I. Introduction
Party autonomy is the spirit of arbitration. Parties are given the right to choose the way their contractual relationship is formed and regulated. However, such liberty is not unfettered. It is subject to various limitations.[1] The limitations can be seen both in theory and in practice.
This essay summarizes the main inherent limitations on party autonomy in international commercial arbitration on the basis of doctrine, as well as the limitations that arise when the process of the arbitration is flawed. Then on a practical level, by going through the whole process of arbitration, this essay admits that party autonomy is the leading principle among the principles guiding the common practice of arbitration, and shows how the exercise of party autonomy is sometimes frustrated or balanced by other considerations.
Notably, due to the various national regulations of vast amounts of countries, this essay can’t enumerate each of their features and therefore only the rules in representative countries are assessed.
II. Inherent Limitations on Party Autonomy
The current framework of international commercial arbitration is not possible without the support of national and international law.[2] In the arbitration process, although the parties have substantial autonomy, it is impractical to push through the arbitration, especially the enforcement, without the regulatory framework set out by the nations’ public power. For instance, one of the most important treaties, the New York Convention is the guarantee of the recognition and enforcement of overseas arbitration.[3] Therefore, arbitration is based on both party autonomy and the nations’ collaboration.
In discussing the limitations to party autonomy, the majority of opinions categorize them into public policies, arbitrability, mandatory rules and so on. They sometimes overlap with each other. This essay tends to classify these limitations into two parts. One part of these limitations is inherent due to the inseparable relationship between the arbitration process and countries’ public power.
First, public policy is the plainest embodiment of public power. It is one of the grounds that the New York Convention provides for the country's authority to refuse recognition and enforcement.[4] Some argue that This is the space that the convention leaves for countries to exercise their sovereignty.[5] To change the perspective completely, if the convention doesn’t leave such space, the countries might not enter the convention in the first place. Even in domestic arbitration, the parties may also want the court to enforce an arbitration judgement, namely to borrow from the countries’ coercive public power, and therefore the authority naturally has the chance to decide if the parties’ demands are in accordance with the country’s public policy.
As listed in article V(2)(a) of the New York Convention, the authority can also refuse the recognition and enforcement on the grounds of arbitrability. In discussing the limitations on party autonomy, this clause shares similar features as the public policy. The difference might be that in national law, arbitrability is more usually regulated by specific mandatory laws,[6] whilst public policies are a broader concept in the national legal system. The national court may invoke mandatory laws that are only prepared for the issue of arbitrability, and can refuse on the grounds of public policy from different sectors of the law of that nation. From this perspective of view, public policy is more like a “last stand” of the authorities’ discretion. However, the grounds of arbitrability can also be argued as part of the nation’s public policy. Though the mandatory rules of arbitrability play their distinct role in arbitration, they cannot be excluded from the nation’s legal system and thus are also part of the public policy. Therefore, the border between arbitrability and public policy is sometimes vague, and the concept of public policy is broader.
To conclude the limitations stated in this part, the word “inherent” would be appropriate. Compared to “limitations”, “pre-conditions” would better describe them from the perspective of the authority and the policymakers. Without the space left for the authority, the international collaboration that creates the international commercial arbitration would have not existed. Therefore, from the parties’ perspective, the limitations are inevitable and inherent.
III. Limitations of Flawed Process
From the above analysis, the limitations of the authorities’ power to the arbitration are outlined. There are also limitations of form requirements. Defects in the arbitral procedure, particularly those that would produce injustice outcome, may lead to the failure of the arbitration. One representative example is due process.
In Article V(1) of the New York Convention, five grounds are listed that the parties may invoke to invalidate the arbitration, [7] details and implications of which will be discussed later. This clause allows parties to raise the argument and evidence that there’re defects in or in the process of generating the award and thus prevent the enforcement of such an award. If the award granted by a tribunal elected by the parties can be frustrated on the ground of procedural defects, on the conceptual level it is equal to say that the party autonomy is limited. The court where the case is presented should actively reject the award. However, the procedural aspect can sometimes be included in the public policy. In some cases, the court may decline the enforcement on the ground of public policy but in fact for the reason of the defect in the arbitral procedure.[8] However, the requirements of procedural integrity are fundamentally different from the limitations stated in the last part. Firstly, the nation is not interested in the procedural defects as the court decides on these cases purely for the sake of the parties, to protect them from the unjust outcome of flawed procedures. Secondly, these limitations only take effect when the parties fail to exercise autonomy in a way that is accepted by the court. Of course, in some cases, the defects are not caused by the parties, but the parties fail to channel their will of autonomy into a legit award, which should also be considered a failure of autonomy.
