Research on the Roles of States in Arbitration

Research in this area can enable for comparison and highlight areas that need to be improved by the states in order to ensure successful arbitration processes are conducted, as different states have been predicted to play different roles in arbitration. This essay will examine the positions that various states play in international arbitration disputes. It will also provide a thorough analysis of the different kinds of arbitration, how arbitration agreements are made, how the arbitration process operates and ends, the roles of the arbitrators, and the nature of the award. Arbitration is a method of conflict resolution where two disagreeing parties resolve their issues outside the traditional courts. In arbitration, the parties to the dispute are called arbitrators and their decision bind to both the parties. The awards must be fair and neutral for them to be binding. In some countries such as the USA, the use of arbitration in conflict resolution is mainly employed between employees and their employers on issues such as delay on payments while in most African countries this is not the case as most of such conflicts are mainly determined in the courts. This can be attributed to the properly developed arbitral systems in the US as compared to Africa. For example in Kenya, there are no well-developed means of enforcing arbitration awards thereby making it hard for parties to use arbitration to settle their issues. According to the evidence given above, it can clearly be seen that states play a critical role in determining the nature and laws involved in arbitration. Different countries just like England have come up with laws that govern arbitration process including giving awards and enforcement of the same.

The arbitration process is mainly governed by two competing theories being the judicial and delocalized theories. The judicial theory describes how arbitration is supposed to work. It states that a just solution actually exists and therefore the duty of the arbitrator is only to give the just solution while defining the principles and facts used to make that decision. The arbitrators act as the judge who is called upon to define the rights and interests of the disputants according to the information provided by the parties themselves.

The delocalized theory (also called political theory) is directly opposite to the judicial theory. It states that arbitration is both an act of collective bargaining and coercion. Here, the arbitrator plays a role of recording the relative strengths of the parties making sure that the strongest gets the highest award. I actually disagree with the principles of this method as it brings confusion between arbitration and conciliation because the disputants are appeased to a sitting without rendering a pragmatic decision (Onyema 46).

Some countries have taken an active role in determining the theory to be applied in making arbitration laws. Singapore, for example, have developed comprehensive laws on arbitration that are mainly based on the judicial theory whereby the arbitrators have the sole responsibility of giving fair awards to the winning parties. The courts are also involved in these processes as some important clarifications and interpretation of arbitration laws can be done (Lauterpacht 23).

The two types of arbitration methods are ad hoc and institutional methods. An institutional arbitration is where intervention is done by a specialized institution which performs the arbitration process. It must be noted that every institution has its own rules and framework to assist in administering the arbitration process. On the other hand, ad hoc arbitration is where the disagreeing parties have the responsibility of determining the main aspects of arbitration (Redfern 567).

Determining the form of arbitration to opt for can be very challenging to the parties especially when the parties cannot come together and reach a common ground. This can be a barring factor to the application ad hoc and therefore the parties can opt for institutional arbitration. Most states however may have indirect influence on the choice of arbitration method. For example, there may be no particular laws on the method to be used in a particular country such as in Kenya, but factors such as lack of properly developed arbitration institutions in the country can hinder the use of institutional arbitration method. This is a direct opposite of countries with well-developed institutions such as England and China (Jan 358).

England also boosts of an efficiently developed arbitral systems and is therefore a good location for formation of arbitration agreement. This is because award enforcement can be easily done as opposed in other countries such as in Africa. Parties therefore choosing a place for arbitration cannot be purely logistical but has significant consequences regarding the applicable procedural laws and enforcement of any award (Onyema 48). In addition the place should have a supportive court system that may help facilitate the whole process.

The major legal institutions relevant to arbitration are the courts and the law enforcers. These are mainly involved in the process of award enforcement as some parties may not be willing to cooperate with the arbitrators. This would call for strict law enforcement especially through the courts to ensure disputes are amicably resolved.

UNICITRAL refers to the United Nations Commission on International Trade Law, a body formed in 1966 and fully recognized as the legal body that deals with international trade laws. It has the mandate of progressively harmonizing international trade laws while promoting the use of both the legislative and non-legislative instruments in business. It deals with key areas in international trade laws such as dispute resolution through mediation, international contract practices, procurement amongst other areas (Dore 21).This body has been critical in ensuring arbitration process are done according to the set laws and its major breakthrough was when it spearheaded formation of a treaty i.e. the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards in 1958. The UNCITRAL have a responsibility of promoting the Convention, its interpretation and application. This body’s arbitration rules have been applied to settle many disputes since they were developed.

