Book Review: International Commercial Arbitration and the Arbitrator’s Contract

Updated: Sep 20

Book Review by:

Aishwarya Shakthi.S (Research Intern)

Graphics:

Shritama Saha(Graphics Intern)


An Overview:

“International Commercial Arbitration and the Arbitrator’s Contract” has been by Emilia Onyema and published by Routledge. This book deals with the nature of the arbitrators’ contract, addressing several topics like appointment, removal, duties and rights of arbitrators, disputing parties and arbitration institutions. The book appeals national arbitration laws from various jurisdictions in Africa, Asia, Europe, North and South America to give a global view. The prime emphasis of the book is a study of the formation of the arbitrator’s contract, the terms of this contract and the institution’s contract.

Introduction:

This book elaborates arbitration as a private process of dispute resolution.1It is an alternative to litigation in state courts. It is a dispute resolution mechanism that has been adopted by commercial parties over a long time.2The arbitrators were required to render a decision binding on the disputing parties in the form of an award, though not necessarily accompanied with reasons. The disputing parties voluntarily complied with the arbitrator’s decision.



Outline of the chapters

· Chapter One gives a contextual discussion of the arbitration agreement, which is the fundamental contract from which all the other contracts examined in this book emanate.

· Chapter Two gives the juridical theories of arbitration and the related theories are examined as part of the contextual analysis of the subject matter of international arbitration.

· Chapter Three gives the nature of the individuals or entities that are parties to the various contracts.

· Chapter Four analyses the formation of the arbitrator’s contract and the contracts involving the arbitration institution.

· Chapter Five gives the terms of the arbitrator’s contract. The same terms are mirrored in the contract between the arbitration institution and the disputing parties.

· Chapter Six examines the remedies that parties to these two contracts may have recourse to.

· Chapter Seven discusses how these contracts may be terminated.

A summary of each topic:

1) Arbitration agreement:

This chapter provides a preliminary discourse on aspects of the arbitration agreement pertinent to matters affecting the arbitrator’s contract and the disputing parties’ contract with the arbitration institution.

The arbitration agreement is the initial contract in any consensual arbitration reference. The parties to the arbitration agreement are those entities whose disputes arising under it. These parties to the arbitration agreement are also parties to the arbitrator’s contract and the institution’s contract. Being a bilateral contract, one party to the arbitration agreement makes an offer with legal intention to be bound by the other party. Upon acceptance of this offer to arbitrate existing or future disputes, the agreement to arbitrate comes into existence between these parties. The prime purpose of this agreement is to arbitrate the covered disputes which have ascended. As a contract, the arbitration agreement has its governing law independent of the law governing the substantive underlying contract or transaction. It is this law that governs matters affecting the existence, formation, validity, performance and termination of the arbitration agreement. The resolution maker applies several connectors of which the principal connecting factors are the law chosen to apply to the underlying transaction and the law of the base of arbitration. The examination of the core focus of this book is divided into two primary forms of arbitral reference which are, ad hoc reference, where the relevant parties are the disputing parties and the arbitrator; and institutional reference, where the arbitration institution takes on an active contractual role in the deal.


This chapter examines:

1. The legal nature of the arbitration agreement: The arbitration agreement is a contract in which the parties exchange promises with the legal intention to be bound to the performance of those promises.

2. The requirements for a valid arbitration agreement under selected arbitration laws and rules:

a) Under most arbitration laws, the arbitration agreement is required to be in writing.

b) The New York Convention requires the arbitration agreement to be signed so that the signature of execution of the main contract suffices for purposes of the validity of the arbitration clause.

c) The requirement for a defined legal relationship cover disputes arising from tortuous or delictual liabilities.

d) Objective arbitrability refers to the nature of the subject matter of the underlying transaction from which the disputes to be arbitrated, emanate.

3. The doctrine of separability or autonomy of the arbitration agreement affects the relationship between the arbitration clause and the underlying main contract. Gary Born describes this doctrine as ‘of central significance in international commercial arbitration’.3

4. Law applicable to the arbitration agreement refers to the proper law of the arbitration agreement. This may be a national law or set of legal rules.

5. The termination of the arbitration agreement: The arbitration agreement can be terminated like most contracts by agreement of the parties, in the event of the breach of a fundamental term or condition of the contract and by abandonment.

