« Previous | Contents | Next »
Listen
PART 5 AWARD
Rule 40 - Rules applicable to the substance of the dispute
120. Rule 40 provides that an arbitrator is to apply the substantive law agreed by the parties (either expressly or by implication) to the merits of the dispute. In the absence of agreement on this, the default rule is that the arbitrator should apply such law or laws as appear to the arbitrator to be appropriate. Commercial and trade usage, custom or practices should also be taken into account.
121. Rule 40(3) provides that an arbitrator is only allowed to disregard the law and rely solely on what he or she considers to be fair and equitable if that is expressly authorised by the agreement between the parties. This maintains the existing law. The technical expressions arbitration " ex bono et aequo" and "amiable compositeur" have not been used for reasons of comprehensibility.
Rule 41 - Form of award
122. Rule 41 makes mandatory provision for the form of a tribunal's award including that it must state where the arbitration is seated. Were it not for this rule, the juridical seat of the arbitration might not be clear from the award. A different procedural law in relation to the arbitration might for instance be agreed by the parties. The simple approach is that the procedural law should always be the seat of the arbitration. But this has to be set against the fact that allowing the law of England to be used in Scottish arbitrations may encourage the use of Scotland as an arbitral venue. The Bill provides more generally that parties should be able to opt for a procedural law on particular aspects of arbitral procedure that is not Scots law (ie, in the default provisions). The mandatory requirement to state the seat of the arbitration however means the parties will not be able to vary this requirement.
123. The consequence of an award not being in proper form is that it could be a ground for challenge of the award.
124. If there has been a previous partial or interim award, an award must contain details of the previous award and, in the case of a previous interim award, specify the extent to which that award is superseded.
Consultation Question
Q17: The mandatory rule requires the seat of arbitration to be stated but the parties to an arbitration can generally vary the procedural law applicable from the seat of arbitration. Do you agree that they should be able to do so?
Rule 42 - Award to contain statement of reasons
125. Rule 42 is a default provision that in the absence of agreement to the contrary, a tribunal's decision must state the reasons for the award.
Rule 43 - Day award takes effect
126. At common law establishing when an award comes into effect is not straightforward. Therefore, the Bill provides a default rule that an award takes effect on the day it is made in accordance with rule 70.
Rule 44 - Power to make interim awards
127. Rule 44 is a mandatory rule that an arbitrator is able to make interim awards for relief. The intention is to protect parties in cases where there is inequality of arms. This will avoid the need for a party to go to court to seek interdict, for example, and thus promote the smooth running of arbitration as a private process.
128. This rule is mandatory because if one of the parties is pre-disposed towards taking some action which would have the effect of frustrating or avoiding the likely or possible outcome of arbitration, then they are unlikely to agree that the arbitrator should power to make interim orders.
Consultation Question
Q18: Do you agree that the arbitrator should be able to make interim awards of relief?
If you answered "No", do you think that this rule should not be mandatory but should instead be a default rule in the absence of inconsistent agreement between the parties?
Rule 45 - Power to make partial awards
129. Rule 45 is a default rule that in the absence of agreement between the parties, the tribunal has a general power to make awards dealing with only part of the dispute.
Rule 46 - Power to produce draft awards
130. Rule 46 is a default rule that in the absence of agreement between the parties, the tribunal may issue an award in draft to the parties and then allow the parties to make representations before the award is actually made. It is thought to be good practice for arbitrators to issue awards in draft form to the parties who will therefore have an opportunity to comment and point out any errors, ambiguity, etc, though it is acknowledged that it will not always be possible to do this due to time constraints.
Rule 47 - General powers in relation to awards
131. Rule 47 clarifies a number of powers that an arbitrator will have under Scots law and adds to available powers. They include giving the tribunal the power to award sums of money, including damages, and to award interest. Until now, arbitrations in Scotland have not had implied powers to award damages or interest and this is a valuable addition to their powers. This is a default rule subject to the agreement of the parties.
Rule 48 - Power to withhold award on non-payment of tribunal fees or expenses
132. We are not aware of existing authority in Scots law which specifically allows arbitrators to withhold awards in cases where all the fees and expenses of the arbitration are not paid by the parties. Therefore, rule 48 makes mandatory provision that the tribunal may refuse to deliver an award to the parties unless all the fees and expenses of the tribunal have been paid in full.
