I. INTRODUCTION
The concept of arbitration at the first of its emergence was quite simple; two disputants voluntarily brought their dispute to a neutral person to settle it privately.[1] In the medieval era, the dispute that was brought to arbitration generally related to commercial matter of the feudal lords who want to exercise their independent jurisdiction and use a settlement procedure which is expeditious, prompt and handled by people who were themselves merchants and acutely aware of mercantile problems and customs.[2] However, during the borderless commercial transaction, international arbitration become more complex especially when it comes to rendering an enforceable award. It will become worst if an arbitrator is susceptible to civil liability as it may disturb the continuity of arbitration as an alternative favourable forum to settle a dispute.[3] To this issue, the relation between the arbitrator with the disputants become the center of discussion as both of them has same objective, which is to render and obtain enforceable award, but has two different interests. Arbitrator needs immunity while the disputant wants possibility to obtain liability from the arbitrator. This article tries to answer a question whether the arbitrator should be liable for making an award that is subsequently annulled or held unenforceable through two parts.
The first part examines the nature of the arbitrators under diametrical roles that is often embedded to her, which are ‘quasi-judicial officer’ and ‘professional service provider’. The examination will end up with three approaches: 1) absolute immunity, 2) absolute liability and 3) qualified immunity approach.However this essay will stand with “qualified immunity” approach. The second part will explore the existence of arbitrator duty to render enforceable award by considering the relationship between the arbitrator and the disputants under contract theory, arbitration law as well as institutional rules that encourage the arbitrator to give her best effort to render enforceable award. Finally, this essay concludes that arbitrator should not be liable for an award the is subsequently annulled and held enforceable unless she has been approved committing misconduct.
II. Toward Immunity and Liability: A Finding to Qualified Immunity for Arbitrator
Judge has been granted with judicial immunity when exercising their ‘judicial act’ to ensure they are free in though and independent in judgment.[4] They are even immune when they are alleged with malicious or corrupt actions as long as such acts fall within the ambit or in excess of their jurisdiction and their judicial act.[5] During the time, this judicial immunity is also extended to arbitrator with the idea that arbitrator is sharing comparable function with the judge in the court. According to Stump v Starkman, this similar function can be tested into two steps which are (1) “whether the act is normally conducted by judge” and (2) whether the parties dealt with judge in his judicial capacity.[6] Refer to this test, it can be said the arbitrator is comparable with the judge because 1) she is conducting independent judgement upon facts which finally rendering a decision upon facts and law[7] and 2) the disputants ask the arbitrator to settle their dispute as their capacity as an arbitrator, not as an individual. This similar function then make her as “quasi-judicial officer” that may be granted with judicial immunity.
Mettler argues immunity is important to foster arbitration as well as strengthen arbitration forum.[8] If the arbitrator is no longer struggle ‘between litigant and saddled within the burden of defending a lawsuit,[9] people will be more encouraged to be an arbitrator.[10] Immunity also can ensure the finality of arbitral award by restricting the vexatious litigant to re-litigate the case by attacking the arbitrator.[11] Taking into account those arguments, arguably the finality of an award as well as the preservation or arbitration is the main focus of absolute immunity which is a good feature for a country which wants to reduce an overcrowded lawsuit in their legal system.[12] This also will be good for a country which wants to attract more investors or commercial actors to have business to their country.
However, the generalization of judge and arbirator is not along the way because there are many factors that can make an arbitrator different with the judge. The arbitrator is appointed by the disputants, therefore her power to settle a dispute comes from a contract, [13] she is not employed and paid by state; rather she obtains remuneration from the disputant.[14] Her decision also has a low societal impact as most of her cases is related to private commercial sectors.[15] Therefore, the arbitrator should not be granted with immunity like the judges as it will encourage carelessness of the arbitrator by removing the incentive to be cautious.[16] Furthermore, absolute immunity also overrides the most simple fact that there is a contract between the disputants and arbitrators which must be upheld by the court.[17] This argument is true if we examine from contract theory which see the exchange of performance between arbitrator and disputants, whereas the disputants pay the arbitrators for getting eventual award from the arbitrator, as the indication of the existence of contract between them.[18] The consequences of this contractual relationship is the arbitrator contract becomes regulation for the parties (pacta sun servada).[19] The procedures, appointment of arbitrators and even the specified format or scope of the award must refer to the agreed term there.
