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Commercial Arbitration: Powers and Duties of Arbitrators in Arbitral Proceedings

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COMMERCIAL ARBITRATION: POWERS AND DUTIES OF ARBITRATORS IN ARBITRAL PROCEEDINGS

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Dr. CHRIS WIGWE

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PhD. BL. Lecturer Faculty of Law. Rivers State Umversity of Science and Technology. Port Harcourt

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ABSTRACT The legal framework governing international commercial arbitration has been shaped in a manner that facilitates the resolution of disputes outside the confines of a typical courtroom To perform their functions within this legal framework, arbitrators are endowed with certain powers by which they can compel compliance from parties to arbitral proceedings, Without these powers, the arbitrators will be unable to act, These powers may be dre:..vn from the law empowering the arbitrators to act as well as from the agreement of the parties, As a corollety to these powers, arbitrators are also expected to perform certain duties for the benefit of parties to arbitral proceedings, In this article, the powers of arbitrators which tney be conferred either directly by the parties or as may be imposed by law will be considered. The duties which act as a guiding light to the actions or inactions of any arbitrator will also be treated, It is hoped that a proper consideration of these two sides of a coin in arbitral proceedings will educate and inform on the scope within which arbitrators are expected to act.

INTRODUCTION In a typical court setting with a judge sitting alone, the actions of such a judge are clearly spelt out and circumscribed by the law, The legal framework pursuant to which judges are appointed and under which they derive their powers is meant to provide full immunity in respect of any potential liability arising out of the conduct of their judicial functions.' This is no doubt linked to the fact that judges are appointed by the state and owe their responsibilities to the state. In arbitral proceedings on the other hand, the position is different. This is primarily because the powers and duties of arbitrators are derived form the agreement of parties even though they perform judicial functions. As regards the difference between parties and duties, both terms are often used interchangeably, This however does not represent the true position. According to the authors Mustill and Boyd, while duties define the minimum which the arbitrator himself must do, the powers define the maximum which he can compel the parties to do." An arbitrator can exercise a power but it does not necessarily mean that he must do so. This is because his powers as an arbitrator are co-extensive with his discretion and not with his duties? In other words, he may choose to exercise a power or to refrain from exercising it and that will not be viewed as a breach, An arbitrator is generally under a legal and moral obligation to perform his functions in a careful manner, Failure to do so may mean that his award will be deemed ineffective,

, Redfern A and Hunter rv1., Law and Practice of International Commercial Arbitration, Sweet and Maxwell, London (2003) p. 246 . MustlillVl.J and Boyd S,C, The Law and Practice of Commercial Arbitration in Eng',and, 2'd Edition (1989) p. 291 0/1ustill M,; and Boyd Sc, op cit, p. 292

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Port Harcourt Law Journal

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Every potential arbitrator must be fully informed of the duties he is expected to perform with respect to any arbitral proceedings. These duties may be imposed by the parties or by law. Regardless of their source, the arbitrator must strive to perform his functions within the scope of his duties. It will be an incomplete analysis to elucidate on either the duties or the powers of arbitrators in isolation: both ought to be treated together. As such. we shall now turn to a proper examination of the powers of an arbitrator. POWERS OF AN ARBITRATOR The powers to act as an arbitrator in arbitral proceedings may either be conferred on an arbitrator by the parties or by operation of law. The absence of a unified code governing international commercial arbitration means that the question of what powers can be exercisable by any arbitrator can only be effectively answered by a comparative analysis of the arbitration rules conferring powers on arbitrators as they exist under different jurisdictions.

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POWERS CONFERRED BY THE PARTIES The parties may confer powers on the arbitrator either directly or indirectly. Such conferment however must be within the limits of the relevant law governing arbitral proceedings. Where the parties have agreed on the powers that may be exercised by arbitrators pursuant to their agreement, such may be described as a direct conferment of powers. It is the parties who usually decide upon which arbitrator(s) will settle the disputes arising between them. The statement that arbitral tribunals owe their existence to the parties is trite 4 and as such, it is fitting that the parties may. by express provision, confer powers on the arbitral tribunal. The parties may also confer powers on the arbitrator indirectly. This happens when the arbitration is conducted according to international or institutional rules of arbitration." Under the UNCITRAL6 Rules. arbitral tribunals are required to "conduct the arbitration in such a manner as it considers appropriate, provided that the parties are treated with equality and that at any stage of the proceedings each party is given a full opportunity of presenting his case." The Rules go further to confer specific powers to, for example, determine the place of arbitration" and to determine the language of the proceedinqs." Worthy of mention is that the conferment of powers on the arbitrator by the parties is subject to three limitations viz: i. The parties cannot give the arbitrator powers, the exercise of which will be contrary to public policy'"; ii. The powers cannot be exercised against the persons who did not take part in the aqrearnent'"; and , Redfern A and Hunter M, OP CIT, P. 247 'Redfern Aand Hunter M, op cit, P. 248 'c United Nations Commission on International Trade Law 7 2

