Aderonke. O.

Elesho*

CHALLENGE OF ARBITRAL AWARDS

INTRODUCTION In international commercial and international investment disputes, arbitration remains the foremost means of dispute settlement, which parties opt for. The reason for this is not much different as parties ordinarily submit to arbitration as it provides an enabling environment for parties to solve their disputes as opposed to litigation that is time-consuming and slow. It also does relatively foster a good relationship between the parties. Arbitration as a dispute settlement process allows parties to hire persons of good standing with peculiar knowledge of the nature of business or intricate relationship that ensues between the parties. Parties from foreign jurisdictions are in particular weary of submitting to the jurisdiction of a foreign court for fear of favour of the local party. Arbitration allows parties to conduct the hearing in a less formal environment. Upon arbitration and the delivery of an award, parties who are dissatisfied with the award then call upon the courts for a review of the award1. The award which is given by the arbitral tribunal is just as binding and enforceable as a court decision and in order to ensure that parties are not laboured under misguided decisions, there has being arguments for the review of arbitral awards and also against it. This work will consider the position of the law on the review of arbitral proceedings/decisions, the form of judicial control available and in particular discuss the appropriateness of having international arbitral awards reviewable. Its been argued that judges will more likely than arbitrators develop and apply principles formulated with a view toward broad social values and to be aware of the cumulative impact of a series of decisions2. This work will argue that despite the need for party autonomy, arbitral awards have to be subject to some form of review, as this would serve as a remedial link for victims of unfair awards. This work will examine some provisions of the US Federal Arbitration Act of 1925, the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards of 1958, UNCITRAL Model Law on International Commercial Arbitration of 1985 and the English Arbitration Act of 1996.

*Legal Practitioner and LL.M Student, University of Hull (2011). The Harvard Law Review Association, (1950) Judicial Review of Arbitration Awards on the Merits, Vol. 63, No. 4, pp 681-690 Available at http://www.jstor.org/stable/1335997 Accessed at 18th of April, 2011. 2 Phillips, P. G. (1934) Rules of Law or Laissez-Faire in Commercial Arbitration, 47 Harv. L. Rev., 590.

ARBITRAL AWARDS The Oxford dictionary of Law3 defines Arbitration as the determination of a dispute by one or more independent third parties (the arbitrators) rather than by a court. The parties to an arbitral proceeding submit to such proceedings in the hope that an arbitral award will be given by the tribunal and an arbitral award is final and binding upon parties. Therefore, upon the conduct of arbitral proceedings, the tribunal is bound to give an award in determination of the issues submitted to it and up till date, there is no internationally accepted definition of an arbitral award as none of the international conventions dealing on arbitration defines the term award. An arbitral award is the final determination and disposition of the dispute between parties and it becomes a binding and enforceable decision on parties. The requirement as to form of the award is generally governed by the arbitration agreement of the parties and the law governing the arbitration. The UNCITRAL Rules require that an award should be in writing; the reasons upon which the award is based be stated; the award shall be signed, dated and contain the place where it was made; where there are three arbitrators and one fails to sign, the award shall state the reason for the absence of the signature4. The provision of the English Arbitration Act is also similar to this5. An award ought to be unambiguous even though the ambiguity can be cured by a subsequent interpretation of the award. An award must constitute an effective and effectual determination of the issues in dispute. There are different categories of an award such as a final, interim or partial award6 and such awards may be consent7 or a default award but whatever the nature of the award is, the award is a final disposition of the issues it deals with. A final award is an award that completes the obligation placed on the arbitrators, the delivery of a final award renders the tribunal functus officio and the tribunal ceases to have jurisdiction over the parties. A partial/interim award is the ability of the tribunal to determine and give an award on matters that are susceptible to determination during the course of proceedings such as making an order that an undisputable sum of money that is due and payable by one party be paid to the other. A consent award may be obtained where parties to arbitration agree to the terms of settlement of their dispute without the arbitrator making the decision. Where this is achieved by the parties, to make their terms of settlement enforceable, the terms of settlement will be written as
3 4 5 6 7

Oxford Dictionary of Law, (2009), (7th edn), Oxford, New York, p. 37. Art. 32, UNCITRAL Rules. S. 52 English Arbitration Act. Art. 32.1., UNCITRAL Rules. Art. 30(1) Model Law

the award of the tribunal. While a default award is an award reached by the tribunal in the absent of one of the parties to the arbitration. In reaching a default award, the tribunal takes on itself the burden of testing the assertions made by the active party, calls for argument and evidence8. An award may cover several ranges of remedies that can be given by the tribunal, such as9:

Monetary compensation; Punitive damages and other penalties; Specific performance and restitution; Injunctions; Declaratory relief; Rectification; Adaptation of contracts and filling gaps; Interest; and Costs.

