1.The Relationship between the Arbitrators and the Parties are mainly a Contractual one
The arbitrators’ status has been too important and delicate for national legislatures to have addressed in any comprehensive fashion and the main focus of the most national arbitration legislation is directed largely to the parties’ rights and obligationsvis-à-vis one another. Therefore, International treaties and national legislation have omitted treatment of the subject.
Statutory provisions regarding the arbitrators’ rights and duties are generally only limited to issues of arbitrators’ fees, immunities, or obligations of confidentiality. Provisions are in the Model Law are limited to the arbitrators’ obligations of independence and impartiality, disclosure of potential conflicts and procedural fairness during the course of the arbitration. The English Arbitration Act, 1996 contain isolated provisions on the arbitrators’ obligations of impartiality and immunities.
Leading institutional rules only prescribes a number of obligations or rights on the arbitrators, e.g., disclosing potential conflicts, maintaining their independence and impartiality, complying with specified timetables, fixing the basis for the arbitrators’ remuneration, requiring confidentiality and in some instances providing for arbitrator immunities.
Soft laws like 1987 IBA Rules of Ethics for Arbitrators, AAA/ABA Code of Ethics and the 2004 IBA Guidelines on Conflicts of Interest, more specialized ethical rules for arbitrators in maritime or insurance arbitration or adopted by particular arbitration institutions. Unlike a lawyer’s or accountant’s rules of professional conduct are binding and enforced by sanctions administered by a specialized regulatory authority, these rules are generally non-binding advisory guidelines and lack enforcement mechanisms.
National courts and commentators have formulated alternative theories for defining the arbitrators’ relations with the parties. Under the widely-accepted contractual theory, the arbitrators and the parties to an arbitration agreement enter into a separate agreement with one another, pursuant to which the arbitrators undertake to perform specified functions vis-à-vis, the parties in return for remuneration, cooperation and defined immunities. The arbitrators’ status, rights and obligations are matters of contract. Judicial decisions in UK, France, Swiss, U.S., German, Austrian, and Finish courts adopted similar analyses.
Also, the following aspects of the arbitrator’s role are explicable most naturally-and in large part only-as a consequence of a contractual relationship. Parties have right to select their arbitrators, arbitrators have right to decline appointment. Arbitrators have duty to conduct the arbitration in accordance with the parities’ agreement, parties have right jointly to remove an arbitrator. Furthermore, a private party does not choose the judge responsible for resolving its disputes, or negotiate with or make commitments to a judge about his or her remuneration or cancellation fees, or prescribe the procedures and scope of the judge’s service, or exercise the authority to remove the judge or other official from office.
The principal alternative theory is that the arbitrators’ relationship with the parties is a matter of quasi-judicial legal “status,” derived from the applicable law (presumptively, the law of the arbitral seat). The arbitrators’ status, rights and obligations are not matters of contract, but are instead conferred by national law in a manner analogous to that of state court judges. The main explanation for this theory is that “employing a professional arbitrator for a substantial remuneration, it is doubtable that whether a business man would, if he stopped to think, concede that he was making a contract then appointing the arbitrator.
However, it is not persuasive to assert that a businessman would not “concede he was making a contract” when appointing an arbitrator, since most businessmen and certainly their legal advisers would readily acknowledge liability to pay the arbitrator a fee and would readily claim rights to prompt, diligent services I return for that fee.
Furthermore, the subject of the status of the arbitrator is completely ignored in almost all arbitration treaties and legislation and it is addressed only occasionally and usually at a high level of abstraction by national courts. There is considerable artificiality in describing the arbitrator’s rights and duties as deriving solely from their legal status when virtually no national laws define-or even address- this status.
It should also be noted that the relationship between the parties and the arbitrators is not solely a creature of contract. The contractual relationship between the parties and the arbitrators is situated in an area where important public polices and mandatory law rules apply. Some fundamental aspects of the relationship between the arbitrator and the parties are derived from a non-contractual legal status recognized by national law. For example, the requirement of equal treatment of parties in mandatory law cannot be altered by contract. Similarly, obligations of arbitrators with regard to the fulfillment of their mandate, such as requiring independence and impartiality, disclosure of conflicts, procedural fairness, or provision of a reasoned award required by applicable law often cannot be altered by contract.
