rights holder.16 In its more recent case law precedent, the Dubai Court of Cassation takes the firm view that a natural person signing an arbitration agreement on behalf of a legal person binds that person to arbitration unless proven otherwise. In this sense also, an agent has been taken to bind a principal to arbitration to some extent in the past.17 This development is encouraging and demonstrates yet again the often-understated, arbitration-friendly nature of the UAE and in particular the Dubai courts. Given their importance to the successful enforceability of arbitration agreements against original rights holders, all three Dubai Court of Cassation judgments under scrutiny here deserve closer scrutiny. One of the traditional arguments raised by award debtors in defence to an action for enforcement by an award creditor of a domestic arbitral award within the UAE is the incapacity of the original signatory of the underlying arbitration agreement and the resultant nullity of the arbitral award as against the legal person on whose behalf the arbitration agreement is purported to have been signed.18 Even though that argument had some credit

14 See G. Blanke, “The DIAC goes offshore: Strategic move or promotional ploy?”, (Kluwer Arbitration Blog, 2016), http://kluwerarbitrationblog.com/2016/06/06/the-diac-goes-offshore-and-the-proverbial-proof-of-the-pudding / [Accessed 19 March 2017]. 15 Based on G. Blanke, “Dubai Courts confirm application of apparent authority to arbitration” (London: Thomson Reuters, forthcoming). See also G. Blanke, “Arbitration in the UAE: End of Year Round-up—From Apparent Authority and shipping arbitration under the EMAC Rules to Kompetenz-Kompetenz under the DIFC Arbitration Law (Part 2)”, (Kluwer Arbitration Blog, 2017), http://kluwerarbitrationblog.com/2017/01/18/arbitration-in-the-uae-end-of-year-round-up-from-apparent-authority-and-shippingarbitration-under-the-emac-rules-to-kompetenz-kompetenz-under-the-difc-arbitration-law-part-2/ [Accessed 19 March 2017]. 16 See the UAE Civil Procedures Code art.58 read together with art.203(4), and the extensive commentary provided in G. Blanke, Commentary on the UAE Arbitration Chapter (London: Sweet & Maxwell/Thomson Reuters, 2017), paras II-017 and II-032-II-037. 17 See G. Blanke, Commentary on the UAE Arbitration Chapter (London: Sweet & Maxwell/Thomson Reuters, 2017), paras I-108 and II-018. 18 See UAE Civil Procedures Code art.216(1)(b); and G. Blanke, Commentary on the UAE Arbitration Chapter (London: Sweet & Maxwell/Thomson Reuters, 2017), at para. II-140.

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators 168 Arbitration under the former case law precedent, it will hardly succeed following the findings of the Dubai Court of Cassation in the more recent rulings discussed here. At least two of these rulings dealt with a request to enforce an arbitration award rendered under the auspices of the DIAC against limited liability companies (LLCs), whose general managers are presumed to have the power to bind the company to arbitration under the prevailing provisions of UAE law and established case law precedent.19 In the first ruling,20 Palm Jebel Ali LLC (PJA), the award debtor, sought the nullification of the award on the basis that the underlying arbitration agreement was not signed by an authorised representative of PJA and therefore was not enforceable against it. According to PJA, given its status as an LLC, it was only its manager that had authority to sign, no one else having been authorised by the manager to do so. Further, there was no obligation on PJA to disclose the identity of the person that appeared to have signed the agreement nor was PJA’s company stamp to be taken into consideration in determining whether the arbitration agreement had binding effect. Finally, pursuant to PJA, it was for Mr Stenet, the award creditor, to prove that PJA’s manager authorised someone else to sign the agreement. The Dubai Court of Cassation rejected PJA’s motion for nullification. According to the Court, bland allegations that the signature of a contract did not accord with that of a company’s manager (despite submission in evidence of specimen signatures) could not succeed without a formal filing for forgery; there was a presumption that the signature placed on behalf of the company was that of an authorised person or representative. In addition, in the Court’s view, the apposition of the company stamp was, in itself, sufficient to confer authenticity and hence a binding effect on the underlying arbitration agreement. The Court hence stated in relevant part: “It is well established that managers of limited liability companies have full management authority and have the capacity to dispose of rights associated with their activities, including agreeing to arbitration in contracts entered between the company and other parties, unless the company’s articles of association limit the manager’s authority by … preventing him clearly from agreeing on arbitration. The manager of the company may delegate his authority in whole or in part to another party unless a clause in the company’s memorandum of association provides otherwise. The other representative in this case is considered a representative of the company and the effects of his actions are binding on the company. It is also well established before this Court that if a name of a company is stated at the beginning of a contract and someone else signs this contract, then this shall constitute legal evidence that the person signing the contract signed it for and in the name of the company. And then, the subsequent rights and obligations arising from that contract become binding on the company as the delegated person is considered, in these circumstances, authorised by the representative. It is also established that signing by affixing signature or stamp or fingerprint to an act under private signature is the only way of giving it authenticity. In the light of the foregoing, it is found that the subject English language contract is affixed with the stamp of the company and with a signature attributed to its representative. Thus, this contract is authentic and binding and the signature is presumed to belong to its representative unless evidence is submitted proving otherwise.”21 In the second ruling,22 Middle East for Development LLC (MED), the award debtor, was equally rebuffed by the Dubai Court of Cassation in its endeavours to nullify on the

19 See UAE Commercial Companies Law art.237; and G. Blanke, Commentary on the UAE Arbitration Chapter (London: Sweet & Maxwell/Thomson Reuters, 2017), paras I-073 and II-021. 20 See Case No.547/2014: Palm Jebel Ali LLC v Alan Stenet, ruling of the Dubai Court of Cassation of 21 October 2015. 21 Case No.547/2014: Palm Jebel Ali LLC v Alan Stenet, ruling of the Dubai Court of Cassation of 21 October 2015 (my translation). 22 See Case No.293/2015: Middle East for Development LLC v Safir Real Estate Investments LLC, ruling of the Dubai Court of Cassation of 27 January 2016.

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators Recent Developments of (International) Commercial Arbitration in the UAE (Part II) 169 basis of lack of capacity a DIAC award rendered in favour of Safir Real Estate Investments LLC (Safir) in relation to the late delivery of an off-plan real estate unit. MED regarded as defective and flawed in its reasoning the Dubai Court of Appeal’s ruling according to which MED had failed to prove that the person who signed the underlying arbitration agreement was not MED’s general manager or a duly authorised signatory. The Court of Appeal also relied on MED’s failure to raise the defence of incapacity before the DIAC tribunal itself. Before the Dubai Court of Cassation MED sought to argue that MED’s signatory (not being a general manager) had only been granted a general—as opposed to a special—power of attorney and could therefore not bind the company to arbitration. In response, the Dubai Court of Cassation started from the premise that the burden of proof for a successful action for nullification rested upon the award debtor. It then continued to summarise the court’s acquis on the issue of capacity in the following terms: “[It] is established in the terms of Article 203(4) of the UAE Civil Procedures Code that recourse to arbitration may be agreed upon only by a person with legal capacity to dispose of the disputed right. The legal capacity of persons is verified by arbitration tribunals before deciding upon disputes and their awards become null if the legal capacity requirement is not met. And the court would order nullification of such void award according to Article 216(1)(c) of the UAE Civil Procedures Code. Nullification is only reversed by the litigant’s subsequent approval of its representative’s unauthorised recourse to arbitration during the arbitration proceedings and before issuance of the arbitration award.”23 In the course of the ruling, the Dubai Court of Cassation addressed the individual grounds of appeal advanced by MED in further detail, citing with approval from the Dubai Court of Appeal’s ruling at length as follows: “It is true that the Commercial License of [MED] indicates that it is a limited liability company managed by Muhsin Umar Hassan Al-Amudi and thus he is the person authorised to sign the arbitration clause. This being said, [MED] failed to provide evidence that the other person who signed the clause is not the general manager or another person unauthorised to agree to arbitration. Additionally, it is established from the subject Sale and Purchase Agreement and its translation (the subject matter of arbitration award) that the person who signed this agreement is the authorised representative of the selling company. The signature block reads ‘Signature of the authorized seller’. This leads the Court to conclude that the person who signed the agreement that includes the arbitration clause is an authorised person. Moreover, [MED] did not provide evidence that disproves this clear apparent fact in the Agreement. It only said that the manager did not authorise the person who signed the Agreement. According to the appellant, ‘Mr Usamah Salah al-Dimishqi has a general power of attorney notarized by the notary of Dubai’s courts. The power of attorney is by the owner of company, Mr Tariq Bin Muhammad Bin Awad Bin Ladin. But, this power of attorney did not authorise him to agree on the arbitration clause in the Sale and Purchase Agreement.’ However, the Agreement says that the arbitration clause was signed based on an authorisation. Furthermore, it is well established before this Court based on its review of the subject arbitration award that, according to Item No.7.5, on 6 May 2012, the lawyers of [MED] submitted copies of their duly notarised powers of attorneys, a special power of attorney and a notarisation letter according to the requests the arbitration tribunal made in its letter of 30 April 2012. Also, Item No.7.20 stated that on 30 August 2012, the arbitration tribunal acknowledged receipt of four sets of original copies of jurisdiction and procedural order No.1 from [MED]. On the same day, the arbitration tribunal requested [MED] to provide it with a new

23 Case No.293/2015: Middle East for Development LLC v Safir Real Estate Investments LLC, ruling of the Dubai Court of Cassation of 27 January 2016 (my translation).

duly notarised special power of attorney. According to Item No.7.21, on 25 September 2012, the arbitration tribunal received a confirmation from [MED] and [Safir] that there is no need to submit copies of any other documents. According to Item No.7.24, on 25 September 2012, the arbitration tribunal received the updated power of attorney of [MED] and sent a confirmation on the following day (26 September) to the two parties that it was valid. Thus, the Court finds that the arbitration tribunal verified, before deciding upon the dispute, that the lawyer had the legal capacity to have recourse to or agree to arbitration by virtue of a special authorisation from the client ([MED]) …. The arbitration tribunal also verified, before deciding upon the dispute, the litigant’s subsequent authorisation to the said attorney during the arbitration proceedings and before issuance of the arbitration award, not after close of the proceedings and issuance of the award. … Having perused the Sale and Purchase Agreement dated 28 May 2006, the Court finds that all the pages of this Agreement carry the stamp of [MED] and the signature of the authorised seller. Having also perused the subject arbitration award, the Court finds that the appellant did not present its argument (that the person who agreed to the arbitration does not have legal capacity to agree to the arbitration clause in the 25 August 2006 agreement) to the arbitration tribunal and thus there is a direct implied approval of the arbitration (an approval to the attorney in the subject arbitration case). Thus, the appellant’s aforesaid argument in relation to legal capacity is baseless and groundless and has no factual or legal valid reason and is thus rejected.”24 In the third ruling,25 the Dubai Court of Cassation concluded as follows: “It is … well established before this Court that if the name of a certain company has been included in the beginning and introduction of a contract while another person signed at the bottom of that contract, this establishes a legal presumption that whoever signs the contract has done so in the name of and for the company irrespective of whether the company’s name is associated with that of the individual signatory. In such case, the rights and obligation resulting from that contract accrue to the company. Accordingly, if the name of the legal person had been stated in the preamble of the contract associated with the name and capacity of the legal representative while the contract was signed clearly by another person and the contract included the arbitration clause, the legal person may plea the nullity of the arbitration clause because it had been signed by a person other than the legal representative which has the power to agree to arbitration. On the contrary, if the name of the legal person had been stated in the preamble of the contract not associated with the name and capacity of the legal representative while the contract was signed unclearly including the arbitration clause, there will be a decisive presumption that he who signed that contract has the power of disposal and the power to agree to arbitration and it is not acceptable to challenge that the signature is not the signature of the legal representative in accordance with the principle of good faith and in accordance with the stipulated standards in the terms of Article 70 of the UAE Civil Transactions Code, according to which no person may resile from what he has conclusively performed and a litigant cannot use his own actions as evidence of his claim against other parties. It is established from reviewing the copy of the sale contract, the subject of the lawsuit, which was written in English and translated into Arabic and which included the subject arbitration clause that it is signed illegibly and is attributed to the seller ‘Al-Firjan LLC’, which name was stated in the beginning of the sale contract including the arbitration clause, while the name of the legal representative was not stated at the preamble. Therefore, the contract has

24 Case No.293/2015: Middle East for Development LLC v Safir Real Estate Investments LLC, ruling of the Dubai Court of Cassation of 27 January 2016 (my translation). 25 Case No.310/2015: Al-Firjan LLC v JNR Development Limited, ruling of the Dubai Court of Cassation of 27 April 2016.

the conclusiveness against it and the signature is deemed as issued by someone who represents it.”26 Taken in the round, the above-mentioned rulings confirm the application of the concept of apparent authority to the formation of arbitration agreements. There also now appears to be a legal presumption in favour of capacity to sign where an award debtor has entirely failed to raise the capacity defence before the arbitral tribunal. The most recent rulings of the Dubai Court of Cassation give rise to the proposition that failure to do so amounts to a waiver to raise the capacity defence at the enforcement stage. For the avoidance of doubt, the burden to prove lack of capacity rests on the award debtor. That said, care has to be taken not to generalise the outcome of those rulings too readily, especially given that the Dubai courts’ reasoning may have been intended to be cumulative, rather than that each ground was to be taken separately.

4. Amendment of the UAE Penal Code Article 25727 One of the most recent developments that has attracted immediate criticism in specialist circles is the amendment of the UAE Penal Code art.257 to include arbitrators: “An expert, arbitrator, translator or investigator who is appointed by a judicial or an administrative authority or elected by the parties and who issues a decision or expresses an opinion or submits a report or presents a cause or proves an incident in favour of a person or against him contrary to the obligation of fairness and impartiality shall be punished by temporary imprisonment. The aforementioned shall be precluded from performing the duties they were charged with in the future.”28 There have been rumours that, in reaction to this amendment, some international law firms have placed an immediate ban on their arbitration partners to serve arbitrator mandates in the UAE and have invited any presently serving arbitrators to withdraw from their UAE-seated mandates. This, no doubt, is a precautionary measure to forestall any negative publicity that potential criminal prosecution (whether ultimately meritorious or not) may entail (apart from an obvious desire to avoid litigation in court and the expenses and commitment of executive time this may require). This is assuredly an over-reaction. One must not forget that a withdrawal by an arbitrator from a pending mandate without good reason may attract civil liabilities under various regional institutional rules as well as the UAE Arbitration Chapter art.207(2) and is unlikely to be covered by professional indemnity insurance. This said, it is unlikely that the new amendment will dissuade arbitrators from serving mandates in the UAE. The main reason for this is that on the basis of UAE criminal law, it will be very difficult to prove the underlying bias that gives rise to criminal liability. It is also important to note that the provision has already been in force with respect to court-appointed experts and translators for many years and its implementation to date does not appear to have caused any major concerns. Nonetheless, there is a real danger that art.257 as amended might be invoked abusively by unmeritorious parties that are known to make use of guerrilla practices in a local arbitration context. Judging by the UAE courts’ mature handling to date of vexatious civil liability claims brought by such parties before

26 Case No.310/2015: Al-Firjan LLC v JNR Development Limited, ruling of the Dubai Court of Cassation of 27 April 2016 (my translation). 27 Based on G. Blanke, “Arbitration in the UAE: End of Year Round-up—From the Penal Sanctioning of Arbitrators to the 2016 DIFC–LCIA Rules of Arbitration (Part 1)”, (Kluwer Arbitration Blog, 2017), http://kluwerarbitrationblog.com/2017/01/17/arbitration-in-the-uae-end-of-year-round-up-from-the-penal-sanctioning-ofarbitrators-to-the-2016-difc-lcia-rules-of-arbitration-part-1/ [Accessed 19 March 2017]. 28 My italics to indicate amended wording.

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators 172 Arbitration the Dubai courts, arbitrators can rest assured that the UAE judiciary will only entertain the most serious infringement.29 There is reason to believe that the initial excitement caused by the amendment to the UAE Penal Code will be short-lived and parties with bad intentions—faced with an unreceptive local judiciary—will ultimately desist from pursuing vexatious criminal liability claims against irreproachable arbitrators. It is important to bear in mind that criminal liability under UAE law requires—for want of a better term—mens rea and will therefore only trigger the criminal liability of an arbitrator who knowingly “issue[s] a decision or expresses an opinion … contrary to the duty of fairness and impartiality”.30 This means that an arbitrator’s criminal liability will only come into play if it can be established that he or she has favoured one of the parties to the arbitration with the intention of providing an unfair advantage, so the bias must be proven to have been intentional (gross professional negligence is likely to attract only civil liability). A qualifying advantage can be procedural, such as not having accorded a party a fair hearing, or substantive, such as a finding in favour of a party in violation of the prevailing law on the merits. Any such violations, whether procedural or substantive, must be proven to have been committed by the arbitrator intentionally, i.e. a genuine error in applying the law or the unintentional conferral of a procedural advantage will not be sufficient.

5. DIFC–LCIA Adopts Revised Set of Rules The DIFC–LCIA Arbitration Centre, the DIFC-based sister organisation of the London Court of International Arbitration (LCIA), has adopted a revised set of arbitration rules, the 2016 DIFC–LCIA Rules. These entered into effect on 1 October 2016 and apply to all new arbitration proceedings commenced in a DIFC–LCIA forum from that date. The 2016 version of the Rules is very closely modelled on the 2014 LCIA Arbitration Rules, which have been in effect since 1 October 2014 and have so far proven uncontroversial in practice. The principal changes introduced by the 2016 version of the Rules are largely cosmetic and leave the overall operating system of the DIFC–LCIA Rules intact. These changes, one senses, have been adopted in order to enhance the overall efficiency and integrity of arbitrations conducted under the auspices of the DIFC–LCIA. Other changes, however, are more conceptual in nature and have probably been adopted in an attempt to modernise the rules in order to bring them into line with other leading sets of international arbitration rules, such as those of the ICC International Court of Arbitration, the Singapore International Arbitration Centre (SIAC) and the Hong Kong International Arbitration Centre (HIAK), all (potentially) strong competitors in the region. Yet a third category of changes appears to aim at underlining the distinctive character of the DIFC–LCIA Rules and at giving them a competitive edge over other competing sets of international rules. Starting with those changes that are probably intended to promote the efficient and integral conduct of DIFC–LCIA arbitrations, the following changes, listed in the order in which they appear in the Rules, are most noteworthy: • Electronic filings: The revised Rules contain a number of provisions that assist in accelerating the arbitration process by permitting the use of electronic means of communication in the filing process. Articles 1.3 and 2.3 allow parties to use

29 For the avoidance of doubt, none of the recent civil liability claims for professional negligence before the UAE courts has succeeded; see my previous commentary: G. Blanke, “The liability of arbitrators in the UAE: Quod novi sub sole?”, (Kluwer Arbitration Blog, 2016), http://kluwerarbitrationblog.com/2016/03/28/the-liability-of-arbitrators -in-the-uae-quod-novi-sub-sole/ [Accessed 19 March 2017]. For a more detailed study, see M. Torres-Lagarde, “Liability of Arbitrators in Dubai: Still a Safe Seat of Arbitration” 33(4) (2015) ASA Bulletin 780–807. 30 This requirement remains unaffected by the removal of the word “knowingly” from the original version of art.257.

a standard electronic form available online on the DIFC–LCIA website for filing a request for arbitration (the “Request”) and a response to the Request (the “Response”). Article 4.3 introduces the delivery of written communications, including pleadings on the merits, by electronic means (as opposed to paper delivery in hard copy) more generally (provided the agreement of the opponent party or an express order by the tribunal and that the chosen electronic means leaves a record of transmission). It is important to bear in mind, though, that a claiming party is under an obligation to provide sufficient evidence of the actual delivery of the Request.31 • Timeframes: The due dates for submissions, starting with the Response, have been brought forward and start counting in a 28-day hiatus from receipt by the DIFC–LCIA Registrar of the Request32 or from the Registrar’s notification of the constitution of the tribunal for the parties’ pleadings on the merits.33 • Constitution of the tribunal: The constitution of the tribunal must not be affected by the potential incompleteness of the Request or the Answer and any controversies between the parties in relation thereto.34 • Expedited replacement of arbitrator: The revised Rules art.9C allows for the expedited appointment of a replacement arbitrator, thus mirroring art.9A on the expedited formation of a DIFC–LCIA arbitral tribunal in cases of exceptional urgency. • Direct communication with the tribunal: Unless the tribunal orders otherwise, communications between the tribunal once constituted and the parties will be direct (with copy to, rather than through, the Registrar).35 • Tribunal and parties to make contact: The revised Rules art.14.1 encourages the tribunal and the parties to make contact (whether by a hearing in person, teleconference, videoconference or exchange of correspondence) within 21 days after the Registrar’s notification of the constitution of the tribunal. No doubt, this provision is to ensure that the tribunal and the parties will put in place and manage the procedure as soon as possible after the tribunal’s formation. This provision recalls the corresponding requirement for holding a case management conference under the ICC Rules and the UAE Arbitration Chapter art.208(1), which requires the tribunal and the parties to schedule a preliminary meeting within 30 days from acceptance of a tribunal’s mandate. • Statement of defence: A respondent may now elect to have the Response stand as its Statement of Defence (thus self-evidently saving time in the preparation and filing of its defences).36

31 See art.1.1(vii), revised Rules. 32 See art.2.1, revised Rules. 33 See art.15, revised Rules. 34 See art.5.1, revised Rules. 35 See art.13.1, revised Rules. 36 See art.15.4, revised Rules.

• Due date of the award: The tribunal is required “to make its final award as soon as reasonably possible following the last submission from the parties”.37 Amongst conceptual changes whose likely main objective is to help the DIFC–LCIA Rules catch up with the more recent wave of modernisation of competing sets of international rules, the following stand out in particular: • The tribunal’s availability: Taking guidance from the 2012 revision of the ICC Rules, the revised DIFC–LCIA Rules introduce into the appointment process the notion of the tribunal’s availability. Pursuant to the revised Rules art.5.4, a nominated candidate must sign a declaration stating whether he/she is “ready, willing and able to devote sufficient time, diligence and industry to ensure the expeditious and efficient conduct of the arbitration”. Further, pursuant to the revised Rules art.10.2, an arbitrator may be revoked if he/she “does not conduct or participate in the arbitration with reasonable efficiency, diligence and industry”. No doubt these provisions read together will also promote the efficient conduct of the arbitration process. • Appointment of an emergency arbitrator: Taking guidance from the ICC Rules, the SIAC and the HIAC Rules, a new art.9B provides for the appointment of an emergency arbitrator “in a case of emergency” at any time before the constitution of the tribunal. It is arguable that this provision, to some extent at least, overlaps with art.9A allowing the expedited formation of the tribunal in cases of “exceptional urgency”. This being said, the emergency arbitrator may also be appointed pending the expedited formation of the tribunal under art.9A: in the terms of art.9B, a party may apply to the LCIA Court for “immediate appointment of a temporary sole arbitrator to conduct emergency proceedings pending the formation or expedited formation of the Arbitral Tribunal”.38 If the application is granted, an emergency arbitrator will be appointed by the LCIA Court within three days of the Registrar’s receipt of the application.39 The emergency arbitrator may conduct the emergency proceedings on the basis of documents only40 and must decide the claim for emergency relief within 14 days of his/her appointment, subject to extension by the LCIA Court “in exceptional circumstances”.41 The emergency arbitrator may issue orders, which must be in writing and reasoned, and/or render awards and/or defer the determination of the claim for emergency relief in whole or in part to a tribunal once constituted.42 An order or award made by the emergency arbitrator may be “confirmed, varied, discharged or revoked, in whole or in part, by order or award made by the Arbitral Tribunal upon application by any party or upon its own initiative”.43 It is not entirely clear how a binding award rendered by the emergency arbitrator, which—by dint of its status as an award will produce a res judicata effect—may be capable of revision by a later tribunal (unless it were intended to be an interim award subject to express revision by a later

37 See art.15.10, revised Rules. 38 See art.9.4, revised Rules. 39 See art.9.5, revised Rules. 40 See art.9.7, revised Rules. 41 See art.9.8, revised Rules. 42 See arts 9.8 and 9.9, revised Rules. 43 See art.9.11, revised Rules.

tribunal on the merits, the sense and function of which, however, may be questionable). Uncertainty is also caused by art.9.12, which expressly reserves the right of the parties to resort to the competent curial courts for any interim or conservatory measures. In any event, by virtue of art.9.14, parties may opt out of the emergency arbitrator mechanism at any time in writing. • Consolidation: The revised Rules provide for more elaborate mechanisms of consolidation, at the hands of both the tribunal and the LCIA Court. Pursuant to art.22, a DIFC–LCIA tribunal will have the power, following consultation of the parties, to order, with the approval of the LCIA Court, “the consolidation of the arbitration with one or more other arbitrations into a single arbitration subject to the DIFC–LCIA Rules where all the parties to the arbitrations to be consolidated so agree in writing”44 or “the consolidation of the arbitration with one or more other arbitrations subject to the DIFC–LCIA Rules commenced under the same arbitration agreement or any compatible arbitration agreement(s) between the same disputing parties, provided that no arbitral tribunal has yet been formed by the LCIA Court for such other arbitration(s) or, if already formed, that such tribunal(s) is(are) composed of the same arbitrators”.45 Given the lack of party identity in the former scenario, it is unsurprising that consent in writing from each party subject to one of the arbitrations to be consolidated is required. No such requirement is imposed in the latter scenario, hence conferring upon the tribunal significantly enhanced powers to conduct the resolution of a number of disputes cost efficiently and with the benefit of economies of scale. In a further alternative, the LCIA Court, having consulted the parties and again out of considerations of efficiency, may order consolidation in the latter scenario provided that no tribunal in any of the arbitrations to be consolidated has yet been constituted. As regards changes that are probably aimed at underlining the distinctive character of the DIFC–LCIA Rules and at giving the DIFC–LCIA a competitive edge over other competing sets of rules, the following changes in particular merit closer consideration: • Law applicable to arbitration agreement: In order to counteract the uncertainty created by the parties’ failure to agree the law applicable to an underlying arbitration agreement, the revised Rules art.16.4 relies on the law of the seat of the arbitration by default. The new default provision is largely uncontroversial given that most arbitration jurisdictions endorse it. • Consultation of parties in selection of presiding arbitrator: Arbitrators, candidates and/or nominees are now expressly authorised to consult with their respective appointing party in the selection of a presiding arbitrator subject to notification of any such consultation to the Registrar.46 This new provision makes good sense, taking into account widely accepted international arbitration practice on the subject.

44 See art.22(ix), revised Rules. 45 See art.22(x), revised Rules. 46 See art.13.5, revised Rules.

• Cross-claims: The revised DIFC–LCIA Rules introduce the concept of cross-claims, as opposed to simple counterclaims.47 This new provision caters in particular for more complex arbitrations that involve, for example, multiple respondents. • Additional written submissions: The revised Rules art.15.6 empowers the tribunal to issue directions requiring additional written submissions, in particular in relation to any cross-claims that may arise between multiple claimants or respondents. • Interviewing witnesses: The revised Rules art.20.5 expressly allows the parties and their legal representatives to interview a prospective witness in preparation for his/her oral or written testimony subject to mandatory provisions of any applicable law and/or the tribunal’s directions otherwise. This provision codifies what for a long time has been widely accepted as common international arbitration practice. • Appointment and conduct of legal representatives: The most innovative and possibly controversial provisions of the revised Rules are those relating to the appointment and conduct of legal representatives in DIFC–LCIA arbitration. The revised Rules art.18.3 requires a change in legal representation to be approved by the tribunal. Article 18.4 defines the circumstances to which the tribunal should have regard in deciding whether it is justified in withholding approval of an intended change in legal representation, including a party’s free choice of legal representation, the stage in the proceedings, efficiency considerations arising from the continuity of the tribunal as well as wasted cost and time resulting from a change in legal representation. In addition, parties must now ensure that their appointed legal representatives have agreed to comply with the General Guidelines for the Parties’ Legal Representatives set out in the annex to the revised DIFC–LCIA Rules.48 These Guidelines are intended to “promote the good and equal conduct of the legal representatives”49 and to encourage legal representatives “not [to] engage in activities unfairly to obstruct the arbitration or to jeopardise the finality of the award”,50 “not knowingly [to] make any false statement to the Arbitral Tribunal or the LCIA Court”,51 “not knowingly [to] procure or assist in the preparation of or rely upon any false evidence presented to the Arbitral Tribunal or the LCIA Court”52 and “not knowingly [to] conceal or assist in the concealment of any document (or any part thereof) which is ordered to be produced by the Tribunal”.53 A legal representative should also not engage in ex parte contact with any of the tribunal members or members of the LCIA Court (bar the Registrar) without immediate disclosure of any such contact.54 In the event of a violation of any of these Guidelines, the tribunal will be empowered to exercise its discretion to impose any of the following sanctions

47 See art.2, (iii), revised Rules. 48 See art.18.5, revised Rules. 49 See Annex, revised Rules para.1. 50 Annex, revised Rules para.2. 51 Annex, revised Rules para.3. 52 Annex, revised Rules para.4. 53 Annex, revised Rules para.5. 54 Annex, revised Rules para.6.

after consultation with the parties and having accorded the legal representative a reasonable opportunity to respond55: (i) a written reprimand, (ii) a written caution as to future conduct in the arbitration, and (iii) such other measures as the tribunal deems necessary to allow for a fair and efficient arbitration process.56 It is questionable to what extent it is sensible to confer upon a tribunal such policing powers; there is a reasoned concern that being entrusted with the policing and sanctioning of the conduct of the parties’ legal representatives, the tribunal’s focus on determining the merits may be diluted and may ultimately jeopardise the procedural efficiency of the arbitration. Finally, there have been some innocuous semantic changes made to the older version of the rules, most notably the “chairman” of a DIFC–LCIA tribunal will from now on be known as the “presiding arbitrator” (thus coming closer to ICC terminology, which uses the term “President” to designate the third arbitrator in a corresponding position under the ICC Rules). Overall, the revised DIFC–LCIA Rules introduce helpful changes that will ultimately render the arbitration process in a DIFC–LCIA forum more efficient and cost-effective. This being said, some of the changes, in particular the introduction of Guidelines for Legal Representatives, are controversial and not beyond criticism. Their practicality and effect in practice are unpredictable and can only be assessed over time.

6. Adoption of the Practice Direction for the Conversion of DIFC Money Judgments into DIFC–LCIA Awards57 The DIFC Courts Practice Direction No.2 of 2015 on the Referral of Judgment Payment Disputes to Arbitration58 was finally adopted on 16 February 2015 and has since been fully in force. For conceptual accuracy, the more appealing title of “Practice Direction on the Conversion of DIFC Court Judgments into DIFC–LCIA Awards”, which was used in the consultation exercise,59 was eventually watered down to “Practice Direction on the Referral of Judgment Payment Disputes to Arbitration”. But the general thrust and objective of the Practice Direction remain unchanged: it essentially allows creditors to enforce payment judgments issued by the DIFC courts against non-compliant debtors, i.e. debtors that have failed to comply with the terms of the judgments voluntarily, that is, are unwilling to pay, through arbitration. The main benefit will be the enhanced enforceability of “judgment-converted awards” under international enforcement instruments typically applicable to international arbitration awards, e.g. the New York Convention. A secondary objective of the Practice Direction is to encourage settlement of payment disputes prior to escalation to arbitration given the deterrent effect of the enhanced global enforceability of a DIFC judgment-converted award.

55 Annex, revised Rules para.7. 56 See art.18.6, revised Rules. 57 Based on G. Blanke, “DIFC Courts Practice Direction No.2 of 2015: Adopted at Last!”, (Kluwer Arbitration Blog, 2015), http://kluwerarbitrationblog.com/blog/2015/03/31/difc-courts-practice-direction-no-2-of-2015-adopted-at-last/ [Accessed 19 March 2017]. See also G. Blanke, “Enforcing DIFC court payment judgments”, 30 April 2015, LexisNexis PSL (interviewed by N. Laver). 58 See the official website of the DIFC courts at http://difccourts.ae/difc-courts-practice-direction-no-2-2015 -referral-judgment-payment-disputes-arbitration/ [Accessed 19 March 2017]. 59 On which I previously reported in G. Blanke, “The DIFC and arbitration: Raising the stakes?”, (Kluwer Law Arbitration Blog, 2014), available online at http://kluwerarbitrationblog.com/blog/2014/07/20/the-difc-and-arbitration -raising-the-stakes-2/ [Accessed 19 March 2017].

The Practice Direction is “the first of its kind globally”60 and “an experiment without parallel in arbitration history”.61 With this in mind, the workability of the mechanism envisaged by the Practice Direction will ultimately depend on its proper implementation by arbitral tribunals and the receptiveness of international courts that are seised of the recognition and enforcement of DIFC judgment-converted awards.62 As Michael Hwang CJ, the author of the Practice Direction, incisively put it: “[The] success of this protocol [Practice Direction No.2 of 2015] will obviously depend on whether the arbitrators of our Arbitration Centre [the DIFC–LCIA] will apply the protocol in the way it is supposed to work. Accordingly, there will be briefings for potential arbitrators at the Centre (including a copy of this Lecture to enable them to understand the theoretical underpinnings of this protocol and how it is to be applied in practice). They will in due course have to exercise their own independent judgment on each case that comes before them pursuant to this protocol, but the tribunal hearing such arbitrations will have to ensure that whatever decision that it may make on the merits of the case must be based on sound arbitration principles (as indeed is this protocol).”63 “The overall reactions from our legal community in the DIFC have been largely encouraging of our intention to give DIFC judgments more global reach. If our experiment subsequently proves successful, we will have developed an important tool to synthesize litigation and arbitration by giving concurrent remedies for enforcement and thereby resolve one of the great problems of international litigation which other jurisdictions can follow. This is because there is nothing in our protocol that changes the existing common law; indeed, our protocol builds on it. If we can develop a model for the rest of the common law world, civil law countries may also be able to adopt it, because ultimately it is a question of persuading courts to interpret, not the national laws of any country, but the meaning of an ‘award’ under the NYC, which is a matter of international, rather than domestic, law. If our bold step proves successful, this would be the ultimate partnership between commercial courts and arbitration”.64 The words of Michael Hwang CJ derive, no doubt, from the best of intentions and it is to be hoped that Practice Direction No.2 of 2015 will live up to its anticipated potential in practice.