CHALLENGE OF ARBITRAL AWARDS The challenge of an arbitral award will encompass both the common law notion of appeal and the civil law notion of judicial recourse against an arbitral award10. There is a large disparage gap between the need to allow for some form of judicial control on arbitral awards in order to monitor and ensure that basic principles of natural justice11 are not ignored by arbitrators while using their dispute settlement mechanisms and the need to allow for the true autonomy of arbitration and allowing for finality. A judicial review is sought by either of the parties or both parties to the arbitration where an issue of contention arose during the arbitral proceedings or whilst the delivery of the arbitral award. There have been arguments for and against the delocalisation of arbitral proceedings and as relating to arbitral awards; it removes the power of the courts at the place of arbitration to make an internationally effective declaration of the awards nullity. The application of delocalisation
8 9

Redfern, p.524 Redfern 10 Jenkins, J. And Stebbings, S. (2006) International Commercial Arbitration Law, Kluwer Law International, P.284. 11 Chung, R.K.L. (2011) The rules of Natural Justice in Arbitration, Arbitration, 77(2), pp. 167-175.

theory can successfully avoid the uncertainty caused by the mandatory rules and public policy exceptions of the relevant laws12. The call for judicial review is a strict contention between the rival goal of fairness and finality and freeing awards from judicial scrutiny enhances finality while promoting fairness calls for some form of judicial supervision13. The judicial review of an arbitral award serves as a form of risk management as it can serve as a deterrent for arbitrators. Court scrutiny of arbitral process or awards may further the development of commercial norms in guiding business managers in planning future transactions. There is no perfect middle ground between the need for finality and the need for fairness. Some jurists argue for a relatively delocalized regime wherein there is little or no judicial scrutiny of international arbitration14, while some other jurists proposes that domestic courts be enabled to monitor arbitrations conducted within their territory15. However, a reasonable compromise between the two extremists approach is that of judicial review which uses a judicial control mechanism while still taking cognizance of party autonomy. It is noteworthy that parties who submit to arbitration are relying on the expertise of the arbitrators16 and they are well aware that the type of justice applied therein is different from that of a courtroom17. Therefore opportunity of having a second bite at the substantive application should not be given. It is also common knowledge that despite the fact that parties to arbitration are aware that there is no appeal on the merits of the case, parties still abuse the review process available by as a means to avoid the immediate consequence of an unfavourable award. Apart from parties who honestly are victims of a misguided decision, some parties may use the review system as an opportunity to cause a delay in complying with the decision and an avenue for the court to revise the award on its merits by making claims of procedural unfairness. This abuse of the arbitral process nullifies the advantage associated with arbitration.
12

Yu, H. (1999) Defective Awards must be Challenged in the Courts of the Seat of the Arbitration- A Further than Localisation ?, Journal of the Chartered Institute of Arbitrators, Vol. 65 No. 3. 13 Park, W. W (2001) Why Courts Review Arbitral Awards, Festchrift fur Karl-Heinz Bockstiegel 596. 14 Fouchard, P. (1997) La Portee international de l annulations de la sentence arbitrale dans son pays dorigine, Rev. Arb. 329 as in Park, W. W (2001) Why Courts Review Arbitral Awards, Festchrift fur Karl-Heinz Bockstiegel 598. 15 Mann, F. (1986) Lex Facit Arbitrum, 2 Arb. Intl 249 as in Park, W. W (2001) Why Courts Review Arbitral Awards, Festchrift fur Karl-Heinz Bockstiegel 598. 16 Mayer, P. (1991) Seeking the Middle Ground of Court Control: A Reply to I. N. Duncan Wallace, Arbitration International, 7(4), pp.311-318. 17 Uva, P.S. (2010) Challenges of Awards vis-a-vis The Finality of International Arbitration, Available at www.consulegis.com/fileadmin/downloads/thomas_marx_0910/consulegis_tma_pedro_susa _uva.pdf Accessed on 13th of May, 2011.

