The Legal Systems Of Different States Law Commercial Essay

Published Date: 02 Nov 2017

Introduction:

Most of the parties prefer to reconcile their disputes away from courts because of expanses, confidentiality and complexions that may present themselves in the State’s formal justice system. Various farms of Alternative Dispute Resolution "ADR" such as arbitration have emerged as popular means of settling the disputes without adopting formal court system and procedures. Examination of idea of settling disputes by means of informal ways of justice and supportive role of the national courts in international arbitration when one party is bent to sabotage the arbitration process. As a way of resolving disagreement between the disputants the essay examines the compulsory role of national courts, its background, purpose, as well as the relationship between formal court system and international arbitration within the English legal system. This Essay will also analyse the role that English courts play in international arbitration within the UK despite of Arbitration Act 1996 which seeks to restrict the role of the courts. This essay will examine the influence of English courts in international arbitration process which possibly conflicts with real spirit of Arbitration Act 1996 but is also vital to rescue to arbitration process when one disputant wants to sabotage to whole process of arbitration.

The essay has analysed various provisions of the Arbitration Act addressing the important aspects of the role of the courts in arbitration process. The provisions of sections 67-69 relate to the some important aspects and conditions of appeal section 73 primarily provides for limitations in terms of the parties rights to object to the proceedings or awards of the tribunal. The relationship between the courts and arbitration can be seen in the provisions of sections 66 - 71 dealing with the powers of the courts in relation to awards. Particularly the wordings of sections 67 and 68 show that the courts still retain powers to deal with applications challenging the awards by tribunals. The provisions of the above are limited by the provisions of sections 70 and 71, which also go on to show a consistent feature of the Act in place, i.e. to keep arbitration within arbitration.

Sections 33 and 74 provide discretionary powers to the arbitrators and immunity for the arbitrators respectively. Conditions relating to the stay of proceedings are set out in section 9 of the Act. Section 44 describes the role of the court in arbitration matters clearly the premise as contained here, points towards the fact that rather than encourage the courts to be involved or support the arbitration process, they should for as much as possible be kept out of it. Although the section gives legitimacy to the courts to act, it restricts the opportunities for it to act and even so provides in s44 (6) for the cessation of the court’s directive once the arbitration panel makes an order regarding that issue. The provisions of Sections 18 and 30 of the 1996 Act address the issues of appointment of the arbitration tribunal and also the jurisdiction or right of the tribunal to exercise jurisdiction over the arbitration agreement. The provision of section 9 is sometimes compared to that of section 86 which is purported to grant the courts power to refuse an application for stay of proceedings in domestic cases [1] hence further explained in this essay.

It may be said that some insight as to the function of tribunals or other arbitration mechanisms as part of a legal system would require some cohesion but at the same time the superiority and sustenance of jurisdiction by the courts are over and above these ad hoc mechanisms.

Along with the references regarding provision of the Arbitration Act 1996, some pertinent revealing case laws will also be used to analyse the topic.

Arbitration in International business transactions, A Parallel ‘de facto’ status to civil justice system:

Arbitration may be defined as a consensual process executed in a judicial manner whereby a dispute between two or more persons is finally resolved by the arbitrator’s decision, which is binding upon the parties and enforceable as a matter of law. [2] 

Carboneau defined the system as "a private, generally informal, and non-judicial procedure for adjudicating disputes. It functions as an alternative to judicial litigation by providing the binding determinations though presumably less expensive, more efficient and expert, and nonetheless fair proceedings..." The [3] parties confer upon the arbitrators full legal authority to pass judgment on disputed matter, i.e. to make a final decision of the matters submitted that can be enforced through powerful legal means such as courts. Once the parties entrust the arbitral tribunal with the authority to rule, subject to settlement they relinquish control of the dispute and of its resolution to the arbitrators.

