Introduction
Arbitration is a means of alternative dispute resolution and is characterized by an agreement between disputants to submit disputes to a third party for resolution.[1] This definition of arbitration encapsulates two distinct concepts. The first and most obvious is the reliance on a contractual arrangement. The second significant point is the judicial nature of arbitration as evidenced by the submission to a third party for resolution. The latter point necessarily implies that the dispute will be heard and considered by a third party indicating that both parties will submit their respective sides of the dispute to a third party to determine and resolve. The first point expressly indicates that the third party’s decision making powers are as much a creature of contract as the agreement to submit to arbitration.
These two factors are equally indicative of the legal nature of arbitration and have formed the basis of academic discourse on the legal nature of arbitration. Some academics emphasise the contractual nature of arbitration, others emphasise the judicial nature of arbitration. Yet, some academics seek to amalgamate both legal concepts of arbitration and focus on a medium between the contractual and judicial nature of arbitration. Further still, there are academics that focus on the private and confidential nature of arbitration as a means of explaining its legal nature. This paper aims to explore the legal nature of arbitration by evaluating and explaining these four common theories. It will be argued that the independent nature of arbitration is the most convincing theory because it offers an alternative, although informal, to litigation and as such provides the kind of satisfaction that is necessary for its success. The informal nature of arbitration together with its judicial nature are significant because together they make it possible for larger numbers of people to have access to justice where they might not be able to afford the time, cost and legal expertise necessary to subscribe to formal litigation. It is for this reason that arbitration is important for its contribution to both community and individual justice.
Theory of Contract
1. The Strengths of the Theory of Contract Approach
The arbitration process is invoked by reference to an agreement between the disputants and this alone gives way to the theory that the legal nature of arbitration is characterized by contract. Party autonomy in arbitration supports this theory even further. To start with the actual construct of the arbitral process is in the hands of the disputants and subject to their agreeing on the procedure to be followed.[2] The disputants are at liberty to choose the type of arbitration, (ad hoc or institutional) the number of arbitrators, the specific qualifications of arbitrators and they may likewise select “matters relevant to the procedure to be followed.”[3] The parties can also set time constraints, for instance they may set a timeframe within which an arbitral award must be delivered.[4] Like any contractual arrangement, the parties to the arbitration agreement may also vary the agreed upon terms of the arbitral process as well.[5]
The contractual nature of arbitration is evolving in international laws as much as it is in domestic laws. For instance there is ample attention to the binding nature of the agreement to arbitrate, more especially, the formal requirements for substantiating whether or not an actual contract to arbitrate exist so that it binds the disputants to it. For instance Article II(2) of the New York Convention 1958 specifically requires that the agreement to arbitrate be manifested in writing.[6] Article II(3) leaves it to the applicable domestic courts to determine the validity and binding nature of the arbitration clause.[7]
What is obvious from these observations with respect to formality and validity of the arbitration clause is its direct link to the issue of consent. Obviously, the New York Convention relies on both substantive and formal proof that the parties to a dispute have indeed consented to submit their disputes to arbitration before the arbitration clause will be enforced. Indeed the issue of consent and proof of such consent are essential elements of contract law and give way to the concept that arbitration as an alternative dispute resolution process is firmly grounded in contract.
2. The Weaknesses of the Theory of Contract Approach
The doctrine of separability further fortifies the argument that the legal nature of arbitratin is contractual. Ironically, the doctrine of separability also weakens the contract argument. The doctrine of separability dictates that the agreement to arbitrate has a life of its own capable of surviving, separate and apart from the main contract.[8] In other words the agreement to arbitrate is considered and treated as a contract all of its own and recognizes party autonomy. However, the doctrine is flawed when it binds a disputant to an arbitral award in a dispute matter arising out of a contract which is not valid and unenforceable.[9]
As McNeill and Juratowitch submit, logic dictates that if the contract containing the arbitration clause fails it follows that the arbitration clause in the contract should fail as well.[10] Since the doctrine of separability insists that the arbitration clause exists outside of the contract creating it, it appears to give the arbitration clause a meaning that distinguishes it from the formal requirements of contract law. Terms and conditions of a contract, for example the duty to pay a sum of money in exchange for goods or services will not be enforceable should the contract creating those obligations fail. The mere fact that the arbitration clause contains the power to survive gives it a more meaningful purpose than those associated with contract. It seeks to enforce judicial rights more so than it seeks to enforce bilateral exchanges of promises. If the latter were so, obligations expressed in main contracts would also survive the main contract.
