Transcript tomlinson associates - The Chartered Institute of Arbitrators, East

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INTRODUCTION
Mr Colin Tomlinson,
Professional Graduate
Engineer who has studied both
the MSc in Construction Law
and LLM in Commercial Law.
A Fellow of the Institute of
Commercial Management,
Member of Institute’s of
Electrical Engineers ,
Chartered Arbitrators ,
Paralegals , Cost Engineers ,
who now works as a consultant
to global companies .
Web Site|
The Quest
for
the Essence
of
Arbitration
www.tomlinson-associates.com
For a presentation at
Downing College
Cambridge
for the
Chartered Institute of
Arbitrators
Summer Seminar
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THE ESSENCE OF ARBITRATION ?
What is Arbitration
Arbitration, a form of alternative
dispute resolution (ADR), is a legal
technique for the resolution of
disputes outside the courts, where
the parties to a dispute refer it to
one or more persons (the
"arbitrators", "arbiters" or
"arbitral tribunal"), by whose
decision (the "award") they agree
to be bound
Wikipedia
What is the purpose of Arbitration?
To resolve disputes
But how is it to perform that function
Arbitration is generally used
when all parties agree to the
process. Most commonly, it is used
because there is an arbitration
clause in a commercial or
consumer contract. Arbitration is
a formal process in which an
impartial third party with
specialist background knowledge
on the nature of your dispute
hears all parties and makes a
binding decision to resolve it.
Law Society
Breaking News | Around 440 BC, Leucippus of Miletus and his pupil, Democritus originated the atom concept
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IN THE BEGINNING
Plato writing around 350BC
describes for want of a better
word the “essence” of
Arbitration in the failure to
fulfil a contract :
If a man fails to fulfil an agreed
contract … an action should be
brought in the tribal courts if
the parties have not previously
been able to reconcile their
differences before arbitrators
(their neighbours that is).”
Plato, The Laws, Translated by
Saunders, Penguin books
In The Law Plato gives an example of
the type of dispute that would be
Arbitrated around 350BC “But if any
professional person sell any such
slave … (with some defect) … which
most men would fail to notice, to a
layperson, the buyer may claim
restitution. (The) … action shall be
tried before a bench of doctors
nominated and chosen by the
parties.” …In this case Doctors were
chosen because of their particular
skill to examine a slave but
appointment was only by the
agreement of the parties.
Aristotle explains that the law in use is the Law of Equity, “It bids us remember ... to settle a dispute by
negotiation and not by force; to prefer arbitration to litigation -- for an arbitrator goes by the equity of a
case, a judge by the strict law, and arbitration was invented with the express purpose of securing full
power for equity."” Aristotle Rhetoric 4th century BC
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EQUITY
Cicero wrote "Nore would our
ancestors permit to be a Judex
even in the most trifling money
matters, not to speak of offers
concerning the dignity of a man,
unless the offering parties were
agreed upon him." I.e. to
appoint a person that the
parties agree upon, again it can
be seen that the system worked
on a version of the Law of
Equity rather than State Law.
Aristotle considered the nature of equity
and its relationship to justice in his famous
passage from his work, Ethics. He
concludes that equity’s role is to prevent
the law from adhering too rigidly to its own
rules and principles when those rules and
principles would produce a miscarriage or
injustice. Equity permits Arbitrators to
depart from the legal principles to promote
justice or that was the original concept if
Aristotle is to be believed
The Romans started their
invasion of Britain from around
55 BC and with it came two
types of law, the first was the
Codified Law and secondly was
Arbitration, the ability of the
parties to Arbitrate disputes in
proceedings agreed between the
parties.
Breaking News | 54 BC – Mrs Caesars little boy Julius decided on a three month holiday to Briton
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DEVELOPMENT OF THE LAW
Through the thirteenth and
fourteenth centuries the
English Courts started to
developed the Common Law
and the system of assumpsit.
Pleading a case became very
intricate with only certain
avenues of address were open
to the claimant.