Question 2

Drafting an effective and valid arbitration agreement require five simple steps including: deciding on the method of arbitration, selection method and the number of arbitrators, considering arbitration rules, arbitration language and the place of arbitration. Making a decision on the type of arbitration method to use only involves choosing between institutional and ad hoc method. The method finally arrived at should be that that reflects the common position of the parties (Onyema 51).

When choosing the number of arbitrators an odd number is preferred because it avoids risking the deadlock. If the parties cannot agree on a specific number of arbitrators then arbitration laws are applied. These laws also automatically have a way of automatically appointing the arbitrators. Three arbitrators are usually preferred if there is significant amount of dispute on top of having lower risks of arriving at wrong decisions.

Arbitration rules are usually set by the parties which will be used together with the arbitration laws to govern the process. Parties that decide to use institutional arbitration usually adopt arbitration rules from the institutions employed such as UNCITRAL Rules. Since UNCITRAL rules are universal countries with less developed arbitration laws such as Kenya can easily adopt them as compared to nations like Singapore who have institutions with well derived rules.

Determining the language of arbitration is only important when the parties are not speaking a common language for example between Chinese and Spaniards or when operating in a country where it is specified that in case of disagreements the national language applies during arbitration. The United States for example is strict on the use of their language as opposed to other nations such as Qatar who allow arbitration processes to be run in different languages in the country. Specifying a common language to use during arbitration helps prevent unnecessary costs of translations during arbitration (Cohen 325).

Consent is an indispensable requirement for any arbitration to be termed successful. Expressing consent by both parties shows that the decision reached by the arbitrators is binding. Consents vary widely and can range from narrow instances such as covering conflicts to wide variations such as covering disputes related to investments. In any case, they are very important in arbitration. Considering the case Peterson Farms Inc v C&M farming Ltd [2003], the claimant (Peterson) failed to make consent on the award of the arbitration given by the arbitrators to solve the dispute between them. This prompted the need to go to the court to help examine the award and reach an agreement where both parties could commit themselves through consent. This case has been used to illustrate the importance of consent in any arbitration process (Jan 358). The English high court therefore set pace for other countries by being enjoined in the arbitration process and facilitating making of final agreements. The Chinese laws on arbitration however exempts the possibility of a court of law to be involved in such process as this is believed could hinder the smooth running of the process.

Concluding valid arbitration agreements are important since this is the part where an authorized person is stated. This means that any transactions done by any unauthorized person regarding the agreement will not be binding and will be null and void. Concluding an arbitration agreement is therefore not an ordinary issue but requires special authorization.

The principle of separability of the arbitration agreement states that validity of the underlying contract and the arbitration agreement should be evaluated differently. Analysis should however be done on whether this autonomy have any impacts on the agreement. The Court of Appeal drew a clear line in the Fiona Trust case making this point very clear. The main effect of this is that the decisions made after arbitration remain to be binding despite the original contract ceasing to exist or has been terminated (Onyema 53). It allows proceedings related to an agreement whose validity has been put to question. Beijing Jianlong Heavy Industry Groupv Golden Ocean Group; Beijing Jianlong Heavy Industry Group v Ship Finance Int’l Ltd [2013] the court ruled that arbitration clauses can be removed from the contracts in which they are included. This was a good move towards ensuring that once an arbitration process is started, it must be completed no matter whether the parties decide to terminate the contract during the process.

Question 3

An anti-suit injunction is an order given by an arbitral tribunal or a court stopping a party from starting or continuing with a proceeding in another forum. If such orders are contravened by the warned party, a contempt of court may be ordered against such party. This can attract fines and/or arrest of the individuals involved. The courts have the power to refuse to recognize a judgement obtained on a breach of injunction. Anti-suit injunction is usually given to stop forum shopping. This is a situation where a party seeks arbitration from different forums before the issue is adequately solved from another. There is a current trend of many jurisdictions placing injunctions where they feel the proceedings are vexatious and oppressive (Hong-Lin 16). Employing anti-suit injunctions have almost been done by all countries as there have been collective efforts in trying to control arbitration process and promote it in a bid to reduce court cases.

