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20 Questions About Arbitration

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    The Arbitration Act20 Frequently Asked Questions

    Dispute

    Resolution

    AtAGlanceGuide

    1

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    Whilst care has been taken in the preparation of this guide, the matters referred to herein are subject to change and no liability or responsibility is accepted by

    anyone for any errors or omissions which may exist in it. The contents of this booklet are descriptive only and should not be used as a substitute for legal advice.

    Contents

    Section: Page No.

    Introduction 2

    1 Can I contract out of the Act? 3

    2 How many arbitrators are there on the tribunal? 3

    3 How do I start an arbitration? 4

    4 When must I start an arbitration? 5

    5 Is the arbitration agreement valid even though the main contract is void? 5

    6 What happens if it is alleged that the arbitrators have no jurisdiction? 5

    7 What can be done if one party ignores the arbitration agreement and commences

    proceedings elsewhere? 6

    8 What is the duty of the arbitrators? 6

    9 What is the duty of the parties to the arbitration? 7

    10 What are the powers of the arbitrators in the conduct of proceedings? 7

    11 What happens if a party defaults or disobeys an order made by the arbitrators? 8

    12 Under what law do the arbitrators decide the dispute? 9

    13 What remedies can the arbitrators award? 10

    14 How are legal costs and arbitrators fees dealt with in arbitration? 10

    15 What is an arbitration award and what must it look like? 11

    16 How can I enforce an arbitration award? 12

    17 What is the courts role in arbitration proceedings? 12

    18 How can I challenge an award? 13

    19 If I am unhappy about an arbitrator, what can I do? 15

    20 Can I appear before arbitrators with a lawyer? 15

    The Arbitration Act

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    2

    Introduction

    The Arbitration Act 1996 marks an attempt to consolidate modern English arbitration law and procedure

    in statute form. The Act also changes fundamentally some aspects of the law.

    The Acts mission is explained in Section 1:

    the fair and impartial resolution of disputes, without delay and expense;

    party autonomy: the parties should be permitted to agree how their disputes are resolved;

    minimal intervention by the court.

    The Act applies to all arbitrations commenced on or after 31 January 1997. Arbitrations commenced

    before that date will continue to be governed by the Arbitration Acts of 1950, 1975 and 1979.

    This publication is intended to be a guide to the meaning of the Arbitration Act 1996 and to arbitration

    law. Whilst care has been taken in the preparation of this guide, the matters referred to herein are subject

    to change and no liability or responsibility is accepted by anyone for any errors or omissions which may exist

    in it. If you wish to use any of the information contained in this publication, it is recommended that you

    seek legal advice. If you have any questions concerning the Arbitration Act 1996, Hill Dickinson will be

    pleased to discuss them with you.

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    3

    1 Can I contract out of the Act?

    Yes - in part. The Act lays down procedures which apply if the parties do

    not agree different procedures. The Act classifies each section as mandatory or

    non-mandatory. The parties cannot contract out of the mandatory sections,

    but can contract out of non-mandatory sections. Mandatory sections are

    marked with an asterisk (*).

    2 How many arbitrators are there on the tribunal?

    If the parties do not agree the number of arbitrators, the tribunal will

    consist of a sole arbitrator.

    If the parties agree that there should be only two arbitrators, they will

    be understood as having agreed that a third arbitrator will also have to

    be appointed.

    If three arbitrators are to be appointed and if one party fails to appoint

    an arbitrator, the other party can appoint his arbitrator as sole arbitrator.

    If there is a failure to appoint any arbitrator in accordance with the above

    procedure, any party may apply to the court to appoint an arbitrator and

    to give other directions.

    Section No.of the Act

    4

    15(3)

    15(2)

    17

    18(2)

    The Arbitration Act

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    4

    3 How do I start an arbitration?

    Where the arbitration agreement names the arbitrator to be appointed,

    the arbitration commences when one party serves written notice on the

    other requiring that arbitrator to be appointed.

