How the Scottish
Courts Support the Arbitration Process
And
Deal with challenges to Arbitration
This paper provides an overview of how the Courts in Scotland
can support Arbitration. It is not intended to provide a fully
detailed account of all procedures and statutes that apply. The
important points are covered concerning Court support along with
a summary of how the Courts can deal with challenges to an Arbitral
Award.
The context of Arbitration carried out under the jurisdiction
of Scots Law is considered.
I. SUPPORT
Introduction
1. There are five
main ways in which parties to the arbitration process may have
recourse to the courts to obtain support for that process:
(1) before
the commencement of the arbitration to obtain assistance in the
appointment of the arbiter or arbiters;
(2) to obtain interim measures of protection;
(3) to obtain assistance in compelling the production of documents,
or the attendance of witnesses;
(4) during the course of the arbitration to obtain an opinion
on a point of law arising from a decision in the arbitration;
and
(5) at the conclusion of the arbitration to obtain assistance
in enforcement of the arbiter's award. |
Appointment
2. The court has
no common law power to appoint an arbiter, but under the Arbitration
(Scotland) Act 1894 it has power to do so in the circumstances
defined in sections 2, 3 and 4. Those circumstances are-
(1) where
one of the parties to an agreement to refer a dispute to a single
arbiter refuses to concur in the nomination of an arbiter, and
there is no contractual procedure for overcoming that refusal
or that procedure has failed;
(2) where there is an agreement to refer to two arbiters, and
one party refuses to name an arbiter, and again there is no contractual
procedure to overcome the failure or that procedure has failed;
and
(3) where arbiters have power to appoint an oversman, but fail
to agree on an appointment. |
There are other circumstances
in which the conventional provisions for appointment may fail,
but in these there is no power in the court to intervene to assist.
3. Under the UNCITRAL Model Law, which applies (a) in
any international commercial arbitration where the place of the
arbitration is in Scotland and (b) in a domestic arbitration
in Scotland where the parties so agree, the court may make an
appointment in the circumstances specified in Article 11(3) and
(4). Those circumstances are -
(1) where
there is no agreed procedure for appointment,
(a) in the case of an arbitration with three arbiters,
(i) one party fails timeously to appoint an arbiter to the arbitral
panel, or
(ii) the two arbiters appointed by the parties fail timeously
to agree on the third member of the panel; and
(b) in the case of an arbitration with a single arbiter, the
parties are unable to agree on the arbiter; and |
(2) where
there is an agreed appointment procedure,
(a) a party fails to act as the procedure requires, or
(b) the parties or two arbiters are unable to reach an agreement
expected of them, or
(c) a third party or institution fails to perform a function
entrusted to him or it. |
It will be seen that the
power of the court to fill a gap left by the agreed procedure
is much more comprehensive under the Model Law than under the
1894 Act.
Interim Protective Measures
4. At common law the Scottish courts do not regard an arbitration
agreement as wholly ousting their jurisdiction. Where parties
have bound themselves to go to arbitration, the courts will ordinarily
simply sist (stay) any court action pending the arbitration.
It follows that it is open to a party to an arbitration to raise
parallel court proceedings and in those proceedings to seek interim
measures of protection, typically in the form of arrestment of
moveable property, inhibition in respect of heritable (real)
property, or interim interdict (injunction).
5. Where the Model Law applies, Article 9(1) provides
that such resort to the court for interim measure of protection
(meaning arrestment, inhibition, interim interdict or any other
interim order) is not incompatible with an arbitration agreement.
Article 9(3) does, however, provide the restriction that where
a party to an arbitration applies to the court for an interim
order, any prior ruling or finding in fact by the arbitral tribunal
on the matter must be treated as conclusive for the purposes
of the application.
Documents and Witnesses
6. An arbiter has no power to compel the attendance of a
witness. The court will, however, on the application of a party
to the arbitration, grant warrant for citing witnesses. The effect
of such a warrant is to make available the same means of compelling
attendance before the arbiter as are available in the case of
a witness cited to attend court.
7. Similarly, since an arbiter cannot compel a third party
to produce documents, recourse can be had to the court to obtain
its authority to compel the third party to make the documents
in question available. The procedure is that the list or description
of the documents to be recovered is first approved by the arbiter,
and the application is then made to the court. If the application
is granted, the ordinary procedures of the court for compelling
production of the documents become available to recover the documents
for use in the arbitration.
8. The Model Law, in Article 27, reflects the pre-existing
practice in relation to the assistance of the court in taking
evidence and recovering documents.
Stated Case
9. Under section 3 of the Administration of Justice (Scotland)
Act 1972, an arbiter may state a case for the opinion of the
Court of Session on any question of law arising in the arbitration.