As the swift, easy, freedom of choice comes to nullity and an annihilation of the arbitral process and parties. The simple act of challenge itself occasions a delay in arbitral process. However, it is trite that a request for annulment should not be for a review of the merits of the award but rather to allow some form of judicial control and for protection of natural justice18. There is no uniformity in national laws governing the application and exercise of the right of appeal from, or the power of review of, arbitral decisions and awards19 and there has been a considerable change in the position of the law with regards to the review of arbitral awards. There used to exist the rule of no appeal on the merits for international arbitration however, this position has considerably changed in the modern arbitration statutes20. Prior to the 1966 Act, parties could confer on an arbitrator the power to determine jurisdiction in a definitive manner, which excludes challenge and intervention of the courts. Under the 1966 Act, the right to judicial review of arbitral decisions on jurisdiction are mandatory21 also, under the former Belgian Code, arbitral awards could not be reviewed. The form of judicial control of international arbitration in England, Germany and France is rather large in comparison to other jurisdictions. All these statutory regulations have similar and distinct grounds for challenge of an award. The review of arbitral award may be subject to an internal structure such as the forms of arbitration established within trade associations22 or challenge by national courts. In determining whether an arbitral award may be subject to review by a national law, the rules under the applicable law are important. Usually the court of the seat of arbitration is the competent court to review the arbitral award however, the freedom of parties to an international arbitration to determine how the arbitration be conducted and under that principle may subject the arbitration to the procedural law of a foreign country different from that of the seat of arbitration. It has been a challenge to maintain a balance between judicial interference and judicial intervention. Amongst international arbitration players, they are of the opinion that the
18

Tweeddale, K and Tweeddale, (2005) Arbitration of Commercial Disputes International and English Law and Practice, New York, Oxford University Press, p. 386. 19 Torgbor, E. (2010) The Right of Appeal and Judicial Scrutiny of Arbitral Decisions and Awards, Arbitration, 76(2), pp. 229-245. 20 Park, W. W. (2006) Judicial Controls in the Arbitral Process, in Arbitration of International Business Disputes- Studies in Law and Practice, New York, Oxford University Press, 234. 21 Shackleton, S. (2002) Challenging Arbitration Awards: Pt I Jurisdiction, 152 New Law Journal, 1746. 22 Grain and Free Trade Association (GAFTA) and ICSID.

involvement of courts in the arbitral process generally constitutes unwanted interference23. Whilst this may be so, recognition of party autonomy is essential for the promotion of arbitration, and this must be balanced against appropriate levels of state control over the arbitral process24. Although judicial monitoring of arbitration is not a complete foolproof, it however suggests that misconduct is less likely because the award will be subject to public scrutiny and sanction. For example, the prospect of a judicial review can make arbitrators more sensitive to the potential benefit in allowing a testimony from a witness they might otherwise not wish to hear25. Judicial control in the form of correction of mistakes of law of interpretation is an aid, not a hindrance and should be made available in arbitral proceedings just as it is with the court system26. It has been argued that judicial review promotes confidence in the arbitral proceedings, which is of particular importance to the commercial community by helping to avoid aberrant arbitral behaviour and arbitral awards will not be a lottery of erratic awards27. Whilst judicial review on the merits is a manifestation of distrust of arbitral justice, suspected of incompetence and partiality28. Park argues that judicial review cannot be excluded, inasmuch as it does not imply a review on the merits of the award, fraud, partiality or excess of authority are the issues which implicate national or third party interests29. Courts review of an award should be for the purpose of preserving an international public order as excluding such review powers could turn arbitration into a dangerous sphere with a potential for abuse, disregard for major principles of justice, corruption and fraud30. Leading to parties been able to enter illegal contracts or avoiding mandatory rules. The ability to review awards at the seat of the arbitration enhances respect for the awards rendered abroad. Without this right, the loser in arbitration will be in a precarious situation of having to defend and fight an action for recognition and enforcement of a defective award in whatever jurisdiction the winner seeks to enforce recognition.