6. The two primary forms of arbitration references are:

a) Ad hoc arbitration: This refers to an international commercial arbitration reference not held under the auspices or rules of any arbitration institution. Under ad hoc references, the parties opt to create their own procedural rules for the particular arbitration reference.

b) Institutional arbitration: It refers to an international commercial arbitration reference held under the auspices of the arbitration rules of a particular institution. The parties incorporate by reference the arbitration rules of an identified arbitration institution into their arbitration agreement.

7. The relationship between the arbitration agreement and the arbitrator’s contract and the contract between the institution and the disputing parties.

2) Juridical and relationship theories

This chapter is divided into two sections:

1. Juridical

2. Relationship

These theories are examined as they affect the formation and performance of the arbitrator’s contract in the international arbitral reference. In this chapter, five major juridical theories of international arbitration are examined. It is agreed by all the various theories that consensual arbitration is based on the arbitration agreement. They all agree that the sovereign state plays some role in the arbitral process. They differ, however, as to the nature and extent of this role. International arbitration has developed over the years and the premises on which some of the juridical theories were based are no longer tenable.

1. Theories on the juridical nature of international commercial arbitration:

According to Professor Julian Lew, the identification of the legal nature of arbitration ‘allegedly holds the key to the identification of the legal and non- legal yardsticks available to arbitrators in international trade disputes’.4 Therefore, each juridical theory affects the legal status of the international arbitrator and the exercise of his autonomy in any given national legal system in which the arbitrator operates. Five different juridical theories are examined in this section:

a) Jurisdictional theory

b) Contractual theory

c) Mixed or hybrid theory

d) Autonomous theory

e) Concession theory

Each subsection provides a brief portrayal of the main propositions of each theory with a brief commentary on its relevance or else in present international arbitral practice.

2. The relationship theories

This explains the relationships in the nature of contract and status or status and contract, depending on the starting point of the analysis. In this section, a review of the present literature and scholarly writings on each theory is briefly examined in three subsections dedicated to each theory:

a) The status or office theory

b) Contract theory

c) The mixed or hybrid theory

3) Parties to the arbitrator’s contract

This chapter inspects the nature of the individuals and entities that are parties to both the arbitrator and institution’s contracts, the disputing parties, arbitrator and arbitration institution.

The contracting parties to the arbitrator’s contract are the disputing parties and the arbitrator under ad hoc references while the arbitrator concludes his contract with the arbitration institution under institutional references.5

This chapter analyses:

1. The nature and role of the disputing parties

2. The arbitrator

3. The arbitration institution

4. Single or multiple arbitrators’ contract

4) Formation of the arbitrator’s contract

This chapter observes various methods of appointing arbitrators to determine the process for the formation of the arbitrator’s contract and analyses the formation of the arbitrator’s contract under

1. Ad hoc

2. Institutional references, through an examination of these various arbitrator appointment methods.

3. The categorization of the arbitrator's contract through the arbitral reference.

4. Formation of other collateral contracts in the arbitral reference. The arbitrator concludes the arbitrator’s contract when he accepts appointment either from the disputing parties or arbitration institution.6

Mauro Rubino- Sammartano, in agreement with this proposition, concludes that the arbitrator’s contract is a contract, ‘consisting on the one hand of the appointment of the arbitrator and on the other hand of the latter’s acceptance’.7


5) Terms of the contracts

This chapter examines the terms in these contracts which may be either expressly agreed between the parties to the contracts or implied by law, arbitral practice or fact.8This chapter examines thirteen of such terms which may be contained in these contracts.

1. Sources of the terms in the arbitrator’s contract: The terms in the arbitrator’s contract reveal the powers, rights and duties the parties to the various contracts exercise in the arbitral reference, and all these powers, rights and duties emanate from the same sources.9

These sources are:

a) National laws and international conventions,

b) The arbitration agreement

c) Arbitration rules incorporated into the arbitration agreement.

2. Terms of the arbitrator’s contract: The terms contained in the arbitrator’s contract, examined below, are not exhaustive. The parties to the arbitrator’s contract can add to the terms in the exercise of their power of party autonomy. However, the terms examined below are considered to be important and are also predominantly discernible from every arbitrator’s contract.