McNeill and Juratowitch maintain however, that the arbitration clause survives the contract because it binds the party to an agreement to submit any and all disputes arising out of the contract to arbitration.[11] Given that the arbitration clause forms the basis of a legally binding contract and the fact that the contract is invalid may form the basis of a dispute between the parties. In order to resolve the dispute, the parties are bound by the arbitration clause to submit that particular dispute to arbitration. After all the issue of whether the contract is valid or not is a dispute arising out of the contract. In this regard, it is not the arbitration clause that survives the contract. It is something more. It is the contractual tenure of the arbitration clause that survives the main contract.
Stavros Brekoulakis aligns the arbitration agreement to its contractual nature by comparing it to the party autonomy concept exploited in international private law. Brekoulakis first notes that freedom of contract and party autonomy dictates that the parties to a contract are essentially free to determine not only which law will govern their contract but how their disputes will be resolved.[12] This freedom is founded on the premise that contracting parties are in the best position to determine their contractual relationships should be best served both procedurally and substantively.[13]
Like choice of law clauses, the agreement to arbitrate is a manifestation of the doctrine of autonomy within the ambit of freedom of contract.[14] Despite these similarities however, the international and domestic courts have treated the agreement to arbitrate with a measure of superiority over the jurisdiction clauses contained in a contract.[15] There are a number of differences in the manner in which courts treat the arbitration agreement over the jurisdiction clause that leads to some doubt about the purely contractual nature of the arbitration clause.
Arbitration may be a creature of contract but it is tightly regulated by statutory instrument and vigorously validated by various international treaties and conventions. The New York Convention on Recognition and Enforcement of Foreign Arbitral Awards for instance instructs courts to refer the issue to arbitration if and when there is an arbitration agreement.[16] The purpose of these various treaties and conventions is “the effective enforcement of arbitration agreements.”[17] Domestic courts too have the same power and may even compel the parties to submit to arbitration. [18] For example, the court may decline jurisdiction or “stay the proceedings.”[19] Moreover, a court cannot assume jurisdiction over a matter subject to an arbitration agreement unless they are satisfied that the agreement to arbitrate is “null, void, inoperative or incapable of being performed.”[20]
The overreaching impact and effectiveness of an arbitration clause goes beyond the idea of contractual arrangements and appears to encapsulate something more profound. Arbitration agreements have the capacity to usurp the functions of the courts, and although they are derived from contracts, they are regulated by statute laws to ensure that arbitration can indeed take the place of judicial proceedings. In this regard, the choice is similar to the choice of law clause only it is more strictly regulated by statute than the choice of law agreement.
3. Conclusion
A choice of law clause although permitted by contract does not become contractual in nature. It encapsulates the application of substantive law. Arbitration clauses are similarly composed. They are made possible by virtue of contract but are applied to allow parties to make a procedural choice for the resolution of their disputes. In this regard, the arbitration clause does not serve to characterize arbitration as a purely contractual arrangement, it only originates out of contractual arrangements. In practice it goes beyond the contract and is regulated by statute. In other words statutory instruments provide the parties with the right to determine how their disputes will be managed. Arbitration is one of those choices.
The Judicial Theory
Strengths of the Judicial Theory Approach
The judicial theory is predicated on the concept that the arbitration process is akin to the judicial process in that the arbitrator plays the part of a judge in the arbitral process. This theory relies entirely on the fact that arbitrators do perform vastly similar functions as those of the judge in that the arbitrator ultimately makes a binding decision. Mauro Rubino-Sammartano submits however, that this is only true “in the abstract” but not so in practice.[21] On an abstract level the role of the arbitrator and the judge are virtually indistinguishable. They are both charged with the responsibility to “decide the procedural issues under the applicable procedural rules.”[22] Likewise both judge and arbitrator will establish the disputed and undisputed facts with respect to both “written and oral evidence” which is submitted by the disputant and “applying to it the applicable substantive law.”[23] In this regard there is no abstract differences in the decision making mechanisms of the judge and the arbitrator.[24]
In practice however, some salient distinctions between the role of the arbitrator and the judge are worthy of note. Mauro Rubino-Sammartano explains that although judges and arbitrators alike are prone to make different decisions in like cases, there is reason to believe that arbitrators are more likely to make inconsistent decisions than judges are.[25] Judges typically sit in a full time position while arbitrators are usually only sitting in a part time capacity.[26] This alone provides sound reason for predicting that judges will less likely make inconsistent decision than arbitrators.