23

Colman, A. (2006) Arbitrations and Judges--How much Interference should we Tolerate? 72 Arbitration, p. 217 at 219. 24 Lurie, J. (2010) Court Intervention in Arbitration: Support or Interference? Arbitration, 76(3), pp 447-453. 25 Park, W. W Journal 26 Wallace, D. (1990) Control by the Courts: A Plea for More, Not Less, Arbitration International, 6(3), pp. 253-267. 27 Park, W. W. (2006) Judicial Controls in the Arbitral Process, in Arbitration of International Business Disputes- Studies in Law and Practice, New York, Oxford University Press, p. 151. 28 Mayer, at p.317. 29 Park, W. W. (2006) Judicial Controls in the Arbitral Process, in Arbitration of International Business Disputes- Studies in Law and Practice, New York, Oxford University Press, p. 164. 30 Uva p.16.

The seat of the arbitration sets a trend for the presumptive validity of an award and the duty to enforce foreign awards is linked with the discretion to refuse enforcement of a vacated decision. Mr Justice Colman in Minmentals Germany GmbH v Ferco Steel Ltd ruled that in international commercial arbitration, a party who submits to arbitration in a foreign jurisdiction is bound by the supervisory jurisdiction of that court. Where there is a defective award, the complaining party must first seek remedy in that court and failure to do that may amount to a waiver of the right to complain. There are two basic tasks for the court in arbitration: assistance and control31. A judicial review can either by way of defence set up by a party to the arbitral proceedings in an action for recognition or enforcement of the award and in an action seeking to set aside, vacate and or order the rehearing of the matter. Depending on the applicable institutional rules and the applicable law of the arbitration, a challenge will be made either to the tribunal or an institutional decision-making body or in the national court of the place of arbitration32. An arbitral award may be challenged in the courts of the place of arbitration and subject to the agreement of the parties, in the court of a foreign jurisdiction if the said relevant laws provide for the basis for a challenge. A call for the review of an arbitral award takes the form of a hearing and raises the question of whether the tribunal was right to reach its conclusion/decision33. A party may challenge an arbitral award to have that award set aside or nullified in whole or in part. Every state has its laws regulating arbitration and the grounds upon which an arbitral award may be challenged. Review of an award may be in different forms, under the ICC Rules, the tribunal on its own initiative or on the request of a party may correct clerical errors and the tribunal may also give an interpretation of the award34. Under the UNCITRAL Rules, the tribunal may correct clerical errors, give an interpretation of an award and make an additional award on request of either of the parties for claims made in the arbitral proceedings but omitted from the award35. Before an award can be challenged before a competent court, parties must exhaust such as any available process of appeal or review; and any available provision for the correction of the award or for
31

Sanders, P. (1999) Quo Vadis Arbitration? Sixty Years of Arbitration Practice, Kluwer Law International, P. 18. 32 Mallet, D. And Allen, N. (2011) Party Instigated Arbitrator Challenges: A Practical Guide, Arbitration, 77 (1), pp. 59-83. 33 Peterson Farms Inc v C&M Farming Ltd [2004] 1 Lloyds Rep, 603; see also Halsbury Laws of England, (5th edn) Vol. 2. 2008 p. 979. 34 Art. 29(1) ICC Rules. 35 Art. 35, 36 and 37 UNCITRAL Rules, Art. 33 Model Law.

an additional award36. However as prescribed under the rules, there are time limits for requests of interpretation, correction and an additional award. UNCITRAL rules provides for 30 days within receipt of an award for an application for interpretation, correction and additional award. While under the Model Law an application for correction, interpretation, additional award and setting aside within three months of receipt of the award or of a request being disposed. There are basically three broad grounds upon which an arbitral award may be challenged and these grounds may exist alone or a challenge may be based on a combination of more than one of the grounds37. An award may therefore be challenged on jurisdictional grounds, procedural grounds and substantive grounds. The grounds for challenge will be considered under the following sub-heads.
i.

Incapacity or invalid agreement to arbitrate a challenge of an arbitral award may be based on the absence of a valid and binding arbitration agreement. A party wishing to challenge an award on the ground of an invalid arbitration agreement must explicitly challenge the underlying contract not the arbitration agreement in the arbitration clause38.

ii.