60 See DIFC press release, “Another Innovative World First for DIFC Courts”, 25 February 2015, http://difccourts .ae/another-innovative-world-first-difc-courts/ [Accessed 19 March 2017]. 61 As Michael Hwang CJ, giving the DIFC Court Lecture on “The DIFC Courts Judgment-Arbitration Protocol—Referral of Judgment Payment Disputes to Arbitration” stated on 19 November 2014, http://difccourts.ae /difc-courts-chief-justices-explanatory-lecture-notes-referral-judgment-payment-disputes-arbitration-november-2014 / [Accessed 19 March 2017]. 62 For some criticism and concerns, see G. Blanke, “DIFC Court Practice Direction on the conversion of DIFC Court judgments into DIFC–LCIA awards goes full steam ahead!”, (Kluwer Arbitration Blog, 2014), http:/ /kluwerarbitrationblog.com/blog/2014/11/23/difc-court-practice-direction-on-the-conversion-of-difc-court-judgments -into-difc-lcia-awards-goes-full-steam-ahead/ [Accessed 19 March 2017]. 63 Michael Hwang CJ, “The DIFC Courts Judgment-Arbitration Protocol—Referral of Judgment Payment Disputes to Arbitration”, The DIFC Courts Lecture, 19 November 2014, para.12(d), http://difccourts.ae/difc-courts-chief -justices-explanatory-lecture-notes-referral-judgment-payment-disputes-arbitration-november-2014/ [Accessed 19 March 2017]. 64 “The DIFC Courts Judgment-Arbitration Protocol—Referral of Judgment Payment Disputes to Arbitration”, The DIFC Courts Lecture, 19 November 2014, para.14, http://difccourts.ae/difc-courts-chief-justices-explanatory -lecture-notes-referral-judgment-payment-disputes-arbitration-november-2014/ [Accessed 99 March 2017].

7. Confirmation of the DIFC as a “Host” Jurisdiction for the Recognition and Enforcement of Domestic and Foreign Awards65 Attentive readers will remember that the DIFC Court of Appeal adopted a ruling in the latter half of 2014 confirming its status as a “host” or “intermediate”—or, in the Court’s own words, “conduit”—jurisdiction for the enforcement of domestic arbitration awards rendered in mainland Dubai (i.e. outside the DIFC) even absent any geographic nexus with the DIFC.66 By way of reminder, Banyan Tree Corporate Pte Ltd, a company incorporated in Singapore and specialising in the management and operation of tourist resorts (Banyan), applied to the DIFC courts for the recognition and enforcement of a DIAC arbitration award it had obtained in its favour against Meydan Group LLC, a UAE-incorporated company engaged in real estate development (Meydan), for the premature termination by Meydan of a hotel management agreement with Banyan. Despite the fact that Meydan was not known to have any assets in the DIFC, the DIFC Court of First Instance67 and the DIFC Court of Appeal confirmed that the DIFC courts were competent to hear Banyan’s application for recognition and enforcement in reliance on DIFC Law No.12 of 2004 art.5(A)(e) as amended by DIFC Law No.16 of 2011, the Judicial Authority Law, read together with DIFC Law No.1 of 2008 arts 42, 43 and 44, as amended, the DIFC Arbitration Law. Following the DIFC Court of Appeal’s affirmation of the DIFC courts’ proper jurisdiction, Meydan chose to absent itself from the further proceedings. Instead, it instigated nullification proceedings for the invalidity of the disputed award before the (mainland) Dubai courts on the basis that: (i) the disputed award was issued out of time; (ii) the sole arbitrator had failed to hold a preliminary meeting with the parties in person (rather than by teleconference); and (iii) the application for recognition and enforcement before the DIFC courts constituted an abuse of process and/or a violation of UAE public policy in that: (1) the Dubai courts were the more appropriate forum (forum non conveniens) and (2) there was an inherent conflict between the DIFC laws and the UAE Civil Procedures Code (CPC) in terms of the determination of the proper forum.68 To the best of our knowledge, the Dubai courts are reported to have dismissed Meydan’s various claims of invalidity. In a further sequel,69 the DIFC Court of First Instance found in absentia that the disputed DIAC award was to be recognised as binding within the DIFC in accordance with the DIFC Arbitration Law art.42(1) and as a result ordered the recognition of the award.70 In confirmation of these findings, H.E. Omar Al Muhairi J, one of the two UAE-national resident judges of the DIFC courts rendering the ruling of the DIFC Court of First Instance, tested the applicability to the case in hand of the various grounds for refusing recognition and enforcement listed in the DIFC Arbitration Law art.44, which in turn are modelled on the New York Convention art.V. Al Muhairi J rejected the various grounds of refusal in the following terms: 1) The invalidity of the arbitration agreement (art.44(1)(a)(i)): Meydan had never advanced any arguments as to the invalidity of the arbitration agreement: Meydan’s argument of invalidity in the nullification proceedings before the Dubai courts was directed at the award only.

65 Based on G. Blanke, “ARB 003/2013: The DIFC Court of First Instance’s Sequel in Banyan v. Meydan”, (Kluwer Arbitration Blog, 2015), http://kluwerarbitrationblog.com/blog/2015/07/19/arb-0032013-the-difc-court-of-first-instances-sequel-in-banyan-v-meydan/ [Accessed 19 March 2017]. 66 Case No.CA-005-2014, ruling of the DIFC Court of Appeal, 3 November 2014. 67 Case No.ARB 003/2013: Banyan Tree Corporate Pte Ltd v Meydan Group LLC, ruling of the DIFC Court of First Instance, 27 May 2014. 68 Case No.211/2014, ruling of the Dubai Court of Appeal. 69 Case No.ARB 003/2013: Banyan Tree Corporate Pte Ltd v Meydan Group LLC, ruling of the DIFC Court of First Instance, 2 April 2015. 70 Case No.ARB 003/2013: Banyan Tree Corporate Pte Ltd v Meydan Group LLC, Order of the DIFC Court of First Instance, 8 April 2015.

2) Failure to afford a fair hearing and over-/under-performance of the arbitrator’s mandate (art.44(1)(a)(ii) and (iii)): There was no evidence that Meydan had not been afforded a fair hearing. Further, Meydan had never raised any argument as to the sole arbitrator’s performance of his mandate infra or extra petita. 3) The arbitration procedure violating the governing arbitration agreement or curial laws (art.44(1)(a)(iv)): There was no need for the sole arbitrator to hold a preliminary meeting in accordance with the DIAC Rules art.22 (and CPC art.208(1)) as such a meeting had already been held by a previously appointed arbitrator whom the sole arbitrator replaced. 4) The award not yet having become binding or having been set aside by the curial court (art.44(1)(a)(v)): There was evidence from DIAC on record before the DIFC courts to the effect that the time limit for the arbitration had not expired at the time the award was issued. Further, the nullification proceedings before the Dubai courts had so far remained unsuccessful (so the disputed award had not yet been set aside). 5) UAE public policy defence (art.44(1)(b)(vii)): The threshold for the UAE public policy defence was “high and far from being met in the present circumstances” (see ruling of the DIFC Court of First Instance, 2 April 2015, para.43). In support, Al Muhariri J relied upon the 2012 Digest of Case Law on the UNCITRAL Model Law (the DIFC Arbitration Law being modelled on the Model Law): “The public policy defence should be applied only if the arbitral award fundamentally offended the most basic and explicit principles of justice and fairness in the enforcement State, or evidences intolerable ignorance or corruption on [the] part of the arbitral tribunal. Courts have also stated that to refuse to enforce an award on the ground that it violates public policy, the award must either be contrary to the essential morality of the State in question, or disclose errors that affect the basic principles of public and economic life. Not every infringement of mandatory law amounts to a violation of public policy. Occasionally it was also required that the violation of public policy must be obvious.”71 The DIFC Court of First Instance’s approach to the recognition and enforcement in the DIFC of domestic awards rendered in mainland Dubai (even absent any geographic nexus to the DIFC) is straightforward and encouraging. The DIFC courts have apparently remained undeterred by challenges mounted by award debtors that have contested recourse to the DIFC courts in the given circumstances as a circumvention of the proper jurisdiction of the Dubai courts. That said, despite the initial positive signs from the Dubai Court of Appeal in support of the DIFC courts’ findings, it remains to be seen whether the Dubai Court of Cassation will chime with the approach of the DIFC Court of First Instance and ultimately support the execution of the DIFC courts’ order for recognition and enforcement of domestic awards rendered in mainland Dubai.72 It bears mentioning in this context that the role of

71 Case No.ARB 003/2013: Banyan Tree Corporate Pte Ltd v Meydan Group LLC, ruling of the DIFC Court of First Instance, 2 April 2015 at [31]. 72 Although it is understood within insider circles that the Dubai Court of Cassation has proceeded with enforcement.

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators Recent Developments of (International) Commercial Arbitration in the UAE (Part II) 181 the DIFC courts as a host jurisdiction has survived both constitutional73 and public policy74 challenges under UAE law.

8. Ruler of Dubai Creates Dubai–DIFC Judicial Committee75 To the great excitement (some may say consternation) of the local legal profession, by adoption of a decree in mid-2016,76 which entered into immediate effect,77 the Ruler of Dubai established a so-called Judicial Committee of the Dubai Courts and the DIFC Courts (the Dubai–DIFC Judicial Committee). From a comparative law point of view, the establishment of the DIFC common law jurisdiction alongside the civil law jurisdiction of the UAE—leaving aside the analogical development in the Qatar Financial Centre—has been a worldwide, unique, unprecedented development (now followed by the Abu Dhabi Global Market (ADGM) courts, which equally are of common law pedigree). Inevitably, the juxtaposition of two jurisdictions of diametrically opposed legal traditions raises questions of compatibility or—in negative terms—jurisdictional conflict and how to resolve these. In order to facilitate the two-directional free movement of judgments, orders and ratified awards between the Dubai courts and the DIFC courts, the Ruler of Dubai had presciently put in place a regime of mutual recognition between the onshore Dubai and offshore DIFC courts in the form of the Judicial Authority Law as amended art.7.78 This article imposes an obligation on the onshore and offshore courts of the Emirate of Dubai to recognise and enforce judgments, orders and ratified arbitral awards issued by the respective other court without a review on the merits. The conceptual idea behind this regime of mutual recognition is essentially that constitutionally speaking, the Dubai and DIFC courts are both part of the same Dubai family of courts, each having been decreed by the Ruler of Dubai, and are, as such, expected to respect and trust the sound exercise of each other’s judicial authority. In the words of one leading local advocate: “Article 7 of the JAL [Judicial Authority Law] establishes a regime of mutual recognition between the DIFC and Dubai Courts, which is intended to facilitate the free movement of judgments, decisions and orders between the Dubai and DIFC Courts and vice versa. This regime is based upon a statutory relationship between the two courts, which in turn finds its origin in both the DIFC and Dubai Courts belonging to the same family of courts, namely the Dubai Courts. This is supported by the fact that both courts have been established by decrees of the Ruler of Dubai and render their rulings in the name of the Ruler of Dubai. In other words, the DIFC Courts form part of the legal system of the Emirate of Dubai and as such ultimately qualify as a Dubai Court. With this in mind, it is the Ruler of Dubai, who is the fountain of powers in the

73 See G. Blanke, “DIFC Court of First Instance dismisses application for referral to USC of purported constitutional conflict between UAE Civil Procedures Code and Dubai Judicial Authority Law and DIFC Arbitration Law”, (Kluwer Arbitration Blog, 2015), http://kluwerarbitrationblog.com/blog/2015/07/22/difc-court-of-first-instance-dismisses -application-for-referral-to-usc-of-purported-constitutional-conflict-between-uae-civil-procedures-code-and-dubai -judicial-authority-law-and-difc-arbitration-law/ [Accessed 19 March 2017]. 74 See G. Blanke, “Host jurisdiction status of DIFC Courts not contrary to UAE public policy”, (Kluwer Arbitration Blog, 2015), http://kluwerarbitrationblog.com/2015/09/05/host-jurisdiction-status-of-difc-courts-not-contrary-to-uae -public-policy/ [Accessed 19 March 2017]. 75 Based on G. Blanke, “Ruler of Dubai establishes new Judicial Committee to resolve conflicts of jurisdictions between the on and offshore Dubai Courts: Will it undermine the DIFC Court’s acquired status as a conduit jurisdiction for the enforcement of arbitral awards?” (London: Thomson Reuters, forthcoming). 76 Decree No.(19) of 2016 forming the Judicial Committee of the Dubai Court and the DIFC Courts, dated 9 June 2016. 77 Decree No.(19) of 2016 forming the Judicial Committee of the Dubai Court and the DIFC Courts, dated 9 June 2016 art.8. 78 DIFC Law No.12 of 2004 in respect of The Judicial Authority at Dubai International Financial Centre as amended.

Emirate, who has ordained the co-existence of the two sets of courts in the same Emirate.”79 The ultimate objective underlying such a regime of mutual recognition is no doubt to achieve the full mutual integration of the Dubai civil law and the DIFC common law systems into a functional whole. Such a holistic approach to the functional integration of a common law legal system and a civil law legal system within one and the same jurisdiction (although, of course, reminiscent of related supranational precursors, such as the legal integration of both common and civil law jurisdictions within the framework of the EU) is conceptually unprecedented and as such a world-first. In similar terms, the Abu Dhabi and ADGM courts are now poised to adopt what appears to be a similar system of mutual recognition.80 Both in deference to and in recognition of the scope and objective of the Judicial Authority Law as amended art.7, the DIFC courts have established themselves as a host or conduit jurisdiction for the recognition and enforcement of both domestic (i.e. onshore, or non-DIFC Dubai) and foreign arbitral awards for onward execution against assets of award debtors in onshore Dubai even in the absence of any (whether geographic or other) connection with the DIFC (bar the actual application for enforcement).81 The reliance on art.7 for such enforcement purposes has survived a number of challenges before the DIFC courts82 and has—according to unverified anecdotal evidence—now also been recognised by the Dubai courts. Viewed from the perspective of the creation of the DIFC courts and their true raison d’être, there is nothing surprising about this. On the contrary, one would have expected matters to follow precisely this course given that ultimately, the DIFC courts have always been intended to offer a jurisdictional choice to international investors as an alternative to the local courts, which—whether rightly or wrongly—have always been perceived as less arbitration- and hence enforcement-friendly. In my view, the Dubai–DIFC Judicial Committee has been established precisely to promote (rather than demote) the very objective of the full mutual integration of the Dubai and DIFC courts and further to consolidate the bond of mutual trust that is required between the two courts to make the regime of mutual recognition develop its full (integrational) potential. There is every reason to be confident that the Dubai–DIFC Judicial Committee will ultimately affirm the acquired status of the DIFC courts as a conduit jurisdiction. Its real intended (yet unspoken) role is to serve as a catalyst between the critics and the proponents of full integration and to fend off any constitutional challenge to the functional form of that integration in support of the resultant free choice (or shall we say forum shopping) between the Dubai or DIFC courts as a preferred enforcement jurisdiction. In other words, the Dubai–DIFC Judicial Committee has essentially been established in order to internalise the potential constitutional conflict between the proper delimitation of jurisdiction between the onshore Dubai and the offshore DIFC courts, a conflict that would otherwise have to be submitted to the Union Supreme Court (USC), for resolution in accordance with UAE Federal Law No.10 of 1973 art.60, the Union Supreme Court Law.83 Returning to the text of Decree No.(19) of 2006, the Dubai–DIFC Judicial Committee is chaired by the President of the Dubai Court of Cassation and otherwise comprises: (i) the President of the DIFC courts, (ii) the Presidents of the Dubai and the DIFC Courts of

79 Case No.XX: (1) Egan (2) Eggert v (1) Eava (2) Efa, Judgment of the DIFC Court of First Instance, 29 July 2015. 80 Memorandum of Understanding between the Abu Dhabi Judicial Department and Abu Dhabi Global Market Courts concerning cooperation in legal and judicial matters, https://www.adgm.com/media/84751/mou-for-cooperation -in-legal-and-judicial-matters-between-adjd-and-adgm-.pdf [Accessed 19 March 2017]. 81 See in particular Case No.ARB 003/2013: Banyan Tree Corporate Pte Ltd v Meydan Group LLC, ruling of the DIFC Court of First Instance, 2 April 2015; and Case No.ARB 002/2013: (1) X1, (2) X2 v (1) Y1, (2) Y2, ruling of the DIFC Court of First Instance, (undated), 2014. 82 See, e.g., Case No.XX: (1) X1 (2) X2 v (1) Y1 (2) Y2, ruling of the DIFC Court of First Instance, 29 July 2015; and Case No.ARB 001/2014: (1) X1 (2) X2 v (1) Y, Order of the Dubai Court of First Instance, 5 January 2014. 83 To this effect, see also CFI 026/2014: Standard Chartered Bank v Investment Group Private Limited, ruling of the DIFC Court of First Instance, 1 August 2016, per Sir David Steel Deputy CJ.

Appeal, (iii) the President of the Dubai Court of First Instance, (iv) a judge of the DIFC Court of First Instance and (v) the Secretary-General of the Dubai Judicial Council.84 The DIFC court members will be nominated by the President of the DIFC courts in due course.85 Despite the criticism levelled at the constitution of the Dubai–DIFC Judicial Committee, concerns that there is an intended imbalance in favour of the onshore Dubai courts are, in my view, overstated. So is the allegation that the requirement of majority decision-making within the Committee and the casting vote of the onshore Dubai Chair86 will create a balance in favour of the onshore Dubai courts where no agreement can be reached between the onshore Dubai and offshore DIFC members of the Committee. The legitimacy of the Dubai–DIFC Judicial Committee in the eyes of local court-users and for it to serve as a catalyst between the local critics and the international (often expatriate) proponents of the jurisdiction of the DIFC courts will ultimately depend on a sufficient degree of local representation and hence local influence on the decision-making within the Committee. A number of the members of the local judiciary are more arbitration-friendly than they are usually given credit for and they can be expected fully to support the status of the DIFC courts as a host-jurisdictional forum (so much the more, one may add, given that some of the DIFC court judges who have been instrumental in establishing the DIFC courts as a conduit jurisdiction are of local origin themselves87 and close to the local, onshore Dubai, non-DIFC judiciary). That the Dubai–DIFC Judicial Committee is more likely than not to endorse the operation of the Judicial Authority Law as amended art.7 in the terms proposed by the DIFC courts to date is also supported by the Committee’s obligation to exercise its own jurisdiction “in accordance with the legislation in force and the rules on jurisdiction prescribed in this regard”,88 including evidently the regime of mutual recognition contained in the Judicial Authority Law as amended art.7 (and its construction to date, even though, of course, technically not binding upon the Dubai courts). Pursuant to Decree No.(19) of 2016 art.2, the Dubai–DIFC Judicial Committee will in particular be entrusted with the determination of jurisdictional disputes in relation to: (i) conflicts of jurisdiction between the Dubai and the DIFC courts,89 including—one would think—the question of whether the DIFC courts may serve as a conduit jurisdiction, and (ii) conflicting judgments of the Dubai and DIFC courts involving the same parties and bearing on the same subject matter,90 including—one would think—conflicting orders of enforcement issued by the Dubai and DIFC courts in relation to the same arbitral award. The Committee will also be charged with (iii) proposing rules that are necessary to prevent conflicts of jurisdiction between the Dubai and DIFC courts and their respective Execution Departments91 and (iv) advising on ways of co-ordination and co-operation between the Dubai and DIFC courts,92 which role, in turn, is anticipated to assist the mutual integration of the two courts over time. It is understood that the Dubai–DIFC Judicial Committee will only decide upon conflicts of jurisdiction upon petition from a litigating party or the Public Prosecutor93 and to the extent that a jurisdictional conflict has materialised (which is not likely to be the case where one of the courts—whether mainland Dubai or DIFC—ultimately declines jurisdiction).94 The deliberations of the Committee will be confidential95 and a final

84 Decree No.(19) of 2016 art.1. 85 Decree No.(19) of 2016 art.1. 86 Decree No.(19) of 2016 art.3. 87 See, e.g., H.E. Al Madhani J in Case ARB 001/2014: (1) X1 (2) X2 v (1) Y, Order of the Dubai Court of First Instance, 5 January 2014. 88 Decree No.(19) of 2016 art.4(3). 89 Decree No.(19) of 2016 art.2(1). 90 Decree No.(19) of 2016 art.2(2). 91 Decree No.(19) of 2016 art.2(3). 92 Decree No.(19) of 2016 art.2(4). 93 Decree No.(19) of 2016 art.4(1). 94 See CFI 026/2014: Standard Chartered Bank v Investment Group Private Limited, ruling of the DIFC Court of First Instance, 1 August 2016, Sir David Steel Deputy CJ. 95 Decree No.(19) of 2016 art.3(d).

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators 184 Arbitration and binding, i.e. non-appealable, decision96 will be issued by the Committee within 30 days from the date of the petition.97 Pending the decision from the Dubai–DIFC Judicial Committee, the proceedings before the Dubai or DIFC courts will be stayed (except for a court’s power to “discharge subsidiary orders so designed that, upon the ultimate enforcement of a final judgment, justice will be done”.98 Little detail is at present available on the precise course of the proceedings before the Committee, but it is expected that more detailed procedural directions will be issued to provide further guidance in due course. In sum, the establishment of the Dubai–DIFC Judicial Committee is intended to deal efficiently and effectively with jurisdictional conflicts arising between the onshore Dubai and offshore DIFC courts, without, however, undermining the status quo and in particular the DIFC courts’ acquired status as a conduit jurisdiction for the enforcement of domestic or foreign arbitral awards for onward execution in mainland Dubai.

96 Decree No.(19) of 2016 art.7. 97 Decree No.(19) of 2016 art.3(b). 98 CFI 013/2016: Oger Dubai LLC v Daman Real Estate Capital Partners Limited, ruling of the DIFC Court of First Instance, 28 July 2016, Sir Richard Field J, at [7].

Keynote Address of the Chartered Institute of Arbitrators (Malaysia Branch) Inaugural Presidential Lecture, Kuala Lumpur, 25 November 20161 Adjudicator, Advocate, or Something in Between? Coming to Terms with the Role of the Party-Appointed Arbitrator

Sundaresh Menon*

1. Secret Conversations and Illegal Wiretaps On 4 November 2009, the Republic of Croatia and the Republic of Slovenia concluded a treaty to submit disagreements over their land and maritime boundaries to arbitration.2 It was a hard-won diplomatic victory not just for the two States, but also for the EU, under whose stewardship the treaty had been concluded. For many, this marked the close of the chapter covering the tumultuous period following the break-up of the former Yugoslavia, and it heralded a new era of diplomatic co-operation. A panel of five arbitrators was convened. In the usual way, Slovenia and Croatia each appointed one of its nationals to the tribunal. Croatia nominated Professor Budislav Vukas and Slovenia nominated Dr Jernej Sekolec. They were joined by three others: two judges of the International Court of Justice and a distinguished Queen’s Counsel, who used to hold the Chichele Professorship of International Law at Oxford University.3 The hearings began in 2012, and on 10 July 2015, the tribunal announced that it expected to deliver its award by the middle of December 2015.4 Everything seemed rosy. But then it all went wrong. On 22 July 2015, a Croatian daily newspaper published transcripts and audio recordings of conversations between the Slovenian arbitrator, Dr Sekolec, and the agent for Slovenia, Ms Simona Drenik. Their conversations had been tapped, most probably by Croatian intelligence. This fact, shocking enough on its own, was eclipsed by the revelations which followed. It transpired that Dr Sekolec had, in his conversations with Ms Drenik, divulged the contents of the tribunal’s private deliberations, including the fact that the tribunal intended to award Slovenia at least two-thirds of the disputed waters. The two discussed how best the other arbitrators could be persuaded to rule in Slovenia’s favour on the remaining issues.

1 A version of this paper was also presented in Singapore as the 2016 Herbert Smith Freehills–Singapore Management University Asian Arbitration Lecture on 24 November 2016. * Assistant Registrar Shaun Pereira and my law clerk, Scott Tan, worked closely with me in the research and preparation of this lecture. In the latter stages, my law clerk, Norine Tan, also assisted with some research and in reviewing and editing the draft. We also discussed the ideas contained here. I am deeply grateful to them for their great assistance. 2 Arbitration Agreement between the Government of the Republic of Slovenia and the Government of the Republic of Croatia (25 May 2011) 2748 UNTS 3 (entered into force 29 November 2010). 3 Permanent Court of Arbitration, Press Release dated 13 April 2012: https://www.pcacases.com/web/sendAttach /238 [Accessed 19 March 2017]. 4 Permanent Court of Arbitration, Press Release dated 10 July 2015: www.pcacases.com/web/sendAttach/1308 [Accessed 19 March 2017].

At one point, it appears that Dr Sekolec even proposed to present to his fellow arbitrators the matters raised by Ms Drenik as if these were his own “notes” on the case.5 Everything quickly unravelled. The day after the story broke, both Dr Sekolec and Ms Drenik resigned their respective positions as arbitrator and agent. This was followed swiftly by the resignation of Professor Vukas, the Croatian-appointed arbitrator, and Croatia itself soon withdrew from the arbitration. In June this year, an almost entirely re-constituted tribunal issued a partial award, in which it concluded that it had the jurisdiction to proceed with the matter, and held that the arbitration should continue.6 Despite this, Croatia steadfastly refuses to participate.7 It now appears that the arbitration is, for all intents and purposes, at an end. What was to have been a moment of triumph for European diplomacy has instead emerged as a symbol of the failure of inter-state arbitration. Fortunately, reported incidents like that which took place between Croatia and Slovenia are not common. But the history of international arbitration, and that of inter-state arbitration in particular, does feature examples of shocking allegations of bias and impropriety arising out of the conduct of party-appointed arbitrators. One might think of the Alaskan Boundaries arbitration in 19078; the Buraimi Oasis arbitration in the 1950s9; the Iran-United States Claims Tribunal in the 1980s10; and the Loewen arbitration in 2004.11 Against that background, it is perhaps unsurprising that some influential voices have spoken out strongly against the institution of the party-appointed arbitrator. The late Professor Hans Smit believed that the problems of misaligned incentives and the predisposition towards bias were endemic.12 He argued that the only solution was the complete abolition of the practice of having party-appointed arbitrators. In a similar vein, Professor Jan Paulsson has said that there can be no justification for tolerating the moral hazards associated with party-appointed arbitrators.13 He, too, proposes abandoning the present system of party appointments in favour of appointments by neutral arbitral institutions. In 2009, Professor Albert Jan van den Berg analysed the 34 cases of the International Centre for Settlement of Investment Disputes (ICSID) in which a dissent had been issued, and found that in almost all those cases the dissents had been issued by the arbitrator appointed by the losing party, causing him to doubt the neutrality of such appointees. He concluded that the “root of the

5 I relied heavily on an excellent article on the subject by Arman Sarvarian and Rudy Baker, “Arbitration between Croatia and Slovenia: Leaks, Wiretaps, Scandal”, posted on the blog of the European Journal of International Law: http://www.ejiltalk.org/arbitration-between-croatia-and-slovenia-leaks-wiretaps-scandal/ [Accessed 19 March 2017]. 6 Permanent Court of Arbitration, Press Release dated 30 June 2016: https://pcacases.com/web/sendAttach/1785 [Accessed 19 March 2017]; the partial award may be found at: https://pcacases.com/web/sendAttach/1787 [Accessed 19 March 2017]. 7 Croatian Ministry of Foreign and European Affairs, Press Release dated 30 June 2016: http://www.mvep.hr/en /info-servis/press-releases/press-release-on-arbitral-tribunal%E2%80%99s-decision-,25852.html [Accessed 19 March 2017]. 8 This arbitration arose out of a border dispute between the US and Canada on where the boundary between Alaska and Canada should be drawn. Theodore Roosevelt wrote to the American appointees to the tribunal putting pressure on them to take the US Government’s position in the award: see J. Paulsson, “Moral Hazard in International Dispute Resolution” (2010) 25 ICSID Review 339. 9 The dispute concerned ownership of a forlorn oasis on the border of Saudi Arabia and modern-day Oman. Saudi Arabia appointed Sheikh Yusuf Yasin, its deputy foreign minister, as its nominee. The arbitration collapsed into confusion and acrimony after the British complained about Sheikh Yusuf’s incessant interference with the tribunal and his constant communications with the Saudi Government: see R. Bernhardt, Decisions of International Courts and Tribunals and International Arbitrations (New York: Elsevier, 2014), p.41. 10 Some Iranian arbitrators appointed to the tribunal were apparently from the legal office that handled the Iranian Government’s claims before the ribunal: see R. Mosk, “The Role of Party-Appointed Arbitrators in International Arbitration: The Experience of the Iran-United States Claims Tribunal” (1988) 1 Transnational Law 253 269. 11 Loewen Group, Inc and Raymond L Loewen v United States of America , ICSID Case No.ARB(AF)98/3, Award (26 June 2003). This was an arbitration between a Canadian company and the US Government under the North American Free Trade Agreement (NAFTA). The US-appointed arbitrator met with US Department of Justice officials prior to his appointment, and he was told that if the US Government lost the case, they “could lose NAFTA”. One scholar commented that the tribunal ruled in favour of the US Government on “a highly abstruse point … which the three arbitrators, most specialists agree, got quite wrong”: Paulsson, “Moral Hazard in International Dispute Resolution” (2010) 25 ICSID Review 345. 12 H. Smit, “The Pernicious Institution of the Party-Appointed Arbitrator” (2010) 33 Columbia FDI Perspectives. 13 Paulsson, “Moral Hazard in International Dispute Resolution” (2010) 25 ICSID Review 357 and 362.

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators Keynote Address of the CIArb (Malaysia Branch) Inaugural Presidential Lecture 187 problem is the appointment method”, arguing that a system of unilateral appointments “may create arbitrators who may be dependent in some way on the parties that appointed them”.14 To be sure, there are risk factors in the system of party appointments—potential bias and conflicts of interest among them—and we must not be blind to this. Indeed, I suggest that with the explosive growth of arbitration in recent decades and the sharp rise in both the number and diversity of persons professing to stand among the ranks of arbitrators, there has never been a more pressing need for a clear and shared understanding of the proper role of the party-appointed arbitrator. In this lecture, I therefore propose to take a closer look at this subject. I will begin with a brief discussion of the history of party-appointed arbitrators before turning to the challenges posed to this institution by the growth of arbitration accompanying the expansion of global trade. I then offer my own views on the justifications for the retention of the institution and the proper position that the party-appointed arbitrator should occupy. Finally, I discuss some practical rules of engagement and best practices that may be adopted to minimise the risks that are often associated with the system of party appointments. I will close by discussing a forthcoming proposal by the Chartered Institute of Arbitrators (CIArb) which envisages the creation of a centralised disciplinary service to handle complaints of arbitrator misconduct.

2. From Greece to Geneva: the History of the Party-appointed Arbitrator I begin with the history of party appointments. The institution of the party-appointed arbitrator is of ancient vintage. Its precise origin—like that of arbitration itself—is lost in antiquity. Speeches written by orators in the Classical and Hellenistic periods of ancient Greece make references to party-appointed arbitrators.15 These speeches are striking because party-appointed arbitrators were consistently referred to as “friends”.16 This was not just a linguistic affectation because the arbitrators were often family members or personal supporters of the parties. Even the common arbitrator, who was jointly appointed by both parties, was referred to as “koinos”, which may be translated as “friend not only of one side, but of both sides”.17 Derek Roebuck, the great scholar of the history of arbitration, explains that the object of arbitration was quite different then. In ancient Greece, the first goal of an arbitrator was not adjudication, but compromise. Arbitrators would try their best to steer the parties towards a mediated settlement. It was only if a compromise could not be reached that the arbitrators

14 A. van den Berg, “Dissenting Opinions by Party-Appointed Arbitrators in Investment Arbitration” in M. Arsanjani et al. (eds), Looking to the Future: Essays on International Law in Honor of W Michael Reisman (Leiden: Brill Academic, 2011), pp.824–825. 15 See the examples cited in A. Gomez-Acebo, Party-Appointed Arbitrators in International Commercial Arbitration (Alphen aan den Rijn: Kluwer Law International, 2016), para.2-5. Demosthenes, writing in the 4th century BC, describes a private dispute between two parties which was submitted for resolution in terms that we would not be unfamiliar with. The parties each appointed one person to sit on the tribunal and, together, selected one common arbitrator. They agreed that if this tribunal of three could not come to a consensus, a decision would be taken by majority vote. This is taken from a speech entitled “Against Aparurius” contained in Demosthenes, Orations, Volume IV: Orations 27–40: Private Cases (translated by A.T. Murray) (Boston, Mass.: Harvard University Press, 1936), p.211: “[T]hey proceeded to an arbitration, and after drawing up an agreement they submitted the matter to one common arbitrator, Phocritus, a fellow-countryman of theirs; and each appointed one man to sit with Phocritus, Apaturius choosing Aristocles of Oea, and Parmeno choosing me. They agreed in the articles that, if we three were of one mind, our decision should be binding on them, but, if not, then they should be bound to abide by what the two should determine.” 16 See, e.g., “Against Archebiades” in Lysias (translated by S.C. Todd) (Austin: University of Texas Press, 2008); “On the Estate of Dicaeogenes” in Isaeus (translated and with an Introduction by Michael Edwards) (Austin: University of Texas Press, 2007). 17 Derek Roebuck, Ancient Greek Arbitration (Oxford: The Arbitration Press, 2011), p.164.