It requires to be noted, however, that -
(1)
the power to state a case may be excluded by express provision
in the agreement to refer to arbitration;
(2) the arbiter may only state a case on the application of a
party to the arbitration;
(3) the arbiter has a discretion whether or not to state a case
if requested by a party to do so;
(4) the arbiter's discretion is, however, subject to the power
of the court to direct him to do so; and
(5) the power to state a case is available "at any stage
in the arbitration", and that has been construed as meaning
that the power ceases when the arbiter issues his award. |
10. The provision for a stated case is here classified
as part of the procedures by which the court supports the arbitration
process rather than as a means by which a party may challenge
an arbitral decision. The fact that the possibility of stating
a case ends as soon as the final arbitral award is made makes
that classification inevitable. It cannot be an appeal procedure,
because it ceases to be available when the arbiter's decision
is made. In practical terms, however, the procedure can be used
in a way that is very similar to an appeal on point of law. That
is so because of the practice which has developed of inviting
arbiters to issue a draft award, to enable the parties to consider,
while the arbitration is thus still pending, whether to make
an application for a stated case.
11. The stated case procedure possibly has more enemies
than friends. In some ways it is cumbersome, and it can be slow
in operation. A general impression (and it is only that) is that
it is not currently much used. It does, however, provide a means
by which an authoritative ruling can be obtained in Scotland
on a point of law arises in arbitration. If parties wish to avoid
its application, they may contract out of it. It involves only
one tier of the court system, because (a) the stated case is
heard by a Division of the Inner House of the Court of Session
(i.e. by a bench of three appellate judges), and (b) it is not
possible to appeal from the decision of that court to the House
of Lords.
12. Although the matter is perhaps not made as clear as
it might be, it seems that the effect of Articles 5 and 6 of
the Model Law is to exclude the stated case procedure where the
Model Law applies.
Enforcement
13. This part does not deal with enforcement of an Arbiter's
award in any detail. The court may become involved by being asked
to grant decree in terms appropriate to give effect to an arbitral
award, if other means of enforcement are not available. Under
the Model Law, the court may become involved in enforcement of
an arbitral award in pursuance of Articles 35 and 36. There are
other procedures for enforcement of arbitral awards that may
involve application to the court, e.g. under section 18 of the
Civil Jurisdiction and Judgments Act 1982, under the Arbitration
Act 1975 (the New York Convention), and under Part II of the
Arbitration Act 1950 (the Geneva Convention).
II. CHALLENGE
14. The first point to be made is
that in Scots law there is no appeal to the courts against an
arbitral award. It has already been mentioned that to an extent
the stated case procedure may be used to give something very
close to an appeal on point of law. Aside form that, however,
there is no provision for appeal from an arbiter's decision to
the courts.
Procedure
15. The primary means by which a challenge to an arbiter's
award may be brought is by reduction, that is by seeking an order
of the court setting the award aside. In modern practice, because
the court's supervision of arbiters is part of its broader supervisory
jurisdiction over subordinate decision-makers, the form of process
probably requires to be a petition for judicial review. Another
possibility is reduction by way of defence to an action for enforcement.
In principle, the challenge must be to the validity, rather than
merely to the soundness, of the arbiter's decision. A decision
which is wrong may nevertheless be valid and cannot be challenged.
Grounds
16. The grounds for challenge are to a considerable extent
steeped in antiquity. The Articles of Regulation of 1695 refer
to three grounds of challenge - "corruption, bribery or
falsehood". The meaning of those expressions is greatly
encrusted with authority, and it would not be sensible to attempt
to examine them in detail here. The common law admits other grounds
of challenge-
(1) that
the decision was ultra vires of the arbiter, or ultra fines compromissi,
i.e. beyond the scope of the jurisdiction conferred on the arbiter
by the parties to the submission;
(2) that the decision fails to exhaust the submission;
(3) that the award is void from uncertainty;
(4) that the arbiter has been guilty of misconduct (again a term
richly encrusted with authority);
(5) that the award was procured by fraud; and
(6) that the arbiter turns out to have been disqualified. |
17. All of the foregoing is superficial
in the extreme, but is sufficient to give some flavour of what
can, and more importantly, what cannot, be relied upon as ground
for challenging an arbitral award.
18. The grounds for challenge permitted under the Model
Law may be summarised as:
(1) incapacity
of a party to the arbitration agreement or invalidity of the
agreement;
(2) inability on the part of a party to present his case through
want of proper notice of the appointment of the arbiter or of
the arbitral proceedings or otherwise;
(3) that the award deals with dispute not contemplated by or
falling within the terms of the submission (with the proviso
that if only part of the decision can be so described, and that
part can be severed from the rest, only that part may be set
aside);
(4) that the composition of the tribunal or the arbitral procedure
was not in accordance with the parties' agreement or not in accordance
with the Model Law;
(5) that the award was procured by fraud, bribery or corruption,
(6) that the subject matter of the dispute was not capable of
settlement by arbitration under Scots law; and
(7) that the award is in conflict with public policy. |
19. In addition to challenge to
the arbitral award on these grounds, the Model Law also contemplates
recourse to the court in a number of other cirumstances:
(1) in the
context of an unresolved challenge of an arbiter on the ground
of his impartiality, independence or qualifications (Article
12 and 13);
(2) in the context of an arbiter becoming unable to perform his
function or failing to act without undue delay (Article 14);
and
(3) in the context of a challenge to a preliminary ruling by
an arbitral tribunal as to its own jurisdiction (Article 16(3)). |
20. In general the Scottish courts are not much troubled
in recent years by challenges to the validity of arbitral decisions.
However, that there has, in 1999 to 2001, been something of a
spate of cases concerned with the validity of decisions by adjudicators
in construction disputes.
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SCIA