Article 15.1, UNCITRAL Arbitration Rules Article 16.1, UNCITRAL Arbitration Rules

'Article 17.1, UNCITRALArbitration Rul,es Terms, for instance, which wl'li require an arbitrator to enforce an illegal contract or which wili require the arbitrator to perform an Illegal act, will be against public policy. The parties cannot by express agreement confer such powers on the arbitrators. E ThiS refers to the power, if any, of the arbitral tribunal over 3,d parties. The powers that may be conferred on arbitrators will not be such as to be exercisable against 3,d parties. In Kursell v. Timber Operators and Contractors Ltd (1923) 2KB 202, it was

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iii. Where the court has reserved for itself certain powers, the parties even by express agreement cannot confer them on the arbitrators." a. POWERS CONFERRED BY LAW The law governing arbitral proceedings also makes provrsions which though not expressly provided for in the arbitration agreement, are implied by law. This is to serve as a guide in the exercise of their powers. Section 12 (1) of the 1950 English Arbitration Act for instance provides: "Unless a contrary intention is expressed therein. every arbitration agreement shall... be deemed to contain a provision that the parties to the reference and all persons claiming through them respectively, shall subject to any legal objection, submit to be examined by the arbitrator or umpire, on oath or affirmation, in relation to the matters in dispute and shall subject as aforesaid, produce before the arbitrator or umpire all documents within their possession or power respectively which may be required or called for. and do all other things which during the proceedings on the reference the arbitrator or umpire may require."

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The section reveals the power of an arbitrator to administer oaths to witnesses 13 and to order the disclosure and inspection of documents and other general statutory powers. Under the English Arbitration Act '1996. powers including such ordering a claimant to provide security for costs" and to generally determine procedural matters" are set out. 6 In Nigeria. under the Arbitration and Conciliation Ad , an arbitral tribunal has the power to order an interim measure of protection 17 The tribunal may also in the exercise of its power and in the absence of any prior agreement by the parties, appoint one or more experts to report to it on a specific issue to be determined by the arbitral tribunal." Arbitrators may also exercise additional powers in the conduct of arbitral proceedings such as correcting clerical mistakes in the award occasioned by accident or mere omission, awarding interests and costs to a deserving party and allowing payment of any sum awarded in installments. It should be noted that there are certain powers which an arbitrator cannot exercise. Such powers are only enforceable by a court of law. To cure this defect, many legal systems serve as a back up to the powers of the arbitral tribunal. This may be done by giving powers directly to arbitral tribunals or authorizing national courts to exercise powers on behalf of arbitral tribunals or a combination of both methods.' S

established th at an arbitrator does not have the power to order 3'e parties to produce documents. This limitation is necessary 12

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since the powers are created pursuant to This limitation relates to powers which circumstances. There are powers which powers c f a judge to compel attendance

the agreement of the parties. only a judge can use. An arbitral tribunal Is not a substitute for a court of law in all have been conferred on courts by law which cannot be exercised by arbitrators. The of witnesses or to exercise other coercive powers, for instance, are not ordinarilv within

the power of an arbitrator. Also provideo under section 38 (Sj English Arbitration Act 1996

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Section 38 (3. English Arbitration Act 1996 Section 34 English Arbitraticn Act 1996

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CfI.p 1'.18, .aws of the Fedecdtion ot Nigeria, 2004 Section 21. Arbitration and Conciliation Act. CAP A18 LFN, 2004 This Is as may be considered necessary in respect of the subject

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C'lat~e, of the dispute " Sec:i~n 2~ Arbitraticn and Conciliation ".ct, U.P ,l\18, LF~J. 2004 ~:ec:'c n I, ,,~d Hunter M, op cit, P. 249

