​THE THREE-TENETS OF ARBITRATION, WHICH HELD SUPREME?

​THE THREE-TENETS OF ARBITRATION, WHICH HELD SUPREME?

Some issues in arbitration that warrant some answers as to the question of party autonomy to agree on an ‘asymmetrical arbitration clause’ or an ‘unilateral option clause’ UOC, allowing one party rights to commence litigation; the question of independence and impartiality when a member of the tribunal was found to be in the apparent conflict with a witness of opinion called by the party; and the question of public policy where an award is rendered unenforceable arising from a sanction levy upon the country where the assets are located. These issues went to the ‘core tenet’ of arbitration being, party autonomy; independence and impartiality; and public policy rule. Which of these should take precedent over the other?

An ‘asymmetric-clause’ is a ‘one-sided agreement’ allowing one party ‘option to choose’ dispute resolution mechanism to self-advantages; contains therein the ‘unilateral option clause’ UOC, granting one party right to elect between arbitration or litigation, i.e, “[…] shall have the right to refer any dispute […], to a competent court in […] or any other competent court in any other country at […] sole discretion.” The criticism is obvious, as it lacks a ‘level playing field’, impeding into the equalities of the party to be heard, thus from an act of party autonomy to the obstruction of natural justice, commonly employed by specific industries i.e. banking and the construction sectors; contrast to the nature of arbitration to have ‘finality’ only to be reviewed by another court of competent jurisdiction; and promote the idea of ‘forum shopping’. Courts between common-law and civil-law are divided, i.e. UK[1], Hong Kong, the UAE[2] and Singapore[3] recognises UOC whereas Russia[4] (issued a Digest[5]) and France[6] rejected UOC outright, thus it is now a question of public policy versus party autonomy, which remains supreme over the other? In the lacked of a consistent approach, party autonomy principle is not entirely absolute as it has to be view against the principle of public policy, as in the case of equality, public policies shall then take precedent.

Common that in a three-member tribunal, one party may raise a concern that an witness of opinion appointed by the other party must be excluded by the tribunal as the witness of opinion concerned was once a partner to a member of the tribunal thus the issues of conflicts and impartiality of the tribunal is now, in question. The criticism is one cannot just keep changing the member of the tribunal simply by introducing a witness of opinion that has conflict with any member of the tribunal, notwithstanding that the sole witness of opinion is the most unique available in the industry, such may not discount any attempt to employ ‘guerrilla tactics’ to derail the arbitration. Tribunal is confronted with the issues of impartiality versus natural justice, which held supreme?  Impartiality has always been the cornerstone to the dispensation of justice.[7] The law holds, threefold tests of bias, actual, imputed, apprehended or apparent bias. Actual bias is difficult to proof; imputed bias, once presented, will void the submission without proof of investigation into its likelihood or suspicion of bias; and apparent bias, is where a reasonable-public could harbour a reasonable-suspicion of bias[8] and there is a sufficient degree of possibility of bias[9]. There is little clarity on this as such the IBA Guidelines on Conflict, has provided Lists to categorically measure the degree of ‘conflicts’ but without the application of ‘case-specific judgment’, it remains just as ‘guidelines’ or ‘soft laws’. The recent case law[10] shed some lights where court set aside an award on the basis of arbitrator apparent bias, in conflict with public-policy, breaching the rules of natural-justice. The court holds, the arbitrator must, statutorily, make full and timeous disclosure, which are likely to give rise to justifiable doubts as to the arbitrator's impartiality or independence, which would enable a 'fair-minded and informed observer' to decide objectively on whether there are justifiable doubts on the arbitrator's impartiality and/or independence. Therefore, considered that impartiality has always been the cornerstone to the dispensation of justice, tribunal would just have to consider the expert opinion just liked any other ‘witness’ and to draw its own conclusion as to the reliability of such ‘opinion’ and on such, the question of ‘independent and impartiality’ does not really surface.[11]