For the parties and the economic environments around, though the utmost purpose of arbitration is to produce a fair result,[9] the importance laid on procedural justice of arbitration is argued to be excessive, enough to constitute a “paranoia” and have overlooked the fairness of substance.[10]
IV. Balance of the Principles in Practice
Admittedly, though subject to various limitations, party autonomy is the leading principle of arbitration. This part emphasizes the leading position of the party autonomy principle in practice, and more importantly, how it is balanced with other principles including the limitations stated above.
First and foremost, the arbitration agreement is the foundation of arbitration.[11] To consolidate the foundation, the arbitration agreement enjoys separability.[12] In short, unless otherwise agreed by the parties, even if the main agreement (the contract) is vacated, the arbitration agreement does not become invalid, non-existent or ineffective. This gives much certainty and strengthens parties’ confidence in arbitration. Then focusing on the agreement, the parties are given multiple options including the choice of the seat of the arbitration, the choice of law and so on. It is worth noting that, in determining the choice of law, the choice of the parties is usually of the highest priority. For example, in English common law conflict of law rules, three stages of examinations will be applied in order: (i) expressed choice of law, (ii) implied choice of law, (iii) system of closest and most real connection.[13] The high priority of the parties’ autonomy can be seen.
Then, if there are no disputes of parallel proceedings, the parties may call for arbitration, maybe in accordance with ICC rules.[14] After that, they may encounter the issue of choosing arbitrators. Being fundamentally different from litigation, parties in arbitration can choose in which way the tribunal is formed to resolve their disputes.[15] No matter one or three arbitrators are appointed, the parties can always agree in advance to ensure the arbitrators are appointed in a procedure that they both accept. If the arbitration is institutional, there may be institutional rules in selecting the arbitrators that apply.[16] Such rules may be seen as a restriction on the parties’ liberty, but it is the parties that choose the institutional rules to govern the procedure and therefore it is actually a promotion of party autonomy. For example, in three arbitrators’ situations, if the ICC rules apply, the ICC Court of Arbitration will choose the presiding arbitrator, namely the chair of the tribunal.[17] Though the choice is not made by the parties, it is made in accordance with the pre-set procedure that the parties agree. In ad hoc arbitration, the parties need to be otherwise particularly careful in designating the method of choice of the arbitrator(s) as the institutional intervene is absent.[18] Which way would make the parties better exercise their autonomy? The involvement of written rules is not a restriction but a promotion.
After the award is rendered, the parties, especially the winning side would want to enforce the award. This is the third and the final stage and most of the factors that may jeopardize the outcome of the arbitration arise in this stage. As stated in part II, the national authorities’ power is to be borrowed to enforce any award and the court now has the chance to run the check on the award and the whole procedure of the arbitration. The losing side is also given the chance to apply to set aside the award of the tribunal.[19] Most of the causes are stated in part III of this essay. In this part, the rarity of such defenses would be emphasized. The arbitrations should be final and binding to the parties.[20] Though the grounds for setting aside ranging from jurisdictional and procedural defects to public policy and arbitrability are provided in Article V of the New York Convention, the merit of the case is mostly immune to the courts’ interventions, with only a few exceptions. In different countries, the exceptions may be public policy and that there is manifest disregard of the law.[21] Let alone that not only the grounds for setting aside is narrow, but there is also judicial resistance to review the award produced by the arbitral tribunal.[22]
V. Conclusion
As a dispute resolution mechanism, Arbitration is separate from the countries’ litigation system and highly promotes the parties’ autonomy. However, it can never isolate itself from the legal system. If the countries’ coercive power is to be borrowed at the end, the countries’ interest in public policy can never be ignored. This constitutes the inherent limitations on party autonomy. If the arbitration is meant to be carried out in due process, the form of the arbitral process may also be examined by the authority to ensure it is free of flaws. This constitutes the limitations of flawed processes. The two types of limitations are classified based on the source of rules. Compared to the usual classifications that contain multiple overlaps, classifying the limitations into these two types better outlines how the party autonomy is limited and regulated.