These terms are:

a) Availability of the parties

b) Any special qualifications of the arbitrator

c) Scope of the arbitrator’s powers

d) Compliance with the arbitration agreement and chosen procedural rules

e) Compliance with decisions of the arbitral tribunal

f) Remuneration of the arbitrator and institution

g) Confidentiality

h) Equality of treatment and fair hearing

i) Disclosure, independence and impartiality of the arbitrator

j) Arbitrator challenge and replacement

k) Arbitrator to decide the dispute

l) Choice of law

m) Dispute resolution mechanisms

6) Remedies

This chapter examines that there are available for breach of the terms of the arbitrator’s contract and the contract between the institution and disputing parties.10

This chapter examines:

1. Remedies for breach of the arbitrator’s contract

This section examines:

a) The availability of the remedies of specific performance. This remedy requires the restoration of the contracting parties to status quo ante; and

b) The award of damages, which may be available to parties under the arbitrator’s contract.

2. Remedies for breach of institution’s contract

3. Effect of exclusion or limitation of liability clauses

This section confers on arbitration institutions and appointing authorities, including their employee and agents, immunity subject to acts or omissions done in bad faith.11


7) Termination of the contracts

This chapter examines the situations under which the arbitrator and institution’s contracts will come to an end or be terminated. The arbitrator and institution’s contracts can be discharged or terminated through one of four methods.12

These are where:

1. Full performance: The arbitrator’s contract is fully performed when the arbitrator has delivered the final award in accordance with the arbitration agreement and s/he has been fully remunerated by the disputing parties or arbitration institution.

2. Agreement of the parties: Generally the parties to any contract can agree to terminate the contract at any time during its existence. The parties to the arbitrator’s contract may equally agree on situations or events the occurrence of which will terminate the contract.

3. Where there is a fundamental breach of the terms of the contracts;

4. Frustration: The contracts are frustrated, so as to bring the contract to an end. There are three categories of events which can frustrate a contract.

a) Those events which make a performance or continuing performance of the contract impossible.

b) A second category is those events that make a continued performance of the contract illegal.

c) The third category is those events whose existence make the continued performance of the contract pointless.

Therefore, each of these contracts can be terminated by its complete performance, by agreement of the parties to it, through the breach of one of its fundamental terms, or as a consequence of the occurrence of a frustrating event.

Summary Statement/Conclusion:

The book “International Commercial Arbitration and the Arbitrator’s Contract” gives a brief knowledge about commercial arbitration laws and also widely covers all the important parts of commercial arbitration laws. Each section of the chapters includes appropriate case laws and well-explained examples which give the reader a better understanding of the concept of commercial arbitration. Thus, this book is of great worth to the arbitration practitioners and researchers in arbitration. It is also useful for students of arbitration on the topics of arbitrators and arbitration institution.

Bibliography:

  • Author:

Emilia Onyemais a Lecturer in Law at the School of Oriental and African Studies, University of London, UK.

  • Title:

International Commercial Arbitration and the Arbitrator’s Contract

  • Publication:

First published in 2010 by Routledge, 2 Park Square, Milton Park, Abingdon, Oxon, OX 144RN.

And in the USA and Canada by Routledge, 270 Madison Avenue, New York, NY 10016.

Routledge is an imprint of the Taylor & Francis Group, an informal business.

This edition published in the Taylor & Francis e-Library, 2010.

References:

1. Arenson v Casson Beckman Rutley& Co[1977] AC 405

2. Mustill, M. (1989). Arbitration: History and Background (Vol. 6). JIA.

3. Born, G. B. (2014). International Commercial Arbitration, Second Edition (Three Volume Set) (2nd ed.). Wolters Kluwer Law & Business.

4. Petrochilos, G. (2004). Procedural Law in International Arbitration (Oxford Private International Law Series) (1st ed.). Oxford University Press.

5. Derains, Y., & Schwartz, E. A. (2005). A Guide to the ICC Rules of Arbitration (2nd ed.). Kluwer Law International.

6. Tweeddale, A., &Tweeddale, K. (2007). Arbitration of Commercial Disputes: International and English Law and Practice (New Ed). Oxford University Press.

7. Rubino-Sammartano, M. (2014). International Arbitration Law and Practice, Third Edition. Juris.

8. Redfern, A., & Hunter, M. (1999). Law and Practice of International Commercial Arbitration (3rd ed.). Thomson Professional Pub Canada.

9. Jarvin, S. (1986).The Sources and Limits of the Arbitrators Powers, ArbInt, Vol 2.

10. Redfern, A., & Hunter, M. (1999). Law and Practice of International Commercial Arbitration (3rd ed.). Thomson Professional Pub Canada.

11. Adler v Dickson[1955] 1 QB 158

12. Russell, F., Sutton, D. S. J., Kendall, J., & Gill, J. (2015). Russell on Arbitration (23rd ed.). Sweet And Maxwell Limited U.K.

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