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators 188 Arbitration would then deliver a decision based on what they thought was just.18 In that context, partisanship could be a virtue, rather than a vice, in as much as it might facilitate compromise. In the Renaissance, the practice appears to have been for each party to appoint an equal number of arbitrators, with a final member appointed by both only in the event of a tie. One example is a treaty concluded in 1606 between James I of England and Henry IV of France, which led to the establishment of two tribunals for resolving trade disputes (one in London and the other in Rouen), each with an equal number of party-appointed arbitrators.19 The careful symmetry in both the location and composition of the tribunals reflects a scrupulous attempt to respect the equality of the two sovereigns, and to create a delicate balance of power that incentivised both sovereigns to behave fairly. From the Renaissance, we can move quickly to the nineteenth century Alabama Claims arbitration between America and Great Britain, which arose out of events that occurred during the American Civil War. The British Government had declared its neutrality in the war, but a lacuna in the relevant British statute permitted persons to commission the building of warships in England, so long as they were retrofitted with armaments outside the jurisdiction of the British courts.20 And this was precisely how the Confederate agents procured English warships for use in the American Civil War. The most famous of these ships was the eponymous CSS Alabama. In the two years she sailed, the Alabama sank no less than 64 American vessels and was alleged to have caused millions in direct losses. Needless to say, this caused considerable resentment, and it threatened to precipitate a transatlantic falling-out between Great Britain and the US.21 Shortly after the sinking of the Alabama in 1864, the possibility of arbitration was broached to determine the compensation Great Britain should pay the US for the destruction the Alabama had wrought. After years of negotiations, the Treaty of Washington was eventually concluded in 1871. Under it, both states agreed to submit the question of compensation for resolution by a tribunal. Although the Treaty was unusual in many respects,22 the issue of the tribunal’s composition was dealt with in a somewhat modern way. The parties each appointed one arbitrator and these two arbitrators were joined by three others—a Brazilian, a Swiss and an Italian—who were appointed by the Emperor of Brazil, the President of the Swiss Confederation and the King of Italy, respectively. The parties preserved some influence through the appointment of a national, but this was moderated significantly by the presence of a greater number of non-nationals.23 The Treaty of Washington is widely recognised as the “basic model for international arbitration today”.24 When President Theodore Roosevelt negotiated the Hague Conventions of 1899 and 1907, he was inspired by the memory of the Alabama Claims arbitration.25 As a consequence, the First Hague Convention, which established the Permanent Court of Arbitration, enshrined the system of party appointment.26 The World Courts followed suit. To this day, a party before the International Court of Justice is permitted to appoint an ad

18 Derek Roebuck, Ancient Greek Arbitration (Oxford: The Arbitration Press, 2011), p.351. 19 John Bassett Moore, History and Digest of International Arbitrations (Washington DC: Government Printing Office, 1898), p.4832. 20 Tom Bingham, “The Alabama Claims Arbitration” (2005) 54 International & Comparative Law Quarterly 1 at 9–10. 21 Roy Jenkins, Gladstone (London: Macmillan, 1995), pp.356–357. 22 Not the least of which was that it purported to lay down, in art.VI, three rules of substantive law relating to the obligations of neutral states in times of war which would apply retrospectively, in the sense that the tribunal was to evaluate Great Britain’s conduct by reference to these principles. This was clearly a product of compromise, rather than legal principle. 23 V.V. Veeder, “The Historical Keystone to International Arbitration: The Party-Appointed Arbitrator—From Miami to Geneva” (2013) 107 Proceedings of the American Society of International Law 387 at 392–393. 24 V.V. Veeder, “The Historical Keystone to International Arbitration: The Party-Appointed Arbitrator—From Miami to Geneva” (2013) 107 Proceedings of the American Society of International Law 387 at 392–393. 25 S. Rosenne, The World Court: What it is and how it works (Dordrecht: Martinus Nijhoff, 1995), pp.5–6. 26 The Hague Convention for the Pacific Settlement of International Disputes of 1899 (the First Hague Convention), art.24.

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators Keynote Address of the CIArb (Malaysia Branch) Inaugural Presidential Lecture 189 hoc judge to the court if no national of that State is already a permanent member of the court.27 In 1927, the International Chamber of Commerce (ICC) Rules were revised to provide for a system of party appointments with the stated aim of giving parties “greater freedom of action” in regard to the arbitral process.28 And in ICSID arbitrations, the default configuration is for there to be a panel of three: two party-appointed arbitrators sitting with a presiding arbitrator who would be jointly appointed by the two appointees.29 The system of party appointments has also become an entrenched part of international commercial arbitration between private parties. Party-appointment provisions are ubiquitous and they may be found in the United Nations Commission on International Trade Law (UNCITRAL) Model Law30 and Rules,31 the ICC Rules,32 as well as the arbitration laws of multiple jurisdictions.33 This brief historical survey reveals that the institution of the party-appointed arbitrator is not new. Rather, it has deep roots in the history of arbitration. One scholar has referred to it as the “historical keystone” of international arbitration, arguing that party appointments were used as a tool to overcome the distrust between disputants from diverse cultures.34 Without the comfort of being able to appoint an arbitrator of one’s choosing, it was said that the parties could not be brought to the table.35 But history also shows that the institution has not been static. It has evolved to meet the contingencies of the day. In the Greek city states, the party-appointed arbitrator reflected the imperative of settlement. In the Renaissance, he embodied the mutual respect between powerful sovereigns. In the Alabama Claims arbitration, the party-appointed arbitrators were part-statesmen, part-jurists and part-negotiators.

3. The Party-appointed Arbitrator Presently Situated However, arbitration plays a vastly different role in the international landscape today. No longer is it a communal affair as in the Greek city states; nor are party appointments reserved for a tightly drawn group of elites, as was the case in the Alabama Claims arbitration.36 I suggest that the confluence of three modern developments has placed the institution under increasing strain.

Dramatic growth in number and diversity of arbitration practitioners The first is the dramatic growth in the number and diversity of arbitration practitioners. When arbitration was in its nascence, practitioners saw themselves as a small and select group who upheld a code of unwritten rules shaped by common values.37 Trust was the currency of practice and there was little need for written guidance or curial supervision. Challenges to arbitrators were few and far between; in fact, it was so rare that arbitrator

27 Statute of the Permanent Court of International Justice, art 31; Statute of the International Court of Justice, art 31. 28 International Chamber of Commerce, “Arbitration—Revision of the Rules of Conciliation and Arbitration” (Stockholm, 1927) ICC Brochure No.50, pp.4 and 11. 29 Convention on the Settlement of Investment Disputes Between States and Nationals of Other States, art.37(2)(b). 30 UNCITRAL Model Law (2006) art.11(3). 31 UNCITRAL Arbitration Rules (2010) art.33(1). 32 ICC Rules of Arbitration (2012) art.12(2). 33 France, the UK, Canada, India, Hong Kong, Singapore. 34 V.V. Veeder, “The Historical Keystone to International Arbitration: The Party-Appointed Arbitrator—From Miami to Geneva” (2013) 107 Proceedings of the American Society of International Law 387 at 391. 35 J. Mathews, “Difficult Transitions Do Not Always Require Major Adjustment—It’s Not Time to Abandon Party-Nominated Arbitrators in Investment Arbitration” (2011) 25(2) ICSID Review 356 at 357 and 362. 36 Charles Francis Adams, the appointee of the United States, was the grandson of the nation’s first President and the son of its fourth, and had spent a great deal of time in London where he held office as America’s chief diplomatic representative. Alexander Cockburn, the appointee of Great Britain, was the Lord Chief Justice of England and Wales. 37 D. Bishop and M. Stevens, “The Compelling Need for a Code of Ethics in International Arbitration: Transparency, Integrity and Legitimacy” 5: http://www.josemigueljudice-arbitration.com/xms/files/02_TEXTOS_ARBITRAGEM/01 _Doutrina_ScolarsTexts/ethics/ethics_in_int_arb_-_icca_2010_-_bishop.pdf [Accessed 19 March 2017].

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators 190 Arbitration misconduct was omitted as a ground for challenge from the 1927 Geneva Convention on the Execution of Foreign Arbitral Awards, the predecessor to the 1958 New York Convention. But in the past two decades, the arbitration industry has grown in tandem with the surge in global trade and investment flows. As traditional court structures strained to grapple with the complexities thrown up by cross-border commerce, international arbitration emerged to fill that gap by promising a neutral mode of dispute resolution that could function well across geographical and cultural borders. Its growth was boosted, in large part, by the New York Convention, which gave arbitral awards unprecedented reach. New arbitral institutions were rapidly set up and many jurisdictions liberalised admissions criteria for foreign counsel appearing in international arbitrations within their borders. All of this has seen a tremendous increase in the number and diversity of new entrants to the global arbitration community.38 These new entrants hail from myriad legal traditions and bring with them their own conceptions of what constitutes ethically acceptable conduct. To give an oft-cited example39: in Germany, speaking to a witness before he takes the stand to give evidence may be a ground for professional censure; in the US, by contrast, a lawyer who fails to prepare a witness might be thought to have breached his ethical duty to advance his client’s best case. The short point is that arbitrators can no longer be said to be meaningfully guided by implied understandings, shared values or unspoken conventions, because, amidst all this diversity, there is no such thing. This can give rise to particular problems in relation to party-appointed arbitrators. I illustrate this by reference to a 2013 study that was published in the Journal of International Arbitration which shows a marked divergence in the practice and expectations of lawyers in Sweden and the US in relation to ex parte pre-appointment communications between arbitrators and counsel.40All of the American lawyers surveyed said they had experienced ex parte interviews with potential party-appointed arbitrators, as against only 42 per cent of Swedish lawyers who had; and 36 per cent of the American lawyers surveyed expressed the view that such interviews were always appropriate, while only 4 per cent of Swedish lawyers thought it to be so. The lack of a common understanding as to what constitutes acceptable conduct is not only a reality today, but is potentially a problem that can, in some instances, cause difficulties in the conduct of international arbitration.

The rise of the professional arbitrator The second development is the rise of a class of arbitrators whose livelihood depends predominantly, if not exclusively, on the receipt of appointments to serve as arbitrator. They are like the itinerant circuit judges of old, save that their jurisdiction is voluntary and, more importantly, their services are remunerated on the basis of demand. An inevitable tension can develop in these circumstances between the arbitrator’s personal interests and his professional duties. Arbitrators earn substantial fees in the cases over which they preside. There is therefore a financial incentive to promote one’s attractiveness as a prospective appointee which could, in the eyes of the appointing party, turn on the likely outcome of the cases for which they are appointed.41 This sits uncomfortably with the notion

38 G. Born and T. Snider, “A Code of Conduct for Counsel in International Arbitration”, (Kluwer Arbitration Blog, 2010): http://kluwerarbitrationblog.com/2010/11/16/a-code-of-conduct-for-counsel-in-international-arbitration/ [Accessed 19 March 2017]. 39 C. Rogers, “Fit and Function in Legal Ethics: Developing a Code of Conduct for International Arbitration” (2002) 23 Michigan Journal of International Law 341 at 344. 40 N. Elofsson, “Ex Parte Interview of Party-Appointed Arbitrator Candidates: A study Based on the Views of Counsel and Arbitrators in Sweden and the United States” (2013) 30 Journal of International Arbitration 230. 41 Y. Dezelay and B. Garth, Dealing in Virtue: International Commercial Arbitration and the Construction of a Transnational Legal Order (Chicago: University of Chicago Press, 1998).

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators Keynote Address of the CIArb (Malaysia Branch) Inaugural Presidential Lecture 191 that adjudicators should have no interest—much less a pecuniary one—in the outcome of the cases they decide.42 This tension is illustrated by Cofely v Bingham,43 a decision of the UK High Court handed down this year. A trend of repeat appointments by a party, coupled with evidence of partisan behaviour during the hearings, led Hamblen J to conclude that apparent bias on the part of the arbitrator had been established. An important factor in the court’s decision was the fact that the appointing party maintained a “blacklist” of arbitrators, which presumably comprised arbitrators who, in that party’s estimation, were unlikely to render a verdict favourable to it. Hamblen J said that the notion that an appointee could fall out of favour with the appointing party depending on the anticipated outcome of the case at hand would be a matter of some import for any person whose income depended on appointments.44 Critics have been especially scathing where investment treaty arbitration is concerned. Appointments are said to be restricted to a closed group of select individuals. There have also been assertions of a pro-investor bias because it is said to be in the interest of the entrepreneurial arbitrator to rule expansively on his own jurisdiction and then in favour of the investor on the merits.45 The argument is that by doing so, the arbitrator both incentivises the bringing of future claims and increases the likelihood that a putative tribunal will have the competence to hear those claims, thereby generating business.

International convergence on impartiality and independence Straining against these two developments—the growth in the number and diversity of arbitration practitioners and the challenges posed by the rise of the professional arbitrator—is a third strand: this is the modern consensus that the duties of impartiality and independence apply equally to all members of the tribunal, whether appointed by a party or not. Arbitration is, at its core, a quasi-judicial proceeding and it must operate within certain limits of integrity and fairness.46 In the words of the Canadian Supreme Court47: “From its inception arbitration has been held to be of the nature of judicial determination and to entail incidents appropriate to that fact. The arbitrators are to exercise their function not as advocates of the parties nominating them, and a fortiori of one party when they are agreed upon by all, but with free independent and impartial minds as the circumstances permit.” Today, virtually every set of arbitration rules, national laws, and every code of ethics that has been promulgated in relation to international arbitration enshrines this principle.48 Yet, not so long ago, some were of the view that party-appointed arbitrators could not be held to the same standards of independence and impartiality as those that applied to non-party appointed arbitrators. The most prominent proponents of this idea were the Americans. The 1977 Code of Ethics for Arbitrators in Commercial Disputes jointly prepared

42 Dimes v Grand Junction Canal (1852) 3 HL Cas 759 ; [1852] Eng R. 789 ; (1852) 10 E.R. 301. 43 Cofely Limited v Anthony Bingham [2016] EWHC 260 (Comm); [2016] 2 All E.R. (Comm) 129. 44 Cofely Limited v Anthony Bingham [2016] EWHC 260 (Comm) at [108]; [2016] 2 All E.R. (Comm) 129. 45 G. van Harten, Investment Treaty Arbitration and Public Law (Oxford: Oxford University Press, 2007), pp.126–128. 46 In inter-State arbitration this is often expressed as the difference between a “diplomatic” and “judicial” model of arbitration: see Steven Schwebel, International Arbitration: Three Salient Problems (Cambridge: Grotius Publications, 1987), pp.144–154. In the case of international commercial arbitration, the difference is between a “contractual” and a “judicial” model. An early champion of the judicial view was Judge Pound: see American Eagle Fire Insurance Co v New Jersey Insurance Co (1925) 240 NY 398 at 405. 47 Steven Szlilard v Ralph Szasz [1954] 1 SCR 3 at 4, per Rand J. 48 See the examples cited in Gomez-Acebo, Party-Appointed Arbitrators in International Commercial Arbitration (Alphen aan den Rijn: Kluwer Law International, 2016), Ch.4, fnn.5–7. The UNCITRAL Rules, for example, afford parties a right to challenge an arbitrator if “circumstances exist that give rise to justifiable doubts as to the arbitrator’s impartiality or independence”: see UNCITRAL Arbitration Rules (2013) art.12(1). See also London Court of International Arbitration Rules (2014) art.5.3. Other sets of rules use different expressions, but the purport and effect is the same.

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators 192 Arbitration by the American Arbitration Association (AAA) and American Bar Association (collectively, the AAA–ABA) went so far as to provide that party-appointed arbitrators, who were referred to as “non-neutrals”, “may be predisposed toward the party who appointed them” and enjoyed many exemptions from general standards of arbitrator conduct.49 However, the AAA–ABA eventually walked this back. The 2004 version of the Code states that it is “preferable for all arbitrators—including any party-appointed arbitrators—to be neutral … and to comply with the same ethical standards”. Thus, while the AAA–ABA still retains a separate set of rules for party-appointed arbitrators, these rules expressly state that they ought only to apply to domestic arbitrations within the US and only if the parties are agreed on this. Several other notable changes were also made. For example, while the 1977 Code permitted party-appointed arbitrators to engage in unilateral communications with their appointing party,50 the 2004 Code subjects all arbitrators, whether party-appointed or not, to the same restrictions on unilateral communication.51 But the fact that there is, in broad terms at least, a consensus that the party-appointed arbitrator is subject equally to the duties of impartiality and independence is not the end of the matter. There remain grey areas where it is unclear whether the observance of these duties can be reconciled with the way in which some parties and their appointees conduct themselves. I refer, for the purposes of this lecture, to the broad subject of ex parte communications between a party and its appointee, both before and after the appointment. But I also think that the tensions that afflict this subject must be considered against the backdrop of the first two trends I have identified, namely, the emergence of many practitioners of diverse backgrounds and the challenges of maintaining a business in offering arbitral services. I would further add that even as we work towards resolving these issues, we must first ensure there is clarity in our understanding of the role of the party-appointed arbitrator so that we minimise the possibility of arbitral misadventure and strengthen the legitimacy of arbitration as an integral part of the dispute resolution framework for this twenty-first century world.

4. Justifications for the Party-appointed Arbitrator Against the backdrop of those three trends and the related observations, the question, for present purposes, is whether the expectations of independence and impartiality imposed by the modern consensus, coupled with the inescapable realities of arbitration practice today, have conspired to reduce the institution of the party-appointed arbitrator to an anachronism that we have grown accustomed to but perhaps no longer understand the need for. Professor Paulsson, perhaps the most trenchant critic of the institution of the party-appointed arbitrator today, thinks so. He argues that once a dispute has arisen, every step taken by the parties—especially the appointment of arbitrators—will be tactical. This, when coupled with the financial incentives which create the desire for re-appointment, means that the party-appointed arbitrator will often be placed in an impossible position in terms of discharging his duties of independence and impartiality. He concludes thus: “The original concept that legitimates arbitration is that of an arbitrator in whom both parties have confidence. Why would any party have confidence in an arbitrator selected by its unloved opponent?”52

49 ABA Code of Ethics for Arbitrators in Commercial Disputes (1977), Canon VII(A)(1). Some have suggested that this was precipitated by the general shift in American jurisprudence that jettisoned the “judicial” view of arbitration in favour of a “contract” view espoused by the New York Court of Appeals in In re Astoria Medical Group and Health Ins Plan of Greater New York 11 NY 2d 128 (1962) at 135: see Mosk, “The Role of Party-Appointed Arbitrators in International Arbitration: The Experience of the Iran-United States Claims Tribunal” (1988) 1 Transnational Law 253 at 259. 50 ABA Code of Ethics (1977), Canon VII(C)(2). 51 ABA Code of Ethics (2004), Canon X(C). 52 Paulsson, “Moral Hazard in International Dispute Resolution” (2010) 25 ICSID Review 339 at 357 and 362.

Two points are frequently made in answer to this. The first is a positive case for the system of party appointments, and the second is a mitigation of its flaws.

Confidence in the process The positive case is that party appointments give the parties confidence in the dispute resolution process. In the words of the late Professor Andreas Lowenfeld, this confidence is founded on the fact that at least one amongst the tribunal “will listen carefully … to the presentation … study the documents with care,”53 and will appreciate the legal and commercial culture, as well as the procedural expectations of the appointing party. It is said that because of this, parties will be more invested in the process and will therefore be more likely to accept the result and comply with it.54 I have no doubt that the selection of a tribunal is a task that must be undertaken with care, and that the tribunal should have the expertise necessary for the adjudication of the dispute placed before it. But what this calls for is persons with a particular expertise. It has nothing whatsoever to do with them being appointed by the disputing parties. The exercise of selection with an eye to expertise and competence can just as easily be undertaken, as Professor Paulsson suggests, by a neutral institution. My deeper concern with this argument is that it presents a profoundly unattractive picture of arbitration. Have our expectations really sunk so low that we derive confidence and satisfaction in the process because we think one of the three adjudicators will attend to our case carefully and give it the attention it is due? After all, the implicit suggestion is that one can have no confidence in the attentiveness, neutrality and impartiality of anyone on the tribunal apart from one’s own appointee, ironic as that may sound. I do not understand this because it runs counter to the most basic expectation of neutrality and impartiality that is surely fundamental to the arbitral process. The short point is this. All arbitrators have a duty to study all the material, and not only those presented by their appointing parties. All arbitrators have a responsibility to give their utmost attention to the cases presented by both parties. After all, the task of adjudication is in many respects a comparative exercise. In my view, all arbitrators must owe the same duties to all parties. Confidence in arbitration must be anchored in the belief that it is a procedurally fair and substantively neutral process for the resolution of disputes. Any other view would be greatly corrosive of confidence in the institution of arbitration. For this reason, I do not think we should do anything that would encourage the belief that the party appointee has a special duty to apply particular care to the arguments, evidence, understandings and expectations of his appointer.

Incentivising good behaviour I turn to the argument presented in mitigation. Some commentators acknowledge the structural problems with the present system of party appointments, but argue that these problems are mitigated by the fact that impartial and independent arbitrators are often the most sought after. In short, the market will correct itself. Thus, it has been said that an overzealous party-appointee is prone to antagonise the other members of the tribunal and cause them to shut out his views in their entirety for being

53 A. Lowenfeld, “The Party-Appointed Arbitrator in International Controversies: Some Reflections” (1995) 30 Texas International Law Journal 59 at 65. 54 Y. Shany, “Squaring the Circle? Independence and Impartiality of Party-Appointed Adjudicators in International Legal Proceedings” (2008) 30 Loyola of Los Angeles International and Comparative Law Review 473 at 474; D. McLean and S. Wilson, “Is Three A Crowd? Neutrality, Partiality and Partisanship in the Context of Tripartite Arbitrations” (2008) 9(1) Pepperdine Dispute Resolution Law Journal 167 at 168–169; V.V. Veeder, “The Historical Keystone to International Arbitration: The Party-Appointed Arbitrator—From Miami to Geneva” (2013) 107 Proceedings of the American Society of International Law 387 at 402.

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators 194 Arbitration tainted.55 On this basis, it is argued that arbitrators achieve success not by being partisan, but by developing a reputation for being honest, independent and impartial56; and conversely, that parties have an incentive to appoint arbitrators who have a reputation for being even-handed and fair, rather than one who will be partisan.57 On this view, the financial incentives promote, rather than discourage, impartiality and independence. Proponents often point to a 2010 survey conducted by the Queen Mary University of London and White & Case LLP in which 66 per cent of corporate counsel surveyed were reported as having listed “open-mindedness and fairness” as the most important factor in the selection of an arbitrator.58 But in my view, the force of this analysis is limited because the real problem has never been with the unsophisticated and rankly partisan arbitrator. One quickly gets a sense when a fellow arbitrator is so nakedly biased that his views lose all credibility. The fear, rather, is with those who shape the outcome of the arbitration in favour of their appointing parties in more subtle ways. Power can be exercised in many and varied ways, and it is often most effective when channelled through the capillaries of influence. The interference may be as innocuous as deliberate reticence during the tribunal’s private deliberations; it may be as subtle as a hint made in a casual remark in the corridor on the way to the deliberation room; or it may take the form of a pointed or well-placed question that derails an important line of questioning pursued by the other party’s counsel in cross-examination. None of these might alone amount to much. Collectively, they can change the outcome of the arbitration in a manner which is improper. The real question is whether an implicit expectation that one must pay special attention to the case of one’s appointer, coupled with the financial incentives of appointment, can consciously, or more dangerously sub-consciously, motivate this sort of conduct.

My views on the party-appointed arbitrator What the foregoing shows us, I think, is that the present system of party appointments is one which carries some considerable risks. The question then becomes: why should it continue to exist? In answer, some have argued that unilateral appointment is a “right”. As early as the 1907 Hague Conference, one of the participants remarked that “the right of choosing one’s own judges [is] a right which is of the very essence of arbitral justice”.59 Those who hold this view contend that the “the right to name an arbitrator has existed for decades, even centuries”60 and should be considered one of the “fundamental elements” of international

55 Y. Derains, “The Deliberations of the Arbitral Tribunal—Retour au délibéré arbitral”, in M. Wirth (ed.), The Resolution of the Dispute—From the Hearing to the Award (ASA Special Series No.29, 2007), p.16. 56 D. Kapeliuk, “The Repeat Appointment Factor: Exploring Decision Patterns of Elite Investment Arbitrators” (2010) 96 Cornell Law Review 47 at 90 in which the author concludes after a statistical analysis of Investment Treaty arbitration decisions that: “[T]the arbitrators’ valuable professional reputation could be a key incentive for them to remain impartial. Impartiality critically affects not only their future selection as arbitrators but also other spheres of their professional careers, whether as private counsel or as academics. In order to promote their reputation, arbitrators may choose to increase accuracy and to counter any real or perceived biases rather than to cater to any particular interests. This tendency rings especially true for repeat arbitrators in the arbitration market, whose most valuable trait may be their reputation as credible and independent decision makers.” 57 A. Mourre, “Are unilateral appointments defensible? On Paulsson’s Moral Hazard in International Arbitration”, (Kluwer Arbitration Blog, 2010): http://kluwerarbitrationblog.com/2010/10/05/are-unilateral-appointments-defensible -on-jan-paulssons-moral-hazard-in-international-arbitration/ [Accessed 19 March 2017]. 58 Queen Mary University of London and White & Case LLP, 2010 International Arbitration Survey: Choices in International Arbitration, p.26: http://www.arbitration.qmul.ac.uk/docs/123290.pdf [Accessed 19 March 2017]. 59 L. Bourgeois, President, in J. Scott, The Proceedings of the Hague Peace Conference, Translation of the Official Texts, II The Conference of 1907, Meetings of the First Commission 2 (New York: Oxford University Press, 1921), quoted in G. Born, International Commercial Arbitration, 2nd edn (Alphen aan den Rijn: Wolters Kluwer, 2014), p.1639. 60 C. Brower and C. Rosenberg, “The Death of the Two-Headed Nightingale: Why the Paulsson-van den Berg Presumption that Party-Appointed Arbitrators are Untrustworthy is Wrongheaded” (2013) 29 Arbitration International 7.

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators Keynote Address of the CIArb (Malaysia Branch) Inaugural Presidential Lecture 195 arbitration and that any abrogation of this right will constitute an “assault on the very institution of international arbitration”.61 I am not convinced that this argument works. There is no question that the current system of party appointments is one which is historically entrenched. However, it does not follow as a matter of logical necessity that just because disputants have been appointing arbitrators from time immemorial, it ought therefore always to be so. Indeed it seems to me that party-appointed arbitrators are at best a contingent, rather than a necessary, part of the institution of arbitration. If indeed the operational landscape as we see it today is such that the perverse incentives are too great to bear or to be tolerated, then a legitimate question can be raised as to whether the practice ought to be discarded. I suggest that the most plausible answer to this is that unilateral appointment is an expression of the principle of party autonomy, and that principle is the cornerstone of arbitration.62 Party autonomy finds its expression in the parties’ voluntary submission and participation in arbitration in a form and manner of their choosing, which extends also to the manner of appointing and constituting the tribunal. But to the extent we now regard the system of unilateral appointments as an integral feature of arbitration, I see it as something that has come about by dint of long usage rather than as a feature that is rooted in sound principle. In the final analysis, the present system of party appointments that we have may be seen as a cultural phenomenon that arbitration users have come to accept, but I am not sure it has any inherent value or significance apart from its long use and history. That said, it is precisely because the system of party appointments has such a long lineage and is so firmly rooted in the practice of arbitration that I do not anticipate its abolition. I think the majority of users understand that there are problems with the process and many will try to use this to their benefit and tell themselves, rightly or wrongly, that the other side is also doing the same; but on the whole, they are not ready to give up the ability to influence, at least in part, the composition of the tribunal that will determine their dispute. The challenge for us is to think about how best to accommodate this reality against the backdrop of the growing diversity of arbitration users and the modern commercial pressures that the arbitrator of today faces. This is important so that we preserve the integrity and efficacy of the arbitration process at two levels. 1) First, at the immediate level of meeting the procedural and substantive expectations of fairness that each party to an arbitration is entitled to hold of the process. The trouble in this context is that, with the plurality of arbitration users today, these sorts of mismatched expectations can arise not because of any malevolent intent, but even just as a consequence of cultural differences in terms of the way in which legal practice or adjudication is conducted in that party’s society. 2) Second, at the broader level of keeping confidence in the institution of arbitration. The practice of party appointments is now so widespread and established that unless we create a framework that effectively manages the risk factors inherent in the practice of party appointments, confidence in the institution of arbitration itself may suffer a harmful blow. This problem is a delicate and complex one, and it has to receive holistic treatment. At a granular level, it is important to first establish a widespread consensus on the appropriate role of the party-appointed arbitrator, and second, to lay down clear guidelines and rules of engagement concerning problem areas such as communications with party-appointed

61 C. Brower, M. Pulos and C. Rosenberg, “So Is There Anything Really Wrong With International Arbitration as We Know It?” Contemporary Issues in International Arbitration and Mediation: The Fordham Papers (2012) 1 at 7: https://international-arbitration-attorney.com/wp-content/uploads/arbitrationCharles_Brower_So_Is_There _Anything_Really_Wrong_with_International_Arbitration_A.pdf [Accessed 19 March 2017]. 62 See Born, International Commercial Arbitration, 2nd edn (Alphen aan den Rijn: Wolters Kluwer, 2014), p.1639.

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators 196 Arbitration arbitrators and conflicts of interest affecting them. I will shortly suggest some steps to this end which are both prophylactic and self-regulatory. These measures, if applied, would help by articulating clear standards and rules that international practitioners can be expected to abide by. But at a broader level, I think that there is also room for the introduction of a regulatory framework with some bite, to ensure that practitioners who do not keep within these bounds of fair play and fair dealing will be taken to task. It is to these matters that I now turn.

5. Articulating a Clear Role for the Party-appointed Arbitrator The first step is to understand the proper role of the party-appointed arbitrator. It may be helpful to begin with the modern consensus that all arbitrators have a duty to be independent and impartial. This standard rules out partisanship or non-neutrality. But many think that an arbitrator can preserve his independence and impartiality and yet still maintain some special role in relation to his appointing party. The question is whether this is even possible. Nigel Blackaby and Constantine Partasides—the current editors of Redfern and Hunter—argue that party-appointed arbitrators have the additional duty of ensuring that “the arbitral tribunal properly understands the case of the[ir] appointing party” and that “a party-nominated arbitrator can fulfil a useful role in ensuring due process for the party that nominated him or her, without stepping outside the bounds of independence and impartiality”.63 Other giants of arbitration scholarship—Doak Bishop and Lucy Reed,64 A.A. de Fina,65 Jacques Werner,66 Catherine Rogers67 and Andreas Lowenfeld,68 among them, have suggested some variants of this view. To the extent it is suggested that a party might have good and legitimate reasons for retaining the right to choose its arbitrator, I have no difficulty with that, as long as some of the risks that inhere in the process can be satisfactorily addressed and managed. But to the extent it is suggested that a party-appointed arbitrator should see himself as having a special duty to one of the parties, I remain fundamentally uncomfortable with such a view. It seems to rest on the untenable and, as I earlier expressed, dangerous assumption that arbitrators can or should devote special attention or care to the case of any one party, merely by dint of affiliation. The line between driving a lively discussion to ensure that a party’s case is fully understood and urging that party’s position upon the tribunal may be so fine that it is impossible to work with in practice. And, really, just what is it that arbitrator to do? Having taken especial care to understand the nuances of the appointing party’s case and having worked hard to ensure that it is properly understood by the other arbitrators, do we really expect that, at that point, the arbitrator will mentally shift gears and reject the validity of the case that he has just presented to his colleagues on the tribunal in the most comprehensible way possible? In truth, in this process, there is a danger of actual bias when the party-appointed arbitrator unconsciously slips into the territory of self-persuasion; and even greater is the danger of apparent bias where such an arbitrator could be seen as being less than impartial by virtue of his role as a quasi-advocate.69 I say quasi-advocate because in essence, it is being suggested that the

63 N. Blackaby and C. Partasides, Redfern and Hunter on International Arbitration, 6th edn (Oxford: Oxford University Press, 2015), para.4.30. 64 D. Bishop and L. Reed, “Practical Guidelines for Interviewing, Selecting and Challenging Party-Appointed Arbitrators in International Commercial Arbitration” (1998) 14 Arbitration International 395 at 405. 65 A. de Fina, “The party appointed arbitrator in international arbitration—Role and Selection” (1999) 15 Arbitration International 381 at 382. 66 J. Werner, “Editorial—The Independence of Party-Appointed Arbitrators: For a Rule of Reason” (1990) 7 Journal of International Arbitration 5 at 5. 67 C. Rogers, Ethics in International Arbitration (Oxford: Oxford University Press, 2014), paras 8.57–8.76. 68 A. Lowenfeld, “The Party-Appointed Arbitrator in International Controversies: Some Reflections” (1995) 30 Texas International Law Journal 59 at 65. 69 Gomez-Acebo, Party-Appointed Arbitrators in International Commercial Arbitration (Alphen aan den Rijn: Kluwer Law International, 2016), pp.104–105.

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators Keynote Address of the CIArb (Malaysia Branch) Inaugural Presidential Lecture 197 party-appointed arbitrator’s duty is to be the presenter of his appointer’s case to the tribunal in the privacy of the deliberation room and to see to it that that case is understood. In truth, the fact that much of this will be played out in the privacy of the arbitral caucus, and therefore outside the knowledge of the parties who might not even be aware of what precisely is taking place, actually has the potential to exacerbate the problem of bias, both actual and apparent. Thus, I prefer a bright-line rule. All arbitrators once appointed, irrespective of how they are appointed or by whom, should owe no affinity, partiality or special duty to either side. They have one role, and that is to judge and this should be done fairly with due regard to the interests of both parties. Of course, this does not mean that arbitrators are blank slates. As has regularly been pointed out in the context of administrative law, “an open mind is not an empty one”.70 Arbitrators are chosen because of the rich tapestry of skills and experiences that they bring to bear, and for their sensitivity to the peculiarities of the dispute in each particular case. This comes in many forms, including legal expertise, industry experience or shared cultural experiences. Party-appointed arbitrators are no different. They are chosen chiefly because they present a particular matrix of skills and experiences which can usefully inform the tribunal’s discussions. There is nothing wrong with this, and if these skills and experiences are applied in a truly fair manner, they may just as well work against the appointing party as in his favour. But the critical point is that the arbitrator cannot have a special role to play in relation to one party’s case just because he was appointed by that party.

