At common law, an agreement to submit a dispute to arbitration might be written or oral. Prior to arbitration legislation, arbitration agreements were referred to as submissions. At common law, the submission could be oral. A submission required an existing dispute and nomination of the arbitrator. The authority of the arbitrator might be revoked but this may give rise to a right to damage at common law. The revocation must require to take place before the publication of the award.
Written arbitration agreements are labelled “arbitration agreements” by modern legislation. Where it is provided that in the event of disagreement between the parties, the dispute is to be referred to the decision of a third person, that person is termed an arbitrator. The decision of an arbitrator is termed an award.
Under arbitration legislation, an agreements to submit a dispute to arbitration must be in writing. It need not be signed or executed as a deed. It may be recorded on paper or in an electronic medium. It does not require to be signed by the parties. It may be part of the main contract or in a separate agreement. It may be entered before or after a dispute has arisen.
Arbitration generally arises from the express agreement of the parties. An arbitration agreement may be incorporated expressly or by implication by reference to another document. The details of the arbitration process may, for example, be incorporated in the standard terms and conditions of a trade body. Arbitration may arise from a statutory provision or under the rules of a club, society or other body which has contractual effect.
Features of Arbitration I
Arbitrators must hear disputes in a judicial manner. This is in contrast to a determination by an expert or by agreement to be bound by opinion of counsel. Similarly, evaluations and appraisal are not arbitrations. They are not based exclusively on evidence submitted but on substantially on the expertise of the determining party.
Where under a building or engineering contract, provision is made for a certificate of an architect or engineer to be final, this does not constitute arbitration. References of disputes in sporting matters to stewards, racing stewards, referees in the Jockey Club are not arbitrations.
An arbitration involves the reference of a matter in actual dispute. It is enough that there are matters in dispute. If a matter is referred to a valuer, there is likely to be a dispute about the valuation. However, because the valuer does not act judicially, there is no arbitration. It must be clear that a judicial type hearing is intended, not merely that the referee or appointed person should determine the matter without hearing evidence, taking into account his own skill, knowledge and experience.
An agreement to refer a matter to a judge is not an arbitration. The judge may sit as an arbitrator in an arbitration agreement other than as a judge. Reference to a foreign court may be treated as an arbitration for the purpose of giving jurisdiction. An agreement that the decision should be unappealable is not an arbitration agreement. The decision is a judgment not an award. The judge is not an arbitrator.
Features of Arbitration II
If there is no dispute on the matter, there can be no arbitration. Where a person agrees that he is liable for a sum, there is no case to prove. The dispute must be of a type which is capable of being tried in a civil court. Such a dispute is generally one of fact or law. It has a characteristic that it is capable of being settled. The dispute must not be one concerning a public or criminal matter. This is not capable of lawful settlement between private parties. It may not arise out of an unlawful matter, such as a gaming contract.
Matters which refer to the status of persons may not be the subject of arbitration. For example, a petition for divorce may not be arbitrated. An arbitrator may not make a determination or give a judgment “in rem”. This is the judgment binding on third parties in relation to the status of a thing. See the separate section on judgments and orders. In contrast to a judgment “in personam”, which is enforceable against the relevant party, a judgment in “rem” is binding on all persons.
It is possible for parties to litigation to agree to refer matters in dispute to an arbitrator. The litigants may agree a reference and the court may agree that it be embodied in an order of the court. The court has inherent power to make a reference to referees and assessors.
Arbitrators are not liable for anything done or omitted in the discharge of their function. as arbitrator, unless it is shown to be undertaken in bad faith. Arbitral institutions generally have similarly immunities.
Limitations and Time Limits
The Statute of Limitations applies to civil disputes referred to arbitration, in the same way as it applies to civil actions. A reference to arbitration is equivalent to commencement of proceedings and accordingly, it may be barred notwithstanding a provision in the arbitration agreement that no cause of action is to accrue until an award is made. The claim or cause is deemed to have “accrued” at the date on which it would have accrued, but for the arbitration agreement.
Parties may contract for a shorter limitation period. Questions of unfair contract terms may arise if the provision is unduly short in a consumer contract.
Arbitration commences for the purpose of the Statute of Limitations when one party gives notice to the other party requesting or requiring him to appoint an arbitrator or agree to the appointment of an arbitrator. Where the arbitration agreement provides that reference is to be made to a designated person, the arbitration is commenced when the person is required to submit the dispute to the nominated person. The notice may be served in a manner equivalent to that provided for commencement of civil proceedings.
Where the courts’ order that an arbitration award be set aside, or that the arbitration agreement shall cease to have effect, it may order that the period between the commencement of the arbitration and the date of the order is excluded in counting time under the Statute of Limitations, or any other equivalent limitation period.
Parties to Arbitration Agreement
A party who has the legal capacity to enter a contract may enter an arbitration agreement. The agreement to submit to arbitration is binding on the parties to the arbitration agreement. Where the agreement is capable of being assigned, it is also binding on the assignees. An arbitration agreement is binding on the personal representatives of the deceased and can be enforced by or against them. A limited category of actions are purely personal actions and cease on death.
An agreement to arbitrate is binding on the Official Assignee and a trustee in bankruptcy. However, they may be able to adopt or repudiate the contract on insolvency law.
Parties may include what they wish in the arbitration agreement subject to the general rules in relation to public policy and lawfulness. It is generally implied that the arbitrator is to determine the dispute in accordance with the ordinary law.
Parties have considerable latitude in determining how the arbitration tribunal or arbitrators are constituted and ascertained. They may determine the number of arbitrators and whether there should be a chairman or umpire. If they do not determine it, the default rules under the Arbitration Act apply.