    Where the tribunal consists of a sole arbitrator, the arbitration commences

    when one party serves written notice on the other requiring an arbitrator

    to be appointed. Such appointment must take place not later than 28 days

    after the service of the written notice.

    If the parties agree that there should be two arbitrators, the arbitration

    commences when one party serves written notice on the other requiring that

    party to appoint his arbitrator. The other party must appoint an arbitrator

    not later than 14 days after service of the notice.

    If the parties agree that there should be three arbitrators, the same procedure

    applies as for two and the two so appointed must appoint a third arbitrator

    forthwith as chairman.

    If the parties agree that there should be two arbitrators and an umpire, the

    same procedure applies as for two and the two shall appoint the umpire at

    any time before any substantive hearing or forthwith if they disagree on

    any matter.

    If the parties agree that the tribunal is to be appointed by a person other

    than a party, the arbitration commences when one party sends that person

    a written request to make the appointment.

    Section No.of the Act

    14(3)

    14(4) and

    16(3)

    14(4), 15(2)

    and 16(4)

    14(4) and

    16(5)

    14(4) and

    16(6)

    14(5)

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    5

    4 When must I start an arbitration?

    Within the time limit specified in the arbitration agreement, unless the

    court extends the time for the commencement of the arbitration.

    If there is no contractual time limit, generally within 6 years of the breach

    of contract.

    5 Is the arbitration agreement valid even though the main

    contract is void?

    The Act specifically provides that an arbitration agreement can be treated

    as a distinct agreement so that even if the main contract is void, the

    arbitration agreement contained, or even only intended to be contained,

    in that contract can still be valid.

    There may of course be a question as to whether or not there was in fact

    an arbitration agreement in the first place; the arbitrators can determine

    this question themselves.

    6 What happens if it is alleged that the arbitratorshave no jurisdiction?

    An application can be made to the arbitrators because they now have the

    power to rule on their own jurisdiction.

    An application can still be made to the court either (a) with the agreement

    of all other parties or (b) with the permission of the arbitrators (provided

    certain conditions are satisfied).

    Section No.of the Act

    12*

    13*

    7

    30(1)(a)

    30 and 31*

    32*

    The Arbitration Act

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    6

    7 What can be done if one party ignores the arbitration

    agreement and commences proceedings elsewhere?

    If the proceedings are commenced in the UK, the court will stay those

    proceedings unless it is satisfied that the arbitration agreement is null and

    void, inoperative or incapable of being performed.

    If the proceedings are commenced outside England, Wales or Northern

    Ireland, the other party can apply to the English court for damages for

    breach of the arbitration agreement or an injunction to restrain those

    foreign proceedings or obtain such other relief as is available under

    foreign law.

    8 What is the duty of the arbitrators?

    To act fairly and impartially as between the parties.

    To give each party a reasonable opportunity of putting his case and dealing

    with the case of his opponent.

    To adopt procedures which are suitable to the circumstances of the case.

    To adopt procedures to avoid any unnecessary delay or expense.

    To provide a fair means to the parties for the resolution of the dispute.

    Section No.of the Act

    9*

    33(1)(a)*

    33(1)(a)*

    33(1)(b)*

    33(1)(b)*

    33(1)(b)*

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    7

    9 What is the duty of the parties to the arbitration?

    The parties shall do all things necessary for the proper and expeditious

    conduct of the arbitration, including:

    complying with any determination, order or directions of the

    arbitrators without delay; and

    taking steps without delay to obtain a decision of the court on any

    preliminary question of jurisdiction or law.

    10 What are the powers of the arbitrators in the conduct

    of proceedings?

    The arbitrators are given wide-ranging powers to determine matters of

    procedure and evidence. The Act gives examples of such matters:

    when and where any part of the proceedings is to be held;

    the language to be used and whether any documents are to

    be translated;

    the form which pleadings should take, when they should be suppliedand whether they can be amended;

    what documents should be disclosed between the parties;

    whether any questions should be put to the parties;

    what rules of evidence should apply;

    contd

    Section No.of the Act

    40(1)*

    40(2)(a)*

    40(2)(b)*

    34(2)

    34(2)(a)

    34(2)(b)

    34(2)(c)

    34(2)(d)

    34(2)(e)

    34(2)(f)

    The Arbitration Act

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    8

    10 contd

    whether the arbitrators themselves should take the initiative in

    determining the facts and the law (i.e. to adopt an inquisitorial approach);

    whether there should be written or oral submissions;

    to appoint their own legal and technical experts.