Considering the case of Laker Airways Inc v FLO Aerospace Ltd [1999], it was determined that an arbitration proceeding could not be stopped just because the barrister appointed to be the arbitrator in the dispute had previously acted for one of the parties in the past. This shows that as long as the arbitrator has been qualified to be able to carry out their duties with no bias, their past professional record will not matter much in this case. The level of integrity maintained by such a person is the most important thing.

An arbitration agreement can effectively be protected by including a clause in the agreement towards protection of the same. Even courts cannot overturn the awards of an arbitration process protected by such clauses. The agreement forms must be signed by all the parties making the originally signed agreements fully binding and no alterations can be made later by any party. Alternatively, other parties may choose to register their agreements in courts so that they are given the much needed protection within the chambers of the courts. The states also have a role to play in developing laws that govern how arbitration agreements are protected from interference by one party. This is a good move as it shows that the states are involved in bettering the arbitration process.

With regards to City of Moscow v Banker’s Trust [2004] the court ruled that an arbitration process should be treated as private unless the parties agree otherwise. This was following arbitration on very critical issues that the parties were not ready to share with the public. Giving an award can also be treated as a private issue and any unauthorized persons should not attempt accessing such information. This is an evidence that the Asian courts have been trained well enough to be able to deal with matters in interpreting arbitration laws as compared to their African counterparts.

Arbitrability refers to whether arbitrators have the authority to make final binding decisions on a dispute. This means the disagreeing parties have the sole responsibility of determining whether a matter can be resolved through arbitration. So in every dispute there is a likely scenario of the parties agreeing on whether disputes that may arise can be arbitrated upon. They also agree on how the arbitration process will be done when making contracts. The court on determining the fate of the dispute on Re Medicaments and Related Classes of Goods (No 2) [2001] they resolved that courts can only participate in ensuring a proper procedure is followed during determination of arbitration processes but do not have full responsibility of forcing any parties to arbitrate against their wish. The court went ahead to highlight on the question of arbitrability of a matter deciding that the courts can only be engaged where there is enough reasons to believe that the parties expected the courts to guide them in an arbitration process. As it is, most states do not have the authority to force parties to engage in arbitration. The authority lies mainly with the disputants. When parties determine arbitrability of their issues they are likely to have a smooth arbitration process. As it is, most states do not have the authority to force parties to engage in arbitration. The authority lies mainly with the disputants. When parties determine arbitrability of their issues they are likely to have a smooth arbitration process.

Arbitration is a process that is arrived at by agreements by the parties involved and the same parties may choose to terminate but only through mutual consent. The agreement can either be tacit or express. An express agreement is executed with the provisions previously agreed upon. But when one party files lawsuit against matters on an arbitration agreement while the other does not object in time, the implied waiver can be applied. As an illustration, the Spanish arbitration law provides that arbitration agreement can be dissolved if a party files a complaint and the defendant fails to raise a lack of jurisdiction as a defense. Death of one of the parties cannot dissolve an arbitration agreement. This is according to arbitration laws that states that in case of death of one party, the successor to the deceased inherits all the rights and duties thereby making the agreement binding until it is fully implemented. Death can only terminate an agreement only when it is provide for in an arbitration agreement. (Hong-Lin 18).

Question 4

An arbitrator is someone or people appointed by conflicting parties to help them solve their issues by arbitration. An arbitrator carefully considers and gives an analysis of the evidence provided by both the sides when hearing a dispute. He or she draws on relevant knowledge, laws policies and procedures on arbitration. Using this knowledge they are able to weigh on matters no matter how heavy they might seem and thoroughly determine the liability of the evidence given (Onyema 101).

Qualifications of an arbitrator vary widely in different countries. We will only look at basic qualities that are required in order to become a qualified arbitrator. Since there are various areas where an arbitrator can work on, they should choose one or two areas of operation and research adequately on those areas.

