Matthew Arnold in his essay ‘The Study of Poetry’ says
'The future of poetry is immense, because in poetry, where it is worthy of its high destinies, our race, as time goes on, will find an ever surer and surer stay’.
We can undoubtedly replace the words ‘poetry’ with ‘Arbitration’ and ‘our race’ with ‘Commercial World’. Then the next question that comes to our mind is what makes the arbitration worthy of its high destiny. Indisputable answer is the “Arbitrators”. The indefinable personality traits that make all the difference in the process of Arbitration are (a) the Arbitrator’s comprehension and appreciation of the basic human rights that are inalienable and equal to all the members of the human family;
and his adherence to fairness in conducting the arbitration proceedings
(b)his understanding of public policy; knowledge of laws pertaining to the subject and substance of the dispute and also the contract through which the dispute is referred to arbitration (c) his sense of responsibility in spite of the availability of considerable level of immunity.
All international instruments such as ‘Universal Declaration of Human Rights’, ‘International Covenant on Civil and Political Rights’ and also the Constitutions of almost all Nations guarantee ‘equality of human beings in status and also before law, non discrimination, freedom of expression, inherent dignity of an individual, opportunity of a fair trial by an independent and impartial tribunal for the determination of his rights and obligations, right to justice without undue delay’ which are the cardinal principles of Arbitration law in almost all jurisdictions.
Disregard of human rights outrages the conscious of a person and as Newton’s law says ‘To every action there will be an equal and opposite reaction’, the oppression and disregard of basic human rights during the conduct of Arbitral proceedings would result in the form of proceedings to set aside the award or as resistance during the enforcement proceedings.
The Arbitrator should treat the parties equally as required by Section 18 of Arbitration and conciliation Act 1996 and article 18 of UNCITRAL Model law. Equal treatment and non discrimination of parties is a fundamental principle of procedural justice. Article-1 of Universal Declaration of Human Rights says ‘All human beings are born free and equal in dignity and rights’.
American Declaration of Independence says “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights...”
‘Equal treatment of the parties’ is possible when the adjudicator doesn’t discriminate the parties. He doesn’t discriminate the parties when there is impartiality in his attitude and behavior; impartial attitude is possible when a person is independent and free from any kind of bias.
Article 2 of Universal Declaration of Human Rights speaks about non-discrimination. ‘Everyone is entitled to all the rights and freedoms set forth in this Declaration, without distinction of any kind, such as race, colour, sex, language, religion, political or other opinion, national or social origin, property, birth or other status. Furthermore, no distinction shall be made on the basis of the political, jurisdictional or international status of the country or territory to which a person belongs, whether it be independent, trust, non-self-governing or under any other limitation of sovereignty’
Incidents and circumstances of a person’s life and surroundings shape his behaviour patterns with regard to discrimination or non discrimination aspects. For example, the incident in which Mahatma Gandhi was thrown out of a train in South Africa made him sensitive to and understand the scope, depth and impact of ‘discrimination’ which helped him to fight against untouchability in India. On the other hand certain experiences and incidents can create prejudices that can hinder a person from thinking fairly with an open mind. For example, in India
Here it is relevant to cite a 1997 decision of the Canadian Supreme Court, R v RDS[1] in which a black youth was acquitted by a black judge, who declined to accept the evidence of a police officer. What she said was ‘The Crown says, well, why would the officer say that events occurred the way in which he has relayed them to the court this morning. I am not saying that the constable has misled the court, although police officers have been known to do that in the past. I am not saying that the officer overreacted, but certainly police officers do overreact, particularly when they are dealing with non-white groups. That to me indicates a state of mind right there that is questionable. I believe that probably the situation in this particular case is the case of a young police officer who overreacted. I do accept the evidence of [RDS] that he was told to shut up or he would be under arrest. It seems to be in keeping with the prevalent attitude of the day. At any rate, based on my comments and based on all the evidence before the court I have no choice but to acquit’.
The application part of value 5 (equality) of Bangalore Principles of Judicial Conduct[2] cautions judges against such unconscious bias in the following words
5.1. A judge shall be aware of, and understand, diversity in society and differences arising from various sources, including but not limited to race, colour, sex, religion, national origin, caste, disability, age, marital status, sexual orientation, social and economic status and other like causes (“irrelevant grounds”).