Foelix J argues that the nature of arbitrator contract is “agency contract” which can be seen from the ‘appointment’ of the arbitrator by the parties as an action that gives the arbitrator ‘mandate’ from the disputants.[20] This mechanism is similar with an agent who holds trust for and subject to the control of another (the principal) in agency theory.[21] The consequences of this relationship is the arbitrator owes duty of performance to the principal which includes obedience, care and skills, non delegation, no secret of profit, respect of principal’s title, duty to account and fidelity.[22] However, the agency theory fails to identify the fact that arbitrator does not act on behalf of the principal, rather she uses her own name and her primary duty is to adjudicate the dispute fairly, not to seek the best interest of the party that was appointing her.[23] In another view, because of the “functional similarity” of the arbitrator with judge, the arbitrator contract cannot be perceived as merely a “service contract,” because when conducting arbitration process in the seat of arbitration she must obtain a ‘delegation’ from the state where the arbitration process is taking place.[24] The alternative approach to describe the contract might be an “sui generis” contract which can accommodate the duty of arbitrator given by state, duty as professional and duty as qusi-judicial officer.[25]
What can be concluded from the variation of arbitrators’ contract is the arbitrator owes a duties to the disputants and in the context of arbitration the aggrieved party should be given an opportunity to uphold their rights because when the disputant concludes a contract with the arbitrator they expect the arbitator to conduct the arbitral procedures with ‘due care’, ‘good faith’ and absence from ‘fraud’, ‘misconduct; or negligence of their personal undertaking. [26] The arbitrator is also expected to carry out their professional standard and proper skill appropriately.[27] The proponents of liability theory argue that ‘full liablity’ theory is more effective to create good environtment for arbitration forum because it makes the arbitrator pay attention to their professional duty and consistenly make a correction to the arbitration regime. Consequently, the disputant and the market generally will get a good arbitration services. [28] However, the full liability theory arguably can threat the integrity of arbitration process because the disgruntled party may impend the arbitrator to influence decision—making process [29] and creates the abundance litigation to the court. On the other hand, the absence of liablity will make a corrupt and greedy arbitration forum, as Lord Acton said, “power tends to corrupt and absolute power corrupts absolutely’. Taking into account the interrelation of arbitrator role as “quasi-judicial” officer and “professional”, arguably the most important thing is to acknowledge the facts that the arbitrator’s role is quite complex while there is also an urgency to preserve the integrity of the arbitration forum and the need to hold professional accountability toward the disputants who already paid the arbitrator as professional.[30] Arguably, these objectives can be achieved with “qualified immunity” theory[31] The idea of qualified immunity is to grant wide immunity to the arbitrator as long she is acting her “judicial task” within his jurisdiction and imposing liability if she fails to conduct his/her duty with or she is approved conducting misconduct.
Further, as under ‘qualified immunity’ theory the liability is qualified to certain acts, the relevance matter of ‘duty to render enforceable award’ is how a country adopts their qualification for immunity. In the United Kingdom as well as another common law countries, they adopt an ‘express qualification of immunity’ while in civil law countries the ‘implied qualification of immunity’ is more favourable. Express qualification means the arbitration law of the country set a provision that can be a ground of liability. As can be seen in UK Arbiration Act which set ‘bad faith[32]’ of arbitrator as qualification to liability. This scheme in general gives broad immunity to the arbitrator. On the other hand, the ‘implied qualification of immunity’ does not set the qualification of immunity on the arbitration statutes, but use the provision of arbitrator contract as an immunity to the arbitrator. In Germany for example, the arbitration law sets the grounds that can make an arbitrator liable, but the arbitrator is immune from making errors award (like a judge in the court) and only liable for breaches of other duties imposed by contract.[33]
Hebaizhi argues the ‘qualified immunity’ theory is not practical because it creates a confusion when trying to find the scope of ‘judicial act’ conducted by arbitrators.[34] His argument is based on the cases when arbitrator is alleged liable when she fails to render award timely. At that that cases the tardiness to render a contract may be caused by the complexity of the case rather than the misconduct of the arbitrator. Hebaizhi’s argument may be true in international level since until now there is lack of uniformity of “judicial task” and also the other qualification (bad faith, intentional misconduct, and so forth). Arguably, what can be proposed to arbitrator overcome this issue is, by ascertaining the potential scope of their liability in accordance with the seat of arbitration.[35]