Excess of arbitral tribunals powers by virtue of Art. 34(2)(a)(iii) where a tribunal in the exercise of its powers, makes an award which is in excess of its powers, if the decisions on matters submitted to it can be separated from matters not submitted to it, the part of the award which contains matters not submitted to it may be severed and set aside39. Under the Federal Arbitration Act40, an award in excess of issues submitted to the tribunal will not constitute a final and definitive award on such subject matter. The situation becomes dicey when an award does not deal with all the matters raised before the tribunal. Under the 1927 New York Convention, this would constitute a ground for refusal to recognise and enforce the award. However this no longer constitutes a ground for refusal to recognise and enforce an award. Problem therefore arises when the failure to consider the other matters not dealt with in the award could have affected and altered the award given41. Where an arbitrator while exercising his discretion on costs relies on points not raised by the

36 37

S. 70(2) English Arbitration Act, 1996. Redfern, A. et al (2009) Redfern and Hunter on International Arbitration, (5th edn) New York, Oxford University Press, p. 594. 38 Vee Networks Ltd v Econet Wireless International Ltd [2005] 1 All ER (Comm) 303. 39 Paris Lapeye v Sauvage (2001) Revue de lArbitrage 806. 40 S. 10(a)(4) US Federal Arbitration Act. 41 Redfern, p. 598

parties and thereby not giving them the opportunity to address the tribunal on such matter, this would amount to a serious irregularity and a challenge to such an award may thereby arise.
iii.

Arbitrability an award would be subject to challenge if the subject matter of the dispute is not capable of determination by arbitration42. Ability to arbitrate on a particular subject matter is usually linked to the concepts of public policy. In determining whether a matter is arbitrable, specific reference has to be made to the law of the place of arbitration. In Westacre Investments Inc v Jugoimport-SPDR Holding Co. Ltd43, the English Court was called upon to refuse enforcement on grounds of public policy and this duty placed an obligation on the court between the desirability of giving effect to the public policy against enforcement of corrupt transactions and, on the other hand, the public policy of sustaining international arbitration agreements44. Matters of public policy are also jurisdiction specific as matters that may be contrary to public policy in one sate may not be contrary to public policy in other states. With this in mind, this has led to the development of the concept of international public order by some jurists in the New French Code of Civil Procedure45 which allows an international award to be set aside if the recognition or execution of the award is contrary to international public policy. This approach may be consistent with the trend to protect arbitral proceedings as international arbitral awards will therefore not be set aside on the mere basis of not confirming to some national standards. In Devolve, Essai sur la motivation des sentences arbitrables46 failure of an arbitral award not to contain reasons was held not to be a ground to annul the award as it would have ordinarily being under a domestic arbitral proceedings.

Procedural grounds

42 43

Art. 34(2)(b)(i) Model Law and Art. II(1) New York Convention. [1998] 2 Lloyds Rep 111. 44 Rogers, A. and Kaley, M (1999) The Impact of Public Policy in International Commercial Arbitration, Journal of the Chartered Institute of Arbitrators, Vol.65 No. 4. P. 329. 45 Art. 1502.5 French Decree Law No 81-500, 12 May 1981. 46 (1989) 2 Revue de l Arbitrage 149.

i.

Procedural irregularity - an award may be challenged if an irregularity culminated in the giving of the award. There are procedural regulations which are to ensure that the tribunal is properly constituted and its proceedings does not result in an effort in futility by ensuring that its conduct are fair and proper. The procedure adopted at the tribunal must be in compliance with mandatory rules of the applicable law and in accordance with the agreement of parties. The purport of ensuring that no procedural irregularity is involved in the arbitration proceedings is to ensure that parties are accorded fair hearing and equality. The law of the place of arbitration majorly regulates the procedure at the tribunal as the approach of national courts differs. In Parsons Whittemore Overseas Co Inc v Societe Generale de lIndustrie du Papier (RAKTA)47 the US Federal Court treated the failure to give parties an oral hearing is a violation of due process and as such a ground for setting aside an award/refusing to recognise and enforce the award under the New York Convention. Art. 34(2)(c)(ii) of the Model Law provides that a party may challenge an award on the basis that proper notice of the appointment of an arbitrator or of the arbitral proceedings was not given, or the party was unable to present his case. In Corporacion Transnacional de Inversiones SA de CV v STET International SpA and STET International Netherlands NV in considering the grounds for challenging an arbitral award under the Model Law, which was enacted in Ontario by way of International Commercial Arbitration Act 1990. Stated that the conduct of the tribunal must be such that offends the notion of justice and that if parties deliberately boycotted the arbitral proceedings, they could not say they had not been given the right to be heard48. Where the composition of the tribunal and the procedure adopted at the proceedings is not in conformity with the agreement of the parties the award may also be challenged and whatever be the agreement of the parties must be in conformity of the law of the place of arbitration. Where parties do not reach an agreement as to the appointment of the arbitrators or of the procedure to be adopted at the proceedings, arbitrators may be selected according to the relevant applicable rules