6. Clear and Practical Rules of Engagement I turn now to the practical guidelines which could help parties approach appointments from level ground. As it stands, many arbitral institutions have already published extensive codes of ethics to regulate and guide the conduct of arbitrators involved in arbitrations under their purview. These codes emphasise the importance of independence and neutrality, and they do not distinguish between party-appointed arbitrators and those who are neutrally appointed. This is a good start, but I propose three further steps that may be taken.

The appointment process First, I support the publication of clear guidelines on what constitutes acceptable conduct in the appointment process, particularly in the course of what is now becoming the widespread practice of pre-appointment interviews. The pre-appointment interview is an area fraught with difficulty because of the sheer number of parameters that may influence its propriety, or give rise to an appearance of impropriety. The temptation for misdemeanour can be irresistible because of the privacy of the interview; and I dare say it would be naive to deny the real danger that potential appointees might be swayed to hold out, if not adopt, a position favourable to the appointing party through the interview process. To put it bluntly: the arbitrator is being interviewed for an appointment, which it is in his professional interest to try to secure. The International Bar Association (IBA) Rules of Ethics for International Arbitrators 1987 specify that potential arbitrators may entertain queries from the parties “designed to determine his suitability … provided the merits of the case are not discussed”. They also specify that no hospitality should be received.71 Similarly, CIArb has issued a practice guideline which sets out a list of permissible topics for discussion and a list of matters which are off-limits, such as the merits of the case. The guideline also specifies that the arbitrator

70 Barbosa v Di Meglio [1999] NSWCA 307 at [9], per Mason P. 71 IBA, Rules on Ethics for International Arbitrators (1987), rr.5.1 and 5.5.

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators 198 Arbitration should be allowed to decline to answer any question without adverse repercussions.72 However, this begs the question as to whose perspective one adopts when assessing adverse repercussions, because a refusal to answer may, not infrequently, lead to the interviewee being ruled out as a candidate for the appointment. Some prospective appointees might see that as a rather adverse repercussion! Various other practical matters are also suggested by the guideline such as where the interview should be conducted,73 who should be present and conducting the interview,74 and how a record should be kept.75 I agree with these suggestions and I would add two more. One, as a matter of prudence, the interviews should be kept short. In one case, the ICC Court refused to confirm an arbitrator who spent 50–60 hours with the nominating party before appointment.76 If one is sincere about the purpose of the interview, the interaction seldom, if ever, needs to extend beyond an hour or two. Two, and I appreciate that this might appear to be radical, I would propose that all pre-appointment interviews and communications be recorded, and that the transcripts be made available to the other party as soon as is reasonably practicable. I think this is necessary if we are to take seriously the task of throwing light on the pre-appointment process, with a view to disinfecting it. In a piece Mark Friedman wrote in response to the CIArb Practice Guideline, he said that, because of the innumerable permutations in which a pre-appointment interview could be conducted, “the overriding control is not guidelines”, but ultimately lies in “judgment about when a conversation strays into unacceptable territory”.77 Despite this, Friedman remains opposed to the idea of recording pre-appointment interviews. He argues that many practitioners “would abhor taping interviews as being intrusive, demeaning and perhaps even likely to provoke more litigation as disgruntled parties pore over every word in search of phrases they might pluck out to support a challenge”.78 However, no explanation is given for that abhorrence and I, for one, cannot think of any reason—apart from the unexplained allusion to the lawyer’s discomfort—why recordings should not be taken. Everything we say in court or in arbitration is generally recorded and transcribed. This is a central feature of open justice. Is it suggested that these discussions with a potential appointee have a quality of privacy or confidentiality that the other party to the arbitration is to be excluded from them? If so, on what basis? The concern of this spawning litigation is also unsubstantiated. After all, if nothing improper had in fact taken place, then there is nothing that needs to be hidden. The important point is this: arbitration is an adjudicative process and because it is so, we need to ensure not only that justice is done, but also that it is seen to be done, so that the confidence of parties and of the broader society is preserved. Leaving aside faith, it seems to me that the only way that one could reasonably satisfy the other party that the judgment of the prospective appointee as to what may properly be discussed during the interview was in fact properly exercised, and that the conversation did not stray into unacceptable territory, is by producing a record of the interview. I also suggest that a widespread and uniform

72 CIArb, Practice Guideline 16: The Interviewing of Prospective Arbitrators (London: CIArb, 2008) at 3.1(10) and 3.1(11). 73 CIArb, Practice Guideline 16: The Interviewing of Prospective Arbitrators (London: CIArb, 2008) at 3.1(15). 74 CIArb, Practice Guideline 16: The Interviewing of Prospective Arbitrators (London: CIArb, 2008) at 3.1(6). 75 CIArb, Practice Guideline 16: The Interviewing of Prospective Arbitrators (London: CIArb, 2008) at 3.1(7). 76 D. Hascher, “ICC Practice in Relation to the Appointment, Confirmation, Challenge and Replacement of Arbitrators” (1995) 11 ICC Arbitration Bulletin 4; see also CIArb, Practice Guideline 16: The Interviewing of Prospective Arbitrators (London: CIArb, 2008) at 3.1(16), which suggests that there should be an agreed time limit imposed on interviews. 77 M. Friedman, “Regulating Judgment: A Comment on the Chartered Institute of Arbitrators’ Guidelines on the Interviewing of Prospective Arbitrators” (2008) 2 Dispute Resolution International 288 at 292. 78 Friedman, “Regulating Judgment: A Comment on the Chartered Institute of Arbitrators’ Guidelines on the Interviewing of Prospective Arbitrators” (2008) 2 Dispute Resolution International 288 at 289.

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators Keynote Address of the CIArb (Malaysia Branch) Inaugural Presidential Lecture 199 practice of recording and disclosing pre-appointment interviews would have the salutary effect of discouraging interviewers from asking improper questions as well as protecting inexperienced and perhaps overly enthusiastic arbitrators from feeling pressured to posture to please their potential paymasters. I am bound to say that I do not think this is a fanciful concern.

Unilateral communications Secondly, I support the institution of a clear rule against unilateral communications following appointment. This prohibition is reflected in the rules of most arbitral institutions and the rationale behind it is self-evident and illustrated starkly by the recent controversy over the Croatia-Slovenia arbitration. However, some institutions in their rules make an exception where the communications concern the selection of the presiding arbitrator. Prominent examples include the International Institute for Conflict Prevention and Resolution, the IBA, and the London Court of International Arbitration (LCIA).79 It is also said by some commentators to be “established and accepted practice”.80 Proponents of the exception argue that the parties are in a better position, by virtue of their greater resources and better understanding of the case, to look up the background and decide on the suitability of prospective appointees.81 As against this, there are other institutions such as the World Intellectual Property Organisation (WIPO) and the AAA, whose rules forbid all forms of unilateral communications save for pre-appointment communications.82 For my part, I would align myself with the institutions which have taken a bright-line rule against all post-appointment ex parte communications, whether or not they relate to the appointment of the presiding arbitrator. I am aware that this suggestion might cut against the grain of prevailing practice,83 but my view is that creating any exceptions to the rule against unilateral communications after appointment is dangerous and should not be countenanced. The difficulty with permitting ex parte communications even in what might seem to be a relatively narrow area is that these communications, which pertain to the choice of a presiding arbitrator, can extend to strategic considerations influenced by a party’s own view of the merits or prospects of its case. It seems to me to be wholly unsatisfactory that such matters should be the subject of private ex parte communication between a party and its appointee on the tribunal. If the intention is to preserve at least some measure of party involvement in the selection of the presiding arbitrator, this can be achieved through a variety of other mechanisms. Parties may draw up mutually agreed lists of suitable candidates; or they could exchange separate lists of potential appointees with their preferences ranked ordinally. None of this requires ex parte communications between a party and its appointed arbitrator.

Conflicts of interest My third point concerns guidelines for managing conflicts of interest. The issue takes special importance in the context of party-appointed arbitrators because the appointee may often be selected on the basis of dealings the appointer has had with the appointee. This raises the murky spectre of multiple repeat appointments of the same arbitrator by a particular

79 CPR, Rules on Non-Administered Arbitrations art.7.4; IBA Rules on Ethics for International Arbitrators (1987) r.5.2; LCIA Arbitration Rules (2014) art.13.5. 80 See for example, A. de Fina, “The party appointed arbitrator in international arbitration—Role and Selection” (1999) 15 Arbitration International 381 at 383. 81 Bishop and Reed, “Practical Guidelines for Interviewing, Selecting and Challenging Party-Appointed Arbitrators in International Commercial Arbitration” (1998) 14 Arbitration International 395; Born, International Commercial Arbitration, 2nd edn (Alphen aan den Rijn: Wolters Kluwer, 2014), p.1699. 82 WIPO Arbitration Rules (2014) art.21; AAA International Arbitration Rules (2014) art.13.6. 83 Born, International Commercial Arbitration, 2nd edn (Alphen aan den Rijn: Wolters Kluwer, 2014), pp.1697–1698.

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators 200 Arbitration party or counsel. Party appointees should therefore be very mindful of the potential risk of a conflict. Historically, jurisdictions sought to define the list of circumstances in which an arbitrator could be removed on the ground of a conflict of interest. These mirrored the circumstances which might trigger a recusal for judges: for example, where the adjudicator has a direct pecuniary interest in the case or is related to one of the parties. This practice, was, however, quickly abandoned given the innumerable factual scenarios which might justifiably give rise to concerns over a lack of independence or impartiality.84 In recent years, arbitral institutions and think tanks have attempted to revive this project by publishing guidelines on situations that might necessitate either disclosure or recusal, depending on the nature of the link or connection in question. The most prominent example is the IBA’s Guidelines on Conflicts of Interest. These guidelines were first published in 2004 and revised in 2014.85 In broad terms, they set out a tiered and categorised system of disclosure, where different types of “flags” might be raised depending on which category the connection in question falls into.86 This is also, in broad terms, the position taken by the ICC, which recently issued a guidance note to parties and arbitral tribunals setting out a non-exhaustive list of situations in which the independence or impartiality of arbitrators may be called into question and which may trigger an obligation of disclosure.87 In principle, I support the promulgation of guidelines which provide a helpful reference point for practitioners who require working examples of what is and is not acceptable conduct. They also serve as a good working tool for arbitrators and parties seeking to police themselves. Guidelines, however, become dangerous when they are treated not as illustrative, but as prescriptive. In the final analysis, the existence of a matter implying a need for disclosure does not necessarily imply the existence of a conflict of interest, much less an absence of neutrality. Whether there are justifiable grounds for suspecting a lack of impartiality or independence is ultimately, as the UK High Court reiterated recently, a matter that is “classically appropriate for a case-specific judgment”.88 This is a powerful insight. Thus, what the prospective appointee must do in each case is to consider the facts fairly and exercise his judgment thoughtfully using the counsel of such materials as the IBA Guidelines and the ICC Guidance Note.

84 Gomez-Acebo, Party-Appointed Arbitrators in International Commercial Arbitration (Alphen aan den Rijn: Kluwer Law International, 2016), para.4-36. 85 IBA, Guidelines on Conflicts of Interest in International Arbitration (2014), Pt II. 86 At the top is the “Non-Waivable Red List”, which triggers mandatory recusal, with no exception. Going down a tier, there is the “Waivable Red List”, which concerns matters which would give rise to significant doubts as to the arbitrator’s independence and impartiality but can be cured with the informed consent of both parties. Third is the “orange list”, which pertains to matters which trigger mandatory disclosure, but may or may not give rise to concerns over fitness to serve. At the very bottom is the “green list”, where there is no disqualifying conflict of interest and therefore no requirement of disclosure. 87 International Chamber of Commerce, “Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration under the ICC Rules of Arbitration” (2016) at paras 17–22: http://www.iccwbo.org/WorkArea/DownloadAsset.aspx?id =19327366894 [Accessed 19 March 2017]. 88 W Ltd v M Sdn Bhd [2016] EWHC (Comm); [2016] C.I.L.L. 3828; [2016] 1 Lloyd’s Rep. The sole arbitrator in that case was a partner of a law firm which regularly advised an affiliate of the defendant, which in turn earned significant remuneration for that work. On this basis, the claimant sought to challenge the award on the ground of apparent bias. It was common ground that the arbitrator himself had never done any work for the defendant but had, for the last 10 years, operated effectively as a sole practitioner who did not concern himself with the affairs of the partnership. Ordinarily, that would be the end of the matter. However, the IBA Guidelines para.1.4 includes as a condition to be disclosed circumstances in which “[t]he arbitrator or his or her firm regularly advises the party, or an affiliate of the party, and the arbitrator or his or her firm derives significant income therefrom.” What was worse, para.1.4 fell within the “Non-waivable red list”, which pertains to matters which trigger automatic recusal. Counsel for the defendant submitted that the IBA Guidelines were “pretty emphatic”, a “very powerful factor”, and even that a real possibility of bias had arisen “because that is what we are told through Paragraph 1.4”. Knowles J unhesitatingly gave short shrift to this argument.

7. A Systematic Approach to Arbitrator Regulation In the last part of my lecture, I consider the issue of arbitrator conduct from a different perspective. The first three points I have touched on are preventive in nature and provide guidance for parties and prospective arbitrators. My final suggestion, however, proposes the establishment of a central body to oversee the discipline of international arbitrators. The broad idea has been canvassed for some time now.89 More recently, CIArb has given this serious thought. Some of my colleagues at CIArb and I are developing a proposal for CIArb to offer to other arbitral institutions an outsourced disciplinary adjudication process in respect of complaints against arbitrators in general, not just party-appointed ones. I see this as an instance of self-regulation by the arbitration profession and I see it as a measure that will ultimately strengthen arbitration as a whole even while it improves outcomes in individual cases. I should caution that this is a work-in-progress, but we are in the process of drafting a set of rules that will allow instances of arbitrator misconduct to be referred to and resolved by CIArb as a completely independent institution. We envisage this operating primarily in the context of arbitrations administered by institutions. Where a complaint arises in a given case, we envisage that the rules will establish a tiered system under which the complaint will first be raised to the arbitral institution administering the arbitration. If justifiable cause for complaint is found on a preliminary inquiry by the institution, the matter will then be referred to CIArb, which will consider the matter further. CIArb may take no further action, or it may administer disciplinary proceedings presided over by arbitrators selected from a list of qualified practitioners maintained by CIArb. A finding of misconduct could result in sanctions which can include, for example, the removal of the transgressing arbitrator from the arbitral institution’s list of approved arbitrators or expulsion from CIArb. On the other hand, dismissal of the claim should put an end to any subsequent due process challenge arising out of these facts being made against the award that is eventually issued. This will likely be the case as long as the process is written into the rules of the arbitral institutions in question and are matters that the parties have agreed to abide by when they arbitrate under the auspices of the institution in question. As a general rule, the findings of any disciplinary proceedings conducted by CIArb will be published and notified to other arbitral institutions enrolled in the scheme. This scheme will have several advantages. I begin by suggesting that CIArb is an ideal body to offer this service and to conduct and administer such proceedings, principally for four reasons: 1) First, CIArb enjoys the great benefit of neutrality as it is not itself involved in administering arbitrations—it is and will be wholly independent. This will overcome one complaint that is sometimes raised, which is that the arbitral institutions may find it difficult to effectively discipline their own. 2) Second, CIArb is a truly global arbitration body with a long reach in membership across numerous jurisdictions. This will ensure sensitivity to a wide arc of practice and also ensure that qualified persons to run the scheme can be drawn from the world over, thus enhancing its legitimacy. 3) Third, CIArb is an institution steeped in arbitral learning and training, and it has devoted considerable attention to the development of best practices. This will help ensure that the scheme remains at the cutting edge as an effective means of advancing the rule of law in arbitration.

89 Last year, for example, the Swiss Arbitration Association proposed creating a transnational body known as the Global Arbitration Ethics Council, which will deal with all sanctions relating to purely ethical issues. See Anne-Carole Cremades, “The Creation of a Global Arbitration Ethics Council: a Truly Global Solution to a Global Problem”, (Kluwer Arbitration Blog, 2015): http://kluwerarbitrationblog.com/2015/11/24/the-creation-of-a-global-arbitration -ethics-council-a-truly-global-solution-to-a-global-problem/ [Accessed 19 March 2017].

4) Fourth, the proposed scheme will build on the existing independent disciplinary system of CIArb which already enjoys worldwide credibility. Beyond this, and looking ahead, I envisage that the scheme will put in place a robust and independent disciplinary process to investigate instances of arbitrator misconduct. This will enhance the legitimacy of arbitration. Moreover, we intend to publish the decisions of the disciplinary tribunals, and I expect this will contribute over time to the development of a corpus of law on the standards of conduct of arbitrators which can then educate and guide practitioners from any jurisdiction. I said earlier that I see this as an example of self-regulation. The idea is that issues of arbitrator conduct will, under this proposal, be dealt with by arbitrators under the auspices of CIArb rather than by many different courts and it should enhance the legitimacy of arbitration as a whole, if many of the leading institutions were to come on board. We hope to take this proposal to the major institutions in the course of the next year or two and look forward to their receiving it warmly.

8. Conclusion I will conclude by leaving you with this thought. I have been speaking on the need for steps like these to be taken if we are to preserve the confidence of users in the arbitration process. But they are also needed for another equally important reason: training and schooling new lawyers and entrants into the field of arbitration on the acceptable standards of conduct and behaviour that are to be expected of practitioners; for it is these young practitioners who are the foundations on which the future of arbitration will rest. The path that our young colleagues will follow into a career in international arbitration will differ significantly from the one that I, and many among those of my generation, followed. Most of us learnt our craft in court where there was much less scope for rules, procedures and expectations to be misunderstood. And when we ventured into arbitration, we mostly interacted with others who had a similar formation. The young today are no longer bound by the shackles of the past. They can and do step into the practice of global arbitration from the start, but they do so in an environment that features a wide penumbra of what constitutes acceptable practice and conduct. As we think again of the institutional design of arbitration to suit the needs of a dynamic and burgeoning market, we should strive to do what we can to provide a measure of clarity in terms of what is and is not acceptable so that in the process, we might lessen the chance of things going awry. Thank you very much.

Bernardo M. Cremades

The reference in art.38.1(c) of the Statute of the International Court of Justice to “the general principles of law recognised by civilised nations” has given rise to a rich evolution of international law and, most particularly, economic international law. Bin Cheng made an important contribution with his book “General Principles of Law as applied by international Courts and Tribunals”.1 The seminal chapter on the principle audiatur et altera pars should particularly be taken into account in all arbitral proceedings. The demands of due process are present in relation to any decision made by an arbitrator during the processing of arbitral proceedings. However, relatively frequently lawyers representing the parties raise questions of due process in a threatening way, suggesting that if the arbitrator does not accept their procedural proposals the result would be a breach of due process. The lawyers do not fail to draw attention to the consequences of a breach of due process. Therefore, it is of great interest to analyse and distinguish when it is justified to raise questions of due process, and when there is an abuse which the arbitrator should reject for the benefit of orderly and effective arbitral management.

1. The Origin of “Due Process of Law” The requirements of due process are the reflection in arbitral proceedings of constitutional demands. Amendment XIV of the US Constitution informs us that “no State shall deprive any person of life, liberty or property, without due process of law”.2 In England the term “due process” first appears in the Magna Carta, 1354 version, during the reign of Edward III.3 In the history of Castile and Aragon the action of amparo or appeal for legal protection developed as a procedural guarantee in addition to the ordinary guarantees for citizens. The Liber Iudiciorum (Fernando III, 1241) stated that “you shall be king, if you abide by law, but if you do not abide by law, you shall not be king”.4 The Tercera Partida (title 23, Law 13) spoke of “recurso omissio medio”.5 The legislation of Castile was reflected in the American territories. The colonial amparo (Andrés Lira) took shape in the Viceroyalty of New Spain.6 The so-called “recurso de obedézcase pero no se cumple” [appeal of obedience

1 B. Cheng, General Principles of Law as applied by International Courts and Tribunals (Cambridge: Cambridge University Press, 2006). 2 Constitution of the United States of America Amendment XIV s.1: “All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the state wherein they reside. No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States, nor shall any state deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws”. 3 The phrase “due process of law” appeared in a statutory rendition of the Magna Carta in 1354 during the reign of Edward III of England: “no man of what state or condition he be, shall be put out of his lands or tenements nor taken, nor disinherited, nor put to death, without he be brought to answer by due process of law” (28 Edw. 3, c 3). 4 J. Gonzalez , Reinado y diplomas de Fernando III (Córdoba, Monte de Piedad y Caja de Ahorros de Córdoba, 1980) doc.670, p.212 and following. 5 “Las Siete Partidas del Rey D. Alfonso X el Sabio” (King of Castille and Leon, 1221–1284) (Madrid: Imprenta Real, 1807). 6 A. Gonzalez, El amparo colonial y el juicio de amparo mexicano: antecedentes novohispanos del juicio de amparo (Mexico: Fondo de Cultura Económica, 1972).

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators 203 204 Arbitration without compliance] appears in the code of the laws of the Indies (law 22, title 1, second book). Behind this concept is the origin of the legal possibility of respecting an order, but where the order is not complied with because the person who ought to enforce it legally deems that it is not lawful.7 In the Kingdom of Aragon the confrontation between the Crown and the different administrative levels gave rise to the so-called Justice of Aragon, which, with the so-called “process of manifestation”, had authority even over the king to avoid abuse of persons. The kings of Aragon took an oath before the Justice8 with the formula described by Antonio Pérez: “we who are equal to you and all together more than you, make you king of Aragon, if you swear to comply with the laws and, if not, we do not”.9 We can see, therefore, how “due process” emerges in the Anglo-Saxon world. At the same time, the appeal for legal protection is established in the kingdoms of Castile and Aragon, precisely to avoid the abuse of persons, even by the king himself. Today, in the Universal Declaration of Human Rights, Paris 1948, it is stated (art.10) that: “everyone is entitled in full equality to a fair and public hearing by an independent and impartial tribunal, in the determination of his rights and obligations…”.10 The European Convention for the Protection of Human Rights 1950 also states (art.6) that “In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law”.11 Our constitutions also contain fundamental rules guaranteeing due process. Article 24.1 of the Spanish Constitution speaks of “effective legal protection”, the text of which is used in the Spanish Constitutional Court’s case law to speak of effective arbitral protection. Article 24.1 continues that under no circumstances shall a person be deprived of their right of defence.12

2. “Due Process” in International Arbitration The requirement of due process as a constitutional guarantee is something that has been developing in Anglo-Saxon and continental laws as a fundamental right of the citizen. In arbitral proceedings, the basic rule consists of submitting to the principles of equality, fair hearing and the right of contradiction. The parties should be treated equally and each one should be given sufficient opportunity to present their case. Due process in international arbitration requires the arbitrators to conduct the proceedings and, consequently, draft their awards in such a way that their awards are enforceable. This means that they should make their best efforts to ensure that their awards are not subject to annulment in the place of arbitration and that they are also enforceable where the person entitled to enforce them wishes to do so.

7 G. Gallo, “La ley como fuente del Derecho en Indias en el siglo XVI”, Estudios de Historia del Derecho Indiano, Madrid, 1972, p.169 and following. 8 G. Fatas Cabeza, Heráldica aragonesa. Aragón y sus pueblos (Zaragoza: Ediciones Moncayo, 1990), p.20. 9 A. Perez, Relaciones de Antonio Pérez secretario de Estado que fue del Rey de España, 1598. See Ralph Giesey, If not, not. The oath of the aragonese and the legendary laws of Sobrarbe (Princeton: Princeton University Press, 1968). 10 Universal Declaration on Human Rights, United Nations General Assembly, Paris, 10 December 1948 art.10: “everyone is entitled in full equality to a fair and public hearing by an independent and impartial tribunal, in the determination of his rights and obligations and of any criminal charge against him”. 11 European Convention on Human Rights, drafted in 1950 by the Council of Europe, entered into force on 3 September 1953 art.6, “Right to a fair trial: 1) in the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law”. 12 Constitución Española 1978 art.24: “1) todas las personas tienen derecho a obtener la tutela efectiva de los jueces y tribunales en el ejercicio de sus derechos e intereses legítimos, sin que, en ningún caso, pueda producirse indefensión”.

In their decision-making, arbitrators should first ask themselves in accordance with which applicable law the content of the due process should be assessed. Naturally, their starting point must be the wishes of the parties in dispute. Furthermore, the arbitrators should take into account conventional and customary international law. The world of international arbitration currently enjoys a great array of international treaties, notably the New York Convention 1958 and the Washington Convention 1965 regarding arbitration to protect investment. I believe that both Treaties should be a starting point when analysing the meaning of due process requirements. Moreover, we currently enjoy the benefits of an important customary international economic law. The difficulty inherent in other sectors of international law to delimit custom and usage is simplified in the world of arbitration by the “opinio iuris” of the legal rules repeatedly endorsed in arbitral awards.

3. Content and Requirements of Arbitral Due Process When something should be considered as a requirement of due process in arbitration has a high discretionary content. It is the arbitrator who should, in view of the circumstances, decide whether a decision can be required or, on the contrary, prohibited depending on their understanding of due process. It is sufficient to recall the old Russian proverb “Do not fear the law, but the judge”. Ascertaining what the content of due process is in arbitration, entails analysing the different stages of the arbitral proceedings. In that respect, a magnificent book by Kurkela and Turunen (Due Process in International Commercial Arbitration)13 analyses the stages of arbitral proceedings presenting questions for arbitrators of due process in the following six general areas: 1) When interpreting the arbitral agreement as the basis for accepting or denying their own jurisdiction. It is well known that the arbitral agreement has a positive effectiveness, permitting the development of arbitral proceedings, and a negative effectiveness, excluding the ordinary courts from hearing matters covered by the arbitral agreement. Precisely that exclusive nature is why the interpretation of the agreement, when accepting or denying their own jurisdiction, raises problems of legal certainty. Their decision-making activity must remain within the limits of the agreement without incurring in ultra or infra petita; 2) Jurisdictional aspects not directly related to the arbitral agreement. This is the case, for example, of the arbitrability of the subject-matter of the lawsuit, the participation of parties who have not formally signed the arbitral agreement, possible res judicata or lis pendens, or the exception of forum non conveniens. The admission or refusal of the participation of amicus curiae may also raise questions of due process. It is frequent in this context to raise the appropriateness of the bifurcation of the proceedings. This is a decision that should be made depending on the circumstances of each case because, what is sometimes appropriate for the effectiveness of the proceedings, can on other occasions simply cause delay; 3) The constitution of the arbitral tribunal itself. The correct appointment of the arbitrators forms an essential part of the arbitration. Their impartiality and independence, and their duty to disclose any circumstance that might call into question the performance of their duties is fundamental in all arbitral proceedings. The arbitrators should avoid direct communication with either of the parties and should ensure that the tribunal secretary, if one is appointed,

13 M. S. Kurkela and S. Turunen, Due Process in International Commercial Arbitration, 2nd edn (Oxford: Oxford University Press, 2010).

should comply with their duty to help the arbitrators and not influence decision-making; 4) With regard to the facts upon which the parties’ claims are based and the evidence to be filed, the arbitrators should first decide who has the burden of proof and then establish the limits for one party to request the other party to adduce certain documentation; 5) The tribunal should guarantee the performance of the arbitral agreement in good faith. One of the arbitrators’ most important tasks is to indicate the facts relevant for the decision, based on the clear idea amongst litigants that cases are won or lost based on the presentation of the facts. There is a current trend in international arbitration to file numerous documents, which Michael Schneider has rightly branded as the “paper tsunami” of arbitration.14 Arbitrators are responsible for fixing certain limits in order to be able to clarify which facts are relevant or irrelevant in the decision to be made; and 6) Arbitrators should give each party a reasonable opportunity to present its case. This is required by art.V(1)b of the New York Convention which states that recognition and enforcement of an arbitral award may be refused if a party “was otherwise unable to present his case”. This is where arbitrators should exercise their authority, subject to the essential principles of hearing, contradiction and equality. The tribunal should conduct the proceedings promptly and minimise potential costs guiding the parties through procedural orders or instructions to establish the relevant facts clearly. The procedural time schedule should be realistic because, as Gabrielle Kaufmann-Kohler rightly observes, best is the enemy of good.15 Arbitrators are under the obligation to combine discretionally what may seem like two poles apart. As Dominique Hascher puts it, between legal certainty and speedy proceedings.16 Johnny Veeder speaks of the necessary balance between the arbitrator’s reasonable activity and his efficiency: “due process” is essentially a moral question, not a legal concept.17 In short, the content of due process can be summed up in two fundamental procedural points: access to justice and reasonableness of the proceedings.

4. The Need for Strong Arbitral Tribunals Philippe Pinsolle presented an interesting paper at the International Council for Commercial Arbitration (ICCA) meeting in Mauritius, May 2016.18 He focused on the danger of arbitration vis-à-vis what he referred to as a “weak Arbitral Tribunal”. In his opinion, a tribunal fearful of the aggressiveness of the parties’ lawyers constitutes a great danger for the effective development of the arbitral proceedings. In his opinion, domestic laws on arbitration and arbitral institution rules confer sufficient powers on arbitrators to perform their duties. National judges and tribunals in arbitration-friendly countries protect them in the exercise of their powers. His work is an interesting exercise of comparative law on the

14 M. Schneider, “The paper tsunami in international arbitration: problems, risks for the arbitrator’s decision making and possible solutions” in Written Evidence and Discovery in International Arbitration, Dossiers of the ICC Institute of World Business Law (Paris: ICC, 2009), p.365 and following. 15 G. Kaufmann-Kohler, “Beyond Gadgetry—Substantive New Concept to Improve Arbitral Efficiency” (2004) 5 J. World Investment & Trade, 70: “The calendar must be realistic: ‘Le mieux est l’ennemi du bien’.” 16 D. Hascher, “Principales et Pratiques de Procédure dans l’Arbitrage Commercial International” (1999) 279 Recueil des Cours of the Hague Academy of International Law 108: “[L]’arbitrage doit se dérouler dans des conditions de sécurité juridique et de célérité afin d’assurer la validité de la sentence et de diminuer les coûts que les parties doivent assumer. Les arbitres font fréquemment référence à ces exigences quand il leur faut décider de l’opportunité de se prononcer par voie de sentence partielle ou organiser l’administration de la preuve.” 17 V.V. Veeder, “Due process, the balancing of fairness and efficiency”, IBA Arbitration Day, Dubai, 2009. 18 Philippe Pinsolle, “The need for strong arbitral tribunals”, Mauritius, 2016, ICCA Plenary.

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators The Alexander Lecture, London, 16 November 2016 207 subject. In his opinion, the key points are as follows: the possible annulment of the proceedings if the ground for annulment is not first raised before the arbitral tribunal itself; disregarding submissions filed in breach of the procedural calendar; refusing to allow additional written submissions; refusing to accept late written evidence; refusing to hear witness evidence; calling by the arbitral tribunal of a witness on its own motion or relying on statements given by witnesses not called by the parties; not allowing or limiting cross-examination; refusing or limiting irrelevant expert evidence; rejecting untimely requests for the submission of documents; and failure to answer each argument raised by the parties. The key issue is to ascertain whether the tribunal should avoid being considered as a “weak Arbitral Tribunal” in such circumstances.

5. Proof in International Arbitration In his decision-making the arbitrator has sufficient reasons to doubt in adopting a strong or weak position. Proof in international arbitration frequently requires such doubt of the arbitrator. National procedural laws do not apply in international arbitration. The arbitrators decide procedural questions. Hence, the standard procedure agreed with the parties in procedural order number 1 sets out the guidelines for the conduct in the arbitral proceedings. Frequently, it should deal with the fusion of the legal cultures of the common and the civil lawyer. The subject matter of the proceedings is different: in civil law, the judge determines and applies the law, whereas, in the Anglo-Saxon system, the judge organises the fair combat between the parties. The Anglo-Saxon lawyer tends to attach greater importance to the hearing, the lawyer bears in mind his historic function of addressing the jury, the members of which sometimes did not know how to read; hence, the tedious and reiterated trend of reading texts that the arbitral tribunal should already know. For the continental lawyer, however, the written stage is the important part. UNCITRAL’s work has permitted that, in practice, the use of both legal cultures has become balanced in international arbitral proceedings. However, well-founded doubts arise with regard to questions of documentary, witness or expert evidence. In civil law, the parties file their documented statements, whereas, in Anglo-Saxon law, the documents are requested after the parties have exchanged their pleadings. The continental lawyer is reluctantly becoming accustomed to the importance of discovery of documents and depositions of witnesses. It can be said that the civil lawyer affirms, requests and proves, whereas the Anglo-Saxon lawyer affirms and hopes to prove. Hence, the difficult mixture in international arbitration: the claim and the defence should be complete and documented and subsequently the documents to which access could not be gained when drafting the statements are sought. Fishing expeditions are not allowed; the request for documents should be made explaining why and for which purpose they are sought; the arbitrators know the facts as a result of having read the written statements and are in a position to control the reasonableness and length of the other party’s requests for documentation. The arbitrator plays the role of moderator, but lacks the power of the state judge; he can, however, request of his own accord certain documents which he deems essential. The parties’ reluctance or refusal can give rise to inferring the consequences that the arbitrator deems appropriate in his assessment of the documentary evidence. The difference between the witness in international arbitration and the witness in proceedings before a national judge is clear: in arbitration the person who has in some way been involved in the facts, usually a client or an employee, appears as a witness; he is not neutral because, since he has been involved, he has an interest in the dispute. Hence the controversy surrounding the possibility of preparing witnesses, which is something that, in principle, is repugnant to the continental lawyer’s professional ethics. The filing of witness declarations with the pleadings, in order to avoid surprising the other party, has become an essential element of witness evidence; the lawyer helps to draft those declarations, so that

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators 208 Arbitration they are more convincing for the arbitrators, but without inventing facts, but rather to help the witness to recall them. Should cross-examination be limited to written testimony or should it deal with any relevant fact? Does formal truth prevail over material truth? The arbitrator should avoid abuses of cross-examination, such as trying to corner the witness or surprising him about facts in respect of which he is not prepared. The civil law judge appoints the expert, whereas in common law the parties present their experts. In international arbitration it can be said that the Anglo-Saxon system prevails, but with preliminary written reports. Frequently the arbitrator himself appoints an expert to present an independent opinion from those offered by the parties’ experts. One speaks of the rigidity of legal proceedings and the flexibility of arbitration. However, flexibility does not mean the chaotic weakness of the arbitrators in conducting the proceedings. It should not be forgotten that the purpose of all evidence is to convince the person who has to judge what the parties affirm and seek. The arbitrators should assess in each case the relevance of the evidence presented, and in their discretion should decide the usefulness of the evidence for their own conviction.

