Module 3 Chapter 6: Arbitration Awards: Purpose, Issues, and Enforcement

• The arbitrator's decision is based on evidence and submissions presented during arbitration
• A good practice guide for the arbitrator is provided by the rules of evidence
• The award needs to determine the issues in dispute and be enforceable

Key elements for an arbitrator

• Ensure all issues in dispute are addressed
• Explain how the decision was reached
• Record the arbitration process and procedures
• Demonstrate fairness and equality in the process

Focus of the chapter

• Purpose and requirements of an enforceable award
• Identifying issues and the reasoning process
• Structuring the award document and key points for publishing

Purpose of an Award

• The primary purpose is to record the arbitrator's decision on the issues and inform the parties
• Parties should understand why the arbitrator decided the way they did
• Clear and easy to understand language is important, especially when parties represent themselves

Remedies

• Awards might order payment or declare a matter for determination

Resolving Disputes

• Awards must address all issues the parties put to the arbitrator, no more
• The arbitrator must be sure to have decided all issues and not stray beyond them
• The written award informs parties of the decision and its consequences
• If the arbitrator finds in favor of the referring party for breach of contract, the award must state what sums should be paid as damages, and the timescale for payment

Award enforceability

• The award has consequences for the parties
• Parties need to understand what to do to comply with the award
• If one party doesn't comply, the other can go to court to ensure compliance and enforce the award

Informing Parties and Institutions

• Parties will review the award themselves
• Awards may be read by a judge for enforcement purposes
• All parties should understand the conclusions and reasoning behind the award
• Reasoned awards help parties understand not only the decision, but how the arbitrator arrived at it
• Awards that need further explanation may not have fulfilled their primary purpose

Avoiding Legal Issues in Awards

• Creating legal controversy is not a good idea for awards

• The involved parties will bear the expense of solving the legal problems

• An enforceable award cannot be challenged under Article V of the New York Convention

• Article V outlines specific conditions under which recognition and enforcement of an award may be refused

Article V: Reasons for Refusal

• Incapacity of a party or invalidity of the agreement under applicable law
• Lack of proper notice for arbitrator appointment or arbitration proceedings
• Inability to present a case
• Award deals with matters beyond the scope of submission to arbitration
• Composition of arbitral authority or procedure not in accordance with the agreement
• Award not yet binding or has been set aside by a competent authority

Additional reasons for refusal

• The subject matter of the difference cannot be settled through arbitration under the country's law
• Recognition or enforcement of the award would be against the public policy of the country

Key Elements of a Well-Drafted Award

• Succinctly outlines the background
• Logically guides the reader to the arbitrator's conclusion
• Explains how the conclusion was reached
• States what is ordered

Specific items for the award

• Identification of parties and their relationships
• Description of the contract, arbitration appointment, and procedures followed
• Applicable laws and substantive matters in dispute

Arbitrator's Considerations in Award

• Submissions by the parties, evidence, and applicable governing law
• Decisions on substantive matters
• Interest, if appropriate
• Liability for arbitrator's fees and expenses (only in the body, not dispositive section)
• Party costs, if contract provides for it

Components of an Award

• Directions or declarations
• Arbitrator's signature
• Date
• Location (seat) of the arbitration in international awards

Plain Language

• Arbitrators need to ensure that they draft in a legally satisfactory way
• Should be clear, concise and unambiguous
• Avoid confusing legal jargon
• Avoid overly vague language
• "Maybe," "should," and "might" should not be used in formal documents

Definitions essential for arbitrators

• "Can" means 'is able' or 'is possible'
• "May" means 'is optional' or 'is permitted'
• "Shall" means 'must'
• "Will" denotes the future
• "He" (unless specific) is 'he, she, or it', and often includes the plural

Key Terms in Arbitration

• Defence: A pleading answering allegations made in the referral or claim
• Claim: A demand/right arising from the contract, either the cause of action or the grounds
• Counterclaim: A claim presented by the responding party against the referring party, either a cross-claim asserting an independent cause of action, or a deduction from the referring party's claim

Important Points About Counterclaims

• Arbitrators must be given jurisdiction to deal with counterclaims
• Counterclaims can be used 'as a shield' for deductions or 'as a sword' as an independent claim

More Important Terms

• Set-off: A cross-claim made as a defense, to defeat or diminish the referring party's claim
• Difference: Is a sub-category of "dispute" in construction adjudication legislation
• Dispute: A contention/assertion with opposing arguments
• The word "dispute" should be given its normal meaning
• Disputes don't arise until it emerges the claim is not admitted

Timeframes

• The time a respondent can remain silent before it's inferred they do not admit a claim depends on the context
• If a claim is nebulous, silence or non-admission aren't likely to lead to a dispute for arbitration

Statements from Collins v Baltic Quay

• The court can infer non-admission of claim and existence of a dispute.
• Negotiations and discussions are viewed as more consistent with an unresolved dispute
• Courts may infer non-admission of a claim to refer it to arbitration/adjudication

Phrases for constructions

• 'Arising out of': very broad and includes almost any dispute, even without a contract
• 'Arising under': more specific, includes issues of non-disclosure
• 'In connection with': excludes rectification and claims for damages from fraudulent inducement
• 'In relation to': restrictive meaning like 'in connection with'
• 'In respect to': includes disputes about breach or circumstances affecting performance
• 'Relating thereto': fairly broad, covering allegations the contract ended due to failed conditions
• 'Relative to': similar to 'relating thereto'.
• 'With regard to': similar to 'in respect of'.

Legal and Substantive Aspects

• Awareness of governing law is important
• Must act, and be seen to act, under principles of natural justice
• Must act fairly, in good faith, and without bias
• Give equal chances to each part to present their case
• Not be invested in the outcome of the dispute

Requirements of an Award

• Stemming from statute, NY Convention, and applicable rules, they are often classified as 'formal' and ''substantive'

Formal Requirements

• The provisions of relevant legislation
• Arbitration Rules
• Common practices for facilitation

Substantive Requirements

• Cogency: needs to show cogent, persuasive, consistent reasoning
• Completeness: needs to deal with all matters it covers, but nothing more
• Certainty: needs to be be free of ambiguity: clear intentions
• Finality: awards that do not leave opportunity for reopening the issues
• Enforceability: enforceable for awarded sum
• Jurisdiction: the matter must be with jurisdiction

Reasons for Decisions

• Giving is required by many rules/laws
• Good practice to provide reasons as a matter of process
• Shows the process is logical and judicial
• Setting out in writing the thought process
• States that "evidence is preferred," but there should be clarity

Aspects of Arbitration Process

• Allow sufficient time to record
• Not acceptable to state that certain evidence is preferred

Consequences of the Publication of an Award w/o Reasons

• They vary across jurisdictions
• They can be serious
• By agreement, it may mean parties have waived their right to appeal under the Arbitration Act

Communication

• In administered arbitration, the award is submitted to the institution and the institution then provides it to the parties
• In an ad hoc arbitration, the arbitrator must communicate his award to the parties as soon as he has completed it
• Minimal delay, with instant, electronic delivery.

Errors

• Laws/rules allow correction
• Most laws use the word "may" to indicate authority to make corrections at the request of a party
• Can typically be limited to removing clerical/typographical ones
• Is limited to the removal of clerical or typographical errors which arise by accident or omission
• Correction is limited to the removal of clerical or typographical errors which arise by accident or omission

Errors

• A palpable error cannot be corrected even if the arbitrator wishes to
• If the arbitrator replies, then it does not matter if the reply is fact or fact based
• Even if errors of fact/law are present, it will be enforced