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In many legal systems, there is an effective partnering of arbitral tribunals with national courts, This is so that effect may be given to the orders of the arbitral tribunal as it iacks coercive powers. The court may order any party to comply with any order given by the arbitrators. Failure to do so may render such a party in contempt of court. Despite their many powers, arbitrators cannot for example, delegate the authority vested on them by the parties, This principle of delegatus non potest deleflare is binding on arbitrators in the performance of their duties subject to certain exceptions." They will also be unable to alter the terms of the arbitration agreement. It is true that arbitrators derive their existence from the parties as a tribunal cannot be set up where there is no dispute to be decided as between the parties." Regardless, the parties must also have regard to any relevant provisions of the law governing the arbitration agreement and also the laws governing the arbitration itself. This is because an arbitrator's power to decide disputes is a hollow one without the enabling law to enforce his or her decisions." According to Redfern et ai, the "best approach when considering the powers of an arbitral tribunal is to look first at the arbitration agreement; then at the law governing the arbitration agreement and finally the law governing the arbitration." DUTIES OF ARBITRATORS The duties of an arbitrator refer to the minimum standards which the arbitrator himself is required to abide by. It is not clear whether an arbitrator found to be in breach of a duty will be held liable in court. What is clear is that where he does not perform his duties, the award he gives may be rendered ineffective. The duties of an arbitrator may either be imposed by the parties or by the law. There is also the general moral obligation to act for the benefit of parties to arbitral proceedings. a.

DUTIES IMPOSED BY THE PARTIES The duties that may be imposed by the parties on arbitrators may come either before the arbitrators are appointed or during the course of arbitration or both." In the agreement pursuant to which the arbitrators are appointed, the parties may impose duties such as the time scale when arbitration may be completed. The arbitrator should always be careful to know what the arbitration agreement provides for before taking up the appointment. He should be properly guided else he may find himself on an unwanted position where the duties imposed on him are too onerous. Duties may also be imposed on the arbitrator by parties while arbitral proceedings are still ongoing. The parties can impose additional duties on the arbitrator which had not been provided for at the time of his appointment. In such circumstance, the arbitrator may exercise his discretion. Where he is comfortable with his new duties, he may carry them out. Where on the other hand he does not wish to perform the new duties, he may have to step aside as arbitrator.

An arbitrator may delegate the performance of an act of ministerial character only. ThiS is unlike the courts whose existence is not predicated on the existence of disputes but is a creation of the state " Hamilton J.W, Doubts about Arbitrator Immunity, The University of Calgary, Faculty of Law Blog on Developments in A\l:~,:c .s..

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http://www.ablawg.ca/2 010/04/2 B/d oubts-cbout-arb Ret ri eved 20/04/2012 Redfern A and Hunter M, op cit, p. 252

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Regardless, it is not a I duties that parties can impose on an arbitrator. If for example, the parties seek to impose duties on the arbitrator which require him to violate the law, then such a duty cannot be carried by any arbitrator.

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b. DUTIES IMPOSED BY LAW The law imposes minimum standards which are to act as guideposts for arbitrators in the performance of their functions. No arbitrator can act without legal backing; an arbitral award cannot stand without the support of the arbitration rules under any particular jurisdiction. The most recognized duties owed by an arbitrator to parties in arbitral proceedings are as follows: i. Duty to take care it is beyond question that an arbitrator owes a moral duty to take care in arbitral proceedings. A problem rises however as to whether an arbitrator may be held legally responsible for failure to act with due care. In other words, is the-e a corresponding legal obligation to take care? The answer to the question of whether an arbitrator can be held liable for failure to act with due care is inextricably linked to the immunity or otherwise of arbitrators from legal proceedings. This question is not easily answered as different arguments have been put forward supporting and opposing the notion of arbitrator immunity contrary to the assumption by some authors that the matter is well settled. 24 One schoo! of thought is of the view that the relationship between arbitrators and 2b parties to arbitral proceedings is a contractual one and that a breach of the contract by the 26 This is based on the arbitrator should lead to legal proceedings being taken against him equitable maxim that equity will not suffer a wrong to be without a remedy. This school is also of the view that where the arbitrator has been negligent in the performance of his duties, he should be held liable in tort. To say that an arbitrator should not be held liable in contract or tort would leave an aggrieved party remediless and the immunity conferred may become subject to abuse by arbitrators. On the opposite side of the divide, their argument is hinged on the similarity of arbitration to the judicial function. The view is that arbitrators perform judicial and quasijudicial functions. To insist that they should be held liable as a result of their actions would be contrary to public policy and wou!d create room for aggrieved parties to have their matte's re-decided which would negate the ordinarily res Judicata effect of arbitral awards. It will also create reluctance on the part of potential arbitrators to act in that capacity for the fear of being sued by aggrieved parties. It is not the purpose of this article to go into the nitty-gritty of the question of arbitral immunity. It is however submitted here that whether an arbitrator can be held liable for breach of his duty to take care is one which should be considered on a case by case basis which will depend on the approach adopted under any particular jurisdiction i.e. contractual or judicial. On the issue of duty of care, it is submitted here that since arbitrators ho!d