    The arbitrators may order a claimant to provide security for costs. This

    power is not limited to claimants resident outside the jurisdiction.

    Indeed, residence may not be relied upon as a ground for such

    an order.

    The arbitrators may order that any property which is the subject of

    the proceedings be inspected, detained or preserved.

    The arbitrators may direct a party to preserve evidence in his control.

    11 What happens if a party defaults or disobeys an order made

    by the arbitrators?

    If the claimant has been guilty of inordinate and inexcusable delay, giving riseto substantial risk of unfairness or a likelihood of serious prejudice,

    the arbitrators may dismiss the claim.

    If a party fails without cause to attend a hearing or to make submissions,

    the arbitrators may continue in the absence of that party or in the

    absence of any submissions from that party and may proceed to an award.

    Section No.of the Act

    34(2)(g)

    34(2)(h)

    37

    38(3)

    38(4)

    38(6)

    41(3)

    41(4)

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    9

    If there is a failure to comply with any other order of the arbitrators, then

    the arbitrators may make a peremptory order and failing compliance with the

    peremptory order the arbitrators may make the following orders:

    If the order relates to provision of security for costs by the claimant,

    the arbitrators may make an award dismissing the claim.

    In all other cases:

    the arbitrators may order that the defaulting party cannot rely

    upon the allegations/material which were the subject matter of the

    order; or

    the arbitrators may draw adverse inferences from the non-

    compliance; or

    the arbitrators may proceed to an award on the basis of the materials

    then before them; or

    the arbitrators may make any orders as to payment of costs as they

    think fit.

    12 Under what law do the arbitrators decide the dispute?

    The arbitrators will apply the law which is chosen by the agreed parties.

    However, if the parties so agree, the arbitrators are authorised to apply

    other considerations so that they can decide matters without necessarily

    applying strict law (e.g. equity and honourable engagement clauses).

    If the parties have not chosen or agreed which law is to apply, the arbitrators

    shall determine this on conflict of law principles.

    Section No.of the Act

    41(5)

    41(6)

    41(7)(a)

    41(7)(b)

    41(7)(c)

    41(7)(d)

    46(1)(a)

    46(1)(b)

    46(3)

    The Arbitration Act

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    10

    13 What remedies can the arbitrators award?

    The arbitrators may provide any remedies which the parties agree upon.

    Otherwise, the arbitrators can award:

    a declaration;

    an order for the payment of money in any currency.

    Or can exercise the same powers as the court to:

    order any party to do or refrain from doing any thing;

    order specific performance of a contract (except for a contract relating

    to land); and

    order rectification, setting aside or cancellation of any deed/document.

    The arbitrators have a general power to award simple or compound interest

    (unlike the court).

    14 How are legal costs and arbitrators fees dealt within arbitration?

    Unless the parties agree otherwise, the arbitrators will award costs and fees

    on the general principle that they follow the event, i.e. costs are awarded

    to the successful party except where that is not considered appropriate.

    Section No.of the Act

    48(1)

    48(3)

    48(4)

    48(5)(a)

    48(5)(b)

    48(5)(c)

    49

    61(2)

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    Section No.of the Act

    63(3)

    63(4)

    65

    52(3)

    52(3)

    52(4)

    52(5)

    52(5)

    While the parties are free to agree what costs and fees are to be recoverable, this

    may be determined by the arbitrators who are required to set out the

    basis on which they have awarded these costs.

    If the costs and fees are not determined by the arbitrators, any party to

    the proceedings can apply to have them determined by the court.

    Unless the parties agree otherwise, the arbitrators can direct that the

    recoverable costs and fees shall be limited to a specified amount.

