If there is a valid arbitration agreement and the parties have submitted themselves to this process an award may be recognised and enforced. In an international arbitration the parties are to be treated equally where party shall be given a full opportunity of presenting its case, Article 18 of the UNCITRAL Model Law on International Commercial Arbitration (‘Model Law’).
Article 19(1) of the Model Law allows the parties to agree on the procedure to be followed by the tribunal in conducting the proceedings. However, any failure to agree will allow the tribunal to conduct the arbitration in such a manner as it considers appropriate. The powers conferred upon the tribunal include: to determine the admissibility; relevance; materiality and weight of any evidence, Article 19(2) of the Model Law.
Let’s assume that parties to a construction dispute have failed to agree on the manner in which the arbitration is to be conducted; namely, that the claimant wanted standard disclosure in accordance with English civil court proceedings. Instead, the tribunal made an order allowing only the disclosure of documents upon which each party relies. On the evidence of the employer’s engineer the existence of a database, which goes to the crux of the issue to be decided between the parties, is brought to light. The claimant, rightfully, seeks the production of this database. The tribunal refuses and further “expresses the view that this database will add little or nothing to the information available and is not required.”
This ruling made by the tribunal provides an opinion and determination without allowing the claimant an opportunity to access the database and make submissions in relation to whether the database would “add little or nothing to the information available”. The tribunal has acted ultra vires, in excess of its power, outside its terms of reference or mandate. It could be inferred that the tribunal is no longer impartial, or maybe bias on some level but this is highly unlikely to succeed.
Article 24 of the UNCITRAL Arbitration Rules states:
- “At any time during the arbitral proceedings the arbitral tribunal may require the parties to produce documents, exhibits or other evidence within such a period of time as the tribunal shall determine.”
The consequences of Article 24(3) are two-fold. First, the tribunal’s decision on the extent of the required disclosure will be discretionary. Second, that decision will be essentially unreviewable and in order to set aside an award or resist enforcement the claimant would need to demonstrate that the effect of failing to order disclosure of the database was so extreme as to deny the claimant a fair opportunity to present its case.
What the claimant should or could do are two very separate options, especially when we don’t know the seat of arbitration whether or not the lex arbitri, law of the seat, would allow the claimant the right to access its courts in order for the respondent to produce the database. If we are to assume that the seat of the tribunal is in a state that provides assistance to international arbitrations, the claimant should object to the tribunal’s ruling at the first possible opportunity, once it’s in the form of an award. This award is then challenged at the courts of the seat.
If the courts of the seat are pro-arbitration this issue will be addressed as follows. On presenting its case, the claimant must show that that evidence to be produced is in the possession of the respondent (satisfied with the evidence of the employer’s engineer) and that the evidence is likely to assist the claimant’s case.
The nature of the dispute between the parties is primarily about ground conditions. The withheld database with the respondent has numerous references to ground conditions of the site. Prima facie this evidence is likely to assist the claimant. One may reasonably infer that the failure by the respondent to produce the database means it is detrimental to its position and why it was never produced.
In a perfect world, the claimant would succeed at the state court requiring the respondent to produce the database. What happens next would depend on the contents of the database. The tribunal would issue an award in accordance with its mandate, but the claimant cannot allege at a later stage that it was denied equal and fair treatment or not given a full opportunity to present its case.
As a side note, assuming the claimant is an English entity, section 2 of the Arbitration Act 1996 (‘Act’) provides English courts the power to intervene even if the seat of the arbitration is outside England and Wales. Further, section 2(4)(b) of the Act allows the court to exercise any power in Part 1 where “by reason of a connection with England the court is satisfied that it is appropriate to do so”. In this example, the claimant may petition an English court that it is appropriate to intervene and exercise court powers in support of arbitral proceedings, section 44 of the Act.
It is highly unlikely in this example that an English court would be satisfied that it is appropriate to intervene, especially when a party is non-English and the seat is in a Model Law state. The English courts would take the view that the claimant should exhaust all avenues at the lex arbitri. The intervention by an English court in these arbitral proceeding would not be appreciated especially when there are alternative avenues available to the claimant for review at the lex arbitri. It’s interesting to note this exotic feature of the Act and English arbitration law is still available to the claimant.
However, what if the law of the seat, the lex arbitri does not allow for such recourse to the state courts for relief. What happens if the tribunal makes its award against the claimant and allowing the respondent’s counterclaim? Will the respondent succeed in enforcing the award? Should the claimant set aside the award at the seat? Not unless it has assets there.
The adoption by 160 nations of the United Nations Commission on International Trade Law Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (‘New York Convention’) poses an interesting dilemma when the parties are domiciled in different New York Convention countries where neither have adopted the Model Law. It’s likely that the parties come from advanced arbitration jurisdictions, especially in our example where the claimant seeks “disclosure as understood in English court proceedings”.
Let’s assume that the claimant is English and in doing so the claimant has a significant proportion, perhaps all, of its assets in the United Kingdom (‘UK’). The respondent will more than likely seek to enforce the award in the UK. Can the claimant resist the recognition and subsequent enforcement of the award in the UK?
The respondent will seek recognition and enforcement of its award in the UK pursuant to Article IV of the New York Convention. In response, the claimant will commence an action seeking to set aside the award pursuant to Article 34(2) of the Model Law or Article V of the New York Convention. However, since neither of the parties domicile has adopted the Model Law, Article 34(2) cannot be relied upon.
Article 34(2) of the Model Law mirrors Article V of the New York Convention, sets out the criteria in order to set aside an award. The only relevant sub-article applicable in this case would be Article V(1)(b).
Article V(1)(b) states:
“Recognition and enforcement of the award may be refused,…if that party furnishes proof that:
- the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case;” [emphasis added]
This is the ‘due process’ clause and the most important ground for refusal under the New York Convention. It is directed at ensuring that the arbitration itself is properly conducted giving notice to the parties and procedural fairness.
Was due process given? Generally, the court is satisfied if the hearing was conducted with regard to any agreement between the parties in accordance with principles of equality of treatment and the right of each party to have a proper opportunity to present its case. Simply, the court’s role is to decide whether or not there has been a fair hearing. One mistake in the course of the proceedings may be sufficient to lead the court to conclude that there was a denial of justice.
In Minmetals Germany v Ferco Steel (1999) XXIV Yearbook Commercial Arbitration 739, the defeated respondent in an arbitration in China opposed enforcement in England on the grounds that the award was founded on evidence that the arbitral tribunal had obtained through its own investigations. An English court rejected this argument on the basis that the respondent was given an opportunity to ask for the disclosure of evidence in issue and comment on it but declined to do so. The court held that the due process defence to enforcement was not intended to accommodate circumstances in which a party had failed to take advantage of an opportunity duly afforded to it.
It would follow that the failure by the tribunal to order the production of the database by the respondent and opining that such evidence will add little or nothing to the information available would amount to a denial of due process where the claimant was not afforded a full opportunity to present its case because the evidence sought was directly relevant to the issues at hand.
The respondent would attempt to enforce the award by virtue of sections 2(2) and 66 of the Act. The claimant would resist by invoking sections 2(4) and 68(2) by challenging the award on the many grounds of serious irregularity meaning an irregularity which the court considers has caused or will cause substantial injustice to the applicant if the tribunal failed to comply with section 33 of the Act. The general duty of the tribunal is “to act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent.”
Whether in the English courts or a New York Convention state, the claimant should succeed in setting aside the award in whole.