47 48

(1974) 508 F2d 969 (2nd Cir) (1999) 45 OR (3d) 183 Ontario Superior Court of Justice.

10

and arbitrators may determine procedure to be adopted at the proceeding. Such procedure must comply with principles of fair hearing. Substantive grounds An appeal on the grounds of mistake of law or fact would usually not lie as judicial review based on merits is seldom allowed. In the English courts errors of law are usually not considered, except such errors are apparent on the face of the award and such a review will be limited to a scrutiny of the award and other related documents. Even though the Arbitration Act provides for such possibility, such proceedings can only be instituted with the leave of court and the consent of all the other parties49.
i.

Mistake of law Art. 550 provides that the matters governed under the law shall not be subject to review by courts except as provided by this law. This then raises the argument between finality of arbitration awards and the need of judicial control. There exists a need for arbitral decisions to be reviewed on points of law as the alternative of that is the risk of inconsistent decisions on same or similar points of law. Standards of interpretations cannot be adopted for contract terms. In the same vein, it is necessary that the arbitration process is protected from abuse as parties may then be subjected to litigation unnecessarily. With parties losing the privacy, expertise of arbitrators and speedy resolution of disputes as anticipated with arbitration. It is not easy to strike a balance between the need for finality51 in the arbitral process and the wider public interest of ensuring of consistency of decisions and predictability of the operation of law.

ii.

Mistake of Fact the Model Law and most state laws do not allow for a challenge on the ground of mistake of fact. Redfern pointed out that while there may be justification for a review/appeal on mistake of law, there is no such justification for challenge on mistake of fact52.

In England, a procedural defect alone will not invalidate an award53, for there to be a successful challenge, it must be established that the occurrence of an irregularity as listed in S. 68

49

Art. 69(1) English Arbitration Act. Model Law 51 Embiricos, E.G.E (2010) Appeals from Arbitration Awards, Arbitration, 76(3), pp. 427-430. 52 Redfern p.611. 53 Shackleton, S. (2002) Challenging Arbitration Awards: Pt II Procedural Irregularity, 152 New Law Journal, 1816.
50

11

occasioned substantial injustice54. Though these exist as a good test for the interference of an arbitral award, it must not be forgotten that before the court will reach such a determination, there must have been a judicial review of the arbitral award. Which will constitute a clogging of the winners right to enjoy the fruits of the award and a delay in the arbitration proceedings. There are time limits to the challenge of an award. Under the Model Law, an action for annulment or review of a partial award on jurisdiction must be brought within 30 days of notification of it to the party wishing to make the challenge 55 while in the UK, a challenge to an award/ an appeal must be made within 28 days of the date of the award56. Upon challenge of an award, the court may confirm the award, refer the award back to the tribunal for reconsideration, vary the award or set the award aside in part or in whole 57. Where an award has been set aside, the award becomes unenforceable. In the absence of review of arbitral awards in the seat of the arbitration, a victim of procedural irregularity may have to defend actions for attachments of property in different jurisdictions. It seems a good idea that arbitral proceedings be freed from mandatory rules and public policy of the place of arbitration, it is also imperative that there exists safeguards against the potential risks that arbitrators may abuse power and every due process requirement. With the resultant effect of parties, not getting the justice desired from the arbitral proceedings. As is existent in Switzerland, Sweden and Belgium, if all parties to arbitration are foreign, they may by express agreement exclude the right to challenge the arbitral award. Some other national laws and arbitration rules provides for waiver of right to challenge the award. Also in some instances, a party may lose its right to challenge an award on jurisdictional basis if such an objection is not made early in the proceedings58 and that party will be deemed to have lost the right. These provisions have indeed tried to reinforce party autonomy by providing for express or implicit exclusion of the right to review. Under the New York Convention and the Model Law, if an award is set aside by a court of the seat of arbitration, the competent court may refuse to grant recognition and enforcement to that award59. This provision has been a