6. The Breach of “Due Process” When a breach of due process has been committed, the arbitral award may be annulled or not enforced, where appropriate. However, this should only occur in cases in which “the most basic notion of morality and justice” is violated.19 When that occurs, normally the sanctions are not directly imposed on the arbitrator who breached his duty, but rather, as W. Park affirms, the party that wins the arbitration pays the price of the arbitrator’s defective conduct because that party and only that party suffers the consequences of the annulment or non-enforcement of the judgment which accepted its claims but was subsequently annulled or not enforced.20 Rarely is the arbitrator subject to actions of responsibility for failing to perform his duties. The Spanish Constitutional Court has found that arbitration is a jurisdictional equivalent and, therefore, the arbitrator enjoys certain immunity in performing his jurisdictional activity. It is true that the arbitrator originally performs his duties under an arbitral agreement and, therefore, is required to fulfil his contractual obligations vis-à-vis the parties. Nowadays, judicial decisions holding the arbitrator liable when he has breached his purely contractual obligations (for instance, accepting the appointment without disclosing a conflict of interest with a consequent annulment of the award) are becoming widespread.

7. Abuse of “Due Process” In many arbitral situations, “due process” has today become a real threat to the arbitral tribunal. When, in a party’s submissions or at the arbitral hearing, one of the lawyers lets the expression “due process” slip, the tribunal usually understands it as a threat that, if the arbitrator does not agree to their petition, the award will subsequently be annulled. In this day and age, we are living in times of significant conflict. Arbitration has ceased to be a method for resolving disputes between gentlemen to become a vast industry where it would seem that aggressiveness is a virtue for the lawyer defending the party’s interests. Challenges to arbitrators are used as a strategic weapon, and claims for compensation against arbitrators or arbitral institutions, as well as criminal prosecutions of arbitrators for declaring jurisdiction at the initial stage of arbitral proceedings, are ever-more frequent in the life of international arbitration. The arbitrators who perform their duties against the state in the place of the arbitration are sometimes subjected to inadmissible pressure. The use of public opinion as

19 Parsons & Whittemore Overseas Co. Inc. v Société General de l’Industrie du Papier Rakta and Bank of America, Yearbook of Commercial Arbitration (1976), p.215. 20 W. Park, The procedural Soft Law on International Law, non-governmental instruments (Leiden: Kluwer International, 2006), pp.146, 147.

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators The Alexander Lecture, London, 16 November 2016 209 a weapon of pressure against the arbitral tribunal is unacceptable. It is general practice of many law firms to have an important communications department, generating news items which are not always to the benefit of the necessary neutrality of arbitrators’ activity. Arbitrators are criticised excessively, and are made responsible for the defects of the large industry of arbitration. However, nothing is mentioned about the excessive length of the time limits fixed by the lawyers in the procedural timetable. The parties have a legitimate right to the proceedings … taking place efficiently and rapidly. The parties’ interests occasionally interfere with the interests and professional obligations of the persons representing them. With an adequate exchange of written communication, arbitrators can know what is asked of them without the need for excessively long and inefficient hearings. At many of these hearings dozens of lawyers meet around the tribunal’s table, but their presence is not justified over the weeks that the hearing might last. The excessive presentation of witnesses is often unnecessary, and there is a proliferation of experts who sometimes do nothing but confuse the tribunal. These are subjects which would have to be analysed at leisure. The Anglo-Saxon technique of cross-examination may be very useful in searching the material truth of the facts, but cross-examinations are frequently theatrical representations for the display of the lawyer in question; sometimes, in that exercise, one gets the impression that the lawyer forgets that his task is to convince the tribunal rather than to be thinking of the transcription of his interventions, frequently intended for his client. I understand that all these excesses can constitute a real breach of “due process” for which only the professionals representing the parties should be held responsible. The documentary “tsunami” to which Michael Schneider referred only confuses arbitrators. A vast part of the documentation, not to mention the repetition of authorities filed, is totally unnecessary. The arbitrator has to put a gargantuan amount of effort into doing what the parties’ representatives ought to have done: present crystal clear and concisely documented conclusions. As a result, arbitration costs have rocketed. When the proceedings end, the tribunal asks the parties for the costs that they have incurred, and these can really be scandalous. All this raises the problem of whether, in fact, as a result of these macro-arbitral proceedings, we are making it impossible for the parties to the arbitral agreement to access justice. Thus, the excessive cost of arbitration can constitute a real ground of denial of justice. To that end, the solution of the financial sector has been the third-party funder, which actually permits access to arbitral justice but, in turn, increases the cost of the proceedings.

8. “Due Process” and Judicial Control In Latin America there is lively debate around the judicial control of arbitral awards. The excessive resort to the appeal of amparo on the basis of a violation of constitutional rights in the arbitration has led to abuses that only serve to delay arbitral proceedings in the courts. Too often the nullity of arbitral awards is sought for breaches of public policy, which is understood as including any constitutional violation. In many jurisdictions the concept of public policy used by judges and courts in the revision of arbitral awards is not well defined. Latin American scholarship is divided between the procedural lawyers who insist excessively on the need for a detailed constitutional control, and the supporters of the flexibility and efficiency of arbitration. The issue even raises questions of professional ethics. Some praise the lawyers that use all available appeals and means for the benefit of their client. They do not think that an unreasonable abuse of the right of defence might constitute an ethical breach that could be subject to disciplinary sanction. For many, the lawyer should use all procedural means within their reach in defence of the interests of their client. When it is said that arbitral tribunals should be strong the seat of the arbitration should not be overlooked, for here lies the eventual judicial control by local judges. Many Latin American countries guarantee the protection of fundamental rights through the appeal of

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators 210 Arbitration amparo in prejudice, as Francisco Gonzalez de Cossío correctly points out, to the fundamental right of judicial security and certainty. The appeal of amparo is permitted to lessen fundamental rights such as the freedom to agree to arbitration for the resolution of conflicts and the legal security of those involved in the arbitral process.21

9. “Due Process”, Shield or Sword? Embedded in the origins of due process requirements is the protection of the right of defence. Today, there is added to this function that of an aggressive sword through the use of the magic words “due process” to force the tribunal to accept certain procedural claims. The criticism against arbitrators at the same time as the silence in respect of the abuses by lawyers in arbitral proceedings is noteworthy. Recently, we have had the opportunity to listen to the President of the International Bar Association (IBA), Mr David W. Rivkin, who has criticised the current defects of arbitral proceedings as if they were the result of the dubious work of the arbitrators. In his speech delivered in Hong Kong on 27 October 2015 he states, inter alia, that “with regard to the hearing itself, every arbitrator should undertake to give their undivided attention, instead of replying to e-mails, doing sudoku puzzles or getting involved in any other distracting activity”.22 I do not know Mr Rivkin’s experience in arbitral matters but, from reading his speech, he gives the impression of Don Quixote de la Mancha, fighting against ferocious giants which were in fact only windmills. The great finding of the President of IBA is the need to draw up a new contract whereby arbitrators are more exactingly committed to the parties who directly or indirectly appoint them. Perhaps he should focus more on the performance of the lawyers in order to obtain better results in arbitral proceedings. International arbitration is currently in the crossfire of international politics. First were the Bolivian states, which initiated forceful criticism of investment arbitration.23 Later the EU signed the Treaty of Lisbon in which it tried to eliminate the powers of the member states of the Union with regard to arbitration to protect investment, in favour of the European Commission.24 Thus, investment protection arbitration was exposed to the politicisation of the political parties within the framework of the European Parliament. When the treaty on the protection of investment between the EU and the US (TTIP) is discussed, the left-wing parties take arbitration to protect investment as a rallying point in their political fights.25 In the US, the New York Times’ fierce criticism is undoubtedly justified by the abuse of class actions in arbitration to protect the consumer, which, in practice, gives rise to real situations of a lack of proper defence.26 In Europe the criminal use of arbitration in the Tapie case has logically discredited commercial arbitration.27

21 F. Gonzalez De Cossio, “Procesos constitucionales y procesos arbitrales: ¿agua y aceite?” (2014) 6 Revista Ecuatoriana de Arbitraje p.229 and following. 22 D. Rivkin, “A new Contract between Arbitrators and Parties”, HKIAC Arbitration Week Keynote Address, 27 October 2015. 23 Bolivia notified its withdrawal from the ICSID convention on 2 May 2007. Two years later, Ecuador took the same step. Venezuela withdrew from ICSID in July 2012. 24 The Treaty of Lisbon was signed in Lisbon on 13 December 2007. Article 207.1 says: “the common commercial policy shall be based on uniform principles, particularly with regard to changes in tariff rates, the conclusion of tariff and trade agreements relating to trade in goods and services, and the commercial aspects of intellectual property, foreign direct investments, the achievement of uniformity in measures of liberalisation, expert policy and measures to protect trade such as those to be taken in the event of dumping or subsidies. The common commercial policy shall be conducted in the context of the principles and objectives of the Union’s external actions”. 25 E. Warren, “The Trans-Pacific Partnership clause everyone should oppose”, The Washington Post, 25 February 2015. 26 J. Silver-Greenberg and R. Gebeloff, “Arbitration Everywhere, Stacking the Deck of Justice”, The New York Times, 31 October 2015; “Rule on Arbitration Would Restore Right to the Banks”, The New York Times, 5 May 2016; “Court Rules Companies Cannot Impose Illegal Arbitration Clauses”, The New York Times, 26 May 2016; “Start-ups Embrace Arbitration to Settle Workplace Disputes”, The New York Times, 14 May 2016; “Bill Seeks to Limit Use of Arbitration to Avoid Courts”, The New York Times, 4 February 2016. 27 D. Thomson, “Tapie award overturned in France”, Global Arbitration Review, 18 February 2015.

We find ourselves in these circumstances at the present time. Undoubtedly, like all institutions, international arbitration should accept certain constructive criticism to improve this dispute-resolution method. With regard to arbitral proceedings, it is beneficial to emphasise the need for a correct use of due process, and to identify and avoid the abuses that are occurring. However, it is not acceptable to single out arbitrators for criticism, overlooking the real abuses committed by many professionals participating in international arbitration. “Let he who is without sin cast the first stone”.

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators Keynote Speech at the Chartered Institute of Arbitrators DAS Convention, 2 December 2016 Ethics and Conflicts of Interest in ADR

Peter Goldsmith

1. Introductory Remarks It is my pleasure and honour to have been asked to deliver this keynote speech at CIArb’s fourth annual DAS Convention. If we examine the last 15–20 years in the field of arbitration, we see huge activity in what I may term the infrastructure of arbitration. There have been new arbitral institutions and facilities in many parts of the world—British Virgin Isles, New Delhi High Court, Seoul, Sydney, Kuala Lumpur and more. Whilst other institutions have grown from domestic providers of arbitration to major world centres displacing the traditional arbitral centres for most popular spot: Singapore and Hong Kong for example are amongst the busiest of centres eclipsing even Paris, the centre of the International Chamber of Commerce (ICC). To meet the growing demand for arbitration that the creation of these new centres implies, new and improved rules have been devised. There are so many that it is hard to know where to start to number them. But one can easily think of the revision of the major rules of the London Court of International Arbitration (LCIA), of the ICC, of Hong Kong and Singapore. And the creation of new services: training of tribunal secretaries, development of ways to make arbitration capable of dealing with multi-party cases as well as the more traditional unitary cases. And so on. And the growth in arbitration has not been illusory. Governments such as the British have made pledges to use Alternative Dispute Resolution (ADR) in place of court services; major conferences international and national are taking place all the time; whole journals are devoted exclusively to arbitration. Indeed, so prevalent has arbitration become that Lord Thomas CJ in his Bailii lecture1 bemoaned the fact that arbitration was taking so many important commercial cases out of the regular court system that it was impeding the development of the common law and so proposed changes to the Arbitration Act [1996] to redress the balance. All of these developments and activity should indicate that the state of arbitration is one of blooming and robust good health. That its use is popular and well supported across the world. Yet when it started to emerge in public that a proposed treaty between the EU and US, what was to be the Transatlantic Trade and Investment Partnership (TTIP),2 would include arbitration procedures to deal with investment claims between host countries and foreign investors the howls of protest and disagreement from NGOs, trades unions and sections of political bodies demonstrated that the perhaps complacent views of the arbitral community on the superiority and beneficial effects of arbitration were not shared by all. Nor were these criticisms limited to the special world of investment arbitration where it became popular to complain about so-called secret courts adjudicating on the terms of national policy and great social issues such as health and the use of nuclear power. The suspicion of arbitration began to spread to all areas of arbitration as you will see if you read some of the remarks of the European Parliamentarians when TTIP was being discussed.

1 The Right Hon. The Lord Thomas of Cwmgiedd, CJ of England and Wales, “Developing commercial law through the courts: rebalancing the relationship between the courts and arbitration”, The Bailii Lecture 9 March 2016, http:/ /www.bailii.org/bailii/lecture/04.pdf [Accessed 19 March 2017]. 2 A proposed Transatlantic Trade and Investment Partnership (TTIP) between the US and the EU which was under discussion in 2016.

This has to prompt the question: what has gone wrong? How can so many be so unpersuaded of the merits of arbitration as a neutral and efficient method of dispute resolution when the empirical evidence in the growth of new centres, of new rules and of other indicia of the growth of arbitration show how important and useful it is? Many of you may have your own theories for this discrepancy between public perception and the empirical evidence. For my part I wonder if at least one reason for it may be that we as a community have not solved the problem to which this session today is devoted: how to regulate the ethical side of arbitration so that there is full confidence in the true neutrality and independence of the system and of individual arbitrations. If so, it is not for want of trying. For the past 30 years at least great energy and thought has gone into the topic. In 1985 Martin Hunter and Jan Paulsson proposed a code of ethics for arbitrators and a code for attorneys decrying the ability of national codes to cover the need.3 In 2001 Johnny Veeder posed the question in his 2001 Lord Goff lecture: “What are the professional rules applicable to an Indian lawyer in a Hong Kong arbitration between a Bahraini claimant and a Japanese defendant represented by New York lawyers, the answer is no more obvious than it would be in London, Paris, Geneva and Stockholm. There is no clear answer.”4 In 2002, Catherine Rogers stated that “[i]international arbitration dwells in an ethical no-man’s land”5. In 2010 Doak Bishop repeated the call for a code of ethics in international arbitration citing the “compelling need” for one.6 In 2014, Gary Born likened ethics in arbitration to a “teenager’s bedroom” and that practitioners in the field of arbitration are faced with a “Rubik’s cube of different ethical obligations”.7 In 2013, I said (at the ICC’s UK Annual Arbitrator’s Forum in 2013) that “ethics in international arbitration has generated much debate but relatively few answers”.8 And it would be wrong to deny that activity has taken place. We have rules on disclosure of arbitrators’ interests that the IBA has produced and to which we now make constant reference. Institutions have provided rules or at least guidance for the conduct of arbitration practitioners. A notable example is the Annex to the 2014 LCIA Rules which sets out some basic and important statements as to the rules for the conduct of arbitrations by the parties’ representative such as the requirement “not knowingly to make a false statement to the Arbitral Tribunal or the LCIA Court” (para.4), “not knowingly [to]conceal or assist in the concealment of any document … ordered to be produced by the Arbitral Tribunal” (para.5) and rules designed to prevent unilateral contact with one member of the Tribunal (para.6).9 And institutions have been active as well: the IBA Guidelines on Party Representation in International Arbitration, though controversial in the powers they proposed to give to arbitrators (a topic on which I will have a little more to say later), did at least grapple with the problem.10 And of course even earlier than these initiatives this Institute’s 2009 Code of Professional and Ethical Conduct for Members set out a detailed guide to rules and conduct said to be “a reflection of internationally acceptable guidelines” which was designed not only as a

3 M. Hunter and J. Paulsson, “A Code of Ethics for Arbitrators in International Commercial Arbitration” (1985) 13 Arbitration International 153. 4 V.V. Veeder, The 2001 Goff Lecture, “The Lawyer’s Duty to Arbitrate in Good Faith” (2002) 18 Arbitration International 435–451. 5 C. Rogers, “Fit and Function in Legal Ethics: Developing a Code of Conduct for International Arbitration” (2002) 23 Mich. J. Int’l L. 341. 6 D. Bishop, “Ethics in International Arbitration”, Keynote address at the 1st ICCA Conference in South America, Rio de Janeiro, May 2010. 7 G. Born, speaker at Inaugural Conference of the Institute for Regulation and Ethics, Queen Mary University of London, September 2014. 8 Keynote Speech at the ICC UK Annual Arbitrators’ Forum: “Ethics in international arbitration — is the time ripe for an international code of conduct?” (27 November 2013). 9 London Court of International Arbitration, LCIA Arbitration Rules, effective 1 October 2014 (London: LCIA, 2014), Annex. 10 IBA, IBA Guidelines on Party Representation in International Arbitration (London: IBA, 2013).

“point of reference” for users of arbitration but also “to promote confidence in dispute resolution techniques”.11 It is that last point—the promotion of confidence in dispute resolution techniques—which to my mind is critical. Arbitration as a successful alternative to litigation in court depends on showing that the participants can have at least as much confidence in the process as they can in court procedures. Of course that confidence is not limited to ethical standards in the running of arbitrations. As any examination of writings on arbitration will show there are many other important issues. Cost and speed for example. The speed— or rather the slowness of arbitration—has become a real and worrying issue. Parties can sometimes wait in excess of a year after hearings for an award. In India’s recent Arbitration Ordinance12 the position has been taken that arbitrations have to be completed on pain of sanction and subject only to the court’s approval within tight and challenging time limits measured in months and not years. Still ethical standards are of the greatest importance or else how can there be confidence in the process? So your present conference is both timely and important. I want therefore to suggest to you a number of questions that you might find helpful in your conversations today: 1) What is the conduct that we are here concerned to regulate and control? Is it only some sorts of unethical conduct or is it all? 2) What are or should be the rules that operate? Are they currently adequate or do we need to create a new set of standards and if so do they need to be global and universal in application or can there be regional or local standards? 3) Are the methods of enforcement of standards adequate or do we need to find new methods, entrusting new powers to someone and if so whom? Arbitrators themselves or institutions or even new bodies?

2. What Is the Conduct that We Are Here Concerned to Regulate and Control? What is the conduct that we are here concerned to regulate and control? Is it only some sorts of unethical conduct or is it all? The most important step towards addressing a problem is defining it in the first place. It would distinguish three types of (unethical) conduct: • First, there is counsel/arbitrator conduct that is criminal and/or invokes civil liability by the general law (e.g., corruption, fraud, knowing presentation of false evidence, etc.). These are situations in which there are clearly defined rules of conduct in criminal law or civil procedure that have been breached. The rules for those egregious types of violations also tend to be similar across jurisdictions, which makes them easier to identify and to enforce in international cases. • Secondly, and this arises regularly in the context of international arbitration, there is conduct that is acceptable, or at least not expressly prohibited, in a counsel’s/arbitrator’s own jurisdiction, but unacceptable in the opposing counsel’s/arbitrator’s jurisdiction (e.g., different approaches to privilege, presentation of submissions, communication with witnesses, confidentiality, etc.). This category causes much more difficulty in terms both of defining conduct as unethical and sanctioning it.

11 The Chartered Institute of Arbitrators Code of Professional and Ethical Conduct for Members (October 2009) (London: CIArb, 2009). 12 Arbitration and Conciliation (Amendment) Act 2015.

• Thirdly, there is behaviour that can be subsumed under the general umbrella of “guerrilla tactics” (e.g., filing groundless challenges to the appointment of arbitrators to delay the proceedings, seeking unjustified extensions, refusing to co-operate with opposing counsel, filing unsolicited submissions or documents in violation of the agreed procedural timetable, etc.). Such conduct may be ethically dubious but is more difficult to regulate—the line between vigorous representation and overzealous tactics may not always be so clear. Where the line is crossed, a tribunal may sanction such behaviour through its decision on costs. To consider whether more standards and enforcement mechanisms are necessary it may be useful to consider some recent cases both international and national which have touched on arbitrator and counsel conduct.

International arbitration Generation Ukraine Inc. v Ukraine.13 The International Centre for Settlement of Investment Disputes (ICSID) tribunal shifted costs of the proceeding to the investor and further ordered it to contribute $100,000 towards the respondent’s legal expenses for what it considered improperly “convoluted, repetitive, and legally incoherent” written submissions and for presenting facts in an “unacceptably slanted” manner. Hrvatska Elektroprivreda v Slovenia.14 The tribunal issued an order seven days before the hearing. Slovenia sought to augment its legal team with the introduction of a barrister who was affiliated with the same chambers as the president of the tribunal. The case is controversial because ultimately the tribunal decided that the barrister should be disqualified from appearing in the case because of his connection to the chairman of the arbitral tribunal. It led to a very contentious question as to whether such powers were in fact available and has triggered therefore some of the further developments in this field to which I have referred below including the IBA rules on party representation. Slovenia-Croatia maritime border dispute. In July 2015, transcripts of covert/ex parte telephone conversations between Slovenian appointed arbitrator (Jernej Sekolec) and Slovenian counsel regarding the ongoing Slovenia-Croatia arbitration were leaked. In short, the transcripts showed that the Slovenian appointed arbitrator was passing on information relating to the tribunal’s deliberations to the state. Kazakh ICSID case (the Astapov case). In March 2016, CIArb’s Professional Conduct Committee expelled a Ukrainian lawyer for false representations regarding payment for the engagement of an expert on Kazakh tax law for an ICSID case. This resulted in the Professional Conduct Committee of the Chartered Institute operating in a way which in my view is commendable.

UK case law Beumer Group v Vinci Construction (September 2016).15 The High Court refused to enforce an adjudicator’s award where he had failed to disclose his involvement in related adjudication proceedings. In the related proceedings, the defendant had put forth arguments that directly contradicted its arguments in the main proceedings. The court held that both counsel for the defendant and the defendant ought to have disclosed the existence of the related proceedings and the content of the defendant’s substantive arguments. Failure to do so amounted to a breach of natural justice.

13 Generation Ukraine Inc. v Ukraine ICSID Case No.ARB/00/9, Award of 16 September 2003, paras 24.2–24.7 14 Hrvatska Elektroprivreda d.d. v Republic of Slovenia, ICSID Case No.ARB/05/24. 15 Beumer Group UK Ltd v Vinci Construction UK Ltd [2016] EWHC 2283 (TCC); [2016] WLR(D) 483.

Cofely Limited v Bingham and Knowles Limited (February 2016).16 The High Court removed an arbitrator on the ground of apparent bias where 18 per cent of his appointments and 25 per cent of his arbitrator income over the previous three years derived from cases involving the defendant. In addition, the evidence established not only that the defendant routinely influenced arbitrator appointments in his favour, but also that the arbitrator had failed to disclose his past involvement with the defendant, as required by the CIArb’s Code of Professional and Ethical Conduct for Members.

3. What Are or Should Be the Rules that Operate? Different legal traditions espouse different and equally legitimate ethical standards. It is therefore easy to see how different standards have the potential to threaten the certainty of the process and undermine the parties’ level playing field. In short, when attorneys who are bound by different ethical rules participate in a single international proceeding, the proceedings may be structurally unfair. This predicament has been coined by Catherine Rogers in “The Ethics of Advocacy in International Arbitration” as the “inequality-of-arms problem”.17 In this context, there has been a debate as to whether a global regulatory framework is necessary or appropriate and if so how such standards would be enforced. Regarding differences in domestic standards of conduct, I will mention a couple, although I am sure that more will be raised during the course of the day by the panellists. First, there is the issue of a counsel’s obligation to inform the tribunal about any evidence/authority that is adverse to its client’s case. Common law lawyers are routinely subject to such an obligation but most lawyers in civil law jurisdictions are under no such obligation. Secondly, document disclosure and production and communication with witnesses. Rules differ as to the obligations of counsel both as to the production of documents which do not assist the client’s case. And as to the limits of “preparation” of witnesses for testimony. Thirdly, ex parte correspondence. I have already referred to one example of this. What are or should be the rules that operate? Are they currently adequate or do we need to create a new set of standards and if so do they need to be global and universal in application or can there be regional or local standards? There have been multiple attempts to codify ethical conduct in international arbitration. CCBE Code (Code of Conduct for European Lawyers prepared by the Council of Bars and Law Societies of Europe).18 There was an attempt to produce an all-embracing code for arbitration. Doak Bishop and Margrete Stevens produced a draft Code of Ethics for Lawyers Practicing before International Arbitral Tribunals. IBA Guidelines on Party Representation in International Arbitration (2013)19; I have already referred to these above. They have provoked controversy and disagreement but despite that have done us the service of showing that there are issues that need to be tackled. And I have already referred to: • The newly adopted LCIA Arbitration Rules.20 • The CIArb’s Code of Conduct.21

16 Cofely Limited v Bingham and Knowles Limited [2016] EWHC 240 (Comm). 17 C. Rogers, “The Ethics of Advocacy in International Arbitration”, Penn State Legal Studies Research Paper No.18-2010. 18 CCBE, Code of Conduct for European Lawyers prepared by the Council of Bars and Law Societies of Europe (Brussels: 1988 amended 1998 and 2002). 19 IBA, IBA Guidelines on Party Representation in International Arbitration (London: IBA, 2013). 20 LCIA, London Court of International Arbitration, LCIA Arbitration Rules, effective 1 October 2014 (London: LCIA, 2014). 21 CIArb, The Chartered Institute of Arbitrators Code of Professional and Ethical Conduct for Members (October 2009) (London: CIArb, 2009).

In 2014, the Association Suisse de l’Arbitrage (ASA) President Elliott Geisinger called for a global regulatory framework. It would be valuable to have a set of core principles, universally recognised counsel ethics which would enable parties/participants in proceedings who are faced with an offending lawyer to refer to a text of narrow but clear principles. But does the analysis above show that enough has already been done? This should not prevent other arbitral institutions adopting their own internal disciplinary procedures/rules. And it should not prevent there being a customised “ethical checklist” for each arbitration. Some forward-thinking arbitrators now insist on including in their procedural orders rules for dealing with the tricky subjects such as disclosure obligations and guidance for the preparation of witnesses. I believe there is of course merit in having a clear and universal set of standards. But it is difficult to define for all circumstances. Much time has now been spent on trying to create such rules. Perhaps we have done enough now to identify the issues? So should our energy now be spent more on seeing that there is adequate enforcement and doing so visibly? Astapov22 was a good example of what may need to be done. Indeed though the answer was relatively obvious once the facts had been identified it was good that the CIArb Professional Conduct Committee stepped in in the way that it did.

4. Are the Methods of Enforcement of Standards Adequate or Do We Need to Find New Methods, Entrusting New Powers to Someone and if so Whom? This is one of the trickier problems. It is tricky for three reasons: First, there are doubts as to who are best placed to enforce these rules. On the one hand there are arguments for a body other than the tribunal to do it. For the tribunal to do it raises questions of independence of the ultimate decision. The tribunal may appear to have descended too far into the arena if it has “convicted” one party of misconduct on the way to the final award. Perhaps that can be dealt with to some extent by leaving the problems to be resolved at the end of the case but that is by no means a complete solution. Secondly, if you do look to another body, for example the court or a professional body, e.g. the Law Society, how do you deal with the confidentiality of materials? How can you show that body what actually took place of which complaint is made without breaching the confidentiality that the arbitration parties expected? And thirdly, does the relevant body that you choose actually have power to do this? This was the key question in the Hrvatska case23 and why the IBA ended up putting forward rules, controversially, which appeared to confirm the existence of powers that many doubted. But a lot therefore is to be said for arbitral institutions doing enforcement. I prefer that approach though it needs to be clear its own rules. And of course it does not deal with ad hoc arbitration.

5. Conclusion You will reach your own conclusions and today will be very valuable in helping to do that. My own are that we should now spend more time on two things: • Enforcing the rules we all really know should be in place and which tribunals can specify anyway, for example, as to disclosure obligations or how witness evidence is prepared;

22 See discussion in Pt 2 above under subheading “International arbitration”. 23 Hrvatska Elektroprivreda d.d. v. Republic of Slovenia, ICSID Case No.ARB/05/24.

• But we need to publicise that this is what is happening. In particular the public need to know that these are not just rules but they are also enforced. That is the way, as this Institute’s Code of Conduct24 says, “to promote public confidences”. I started by referring to the TTIP debate. This is probably a dead issue now that Mr Trump will be (in all likelihood) in the White House and has expressed strong dislike of trade treaties. But that does not deal with the question of confidence in arbitration. It does not mean that that question has gone away. And so to the conference today: your deliberations and what may flow from them will be very valuable in promoting that essential condition. That will be important for all users of arbitration and for arbitration itself.

24 CIArb, The Chartered Institute of Arbitrators Code of Professional and Ethical Conduct for Members (October 2009) (London: CIArb, 2009).

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators Presentation given at the University of West London, 8 March 2016 Alternative Dispute Resolution (ADR) and Access to Justice: An Introduction

Julio César Betancourt

1. Introduction Let me begin with an interesting quote from Stephen Leacock regarding the utility of university lectures. In 1922, Mr Leacock wrote “[m]ost people tire of a lecture in ten minutes; clever people can do it in five. Sensible people never go to lectures at all”.1 Of course, I do not agree with Mr Leacock’s statement, but I do think that the real value of any lecture is determined by what the students do with the information that has been imparted to them.2 The best law students will usually do further research on the subject matter, whereas the average law student will just rely on the notes taken during the lecture. Very frequently, law courses have a textbook. Furthermore, our lectures are based on previous research, and you will always be able to find further information in books, law journals and so on. So, if you want to be one of the top law students, I suggest you do your own research.3 Let’s get started. I have been asked to talk to you about the notion of Alternative Dispute Resolution (ADR), which is, perhaps, one of the most interesting subjects in the area of law and, without a doubt, a gigantic step forward in relation to the way in which disputes are currently being handled, not only in England and Wales,4 but also in several other common law countries. In common law countries, there has been a change in the paradigm of the traditional justice system. I am referring, in particular, to the civil justice system. The shape of civil justice,5 as Professor Hazel Genn would put it, is permeated by non-jurisdictional practices, to the extent that courts have become the primary sponsors of alternatives to the old-fashioned system.6 As a result, lawyers have been making use of a wide array of mechanisms that are more efficient in terms of time, cost and, more importantly, with respect to the overall performance concerning the parties and their degree of satisfaction with the functioning of these mechanisms. What I intend to do this evening is to show you that we have moved into a new epoch where the role of lawyers is no longer limited to the execution of court-related activities.7 Thus, the new generation of lawyers should be in a position to know and sufficiently

1 S. Leacock, cited by K. Exley and R. Dennick, Giving a Lecture: From Presenting to Teaching, 2nd edn (New York: Routledge, 2009), p.1. 2 See, generally, S. French and G. Kennedy, “Reassessing the Value of University Lectures” (2016) Issues and Ideas Paper 1–15. 3 For further guidance, see S. Barkan, B. Bintliff and M. Whisner, Fundamentals of Legal Research, 10th edn (Saint Paul: Foundation Press, 2015), pp.1–828. 4 For an authoritative account of ADR within England and Wales, see S. Blake, J. Browne and S. Sime, The Jackson ADR Handbook (Oxford: Oxford University Press, 2013), pp.1–336. 5 H. Genn, Judging Civil Justice (Cambridge: Cambridge University Press, 2009), p.5. 6 cf. W. Hammond, “The Legal Profession—Its Past—Its Present—Its Duty” (1875) 9 Western Jurist 1–16. 7 See, generally, A. Rau, E. Sherman and S. Peppet, Processes of Dispute Resolution: The Role of Lawyers, 4th edn (New York: Foundation Press, 2006), pp.1–1166.

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators 219 220 Arbitration understand the various forms of decision making,8 and litigation, to be sure, is only one of them. It can be argued that the role of lawyers has changed from that of a gladiator to that of a problem-solver.9 Accordingly, it can be further argued that “the best lawyer” is not necessarily the one who wins most cases that go to trial, but rather the one who is able to provide the best legal advice, that is, the one that better satisfies the clients’ interests. As we go through this lecture, I hope to be able to demonstrate the importance of this new approach. The title of my lecture is “Alternative Dispute Resolution and Access to Justice”. The topic is timely given that in the last three decades, especially, but not exclusively, in common law countries10 (such as the US,11 Canada,12 England and Wales13 and Australia,14 to name just a few) we have seen a remarkable trend towards the utilisation of several different ADR mechanisms within the mainstream of the practice of law. In England and Wales, for example, the use of ADR mechanisms has been methodically integrated into the civil justice system.15 Active case management16 practices allow the courts to encourage the parties to utilise an alternative dispute resolution mechanism—where appropriate—and the parties are expected to positively respond to the courts’ encouragement.17 Within the EU, for instance, one of the initiatives aimed at ensuring the proper functioning of the internal market has been the development of alternatives to the court system. The idea was enshrined in the Lisbon Treaty, and culminated in a series of different outcomes that are currently visible within member states.18 Owing to the limited time available, I will only introduce the topic of ADR and access to justice. I will provide a brief overview of the renewed interest in the use of alternatives to litigation and contextualise this phenomenon within the scope of the relationship between jurisdictional and non-jurisdictional justice. First, I’ll be looking at the notion of ADR and some closely related concepts. Then, I’ll be examining the relationship between ADR and access to justice. Finally, I’ll touch upon the idea of practising law in the interest of justice. Perhaps we can leave any questions you may have until the end of the lecture. Let’s now look at the notion of ADR and some closely related concepts.