5.2. A judge shall not, in the performance of judicial duties, by words or conduct, manifest bias or prejudice towards any person or group on irrelevant grounds.
Justice Keith Mason, President of the New South Wales Court of Appeal, advices the judges that the best answer to unconscious judicial bias is for them to “come clean and get real.”[3]
Another solution which might probably be of use is to read extensively the histories, literatures of different countries, races, communities and groups of people around the world. Such reading makes a person understand the basic commonness of all the human beings, struggling and fighting for a dignified life with all basic human rights, on an individual scale and also as a group or as a Nation. Such awareness broadens the vision of a person and fosters Universal brotherhood in his conscience and uplifts him from the prejudices.
Article 2 of the United Nations Basic Principles on the Independence of the Judiciary[4] requires the judiciary to act impartially and without any ‘improper influences, inducements, pressures, threats or interferences, direct or indirect, from any quarter or for any reason’.
The values of independence and impartiality are given utmost importance in the Bangalore Principles of Judicial Conduct also.
Article 7.1.of ICC Arbitration Rules says that “every arbitrator must be and remain independent of the parties involved in the arbitration“,
The UNICITRAL Rules imposes a duty on the arbitrator to disclose “any circumstances likely to give rise to justifiable doubts as to his or her impartiality or independence“(article 11 of UNCITRAL arbitration rules 2010)
The ICSID Rules expect from arbitrators that they be “persons of high moral character and recognized competence in the fields of law, commerce, industry or finance, who may be relied upon to exercise independent judgment” (art. 14 of the Convention).
A declaration of independence and disclosure is required in the case of a LCIA arbitration (article 5.3. of the LCIA Rules).
Whether the Arbitration rules calls for ‘Declaration of independence or Disclosure of the circumstances likely to give rise to justifiable doubts as to his or her impartiality or independence’, the Arbitrator is expected to be clean from any relationships whether pecuniary or social that can cause bias which in turn can influence the outcome of arbitration.
"Dependence" is defined by the IBA Ethics[5] as arising from "relationships between an arbitrator and one of the parties, or with someone closely connected with one of the parties". ‘According to this source, the following may be considered as giving rise to justifiable doubts as to an arbitrator's impartiality or independence: (1) a material interest in the outcome of the dispute; (2) a position already taken in relation to the dispute; (3) current direct or indirect (i.e., via a member of family, firm or partner) business relationships with a party or a potentially important witness; (4) past business relationships of such a magnitude or nature as to be likely to affect an arbitrator's judgment; and (5) continuous and substantial social or professional relationships with a party or a potentially important witness’[6].
This constitutes the essence of the first limb of the principles of Natural Justice, nemo iudex in causa sua means "No man is permitted to be a judge in his own case".
Real danger of bias and reasonable apprehension of bias are the two concepts that are taken into consideration while assessing the partiality of an adjudicator.
Often quoted sentence that ‘judges, like Ceasar’s wife should be above suspicion’ applies to Arbitrators as well.
“A landmark decision, Dimes v Even if a judge is in fact uninfluenced by his financial interest in coming to a decision (as where he forgets he has shares in a company that is a party), it would still be wrong to preside in such a case because it might look like he was improperly swayed. That is the meaning of the famous saying (or “dictum” in legal language) from a case in 1924 that ‘justice must not only be done but should manifestly and undoubtedly be seen to be done’.” [7]
Spiritual Texts say that the causes of bondage in a human being are Greed, Desire, Anger, Jealousy and Ego. By a conscious and continuous effort to keep all these qualities under check a person becomes free from inside and attains balance and inner peace which is an essential character of a decision maker. Absence of ego makes him a good follower and a good leader at the same time. He has to be a follower of the terms of the agreement as he cannot traverse or transgress the mandate given by the agreement of the parties. During the period of submission and resolution of the dispute, wherever there is disagreement among the parties (or parties could not reach an agreement on any issue) the leadership of the Arbitrator has to be like a light house to lead the parties safely to the harbor of Justice
Natural justice is another name for commonsense justice[8]. As Lord Buckmaster said, no form or procedure should ever be permitted to exclude the presentation of a litigants’ defence. [9]
The second limb of the principles of Natural Justice is Audi Alteram Partem – the maxim indicates that no one should be condemned unheard. This principle could be broadly classified as under.[10]
i. party to an action is prima facie entitled to be heard in his presence
ii. he is entitled to dispute his opponent’s case, cross examine his opponents
witnesses and entitled to call his own witnesses and give his own evidence
before Court.
iii. He is entitled to know the reasons for the decision rendered by a Court /
Tribunal.