III. Exploring the Duty to Render Enforceable Award: Is that exist?
Derain and Schwartz state that the enforceability of an award is the raison d’etre or the ultimate goal of an arbitral process.[36] While Redfern and Hunter state that the “enforceability” is one of the primary reasons that drive the party to bring their dispute to arbitration instead of to national court.[37] This reason is understanable because the New York Convention 1954 gives facility to enforce arbitral award in its Member country.[38] The enforceability can be done because the national court gives their assistance to execute the losing party assets in their territory. In contrast, there is no global treaty that can facilitate the enforcement of ‘court judgment’ which can be accepted internationally as New York Convention 1954.[39] The relevant question to the aforementioned assumptions is whether it automatically vests the arbitrator with duty to render enforceable award?.
According to Boorg, saying that the arbitrator under a legal duty to render enforceable award is a conceptual leap. He bases his argument on Football Association of Serbia (FAS) v Serbian Football Player case. At that case, the FAS alleged the Court of Sport Arbitration (CAS) violating the principle ‘arbitrator should render enforceable award’ because the CAS accepted jurisdiction to adjudicate dispute which under Serbian Law is not arbitrable. Switzerland Appeal of Court decided that the CAS does not violate any principle about rendering an award because to decide jurisdiction to arbitrate is purely the jurisdiction of Switzerland arbitrator. [40] In ICC Case 4695 (interim award), the ICC tribunal unequivocally said if the tribunal declines to exercise jurisdiction on the basis of possible difficulties of enforcement in the home jurisdiction, then there would no award at all.[41] These cases show that to some extent the case laws give “space” where an award is permissible to be annulled or challenged and implicitly show that the arbitral tribunal duty to render an “internationally enforceable award” is not the ultimate goal of arbitration tribunal.
Furthermore, although the New York Convention 1958 has already limited the ground that can be used to challenge an award, the arbitrator still faces different standard in treating each grounds even in one national court. In regard to public policy for example, the arbitrator must face the discretionary principle given by New York Convention to national court through Article V (2) (a) New York Convention that states “…the recognition and enforcement…mayalso be refused..” which means the national court is not under obligation to enforce arbitral award. As an illustration, in Omnium de Traitement et de Valorisation (OTV) SA v Hilmarton Ltd, the English court held that an arbitral award should be enforced ‘even if English law would have arrived at a different result on the ground that the underlying contract breached public policy…’.[42]. However in Soleimany v Soleimany, the Court of Appeal held that ‘an English court would not enforce an award on the ground of public policy which sought to enforce a contract which was illegal under English law as well as illegality to be of no relevance since under the law governing the arbitration.’[43]
Julian LQ argues that arbitrator is not under obligation to ensure the enforceability of an award unless the disputants have clearly stated the country where they want to seek enforcement of the award.[44] However, the arbitrator must take into consideration all factors that can threaten the validity of the award.[45] Taking into account the aforementioned theories, it can be said that the enforceability of an award is more likely a “process” rather than “definite” product.[46] However, it does not mean that the arbitrator is justified to make an unenforceable award as many arbitration institutional rules tries to fill this lacuna by ruling that the arbitrator should “make every effort to make enforceable award”[47] or “reasonable effort”[48] when settling a dispute. Thefore, it can be concluded that the ultimate goal of arbitration is to render an award that can be ‘potentially’ enforceable after the arbitrator do her best effort under her ‘judicial duty’, ‘duty given by their contract’ and limited to the matters that expressly provided[49] to the arbitrator. To reach this goal, what can be explored is how the arbitrator can follow all the procedures in the seat of arbitration to ensure the arbitral award is not annulled, because the annulment of an award has greater damage than an award that is unenforceable. An annulled award is susceptible to be declined by some countries under the ground of Article V (2) (e) New York Convention. [50] Although Article V gives discretion to the court whether to enforce an award that is annulled or not, but for the sake maintaining international comity and the principle of ‘ex nihilo nil fit’ national court generally decline the enforcement of an award that has been annulled in the seat of arbitration [51] as for example can be seen in Baker Marine (Nig) Ltd v Chevron (Nig) Ltd.[52] In contrast, an award that is not annulled in the seat of arbitration still can be enforced in another country because of different interpretation to the New York Convention or different standard of laws. Further, New York Convention explicitly gives opportunity to the party to do a ‘forum shopping’ to enforce an award to the litigant through VII (1) of the New York Convention. By paying attention to the seat of arbitration, the arbitrator will mitigate the risk of the award become unenforceable in another country. For the disputant, arguably it is better to have an award that is enforceable in several jurisdiction rather than an award that is unenforceable at all.