Breaking News | The 100 Years' War was actually a series of conflicts between France and
England that began in 1337 and ended in 1453
Aggrieved persons found that
legitimate complaints were
rejected for failure to comply
with the technicalities of the
requirements for the
submission of the pleadings
and if the complaint was not
dismissed at first instance,
relief was in most case denied
based on the lack of a
controlling statute or
precedent.
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DIFFERENT SYSTEMS
The aggrieved plaintiffs
therefore then looked to the
king whom in turn referred
requests for relief to the
Chancery Court (defined as a
“court with jurisdiction in
equity”). The Chancery
possessed the power to settle
disputes according to their
conscience with little or no
regard to the Common Law
hence the basis for the Law of
Equity.
The Common Law and Law of Equity
represented two opposing values in the English
Legal System. The Common Law was created
independently from the Crown, whereas the
Chancery and its use of the Law of Equity
developed as part of the duties firstly imposed
by Edward I of England due to his annoyance at
the number of cases coming to him
The Chancery was seen as
one of the four central courts
and the number of private
cases had increased
dramatically. The reason for
this was the only remedy
available to the Common
Law Courts was the award of
damages, but the Chancery
had the ability to make an
order of specific
performance or an
injunction.
Breaking News | The 4 different Courts were at odds with each other, Ecclesiastical, Chancery , Common, Jus
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ISSUES BEFORE THE ACT
Had the parties entered in to a
valid agreement to Arbitrate
and if so agreed to be bound by
the award?
WROTTING v ALGOR (1405)
Coram Rege Roll 575
There are several reported cases where a losing
party refused to acknowledge that an arbitration
took place.
ASSER v BRADMOR (1405) Coram Rege Roll 575
BLOUNDELL v AKELEY (1471) YB
10 Edw IV
One of the problems was that
any party could revoke the
Arbitrators authority before the
published award
An alternative to the losing
party was an attempt to upset
the award. Claims that the
award had not been published,
or that it was incomplete may
be found
FANE v PRIOR OF TONBRIDGE
(1522) CP Apr
ANON (1522 or 1523)
One way round this was the introduction of the Arbitration Bond which meant that if the loser did not honour
the award the other party would call for the bond, and example is SCOTT v BERACRE (1313) YB 6 & 7 Edw II
where an award of £15 was not honoured. ‘ S’ sued on a bond of £30 which the parties had entered into to give
effect to the award.
Breaking News |
Mrs Shakespeare's little boy William wrote a few plays (1564 - 1616)
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TYPICAL 15TH CENTURY EXAMPLES
in Wrotting v Algor (1405) the
sheriff was directed to secure
a jury at Westminster to
enquire whether the parties
had agreed to Arbitrate and if
so had the parties agreed to be
bound by the award of the
Arbitrator
In 1484 rivalry between the two guilds erupted
into violence during the Mayor of London’s river
procession, both guilds were in the habit of racing
each other and on this day the race got out of hand
with the result of injury and death.
The parties agreed to Arbitration and the
Arbitrator’s decision (Robert Billesdon) resolved
the issue by deciding that the Barges should
alternate between sixth and seventh place each
year, an equitable decision and giving rise to the
saying “all at sixes and sevens.
Breaking News | The Houses of York and Lancashire fight The War of the Roses 1455 - 1485
In Bloundell v Akeley (1471) a
similar direction was given so
the jury could enquire into the
validity of an obligation under
seal to refer to arbitration and
whether an award had actually
been published
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17TH CENTURY
THREE WAY OF DEALING
The first was an arbitration
commenced at Common Law
without the Court's involvement.
This was the traditional method of
Arbitration whereby the parties
agreed on an Arbitrator who then
proceeded to determine the issues
privately between the parties
without recourse to the Court.
Whilst the procedure was a judicial
process in that, in very limited and
ill defined circumstances, the parties
could invoke the aid of the Court by
way of a Bill in Equity, it was not
subject to systematic Court
regulation or assistance.
The second form of Arbitration was a
reference by the Court in a pending suit. Since
medieval times the Court had recognised that
Arbitration had a role to play in the resolution
of disputes.
This procedure had the advantages of, on the
one hand, enabling the parties to select the
tribunal best qualified to decide the dispute, or
part of it, while nevertheless retaining the
sanction of the Court for a party's refusal to
proceed with the arbitration.