Moreover, arbitrators are typically experts in particular subject matter of the dispute as opposed to the “average judge and this definitely influences their decisions.”[27] Another reason for predicting that arbitrators are less likely to make consistent decisions than judges are , is accounted for by the relative systems of controll. The nature of arbitration precludes the possibility of public scrutiny with the result that the arbitrator is no exposed to public criticism.[28] In this regard, the judge’s error are open to the public while the arbitrator’s is not, therefore, aware of this public exposure, the judge is likely to be more consistent in his decision making than the arbitrator.[29]
Another practical difference is found in the fact that the judge does not receive payment from the disputants which the arbitrator does.[30] Rubino-Sammartano notes that:
“Ocassionally, an arbitrator is paid only by one party and this becomes clear even during the arbitral proceedings. This too may, even if unconsciously, influence his/her decisions.”[31]
Be that as it may, litigants cannot be assured one way or another whether or not they will end up with a good judge, but they can ensure that they will end up with a good arbitrator since they are at liberty to choose.[32]
Despite the mechanisms that control or perdict the frequency of indidents of inconsistency of arbitral decision makings there are no differences between the decision making mechanisms of the arbitrator and the judge. At least not in principle. The differences pointed out will not ensure that a judge will render consistent decisions. While it is certainlty true that courts are minded to adhere to a measure of consistency and certainty, neither of these commitments steer the judicial nature of the litigation system. What distinguishes formal litigation as judical in nature is the persence of the third party, ususally the judge who determines the facts in a nuertral and impartial manner. It is the neutral and impartial decision maker that primarily gives litigation its judicial nature and likewise lends it self to the legal nature of arbitration.
Professor Julian D.M. Lew points out a number distinctive traits of arbitration that makes it possible to align it to formal litigation and as such arbitration can be characterized as judicial in nature. Lew notes that while there are no specific procedural laws dictating the form that the arbitral process will take either on a national or international level, the process is essentilly similar to that of formal adjudication.[33] This is manifested by the fact that arbitration:
“…invariably involves sequential submissions, which involve all testamentary and documentary evidence, expert reports, legal argument and materials on which the party relies.”[34]
Likewise arbitration will typically include a process in which the parties to the dispute and the arbitral process will be heard and will examine and cross-examine witnesses.[35]
This process is characteristic of a judicial approach to dispute resolution in what is deemed a fair and impartial hearing. This is the defining feature of formal litigation. The process permits both sides to be heard and to counter the evidence introduced against their cause. This mechanism is founded on principles of justice and natural law. The fact that the arbitration process permits such an approach and carries it out in practice demonstrates that arbitration is indeed akin to the judicial process and is conducted in much the same way so as to ensure that justice is done between the two parties.
Authors Matti Krukela, Richard Levin, Christoph Liebscher and Patrick Sommer take the judicial theory with respect to the legal nature of arbitration a bit further. The first point for consideration is the burden of proof.[36] The authors point out that arbitrators, unlike “national judges” are “not bound by national rules of procedure.”[37] For example, arbitrators are not required to collect evidence, an obligation “imposed on national judges.”[38]In fact, Krukela et ales maintain that arbitrators are largely free with respect to the presentation of evidence subject to the proviso in must jurisdictions that they permit the disputants “a reasonable opportunity to be heard.”[39]
On a substantive level this appears to be the correct form to take if arbitration has any real semblance to judicial traits. Procedural distinctions do not take away from this theory. Procedural differences between arbitration and formal litigation are not only expected but are absolutely necessary. The entire ambit of arbitration is to provide an less costly alternative dispute resolution mechanism. In order to be less costly, the arbitration process is going to have to cut out some of the methods of formal adjudication. Curtailing the procedural rules is the sensible approach. By adhering to the substantive approach to the hearing itself, the integrity of the arbitral award has essentially the same degree of judicial merit as a judge rendered by a state formed tribunal of fact.
The issue of discovery prior to the arbitration process also lends itself to the argument that the arbitration process is not consistent with the judicial theory. As noted in the preceding paragraph, there are bound to be specific departures from the procedural aspects of formal adjudication since the scope and range of arbitration aims to facilitate not only a cost effective method of dispute resolution, but also a faster method of resolving disputes.