133. Where a tribunal refuses to deliver its award unless its outstanding fees are paid, a party can apply to the court for an order that it do so on payment into court by the applicant of the fees demanded. The applicant will have to provide the full amount of fees and expenses (or a lesser amount specified by the court). The applicant may have to seek payment of their share separately from the other party or parties to the arbitration. The court then directs how the fees and expenses "properly payable" are to be determined and these are met from the funds in court. Any balance will be paid back to the applicant. This provides a remedy for a party who wants to take up the award but considers the tribunal's fees are excessive and wants them reviewed - although it will not assist a party who considers the fees to be excessive where the other party has already paid the tribunal's fees (in which case the remedy would be an application under rule 62). The procedure is not available if the arbitration agreement itself provides for any process for appeal or review which has not been exhausted.
134. The leave of the court is to be required for any appeal from a decision of the court under these provisions.
Consultation Question
Q19: Mandatory provision has been made that the tribunal may refuse to deliver an award to the parties unless all the fees and expenses of the arbitration have been paid in full. Do you agree?
Rule 49 - Award to be final and binding on parties
135. Rule 49 is a default rule providing that an award, including a partial award, is to be final and binding on the parties. Interim awards are not however final.
136. We understand that arbitrators usually stipulate time limits for compliance in awards based on the circumstances of the case. The Bill does not therefore seek to do this.
Rule 50 - Award treated as made in Scotland
137. It may not always be possible or convenient to sign the award in the place where the arbitration was held and there have been cases where a signature was applied away from the seat of arbitration leading to difficulties establishing what the applicable law is. Rule 50 is therefore a default rule that an award is to be treated as having been made in Scotland even if it is signed outwith Scotland. The rule applies to arbitrations seated in Scotland.
Rule 51 -Arbitration to end on last award or early settlement
138. The end of an arbitration, when the arbitral tribunal's powers are to cease, will be when the last, or terminating, award to be made in the arbitration takes effect (see rule 43). This is, however, subject to exceptions in cases of objection to the arbitrator's jurisdiction or default of one of the parties.
139. The parties may end the dispute by notifying the tribunal that they have settled the dispute. The common law position in Scotland is that where parties settle their dispute before the arbitration reaches an end, the arbitrator cannot issue an award which incorporates the terms of the settlement. This is out of step with modern arbitral practice and so the Bill provides a default rule that an award may reflect the terms of the settlement of the dispute.
140. The fact that arbitral proceedings have ended does not affect the operation of other rules, such as on correction of awards (see rule 51(4)). Nor will that effect the enforcement of awards in any event.
Rule 52 - Enforcement of award
141. Rule 52 is a mandatory rule dealing with the options available to a successful party in the event that the unsuccessful party fails to comply with the terms of the arbitral award.
142. The rule provides that an application may be made to the sheriff for an order which will give the decree arbitral the same effect as a court order bearing a warrant for execution. The effect of this is that where a sheriff grants an order under this rule, the tribunal's award can be enforced by executing diligence in the same way as a court decree may be enforced (without a further warrant). This does not prevent the award from having effect as if it were a court order where the remedy could not be achieved by diligence.
143. The party against whom the decree arbitral is made can object to the application for an order particularly on the basis that the arbitrator had no jurisdiction but only where the person has not lost the right to object under the arbitration agreement or rule 67.
144. Someone in another jurisdiction could opt to use Scots procedural arbitration law for their arbitration so enforcement is available in the Scottish courts for those with arbitrations seated elsewhere (see section 6(2) of the Bill). New York Convention awards are excluded here as they can be enforced separately under sections 11 to 15 of the Bill.
145. Awards will continue to be registrable for execution in the Books of Council and Session or the sheriff court books, where the parties have so agreed in the arbitration agreement or otherwise. The rule is sufficient to have the effect under the Requirements of Writing (Scotland) Act 1995 that awards are registrable despite not being self-proving.
Rule 53 - Correcting an award
146. Once an award is made the powers of the arbitrator come to an end. This means at present that the arbitrator cannot correct any clerical errors or errors of calculation found in the award, although a court can allow some errors to be corrected. Rule 53 provides a default rule that arbitrators have a power to correct certain defects in any final award they make. This rule applies to partial awards and interim awards as it applies to final awards. There is a procedure for such corrections.
147. Rule 53(7) provides that a corrected award should be treated as though it had been in corrected form on the date it first took effect. While there is a risk that parties may implement awards which are corrected, the parties will be on notice that this can happen, and this possibility is time limited. When a party applies for correction they are obliged to send a copy of the application to the other party, which will also give the other party warning that a correction may be on the way.
Consultation Questions
Q20: There is some limited possibility that a party may potentially contravene a corrected award. Is further protection needed for a party who may unwittingly act in contravention of an award which is the subject of an application for correction by doing something before it is corrected or indeed before they become aware that it may be corrected?
« Previous | Contents | Next »