The third method comprised
reference to Arbitration pursuant to
statute. The success of referrals to
Arbitration in a pending action
culminated in an Act of 1698 which
enabled parties to make the
reference a rule of Court. That is,
the parties could effectively register
their Arbitration agreement with
the Court; and their agreement
thereby became subject to a similar
sanction for non-observance as
obtained in suits commenced in
Court and subsequently referred to
Arbitration
The acts main objective of the act was to render an award more effective, and this can be seen in the Act 1698:
“whereas it hath been found by experience, that reference made by rule of court have contributed much to the ease of the
subject, in determining of Controversies, because the parties become thereby obliged to submit to the award of the
arbitrator, under the penalty of imprisonment for their contempt in case they refuse Submission
Breaking News | Change is afoot with the introduction of the Arbitration Act 1698
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JUDICIAL INTERFERENCE
In 1802, English Courts
claimed the right to
interfere with an
Arbitration Award for error
of law on the face of the
award; up to that point, the
decisions of Arbitrators on
questions of law had been
conclusive, barring fraud or
a similar allegation
The wide degree of judicial oversight was
unpopular with Arbitrators and led to the
practice of Arbitrators detailing their reasons
for the award, hoping to avoid judicial review;
however, the reasons were stated in a separate,
confidential document which prevented them
from being shared with a court for the purpose
of a substantive appeal
Breaking News | The first real attack come in 1802
The second basis for judicial
review of errors of law was in
the form of a special case
procedure, which empowered
Arbitrators to state a case on a
point of law for the Court’s
opinion. While grounded in
Common Law, the special case
procedure was given limited
recognition in the 1854 Act and
subsequently codified in the
Arbitration Act of 1950
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NEXT 200 YEARS
In 1854 Common Law
Procedures Act incorporated
into statute a Common Law
remedy that had been available
for some time. Before the 1854
Act the Arbitrator was able to
ask the Court’s opinion on a
point of law as a Common Law
right, the 1854 Act empowered
the Arbitrator to state a case on
a point of law for the Court’s
opinion and held the Arbitrator
duty bound to issues a valid
award.
The 1889 Arbitration Act repealed all previous
legislation in Arbitration and reintroduced
additional provisions encapsulated into the
1889 Arbitration Act as all encompassing, for
the first time making provisions for the
appointment of Arbitrators by Courts, setting
out the terms and conditions to be universally
implied into every arbitration agreement
The Arbitration Act 1950
repealed all previous statue. An
important development was the
codification of the special
procedures rule at section 21,
providing that, following a party’s
request, an Arbitrator could state
an award (or part thereof) in the
form of a special case for the
consideration of the High Court; if
the Arbitrator refused the High
Court could order him to do so the
Courts upheld the right to state a
special case.
“Arbitrators, unless expressly authorised, have to apply the laws of England. When they are persons untrained in law, and
especially when as in this case they allow persons trained in law to address them on legal points, there is every probability of
their going wrong, and for that reason parliament has provided in the Arbitration Act (1950) that, not only may they ask the
courts for guidance and the solution of their legal problems in special cases… but that the court may require them, even if
unwilling, to state cases for the opinion of the court on the application of [a] party to the arbitration if the court thinks it
proper”.
Breaking News | What have we done ???.
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1979 – 1996
The Arbitration Act (1979)
abolished the general power of
the Courts to review a case for an
error in law on both the face of
the award and by means of a
special review. After a judicial
review it was believed that the
primary purpose of Arbitration
(namely, an efficient and final
award by a chosen decision
maker) was effectively thwarted
by excessive judicial intervention.
As such, the 1979 Act limited the
powers of judicial review for an
error of law
It was asserted that one of the reasons for the
introduction of the 1979 Arbitration Act was to
dispel the fear that the Courts were interfering
too much, but this approach did no work and it
was held that Court interference in Arbitration
was unacceptable, hence when the first draft of
the new Arbitration Act was produced in1994
such was the chorus of disapproval that the
whole act was redrafted.
The intervention of the courts in
arbitration had to be tackled if
England was to regain it success as
the world leader for Arbitration.
