negotiations may operate to the disadvantage of weaker parties where significant imbalances of power are present.338
haste – that disputes are determined speedily and, hopefully, cost-effectively.341 A key element of arbitration, as compared with trial, is that it is a private process, defined by contract.342
The tribunal is chosen by, or on behalf of, the parties who may also establish the procedures to be adopted by the tribunal. The decision of the tribunal is final and legally binding on the parties, but is to be made in the light of the evidence and arguments submitted to the tribunal by the parties. A valid award may be recognised and enforced by the courts.343 While these elements are to be found in practically all arbitrations, arbitration is not a homogenous product. The nature of a particular arbitration will be influenced by matters such as the size and character of the dispute and the location and identity of the parties to the dispute.
Arbitration clauses are frequently incorporated in contracts such as building contracts, deeds of lease, deeds of partnership, insurance policies and deeds of sale.344
2.3.1.1 The Arbitration Framework: Contractual and Legal Standards
A complaint often heard about arbitration is that it can be as cumbersome and complex as going to court, and it can be just as time consuming and costly. The objective of arbitration procedures ordinarily is to simplify the process, to make it faster and less complex, while at the same time retaining all the elements necessary for a fair and equitable resolution of the dispute.345 Arbitral proceedings may be commenced by any one of three ways: by statute, order of court and by agreement of the parties.346 The practice involves a lot of rules reflecting both the private contractual foundation of arbitration as well as public laws. It includes the agreement to arbitrate,347 the arbitration procedural rules, arbitration statutes, international conventions, substantive law applicable to the merits of an arbitrated dispute and ethical rules.348
341 Ash, M. The Status of Arbitration in South Africa: An Update. Available @ www.taxtalk.co.za, p.15, accessed 25/9/09
342 Folberg, op cit p.6
343Schulze, C. (2005). International Commercial Arbitration: An Overview. Codicillus. Volume 46, No 2. Unisa Press pp 45 at 46
344 Ibid
345 Wilkinson, H.J. Boardroom Procedure for Arbitration. Canadian Arbitration and Mediation Journal, Fall 2007. A publication of the ADR Institute of Canada, Inc. Vol. 16 No.1, p.27
346 Ojielo, op cit
347 See generally, Fabunmi, J.O. 2009. Common Provisions in International Contracts in Fabunmi, J.O. Ed.
Themes on Jurisprudence and International Law; Essays in Honour of Professor Ayodele Ajomo. P. 53-57
348 Folberg, op cit p.557-558
The Agreement to Arbitrate – Generally speaking, binding arbitration is a creature of a private contract and the arbitration clause would usually provide directions as to the rules for the process. It will also identify the procedures and supporting administrative framework (if any) as well as the law to be applied by the arbitrators. An arbitration agreement is a contractual undertaking by two or more people to resolve disputes by the process of arbitration, even if the disputes themselves are not based on contractual obligations.349 Some arbitration agreements cover the barest minimum obligations while others may be very detailed depending on the subject matter. It is better however for the agreement to cover issues such as procedural rules, number of arbitrators and selection of same, time lines for concluding the process where time is of the essence, commencement of the proceedings and similar issues.
Today, most arbitrations are usually conducted under specified rules or procedures similar to court rules. Arbitration rules and procedures have been developed and published by private and public institutions to provide guidance or support for the arbitration process.350 These are usually lengthy and as such are only incorporated by reference in the arbitration agreement.
The rules will address issues such as: the filing of an arbitration demand and other pleadings, what constitutes notice for procedural purpose, methods of choosing arbitrators including procedures for challenging appointees), prehearing conferences, elements of the hearing, arbitral wards and remedies and procedures for publication or clarification of awards.351 Where an arbitration agreement provides for certain steps to be taken prior to commencing arbitration proceedings, particularly where couched in mandatory terms, they must be complied with.352 Where the contract is silent on steps to be taken, the provisions of the applicable arbitration statute will apply.353
Stages of Arbitration – The nature of the parties’ agreement and whatever rules they have adopted (if any) will influence the specific features of an arbitration process. Invariably,
349 Sutton, D.S., Gill, J. and Gearing, M. (2007). Russell on Arbitration, 23rd ed. London: Sweet and Maxwell, p.
29. See, Section 6 of the Arbitration Act of England which defines the arbitration agreement as an agreement to submit to arbitration present or future disputes (whether they are contractual or not).
350 Some of such institutions include American Bar Association, International Chamber of Commerce, The Center for Effective Dispute Resolution, UK, Judicial Arbitration and Mediation Services, London Court of International Arbitration, Lagos Court of International Arbitration, Regional Centre for International Commercial Arbitration, Lagos.
351 Folberg, op cit, p.567
352 See, for example, the case of J.T. Mackley & Co Ltd v. Gusport Marina Ltd [2002] EWHC 1315 where amongst other things, failure to comply with a condition precedent rendered the arbitration notice invalid.
353 For example, S.14 of the English Arbitration Act provides that the arbitration must be commenced by service of a notice of arbitration on the other party.
however, most arbitration processes begin with the filing of a demand and other pleadings and the appointment of arbitrators.354 The arbitrator(s) will often begin planning for the process by engaging the parties in prehearing meetings or phone/email/video conference discussions to develop timetables, flesh out procedures, develop an agenda and set the stage for all that will follow.355
Prehearing Conference/Preliminary Meeting – While there is no legal requirement for a preliminary meeting, most arbitrators find it useful to have such a meeting at the very earliest stage of the reference. Some arbitration institutions actually contemplate same in their rules.