Fundamentally, arbitration is a complete alternate to the traditional approaches of dealing with the disputes that would have normally filed before the state courts. Shelkoplyas [4] suggest that arbitration has supposed a ‘de facto’ parallel status of civil justice in international business transactions. As discussed by Brown and Marriot, the method of resolving the disputes neglecting the state courts can be drawn as organized dissatisfaction with the legal procedures and in certain instances a reaction to the miscarriage of justice by the courts in certain circumstances. The meticulous factor impelling the parties towards acceptance the option of arbitration is not absolutely clear but as stroked upon by Carboneau’s definition earlier cited, the issue related to cost, professionalism, speed and privacy are assumed to be the top listed in most cases. Undoubtedly it is not always the case is that all the parties to arbitration are satisfied with the process which leads to the unsatisfied party to sabotage the process by using several tricks. The earlier form of arbitration which was called Private Dispute Resolution said to had problems associated with uncertainties on the nature and scope of the powers of arbitrators, strict adherence to litigation style procedures by the arbitrators. Consequently these all led to delays, increased costs and formalities that defeated the whole purpose of arbitration in certain instances and also provided grounds to the loser party to approach the formal court system.

After the above general introduction as the proposal of Arbitration, is it sensible to consider the Arbitration Act 1996 and see the areas of the law that directly coincide the assistance and involvement of the courts in arbitration process.

As an Act to reaffirm and improve the law relating to arbitration in an agreement to arbitrate, the Arbitration Act was incorporated into law in June, 1996. The Act makes other stipulation relating to arbitration and arbitration awards and for connected purposes. This Act was a symbol of the combination of transformation and terms of the legal standards preserved in the previous Acts of 1950, 1975 and 1979, as well as the Consumer Arbitration Agreements Act [5] and Common Law. Sketching of a new law on Arbitration for England and Wales, the Departmental Advisory Committee rejected an umbrella adoption of the Model Law but made a case for the adoption of its language, so as to achieve its objective of being much more user-friendly and relevant to arbitrating parties.

Role of the English Courts in international arbitration Under The Arbitration Act 1996:

The spirit of the Act is stuffed towards independence, such that restricts the intervention of the courts to the best possible minimum levels and empowers the parties to arbitration to run a somewhat self-sufficient settlement of disputes. Intentions of providing this Act are clear to serve as a kind of boost for the process of arbitration assisting an increase in independence of tribunals from the judicial interfering powers of the courts before the Act was passed. Finality is one of the means underlying motives of the 1996 Act as informed by Merkin and Flannery [6] and it is in this sense that the effect of the guidelines for appeals from the awards of tribunals are set.

Sections 67-69 provide different conditions to appeal, restrictions in terms of right of parts to object to the proceedings are primarily provided in section 73 along with the objection on award of the tribunal. Sections 33 and 74 provide more discretionary powers to the arbitrators and immunity for the arbitrators respectively. The most important provision provided by the 1996 Act relates to the stay of proceedings as set out in section 9. Some important and vital things which may affect the relationship between courts have been discussed briefly. Now paper will look more closely at these issues, closely related with the role of the courts under common law, prior to the 1996 Act and since the coming into effect of the Act on January 31st 1997.

Lord Mustill’s comment in Copple Levalin NV v Ken-Ren Fertilisers and Chemicals [7] , digs deep into the challenge posed by the essay topic. His observation took into light that a clear anxiety in international law with regard to the relevance of arbitration to the exclusion of local courts and the undeniable fact that only the courts provide a safeguard for the arbitrations where things have gone wrong. The fact that the states with their laws on negotiation vary in terms of scope and limitation on the suitability of arbitration is also talked by Redfern and Hunter [8] who significantly underlined that idea of cohabitation and partnership may arise within this area. The court can or do play its role in the arbitration process either further restricting their powers to act before, during or after the arbitration process. They say that usually the relation between the parties in a partnership is unequal where there is collaboration between the two rather than a simple equal partnership.

The role of the courts to give effect to the arbitration proceedings is very vital; international arbitration may depend on the support of the legal systems of different States International arbitration laws therefore recognise the importance and the role of the local courts in protecting and aiding the settlement of disputes through arbitration process. Redfern and Hunter [9] further point to the fact that more than often in the preliminary stages, it is often the courts that are relied upon to; enforce the arbitration agreement, establish the tribunal and deal with issues regarding the challenges to jurisdiction. Similarly, the role of the courts during the period when arbitration proceedings are under process deals with the issues such as order to third parties whilst proceedings are ongoing, ex parte applications for relief in relation to items or assets subject matter of a dispute and the enforcement of such orders require the authority of the courts.