2. Weaknesses of the Judicial Theory Approach
Be that as it may, there is nothing preventing the parties to arbitration opting for discovery as a part of their particular arbitration process. In fact, Joseph Forstadt goes so far as to say that in the United States at least, the parties are at liberty to agree to have the Federal Rules of Civil Procedure apply to their arbitral process.[40] No doubt a similar approach to the arbitral process on the part of the parties can be taken in most jurisdictions. This is so because of the doctrine of party autonomy. The parties to arbitration are free to choose the procedural legal framework for the conduct of the arbitration process.[41]
Procedure itself does not compromise the judicial basis of the arbitral process as long as the substantive approach is not sacrificed in the interest of time and economy. There is nothing in the literature that suggests that the arbitration process permits the parties to agree to an unfair hearing conducted by an unfair and biased arbitrator. The cornerstone of formal litigation is that it is predicated on fairness to both sides and this includes the requirement that the judge is fair and impartial. The same principles of justice likewise apply to the arbitration process.
The parties to an international arbitration agreement are free to agree what and how the evidence will be taken during the arbitration process.[42] When the parties fail to agree the arbitrator is empowered by the UNCITRAL Model Law on International Commercial Arbitration to use his or her discretion on how the evidence will be taken. [43] In fact the judicial nature of the arbitration process is supported by the UNCITRAL Secretariat who refers to the UNCITRAL Model Law on International Commercial Arbitration as the “Magna Carta of Arbitral Procedure.”[44]
3. Conclusion
Many of the perceived difficulties with the judicial nature of the arbitral process are cured by local statutory provisions that regulate the limits and liberties with respect to the procedural nature of arbitration. For instance in the UK, the Arbitration Act, 1996 and in Germany the 10the book of the German Code of Civil Procedure regulate the arbitration process within their respective jurisdictions.[45] In many cases these statutes provide for mandatory procedure unless the parties to the arbitral process agree to depart from them.[46]
This process alone speaks to the judicial nature of the arbitration contract in that the various regulatory regimes have prescribed the expected form for the arbitration process to take. By doing so it sets a minimum standard so that arbitrators who are left to decide the procedural issues when the parties do not agree cannot apply procedural rules as they see fit, but must adhere to the minimum standards set by statutory provision. Moreover, the right to waive those procedures are similar to judicial process where the parties to a formal adjudication process may wave certain procedures. For instance, a party to a civil dispute before the courts may legitimately waive service of a particular document although the rules of civil procedure guarantee the parties the right to be served with notice of the process.
Tritmann and Boris note that they themselves have witnessed a number of international arbitration processes that these processes generally take the approach to witness testimony that the courts in the UK take.[47] This is so in both common law and civil law jurisdictions. In fact, the international arbitration process generally requires that witness statements be prepared and the witnesses be subjected to examination and cross-examination.[48]
Another approach to international arbitration that lends itself to the judicial theory with respect to arbitration is the practice of international arbitrators to insist on the presentation of documentary evidence.[49] The Similarities with the judicial process is derived from the fact that arbitrators in the international context are taking the position that “documentary evidence constitutes the best evidence.”[50] To this end, both common law and civil law jurisdictions have made legal provisions for developing a rules-based process that ensures that the documents are made available between the parties.[51]
Both domestic and international arbitration in the jurisdiction of the UK are so closely tailored to the court’s process that it is barely distinguishable.[52] This is particularly important as it supports the judicial theory. In English legal circles discovery is looked upon as an important instrument of justice.[53] In cases where the parties, their lawyers and the arbitrators are all from both Common law and civil law countries the chances are great that they will adapt the English rules of procedure and this includes the English rules of discovery.[54]
Based on the foregoing discussion the judicial theory is hardly flawed. While there are certain procedural deficiencies attached to the arbitration process, the substantive rules remain vastly similar to those of formal litigation. By virtue of the substantive rules the parties are entitled to a fair hearing by a fair and impartial tribunal of fact, the cornerstone of the justice system in most jurisdictions and certainly in Common law jurisdictions.
The Theory that Combines the Contractual Nature of Arbitration with Judicial Nature of Arbitration
1. Strengths of the Combination Theory
Although the arbitration clause is a part of a main contract and started out as means by which to “lower the cost of litigation” and to speed of the dispute resolution process has taken on a number of policies and practices of formal litigation.[55] This observation is indicative of the theory that the arbitration process has evolved in such a way that it stands at cross purposes between the judicial and contractual legal characteristics. On the one hand, the contention is that arbitration is a creature of contract and is therefore contractual in nature. On the other hand, the evolution of the arbitral process has taken a more judicial tone.
