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PART 2 TRIBUNAL FUNCTIONS
Rule 17 - Principal duties
78. The obligation of fairness is fundamental to the nature of arbitration and the courts have repeatedly reinforced this over the years. The parties cannot contract out of this mandatory obligation without depriving the decision of its enforceability as an award. However informal proceedings may be, they must be fair. The proceedings must also be conducted in a manner which maintains confidence in their impartiality.
79. Under the Bill, arbitrators have wide discretion regarding the conduct of proceedings subject to (1) agreement of the parties, in the arbitration agreement or otherwise, and (2) other duties under the Scottish Arbitration Rules (see rule 26).
80. Rules 17 to 20 are mandatory. Rule 17 makes it mandatory that an arbitral tribunal (and any oversman) conducting an arbitration must comply with its principal duties - firstly to be impartial (and appear impartial) between the parties, and to treat the parties fairly (not necessarily treat them in the same way). The former is about the arbitrator him or herself and the latter is about the conduct of the process. The tribunal must also allow parties a reasonable opportunity to put their case and respond to the other party's case.
81. The principal duties to be fair and impartial could conflict with the further duties in rule 18. Therefore, rule 17(4) provides that the principal duties of impartiality and fairness are paramount. This hierarchy of duties could be relevant, for example, where it might be reasonably practicable to avoid incurring the expense of conducting the proceedings in a particular location, but it might be seen as fair to allow that expense to be incurred if one party is based close to that location and cannot easily travel.
Rule 18 - Further duties
82. The Bill also imposes a mandatory duty on the tribunal to do its best to conduct the arbitration in accordance with the wishes of the parties, as quickly as reasonably practicable and without incurring unnecessary expense.
83. These further duties are qualified (using the term "do its best") as they are not absolute. The further duties are for instance subsidiary to the principal duties. In some circumstances a tribunal would not necessarily be in breach, say of the duty to conduct the arbitration as quickly as reasonably practicable, if it failed to act altogether, were that to lead to unfairness.
84. The duties must also be read together. "In accordance with the parties' wishes" qualifies the duties in sub-paragraphs (b) and (c). If the parties wish the proceedings to progress slowly, speeding them up might not be "reasonably practicable". Similarly, any expense the parties want the tribunal to incur may not be regarded as unnecessary even if it might otherwise be regarded as frivolous. Although "in accordance with the parties' wishes" would remain subordinate to any legal requirement to the contrary.
Consultation Questions
Q10: Do you agree that there should there be a hierarchy of the arbitrators' duties?
Q11: Section 1 of the Bill provides founding principles which will steer the interpretation of the provisions of the Bill. Rules 17 and 18 place on the arbitrator mandatory general duties. The intention is that the founding principles and the duties placed on arbitrators should complement each other, but they might potentially conflict. Do you think this will cause difficulties in practice?
If you answered "Yes", what potential conflicts and difficulties do you believe could arise between the founding principles and the duties on arbitrators?
Rule 19 - Tribunal to rule on own jurisdiction
85. The extent of an arbitrator's jurisdiction and his or her power to decide his or her own jurisdiction is important in arbitration since it determines exactly what issues the arbitrator may decide. In general, the extent of the jurisdiction of an arbitrator is established by agreement of the parties but questions may arise during the arbitral process as to whether it is competent for him or her to deal with a particular issue. This may lead to the arbitrator's jurisdiction being challenged.
86. An arbitrator at present has the power to determine his or her own jurisdiction, but that power is limited to deciding the matter on a preliminary basis. The final decision on jurisdiction lies with the court. Uncertainty about the extent to which an arbitrator can rule on his or her own jurisdiction has led arbitrators to be cautious for fear of not having immunity in relation to a decision on jurisdiction. In those circumstances arbitrators may decline to rule on their own jurisdiction. The result is that there are many unnecessary referrals to the courts.
87. Rule 19 provides certainty and brings Scots common law into line with international arbitral practice by providing for a clear power allowing the arbitrator to decide his or her own jurisdiction. As a mandatory provision it will not be possible for the parties to exclude the arbitrator from ruling on jurisdiction.
Consultation Question
Q12: The arbitrator should be able to determine his or her own jurisdiction. Do you agree?
Rule 20 - Objections to a tribunal's jurisdiction
88. If a party considers that the tribunal does not have jurisdiction, the party may object to the tribunal. This will also avoid spurious delaying objections being made to the court (which under the Bill would only be able to be made after the final award or after the tribunal rules on the objection under this rule). Rule 20 is a mandatory rule which requires an objection to be raised as soon as practicable after the matter is first raised in the arbitration. If a tribunal upholds an objection, it has the general power to terminate an arbitration insofar as it does not have jurisdiction and express power to set aside any interim or partial award in so far as there is no jurisdiction.
89. An objection cannot be raised after the arbitration has finished. The only recourse at that point is a court challenge to the award on grounds of lack of jurisdiction.
Consultation Question
Q13: The arbitrator should be able to determine challenges to his or her own jurisdiction. Do you agree?
Rule 21 - Appeal against tribunal's ruling on objection
90. The Bill provides a default rule that within 14 days of the date of the tribunal's decision, an application can be made to the court on a question of an arbitrator's jurisdiction. The arbitral proceedings will be able to continue until the court comes to a decision on the objection to jurisdiction to avoid vexatious objections being taken to the court to delay the whole process. However, the arbitrator may suspend the proceedings at his or her own discretion and must do so if all the parties agree to the suspension.
Rule 22 - Tribunal decisions
91. In the absence of inconsistent agreement, rule 22 provides on a default basis that decisions, orders and awards can be made by all or a majority of the arbitrators. Where there is neither unanimity nor a majority, any chair will have a casting vote.
Rule 23 - Oversmen
92. In the absence of inconsistent agreement, rule 23 is a default rule to the effect that if there is an even number of tribunal members, with no chair, the tribunal should be permitted to nominate an oversman to decide a matter on which they cannot agree. If the tribunal cannot agree the appointment of an oversman within 28 days of the date of any party or tribunal member requesting the tribunal to appoint an eligible individual, then any party or tribunal member may apply to an arbitral appointments referee to do so. Rule 23(2) clarifies the application of certain specific Scottish Arbitration Rules to oversmen.
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