The significance of the arbitration is not just the parties’ will to resolve their disputes in the way they want, but also the litigation cost economized for both parties and countries. The fundamental characteristic of arbitration is collaboration. Collaboration between nations, between parties and between authorities and parties. Therefore, the balance of principles is found throughout the arbitration process.
Bibliography
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German Seller v. German Buyer [1980] Yearbook of Commercial Arbitration 260
ICC, ICC Arbitration Rules < https://iccwbo.org/dispute-resolution-services/arbitration/rules-of-arbitration/> accessed 3 May 2021
Sulamerica Cia Nacional de Seguros SA v Enesa Engelharia SA [2013] 1 WLR 102
UNCITRAL Model Law on International Commercial Arbitration (United Nations document A/40/17, annex I) < https://uncitral.un.org/sites/uncitral.un.org/files/media-documents/uncitral/en/06-54671_ebook.pdf> accessed 3 May 2021
United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 10 June 1958) < https://www.newyorkconvention.org/english> accessed 3 May 2021
UK Arbitration Act 1996
Secondary Source
Dickson M, ‘Party autonomy and justice in international commercial arbitration’ (2018) 60 Int JLM 114
Moses M, The Principles and Practice of International Commercial Arbitration (3rd edition, CUP 2017)
Naimark R, S Keer, ‘International Private Commercial Arbitration: Expectations and Perceptions of Attorneys and Business People’ (2002) 30 Int Bus Law 203
Okekeifere A, ‘Public policy and arbitrability under the UNCITRAL Model Law’ (1999) 2 Int ALR 70
Scherer M, 'The fate of parties' agreements on judicial review of awards: a comparative and normative analysis of party-autonomy at the post-award stage', in William W. Park, Arbitration International (OUP 2016, Volume 32 Issue 3) 437
Sharma S, ‘Due process “paranoia”: turning away from judicial attitudes and looking for answers within’ (2018) 84 Arbitration 314
[1] Maxi Scherer, 'The fate of parties' agreements on judicial review of awards: a comparative and normative analysis of party-autonomy at the post-award stage', in William W. Park, Arbitration International (OUP 2016, Volume 32 Issue 3) 437, 448
[2] Margaret L. Moses, The Principles and Practice of International Commercial Arbitration (3rd edition, CUP 2017) 6-10.
[3] Ibid, p 3.
[4] United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 10 June 1958), art V(2)(b)
[5] Moses Oruaze Dickson, ‘Party autonomy and justice in international commercial arbitration’ (2018) 60 Int. J.L.M. 114, 115.
[6] Andrew I. Okekeifere, ‘Public policy and arbitrability under the UNCITRAL Model Law’ (1999) 2 Int. A.L.R. 70, 77
[7] Grounds including Incapacity and invalidity, violation of due process, scope of jurisdiction, irregularity in the composition or procedure, and award not binding.
[8] German Seller v. German Buyer [1980] Yearbook of Commercial Arbitration 260.
[9] Richard W Naimark and Stephanie E Keer, ‘International Private Commercial Arbitration: Expectations and Perceptions of Attorneys and Business People’ (2002) 30 Int Bus Law 203, 203.
[10] Sameer Sharma, ‘Due process “paranoia”: turning away from judicial attitudes and looking for answers within’ (2018) 84 Arbitration 314.
[11] Supra, n 4, art II.
[12] In respect of UK, see Arbitration Act 1996 s. 7.
[13] For example, see Sulamerica Cia Nacional de Seguros SA v Enesa Engelharia SA [2013] 1 WLR 102.
[14] ICC Arbitration Rules, art 4.
[15] Supra, n 2, p 127.
[16] Ibid, p 131.
[17] Supra, n 14, art 12(5).
[18] Supra, n 2, p 138.
[19] Supra, n 2, p 216.
[20] Ibid, p 218.
[21] Ibid, p 221.
[22] Ibid, p 224.
[21] Ibid, p 221.
[22] Ibid, p 224.