Again, the mere fact that an arbitration agreement is a creature of contract the statutory provisions of the country in which the arbitration is being conducted generally makes provision for certain minimum standards of procedure and presentation of evidence. The standards reflect an attitude that the arbitration process is judicial in nature and though informal when compared to the formal adjudication, will not typically allow derogation from the substantive principles of justice. As previously noted the arbitration process typically requires that both sides be heard and that the arbitrator is fair and impartial. These requirements are far more important to formal adjudication than the rules against hearsay.
Stephen Choi points out that although the current trend in the arbitral process allows for discovery, legal representation and has become entirely “standardized.”[56] The result is that disputants by and large will find themselves in a dispute resolution process that is vastly similar to “court proceedings.”[57] Be that as it may, the nature of the arbitration agreement is such that it allows the parties to alter this process by consent.[58] In other words, the arbitration process although founded in contract realities, has developed a process that has become almost entirely judicial in nature. However, given the fact that the right to self-determination is the cornerstone of the arbitration process and predicated on the concept of contractual relations the parties to the contract can agree to conduct their proceedings in a much less formal manner.
2. Weakness with the Combination Theory.
This observation can lend some weight to the theory that the arbitration process is a hybrid of both contract and judicial concepts of law. However, it ignores the fact that formal litigation also allows parties to agree to waive certain procedural rules and fundamental protections. This is even so in the criminal process where a criminal defendant has the right to remain silent but gives up that right in favour of testifying under oath. This reality does not in any way make the criminal trial in which the defendant waives his right to remain silent less judicial. Neither does it strip such a trial of its judicial status.
Another point that may serve the combination theory is the fact that arbitrators are paid for their services. Over time, arbitrators or arbitration institutes may develop reputation for fairness and impartiality.[59] As a result they may be at liberty to charge a higher fee, based on the acquired reputation.[60] This observation implicitly lends weight to the argument that arbitrators have a role to play that is vastly similar to that of the judge in the formal adjudication process to the extent that he or she sits neutrally and impartially. However, that impartiality is secured by payment and the contract that derives from contractual commitments. It therefore follows that the arbitration process takes its legal metal from a combination of contract and the judiciary.
This theory is unfounded because it presupposes that judges sit gratuitously and provide no more than a solemn and civic duty. Judges are paid for their services and are under employment contracts to administer justice in much the same way that arbitrators are. The only difference is that judges are paid by the government and are employees of the state. Arbitrators are paid by the disputants and are private employees in that respect. However, after all is said and done, the government generates its income from taxes in most jurisdictions and those taxes come form potential litigants. So in reality, judges also work for litigants although in a less direct way. It therefore follows that arbitration is no less contractual in nature than the judicial process and by making the distinctions between the judiciary and arbitrators with respect to payment will not infer or support a combination theory.
One final observation that gives way to the concept that arbitration is characteristic of both the judicial process and the contract is found in the judicial attitudes toward the finality of the arbitral award. This attitude is cultivated by a belief that the agreement to arbitrate is a product of a collateral agreement which has as its purpose the facilitation of a cheaper and faster means of dispute resolution. In the words of Justice Douglas of the US Supreme Court in Steelworkers v Enterprise Wheel 363 US 593 (1960):
“The refusal of courts to review the merits of an arbitration award is the proper approach to arbitration under collective bargaining agreements. The federal policy of settling labor disputes by arbitration would be undermined if courts had the final say on the merits of the awards.”[61]
Justice Douglas’s comments are two-tiered in that it lends itself to the purported dual nature of the contractual and judicial nature of the arbitration process. The use of the phrase “collective bargaining agreements” in the context of arbitration speaks plainly to the contractual nature of arbitration. The second part of the statement which refers to the practice of barring the court’s interference on the merits of the award speaks to the judicial nature of arbitration by aligning “award” with the courts.
Conclusion
However, only to the extent that the arbitration agreement gives rise to the arbitral process can it be said that the arbitration process is contractual in nature. The process itself is judicial in nature and although it can be varied by consent, so too can the judicial process in formal adjudication. Parties can waive discovery, cross-examination and other parts of the judicial process. The fact is, contracts form a part of virtually every aspect of daily lives, that is if the standards for regarding an arbitration clause as a contract are broadly applied. At the end of the day, an arbitration clause is a mere gratuitous exchange of promises and is does not meet the formal requirements of a contract. Outside of the main contract it is missing the main ingredient for validating a contract and that is the requirement for valuable consideration.