54

S.68 Arbitration Act, 1996 and Macpherson, C. and Mainwaring-Taylor, C. (2006) Final and Binding? Challenges Under the Arbitration Act 1996, Section 69, Arbitration, 72(2), pp. 119-123. 55 Art. 16(3) 56 S.70 4(1),(2) and (3) English Arbitration Act. 57 S. 67(3) Arbitration Act 58 Art. 21(3) UNCITRAL Rules, Art. 16(2) Model Law, S. 31 English Arbitration Act. 59 Art. V(1)(e) New York Convention.

12

subject of international discourse and until an international public policy is set and acceptable, same should remain. The review of arbitral proceedings/award is necessary to protect third parties from arbitral opportunism. In order to juxtapose the competing rights of parties to arbitral proceedings, its suggested that appeals should only lie from arbitral awards if there is a claim for violation of mandatory rules. This preserves the rights of parties freedom to choose arbitration as a means of dispute resolution while also allowing the courts to intervene in order to enforce mandatory rules. The risk with courts totally refusing to review arbitral awards is that parties would enter contracts that violate mandatory awards and arbitrators will give enforcements to such contracts, as they are not motivated to do otherwise. Upon determination that it is necessary for some form of control in international arbitration, the most important question then becomes to what extent, should judicial control be allowed in international arbitration. For reasons of party autonomy, mandatory appeal is not tenable; neither should a full review on the merits of the case be allowed. Allowing full review of the award on the merits of the case would subject the arbitral tribunal to another tier of the court and it will be totally inconsistent with the role of arbitration as a dispute settlement mechanism with the ability to give final and binding decisions. It has been suggested that to safeguard the autonomy of arbitration, an international convention be passed which will establish a common ground for challenge of international arbitration. This will increase the harmonization of laws of states regarding international arbitration60.

CONCLUSION

60

Uva, p.22.

13

Throughout the years there have been tensions between state control of arbitration and the authority of parties to determine the jurisdiction and finality of the arbitration process. There has been the battle for supremacy between the national law, on the one hand, and the independence or autonomy of the arbitration process on the other hand61. It is noteworthy that the limits of party autonomy is thin and a tribunal would be in breach of its right when it fails to act on a valid arbitral agreement, disregard substantive and fundamental procedural rules. The review of arbitral award helps to keep arbitrators in check, with the effect of their awards been overturned, reputation harmed and the resultant effect of decline in arbitration. As pointed out by Gerold Herrmann, procedural errors and failures of justice should be tackled at the earliest opportunity through the medium of the national court at the place of arbitration. Limiting control to the stage of recognition of the arbitral award could leave the claimant whose claim has being dismissed with no remedy, and, the defendant who is the victim of a wrongful decision may be potentially harassed with enforcement proceedings around the world62. Above all arguments for review, parties should be able to exercise the right to contract out of all review or to contract into full review on the merits of the dispute as this is the sole purport of party autonomy that is the canon principle of arbitration. With harmonized grounds of challenge and a not too large threshold for such challenge, international arbitration is guaranteed its continued sphere of relevance in international commerce.

BIBLIOGRAPHY
61

Lew, J.D.M. (2006) Achieving the Dream: Autonomous Arbitration, 22 Arbitration International, p. 179 at 181. 62 Herrmann, G. (1999) Does the World Need Additional UnIFORM Legislation on Arbitration? 15 Arb. Intl. 234.

14

STATUTES

English Arbitration Act. US Federal Arbitration Act.

INTERNATIONAL INSTRUMENTS

UNCITRAL Model Law on Electronic Commerce, 1996. UNCITRAL Abritration Rules, 1976. New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958.

CASE LAW

Corporacion Transnacional de Inversiones SA de CV v STET International SpA and STET International Netherlands NV (1999) 45 OR (3d) 183 Ontario Superior Court of Justice.

Paris Lapeye v Sauvage (2001) Revue de lArbitrage 806. Parsons Whittemore Overseas Co Inc v Societe Generale de lIndustrie du Papier (RAKTA)63 (1974) 508 F2d 969 (2nd Cir Peterson Farms Inc v C&M Farming Ltd [2004] 1 Lloyds Rep, 603 Westacre Investments Inc v Jugoimport-SPDR Holding Co. Ltd [1998] 2 Lloyds Rep 111. Vee Networks Ltd v Econet Wireless International Ltd [2005] 1 All ER (Comm) 303.

