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Law Of Arbitration And Legal Framework

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Question:

Discuss about the Law of Arbitration and Legal Framework.
 
 

Answer:

Introduction:

The 1996 Arbitration Act is a legal framework that can be used for purposes of justifying the validity of the clause, under the laws of England. For instance, section 9 (1) of the act denotes that the parties to the arbitration dispute can apply to the legal principles in which they had agreed upon to use, in case disputes arise out of their contractual agreements. Under this case, the arbitration clause was clear, that the arbitration process would be carried out through the use of English Laws. In the 2012 case of Lombard North & Anor vs. GATX Corp, the court sought to enforce the provisions of this law, by denoting that, a legal proceeding that concerns arbitration agreement can only be brought into the court where the arbitration agreement stated that the laws which govern the courts under consideration can be used”.  

From the legal principle that has been established in this case law, it is possible to denote that the clause under consideration is valid, and acceptable under the provisions of the English law. Moreover, the precedent established in Lombard North & Anor vs. GATX Corp, is that, the English laws will only be required to handle and arbitrate over disputes that emanate because of the failure by the two parties to honor their contractual agreements, and this includes the breach, validity and termination of the contract under consideration. The clause above identifies these aspects, and denotes that issues pertaining to the breach of the contract, its validity and termination shall be solved in accordance to the British law. On this note, the clause under consideration is valid and acceptable according to the English law.

 

Whether the clause is valid according to the Irish laws

The 2010 Arbitration Act of Ireland makes it legal for such kind of a clause. This is because the law uses the UNCITRAL Model Law for arbitration, and this law is contained in the 2nd schedule of the act. Article 16 of the law recognizes the power of the arbitration tribunal to set up its own jurisdiction, and section 9 (1) of the Act provides powers to the High Court to enforce the decisions that that are decided by the arbitration tribunal, and this includes setting up of its own jurisdiction. Basing on these facts, the clause that is contained in this agreement is also valid under Irish laws, since it has integrated the UNCITRAL Model Law into its laws of arbitration, on a specific note, the 2010 Arbitration Act.

The Brussels I Regulations insists that there is a need of limiting the occurrence of parallel proceedings about a given case, in different countries. This is a principle that is established under the article 27 of the regulations, which prevents two different courts from deciding on a matter that is similar and involves the same parties. Additionally, article 28 of the Brussels 1 Regulations denotes that the court of the 1st instance is the one that will have jurisdiction over the case. This means that the court that the dispute was first initiated will have the power and ability of determining the case.        

Basing on these facts, it is possible to denote that a parallel proceeding of the case in England and Ireland is unacceptable, and the case can only be heard in one country. However, article 16(1) of the UNCITRAL Model denotes that the tribunal has the power and capability of making a decision on whether it has the jurisdiction to preside over the arbitration. On this note, the arbitration tribunal will also analyze the arbitration clause, treating it independently, and as an agreement to the parties of the contract. In this case, the clause is clear that the arbitration shall take place in Dublin, Ireland; hence, the Irish arbitration tribunal shall not respect the consequent proceeding that is taking place in the English court.

 

Whether the Clause was well drafted

The arbitration clause in this case was not well drafted; therefore, an example of a good arbitration clause in reference to the above case is;

“All the disputes pertaining to the breach and validity of this contract shall be settled in accordance to the arbitration rules contained in UNCITRAL Model Law. The location of the arbitration process will be in Dublin, Ireland, and the arbitration tribunal will consist of 3 arbitrators. The provisions of the English laws will be used in this process, and the language used will be English”.  

From this clause, it is possible to denote that there is an introduction of the UNCITRAL Model Law, and it is this law that makes it possible for the arbitration process to be carried in Ireland, based on the laws belonging to another country. Without the mentioning of this model, the arbitration tribunal cannot rely of the Irish High Court to enforce the decisions it has made or developed.  

During an arbitration process, it is the right of the parties to the process to choose a law that will help to govern the manner which their contractual relationship exists and is carried out. While choosing the most desirable and applicable laws, the parties to a contractual relationship have to use express terms, but it is not mandatory for the parties to the contract to use express terms for purposes of identifying the laws they can use during the arbitration process. However, when the parties to the contract have not chosen a law that the arbitration tribunal can make a decision on the proper law to use. This is a principle that was established in James Miller v Whitworth Street where the judge denoted that the parties to a contractual agreement have a right of choosing the law they can use for purposes of guiding their contractual relationship; however, if they have not chosen any law, the tribunal has the power and authority of determining the best law to use in solving their contractual disputes.

Basing on the principle established in this case law, it is possible to denote that the court can use the implied terms that are found in a contractual agreement for purposes of determining the law that is applicable for the arbitration process. In order to get these implied terms, the arbitration tribunal would read through the provisions of the contract, and determine the circumstances in which the contractual relationship was made. On this note, the tribunal would seek to determine what the parties to the contractual agreement agreed on; thereafter, the tribunal will decide the best laws to use in solving the dispute.

It is important to note that the provisions of the Rome Convention under 80/934/ECC when choosing the law that should be used in the arbitration process; there is a need of making a reasonable choice, based on the terms of the contractual agreements and circumstances surrounding the formation of the contract. Basing on these facts, the approach to use in deciding the best law to use can either be through the principle of delocalized approach or the use of lexi fori. It is important to note that the principle of Lex Fori revolves around the use of local laws where the seat of arbitration is. In the case of Smith Ltd v H International, the court was of the opinion that Lexi Fori revolves around the use of standard national laws, that appeals to the wishes and needs of the parties under the dispute.