The Privacy Theory
1. Strengths of the Privacy Theory
The privacy theory distinguished arbitration from all other theories and from formal litigation and is perhaps the more characteristic of its legal nature. Privacy and confidentiality provides arbitration with an independence that defined it. If arbitration were open to the public and required documentation it would increase time and costs because formal records would require an increase in administrative staff which would consume both time and money. Therefore, privacy and confidentiality is a convenient tool and is provides the motivation for its selection as a method of dispute resolution. As Greer LJ explained in Union-Castle Mail Steamship Co. Ltd. v Huston Line Ltd. [1936] 55 Lloyds Rep. 136:
“One of the reasons why businessmen prefer arbitration to hearings in Court is that the arbitrator does not sit in public and therefore is not called upon to wash soiled linen in public or to disclose their business to other people.”[62]
Greer’s statement indicates that the legal nature of arbitration is one of privacy and confidentiality. It also explains the diverging roles of the judge and the arbitrator, placing a gap between their respective functions. The judge sits in an open and public forum and is accountable to the public. The arbitrator on the other hand, sits in private and is accountable to the disputants only.
Confidentiality is another matter and by virtue of the dynamics of the arbitration process it is not clear whether it is a creature of contract or if it necessarily arises out of the nature of the relationship between the relevant parties and the arbitrator.[63] The fact remains that unless the parties agree, the arbitral process and the decision is not a matter for public disclosure. This aspect of arbitration clearly lends itself to the independent nature of arbitration, defining its legal nature more accurately than each of the other theories.
It is assumed by the privacy and confidential theorists that the non-disclosure and private nature of arbitration is the primary reason that it is opted for as means of resolving disputes out of court. But it goes beyond the privacy and the obvious informality that pervades the process. It is the entirely independent nature of arbitration that acts as lure.
It is the “physical person” as the commander of the dispute resolution process rather than the state[64] that gives arbitration its independence. The public has no right to participate. In other words, the entirely private nature of arbitration denies the taxpayer locus standi.[65]
Another incident of privacy in connection to arbitration is the relative escape it allows from normative practices. By virtue of arbitration the parties have at their disposal a process that focuses on the professional or business relationship that gives rise to the dispute. In other words that parties can choose an arbitrator learned in the area that specifically affects them. These elements exist outside of the contractual relations that bind them.[66]
2. The Weaknesses of the Privacy Theory
It is difficult to argue against the privacy theory in that it is an undisputable fact that arbitration is characterised by privacy, confidentiality and independence from the state. However, it is note worthy that although the parties to arbitration are in command of their regulatory process, they choose from government mandated rules with respect to arbitration.[67]
3. Conclusion
Unquestionably, arbitration provides the disputants with privacy and confidentiality, elements that set arbitration apart from the judicial and contractual nature of arbitration. By virtue of privacy the parties are in a position to have the customs of the trade taken into account, outside of the actual contract. It also allows an approach that will not factor in during formal litigation. This is because judges are focuses on law rather than custom.
Evaluation of the Four Theories
Arbitration by its very nature is said to be for the express purpose of resolving disputes. As Francis Miller maintains, “settling disputes is the essence of arbitration.”[68] Although made possible by the construction of contract and as such binds the parties to its process. The contractual aspect of arbitration in no more than a tool for facilitating it. The legal nature of arbitration is founded on its purpose and intent and that is to provide an alternative means of acquiring adjudication. It provides the parties with an informal method of “litigating” a civil dispute which in all probability would be more costly and time consuming in a court of law.
Privacy and confidentiality also lends itself to the legal nature of arbitration. It is not just a facilitator of the process, it allows for consideration of matters outside of the contract and matters that would not normally be considered by a judge. Those matters are the customs of the practice effecting the parties. Privacy and confidentiality facilitates cost effectiveness and minimizes consumption of time. If arbitration was open to the public and subject to public scrutiny it would not only lose its informal appeal, but it would mire the arbitration with staff and administrative costs. It would as a result, not be much in the way of an alternative method of resolving civil disputes. It would just be another court and lose its distinction and place among the discourse of alternative dispute resolution. Moreover, the privacy theory is centred around the parties and is not subject to state participation.