International parties do not want or
require the intervention of the
English Courts in multi national
disputes.
Commercial parties to disputes see
that excessive court involvement
defeats the purpose of the party’s
initial decision to arbitrate in the
first place, there is a loss of
confidentiality and addition cost of
the Court
“What I was faced with was the fact that competing nations had gone a long way towards improving their own arbitral
procedures in the light of the UNICTRAL model law, while here (UK) no progress was apparent despite the years that had
passed by. In these circumstance it seemed to me that while what had to be done was obvious, it had to be done as fast as
possible.”
Breaking News |
In the late Autumn of 1994 Lord justice Saville assumed Chairmanship of the DAC and stated
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THE LAW OF ARBITRATION
Mr. Justice Denning (as he
then was) asserted, “ There is
not one law for arbitrators
and another for the Courts.
There is one law for all, and
arbitrators are bound by it
just as much as the Courts. ”
We are here to provide a service that meets
the requirements of our own times.
Commercial men require not only speed,
economy, and consideration in the
procedures that we adopt: they also
require, and expect to have the benefit of
fair judgment, based on common sense and
commercial reality. In a word, they expect
that we shall apply “ natural justice” in the
dispensing of our judgment, in the same
way that we apply “ natural justice” in our
procedures.
Lord Justice Singleton said
“ The duty of an arbitrator is
to decide the questions
submitted to him according to
the legal rights of the parties
and not according to what he
may consider fair and
reasonable under the
circumstances”
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HGCRA 1996
During the late 60’s, 70’s,
and 80’s we saw Arbitration
fail on a number of points:
•
•
•
•
Legalised
Expensive
Stopped being quick
Damage and reputation
destroyed
Statutory Adjudication was introduced on
the 1st May 1998 and incorporated into
the Housing Grants Construction and
Regeneration Act 1996 (HGCRA).
WHY???
Breaking News | What is to stop us ruining the process again
Assertion of Blame
Nobody played fair
Pay when Paid clauses in
contracts
Industry practises in 80s
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INITIAL DESCRIPTION
There was initial opposition to
Adjudication
100 DAY
Arbitration
• Adjudication is not suitable for all types of
cases
• Protracted and costly
• Uncertain outcome
• Adjudicators fees have increased
disproportionately
• Interim not final
• Problems with enforcement
• An expensive way to flip a coin’
A
d
j
u
d
i
c
a
t
i
o
n
This presentation was one of many in the late 90’s that went on to insist that
Adjudication would be costly .
Adjudicator unlikely to have legal/ procedural training???
Adjudicate
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THE LAST 12 YEARS
Reasons for challenges in
court
•
•
•
•
•
•
Lack of jurisdiction
No dispute
Contract not in writing
Breach of Natural Justice
Bias
Service of notice
The last 14 years have seen a multitude of
cases have been put before the courts, and
most areas have been challenged.
Tecsa
£1750/Day
But some of the issues are the same.
CEDR
On appointment
AICA
Dependant
Costs
Costs to contractor estimated
at approx. £40k
JCT/RISC
£100 / Hr
Challenges
Reasoned awards
Rupert Jackson, when in charge of the Technology and Construction Court has raised questions as to the
suitability of adjudication for large complex final account claims and professional negligence claims. The
increasing view is that to attempt to squeeze a complex ‘quart’ of a case into a ‘pint pot’ of the adjudication
procedure gives a result that is unfair and therefore unenforceable
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SUMMARY
Arbitration started life as an
equitable solution to a
dispute, we have seen that
through judicial interference
this process has changed and
with the direct interference
during 19th and 20th century
the demise of the English
Arbitration system with the
estimated loses in the 1960’s
of £500 million.
What is the correct law for Arbitration or
Adjudication ?
By using Judges’ Law are we in breach of the
laws of natural justice?
Why do we allow judicial interference?
Should we look at adopting
the UNCITRAL model of
arbitration ?
Is the 100 day Arbitration
model of any advantage
compared to Adjudication?
Is the skill base correct for Adjudication?
John Riches recently talk was entitled “ We lost Arbitration are we losing Adjudication “