 


Most countries normally have their own national laws that can be used for purposes of settling contractual disputes, and these laws can be applied in settling international conflicts, where the seat of arbitration is in the country under consideration. In the 1999 case of Minmentals v Ferco Steel, the court was of the opinion that contractual obligations that are settled in a foreign jurisdiction, is bound by the decisions of the arbitration tribunal in the jurisdiction under consideration and by the contractual laws of the country. On this note, if the award of the arbitration tribunal is defective, then the aggrieved party must appeal against the award to the courts of the land or the country under consideration. Therefore, from these provisions, it is possible to denote that one of the factors to consider while deciding the laws to use, is the laws that govern the country where the seat of arbitration is. Under this case, the laws that can be considered are the laws of Ireland.

Another approach that can be used in making a choice on the best law to use is the delocalized approach. Under this approach, the arbitration tribunal would seek to use international laws and conventions that can be used for purposes of settling the contractual dispute under consideration. The intention of this approach is to use international laws and procedures for purposes of solving the dispute, and limiting the interference of local laws and procedures during the arbitration process. An example of an international law that can be used during this arbitration process is the UNCITRAL Model Law. This is a legal principle that is widely accepted as a law that can be used for purposes of solving international disputes touching on contractual relationships. Another example of an international law that can be used for purposes of solving the dispute is Lex Mercatoria; however, the law is not used since it is considered as vague and uncertain.   

Prof Green and the Arbitration Process

The Professor has to disclose the article that she had written to the Irish Gazette. This is because the article is material enough and has the capability of affecting the outcome of the arbitration process. This is a principle that was established in the 2007 case of Nichia Corporation v Argos, where the court ruled that it is the obligation of the parties to a civil procedure to disclose information that will directly affect the outcome of the case, or support the case that is before the tribunal. Furthermore, in the 1882 case of Peruvian Guano Case, Justice Brett denoted that it is important and essential for all the parties to the arbitration procedure to disclose any information that directly or indirectly affects the case.

 On this note, Professor Green has the responsibility and moral obligation of disclosing this information to the parties of that are involved in the arbitration process. This is because she already has a bias towards the case, and the materials that were written by her can be used to support the outcome of the case. Furthermore, article 12 of the Model Law that is adopted by the 2010 Arbitration Act states that an arbitrator has the responsibility of disclosing any information that may make them to be impartial during the process of arbitration.

The High Court of Ireland is the most competent authority that has the power and jurisdiction of determining the challenge of Professor Green. Article 11 of the Model Law gives power to the High Court to appoint an arbitrator. This is in case the parties to the arbitration process are unable to find or agree on an arbitrator. Additionally, article 13 and 14 gives powers to the High Court to remove an arbitrator if there I a successful challenge brought against him in the court.

The decision by the High Court is final, and cannot be appealed, as determined by section 11 of the Model Law. This pertains to any decision that is made under the 2010 Arbitration Act, and this includes the challenge whether Professor Green can sit in the arbitration tribunal.

 

Lex arbitri and Interim Award

An arbitrator, under section 17 of the Model Law has the power and authority of issuing out an interim award. This includes ordering an interim protection that is considered as relevant and considerable to one of the parties of the contractual relationship. While issuing an interim award, the arbitrator can hope to restore or maintain the status quo, issuing out an order that will prevent one of the parties from harming the interests of the other party to the contractual relationship or preserving evidence that can be used for purpose of solving the contractual problem. The parties to the conflict cannot appeal against these interim orders, and in fact, the arbitrators can seek for the protection of the High Court, under section 10, of the Corporation Act that was enacted in 2010. On this note, the interim award cannot be challenged in the Irish courts.

If the arbitration tribunal seeks to use lex mercatoria and not the English law, the ruling can be reviewed and repealed by the Irish High Court. Section 11 of the Model law provides authority and power to the Irish High court to hear any appeals that is brought to it, which concerns the application of the 2010 Arbitration Act. According to this act, the law that is to be used during the arbitration process is the law that the parties to the process chose. In this circumstance, the parties of the arbitration process agreed that the English law would be used; hence, using the lex mercatoria is unacceptable and the parties can appeal against its use, to the Irish High Court.

The Tribunal and its own jurisdiction

The arbitrators have the power and capability of determining their own jurisdiction, and this is based on the provisions of article 16 of the Model law. In the above situation, Elecbuild Ltd was becoming insolvent; hence it did not have the capability of meeting its contractual obligations. The tribunal can determine whether it has the capability of hearing the case in such kind of circumstances, as per article 16 of the model law. However, the parties to the proceeding can raise an objection that the tribunal is exceeding its authority earlier on during the proceeding, and they can bring the case to the High Court under article 16 (3) of the Model Law. Under these circumstances, the High Court can determine whether the arbitration tribunal has the power to hear the case, or it is above its scope of authority.    

The likely decision of the arbitration tribunal in this case, is the fact that they will have jurisdiction in arbitrating over the matter. This is because the contract did not contain a disclaimer where the parties agreed that in case of insolvency or bankruptcy, the contractual agreement will be void. This is a provision that is contained in section 27 of the 2010 Arbitration Act, which denotes that a contractual agreement will be enforced against a party that is insolvent; unless there was a disclaimer that protected the enforcement of the contract to a person who is insolvent.

 

Reference List

Arbitration Act. 2010. Section 10

Arbitration Act. 2010. Section 27

Arbitration Act. 1996. Section 9 (1)

Rome Convention Article 80/934/ECC.

The Brussels I Regulations Article 28

UNCITRAL Model Law Article 11

UNCITRAL Model Law Article 12

UNCITRAL Model Law Article 16

UNCITRAL Model Law Article 17

James Miller v Whitworth Street. 1969

Lombard North & Anor vs. GATX Corp. 2012

Minmentals v Ferco Steel. 1999

Nichia Corporation v Argo. 2007.

Smith Ltd v H International. 1991

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