Dignity of individual is the Constitutional assurance. The Arbitrator has to uphold his own dignity as well as the dignity of the parties. Acting without transparency and doing something behind the back of one party is nothing but cheating. Cheating one of the parties is detrimental to his own dignity not only as an arbitrator but also as a human being. Not giving enough opportunity to present their case is oppression and by oppressing, the arbitrator is violating the dignity of the parties.
The Arbitrator has an equally important dual duty of resolving the dispute expeditiously and also giving the parties sufficient and equal opportunity to present their case. Here the Arbitrator may have to encounter the dilatory tactics of one of the parties. Methodical recording of minutes of proceedings and well contemplated written communication with the parties in the form of ‘notices’ and ‘proposals’ during the conduct of Arbitration Proceedings, will serve two faceted purpose. One is ‘such record’ restrain the parties from delaying tactics and the second purpose is it serves as a proof of the fair proceedings, transparency, lack of bias and equal treatment to the parties. The Record of Arbitration Proceedings plays an important role in upholding and enforcing the Award.
Nothing astonishes men so much as common-sense and plain dealing-
Ralph Waldo Emerson
Ralph Waldo Emerson
The Arbitrator’s commonsense approach in understanding the dispute and the surrounding circumstances and behaviour of parties at each stage of the evolution and resolution of dispute helps him to maintain the proceedings simple, transparent and efficient.
Technicalities and formalities of procedure can be dispensed with in Arbitration but conscious and manifest disregard of law can be fatal to the award. One cannot term a mere error in interpretation or application of law as manifest disregard of law. To constitute Manifest Disregard of law the Arbitrator’s decision should be in contravention of an established and well defined legal principle which the Arbitrator has refused to regard. This is a non statutory and judge made ground for vacating the Award as demonstrated in a recent US Case of Stolt-Nielsen v. Animal Feeds[11] Manifest Disregard of law Doctrine applies not only to Arbitrator while making a decision but it applies to parties as well when they are entering into agreements.
In Hall Street Associates v. Mattel, Inc, the US
Though the decisions of both the above mentioned cases appear to be contradictory to each other on the issues of review of the award by the court and also on the possibility of expansion of grounds that are set forth in the legislation for vacating awards, in fact it is the regulation and confirmation by the court that neither the parties nor Arbitrator can claim at any time that they are above the law. ‘Autonomy of the parties’ and derivation of Arbitrator’s authority by the consent of the parties doesn’t mean that they are above the rule of law.
“No man in this country is so high that he is above the law.” (U.S. v. Lee, 106 U.S. 196,220 (1882)).[13]
“Section 69 of the English Act of 1996, there is an appeal provided on a point of law under subject of course to obtaining leave (or with consent of all parties). Leave shall be given only if the court is satisfied that on the findings of the fact arrived at, a question of general public importance has arisen or the decision of the arbitrators is ‘obviously wrong’ or is at least open to serious doubt in all the circumstances of the case, and the court feels that it is ‘just and proper’ to decide the question of law”[14].
The scope and heads of public policy in India was defined by Supreme Court in Renusagar Power Co Ltd v General Electric Co as (i) the fundamental policy of Indian law; or (ii) the interests of India
The Indian Supreme Court in ONGC Vs SAW Pipes further held that an award could be set aside if it was so unfair and unreasonable that it shocks the conscience of the Court.
There is a general agreement that the courts may extend existing ‘Public Policy’ to new situations and the difference between extending on existing principle as opposed to creating a new one will often be wafer thin[15].
Due to this reason the comment of an English judge in the early 19th century that “public policy is a very unruly horse, and once you get astride it you never know where it will carry you” is so often quoted.