8 See, generally, S. Roberts and M. Palmer, Dispute Processes ADR and the Primary Forms of Decision-Making, 2nd edn (Cambridge: Cambridge University Press, 2009), pp.1–408. 9 cf. S.P. Sturm, “From Gladiators to Problem-Solvers: Connecting Conversations about Women, the Academy, and the Legal Profession” (1997) 4 Duke Journal of Gender Law & Policy 119–147. See also C. Menkel-Meadow, “Lawyer as Problem Solver and Third-Party Neutral: Creativity and Nonpartisanship in Lawyering” (1999) 72 Temple Law Review 785–810. 10 W. Twining, “Alternative to What? Theories of Litigation, Procedure and Dispute Settlement in Anglo-American Jurisprudence: Some Neglected Classics” (1993) 56 The Modern Law Review 381. See also P. Sanders, “ADR in Common Law Countries” in J. Betancourt and J. Crook (eds), ADR, Arbitration, and Mediation: A Collection of Essays (Bloomington: AuthorHouse, 2014), pp.152–161; A. Brady, “ADR in Developments within the European Union” in Betancourt and Crook (eds), ADR, Arbitration, and Mediation: A Collection of Essays (Bloomington: AuthorHouse, 2014), pp.229–252. 11 F. Sander, “Alternative Dispute Resolution in the United States: An Overview” in Betancourt and Crook (eds), ADR, Arbitration, and Mediation: A Collection of Essays (Bloomington: AuthorHouse, 2014), pp.1–15. 12 D. Zutter, “Incorporating ADR in Canadian Civil Litigation” (2001) 13 Bond Law Review 1–18. 13 K. Mackie et al., The ADR Practice Guide: Commercial Dispute Resolution (London: Butterworths, 2000), p.64 and following. 14 T. Sourdin, “ADR in the Australian Court and Tribunal System” (2003) 6 ADR Bulletin 1–4. 15 L. Mistelis, “ADR in England and Wales” (2001) 12 American Review of International Arbitration 167–222. 16 As for the notion of active case management, see Jackson LJ (ed.), Civil Procedure: The White Book, Vol.2 (London: Sweet & Maxwell, 2016), para.14-7. 17 See Civil Procedure Rules, Pt 1.4(2)(e), stating that “Active case management includes … (e) encouraging the parties to use an alternative dispute resolution (GL) procedure if the court considers that appropriate and facilitating the use of such procedure”. 18 See J. Betancourt, “Medios Alternativos de Resolución de Conflictos (ADR) en la Unión Europea y la Fenomenología de su Constitucionalización” (2012) 2 Arbitraje Revista de Arbitraje Comercial y de Inversiones 413–435.

2. Alternative Dispute Resolution and Some Closely Related Concepts The notion of ADR seems to have been introduced for the first time by Professor Frank Sander of Harvard Law School in a talk entitled “Varieties of Dispute Processing”.19 This talk was given at the 1976 Pound Conference,20 which has been described as the starting point of the ADR movement.21 In the US, the Pound Conference has also been described as the beginning of a serious attack on the traditional justice system.22 Dissatisfaction with the American justice system was clearly not novel at all,23 but this conference, and in particular, Professor Sander’s talk, ended up generating a lot of debate about future policy on dispute processing. At the Pound conference, Professor Sander spoke, among other things, about the spectrum of alternatives available and, very briefly, about the idea of a “Dispute Resolution Centre”24 (later called multi-door courthouse),25 an institution in which disputes would be finally settled or resolved through the most appropriate method(s). In the 1980s, Professor Sander,26 together with other scholars,27 developed the concept of alternative methods of dispute resolution in more detail. During this decade, the initialism “ADR” began to be used in a more or less consistent fashion and, nowadays, it has become part of the legal terminology.28 ADR, in simple terms, refers to the idea of exploring and, where appropriate, utilising different means other than litigation, particularly in those cases where litigation would not seem to be the best option. ADR mechanisms, therefore, are not intended to replace the traditional justice system, but to complement it by developing a more sophisticated dispute management system.29 This ground-breaking system obviously includes but is not limited to litigation, thereby enhancing the number of options available to the parties. The aim is, as Professor Sander would state it, to reserve the courts for the settlement of those cases that truly require a judicial decision, and to employ the most suitable mechanism(s) for either settling or resolving those cases in which a judicial decision is not indispensable.30 In most common law countries, this new justice system has been systematically put into practice through a series of civil justice reforms.31 These reforms resulted in the establishment

19 F. Sander, “Varieties of Dispute Processing” (1976) 70 Federal Rules Decisions: Addresses Delivered at the National Conference on the Causes of Popular Dissatisfaction with the Administration of Justice 111–135. 20 See R. Lee, “The Profession Looks at Itself—The Pound Conference of 1976” (1981) 3 Brigham Young University Law Review 737–740. See also W. Brazil, “Court ADR 25 Years after Pound: Have We Found a Better Way?” (2002) 18 Ohio State Journal on Dispute Resolution 93–150. 21 J. Lieberman and J. Henry, “Lessons from the Alternative Dispute Resolution Movement” (1986) 53 University of Chicago Law Review 427 fn.17. For an interesting account of the founders of the ADR movement, see C. Menkel-Meadow, “Mothers and Fathers of Invention: The Intellectual Founders of ADR” (2000) 16 Ohio State Journal on Dispute Resolution 1–37. 22 L. Nader, “Controlling Processes in the Practice of Law: Hierarchy and Pacification in the Movement to Re-Form Dispute Ideology” (1994) 9 Ohio State Journal on Dispute Resolution 5. 23 See, for example, R. Pound, “The Causes of Popular Dissatisfaction with the Administration of Justice” (1906) 29 Annual Report of the American Bar Association 395–417. 24 Sander, “Varieties of Dispute Processing” (1976) 70 Federal Rules Decisions: Addresses Delivered at the National Conference on the Causes of Popular Dissatisfaction with the Administration of Justice 131. 25 See F. Sander, “The Multi-door Court House: Settling Dispute in the Year 2000” (1976) 3 Barrister 18 and following. See also F. Sander and M. Hernandez Crespo, “A Dialogue Between Professors Frank Sander and Mariana Hernandez Crespo: Exploring the Evolution of the Multi-Door Courthouse” (2008) 5 University of St. Thomas Law Journal 665–674. 26 See, generally, F. Sander, “Alternative Methods of Dispute Resolution: An Overview” (1985) 37 University of Florida Law Review 1–18. 27 S. Goldberg et al., Dispute Resolution (Boston: Little Brown, 1985), pp.1–594. 28 J. Law (ed.), A Dictionary of Law, 8th edn (Oxford: Oxford University Press, 2015), p.34. 29 cf. Sander, “Alternative Methods of Dispute Resolution: An Overview” (1985) 37 University of Florida Law Review 1–2; D. Strawn, Dispute Management: How to End the Litigation Problem (New York: iUniverse, 2004), pp.1–172. 30 Sander, “Varieties of Dispute Processing” (1976) 70 Federal Rules Decisions: Addresses Delivered at the National Conference on the Causes of Popular Dissatisfaction with the Administration of Justice 132. 31 See, for example, H. Genn, “What is Civil Justice for—Reform, ADR, and Access to Justice” (2012) 24 Yale Journal of Law & the Humanities 397–418.

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators 222 Arbitration of both “court-referred” and “court-annexed” programmes whereby “litigants” are encouraged to either settle or resolve their disputes without actually having to “litigate” the matter.32 In some cases, participation in these programmes is “mandatory”, whereas in some other cases participation is “voluntary”.33 The question of mandatory versus voluntary participation in ADR is in itself controversial, and neither approach has indisputably proved to be superior to the other.34 We don’t have time to go into complexities, because this is just an introduction, but the truth of the matter is that participation in ADR is taking place. Interest in ADR is said to have grown over the years.35 The rationale behind it is that ADR can facilitate access to justice which, according to Professor Sander, has always been one of the main objectives of the ADR movement.36 The idea is to engage the parties in mediation, arbitration, or any other non-jurisdictional mechanism that is suitable for them, so that the matter can be either “settled” or “resolved” in a more effective manner. This innovative line of thought has engendered some controversy,37 but there are more supporters in favour of this proposition than there are detractors. Throughout this lecture, I have deliberately distinguished between the terms settlement and resolution, the reason being that, strictly speaking, the concept of settlement—or dispute settlement—is related to the idea of third-party decision making, whereas the concept of resolution—or dispute resolution—has to do with the idea of joint decision making.38 Let me give you a couple of examples. Arbitration is a “dispute settlement mechanism” in which an impartial third party called “the arbitrator” puts an end to the dispute by way of an award. Mediation, on the other hand, is a “dispute resolution mechanism” in which a third party called “the mediator” attempts to help the parties to resolve their dispute by means of a negotiated agreement. This distinction, of course, casts certain doubts on the adequacy of the term “Alternative Dispute Resolution”, inasmuch as if we discriminate between the concepts of settlement and resolution it would also be necessary to separate the notion of “Alternative Dispute Settlement (ADS)” from the notion of “Alternative Dispute Resolution (ADR)”. Professor Carrie Menkel-Meadow, one of the most prominent scholars in the field of ADR, prefers to make use of the expression “Appropriate Dispute Resolution”,39 in the sense that it embraces a diverse range of problem-solving mechanisms, including both dispute settlement and dispute resolution techniques. Nevertheless, it can be said that the expression “Alternative Dispute Resolution” is the one that has gained widespread acceptance worldwide. The “globalisation” of the alternative dispute resolution movement is beyond description,40 and I believe that such an expression is not likely to be replaced in the foreseeable future.

32 S. Keilitz, “Alternative Dispute Resolution in the Courts” in S. Hays and C. Graham Jr (eds), Handbook of Court Administration and Management (New York: Marcel Dekker, 1993), p.384 and following. 33 cf. M. Galanter, “The Vanishing Trial: An Examination of Trial and Related Matters in Federal and State Courts” (2004) 1 Journal of Empirical Legal Studies 459–570. 34 See L. Katz, “Compulsory Alternative Dispute Resolution and Voluntarism: Two-Headed Monster or Two Sides of the Coin” (1993) 1 Journal of Dispute Resolution 1–56. See also A. Marriott, “Mandatory ADR and Access to Justice” (2005) 71 Arbitration 310. 35 St. Shavell, “Alternative Dispute Resolution: An Economic Analysis” (1995) 24 Journal of Legal Studies 1. 36 Sander, “Alternative Methods of Dispute Resolution: An Overview” (1985) 37 University of Florida Law Review 3. 37 See, for example, O. Fiss, “Against Settlement” (1984) 93 The Yale Law Journal 1073–1090. See also A. Sarat, “Alternative Dispute Resolution: Wrong Solution, Wrong Problem” (1988) 37 Proceedings of the Academy of Political Science 162–173. 38 Betancourt and Crook (eds), ADR, Arbitration, and Mediation: A Collection of Essays (Bloomington: AuthorHouse, 2014), p.xxii. 39 C. Menkel-Meadow, “Ethics in ADR: The Many ‘Cs’ of Professional Responsibility and Dispute Resolution” (2001) 28 Fordham Urban Law Journal 979–980. 40 cf. J. Coben, “Intentional Conversations about the Globalization of ADR” (2006) 27 Journal of Law & Policy 217–227.

When we talk about ADR mechanisms, however, it is important to remember that there are numerous types of dispute settlement and dispute resolution methods. Arbitration and mediation are probably the most commonly used forms of ADR,41 but there is a plethora of dispute settlement and dispute resolution devices that can be as useful as arbitration and mediation. These include, for example, conciliation, construction adjudication, dispute boards, early neutral evaluation, expert determination, mini-trial, negotiation, negotiated rule-making, neutral expert fact-finding, ombudsman, private judging, summary jury trial, and so on, but also encompass tailor-made or systematically designed dispute settlement and dispute resolution mechanisms.42 It is clear that no single dispute settlement—or dispute resolution—mechanism can be seen as a panacea.43 When selecting an ADR mechanism, we need to delve into several factors, such as the nature of the dispute, the relationship between the parties, the interests of the parties, the amount in dispute, costs, speed, etc.44 In 2010, the Chartered Institute of Arbitrators published a little manual in which the main ADR categories are concisely examined. This publication has been translated into several languages, so I suggest you have a quick look at it at some point, so that you can get an idea of how these mechanisms actually work.45 In a more recent publication, one of my colleagues and I shed some light on the notion of Online Dispute Resolution (ODR). It reviews a series of studies on the use of e-negotiation, e-mediation and e-arbitration. ODR is a captivating area of research and, if you are interested in this topic, I recommend that you read this publication.46 It can be said that the study of ADR mechanisms is as important as the study of litigation. Why is it important? Well, it is important because the law student who only focuses on litigation as a means of dispute settlement—without regard to other methods—can be deemed to be as “fully qualified” as the medical student who solely concentrates on the study of surgery as the only option for the treatment of a given disease. As Professor Sander would put it: “[h]ow would you feel about a doctor who suggested surgery without exploring other choices?”47 Particularly when you know that there are various courses of treatment. This observation is, in a sense, analogous to that of a lawyer who advises his client to litigate the matter without considering other options.

3. The Relationship between ADR and Access to Justice So, let’s now turn to the central theme of this lecture, which is the notion of ADR as a means of improving access to justice. The link between the use of alternatives to ligation and the notion of access to justice was first made by Professor Mauro Cappelletti (1927–2004) shortly before Professor Sander’s talk was published.48

41 T. Moyer, “Essay: ADR as an Alternative to Our Culture of Confrontation” (1995) 43 Cleveland State Law Review 15. 42 See N. Rogers and others, Designing Systems and Processes for Managing Disputes (New York: Aspen Publishers, 2013), pp.1–496. 43 cf. H. Edwards, “Alternative Dispute Resolution: Panacea or Anathema?” (1986) 99 Harvard Law Review 668–684. 44 Sander, “Varieties of Dispute Processing” (1976) 70 Federal Rules Decisions: Addresses Delivered at the National Conference on the Causes of Popular Dissatisfaction with the Administration of Justice 118 and following. 45 See J. Betancourt (ed.), What is Alternative Dispute Resolution (ADR)? (London: Chartered Institute of Arbitrators, 2010), pp.1–43. 46 J. Betancourt and E. Zlatanska, “Online Dispute Resolution (ODR): What is it, and is it the Way Forward?” (2013) 79 Arbitration 256–264. 47 F. Sander, “Professional Responsibility: Should there be a Duty to Advise of ADR Options?” (1990) 76 ABA Journal 50. 48 See, generally, M. Cappelletti, “Access to Justice: Comparative General Report” (1976) 40 Rabels Zeitschrift für ausländisches und internationales Privatrecht 669–717.

The ADR movement was conceived within the framework of the “access-to-justice project”, which is perhaps one of the greatest legacies of Professor Cappelletti.49 It was the largest research project ever carried out in this area, and the encouragement of alternatives to the court system was a landmark in the changing theoretical conception of access to justice. Professor Cappelletti spoke of a “broader conception of access to justice”,50 which is not necessarily tantamount to the concept of access to court. The new “access-to-justice approach” called for the exploration of alternatives to the traditional justice system, and it also promoted “imaginative access to justice reforms”.51 The sentiments of this broader conception of “access to justice” are, in the words of Professor Sackville, “capable of meaning different things to different people”.52 There is little room for discussion with regard to the meaning of the word “access”, but the same cannot be said about the meaning of the word “justice”.53 The concept of justice has been dissected for centuries,54 and yet no consensus has been reached as to what it actually means. It would be preposterous to think that, in today’s lecture, we will be able to put an end to this long-standing debate, but I will make an attempt to articulate my insights into the meaning of this provocative concept. At the risk of oversimplifying, I will argue that “justice”, stricto sensu, is nothing more than a protean concept relating to the maintenance and restoration of social order.55 In this context, social order may be defined as the pattern of approved behaviour that is necessary to guarantee peaceful coexistence in any civilised society. In addition, I will also argue that the expression “access to justice”, lato sensu, is closely linked with the right—or the opportunity—to make use of one or more mechanisms suitable for maintaining and restoring social order in a given case. It should be noted that our vision of access to justice is not restricted to a one-way approach—I’ll explain what I mean in a moment. Access to justice, therefore, in the sense described here, does not equate with “access to court”. I don’t dispute that, in some cases, “access to court” gives you “access to justice”, but if we see justice as an ideal—or as a destination—we will find that there are multiple avenues towards the attainment of justice. From this point of view, the notion of ADR can be understood as part of a “superhighway” containing several different lanes whose final destination is justice. Thus, the question of how to get to justice can be seen, for the most part, as a matter of choice, and our role is precisely to help our clients to make an informed choice.56 For some reason, however, there has always been a tendency to confuse the concept of access to justice with the concept of access to court.57 Let me explain this. Any dispute could be defined as a perceived violation of a normative expectation of behaviour. Traditionally, lawyers were trained to satisfy the parties’ expectations by initiating court proceedings.

49 See M. Cappelletti, “Alternative Dispute Resolution Processes within the Framework of the World-Wide Access-to-Justice Movement” (1993) 56 The Modern Law Review 282–296. 50 Cappelletti, “Access to Justice: Comparative General Report” (1976) 40 Rabels Zeitschrift für ausländisches und internationales Privatrecht 704–710. 51 Cappelletti, “Access to Justice: Comparative General Report” (1976) 40 Rabels Zeitschrift für ausländisches und internationales Privatrecht 716. 52 R. Sackville, “Access to Justice: Assumptions and Reality Checks” (2002) Access to Justice Roundtable: Proceedings of a Workshop 19. 53 As to the origin of the idea of justice, see W. Kaufmann, “The Origin of Justice” (1969) 23 The Review of Metaphysics 209–239. 54 See, for example, H. Spens (tr), The Republic of Plato (Glasgow: Printed by R. and A. Foulis, 1763), pp.1–430. 55 See, for example, E. Havelock, The Greek Concept of Justice: From Its Shadow in Homer to Its Substance in Plato (Cambridge, MA: Harvard University Press, 1978), pp.1–382. 56 See F. Sander and S. Goldberg, “Fitting the Forum to the Fuss: A User-Friendly Guide to Selecting an ADR Procedure” (1994) 10 Negotiation Journal 49–68. 57 cf. H. Genn, Paths to Justice: What People Do and Think about Going to Law (Oxford: Hart Publishing, 1999), p.1.

Consequently, litigation became a “default mechanism”58 for imploring a final determination—or decision—concerning the purported violation of a given norm, but research shows that, in common law countries, the vast majority of cases that are taken to court are not disposed of by full litigation.59 In a great number of them, the parties negotiate an agreement which, I would argue, gives them a sense of closure based upon the recognition that justice has been done. It would be a mistake to think of negotiated agreements as something contrary to the idea of justice. These agreements are more likely to be voluntarily complied with than a judgment, and what’s more these types of agreements are allowed by law, so they are, literally, as legitimate as—if not more legitimate than—a judgment. The use of negotiation as a means of bringing an end to court proceedings has been labelled by Professor Marc Galanter as “litigotiation”.60 Without deprecating the importance of litigation, Professor Galanter explains that in the US, for example, lawyers spend more time negotiating than litigating, and the situation is more or less the same in some other common law countries. This suggests that the parties are not necessarily looking for a judgment, let alone that the parties unequivocally associate justice with judgment. It is evident that disputes can be either settled or resolved without having to go to court, and our legal system enables us to do that. The myth that the parties want “to have their day in court” is based upon the mistaken assumption that litigation is the only way to tackle their problems but, in most instances, it simply sets the scene for an agreement to be reached. Litigation is a time-consuming exercise that, in some cases, has devastating consequences for the parties, not only financially, but also emotionally and even physically.61 Therefore, from the parties’ perspective, litigation is far from exciting and, therefore, no sensible person would ever be looking forward to having a day in court. I am not, in any way, calling into question the value of litigation. Before I became a full-time researcher, I was actually a litigator. I was also an Assistant Professor of Civil Litigation, and I passionately taught my students how to succeed in court. The very idea of bringing cases to court or the notion of settling disputes by means of litigation, therefore, is not necessarily anachronistic. Litigators represent disputes as “cases”,62 and no doubt there are certain cases that are expected to be brought to court. These cases are supposed to be decided by the state in exercise of its “jurisdictional power”63 but, in most situations, the parties can employ other mechanisms to either settle or resolve their disputes. I say “in most situations” because there are certain matters that, for public policy reasons, can neither be settled nor resolved out of court.64 In light of the above, one could make a distinction between jurisdictional justice and non-jurisdictional justice. In essence, both concepts are inextricably linked with the idea of maintaining or restoring social order. The former refers to the idea of administering justice through the use of litigation, whereas the latter concerns the pursuit of justice through different means other than litigation.

58 cf. New York County Lawyers’ Association Ethics Institute, The New York Rules of Professional Conduct, Vol.1 (New York: Oxford University Press, 2011), p.xli. 59 See M. Galanter and M. Cahill, “‘Most Cases Settle’: Judicial Promotion of Settlement and Regulation of Settlement” (1994) 46 Stanford Law Review 1339–1391. See also J. Farrell, “Administrative Alternatives to Judicial Branch Congestion” (2007) 27 Journal of the National Association of Administrative Law Judiciary 3. 60 M. Galanter, “Worlds of Deals: Using Negotiation to Teach about Legal Process” (1984) 34 Negotiation and Legal Process 268–276. 61 cf. D. Trubek, “The Costs of Ordinary Litigation” (1984) 72 UCLA Law Review 72–127. See also W. Burger, “Isn’t There a Better Way?” (1982) 68 American Bar Association Journal 275. 62 S. Roberts and M. Palmer, Dispute Processes: ADR and the Primary Forms of Decision-Making (Cambridge: Cambridge University Press, 2005), p.79. 63 As for the notion of jurisdictional power, see J. Betancourt, “Understanding the ‘Authority’ of International Tribunals: A Reply to Professor Jan Paulsson” (2013) 4 Journal of International Dispute Settlement 227–244. 64 See T. Marks and J. Betancourt, “Rethinking Public Policy and Alternative Dispute Resolution: Negotiability, Mediability and Arbitrability” (2012) 78 Arbitration 24.

Social order is a reasonable aspiration, and our legal system has been designed to achieve such a goal.65 The traditional justice system is a fundamental part of any civilised society, but the truth of the matter is that it cannot cope with the countless number of disputes that arise in our society. For this reason, we have to make sure that the civil justice system is used in an intelligent manner. We cannot continue to assume that litigation is the only way.66 The indiscriminate use of courts can be detrimental to the future of our traditional justice system. Judicial congestion, together with the vicissitudes of this undesirable phenomenon, may be the end result of an abhorrent predisposition to litigate, and we lawyers are “partly” to blame for this. I say “partly” because the number of cases that can be lawfully taken to court within the ambit of the civil justice system,67 as Professor Hazel Genn has pointed out, is practically infinite. Neither policy makers nor lawyers seem to have developed a systematic criterion as to what needs—or does not need—to be decided in court. Strategic use of litigation (in particular) as well as dispute settlement and dispute resolution mechanisms (in general) presupposes a new mindset, but it also demands an additional set of skills.68ADR has become a new discipline. The literature is so vast that substantial effort would be needed to identify, survey and digest the most relevant information. That’s why I disagree with Mr Leacock’s statement that sensible people never go to lectures at all, since without “the right guidance” it would be quite difficult to know where to start. I say “the right guidance”, because there are hundreds of courses offered under the title of “Alternative Dispute Resolution”, but what is actually taught in these courses is something rather different. To conclude, let me now touch upon the idea of practising law in the interest of justice.

4. Practising Law in the Interest of Justice and Some Concluding Remarks Professor Menkel-Meadow has written extensively about the ways in which we might teach ADR, and I would like to think—after having read some of her publications69—that, when I teach ADR, I am doing the right thing, that is, to teach the new generation of lawyers to practise in the interest—or towards the achievement—of justice. To practise in the interest of justice is to do “with the possibilities of achieving justice … in a variety of different ways”.70 To practise in the interest of justice is simply to appreciate that, in some cases, social order may be maintained and restored through coercive and non-coercive mechanisms. It is merely to recognise that there are different paths to justice. I hope that my simile of the “superhighway” will give you an idea of what this new approach involves. Because this room is full of good law students, I also hope that, after this lecture, you will be doing further research into the many ways in which justice can be done. I further hope that, in the near future, you will all be practising law in the interest of justice. I am convinced that the new generation of lawyers can be equipped to make better use of the civil justice system. I am also convinced that, sooner or later, lawyers will be able to

65 cf. L. Frank, “What is Social Order?” (1944) 2 ETC: A Review of General Semantics 29–37. 66 cf. C. Menkel-Meadow, “When Litigation Is Not the Only Way: Consensus Building and Mediation As Public Interest Lawyering” (2002) 10 Journal of Law & Policy 37–61. 67 H. Genn, “Understanding Civil Justice” (1997) 50 Current Legal Problems 160. 68 See J. Lande and J. Sternlight, “The Potential Contribution of ADR to an Integrated Curriculum: Preparing Law Students for Real World Lawyering” (2010) 25 Ohio State Journal on Dispute Resolution 251. 69 For free access to some of Professor Menkel-Meadow’s scholarly papers, visit her SSRN’s webpage at https:/ /papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=98428 [Accessed 19 March 2017]. 70 C. Menkel-Meadow, “Peace and Justice: Notes on the Evolution and Purposes of Legal Processes” (2005) 94 The Georgetown Law Journal 554.

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators Presentation given at the University of West London, 8 March 2016 227 provide their clients with more accurate information concerning litigation, ADR mechanisms, and the best access-to-justice route. It has been a real pleasure to address you all this evening. Thank you very much for listening to me, and I look forward to answering any questions you may have.

The Enforcement of Adjudicators’ Awards under the Housing Grants, Construction and Regeneration Act 1996: Part 62

Kenneth T. Salmon

1. Introduction The Act means the Housing Grants, Construction and Regeneration Act 1996, as amended by the Local Democracy, Economic Development and Construction Act 2009 Pt 8. The “new” provisions apply to contracts entered into on or after 1 October 2011. The main regulations are contained in the Scheme for Construction Contracts (England & Wales) Regulations 1998 (the Principal Regulations).1 They have been amended by the Scheme for Construction Contracts (England & Wales) (Amendment) (England) Regulations 2011.2 The new Scheme applies only to contracts for construction operations in England entered into on or after 1 October 2011. For earlier contracts the Principal Regulations apply. There are separate regulations for contracts for work in Scotland applicable to contracts made on or after 1 November 2011.3 The new regulations apply only to contracts for work in Scotland entered into on or after this date. For earlier contracts the Scheme for Construction Contracts (Scotland) Regulations 19984 applies. There are new separate regulations for Wales, applicable to contracts for construction operations in Wales entered into on or after 1 October 2011.5 A reference to “the Scheme” is to the Principal Regulations for England and Wales, or the Scheme for Scotland, as the context so requires. The law is stated at 26 January 2017. This Part contains cases dealing with payment and payment notices, jurisdiction following successive adjudications, reservation of rights, stay, what happens when an insolvency moratorium ends just after enforcement proceedings due to be heard and the (rare) granting of permission to defend where the existence of a contract was disputed.

2. Enforcement—Insolvency—Expiry of Moratorium See South Coast Construction Ltd v Iverson Road Ltd.6 This was an application to pursue proceedings for the enforcement of an adjudicator’s award whilst there was a moratorium in place pursuant to the Insolvency Act 1986 Sch.B1 r.43(6)(b). Leave may be granted to pursue proceedings despite the existence of the moratorium in certain circumstances. The guideline considerations are:

1 Scheme for Construction Contracts (England & Wales) Regulations 1998 (SI 1998/649). 2 Scheme for Construction Contracts (England & Wales) (Amendment) (England) Regulations 2011 (SI 2011/2333). 3 Scheme for Construction Contracts (Scotland) Amendment Regulations 2011 (SI 2011/371). 4 Scheme for Construction Contracts (Scotland) Regulations 1998 (SI 1998/687) (s.34). 5 Scheme for Construction Contracts (England and Wales) Regulations 1998 (Amendment) (Wales) Regulations 2011 (SI 2011/1715) (W.194). 6 South Coast Construction Ltd v Iverson Road Ltd [2017] EWHC 61 (TCC) per Coulson J.

1) Whether the legitimate interests of the applicant outweigh the interests of the other creditors. If granting leave is unlikely to impede the achievement of the objects of the administration leave should be granted.7 2) Only in exceptional cases will a creditor with a monetary claim by given the right to override the statutory process.8 3) The state of the proceedings at the time of the application. The nearer the proceedings are to an outcome, the greater the weight to be attached to this factor.9 4) The parties’ conduct.10 There was a dispute over an instruction omitting the remainder of the contractor’s works, a non-completion certificate and a pay less notice for liquidated damages of £844,330. There was also a dispute over the contractor’s final account by which he claimed payment of £996,000. The adjudicator was asked to decide what additional payment was due to the contractor. By his decision dated 21 November 2016 the adjudicator awarded the contractor £868,728 and an extension of time, decided the omission of works was a repudiatory breach and held that the employer was not entitled to liquidated damages. The contractor issued enforcement proceedings and the employer alleged the adjudicator had exceeded his jurisdiction. The hearing was due to take place on 18 January 2017. The employer asked that the hearing date be vacated and the action discontinued because the moratorium was due to expire on 18 January. The contractor asked for permission to proceed with the enforcement. Both applications were heard on 18 January before the moratorium expired. Judgment was handed down on 19 January 2017. The court acknowledged that the moratorium had then ended. On the facts, the challenge to jurisdiction failed, and the application for summary judgment was granted. The court confirmed it would have granted the application for permission to proceed with the enforcement on the principles set down in Atlantic Computer Systems11 as the balancing exercise favoured the contractor. The judgment did not give the contractor a preference over other creditors as he was still an unsecured creditor. The parties’ conduct was to be taken into account. The contractor had acted properly throughout. Not so the employer who had behaved in a way “which should not be rewarded by the court”. In particular it had issued three notices of intention to appoint an administrator, without informing the contractor or the court. The test in Ronelp12 was also satisfied and the situation was “exceptional”.

3. Jurisdiction of Second Adjudicator—Valuation Issue See Universal Piling & Construction Ltd v VG Clements Ltd.13 This is yet another tale of two adjudications. In the first adjudication, the sub-contractor Universal claimed payment of its September 2015 interim application. In the second adjudication, the contractor Clements sought an assessment of the proper sum due under the sub-contract following payment and pay less notices issued in August 2016.

7 Re Atlantic Computer Systems plc [1990] B.C.C. 859; [1992] 2 W.L.R. 367; [1990] EWCA Civ 20: [1992] Ch. 505. 8 AES Barry Ltd v TXU Europe Energy Trading [2004] EWHC 1757 (Ch). 9 Ronelp Marine Ltd v STX Offshore and Shipbuilding Co Ltd [2016] EWHC 2228 (Ch). 10 X-Fab Semiconductor Foundries AG v Plessy Semiconductors Ltd [2014] EWHC 3190 (QB). 11 Re Atlantic Computer Systems plc [1990] EWCA Civ 20; [1990] BCC 859; [1992] 2 W.L.R. 367; [1992] Ch 505. 12 Ronelp Marine Ltd v STX Offshore and Shipbuilding Co Ltd [2016] EWHC 2228 (Ch); [2016] All E.R.(D) 77 (Oct). 13 Universal Piling & Construction Ltd v VG Clements Ltd [2016] EWHC 3321 (TCC), O’Farrell J. The judgment is not available so the author is indebted to PLC for this report.

From the brief report available, O’Farrell J declined to grant the declaratory relief sought by Universal, finding that the dispute referred to the second adjudicator was different from the dispute referred to the first adjudicator. The judgment is not available on the court website but it appears this case dealt with two issues. First, the factors to take into account when considering whether the same or the substantially the same dispute had been referred. Secondly, the question decided in Kilker Projects Ltd v Purton (t/a Richwood Interiors),14 namely whether a finding that a sum is due in the absence of a pay less notice, precludes a subsequent adjudication as to the valuation of the sum due. It also seems that the court was required to consider cl.50 of, apparently, the NEC 3 short-form contract. In doing so, the court read cl.50 together with cl.10.1 (the latter providing for the parties to act in the spirit of mutual trust and co-operation), and concluded that cl.50 provided “a code for payment” in relation to the sub-contract works. Clause 50.1 imposed on the sub-contractor an obligation to make payment applications in accordance with the sub-contract. Clause 50.4 allowed the contractor to correct “wrongly assessed amounts due”. The court found that applications for payment, or their assessment, were not “conclusive as to the value of the work carried out”.