    15 What is an arbitration award and what must it look like?

    The award is the embodiment of the decision of the arbitrators in relation

    to the dispute between the parties.

    Unless the parties agree otherwise, the award shall:

    be in writing;

    be signed by all the arbitrators or those assenting to the award;

    contain the reasons for the award (unless the parties have agreed to

    dispense with the reasons);

    state the seat of the arbitration; and

    state the date when the award was made (i.e. published).

    The Arbitration Act

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    16 How can I enforce an arbitration award?

    An award is final and binding, subject to any successful challenge or appeal.

    With the permission of the court, a judgment may be entered in the terms

    of the award and the award can be enforced as a judgment.

    The award may be enforced under the New York Convention on the

    Enforcement of Foreign Arbitral Awards 1958.

    17 What is the courts role in arbitration proceedings?

    The Act expressly states as one of its guiding principles that the court should

    not intervene in arbitrations except to the extent provided. The court may

    act to:

    enforce the peremptory orders of the tribunal;

    secure the attendance of a witness before the tribunal to give testimony

    or produce documents or other evidence;

    make orders for the preservation of assets or evidence, the inspection of

    property, Search orders or interim (such as Freezing) injunctions, if thetribunal has no power or is unable to act;

    determine a preliminary point of jurisdiction; and

    determine a preliminary point of law.

    Section No.of the Act

    58

    66*

    66(4)* and1950 Act*

    1(c)

    42

    43*

    44

    32*

    45

    12

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    18 How can I challenge an award?

    There are only three bases on which an award can be challenged and these

    require an application to the court:

    Substantive jurisdiction. This is where a party alleges that, for whatever

    reason, the arbitrators did not have the jurisdiction to make the award.

    Serious irregularity. The Act has replaced the concept of misconduct

    and now lists the various grounds (apart from jurisdiction or appeal)

    on which an award can be challenged.

    These are:

    failure by the arbitrators to comply with their duty referred to in

    question 8; or

    the arbitrators exceeding their powers; or

    failure by the arbitrators to apply the procedure agreed by the

    parties; or

    failure by the arbitrators to deal with all the issues put to them; or

    any arbitral or other institution or person vested by the partieswith powers in relation to the proceedings or the award exceeding

    its powers; or

    uncertainty or ambiguity as to the effect of the award; or

    contd

    Section No.of the Act

    67*

    68*

    The Arbitration Act

    13

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    18 contd

    the award being obtained by fraud or being contrary to public

    policy; or

    failure to comply with the requirements as to the form of the

    award; or

    any irregularity in the conduct of the proceedings which is admitted

    by the arbitrators or the institution or person who has powers in

    relation to the arbitration.

    Appeal on point of law. A party can only appeal on a point of law

    either with the agreement of all the other parties to the proceedings

    or with the leave of the court.

    The court will give leave if it is satisfied that:

    the point substantially affects the rights of one or more of the

    parties; and

    the arbitrators were asked to determine the point; and

    the arbitrators decision is obviously wrong, or, if the point is one

    of general public importance, the arbitrators decision is at leastopen to serious doubt; and

    it is just and proper for the court to determine the point.

    Section No.of the Act

    69(1) and69(2)

    69(3)

    14

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    Section No.of the Act

    24(1)

    24(1)(a)*

    24(1)(b)*

    24(1)(c)*

    24(1)(d)*

    36

    19 If I am unhappy about an arbitrator, what can I do?

    The court can remove an arbitrator if:

    there are justifiable doubts as to his impartiality; or

    he does not possess the qualifications required by the arbitration

    agreement; or

    he is physically or mentally incapable of conducting the proceedings

    or there are justifiable doubts as to his capacity; or

    he has failed to conduct the proceedings or to make or use reasonable

    despatch in conducting the proceedings or making an award and

    substantial injustice has resulted or will result.

    20 Can I appear before arbitrators with a lawyer?

    Yes - you are entitled to legal representation as of right, but you may

    waive this right.

    The Arbitration Act

    15

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