IV. Conclusion
Arbitrator should not liable for the award that is subsequently annulled or held unenforceable unless she is proven committing misconduct or fail to follow the procedures, arbitration law and and arbitration rules at the seat of arbitration. This conclusion is obtained from ‘qualified immunity’ theory which in the view that the arbitrator should be granted with immunity to ensure her freedom when exercising ‘judicial duty’ that is comparable to the judge in the court. Immunity is also needed to secure the finality of an award made by arbitrator. However that immunity must be limited because in fact, the arbitrator is not judge. Arbitrator is also a professional who owes duties to her client (disputants) whether the duty that is implied in the contract or the duty that arises from their their ethic as professional. Furthermore, duty to render enforceable award is not a ‘definit’ product, but that is the matter on how the arbitrator must give her best effort when conducting arbitration process. By using this theory, what should be done with the arbitrator is to make an award that is ‘potentially’ enforceable by paying attention and adhere with the arbitration law of the seat of arbitration, New York Convention and the arbitrator contract with the arbitrator. Therefore, the liability of arbitrator to the disputant must be assessed critically, at the minimum, based on the provision of arbitration law and arbitral institution rules in the seat of arbitration to find out the “qualification of liability” that can make the arbitrator liable.
_______________________________________________________________
[1] Elvi J. Olesen, ‘Baar v Tigerman: An Attack on Absolute Immunity for Arbitrators!’ (1985) 21 California Western Law Review 564 , citing M. Domke, ‘Commercial Arbitration 1.01.1 (G. Wilner ed 1968 & Supp. 1983)
[2] Harry Baum & Leon Pressman, ‘The Enforcement of Commercial Arbitration Agreements in the Federal Courts’(1930) 8 N.Y.U. L.Q. REV. 238
[3] Susan d. Franck, ‘The Liability of International Arbitrators: A Comparative Analysis and Proposal for Qualified Immunity’ (2000) 20 N.Y.L Sch. J. Int’l & Comp. L.1
[4] Sirros v Moore [1975] Q.B. 118.
[5] Stump v. Sparkman, 435 U.S. 349 (1978).
[6] Ibid
[7] Arenson v Casson Beckman Rutley & Co. [1977] A.C 405
[8] Andrea Mettler, ‘Immunity vs. Liablity in Arbitral Adjudication’ (1992) 47 Arbitration Journal 24
[9] Tamari v. Conrad, 552 F.2d 778, 781 (7th Cir. 1977)
[10] Alan E Seneczko, ‘Arbitration – Arbitrator Potentially Liable for Failure to Render a Decision. Baar v. Tigerman, 140 Cal. App. 3d 979, 189 Cal. Rptr. 834 (1983)’ (1983) 67 Marquette Law Review 147
[11] Murray L Smith, ‘Contractual Obligations Owed by and to Arbitrators: Model Terms of Appointment’(1992) 8 Arbitration International 17
[12] Baar v. Tigerman, 140 Cal. App. 3d 979, 984
[13] Hazem Hebaizhi, ‘Should Arbitrator Immunity Be Preserved Under English Law?’ (2014) 2 North East Law Review 45
[14] Arenson v Casson Beckman Rutley & Co (n7)
[15] Baar v Tigerman (n12)
[16] Mettler (n8)
[17] Ibid
[18] Dario Alessi,‘Enforcing Arbitrator’s Obligation: Rethinking International Commercial Arbitrators’ Liability,’ (2014) 31 Journal of International Arbitration 735
[19] Vienna Convention 1969 on The Law of Treaties, Article 26