4. Jurisdiction—Reservation of Rights See Imperial Chemical Industries Ltd v Merit Merrell Technology Ltd.15 The defendant MMT sought summary judgment upon the decision of the adjudicator, Mr John Wright, who had awarded it £816,093.34 plus VAT and interest. The claimant, ICI, resisted enforcement on the grounds that Mr Wright did not have jurisdiction to reach the decision that he did. ICI was employer and MMT contractor under a contract for steelwork and tank installation at a new paint processing plant, made on the NEC3 form of contract including Option W2. The contact came to an end when ICI sought to terminate it on 17 February 2015. Thus far the project had given rise to four adjudications and further proceedings pending before the court. In Adjudication No.2 before Robert Slewinski, ICI sought and was granted the provision of certain documents. Amongst various defences MMT argued it was entitled to a lien on the documents because the sum of £816,093.34 remained owing to it on application No.23. MMT did not seek payment of that sum in that adjudication. The adjudicator rejected the defence of lien but he made certain findings including one that the balance due on application No.23 was as claimed by MMT but that the right to payment had not crystallised at that time. ICI subsequently obtained a declaration from Edwards-Stuart J that the decision was valid and binding. Adjudication No.3 concerned the propriety of the termination. Mr Slewinski was again appointed as adjudicator and he decided that ICI had repudiated the contract. The court considered the law to be well established. 1) A party who takes the position that an adjudicator does not have jurisdiction must raise that objection and reserve its position as soon as possible. It may then participate in the adjudication, without prejudice to any defence it later might raise in enforcement proceedings as to lack of jurisdiction. If it does not so reserve its position, then it cannot avoid the effect of the adjudicator’s

14 Kilker Projects Ltd v Purton (t/a Richwood Interiors) [2016] EWHC 2616 (TCC); [2016] W.L.R.(D) 548; [2017] Bus L.R. 418. 15 Imperial Chemical Industries Ltd v Merit Merrell Technology Ltd Unreported 13 October 2016 (TCC) as per Jefford J.

decision on jurisdictional grounds: it is taken as having consented or submitted to the adjudicator’s jurisdiction.16 2) Where an issue is raised as to the adjudicator’s jurisdiction, the parties may, by express or implied consent, give the adjudicator jurisdiction to determine that issue. In adjudication No.4 MMT relied on the first adjudicator’s findings in relation to its payment application No.23: i.e. that there was no valid pay less notice or payment notice and that these findings were binding. In any event it said that the findings were correct. In addition, Mr Slewinski had not been asked to decide the third adjudication and had not decided whether ICI was obliged to make payment in circumstances in which it repudiated the contract after payment became due but before the final date for payment. MMT categorised this last point as the one now falling due for determination. ICI’s position in its response was that nothing said about application No.23 was binding. ICI therefore took no objection to Mr Wright’s jurisdiction to decide the dispute referred, namely whether the sum of £816,093.34 or some other sum was due and payable on application No.23. Alternatively, ICI contended that the decision in adjudication No.2 was that no payment was due. After the formal submissions there then followed a number of exchanges by letter in one of which ICI’s solicitors said that Mr Wright had no jurisdiction to decide whether ICI was obliged to make any payment in respect of application No.23 because that issue had already been determined in adjudication No.2. If that response was to be read as an objection to Mr Wright’s jurisdiction, then the court said that it was contrary to ICI’s primary case and far too late. Mr Wright decided that Mr Slewinski’s comments in adjudication No.2 on application No.23 were not binding on him. He decided there was no valid payment notice; and there was no valid pay less notice. He further found that he was bound by some comments and findings in adjudication No.3 as to the effect of repudiation, and crucially, that payment had not become finally due at the date of repudiation. However as ICI could not rely on its own breach to avoid payment, he decided that ICI was liable to pay the sum claimed. Whether right in law or not, that decision was one Mr Wright had jurisdiction to make. MMT sought enforcement. ICI issued an application for a declaration that no sum was payable and that application was listed for hearing and was dealt with as the early hearing of MMT’s summary judgment application hence the curiosity that the roles of claimant and defendant were reversed. The court rejected ICI’s defence of lack of jurisdiction for three reasons. 1) The dispute referred was whether MMT was entitled to payment of £816,093.34 (or some other sum) on application No.23, as to which ICI made no objection to the adjudicator’s jurisdiction. That was the dispute decided. 2) If, as ICI contended, Mr Wright had no jurisdiction to decide the effect of adjudication No.2, then any conclusion he reached about this was part of his non-binding reasoning and he then proceeded (without objection) to decide the dispute referred to him. 3) If Mr Wright did have jurisdiction to decide the effect of adjudication No.2 (and in the court’s view he did), that was not limited to answering the question whether things said in the decision were binding or not. He had jurisdiction to decide the consequences of his answer to that question, which may have been that he had no jurisdiction over the dispute referred to him or that he did. He concluded the latter and that was within his jurisdiction because it was something ICI had invited him to do. Therefore MMT was entitled to summary judgment for the sum claimed.

16 The Project Consultancy Group v The Trustees of the Gray Trust [1999] B.L.R. 377 and later cases.

5. Payment and Pay Less Notices See Surrey and Sussex Healthcare NHS Trust v Logan Construction (South East) Ltd.17 The claimant Trust (the Trust) applied for two declarations against the respondent contractor (Logan) as to the invalidity of an alleged interim payment notice and the validity of a pay less notice. The Trust had failed before the adjudicator who decided the payment notice was valid but the pay less notice was not and found the Trust liable to pay £1,015,557.95 plus interest. The parties agreed the questions were suitable for consideration by way of a Pt 8 claim and that no separate enforcement proceedings were necessary. The Trust engaged Logan under a JCT Intermediate Building Contract with Contractor’s Design 2011 (the Contract) to refurbish various operating theatres, a recovery ward and associated works in the sum of £4.388 million. Logan did not make any interim payment application after practical completion, but the Trust continued to issue interim certificates at bi-monthly intervals in accordance with the Contract. A Certificate of Making Good was issued. Logan made no further applications for interim payment though the Contract entitled it to do so. There were discussions about the final account. On the eve of the date for service of the Final Certificate, a meeting was scheduled to take place. In advance of the meeting Logan submitted a worksheet entitled “Interim Payment Notice (Clause 4.10)”. Logan later relied on this as a valid payment notice under the Contract. There was no agreement at the meeting and the Trust issued a Final Certificate for £1.1 million less than applied for in the Interim Payment Notice. In the covering email, the Trust responded to the Interim Payment Notice, saying that it was “out of date and void”. It added that, in any event, “the details stated in the Final Certificate are the same as could have been stated in any final Interim Certificate which may have been issued”. The adjudicator held that the Final Certificate and covering email did not amount to a valid pay less notice. On the first issue, the Court held that Logan’s application was “in substance form and intent”18 an interim payment application. The Court took into account the contractual and factual background to the payment notice and how it would have informed a reasonable recipient. Whilst the email sent with the worksheet did not refer to a payment notice, the worksheet itself was sufficiently clear and free from ambiguity in terms of legibility, substance, form and intent as to amount to a valid payment notice. Logan had been open and transparent about its intentions and it was relevant that the dispute would not have arisen if the Trust had issued an Interim Certificate after the Certificate of Making Good as required by the Contract. The crucial second issue was then whether the Trust’s Final Certificate and covering email was a valid pay less notice. The court again considered and found assistance in the decision in Jawaby, namely that as essential a requirement for the service of a notice is the requisite intention to serve it. The Court found the Trust had given a valid pay less notice. The notice fulfilled the contractual requirements, specifying the sum due and the basis on which it was calculated. The Trust’s mistaken belief as to the payment procedure, by referring to what it would have certified in a final Interim Certificate, did not deprive the notice of the required intention and a reasonable reader would have appreciated that the Final Certificate was intended to be responsive to the Interim Payment Application. It was unnecessary for the Trust to state expressly that it was giving a pay less notice or to make specific reference to the relevant contractual provision for a pay less notice. Finally, a pay less notice would be valid even if given contingently, that is, despite the denial by the Trust in its email that Logan’s Interim Payment Notice was valid or in time.

17 Surrey and Sussex Healthcare NHS Trust v Logan Construction (South East) Ltd [2017] EWHC 17 (TCC) as per Mr Alexander Nissen QC (sitting as a Deputy High Court Judge). 18 Approving the test applied in Jawaby Property v The Interiors Group Ltd [2016] B.L.R. 328.

Comment It is clear from the judgment that the dominant factor was the intention of the parties viewed objectively. In regard to the pay less notice, a decisive consideration was whether it was responsive to the payment notice. Despite the findings it will always be advisable to expressly make clear the nature and purpose of a notice. In this case it was a careful consideration of the factual background which supplied the necessary intention and the understanding of the parties.

6. Payment and Pay Less Notices—Right to Valuation—Estoppel by Convention—Stay See Kersfield Developments (Bridge Road) Ltd v Bray and Slaughter Ltd.19 This case dealt with a number of increasingly common issues: (i) the validity of an interim payment application, (ii) the validity of a pay less notice, (iii) the effect of the absence of a payment and effective pay less notice; and in the result (iv) whether there were grounds for a stay. Bray was employed by Kersfield under a JCT Design and Build Contract 2011 Edition for the refurbishment and conversion of a mansion house and stables and the construction of dwellings in Leigh Woods. Clause 4.8.4 provided that interim payment applications should be accompanied by the “further information” specified in the Employers’ Requirements. Clause 1.7.3A provided for the service of (inter alia) notices under s.4 (Payment) and that service by email should be on a business day by 4.00pm and be deemed served the next business day. Bray issued Interim Payment Application 19 on 5 August 2016 for £1,208,279.39 (IA19). The final date for payment was 19 August 2016. The employers’ payment notice was due by 10 August 2016 but was issued late. Thus the sum applied for became the sum due unless the employers served a pay less notice (cl.4.9.3). A pay less notice was served by the employers’ agent CS2 by email timed at 9.50pm on Friday 12 August 2016 and deemed served on Monday 15 August 2016 (cl.1.7.3A). Bray referred the dispute over the unpaid balance of IA19 to adjudication in which the adjudicator Mr Garcia awarded it £1.31 million, finding that IA19 was valid and no valid payment or pay less notice had been served. Bray applied for summary judgment to enforce the award. Kersfield issued proceedings under CPR Pt 8 claiming a declaration that it was entitled to refer the dispute over the valuation of IA19 to adjudication or other proceedings and also for a final determination of the parties’ dispute over the adjudicator’s decision. O’Farrell J held as follows: 1. IA19 was a valid payment application. It complied with the requirement of the contract. The parties were free to agree upon additional requirements that did not conflict with the Act. Clause 4.8 provided for the provisions of the additional information specified in the Employers’ Requirements but did not expressly state that the application would be invalid in the absence of the further information. Implying such a term would lead to uncertainty in the payment process and enable an employer to avoid the need to serve a payment or pay less notice by challenging all or part of the application. A deficient application could justify the employer in reducing the application but would not render it invalid. The proper remedy was to serve a payment notice excluding the claim or a pay less notice deducting unsubstantiated sums.

19 Kersfield Developments (Bridge Road) Ltd v Bray and Slaughter Ltd [2017] EWHC 15 (TCC), per O’Farrell J.

2. Bray’s claim that there was an estoppel by convention failed. The fact of payment of earlier applications did not give Bray a contractual entitlement to payment of an invalid application. The fact of the payment of previous applications could be equivocal. In any case, the employers’ agent had no authority to vary the terms of the contract to relieve the contractor of the obligation to provide the additional information. 3. The payment notice was served late with the effect that the sum claimed became the notified sum, subject to any pay less notice. Bray’s issuing of an invoice for a lesser sum than IA19 and suspension of work pending payment was not inconsistent with its claim to the balance of IA19. Bray had also reserved its rights when issuing its invoice and the suspension notice. 4. The pay less notice was served late. The parties were free to agree mode and timing of service and the deeming provision was sensible and reasonable. The notice should have been served at the latest by 14 August and was not effectively served till 15 August. 5. The employers had no right to refer to adjudication the proper valuation of IA19. Where there was no valid payment notice or pay less notice, there was no dispute as to the proper sum due in respect of the application for payment. That was because the payment mechanism in the contract provided that in default of a payment notice or pay less notice, the sum applied for became the notified sum and the sum due.20 There was nothing to prevent the employers from challenging the value in a subsequent interim payment cycle or at the final account. The Court also noted that the Act s.111(8) did not empower an adjudicator to open and revise a payment notice or pay less notice. His authority was to determine the sum due and payable and under s.111(9) to order the payment of any additional sum found due based on his findings. Finally s.111(8) could be invoked by either party. 6. No stay of execution would be granted. The employers had argued they could not afford to pay the award and it would be manifestly unjust to order them to do so. In addition Bray would be unable to repay the sum awarded at a future date. The employers were not insolvent and the evidence did not suggest they could not raise further funds. Neither was Bray insolvent. The evidence did not suggest it would be unlikely to be able to repay the judgment sum. The Court observed that generalised statements about the parties’ respective financial positions were of no probative value and little help in resolving conflicting evidence as to the true position.

7. Pay Less Notice Invalid See Octoesse LLP v Trak Special Projects Ltd.21 Octoesse employed Trak under a JCT Intermediate Building Contract (IC 2011) with bespoke amendments not material to the dispute to build residential and retail units in London. Following practical completion a final certificate was issued for payment against which Octoesse issued a pay less notice deducting liquidated damages (LDs) of £89,250. Trak commenced adjudication claiming further monies and a declaration that Octoesse was not entitled to deduct LDs and that the pay less notice was invalid. The adjudicator, Mr Bingham, found for Trak and awarded it £59,991.83 plus interest and other sums. The decision turned on the proper construction of cll.2.22 and 2.23 of the contract.

20 See ISG Construction Ltd v Seevic College [2014] EWHC 4007 (TCC); and Galliford Try Building Ltd v Estura Ltd [2015] EWHC 412 (TCC); [2015] B.L.R. 321; 159 Con L.R. 10. 21 Octoesse LLP v Trak Special Projects Ltd [2016] EWHC 3180 (TCC) per Jefford J.

Clause 2.22 provided that if the contractor failed to complete the works, the architect/contract administrator shall issue a certificate to that effect. If an extension of time is made after the issue of such a certificate, the extension shall cancel that certificate and the architect/contract administrator shall where necessary issue a further certificate. Clause 2.23 provided for the contractor to pay LDs provided the architect/contract administrator had issued a certificate under cl.2.22 and the employer had notified the contractor before the date of the Final Certificate that he required payment of, or might withhold or deduct LDs. Clause 2.23.1.3 provided that the requirement to pay LDs would remain satisfied notwithstanding the cancellation of any certificate under cl.2.22. Before the Court, Octoesse claimed a declaration as to the true construction of the above clauses, that its pay less notice was valid, that it was entitled to deduct LDs and that Mr Bingham’s award was unenforceable. Trak counterclaimed the sums due under the Award, but dropped a counterclaim for additional sums claimed due on invoices.

The construction issue Jefford J gave judgment for Trak on the construction issue, for the following reasons. By the use of the word “shall”, cl.2.22 imposed mandatory obligations on the contract administrator (CA), in the circumstances, to issue a certificate of non-completion if the contractor for any reason fails to complete by the original date for completion or any extended date. The clause makes clear that the effect of an extension of time is to cancel any certificate already issued and require the CA where necessary to issue a new certificate. In respect of the cancellation of the certificate already issued, there is no exception where the extension is made after practical completion (noting that cl.2.19.3 expressly contemplates the making of an extension of time after practical completion). In respect of the words “where necessary”, it would not be necessary for the CA to issue a certificate if the effect of the extension of time were that the contractor had no longer failed to complete the works by the completion date. Even if there was any merit in Octoesse’s argument that a further non-completion certificate was not necessary, the effect of the making of an extension of time was to cancel any certificate previously issued. A cancelled certificate could not be relied on as fulfilling the condition of cl.2.23.1.1. The fact that the employers’ notice of intention to deduct need not be repeated if a further extension of time is made, did not assist Octoesse, there being a clear distinction between the treatment of the employer’s notice under cl.2.23.1.2 and the certificate of non-completion. The court declined to make the declarations sought by Octoesse.

Costs There was an issue as to costs. Trak claimed the costs of employing a claims consultant to instruct and assist counsel (who was in turn employed on a direct access basis). After reviewing previous case law at some length, the Court held that costs incurred by claims consultants assisting a litigant in person will usually be recoverable on adjudication enforcement proceedings, assuming the same consultant has represented the party in adjudication. In the circumstances of the case, the recoverable costs included 50 per cent of the costs of instructing and liaising with counsel (recognising that had solicitors been instructed, they might have sought assistance of the claims consultants but not necessarily wholly relied on them); the time spent attending the hearing plus a reduced rate for travelling time. The costs of liaising with the Court and preparing the schedule of costs were not recoverable as this was work which solicitors normally do.

8. Permission to Defend—Real Prospect of Success—No Contract See Dacy Building Services Ltd v IDM Properties LLP.22 This was a case based on an alleged oral contract, where the evidence pointed in different directions and it was unclear whether there was a contract at all or if so with whom. Whilst the court noted the latitude to be given to adjudicators who had to grapple with oral contracts, it felt unable to enforce the adjudicator’s decision in this case. The factual dispute was simply too complex to determine under CPR Pt 24. The defendant had a real as opposed to a fanciful prospect of succeeding in its defence. It also held that the defendant had effectively preserved its right to challenge the decision at the outset when it alleged there was no contract and served its response without prejudice to that contention. It had not conferred jurisdiction on the adjudicator to decide that issue by agreeing to his nomination.

9. Summary

Enforcement—insolvency—expiry of moratorium See South Coast Construction Ltd v Iverson Road Ltd. The court would have granted permission to proceed with the enforcement application, applying the appropriate tests, where the proceedings were well advanced, turned on one issue and all the other factors were favourable to the applicant.

Jurisdiction of second adjudicator—valuation issue See Universal Piling & Construction Ltd v VG Clements Ltd. The dispute referred to the second adjudicator was different from the dispute referred to the first adjudicator.

Jurisdiction—reservation of rights See Imperial Chemical Industries Ltd v Merit Merrell Technology Ltd. By asking the adjudicator to determine the issues that he did, without a proper reservation, ICI had submitted to his jurisdiction.

Payment and pay less notices See Surrey and Sussex Healthcare NHS Trust v Logan Construction (South East) Ltd. The contractor’s payment application was sufficiently clear and free from ambiguity to amount to a valid application. The contractor had been open and transparent about its intentions. The Trust’s Final Certificate and covering email was a valid pay less notice. The requisite intention to serve it existed and it was capable of being viewed as responsive to the payment application. A mistaken belief as to the payment procedure by referring to what it would have certified in a final Interim Certificate did not deprive the Trust’s notice of the required intention. It was unnecessary for the notice to state expressly that it was given as a pay less notice or to make specific reference to the relevant contractual provision. A pay less notice could be validly given contingently, i.e. under a denial of the validity of the payment notice to which it responded.

22 Dacy Building Services Ltd v IDM Properties LLP [2016] EWHC 3007 (TCC), per Jefford J.

Payment and pay less notices—right to valuation—estoppel by convention—stay See Kersfield Developments (Bridge Road) Ltd v Bray and Slaughter Ltd. A payment application that was otherwise valid remained so even though it did not comply with an additional requirement of the contract. Parties were free to agree upon additional requirements that did not conflict with the Act. Here the provisions for the additional requirement did not expressly state that the application would be invalid in the absence of meeting the requirement. Implying such a term would lead to uncertainty. A deficient application could justify the employer in reducing the application but would not render it invalid. The proper remedy was to serve a payment notice excluding the claim or a pay less notice deducting unsubstantiated sums. There was no estoppel by convention by reason of the making of previous payments on the same basis. The pay less notice was out of time. The parties were free to agree mode and timing of service and deeming provisions. Where there was no valid payment notice or pay less notice, the payment mechanism in the contract provided that the sum applied for became the notified sum and the sum due. Therefore there was no dispute as to the proper sum due and no right to seek a valuation. However, there was nothing to prevent the employer from challenging the value in a subsequent interim payment cycle or at the final account. Section 111(8) of the Act did not empower an adjudicator to open and revise a payment notice or pay less notice. His authority was to determine the sum due and payable and order the payment of any additional sum found due.

Pay less notice invalid See Octoesse LLP v Trak Special Projects Ltd. In the absence of a valid and effective certificate of non-completion there was no right to deduct liquidated damages and the pay less notice was invalid. Use of the word “shall” in cl.2.22 of the contract imposed a mandatory obligation on the contract administrator to issue a certificate of non-completion if the contractor for any reason failed to complete by the original date for completion or any extended date. The effect of a later extension of time was to cancel any certificate already issued and to require where necessary a new certificate. There was no exception where the extension was made after practical completion. The words “where necessary” meant it was not necessary to issue a certificate if the effect of the extension of time was that the contractor had no longer failed to complete the works by the completion date. The effect of the making of an extension of time was to cancel any certificate previously issued. The costs of employing a claims consultant to assist a litigant in person in adjudication enforcement proceedings will usually be recoverable, assuming the same consultant has represented the party in adjudication.

Permission to defend—real prospect of success— no contract See Dacy Building Services Ltd v IDM Properties LLP. Where the adjudicator had to grapple with an issue as to whether or not there was a contract, and the evidence pointed in different directions, the issue was too complex to be determined on a summary judgment application and, exceptionally, permission to defend was granted.

Hew R. Dundas

1. Introduction Conflict of interest cases occur with some frequency in arbitration2 but are much rarer in Expert Determination (ED), mainly (no doubt) because of the far smaller number of ED cases but also, it is submitted, by the very nature of ED where an Expert Determiner (ED-er) is for example called upon to value a property or its rental value applying his/her professional expertise3 and where the typical triangle of surveyors necessarily involves closer connections than might be the norm elsewhere. While the present case is, arguably, not a “Eureka” one it does feature both (i) a very rare ED outing in the Court of Appeal and (ii) a novel factual scenario. In addition, the role of the “fair-minded informed observer” (FMIO), now central to considerations of bias and conflicts, is given a thorough “working-over” and the “tribunal test” in Porter v Magill4 is imported into ED. Finally, the judgment introduces CPR Pt 35 and expert witness considerations which, it will be argued, have no place in ED.

2. The Facts The case was an appeal by Mr H against an order by a Chancery judge in November 2014 dismissing Mr H’s application to enforce a February 2014 Tomlin Order which compromised an unfair prejudice petition that Mr H had brought in 2012 in relation to the affairs of the fourth respondent, Maximus Securities Limited (MSL). Under the terms of the schedule to that Order, the fifth respondent, Maximus Group Limited (MGL), had agreed to purchase Mr H’s shares in MSL at their open market value as at 30 September 2010. MSL was a single-purpose vehicle whose only asset was some land at Clay Cross in Derbyshire which was registered in the name of a wholly owned subsidiary, Cavendish Estates (London) Limited (CELL). The Schedule therefore provided for what it described (in cl.2(c)) as an independent valuation of the land and for the value of Mr H’s shares in MSL to be determined in the light of that valuation. Clause 2(d) of the Schedule provided as follows: “The Land shall be valued by a suitably qualified independent valuer. … Each party shall be entitled to make written submissions to the Valuer within 14 days of the Valuer’s joint instruction. The Valuer shall value the land acting as an expert and not an arbitrator. … The Valuer’s valuation of the Land shall be binding on the parties save in the event of manifest error by the Valuer.” Clause 2(e) of the schedule specified the procedure for the valuation of Mr H’s shares once the value of the land had been determined.5 Under cl.3, the value of the shares was to be paid by MGL within 21 days of an independent accountant certifying the value of MSL. The valuation of MSL also had cost consequences: if the shares were valued at more than

1 Hopkinson v Hickton [2016] EWCA Civ 1057, per Patten and King LJJ. 2 See (1) Hew R. Dundas, “Conflicts of Interest and Arbitrator Disclosure Revisited: Barristers Acting as Counsel and as Arbitrator” (2012) 78 Arbitration 72–80 and (2) Hew R. Dundas, “An English Judicial Perspective on the 2014 IBA Guidelines on Conflicts of Interest in International Arbitration: W Ltd v M Sdn Bhd” (2016) 82 Arbitration 331–337. 3 Most notably the seminal case Checkpoint Ltd v Strathclyde Pension Fund [2003] EWCA Civ 84; [2003] L. &T.R. 22; [2003] 1 E.G.L.R. 1; [2003] 14 E.G. 124, in which the Court of Appeal held that an ED-er could deploy his/her own professional expertise (i.e. the very basis of his/her appointment) without being obliged to disclose that expertise to the parties by analogy with the Arbitration Act 1996 s.37(1)(b). 4 Porter v Magill [2001] UKHL 67; [2002] L.G.R. 51; [2002] 2 W.L.R. 37. 5 That second stage forms no part of the present case nor of this article.

£300,000 then the respondents were to pay Mr H’s costs, if less than £300,000 Mr H was required to pay their costs and if exactly £300,000 there was to be no order for costs. Following the making of the Tomlin Order, the respondents’ solicitors provided the names of three valuers to Mr H’s solicitors, including a Mr C FRICS, a partner in a well-known firm of surveyors and who was at the time the Head of Regional Valuation for S and managed approximately 70 valuers based in 12 regional offices across the UK. In January 2014 Mr C was selected by Mr H to carry out the valuation of the land in accordance with the Tomlin Order and a joint letter of instruction was sent to him; in his letter accepting the appointment Mr C confirmed that the land would be valued at market value in accordance with the standard published RICS guidelines6 and that his report would be fully compliant with the CPR. He acknowledged that he would have “an overriding duty of independence and impartiality” and said that he had carried out the checks necessary to confirm that he had no conflicts of interest in acting as the expert valuer. Written submissions from the parties followed a few days later. Mr C’s report was duly provided to the parties in April 2014 and in it he valued the land as at 30 September 2010 in the sum of £5.9 million. However, MSL had had considerable debts and liabilities, its banking facilities had been withdrawn in 2012 and CELL had been placed into administration. In July 2013 the administrators had sold the land to SMP plc, a large English property company, for £4 million. Given the scale of MSL’s liabilities, its shares could have had no value unless the land had been worth at least £12.5 million so the valuation at £5.9 million meant that the company had had, in 2010, a negative value of about £(6.5) million and Mr H’s shares had therefore been worthless. Mr C’s report included a section headed “Disclosure of Interest” in which he referred to his previous involvement as a valuer with the land: “I have had overall responsibility for valuing the SMP portfolio of properties which, after July 2013, has included the subject property (therefore included in the November 2013 valuation that was undertaken on their behalf). Whilst I did not personally undertake the valuation, I had responsibility for overseeing it and formally signed it off. As such, I had some familiarity with the property prior to receiving these instructions and was aware of the purchase price as at July 2013 (which in any event has been confirmed in the parties’ submissions). This valuation was undertaken [more than] three years after the valuation date in this matter, in a different market, for a different purpose and under different circumstances. I confirm that the SMP valuation exercise did not reveal any new or different information that would either supplement or contradict the information that has been made available to me in this matter. I do not consider, therefore, that this valuation advice conflicts with my expert advice in this report.” This was the first occasion that Mr C had disclosed to the parties his role in the 2013 SMP valuation. When he was first approached in January 2014 to find out whether he was willing to act as ED-er, Mr C had disclosed to them as an indication of his relevant experience that he did provide valuation advice to various property companies including SMP who had a large land bank within their portfolio. He did not, however, mention any involvement with this land nor did he make any reference to this or to SMP more generally in the CV he submitted to the parties. In his witness statement prepared for the Chancery hearing, Mr C had explained that although he had signed off the 2013 SMP valuation, he had not been involved with the valuation of the individual properties within it such as the land. His only role had been to have carried out what he described as a high level review of the portfolio valuation and he did not immediately connect the reference in it to “Clay Cross” with the land he had been

6 For the avoidance of doubt, save as referred to and/or commented upon by Patten LJ, this article is not concerned with and does not address the RICS Guidelines, Code of Ethics etc.

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators 240 Arbitration asked to value in 2014. The computerised conflict check he had carried out prior to accepting appointment as ED-er had made no link between the 2013 SMP valuation and the present ED instructions which explained why he had referred in general terms to having acted for SMP but had made no specific reference to the land. His statement in his acceptance of the appointment that there were no conflicts had been made on the same basis. Mr C said that it had only been when he had received the respondents’ valuation submissions that he had become aware that the land which SMP had purchased in July 2013 for £4 million was the land itself. He said that he had considered whether this had given rise to a conflict of interest, or had otherwise compromised his independence having regard to the rules in the CPR Pt 35 and in the RICS Practice Statement and Guide Note about acting as an expert witness,7 but he had decided that it had not. His position had been that the market conditions in 2013 had been very different from those at the valuation date in 2010 and that, in preparing his valuation, he had not had regard to any facts which would not have been known at that valuation date. The 2013 sale price to SMP had been used strictly as a sense check on his valuation as at September 2010 and the 2013 SMP valuation had had no bearing on his report.

3. The Parties’ Submissions Mr H’s position was that he would not have chosen Mr C to act as the expert valuer had he known about his involvement with the 2013 SMP valuation and, after taking counsel’s advice, his solicitors issued an application for a declaration that Mr C was not an “independent valuer” within the meaning of the schedule and, in consequence, that his valuation of 11 April 2014 was not therefore binding on the parties. The Chancery judge had rightly recognised that the determination of that application had not involved any element of discretion on the part of the court. If the facts relied on (i.e. Mr C’s prior involvement in the 2013 SMP valuation) disqualified him from acting as an independent valuer then it necessarily followed that the contractual machinery in the Tomlin Order had not been operated and the valuation report was not binding. But it was also important to note at the outset just how limited was and is the scope of Mr H’s challenge to the valuation which was solely a challenge to Mr C’s appointment and not to his competence or conduct as a valuer. The judge had not been asked to review the correctness of his methodology nor was it suggested that Mr C had failed to carry out the valuation in accordance with the relevant RICS guidelines or any other relevant principles of valuation. In terms of the schedule, it was not therefore disputed that he was “suitably qualified” and still less was it suggested that, in carrying out the valuation, Mr C had actually approached his task with a closed mind or had in fact been sufficiently influenced by any perceived need to ensure consistency between his expert valuation and the 2013 SMP valuation that he had not acted independently. The sole issue was whether on the date of his appointment Mr C had been an “independent valuer” within the meaning of the Schedule para.2(d)(i). It might be thought strange that Mr H should be able to challenge the appointment of Mr C as an independent valuer when no criticism was being made of the way in which he in fact conducted the valuation. However, Mr H had contracted (i) for an independent valuation of the land (ii) to be carried out by an independent valuer and he had been entitled to both. A material departure from the contract will vitiate the determination regardless of its effect on the ultimate result of the process: see Veba v Petrotrade.8 The appointment of an expert valuer who was not independent would, Patten LJ considered, constitute a material departure from the contract even if it resulted in an independent valuation of the land.

7 This and the earlier reference to Pt 35 are curious in that it does not apply to ED; perhaps since the present valuation exercise was being carried out pursuant to a Tomlin Order issued by a Chancery Judge, there might be some logic to considering Pt 35 but, otherwise, the import into ED of Pt 35 considerations must be plain wrong. 8 Veba Oil Supply & Trading GmbH v Petrotrade [2001] EWCA Civ 1832; [2002] 1 All E.R. 703; [2002] 1 Lloyd’s Rep. 295.

Mr C’s independence was being challenged on the basis of the 2013 valuation of the land which S had provided to SMP. It was said that he had a vested interest in reaching a 2010 valuation figure which was consistent with the 2013 valuation in order to save him and his firm the embarrassment of reaching a conclusion which conflicted with the 2013 valuation. He would have been bound to inform SMP had this occurred and his own and his firm’s reputations were therefore at stake. This created the inevitable perception that he had been likely to have followed the 2013 valuation as opposed to much earlier valuations of the land by other firms which had placed a value on it of up to £22 million. Counsel for Mr H submitted that the judge had been right to have concluded that Mr C’s status as an independent valuer as at the date of his appointment had fallen to be judged by the application of what he called the tribunal test, i.e. the test of apparent bias approved by the House of Lords in Porter v Magill9 and Helow v Home Secretary10 but the judge had gone wrong, he argued, by then taking into account Mr C’s evidence about how he had carried out the valuation and why he had not been influenced by his involvement in the 2013 SMP valuation. Counsel for the respondents sought to support the judge’s conclusion that Mr C had been independent on a number of different grounds. His first point was that the Schedule para.2(d)(i) required the valuer to be independent not at the date of his appointment but at the date of the valuation. He submitted that what the schedule mandated was that the land should be valued by a suitably qualified independent valuer and this condition was satisfied if the valuation was in fact carried out independently even if the valuer as appointed was not independent within the meaning of the schedule. Patten LJ was not persuaded by this considering that it was clear from the Schedule para.2(d)(i), read in conjunction with para.2(d)(iv), that the valuer had to have been independent when appointed. An independent valuer once appointed may still, due to some supervening event, not carry out the valuation independently in which case there would be a breach of both paras 2(d)(i) and 2(c) but the requirement that he should both be independent and act independently was not the same, although both conditions had to have been be complied with. The Schedule had entitled the parties to have had the services of an independent valuer and the requirement of independence was, on Patten LJ’s construction of the Schedule, a condition of appointment. The next issue was what was meant by “independent”: Counsel for the respondents submitted that that meant independent of the parties and not independent of the land. A previous involvement with the subject matter of the valuation would not therefore disqualify the valuer unless it created some connection with one of the parties or at least an interest in the outcome of the valuation. A previous professional involvement with the valuation of the land did not therefore mean that Mr C had not been independent unless it gave rise to one or more of the circumstances mentioned above. Patten LJ considered that this was too narrow a construction of the Schedule, there being no obvious reason to restrict the meaning of the word to such circumstances. The requirement that the valuer be independent was that he should be capable of carrying out the expert valuation without there being any real risk of his approaching his task with a closed mind or a particular objective. The circumstances in which this might arise are not necessarily limited to the categories mentioned by counsel and Patten LJ saw no reason why the parties should be taken to have adopted such a restricted definition.

4. The Law In Kemp v Rose11 the court set aside the determination by an architect of the value of some additional works under a building contract when the architect had, unbeknownst to the

9 Porter v Magill [2001] UKHL 67; [2002] L.G.R. 51; [2002] 2 W.L.R. 37. 10 Helow v Home Secretary [2008] UKHL 62; [2008] 1 W.L.R. 2416; [2009] 2 All E.R. 1031. 11 Kemp v Rose [1858] 1 Giff 258.