UNCITRAL Model Law refers to public Policy in Articles 34(2)(b)(ii) and 36(1)(b)(ii), but doesn’t define public policy anywhere.
The 70th Conference of the International Law Association held in New Delhi , India
1(d) The international public policy of any State includes: (i) fundamental principles, pertaining to justice or morality, that the State wishes to protect even when it is not directly concerned (ii) rules designed to serve the essential political, social or economic interests of the State, these being known as “lois de police” or “public policy rules” and (iii) the duty of
the State to respect its obligations towards other States or international organisations.
1(e) An example of a substantive fundamental principle is prohibition of abuse of rights. An example of a procedural fundamental principle is the requirement that tribunals be impartial. An example of a public policy rule is anti-trust law. An example of an international obligation is a United Nations resolution imposing sanctions. Some rules, such as those prohibiting corruption, may fall into more than one category.
“Justice is a great civilizing force. It ensures that the rule of law rather than the rules of nature (survival of the fittest and prevalence of might over right) prevail in regulating human conduct” [16]. Public Policy controls anarchy by restricting the freedom of the parties and also by acting as a check against the unscrupulous arbitrators.
In 2009 the Court said in “Public policy is often invoked by a losing party in an attempt to manipulate an enforcing court into re-opening matters which have been (or ought to have been) determined in an arbitration. The public policy ground is thereby raised to frustrate or delay the winning party from enjoying the fruits of a victory. The court must be vigilant that the public policy objection is not abused in order to obtain for the losing party a second chance at arguing a case. To allow that would be to undermine the efficacy of the parties’ agreement to pursue arbitration.”
But Lord Denning in 1971 assured that ‘With a good man in the saddle, the unruly horse can be kept in control.’[18]
What happens when the Arbitrator, who is not directly accountable to or supervised by a hierarchy as in the case of members of judiciary, is negligent in exercising due care and skill?
English and Irish courts recognized that as the Arbitrators are rendering judicial functions they enjoy the same immunity as that of judges. The Australian legislation gives immunity for negligence but makes the Arbitrator liable for fraud. US Courts support extensive arbitral immunity but at the same time recognize the Arbitrator’s contractual liability to render a timely decision( E.C.Ernst V Manhattan construction Company of Texas).[19] Civil Law Jurisdictions take a contractual approach towards arbitral immunity. Arbitrators are contractually liable for loss and damages for failure to perform their duties. However civil law jurisdictions ‘fix liability on the arbitrator on the event of gross fault, fraud or connivance with one of the parties’[20]. Tendency of the courts has been to discourage frivolous and spurious law suits against the arbitrators by losing parties. So Arbitrators are given immunity by the courts for almost all bonafide acts and decisions.
Inspite of the availability of greater degree of immunity than other professionals who are liable in damages for negligence if they fail to exercise due care and skill, the Arbitrator should have awareness that until unless consumers of Justice Delivery System are certain that Arbitration renders justice expeditiously with fair procedure and cost effectiveness, there is no future for Arbitration and also for Arbitrators.
Hon’ble Justice Mohit S.Shah, Chief Justice of Bombay High Court, in his lecture ‘Mediation Movement in
“So far we did not pay heed to the modern litigant who is conscious of the fact that he is a consumer of Justice Delivery System and not a mere recipient of the court verdicts. He looks for options when he goes to buy television sets or cars. He demands a choice of movies and therefore, prefers to go to a multiplex. There he even has a choice of stairs, elevators and escalators. This litigant is, therefore, highly dissatisfied when he goes to a court and finds that he has to stand in the same queue and wait not only for years but for decades, he finds that the system is not only too complex and technical but also prohibitively expensive. He finds that even when he goes to Alternative Dispute Resolution Mechanisms, they are not treated with the respect they deserve and that judges and lawyers still consider the adversary system as the best thing on earth.”