Justice Ashok Bhan states that:
“The concept of arbitration revolves around the agreement between two parties to get their disputes settled from a third person.”[69]
The evidence suggest however, that the judicial nature of arbitration is a strong motivation for opting out of litigation. This is manifested by the reports referred to in this paper that reflect the selection of applicable evidentiary rules and procedures that are increasingly taking on the image of formal adjudication.
This is not to say that the party autonomy and the self-determination structure of arbitration does not make its contractual nature appealing to disputants. It does have a part to play in the legal nature associated with arbitration as does privacy and confidentiality. To say otherwise would be naive. Even so, the confidentiality and privacy aspects of the process are subject to contract. The parties can waive both elements if they see fit.
The contractual nature of the contract permits party autonomy and self-determination. The reality is that the parties use the contractual nature of arbitration to secure a judicious application of the arbitration process . It therefore follows that the privacy nature of arbitration is the primary motivating factor for disputants in opting for arbitration as an alternative dispute resolution. It is the primary reason that costs are cut and time is saved and as such it defines arbitration.
Conclusion
The main aspect of arbitration is that it provides access to justice for those who would not otherwise have the means and wherewithal to litigate their grievances. The cornerstone of arbitration is that, while a creation of contract, it is regulated by statutory provisions and brings in a third party to resolve the issues in a manner that is private and confidential. By doing so, arbitration provides the disputants with a method of dispute resolution that is closely aligned to the judicial process, but independent of the state. This is so because the parties have a right to be heard, to test the evidence of the other party and ultimately obtain a binding decision. The fact that the process can be private and confidential if the parties so desire is the only means by which arbitration can in principle be distinguished from the judicial process. It therefore follows that the legal nature of arbitration is firmly grounded in the privacy theory.
The main lesson learned from this research is that the parties who opt for arbitration are actually seeking a more efficient means of obtaining a judicial result. This is evidenced by the current trend in setting up court-like proceedings, that mirror the English courts. This fact alone is supportive of the privacy theory. Obviously, disputants want normative justice, but they do not want to air their grievances in public, otherwise they could opt for formal litigation. The privacy of arbitration allows a form of adjudication without state participation and bars public participation as well. Unfortunately, the research does not provide evidence of the measure of awards typically handed out by the arbitral process. This might have some bearing on why people opt for arbitration as opposed to litigation.
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[1] Khurana, S.I. (Ed) “Alternative Dispute Resolution Mechanisms in the Indian Context.” (2007) XL(3) Indian Council of Arbitration Journal, 3.
[2] Pryles, Michael. “Limits to Party Autonomy in the Arbitral Procedure.” [2007] 24(3) Journal of International Arbitration, 327-329, 328,
[3] Ibid, 328.
[4] Ibid, 328.
[5] Ibid, 328.
[6] Houtte, Vera, Van. “Consent to Arbitration Through Agreement to Printed Contracts: The Continental Experience.” [2000] 16(1) Arbitration International, 1-18, 2.
[7] Ibid, 2.
[8] McNeill, Mark and Juratowitch, Ben. “Agora: Thought on Fiona Trust. The Doctrine of Separability and Consent to Arbitrate.” [2006] 24(3) Arbitration International, 475-487, 475.
[9] Ibid, 475.
[10] McNeill, Mark and Juratowitch, Ben. “Agora: Thought on Fiona Trust. The Doctrine of Separability and Consent to Arbitrate.” [2006] 24(3) Arbitration International, 475-487, 476.
[11] Ibid, 477.
[12] Brekoulakis, Stavros. “The Notion of the Superiority of Arbitration Agreements Over Jurisdiction Agreements: Time to Abandon it?” [2007] 24(4) Journal of International Law, 341-364, 342.
[13] Ibid, 342.
[14] Ibid, 342.
[15] Ibid, 342.
[16] Ibid, 343.
[17] Ibid, 343.
[18] Ibid, 343.
[19] Ibid, 343.
[20] Brekoulakis, Stavros. “The Notion of the Superiority of Arbitration Agreements Over Jurisdiction Agreements: Time to Abandon it?” [2007] 24(4) Journal of International Law, 341-364, 342.
[21] Rubino-Sammartano, Mauro. “The Decision-Making Mechanism of the Arbitrator vis-a vis the Judge.”[2008] 25(1) Journal of International Arbitration, 167-170, 167.