Countries such as US and England have comprehensive education requirements for anyone wishing to become an arbitrator. A law degree is a must requirement in such nations. This is different in Kenya where a law degree is not a requirement but at least having a bachelor’s degree is often required. Future training on an area in conflict resolution on top of their basic bachelor’s degree is also a requirement. It must be noted that most countries prefer arbitrators to be law degree holders and have a prior experience as a business professional or an attorney. After training the arbitrator must obtain a license allowing them to practice in a particular country (Onyema 105).

Licensing is also an area where states are directly involved in regulating arbitration processes. Licensing allows for recognition and makes their work a legal practice. In the US, certification from the National Academy of Arbitrators (NAA) is given to those arbitrators with ten years of experience in their work. Many other countries do not have a body charged with a responsibility of licensing arbitrators. The US is therefore a step ahead in terms of licensing arbitrators a factor that has led to growth of professional arbitration in the country.

The Arbitration and Conciliation Act of 1996 lays down a procedure that should be followed in appointing an arbitrator. It states that an arbitrator can only be appointed under two means i.e. appointment by the parties or alternatively by the courts. The disputants may agree to appoint one or more arbitrators to guide them in the arbitration process. After appointment, such arbitrators can proceed to carry out their mandate. If they fail to agree on the arbitrators, they may allow a third party to help them in appointing the arbitrators.

The act also provided for the role of the courts in appointment of arbitrators. An arbitration clause is inserted by the disputants to this effect. This is because the disputants are regarded to be having full responsibility of appointing the arbitrators and the courts can only come in if they are given the permission to do so. In the Emmott v Michael Wilson & Partners Ltd [2008] EWCA Civ 184 the parties failed to agree on the arbitrators within thirty days from the request by the petitioner, the high court therefore took the responsibility of appointing an arbitrator that helped resolve the conflict.

Parties involved in arbitration should agree on the number of arbitrators and how they are appointed. If they fail to agree, then they follow the laid down procedures by an institution they contacted. An odd number is often preferred so that the stalemate can easily be resolved in case a voting may be needed. The number of arbitrators to be appointed also depends on the gravity of the matter to be resolved. The heavier and more critical it is will often require a large number of arbitrators to encourage discussions and consultations so that error margin is lowered.

Question 5

An arbitration award is the final determination and decision given by the arbitrators in a tribunal. It is analogous to a court of law judgment on the conflict. An award can be of monetary or non-monetary nature. In terms of money awards one party can be compelled to pay the other in order to settle the dispute. Non-monetary awards can involve actions such as adding an employment incentive or stopping certain business practice as a means of resolving an existing conflict (Onyema 112). An arbitration award must be differentiated from a jury award which refers to monetary damages given by a court in order to pay for damages caused by a party on another. Different states have direct say on the type of arbitration award given after a successful arbitration process. This can mainly be attributed to different cultures and political environments.

Understanding the process in making decisions is critical in understanding the effects of arbitration schemes. An award given is a function of both offers of the parties and facts of the case. The weight put by arbitrators on the case is related to function of the quality of the offers resulting from the case.

The 1996 arbitration act clearly provides that unless otherwise agreed by the parties, an appeal to the final award can be made in a court when the laws used are in question. Making such appeals can only be done when all other parties involved are in agreement with the proceedings or with permission of the courts. It is worth noting that in Singapore, despite reaching an agreement, the final award must be determined by the courts to analyze how such decisions were arrived at and also determine their validity. This is a direct opposite to the Kenyan case where it is not a must to involve courts when giving awards.

Arbitrators can make several other decisions such as when and how the award can be made. They make sure that all the parties are treated equally, impartiality is very important. All these decisions majorly depend on how the awards were made and the agreements by both the parties on how to settle these matters.

Question 6

It has been said that the arbitration award is final and binding but this is not true as the award do not signalize the end to any further proceedings. There are well laid down procedures and processes meant for confirming, correcting and even the arbitration awards. Although an option for reviewing an arbitration award is provided for, it is limited as it has been scarcely used in recent times (Elkouri &Edna 55).