Although the role of the courts to act or intervene in pending proceedings is to ensure the preservation of the assets and evidence related to the dispute, yet the courts do not enjoy freedom to interfere and intervene without agreement of the parties. International arbitration law do not support the interference of the courts for example, the ICC rules [10] , UNCITRAL [11] Model Law [12] and other related laws all tell that there is room for parties to apply to courts for the grant of some interim measure of protection and recognise the legitimacy of the courts to grant in such circumstances. The arbitration tribunal is always priority for making such applications; and in most case the parties cannot approach to the courts without applying to the Tribunal at first instance. Section 44 of the Arbitration Act 1996 is an example of above. The Section states that

(1) Unless otherwise agreed by the parties, the court has for the purposes of and in relation to arbitral proceedings the same power of making orders about the matters listed below as it has for the purposes of and in relation to legal proceedings.

(2) Those matters are - (a) the taking of the evidence of witnesses; (b) the preservation of evidence; (c) making orders relating to property which is the subject of the proceedings or as to which any question arises in the proceedings -

(3) If the case is one of urgency, the court may, on the application of a party or proposed party to the arbitral proceedings, make such orders as it thinks necessary for the purpose of preserving evidence or assets.

(4) If the case is not one of urgency, the court shall act only on the application of a party to the arbitral proceedings (upon notice to the other parties and to the tribunal) made with the permission of the tribunal or the agreement in writing of the other parties.

(5) In any case the court shall act only if or to the extent that the arbitral tribunal, and any arbitral or other institution or person vested by the parties with power in that regard, has no power or is unable for the time being to act effectively.

(6) If the court so orders, an order made by it under this section shall cease to have effect in whole or in part on the order of the tribunal or of any such arbitral or other institution or person having power to act in relation to the subject-matter of the order.

(7) The leave of the court is required for any appeal from a decision of the court under this section.

It can be argued that the 1996 Arbitration Act limits the role of the courts in supporting or rescuing the system yet the fact is that it still allows for the courts to support the system even though the conditions seem to be more difficult than what the other international arbitration law provisions accept.

Provision of Sections 18 and 30 of the Arbitration Act 1996 can be seen as other examples. The sections not only highlight the matters of appointment of the arbitration tribunal but also the jurisdiction or right of the tribunal to apply jurisdiction over the arbitration agreement. The Act provides a type of real jurisdiction to the tribunal and also empowers them as the primary point of review where any objection regarding their jurisdiction arises through section 30. In the light of Section 30, it is clear that the position of courts to determine and decide issues regarding the formation of the tribunal, the validity of the arbitration agreement and similar points of controversy has been moved to the tribunals. This reckons the idea of ensuring independence and finality in the process of arbitration is actually the focus of the Act. Furthermore the time consumed in the arbitration process is cut shorted, avoid unnecessary delay or prolonging of a dispute based on appeals to courts after awards have been made or delays that happen because one of the parties is trying to gain some type of advantage by delaying the preliminary part of the dispute by applying to the courts to determine the issues that are mentioned above. The position of the Act also highlights that society considers that courts are not very much effective in dealing with some of these cases as compared to the authority of the arbitration tribunals increased through this Act or to power of courts in case of arbitration is lessened. The increase in the jurisdiction of arbitration tribunal stated under section 30 in yet not clear whether it s beneficent for the involved parties as they also bear some big responsibilities in the composition of the tribunal.

The issue of the stay of proceeding stated in section 9 of the Act is commented by Merkin and Flannery in their book. [13] They wrote that the section 9 is a reflection of the provision of Model Law or Article 8. As decided in Doleman and Sons Ltd v Osset Corporation [1912] 3 KB 257 that arbitration agreement count not exclude the jurisdiction of the court, this point is raised based on the idea that as was assumed before now. The importance of this is that the provision of section 9, which requires a court to stay any proceedings before it [which should be by agreement dealt with by arbitration] adds strength to the idea that parties can exclude the jurisdiction of the courts from dealing with their matter. In fact, it is commonly accepted that in most instances, the settling of commercial disputes is increasingly done by arbitration and would be seen as a default agreement by parties in such circumstances. What this tells is that in such cases the tribunals will have supremacy over the courts whether or not the court has failed to stay proceedings and gone ahead to decide the matter, although the section gives room for the courts to consider whether the arbitration agreement is null and void, inoperative or incapable of being performed. If it cannot satisfy itself that the conditions above apply then it has to stay proceedings before it. One thing is not really clear and that is the guidelines for checking whether or not these issues that are stated are true or not. For example; how can a court determine to the satisfaction of both parties that the conditions of an arbitration agreement cannot be performed or how can it tell whether or not it is inoperative where the parties have previously or clearly stated that the agreement is operative and therefore enforceable as they intend to be bound by it? The provision of section 9 is sometimes compared to that of section 86 which is purported to grant the courts power refuse an application for stay of proceedings in domestic cases (Section 66 provides that domestic arbitration awards may, as before, be enforced with the permission of the court as if they were court judgments. Permission shall only be refused if the person against whom the award is to be enforced shows that the tribunal lacked substantive jurisdiction to make the award) yet it is considered a now established principle that the distinctions between municipal and international arbitration are not applicable under European Community law. [14] 