[22]Ibid, 167.
[23] Ibid, 167.
[24] Ibid, 167.
[25] Ibid, 168.
[26] Ibid, 168.
[27] Ibid, 168.
[28] Rubino-Sammartano, Mauro. “The Decision-Making Mechanism of the Arbitrator vis-a vis the Judge.”[2008] 25(1) Journal of International Arbitration, 167-170, 169.
[29] Ibid, 169.
[30] Ibid, 169.
[31] Ibid, 169.
[32] Ibid, 170.
[33] Lew, Julian, D.M. “Achieveing the Dream: Autonomous Arbitration.” [2006] 22(2) Arbitration International, 179-203, 196.
[34] Ibid, 196.
[35] Ibid, 196.
[36] Kurkela, Matti; Levin, Richard; Liebscher, Christoph and Sommer, Patrick.” Certain Procedural Issues in Arbitrating Competition Cases.” [2007] 24 (2), Journal of International Arbitration, 189-210, 191.
[37] Kurkela, Matti; Levin, Richard; Liebscher, Christoph and Sommer, Patrick.” Certain Procedural Issues in Arbitrating Competition Cases.” [2007] 24 (2), Journal of International Arbitration, 189-210, 191.
[38] Ibid, 191.
[39] Ibid, 191.
[40] Forstadt, Joseph. “Discovery in Arbitraton.” [2006] ADR and The Law, 1-5, 2.
[41] Ibid, 2.
[42] Tritmann, Rolf and Kasolowsky, Boris. ”Taking Evidence in Arbitration Proceedings Between Common Law and Civil Law Traditions – The Development of a European Hybrid Standard for Arbitration Proceedings.” [2008] 31(1) University of South Wales Law Journal, 330-340, 330.
[43] Ibid, 330.
[44] Ibid, 330.
[45] Tritmann, Rolf and Kasolowsky, Boris. ”Taking Evidence in Arbitration Proceedings Between Common Law and Civil Law Traditions – The Development of a European Hybrid Standard for Arbitration Proceedings.” [2008] 31(1) University of South Wales Law Journal, 330-340, 331.
[46] Ibid, 332.
[47] Ibid, 333.
[48] Ibid, 334.
[49] Tritmann, Rolf and Kasolowsky, Boris. ”Taking Evidence in Arbitration Proceedings Between Common Law and Civil Law Traditions – The Development of a European Hybrid Standard for Arbitration Proceedings.” [2008] 31(1) University of South Wales Law Journal, 330-340, 334.
[50] Ibid, 334.
[51] Ibid, 334.
[52] Ibid, 337.
[53] Ibid, 335.
[54] Ibid, 337.
[55] Hanslik, Chris. “Watching the Contract Wording Will Revive Arbitration Process.” (August, 8-14, 2008) Houston Business Journal, 1.
[56] Choi, Stephen. “The Problem with Arbitration Agreements.” [2003] Vanderbilt Journal of Transnational Law, 1233-1240, 1233.
[57] Ibid, 1233.
[58] Ibid, 1233.
[59] Choi, Stephen. “The Problem with Arbitration Agreements.” [2003] Vanderbilt Journal of Transnational Law, 1233-1240, 1237.
[60] Ibid, 1237.
[61] Nicolau, George. “Whatever Happened to Arbitral Finalty: Is it Their Fault or Ours?” (1997) Labor Law Journal, 259-271.
[62] Troma, Ioanna. “Confidentiality in English Arbitration Law: Myths and Realities About its Legal Nature.” [2008] 25(3) Journal of Internatonal Arbitraton, 299-314, 300-301.
[63] Troma, Ioanna. “Confidentiality in English Arbitration Law: Myths and Realities About its Legal Nature.” [2008] 25(3) Journal of Internatonal Arbitraton, 299-314, 300-302.
[64] Bantekas, Ilias. “The Private Dimension of the International Customary Nature of Commercial Arbitration.” [2008] 25(4) Klewer Law International. 449-460, 449.
[65] Ibid, 450.
[66] Ibid, 453.
[67] Ibid, 453.
[68] Miller, Francis. “Redefining Terms of Arbitration.” [1990] 140, New Law Journal, 827.
[69] Bhan, Ashok. “Alternative Dispute Resolution Mechanisms in the Indian Context.” (2005) XL(3) International Federaton of Commercial Arbitration Institution. 1-24, 3.