The arbitrators may be actually named. More commonly, provision is made for their appointment. Arbitrators are commonly appointed by the Chairperson or President of certain professional organisations. The Arbitration Act seeks to make provision where there is default in operation of the arbitration machinery, including, the provisions as to appointment.
When a person accepts appointment as an arbitrator, he enters into a contract with the parties in the terms agreed. It will set out the basis on which the arbitration is to take place, the dispute(s) the subject of adjudication, the terms on which the adjudicator is prepared to act and an agreement to conduct the arbitration without undue delay. Arbitrators are contractually bound to complete their appointment.
There are no requirements for any particular qualification, in order to act as an arbitrator. Commonly, arbitrators have specialist qualifications in the relevant industry. In the case of certain classes of international arbitration, certain professional qualifications and membership of certain organisations may be required.
Arbitrators must be impartial. They may be removed if they are or appear to be impartial or compromised. Actual or perceived bias or the risk of bias may be sufficient. Some arbitration rules including the UNCITRAL Model Law specifically require that arbitrators be independent.
The general presumption is that in the absence of an indication to the contrary, that the matter is to be referred to the decision of a single arbitrator. Where an arbitration agreement provides for reference to more than one arbitrator, one is generally to be appointed by each party, unless the contrary is clearly expressed. If either refuses to act, is incapable of acting or dies, the party who has appointed him, may appoint a substitute to act in his place.
If where more than one arbitrator is required, one party fails to appoint an arbitrator after the other person has appointed an arbitrator, the other party may serve a notice of default and may appoint his appointee to act as sole arbitrator. The court may set aside an appointment made under the above provision.
Where the reference is two arbitrators, it is implied unless the contrary is shown, that the two arbitrators are to appoint a chairman or umpire after they have been appointed themselves. Arbitration agreements are deemed to provide where appropriate, in the absence of an indication to the contrary, that if the arbitrators can’t agree on an award, that the umpire is to enter under reference in place of the arbitrators.
Where an agreement provides for three arbitrators, one to be appointed by each and the third to be appointed by the two appointees, the agreement is deemed to provide for the appointment of an umpire and not for the appointment of a third arbitrator. The umpire is to be appointed by the appointed arbitrators.
Where the arbitration agreement provides that there should be a reference to three arbitrators, the award of any two of the arbitrators is binding, in the absence of an agreement to the contrary.
Provisions regarding the examination of witnesses on oath or affirmation are implied in an arbitration agreement unless the contrary is provided. They are deemed to contain a provision that the arbitrator shall have the same power as the High Court to order specific performance of a contract, other than a contract relating to real property. Arbitration agreements are presumed to contain a provision that the award, to be made by the arbitrator, is to be final and binding on the parties and persons who claim through them.
It is implied that an arbitrator has the power to make an interim award. It is implied that the arbitrator may make an order in relation to costs. He may direct who is to pay the costs. He may tax and settle the amount of costs. The costs may be “taxed” in the High Court unless otherwise directed under the award. A provision in an arbitration agreement, other than an agreement to submit a dispute which has already arisen, that the parties shall pay their own costs in relation to the reference, in any event, is deemed void.
Scope of Appointment
Where the agreement is to refer all matters in difference or in dispute to arbitration, the reference is to include disputes and claims in different capacities and disputes of law and fact. Where the agreement is between more than two parties, differences arising between the parties jointly and severally and jointly or severally may be determined. However, a provision for reference of all disputes in a contract with an arbitration clause may be impliedly limited by the nature of the of the dispute that arises under it.
When an agreement contains a foreign element, the essential validity and interpretation is governed by the proper law of the contract. General conflicts of law provisions apply.
The authority of the arbitrator is presumed to be irrevocable, except with the leave of the High Court. An application for leave is made to the Master of the High Court. The court may exercise its jurisdiction to revoke an appointment of an arbitrator or an umpire on the basis of misconduct, lack of partiality and bias. The court may instead appoint a new arbitrator.The courts will not readily dismiss an arbitrator.
Where it is apprehended that the arbitrator may make a mistake, an application may be made to the arbitrator to state a case. The fact that a contract is frustrated or repudiated does not prevent the operation of the arbitration clause to refer disputes arising out of it to arbitration. Parties may, for example, refer to arbitration the very question of whether the agreement has been discharged or frustrated.
Where a party repudiates a contract on the basis of a claim that it is void or voidable, he may be precluded from relying on the arbitration clause. However, if he simply alleges repudiation or a breach by the other party, he may rely on the clause, even if he has accepted the repudiation or breach. The arbitration clause remains binding on both parties.
The court has inherent power to restrain arbitration proceedings by injunction directed to the arbitrator. This jurisdiction will be exercised sparingly only. There is power to terminate an arbitration agreement where a party has been guilty of fraud, where the tribunal is removed by an order of the court or where the authority is revoked by the leave of the court.
Termination of Appointment
The parties may agree on the circumstances in which an arbitrator may be removed or may resign. Generally, in the absence of agreement, the arbitrator’s authority may not be revoked without the consent of each party to the dispute. An arbitral institution may have powers in this regard. Early termination of the appointment may be a breach of contract for which the relevant party may be entitled to damages.
Institutional rules which may apply may allow removal of the arbitrator. If they are exhausted, it may be possible to apply to the court to remove the arbitrator.
The resignation of an arbitrator may constitute a breach of contract unless otherwise provided by the agreement. An arbitrator may apply to the court for relief in some jurisdictions.
Arbitrators agreement may determine how vacancies are to be filled. They will determine the status of the existing proceedings and deal with the effect of cessation of office. In the absence of agreement, the same procedures as apply to the initial appointment, apply to the appointment in the case of vacancies.
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