[20] Hong Lin Yu, ‘Who is an arbitrator? A study into the issue of immunity,’ [2009] International Arbitration Law Review 1
[21] Warren A Seavey,’The Rationale of Agency Theory’ (1920) 29 The Yale Law Journal 860
[22] Ibid
[23] Yu (n 20)
[24] Ibid
[25] Christian Hausmaninger, ‘Civil Liability of Arbitrators: Comparative Analysis and Proposals for Reform’ (1990) 7 Journal of International Arbitration (1990) 7
[26] Maureen A Weston, ‘Reexamining Arbitral Immunity in an Age of Mandatory and Professional Arbitration,’ (2003-2004) 88 Minnesota Law Review 449
[27] Alan Redfern, Martin Hunter and others, Redfern and Hunter on International Arbitration (5th ed OUP 2015) 327
[28] Dario Alessi, ‘Enforcing Arbitrator’s Obligation: Rethinking International Commercial Arbitrators’ Liability,’ (2014) 31 Journal of International Arbitration 735
[29] Franck (n 3)
[30] Ibid
[31] Ibid
[32] Arbitration Act 1996 s 29
[33] Franck (n 3) in citing Peter Sanders, National Report on Germany, in International Handbook on Commercial Arbitration 14 (1998)
[34] Hazem Hebaishi, ‘Should Arbitrator Immunity Be Preserved Under English Law?,’ (2014) 2 North East Law Review 45
[35] Redfern and Hunter (n 27) 332
[36] Yves Derains and Eric Schwartz, A Guide to the New ICC Rules of Arbitration (1998) 353
[37] Redfern and Hunter (n 27) 35
[38] New York Convention 1958 of Enforcement of Foreign Arbitral Tribunal, Article 1
[39] Andrew T Guzman, ‘Reconciling Arbitration and Mandatory Rules’ (2009) 49 Duke Law Journal 1279
[40] Decision 4A_654/2011 dated 23 May 2012 (Swiss Supreme Court).[/fn]
[41] Martin Platte, ‘An Arbitrator Duty to Render Enforceable Awards,’ (2003) 20 Journal of International Arbitration 307, citing ICC Case 4695
[42] Omnium de Traitement et de Valorisation (OTV) SA v Hilmarton Ltd [1999] 2 All ER 146.
[43] Soleimany v Soleimany [1998] EWCA Civ 285
[44] Julian D.M Lew, Mistelis Loukas A and others, Comparative International Commercial Arbitration (Kluwer Law International, 2003) 275
[45] Ibid
[46] Redfern and Hunter (n27) 624
[47] International Chamber of Commerce Rules 1998, article 35
[48] London Chamber of Commerce and Industry Arbitraiton Rules 2014, article 32.2
[49] Christopher Boog, Benjamin Moos and others, ‘The Lazy Myth of the Arbitral Tribunal’s Duty to Render an Enforceable Award,’ Kluwer Arbitration Blog (28 Januari 2013) < http://kluwerarbitrationblog.com/2013/01/28/the-lazy-myth-of-the-arbitral-tribunals-duty-to-render-an-enforceable-award/> accessed 05 January 2017
[50] Ibid
[51] Albert van den Berg, ‘Enforcement of Annulled Awards’ (1998) 9 ICC Bulletin 15, 16
[52] Baker Marine (NIG.)Ltd. v. Chevron (NIG.) Ltd., 191 F.3d 194
BIBLIOGRAPHY
Primary Sources
International Treaties & Statutes
International Chamber of Commerce Rules 1998
London Chamber of Commerce and Industry Arbitraiton Rules 2014
New York Convention 1958 of Enforcement of Foreign Arbitral Tribunal
United Kingdom Arbitration Act 1996
UNCITRAL Model Law on International Commercial Arbitration
Vienna Convention 1969 on The Law of Treaties
American Cases
Arenson v Casson Beckman Rutley & Co. [1977] A.C 405
Baar v. Tigerman 140 Cal. App. 3d 979 (Cal. Ct. App. 1983)
Baker Marine (NIG.)Ltd. v. Chevron (NIG.) Ltd., 191 F.3d 194
Bradley v Fisher 80 U.S. (13 Wall) 335;
Tamari v. Conrad 552 F.2d 778, 781 (7th Cir. 1977)
Sirros v Moore [1975] Q.B. 118.