Provisions of sections 66-71 dealing with the authority of courts can be seen in the Arbitration Act 1996 is an important analogous in the consideration of the Act as it provides a relationship between the courts and arbitration. Wordings of the sections 67 and 68 clearly illustrate that the courts still posses the powers to deal with functions challenging the grants by tribunals. As a matter of fact, provided with sections 70 and 71 [15] it is true that the influence of the above mentioned sections are restricted, also the consistent characteristic of Act is shown in these sections, i.e. arbitration is kept within the definition of arbitration. It can be observed that in most of the cases, working-out on referring the dispute back to the tribunals for reconsideration is considered to be the first option as the courts come-up with the findings of irregularities or substantial divergences of points of law. Again an impression of significant control on the aptitude of courts to act can be noticed. In some cases, it could be unclear whether other power granted the court to act comprise enough to defend the comfort of the system. It is understandable that the purpose of providing the Act is to minimize the time spent by the parties to deal with the disputes, while on the other hand capacity of the courts to act is a strong concern whether the 1996 Act provides the courts to act where it something goes wrong. In this aspect, an extra-defensive example regarding the role of courts to serve arbitrating parties can be seen in the case of Ethan Stein v Balkrishan V Doshi [16] gives a good example of dependence of courts is seen in one of the possible situations. In that case, the appeal brought before a court by one of the parties who challenged amongst other things in a prolonged case, that the declaration by the defendants that the arbitration tribunal had reached an award was allowed by the Indian court who said that it seemed the defendants were contented to prolong the arbitration process by objecting to the constitution of a the tribunal, insisting on the non-resignation of one of the tribunal members. The defendants by virtue of owning possession of the license and some other rights around which the dispute evolved were content to delay the arbitration process since it was benefited them. In the end, the purported award was overruled by the courts as being nothing more than a mere commentary on the dispute and the courts directed the appointment of a specific individual and also redirected for the dispute to be speedily considered. The relevance of this case can be seen in the fact that without the option of recourse to the courts or for their intervention upon the application of one of the parties without undue restriction, the appellant would have continued to linger in uncertainty.

Conclusion:

In summarising this paper, it is true that arbitration has become a very good option for society in the resolution of disputes. In many cases, it has provided speedy relief to the parties to the disputes and saved costs for them. We can say that the societies have accepted arbitration as a reasonable option in resolving the disputes and many parties are quickly relieved along with the time-saving and less cost. Motives behind the enforcement of the Arbitration Act of 1996 were to maximize the independence of the parties and tribunal and facilitate the international arbitration by ensuring less and minimum interference of the national courts. The Act has objective of increasing the independence of the arbitration process and do away with the sometimes oppressive acts and methods which has potential to affect the effective and speedy delivery of justice by the traditional courts. Although this act cogged the experience of negotiation for many parties to resolution, a true anxiety exists that some of its conditions have been overdone to a level that they prohibit the courts form acting to salvage the system in case the system needs. Level of risk is too high in most instances where the arbitrating parties may experience the misjudgements in the absence of a judicial commission, government department or other such indirect government owned departments holding the powers to reconsider and alter the outcomes. However, it is worth mentioning that the role of courts is not completely contained in the case of arbitration, they still have kept some powers of petition from the panel whether before, during or after the initiation of proceedings. The act differs from former acts in the conditions for appeals or other similar applications arising from arbitration proceedings are a lot tougher. It can therefore be said in response to the idea of the topic of this paper that it is true that although the courts tend to play a significant role [17] in helping the system from time to time, the provisions of the Arbitration Act 1996 have further restrained its capacity to act in certain instances and although there is little to show that the result of the Act has led to the increase in cases of dissatisfaction it is difficult to be totally comfortable with it.