Referring to the arbitral case between Union Marine Classification Services LLC v The Government of the Union of Comoros & Bruce it is well demonstrated that the final award can be reviewed. Mr. Harris found that the respondent was found guilty of breaching a contract and first award given. The arbitrator did a correction in 2014 after the respondent applied for a correction. The final decision therefore brought about a new perspective to the role of arbitrators in making corrections on their initial award. The arbitrators can only do so if they have enough laws to support their actions so that they are protected from controversial court cases. In this regard, Singapore has shown more maturity in supporting arbitrators in their job in Asia as compared to other nations (Drahozal 67).

In case an arbitrator made some mistake to the award there are two major options that can be considered. These include taking the matter to a court to do a thorough review on the award and determine its fairness. Another option involves taking the matter to another arbitrator who is believed to be reasonable enough to give a fair review on the award. This second option is however rarely considered by most parties as they always rush to the courts to resolve such matters. There are many instances that may influence an arbitrator such as when an arbitrator becomes corrupted by one of the parties to give an award in their favor. Despite any method chosen to review the award it must come from the disputants after an agreement between them (Onyema 115).

According to the case Soleimany v Soleimany (1998), it can be noted that the son did not want to comply by paying the award arrived at after the arbitration. The son resisted enforcement since the contract was illegal and was against the Jewish laws and the court also supported his argument therefore the contract was terminated without the award being enforced. In this case, the state laws played a significant role in determining the outcome of the arbitration process.

The roles of the arbitrators end after issuing the final award. Their authority is terminated when they complete the hearing and issue the award; prior to delivery of an award, by their inability to make an award or by a revocation of the submission. When a submission is validly revoked, the authority of the arbitrator is terminated.

In conclusion, it is evident that states and state laws play an important role in determining how arbitration processes are done. As shown, their involvement means good for arbitration as they are geared towards protecting the processes. I personally support the roles that countries play in this regard though there should be improvements on the weak areas and the countries that are lagging behind should start taking an active role in regulating arbitration processes. States with good rules and judicial systems that support arbitration process is an ideal environment for implementation of this method in conflict resolution as the arbitrators will have sufficient resources used in the award and enforcement of such awards. The judicial theory has also been heavily applied in the several cases examined and it is proving to be most efficient as it leads to fewer conflicts as compared to the delocalized system. This is because in delocalized system one party may feel unfairly judged and therefore lose confidence in engaging in future arbitration processes.

Works Cited

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Beijing Jianlong Heavy Industry Groupv Golden Ocean Group; Beijing Jianlong Heavy Industry Group v Ship Finance Int’l Ltd [2013] EWHC 1063

City of Moscow v Banker’s Trust [2004] EWCA Civ 314.

Cohen, Neil B. "Should UNICITRAL Prepare a Model Law on Secured Transactions." Unif. L. Rev. 15 (2010): 325.

Dallah Real Estate & Tourism Holding v Ministry of Religious Affairs & Govt of Pakistan [2010] UKSC 46 – note that the French courts arrived at the opposite conclusion.

Dore, Isaak Ismail. Arbitration and conciliation under the UNICITRAL rules: a textual analysis. Martinus Nijhoff Publishers, 2016: 21

Drahozal, Christopher R. "Party Autonomy and Interim Measures In International Commercial Arbitration." (2011): 67

Elkouri, Frank, and Edna Asper Elkouri. Legal Status of Federal-Sector Arbitration. Bureau of National Affairs, 1980: 54-59

Hong-Lin Yu, “Explore the Void: an Evaluation of Arbitration Theories, Part 2”, (2005) Int ALR, Vol 8(1), pp 14-22

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Laker Airways Inc v FLO Aerospace Ltd [1999] 2 Lloyd’s Rep 45.

Lauterpacht, Hersch. Private law sources and analogies of international Law: with special reference to international arbitration. The Lawbook Exchange, Ltd.,( 2002): 23

Onyema, Emilia. "Enforcement of Arbitral Awards in Sub-Sahara Africa." Arbitration International 26.1 (2010): 115-138.

Onyema, Emilia. "Selection of arbitrators in international commercial arbitration." International Arbitration Law Review 8.2 (2005): 45-54.

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Peterson Farms Inc v C&M farming Ltd [2003]

Re Medicaments and Related Classes of Goods (No 2) [2001] WLR 700

Redfern, Alan. Law and practice of international commercial arbitration. Sweet & Maxwell, 2004: 567