]" Morris

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Report on Arbitration of Family Lav, Dispute In British Columbia (Ministry ofl"\ttornev General of British Columbia 2004,

avalabte under "Research and Reports" from tne Family Justice Reform Working Group of the BC Justice Review Task Force) 2'

Mels in The Inw,u"ity of Arbitrators (Lew eo. Lloyd·s 1990), p. 18 describes the contract between arbitrator and the partie'

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beinG sui qeneris PIJPn though It close}, reserT:bies a contract for services. Under the contractual approach, an arb.t-ator is seen to be in a contract with the parties to the arbitral proceedings.,ln countries

sucn as I~ustria and the Netherlands, an ar bitr at o r may be liable to the parties for any loss caused by his negligence.

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thornse.ves out to be professionals, they ought to be held legally responsible for their actions 27 once it is shown that there was fraud or that the arbitrator acted in bad faith.

Ii Duty to act diligently I-\s with the duty to take care, there is a moral obligation on arbitrators to act diligently. This is based on the principle that justice delayed is justice denied. The question however, of whether there is a corresponding legal obligation remains largely unanswered. The English Arbitration Act 1996 provides that arbitrators are to: "adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay or expense, so as to provide a fair means for he resolution of the matters falling to be determined.,,28 Underlining supplied

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Under section 13 (3) of the English Arbitration Act 1950, a negligent arbitrator may be removed for failure to act diligently. Under the English jurisdiction, where an arbitrator does not proceed diligently and with due dispatch, he may be deprived of his remuneration. Regardless, these remedies of removal and loss of remuneration may not adequately compensate for all losses that wouid have been suffered by the aggrieved party." According 10 Redfern et al. financial conseouences of delay may in some countries and in appropriate circumstances, be brought horne :o an arbitral tribunat." The duty on the arbitrate- to act diligently is intertwined with his duty to decide all matters referred to him for decision. He should not, under the excuse of deciding matters speedily, omit to decide important questions which are crucial to the validity of the final award. It is submitted here that arbitrators should be held liable under the law for failure to act diligently. The losses that may have been suffered by an aggrieved party are not always such as may be easily compensable with interest. Once it can be shown that any arbitrator has wasted unnecessary time in arriving at a decision contrary to the conditions of his appointment and that a party has suffered loss as a consequence, such an arbitrator should be held liable. This argument is premised on the fact that arbitrators hold themselves out as professionals and should be held liable for breach of duties owed."

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" Sabin c.L., The Adjudicatory Boat without Keel: Private Arbitration and the Need for Public Oversight of Arbitrators (2001-2002) 87 iowa Law Review, 1337; Weston M., Reexamining Arbitral Immunity in an age of Mandatory and Professional Arbitration (2004) 88 Minnesota Law Review 449; Vat-sen Li, Arbitral Immunity: A Profession Comes of Age (1998) 64 Arbitration 51; Franck 5,0, The Liability of International Arbitrators: A Comparative Analysis and Proposal for Qualified Immunity (2000) 20 N.Y/L Sch J. Int'I and Compo L.I "Section 33 (1) (b) English Arbitration Act 1996 2'J I\ccording to Mustill and Boyd, delays may weaken the case of any of the parties when witnesses die or are unable to recollect events. The recovery of interest in such a circumstance may not prove to be an adequate remedy because of severe financial k)',:,es. ,OJ qedfern et