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators 242 Arbitration builder, previously assured the clients that the total cost of the works would not exceed a particular sum. Sir John Stuart VC said (at p.265): “A perfectly even and unbiased mind is essential to the validity of every judicial proceeding.12 Therefore, where it turns out that, unknown to one or both of the persons who submit to be bound by the decision of another, there was some circumstance in the situation of him to whom the decision was intrusted which tended to produce a bias in his mind, the existence of that circumstance will justify the interference of this Court. Whether in fact the circumstance had any operation in the mind of the arbitrator must, for the most part, be incapable of evidence, and may remain unknown to every human being, perhaps even unknown to himself. It is enough that such a circumstance did exist.” Re Benfield Greig Group Plc13 concerned the valuation put on some shares by the company’s auditors in relation to a transfer under pre-emption rights in the Articles of Association. The auditors’ valuation was £2.10 per share which conflicted with a valuation of £4.00 per share put on a similar transfer two years earlier. It transpired that the auditors had, since the transfers at £4.00, given valuations of the company’s shares at £1.50 to the Inland Revenue, having been asked by the company to provide a low valuation for tax purposes. This court held that the auditors were, in the circumstances, not independent because, in their dealings with the Inland Revenue, the auditors had had to distinguish and downplay the transfer at £4.00 per share and were therefore unlikely to depart from the position they took with the Revenue. Aldous LJ said: “The scenario that I have outlined is supported in the pleading by reference to documents that have been disclosed in the Pricewaterhouse action. It does in my view provide a reasonable argument that the petitioners have been unfairly prejudiced. First by appointing Pricewaterhouse as valuers when they were not ‘independent’. By that I mean that they could not reasonably approach the task of valuer without restrictions imposed by the advice that they had given in very different circumstances. In particular advice for the purposes of persuading the Inland Revenue to disregard the placements at £4.00 and to accept the low value at which they had been arrived. Second, they had also acted as adviser to Benfield upon another, but similar matter that was in dispute between Benfield and the petitioners. In so doing it is arguable that they had compromised their ability to be an independent valuer. Whether that can be categorised as a failure to act in good faith or a failure of an obligation to appoint an independent valuer or some other failure is in my view irrelevant.” Furthermore, there was clear authority that an expert witness14 is not automatically disqualified from giving expert evidence by reason of some relationship with one of the parties or even an interest in the outcome of the proceedings. The weight to be given to the evidence or even its admissibility is a matter for the judge to assess having regard to the relevant circumstances: see R. (Factortame Ltd) v Transport Secretary (No.8)15. In relation to ED, different factors apply because the expert is performing a quasi-judicial function which requires the exercise of impartiality but even in these cases the balance of authority indicates that a link such as a professional relationship with one of the parties will not be sufficient to impeach the valuation or other ED unless it can be shown that the expert was

12 This appears to be an arbitration case but, since ED is not a judicial proceeding, the relevance of this citation is open to serious question. 13 Re Benfield Greig Group Plc [2001] EWCA Civ 397 at [37]; [2002] W.T.L.R. 769; [2002] B.C.C. 256. 14 Despite Patten LJ’s later disclaimer, the author remains highly sceptical of the introduction of expert witness (EW) considerations into ED; an EW renders an opinion challengeable (by opposing expert opinion and by cross-examination) by the other side, the ED-er makes a binding decision with no scope for any form of challenge; i.e. there is a huge difference. 15 R. (Factortame Ltd) v Transport Secretary (No.8) [2002] EWCA Civ 932; [2003] Q.B. 381 at [69]–[70].

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators Conflicts of Interest in Expert Determination 243 actually partial in making that determination: see Macro v Thompson16 and the cases therein cited. Counsel for the respondents submitted that the test of actual partiality or bias should be applied to determine whether Mr C had been independent at the date of his appointment. In Bernhard Schulte GmbH & Co KG v Nile Holdings Ltd17 Cooke J had held (following the decision of Robert Walker J in Macro v Thompson (No.2)18 that an ED could not be set aside except on proof of actual bias but that had not been a case where any criticism had been made of the independence of the expert when appointed, the complaint having been that he had acted unfairly by failing to give both parties a proper opportunity to make submissions. Similarly in Owen Pell Ltd v Bindi (London) Ltd19 HH Judge Kirkham had rejected a submission that the expert had been obliged to have followed the rules of natural justice or had been guilty of actual bias in that case. While Patten LJ had some reservations about certain of the judge’s observations concerning the law, for present purposes it was another case in which no issue had arisen concerning the appointment of the ED-er and it therefore did not assist. Patten LJ considered that the question of what had to be shown in order to be able to challenge the appointment of an “independent” valuer was really determined by the construction of the word “independent” discussed above. It followed that an expert valuer did not satisfy the independence requirement that if he had a connection with one of the parties, an interest in the outcome of the valuation or some other connection with the property which, objectively viewed, created a real risk that he may act partially in carrying out the valuation, his independence would be negated by the relevant factor regardless of whether in fact it would have caused him to act partially. The stipulation that the expert be independent was intended to remove from the parties the risk of a lack of impartiality and professional objectivity. The test suggested by counsel for the respondents would also be impossible to apply in most ordinary cases since it would involve either the direct examination of the expert in relation to how he or she was likely to carry out the determination or some other evidence which disclosed a present state of actual bias on the expert’s part. In relation to an exercise which had not yet taken place, this was likely to be a near impossible task. The difficulty of proving actual bias (which may often be unconscious) has been a strong reason for the development of an objective test of apparent bias as a sufficient basis for demanding the recusal of judges and other adjudicators prior to any actual hearing or determination and Patten LJ could see no justification for applying a different rule in relation to ED-ers. Patten LJ therefore considered that the judge had been correct in adopting the “tribunal test” in relation to his assessment of whether Mr C, as at the date of his appointment, had been independent.

5. The Decision In the course of his submissions, counsel for Mr H had raised the issue of the non-disclosure of the 2013 SMP valuation prior to his client’s decision to appoint Mr C. This had not been relied upon as a separate breach of the terms of the Schedule invalidating the subsequent appointment (and therefore the valuation) but was rather a further indication that Mr C had not been independent. Counsel argued that the FMIO who was to assess the likelihood of apparent bias would have inferred that Mr C had been likely to have been biased towards affirming the conclusions in the 2013 SMP valuation from the fact that Mr C had chosen not to disclose its existence.

16 Macro v Thompson (No.3) [1997] 2 B.C.L.C. 36 at [64g]–[65h]. 17 Bernhard Schulte GmbH & Co KG v Nile Holdings Ltd [2004] EWHC 977 (Comm); [2004] 2 Lloyd’s Rep. 352. 18 Macro v Thompson (No.3) [1997] 2 B.C.L.C. 36 at [64g]–[65h]. 19 Owen Pell Ltd v Bindi (London) Ltd [2008] EWHC 1420 (TCC); [2008] B.L.R. 436; [2008] C.I.L.L. 2605.

Patten LJ was not convinced either that this was a relevant factor or that it added anything to Mr H’s case. Mr C had provided an explanation as to why the 2013 SMP valuation had not been disclosed in his CV and the judge had accepted that. This was information which the FMIO would have had available and would have considered in deciding whether there had been a real likelihood of bias but that non-disclosure could make no difference to the outcome of the challenge to Mr C’s appointment. If his involvement in the 2013 SMP valuation had been enough to have disqualified him from being an independent valuer then its non-disclosure was irrelevant. If, on the other hand, his involvement had not been sufficient to have had that effect then, in the light of the explanation which the judge had accepted, its non-disclosure could not alter that conclusion. Patten LJ next turned to the critical question of whether the carrying out of the 2013 SMP valuation had been sufficient to have satisfied the test of apparent bias. In Porter v Magill20 the House of Lords had adopted the formulation of the test set out by Lord Phillips of Worth Matravers MR in Re Medicaments and Related Classes of Goods (No.2)21 as follows: “When the Strasbourg jurisprudence is taken into account, we believe that a modest adjustment of the test in R v Gough22 is called for, which makes it plain that it is, in effect, no different from the test applied in most of the Commonwealth and in Scotland. The court must first ascertain all the circumstances which have a bearing on the suggestion that the judge was biased. It must then ask whether those circumstances would lead [an FMIO] to conclude that there was a real possibility, or a real danger, the two being the same, that the tribunal was biased.” Lord Hope had said in Porter v Magill23: “I respectfully suggest that your Lordships should now approve the modest adjustment of the test in R v Gough24 set out in that paragraph. It expresses in clear and simple language a test which is in harmony with the objective test which the Strasbourg court applies when it is considering whether the circumstances give rise to a reasonable apprehension of bias. It removes any possible conflict with the test which is now applied in most Commonwealth countries and in Scotland. I would however delete from it the reference to ‘a real danger’. Those words no longer serve a useful purpose here, and they are not used in the jurisprudence of the Strasbourg court. The question is whether the [FMIO], having considered the facts, would conclude that there was a real possibility that the tribunal was biased.” This requires the court to determine the facts which the observer would know and take into account and then to determine whether the FMIO would conclude on those facts that a real possibility of bias had existed. In Helow v Home Secretary25 Lord Hope provided some further guidance concerning FMIOs: “The observer who is fair-minded is the sort of person who always reserves judgment on every point until she has seen and fully understood both sides of the argument. She is not unduly sensitive or suspicious, as Kirby J observed in Johnson v Johnson26. Her approach must not be confused with that of the person who has brought the complaint. The ‘real possibility’ test ensures that there is this measure of detachment. The

20 Porter v Magill [2001] UKHL 67; [2002] L.G.R. 51; [2002] 2 W.L.R. 37. 21 Re Medicaments and Related Classes of Goods (No.2) [2000] EWCA Civ 350; [2001] UKCLR 550; [2001] 1 W.L.R. 700 at [85]. 22 R. v Gough [1993] AC 646, [1993] UKHL 1; [1993] 2 All E.R. 724. 23 Porter v Magill [2001] UKHL 67 at [103]; [2002] L.G.R. 51; [2002] 2 W.L.R. 37. 24 R. v Gough [1993] UKHL 1; [1993] A.C. 646; [1993] 2 All E.R. 724. 25 Helow v Home Secretary [2008] UKHL 62 at [2]–[3]; [2008] 1 W.L.R. 2416; [2009] 2 All E.R. 1031. 26 Johnson v Johnson [2000] HCA 48, 74; [2000] A.L.J.R. 1380; [2000] 201 C.L.R. 488, 509 at [53]; of course, Kirby J gave the citation in his judgment, not in a footnote.

assumptions that the complainer makes are not to be attributed to the observer unless they can be justified objectively. But she is not complacent either. She knows that fairness requires that a judge must be, and must be seen to be, unbiased. She knows that judges, like anybody else, have their weaknesses. She will not shrink from the conclusion, if it can be justified objectively, that things that they have said or done or associations that they have formed may make it difficult for them to judge the case before them impartially. Then there is the attribute that the observer is ‘informed’. It makes the point that, before she takes a balanced approach to any information she is given, she will take the trouble to inform herself on all matters that are relevant. She is the sort of person who takes the trouble to read the text of an article as well as the headlines. She is able to put whatever she has read or seen into its overall social, political or geographical context. She is fair-minded, so she will appreciate that the context forms an important part of the material which she must consider before passing judgment.” Patten LJ observed that there was an issue in the present case as to precisely what facts the FMIO would have known and taken into account in relation to Mr C’s appointment. It was, he thought, common ground that the observer would have known the facts about Mr C’s role in the 2013 SMP valuation and the fact that the land had been sold to SMP shortly beforehand (July 2013) for £4 million but the judge had not considered that the FMIO would have taken into account Mr C’s statement in his report that the 2013 SMP valuation had been made in a different market for a different purpose and under different circumstances because no consideration of those issues could have taken place absent the disclosure of the 2013 SMP valuation which had not then occurred. The judge considered more controversial the extent to which the FMIO would have been entitled to have taken into account the way in which Mr C had in fact carried out the expert valuation of the land. The Chancery judge seemed to have given some weight to Mr C’s statements in correspondence and in his evidence to the effect that the 2013 SMP valuation had had no bearing on his ED which he had approached with an entirely independent mind. Insofar as the judge had taken into account Mr C’s assurances that he had acted independently free of any influence exerted by the 2013 SMP valuation then he had been wrong to have done so. As Lord Bingham of Cornhill CJ had explained in Locabail27: “It is noteworthy that in [R v Gough]28 evidence was received from the juror whose impartiality was in issue (see pp.651G and 658D), and reliance was placed on that evidence (see p.652F); both in the Court of Appeal and the House of Lords it was accepted that if the correct test was the real danger or possibility test the appeal could not succeed, since the allegedly disqualifying association had admittedly not been known to the juror at the time when the verdict had been returned, and therefore there was no possibility that it could have affected her decision: see pp.652D, 660G and 670G. While a reviewing court may receive a written statement from any judge, lay justice or juror specifying what he or she knew at any relevant time, the court is not necessarily bound to accept such statement at its face value. Much will depend on the nature of the fact of which ignorance is asserted, the source of the statement, the effect of any corroborative or contradictory statement, the inherent probabilities and all the circumstances of the case in question. Often the court will have no hesitation in accepting the reliability of such a statement; occasionally, if rarely, it may doubt the reliability of the statement; sometimes, although inclined to accept the statement, it may recognise the possibility of doubt and the likelihood of public scepticism. All will turn on the facts of the particular case. There can, however, be no question of

27 Locabail (UK) Ltd v Bayfield Properties Ltd [1999] EWCA Civ 3004; [2000] 2 W.L.R. 870; [2000] Q.B. 451 at [19]. 28 R. v Gough [1993] UKHL 1; [1993] A.C. 646; [1993] 2 All E.R. 724.

cross-examining or seeking disclosure from the judge. Nor will the reviewing court pay attention to any statement by the judge concerning the impact of any knowledge on his mind or his decision: the insidious nature of bias makes such a statement of little value, and it is for the reviewing court and not the judge whose impartiality is challenged to assess the risk that some illegitimate extraneous consideration may have influenced the decision.” Patten LJ considered that more difficulty arose from Mr C’s evidence about how he had actually gone about his task. Counsel for the respondents submitted that the judge had been entitled to have considered both (i) Mr C’s evidence about the relevance of the 2013 SMP valuation to his ED and (ii) his statement that he had not taken that valuation into account even as a cross-check. Mr C’s actual conduct of the expert valuation must, counsel contended, have been material to whether he should be regarded as having been independent when appointed. Counsel for Mr H contended that none of these matters should have been taken into account by the FMIO. The Chancery judge had clearly taken some of these facts into account: at [23] in his judgment he had said: “Nor do I consider that it would be appropriate to order cross-examination,29 as suggested by Mr Cohen, because no foundation has been put forward to demonstrate that Mr C in fact lacked independence. His evidence is very clear and I have no reason to doubt it. He did not take into account, not even as a cross-check, what his own valuation30 was in November 2013. He did have minimal regard to the actual sale price of £4 million but that was something he could not ignore because it was referred to in the submissions of the parties. It is clear, however, that he had very little regard to it. He says he referred to it as a sense check, standing back from the valuation he had independently reached. I have no doubt that this is what he must have done and have no reason for questioning his integrity or the accuracy of his explanation of his approach in that regard.”31 Patten LJ’s reading of the authorities was that a statement by the judge or other adjudicator as to what he/she knew or did at the relevant time is generally admissible but the weight to be given to it will depend on the circumstances and to the nature of the facts in question. In this particular case, the FMIO would have attached some caution to Mr C’s statement about having no regard to the 2013 SMP valuation when carrying out his ED and must also have considered the possibility of unconscious bias. The FMIO was also not himself a trained valuer and can make no informed assessment of the methodology used but in this case his task would have been to have assessed the likelihood of bias on the part of Mr C as at the date of his appointment, i.e. before the receipt of the written submissions and at a time when, on the judge’s findings, Mr C had not linked the land with the land he had valued for SMP in 2013. The FMIO would also have asked himself what were the chances of bias on the part of Mr C if he had in fact made a link between the 2013 SMP valuation and his new instructions sooner than he said that he had. It seemed to Patten LJ that the FMIO would have been likely to have rejected any blanket assertion that a prior valuation of the same property would necessarily impact on the subsequent valuation to the extent of encouraging the valuer to produce conformity between the two valuations regardless of the evidence produced in relation to the second valuation. Although not a valuer himself, the FMIO would have considered that it had been necessary to have taken into account the time gap between the two valuation dates and any other

29 The apparently novel concept of cross-examining an arbitrator was considered in the article Hew R. Dundas, “Two Rarities: Subpoenaing an Arbitrator to Give Evidence and Court Enforcement of a Peremptory Order” (2014) 80 Arbitration 196–203. 30 We note in passing that the 2013 SMP valuation was not directly or strictly “his own” since Mr C merely had signed off the work of others without preparing the valuation itself. 31 His Honour Judge Purle QC, Chancery Division, Birmingham, Case No.8503 of 2012.

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators Conflicts of Interest in Expert Determination 247 intervening events which to an informed layman were likely to have impacted one way or another on the valuation exercise. In this case, a fact of some significance in that assessment was that the land had changed hands in the open market for £4 million only three or so months before the 2013 valuation had been carried out. The FMIO would have assumed that the 2013 SMP valuation had either been confirmatory of, or in excess of, this figure (if a forced sale by an administrator) and would therefore have been unlikely to have had significantly more impact on an expert valuation of the same property as at September 2010 than the July 2013 sale price. The observer would also have started off from the position that an experienced valuer such as Mr C with a significant professional reputation was not likely to act other than professionally in carrying out the ED so that, had some information in the submissions of the parties in fact caused him to doubt the accuracy of the 2013 SMP valuation, he would have notified SMP accordingly rather than have compromised his duties to Mr H and the respondents. Taking these matters into account, Patten LJ considered that the FMIO would not in this case have concluded that there had been a real possibility of bias. The valuation dates were three years apart and the 2013 sale price to SMP (which was relied on in the parties’ submissions) was likely to have been far more relevant to the ED exercise than any subsequent 2013 valuation based upon it. However, perhaps most important of all, the FMIO would have had regard to the fact that, at the date of his appointment, Mr C had not yet linked the subject matter of the 2013 SMP valuation with the land. Although the FMIO would have scrutinised the evidence on this in the way that Lord Bingham had indicated in the passage in Locabail32 cited above, Patten LJ saw no grounds for inferring that he would have rejected it. In these circumstances, there was no basis for the FMIO to have concluded that, as things stood at the date of his appointment, there had been a real possibility of bias on the part of Mr C. The latter had had no reason to have believed that the 2013 SMP valuation had been relevant because, as the judge had accepted, he had made no connection between the land and the substantial land bank belonging to SMP, the valuation of which he had supervised [author’s emphasis]. There had, therefore, been no possibility that the existence of the 2013 SMP valuation could have impugned his independence at the time when he was appointed. This case was therefore factually a long way distant from cases like Re Benfield Greig Group plc33 where the auditors could be shown to have consciously discounted the comparable transaction relied on by the petitioner and had been likely to have approached the current valuation on that basis. This was not to say that Mr C’s involvement in the 2013 SMP valuation had not been capable of being relevant to the question of whether (notwithstanding the fact that at the date of his appointment he had been an independent valuer) the subsequent ED produced by him had not been an independent one. Mr C’s limited involvement34 with the 2013 SMP valuation could have been highly relevant in this context if, having subsequently made the connection between the land and SMP, he had been influenced by the 2013 valuation into producing a lower valuation than would otherwise have been the case. However, in this case, as explained above, it was not submitted that the valuation report itself had been contaminated by Mr C’s subsequent knowledge of the connection and reliance had been placed only on the submission that, at the date of the appointment, he had not been independent. It therefore followed that cl.2(d)(i) of the Schedule having been satisfied and there being no challenge to the way in which the valuation had been carried out, Mr H was, in accordance with the terms of the Tomlin Order, bound by the valuation provided by Mr C.

32 Locabail (UK) Ltd v Bayfield Properties Ltd [1999] EWCA Civ 3004; [2000] 2 W.L.R. 870; [2000] Q.B. 451 at [19]. 33 Re Benfield Greig Group plc [2001] EWCA Civ 397 at [37]; [2002] W.T.L.R. 769; [2002] B.C.C. 256. 34 As we noted earlier, the 2013 SMP valuation was not made by Mr C himself as he just signed off the work of others.

For these reasons, Patten LJ considered that the Chancery judge had reached the right conclusion in this case and Mr H’s appeal should therefore be dismissed. King LJ agreed.

6. Comments/Concluding Remarks This case offers, it seems to the author, a number of interesting features. First, there are two seriously troubling strands in this judgment: (i) the blurring of the demarcation lines between ED and arbitration and the consequent import into ED of quasi-judicial concepts and (ii) the import of expert witness and CPR Pt 35 concepts, none of which, self-evidently on the authorities, have any place therein. It may be that since the ED formed part of a Tomlin Order, the courts saw fit to effect these imports but such are clearly unjustified. Second, the court refers to the development of an objective test of apparent bias as a sufficient basis for demanding the recusal of judges and other adjudicators prior to any actual hearing or determination and the court could see no justification for applying a different rule in relation to ED-ers. The present author respectfully agrees wholeheartedly notwithstanding that ED is not a quasi-judicial process; inter alia, the provisions of ECHR art.6 must be borne in mind. Third, it seems to the present author that the Court’s consideration of what an FMIO might/should/could have done goes considerably deeper and into more detail than in any comparable case; in breaking new ground in this way, the author suggests approaching this development with some caution as it may be that the valuation fraternity has a different view of how the FMIO should respond. Fourth, we have seen argument based on the ED-er’s vested interest and his/her apparent “need” to justify his/her own prior decision35 and Benfield clearly demonstrates the difficulties the accountants there put themselves into in circumstances where they deserve no sympathy. In the present case, the SMP valuation was carried out in 2013, the distress sale of the land (£4 million) was also in 2013 so the author cannot imagine what vested interest Mr C might have had in 2014 in making a retrospective valuation of £5.9 million as at 2010 “in a different market, for a different purpose and under different circumstances”. Fifth, the present author finds it wholly unsatisfactory that Mr C appears to be being deemed personally responsible not only for the 2013 SMP valuation but for every small component thereof which appears wholly unrealistic. Finally, as the present author has written previously36: “even if Mr X’s ‘transgression’ was (as was not disputed) inadvertent and failed to engage s.68, on the facts presented in the judgment it seems strange that he appears to have failed (even with, as was no doubt available to him, the assistance of Clerks at his Chambers) to have carried out an adequate conflict check. Sole practitioners (with no staff or clerk) known to the present author are markedly more thorough and careful. The question then arises as to whether this was a ‘one-off’ or is typical of the Bar.” Most interestingly, no one from the Bar responded. The same question can clearly be directed to the nationally known large surveyor firm, S, whose conflict-checking systems patently failed in the present circumstances.

35 On several occasions, when speaking about Arb-Med (NB not Med-Arb), the author has heard the criticism that the Arb-Med-er will, in the mediation phase, be influenced by his/her earlier decision in the arbitration phase. This is a massive non-sequitur since, if the mediation succeeds and the parties reach settlement, the arbitral award will be destroyed without ever being seen by the parties so the arbitrator’s decision as arbitrator is wholly irrelevant. Further, there is no benefit to the arbitrator whatsoever in his/her now-destroyed award being the same as the settlement amount. 36 Hew R. Dundas, “Conflicts of Interest and Arbitrator Disclosure Revisited: Barristers Acting as Counsel and as Arbitrator” (2012) 78 Arbitration 72–80.

The Doctrine of Res Judicata Before International Commercial Arbitral Tribunals, by Silja Schaffenstein, (Oxford: Oxford University Press, 2016), 368 pp., £125, ISBN: 978-0-19-871561-0.

This monograph is a timely contribution on the research of the application of res judicata in arbitration. To the best of my knowledge, this is the first comprehensive work dedicated to the workings of the doctrine of res judicata within the context of arbitration more specifically rather than addressing the application of the doctrine in dispute resolution and in particular litigation more generally. The doctrine of res judicata is known to most of us from a litigious context and from the adage that an arbitral award once rendered is res judicata. In this latter sense, an award once rendered is—in reliance on the Latin origin of the term—“decided matter”, i.e. final and binding on the merits and therefore cannot be re-opened. This, no doubt, is taken for granted by the majority of arbitration practitioners the world over and finds expression in the practice of arbitration in the world’s leading arbitration jurisdictions. This said, the application of the doctrine is more complex than initially meets the eye. Questions that require consideration for an effective application of the doctrine in practice include, for example: (i) the determination of the law applicable to the question of res judicata, which in turn is dependent on whether res judicata qualifies as a matter of substance or procedure under the relevant laws; and (ii) whether, as a matter of principle, res judicata should apply in arbitration at all. To say the least, it is certainly interesting to note that even though the finality of arbitral awards is enshrined in most national and international arbitration laws, the scope of the application of the res judicata doctrine remains subject to assessment on a case-by-case basis. In recognition of this difficulty, there have so far only ever been soft law instruments1 that have sought to deal with and provide tentative (rather than definitive) guidance on the application of the doctrine within the context of arbitration. Further complexity is added by a variation of the theme (at least from an English law perspective), the rule in Henderson v Henderson.2 This rule deals with abuse of process more generally and prohibits a party from re-litigating claims that it could have brought but did not bring in a previous proceeding. Some jurisdictions have also developed exceptions to the application of res judicata in “special circumstances”.3 These are essentially open-ended and subject to assessment on a case-by-case basis and can—depending on the applicable law—include errors of law: in other words, even though an error of law may be binding upon the parties in relation to a set of issues determined as final and binding by a tribunal, the legally erroneous determinations reached by that tribunal may not produce any conclusive and/or preclusive effect in relation to corresponding future claims between the same parties under the same contractual framework before the same or a different future tribunal. In this sense, the identification of special circumstances, such as for example a change in law or indeed an erroneous application of the law by a previous tribunal, may oust the preclusive effect of res judicata in an individual case. Schaffenstein ably discusses all these various facets of the doctrine of res judicata and the rule in Henderson v Henderson and their application in practice. Her narrative and analysis focus on a number of key jurisdictions, including the US, the UK, France and Switzerland, in which res judicata is regularly used in the domestic courts. The book also

1 Such as the International Law Association (ILA) Final Report on Res Judicata and Arbitration (Report of the ILA Seventy-First Conference, Toronto, 2006). 2 Henderson v Henderson (1843) 3 Hare 100; [1843] Eng R. 917; (1843) 67 E.R. 313. 3 e.g. Arnold v. National Westminster Bank Plc [1991] 2 A.C. 93, [;991] 3 All E.R. 41; [1991] 2 W.L.R. 1177.

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators 249 250 Arbitration discusses the status quo of the application of the doctrine by arbitral tribunals, including in particular under the ICC Rules.4 The book is divided into two parts. Part one discusses how the doctrine applies in domestic and international litigation whereas Part two deals with the application of the doctrine before international commercial arbitration tribunals. The two Parts, in turn, are sub-divided into a total of seven chapters: Chapters 1 and 2 discuss the doctrine of res judicata in domestic and international law respectively; Chapters 3–6 identify the status quo of res judicata in international arbitration and seek to identify transnational principles to assist in the application of res judicata in that context; Chapter 7 concludes. Importantly, Schaffenstein, in essence, finds that the scope of the doctrine of res judicata is not a settled matter and remains in a state of flux. The book contains the usual front and end matter. Having used the book in my own practice, I can recommend it to anyone who is looking for a comprehensive modern treatment of the doctrine of res judicata within the context of arbitration in a single volume.

Gordon Blanke

Commercial Arbitration in Germany, by Richard Kreindler, Reinmar Wolff and Markus S. Rieder, (Oxford: Oxford University Press, 2016), 527 pp., £145, ISBN: 978-0-19-967681-1.

This book is a comprehensive guide to domestic and international commercial arbitration with a seat in Germany. The guide is written by a trio of experienced arbitration professionals, each of whom has a German practice focus. This text is undoubtedly a welcome addition to the existing literature on international arbitration given that only a few integral texts1 are available on German arbitration in the English language. For the avoidance of doubt, Germany is a Model Law country2; its arbitration legislation is inspired by the UNCITRAL Model Law.3 The book comprises six chapters. Chapter 1 provides an introduction to arbitration in Germany, giving an overview of key features of the arbitration process in Germany and setting the scene for the ensuing chapters. Chapter 2 discusses the all-important topic of the arbitration agreement in minute detail, dealing with both content and form requirements as well as the validity, scope, effect and termination of the arbitration agreement. Chapter 3 explores all matters relating to the arbitral tribunal, including its constitution (and in particular the selection of arbitrators),4 the challenge and replacement of arbitrators, and the so-called arbitrator agreement.5 Chapter 4 deals with the procedural detail of the arbitral proceedings. Chapter 5 addresses the interesting question of interim relief, both by way of court assistance in nascent and ongoing arbitration proceedings and as a special power of the arbitral tribunal. Chapter 6 deals with all relevant matters pertaining to the issuance, enforcement and challenge of a resultant award. This book is particularly useful for foreign practitioners who have to familiarise themselves with the arbitration process in Germany: there are frequent references to international best

4 Whose awards are most accessible given the ICC’s regular publication of extracts of awards in the Bulletin of the ICC International Court of Arbitration. 1 The other prominent work that comes to mind is K. Böckstiegel, S. Kröll and P. Nacimiento (eds), Arbitration in Germany: The Model Law in Practice (Alphen aan den Rijn: Kluwer Law International, 2007). 2 Even though the UNICITRAL Model Law has not been adopted into German law as a whole, the German arbitration law is enshrined in Book Ten of the German Zivilprocessordnung, the German Code of Civil Procedure. 3 UNCITRAL Model Law on International Commercial Arbitration. 4 Providing interesting considerations on the appointment of professors of law (arbitration essentially having developed into a professorial profession) and active and retired judges, both law professors and active judges (qualifying as public officials) requiring government approval in order for them to be allowed to serve mandates as arbitrator. 5 The arbitrator agreement being the service contract between the arbitrator and the arbitrating parties.

(2017) 83 Arbitration, Issue 2 © 2017 Chartered Institute of Arbitrators Book Reviews 251 practice and standards by way of comparison. This comparative method, including a conscious distinction drawn between the common and civil law approach, assists practitioners to gain a full appreciation of the procedural distinctiveness of German arbitration from arbitration elsewhere in Europe. To name but a few procedural peculiarities in German arbitration to which the authors draw the reader’s attention: German arbitration practitioners prefer front-loaded pleadings, whereby a party’s entire case is pleaded in writing with all supporting documentation and witness evidence from the outset of the procedure in order to meet the burden of proof (and in the interest of “judicial [read here: arbitral] economy”);6 and the hearing of witnesses is largely driven by the decision makers, i.e. the arbitral tribunal, in the interests of procedural efficiency. This book contains the usual front and end matter. In addition, it features appendices containing, amongst others, the arbitration-relevant provisions of the German Code of Civil Procedure, the New York Convention, the IBA Rules on the Taking of Evidence and the IBA Guidelines on Conflicts of Interest in International Arbitration. Taken in the round, I would not hesitate to recommend this book to anyone who requires guidance on arbitration in Germany.

Gordon Blanke

The IBA Guidelines on Party Representation in International Arbitration: A Guide, by Peter Ashford, (Cambridge: Cambridge University Press, 2016), 154 pp., £89.99, ISBN: 978-1-10-716166-5.

Peter Ashford’s latest publication, The IBA Guidelines on Party Representation in International Arbitration: A Guide, is an extremely helpful and informative guidebook. It adds to the same author’s earlier work.1 The structure of the new book is very easy to follow. It includes a short introduction to the IBA Arbitration Committee and is then broken into the following sections: Preamble, Definitions, Guidelines 1–3, Guidelines 4–6, Guidelines 7–8, Guidelines 9–11, Guidelines 12–17, Guidelines 18–25 and Guidelines 26–27, following the provisions of the IBA Guidelines on Party Representation. Each section contains the provisions of the Guidelines reproduced in full (in bold) and the accompanying Comments of the IBA Committee in italics for ease of reference. The author then provides a detailed discussion of the relevant provisions. The guide is particularly helpful as it refers to a mix of case law from the UK, US and France, as well as ICSID, on the various issues raised. The inclusion within the text of cross-references and analysis of supplementary arbitration guidelines and rules as well as comments on varying practices in different jurisdictions contributes to the completeness of the book. The combination of academic analysis and practical guidance offered by Peter Ashford, an experienced and well-regarded international arbitration practitioner, is the hallmark of this publication. In addition, the book conveniently includes further information in its three appendices. The first contains an extract from the 2014 LCIA Arbitration Rules dealing with legal representatives. The second contains a handy chart comparing the provisions of the IBA Guidelines on Party Representation with major professional conduct rules, including, among others, the 2013 ABA Model Rules of Professional Conduct, the 2015 Bar Standards Board Handbook (England and Wales) and the 2011 Solicitors Regulation Authority Code of Conduct as well as the Singapore Legal Professional (Professional Conduct) Rules 2012.

6 A structured approach referred to in German as Relationstechnik. 1 Guide to the IBA Rules on the Taking of Evidence in International Arbitration (Cambridge: Cambridge University Press, 2013).

The third appendix provides a table comparing the IBA Guidelines’ provisions with major institutional arbitration rules. Arbitration rules that are analysed include those of the LCIA (2014), the ICC (2012), the SCC (2010), the SIAC (2013), the ICDR (2014), the WIPO (2014) and the HKIAC (2013). The beauty of this book is that it is relatively short and the reader can go through the 154 pages in a few hours. Overall, the Guide provides an invaluable resource as it contributes to the understanding and the practical application of the IBA Guidelines on Party Representation. Everyone involved in arbitration should buy a copy.

Elina Zlatanska