To illustrate, the CPR Non-Administered Arbitration Rules direct arbitrators to hold a ‘pre-hearing conference for the planning and scheduling of the proceeding.’ Also, Article 18 of the International Chamber of Commerce Rules provides that ‘as soon as it has received the file from the Secretariat, the Arbitral Tribunal shall draw up, on the basis of documents or in the presence of the parties and in the light of their most recent submissions, a document defining its Terms of Reference.’356 The preliminary meeting gives the parties an opportunity to meet and obtain directions from the tribunal on the future conduct of the reference.357 The tribunal may also wish to consider certain substantive issues at the preliminary meeting, such as questions of jurisdiction or applicable law. Other matters to be dealt with include clarifying any terms in the agreement as to how the reference is to be conducted, seat of the arbitration, evidential rules, whether interim measures are appropriate, what documents need to be provided, use of experts, location of the hearings, administration of the reference, fees and deposits, confidentiality restrictions, framework for information exchange and discovery, setting ground rules for the hearing, nature of hearing (e.g. whether documents only or whether to adopt boardroom style hearing etc.) and any other specific issue arising from the nature of the dispute.358 The outcome of the hearing is a procedural order issued by the arbitrators setting forth a timetable and other elements of the ‘arbitration plan’ as agreed by all the participants.
The Procedure – Pleadings or other written statements are not useful in all arbitrations. For example in a commodity arbitration where the dispute is on quality, it may be pointless to
354 Ibid, p.584
355 Ibid
356 In shipping cases, such meetings are generally not part of the proceedings. See generally, Harris, B.
‘Procedural Reform in Maritime Arbitration’ [1995] A.D.R.I.J. 18
357 Sutton, et al. op cit, p.232
358 See, Folberg, op cit 587, Sutton, op cit, 233-234, Mustill and Boyd, op cit 314- 316
order pleadings. In other cases, a written statement may help clarify the issues.359 The arbitrator may order any of these four options: order full pleadings as would be done in a high court trial; or order parties to deliver a full written statement of their case (which would include the statement of facts as well as arguments and evidence, with copies of relevant documents attached; or delivery of brief informal letters setting out each parties’ case; or hold oral discussions with the parties to agree on the issues to be determined and make a written record of same.360
The hearing – Arbitration hearings though formal are more flexible than a court trial. It may be held around a conference table even though it features some of the basic elements of a trial. Though the tribunal is expected to have read the parties statements, the hearing would ordinarily commence with opening statements by the parties.361 This will be followed by introductory evidence, examination and cross examination of witnesses, testimony under oath, closing statements and arguments. 362 It is worthy of note that formal rules of evidence do not apply,363 thus hearsay or other evidence otherwise inadmissible in a court hearing may be considered by the arbitrators. The tribunal may ask questions of the witnesses during the course of the evidence or after the parties have completed their questioning.364 Where the arbitrators have asked questions, parties are usually given opportunity to ask any further supplemental questions as failure to afford such opportunity to the parties could potentially give rise to a challenge that parties were not given full opportunity to present their case.365 Depending on what was agreed, the proceedings may be brought to a close either by parties making oral closing submissions or agreeing to exchange written post-hearing submissions or by the tribunal formally declaring same as closed so that no further submissions will be entertained).366 A tribunal has discretion however, whether or not to hear fresh evidence after
359 Mustill and Boyd, op cit 318
360 Ibid
361 See, Folberg, op cit 592, Sutton op cit, 261-262 Mustill and Boyd, op cit 346- 367
362 Ibid
363 Most arbitrators would however err on the side of admitting evidence because an award can be set aside on ground that the arbitrator mis-conducted himself by refusing to hear or admit relevant evidence. See Mustill and Boyd, op cit 352
364 Sutton, et al, op cit 263
365 See, sections 33 and 68(2) of the English Arbitration Act, 1996
366 See, for example, Margulead Ltd v. Exide Technologies [2005] 1 Lloyds Rep.324; Art. 22.1 ICC Rules specifically requiring the tribunal to declare the proceedings closed once the parties have a reasonable opportunity to present their case.
proceedings have been closed but before publication of the award. Such evidence will be allowed particularly if it is material and could not have been produced earlier.367
Once proceedings are closed, the tribunal will ordinarily publish its award on the date agreed after which the tribunal becomes functus officio and the reference is terminated. The tribunal may however be able to correct clerical errors or mistakes or clarify an ambiguity.368 It can also make additional awards in respect of any claim presented during the hearing but not dealt with in the award.369 A court has power to also remit matters back to the tribunal for a decision.370 Where parties have not agreed otherwise, the tribunal would usually state the reason for an award; this has also been confirmed in some arbitration statutes.371 The effect of an award is that between the parties to the reference and parties claiming through or under them, the award is conclusive as to the issues with which it deals, unless and until there is a successful challenge or appeal against the award.372 An award is final and binding on the parties and their privies,373 it does not bind third parties except that party agrees or had agreed to be so bound.374