With the advent of privatization consumers started getting importance. As the monopoly of the government in many sectors like banks, telecom and electricity have come to an end, not only consumers enjoyed wide choice of service providers, but also, there is an attitudinal change from authoritativeness to courteousness and customer friendliness. For example compare the attitude of the BSNL employees in 1990 and 2010. As ‘the entire foundation of law of contract, Transfer of property and sale of goods is voluntary and informed consent’[21] the modern litigant seeks justice in private sector for procedural flexibility, cost effectiveness and also for choice of an Adjudicator with specialized knowledge. So it is important for the Arbitrator to understand about the need for quality of service and also about his principal duty to render impeccable justice.
Justice is truth in action.-Joseph Jourbert.
Truth in action can be defined as doing the right thing with relevance to the surrounding circumstances of the issue and taking into account that particular point of time. The Arbitrator should always strive to come to a correct conclusion on any issue. He should test and check his each and every conclusion against the consolidated and crystallized experiences (in the form of precedents, legislations and Trade usages) of the people involved in ‘Trade and Commerce’ and also of the legal systems worldwide with an intention to apply the spirit and essence of the same to the situation at hand; and if the situation so demands, with utmost responsibility and balance, only in the interest of justice and keeping in mind the autonomy of parties as paramount, the Arbitrator should have the courage to explore new solution suitable to that particular situation. In such cases the reasons given in the award for arriving at such a decision must be still more elaborate, unequivocal, pragmatic and clear so that when the award goes for Judicial Scrutiny, it confirms to the collective conscience of mankind of which the Arbitrator’s conscience is an integral and indispensable part.
As we must account for every idle word, so we must for every idle
silence-Benjamin Franklin
Character may almost be called the most effective means of persuasion...Aristotle
Thus the catalyst that makes arbitration genuine in style and substance is the personality of the arbitrator.
[2] Bangalore Principles of Judicial Conduct prepared by the Judicial Integrity Group. see The United Nations Social and Economic Council’s resolution 2006/23 of 27 July 2006
[3] Keith Mason, ‘Unconscious Judicial Prejudice’, Supreme and Federal Courts Judges’
Conference, January 2001, at 7. as quoted in ‘Impartiality in Judging and the Passions of Mankind’ by The Rt. Hon. Dame Sian Elias, GNZM, Chief Justice of New Zealand
[4] Adopted by the Seventh United Nations Congress on the Prevention of Crime and the Treatment of Offenders held at Milan
[5] International Bar Association, Ethics for International Arbitrators § 3.1, reprinted in 26 I.L.M. 583, 584-89 (1987) as quoted in Practical Guidelines For Interviewing, Selecting And Challenging Party-Appointed Arbitrators In International Commercial Arbitration by Doak Bishop & Lucy Reed
[6] Practical Guidelines For Interviewing, Selecting And Challenging Party-Appointed Arbitrators In International Commercial Arbitration by Doak Bishop & Lucy Reed
[8] Uma Nath Pandey v. State of U.P.
[9] as quoted in the judgment of Uma Nath Pandey v. State of U.P
[10] Lecture on PRINCIPLES OF NATURAL JUSTICE delivered by Justice T.S.Sivagnanam at Tamil Nadu State Judicial Academy
[11] 130 S. Ct. 1758 (2010).
[12] Did the U.S. Supreme Court, in its Stolt-Niesen Decision, Make it Easier for Courts to Vacate Arbitration Awards?
by Margaret Moses
[13] as quoted in Are Arbitrators Above the Law?The “Manifest Disregard of the Law” Standard by Michael H. LeRoy
[14] In “Arbitration in India : Section 34, ONGC vs. SAW Pipes, manifest illegality and similar approaches in UK
[15] Laws on Public Policy of India
Vijay Gupta, Sr. Highway Consultant L. R. Kadiyali & Associates,New Delhi
Vijay Gupta, Sr. Highway Consultant L. R. Kadiyali & Associates,
[16] See the Speech delivered by Justice Smt. Sujata V. Manohar, Supreme Court of India (Retd.) at programme for Orientation & Training of New Members, Income Tax Appellate Tribunal, Mumbai. held from 12th November, 2007 to 28th November, 2007
[19] See ‘Claims Against Arbitrators for Breach of Ethical Duties’ by Michael Hwang, Senior Counsel , Singapore
[20] Above mentioned article of footnote 19
[21]‘Mediation Movement in Gujarat’ by Hon’ble Justice Mohit S. Shah, Chief Justice of Bombay
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