INTERPRETATIVE TEXT

Oxford Dictionary of Law, (2009), (7th edn), Oxford, New York. Halsbury Laws of England, (5th edn) Vol. 2. 2008.

BOOKS

Jenkins, J. And Stebbings, S. (2006) International Commercial Arbitration Law, Great Britain, Kluwer Law International.

63

(1974) 508 F2d 969 (2nd Cir)

15

Park, W. W. (2006) Judicial Controls in the Arbitral Process, in Arbitration of International Business Disputes- Studies in Law and Practice, New York, Oxford University Press, 234.

Redfern, A. et al (2009) Redfern and Hunter on International Arbitration, (5th edn) New York, Oxford University Press, p. 594. Sanders, P. (1999) Quo Vadis Arbitration? Sixty Years of Arbitration Practice, Kluwer Law International. Tweeddale, K and Tweeddale, (2005) Arbitration of Commercial Disputes International and English Law and Practice, New York, Oxford University Press

ARTICLES

Colman, A. (2006) Arbitrations and Judges--How much Interference should we Tolerate? 72 Arbitration. Chung, R.K.L. (2011) The rules of Natural Justice in Arbitration, Arbitration, 77(2), pp. 167-175. Embiricos, E.G.E (2010) Appeals from Arbitration Awards, Arbitration, 76(3). Fouchard, P. (1997) La Portee international de l annulations de la sentence arbitrale dans son pays dorigine, Rev. Arb. 329 Herrmann, G. (1999) Does the World Need Additional UnIFORM Legislation on Arbitration? 15 Arb. Intl. 234 Lew, J.D.M. (2006) Achieving the Dream: Autonomous Arbitration, 22 Arbitration International. Lurie, J. (2010) Court Intervention in Arbitration: Support or Interference? Arbitration, 76(3). Macpherson, C. and Mainwaring-Taylor, C. (2006) Final and Binding? Challenges Under the Arbitration Act 1996, Section 69, Arbitration, 72(2). Mallet, D. And Allen, N. (2011) Party Instigated Arbitrator Challenges: A Practical Guide, Arbitration, 77 (1). Mann, F. (1986) Lex Facit Arbitrum, 2 Arb. Intl 249 Mayer, P. (1991) Seeking the Middle Ground of Court Control: A Reply to I. N. Duncan Wallace, Arbitration International, 7(4 Park, W. W (2001) Why Courts Review Arbitral Awards, Festchrift fur Karl-Heinz Bockstiegel 596.
16

Phillips, P. G. (1934) Rules of Law or Laissez-Faire in Commercial Arbitration, 47 Harv. L. Rev., 590. Rogers, A. and Kaley, M (1999) The Impact of Public Policy in International Commercial Arbitration, Journal of the Chartered Institute of Arbitrators, Vol.65 No.4. The Harvard Law Review Association, (1950) Judicial Review of Arbitration Awards on the Merits, Vol. 63, No. 4, pp 681-690 Available at http://www.jstor.org/stable/1335997 Accessed at 18th of April, 2011.

Shackleton, S. (2002) Challenging Arbitration Awards: Pt I Jurisdiction, 152 New Law Journal, 1746 Shackleton, S. (2002) Challenging Arbitration Awards: Pt II Procedural Irregularity, 152 New Law Journal, 1816. Torgbor, E. (2010) The Right of Appeal and Judicial Scrutiny of Arbitral Decisions and Awards, Arbitration, 76. Uva, P.S. (2010) Challenges of Awards vis-a-vis The Finality of International Arbitration, Available at www.consulegis.com/fileadmin/downloads/thomas_marx_0910/consulegis_tma_pedro _susa_uva.pdf Accessed on 13th of May, 2011.

Wallace, D. (1990) Control by the Courts: A Plea for More, Not Less, Arbitration International, 6(3). Yu, H. (1999) Defective Awards must be Challenged in the Courts of the Seat of the Arbitration- A Further than Localisation?, Journal of the Chartered Institute of Arbitrators, Vol. 65 No. 3.

17