Hoosac Tunnel Dock & Elevator Co v O’Brien
English Cases
Soleimany v Soleimany [1998] EWCA Civ 285
Omnium de Traitement et de Valorisation (OTV) SA v Hilmarton Ltd [1999] 2 All ER 146.
Switzerland Cases
Football Association of Serbia (FAS) v Serbian Football Player Decision 4A_654/2011 dated 23 May 2012 (Swiss Supreme Court
Secondary Sources
Books
Redfern A, Hunter M and others, Redfern and Hunter on International Arbitration (5th ed OUP 2015)
Lew Julian D.M, Mistelis Loukas A and others, Comparative International Commercial Arbitration (Kluwer Law International, 2003) 275
Journals
Alessi Dario, ‘Enforcing Arbitrator’s Obligation: Rethinking International Commercial Arbitrators’ Liability,’ (2014) 31 Journal of International Arbitration 735
Van den Berg Albert Jan, Enforcement of Annulled Awards, (1998) 9 ICC Bull. 15
Franck D. Susan, ‘The Liablity of International Arbitrators: A Comparative Analysis and Proposal for Qualified Immunity,’ (2010) 20 N.Y.L. Sch. J. Intl’l & Comp. L.1
Hausmaninger Christian, ‘Civil Liability of Arbitrators: Comparative Analysis and Proposals for Reform’ (1990) 7 Journal of International Arbitration (1990) 7
Horvath Gunter J, ‘The Duty of the Tribunal to Render an Enforceable Award,’ (2001) 18 Journal of International Arbitration 135
_______________, ‘What Weight Should Be Given to the Annulment of an Award under the Lex Arbitri’ (2009) 26 Journal of International Arbitration 249
Hebaishi Hazem, ‘Should Arbitrator Immunity Be Preserved Under English Law?,’ (2014) 2 North East Law Review 45
Lew Julian D.M, Mistelis Loukas A and others, ‘Rights and Duties of Arbitrators and Parties,’ [2003] Comparative International Commercial Arbitration 275
Lozada Fernando Perez, ‘Duty to Render Enforceable Awards: the Specific Case of Impartiality,’ [2016] Spain Arbitration Review 71
Mettler Andrea, ‘Immunity v Liablity In Arbitral Adjudication’ (1992) 47 Arbitration Journal 24
Platte Martin, ‘An Arbitrator Duty to Render Enforceable Awards,’ (2003) 20 Journal of International Arbitration 307
Olesen J. Elvi, ‘Baar v Tigerman: An Attack on Absolute Immunity for Arbitrators!,’ (1985) 21 California Western Law Review 564
Seavey Warren A,’The Rationale of Agency Theory’ (1920) 29 The Yale Law Journal
Seneczko Alan E, ‘Arbitration – Arbitrator Potentially Liable for Failure to Render a Decision. Baar v. Tigerman, 140 Cal. App. 3d 979, 189 Cal. Rptr. 834 (1983),’ (1983) 67 Marquette Law Review
Sponseler Mark, ‘Redefining Arbitral Immunity: A Propossed Qualified Immunity Statute for Arbitrators’ (1992-1993) 44 Hasting L.J 421
Wahl Philip, ‘Enforcement of Foreign Arbitral Awards Set Aside in their Country of Origin,’ (1999) 16 Journal of International Arbitration 131
Weston Maureen A, ‘Reexamining Arbitral Immunity in an Age of Mandatory and Professional Arbitration,’ (2003-2004) 88 Minnesota Law Review 449
Yu Hong Lin, ‘Who is an arbitrator? A study into the issue of immunity,’ [2009] International Arbitration Law Review 1
Blog
Boog Christopher, Moss Benjamin and others, ‘The Lazy Myth of the Arbitral Tribunal’s Duty to Render an Enforceable Award,’ Kluwer Arbitration Blog (28 Januari 2013) < http://kluwerarbitrationblog.com/2013/01/28/the-lazy-myth-of-the-arbitral-tribunals-duty-to-render-an-enforceable-award/> accessed 05 January 201