2. Arbitrator’s Contract is better to be Understood as a Separate Agreement rather than a Trilateral one
One view is that arbitrator’s contract is a trilateral one, in which the arbitrator is joined as a party to the original bilateral arbitration agreement between the parties. In the new agreement, the arbitrators become a party to the previously bilateral arbitration agreement between the parties.
Another view is that arbitrator’s contract is a separate agreement, distinct from the parties’ arbitration agreement, arising between the arbitrators and the parties and defining their respective rights and obligations vis-à-vis one another.
The latter view is preferable. Arbitration agreement between two commercial parties is to provide for the resolution of all disputes under a particular contractual relationship. While the arbitrator’s contract is made between three (or more, depending on the size of the arbitral tribunal) parties, to cover a single dispute (or single set of disputes) in a single arbitration. Also, the focus of the arbitration agreement is on the parties relations with each other; while the focus of the arbitrator’s contract is on the arbitrator’s obligations to the parties, and the reciprocal obligations of the parties to the arbitrator.
It should be noted that the terms of the arbitration agreement like the scope of their jurisdiction, language, seat, institutional rules are incorporated into the arbitrator’s contract, since they prescribe the mandate that the arbitrator agrees to undertake. Such incorporation is not transforming the arbitration agreement into a substantially new contractual relationship, rather it just like the way that subcontracts sometimes incorporate relevant provisions of a main contract.
This approach also avoids disputes about the status of the arbitrator’s contract in the event that the underlying arbitration agreement is held to be nonexistent or invalid. If the arbitrator’s contract was merely an enlargement of the arbitration agreement, then the invalidity of the latter should, properly considered, entail the invalidity of the former. This result would make no commercial sense and would be contrary to the parties’ obvious expectations (i.e., arbitrators who make a negative jurisdictional determination are as entitled to remuneration for their services and arbitrator immunity as those who do not).
3. Characterization of The Arbitrator’s Contract : a sui generis Agreement
The first view is that arbitrator’s contact is an agency agreement, where the arbitrator serves as the parties’ agent. Most legal systems would require the arbitrator to follow the parties’ directions and to provide the parties with information and an accounting, all of which can only be assimilated with difficulty, if at all, to the adjudicative rule of an arbitrator. It is also inconsistent with the arbitrator’s adjudicative function to be independent of the parties, including with obligation in some circumstances to refuse to obey their instructions.
The second view treats the arbitrator’s contract as an agreement for the provision of services. However, except a service, arbitrators also serve a public, adjudicatory function, possessing binding adjudicatory powers and immunities from suit and liability, that cannot be equated with the provision of service in a commercial relationship.
Another unacceptable approach treats the arbitrator as an “employee” of the parties and characterizes the arbitrator’s contract as employment contract. Under which, arbitrators are obliged to perform services or earn his fees for and under the direction of the parties.
The acceptable approach is to regard the arbitrator’s contract as s sui generis or hybrid form of agreement. The arbitrator’s mandate differs in fundamental ways from the provisions of many other services and consists in the performance of a relatively sui generis adjudicatory functions. In fact, an arbitrator is in the category of an independent provider of services who is not in a relationship of subordination with the parties who receive his services.” An arbitrator has to, in deciding a legal dispute, identify the law by matching the relevant facts to the relevant legal provisions. And the performance expected fro him is the award, which constitutes the goal and outcome of his activity. It is true that the extent of his powers depends on the arbitration agreement, which can to a greater or lesser extent prescribe the way to that goal for him. But, apart from this restriction, his position is entirely free, freer than that of an ordinary judge. The arbitrator’s status involves a contractual provision of services, but those services are of a unique character, in which the arbitrator is, and is required to be, independent from the parties and impartial. This independence and impartiality, autonomous from the parties’ control and directions, is essential to the status and role of the arbitrator.
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