With regard to sanction as public policy, two distinctive issues, one ‘non-arbitrability doctrine’[12] with regard to which law to apply in challenging the validity of the award? Second, the validity of sanction making an arbitration inarbitrable.[13] Arbitrability, ‘involves …types of issues can and cannot be submitted to arbitration’[14]; viewed as ‘objective’, matters can be arbitrated; and ‘subjective’, who can resort to arbitration[15]. ‘Inarbitrability’, can challenge enforcement of arbitral award[16]; public policy as basis of inarbitrability; fundamental to comply[17], tribunal must consider which lex arbitri, substantial law[18] or lex fori[19], applicable[20]? Sanctions are temporary restrictive, whereas public policy fundamentally legal-principles, stable to political changes.[21] When sanction was imposed, binding only if parties could have known that they would be subjected to this rule, otherwise, they might selected another law, in which sanction would give effect only if they satisfied the conditions external to the applicable-law. Thus, public policy ultimately overrides party autonomy as to choose which forum as preferences.  

On such account, among the three-tenets of arbitration, very likely that the following shall be the order of priority, independence and impartiality; public policy; and party autonomy.
 
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[1] NB Three Shipping v. Harebell Shipping [2004] EWHC 2001 (Comm); Deutsche Bank v. Tongkah Harbour [2011] EWHC 2251 (QB)
[2] A3 v B3 [2019] ADGMCFI 0004: citing Pittalis v Sherrefettin [1988] 2 All ER 227
[3] Hong Kong Court of Appeal ([2001] 3 HKC 580) and decision by the Singapore Court of Appeal ([2017] SGCA 32).
[4] Sony Ericsson v Russia Telecom [2012] No.1831/12
[5] <http://arbitrationblog.kluwerarbitration.com/2019/05/07/unilateral-option-clauses-russian-supreme-court-puts-an-end-to-the-long-lasting-discussion/>
[6] UOCs also applied the Brussel I Regulation and the Lugano Convention. Arbitration agreements and therefore UOCs to arbitration are outside the scope of the Lugano Convention, Brussel I Regulation and its successor, Recast Brussels Regulation; The Rothschild Case [2012] No 11-26.022;
[7] R v Sussex[1924] 1KB256; Findlay v UK[1997] 24EHRR221; W v M[2016] EWHC422(Comm)
[8] R v Gough[1993] AC646
[9] Porter v Magill[2001] 1UKHL67; Re Medicaments(No.2)[2001] 1WLR700
[10] Halliburton v Chubb[2020]UKSC48
[11] World Duty Free Co. v Rep. of Kenya ICSID Case No. ARB/00/7; R v Alex Julian Pabon [2018] EWCA Crim 420.
[12] Gary B.Born, International Commercial Arbitration (Born, 2nd Ed.) p.243.
[13] <http://arbitrationblog.practicallaw.com/implications-of-economic-sanctions-on-international-arbitration>: some scholar opined that disputes involving economic sanctions are ‘arbitrable’
[14] Loukas A.Mistelis and Stavros L.Brekoulakis, Arbitrability: International and Comparative Perspectives, Int.Arb.Law.Lib.Vol.19 (Mistelis and Brekoulakis), pp.3&4, para.1-6.
[15] Emmanuel Gaillard and Domenico Di Pietro, Enforcement of Arbitration Agreements and International Arbitral Awards: The New York Convention in Practice (Cameron, 2008 Ed.), p. 503.
[16] Karl-Heinz Bockstiegel, Public Policy and Arbitrability, in Pieter Sanders (ed), Comparative Arbitration Practice and Public Policy in Arbitration, ICCA Congress Series, Volume 3 [Bockstiegel], p. 178: MODSAF v IMS [2001] EWCA Civ 145
[17] George A.Bermann, Introduction: The Origin and Operation of Mandatory Rules, in Mandatory Rules in International Arbitration (Bermann & Mistelis Ed.2011) p.4.
[18] Melli Bank v Holbud Ltd  [2013] EWHC 1506 (Comm); DVB Bank SE v Shere Shipping Co Ltd [2013] EWHC 232
[19] Art.V(2)(b)ML: allows the refusal of enforcement when enforcement would be ‘in contrary to the public policy of that country’; Westacre Investments Inc v. Jugoimport-SDRP Holding Co Ltd [1999] EWCA Civ 1401
[20] Bockstiegel, pp. 184 and 185.
[21] Semanya v IFFA [2018] 4A 318/2018