CHARTERED INSTITUTE OF ARBITRATORS CENTENARY
CONFERENCE
KEYNOTE SPEECH
1. Arbitration has been around for millennia. The leading modern authority
of the early history of arbitration and mediation, Derek Roebuck, tells
how arbitration was a preferred method of dispute resolution in
Confucius’s China1 and in Homer’s Greece2. Roebuck also tells us3 how
arbitration even does something of an unexpected star turn in the
excellently gossipy and readable, and surprisingly accurate, Histories of
the 5th century BC historian Herodotus. Herodotus records4 that in the late
8th century BC, Deioces set himself up as a private arbitrator in his
Median village with some success. Indeed, it appears that he attained
such a reputation for the justice of his decisions that when the Medes
were looking for a king, they decided to appoint him. They made a good
choice as he ruled for no less than 53 years, and founded the Median
empire5.
2. Now don’t let this information give any of you royalist ideas above your
station. The fact that in 1921 (which was far more recent) the great
English cricketer CB Fry was reputedly offered the crown of Albania6
1
D. Roebuck, A Miscellany of Disputes (1999) pp 21-22
Op cit pp 45-46
3
Op cit p 69
4
Herodotus, Histories I, pp 96-100
5
See eg the entries on Deioces in Wikipedia and Encyclopaedia Britannica
6
See C Ellis, C.B.: The Life of Charles Burgess Fry (1984) pp 196-199 and I Wilton, C.B. Fry: An English Hero
(2000) pp 302-309. The story is probably apocryphal but is too well-known and delicious to be discarded
2
does not mean that all successful cricketers should harbour regal
ambitions. So should arbitrators not hanker after an empire because of
Deioces’s good fortune. And, equally, particularly as members of the
Chartered Institute, I am sure that none of you need to have your attention
drawn to Derek Roebuck’s reminder7 that it was partly taking bribes as an
arbitrator which resulted in the great Lord Chancellor, essayist and
scientist, Francis Bacon being prosecuted, imprisoned, massively fined
and stripped of his honours
3. But more to the point, and confining myself for the moment to the
English experience, arbitration has been part of legally recognised dispute
resolution in this country since before “the memory of man runneth not to
the contrary”8 (which as any land lawyer, such as I used to be, will tell
you is 1189). In his magnum opus on mediaeval dispute resolution9,
Derek Roebuck explains what a consistently significant part arbitration
and mediation played in England dispute resolution in the period since,
and probably before, the Norman Conquest. Often this was because of the
slow, technical and parochial attitude of the common law. Indeed, it
might be said that arbitration performed a similar role to that of equity, or
Chancery law, in representing a route of avoiding the artificial rigours of
the traditional common law approach to cases, with its serious delays,
7
D Roebuck, op cit pp 66-68
First Statute of Westminster 1275, 3 Edw I cap 5, Blackstone Commentaries (1765), vol 1, p 63c, Prescription
Act 1832, section 1
9
D Roebuck, Mediation and Arbitration in the Middle Ages (2013)
8
technicalities of pleadings and strict limitations on the nature of the relief
which could be granted10. Like equity, arbitration could be more practical
and informal, more concerned with a commercially just result than a
strictly legal outcome. Indeed, the role of arbitration in mediaeval and
Tudor times appears to have been similar in some ways to the role of
mediation today.
4. In the following centuries, arbitration can be seen as again marching with
equity. Initially, the courts of Chancery adopted an approach which
depended very much on the Lord Chancellor’s ideas of right and wrong:
hence the 17th century John Selden’s statement that equity varied with the
length of the Lord Chancellor’s foot11. However, by the late 17th century,
with the appointment of Lord Nottingham as Lord Chancellor12, the
courts of Chancery were starting to develop relatively strict rules, so that,
by the early 19th century, with the notoriously conservative Lord
Chancellor Eldon13, equity as administered in the courts of Chancery
became relatively rigid.
5. Similarly, having initially been pretty informal and independent of the
courts, it appears that by the 18th century, arbitration had become more
formal, and bound by legal procedures and substantive law. It is
10
Lord Parker of Waddington, the History and Development of Commercial Arbitration (1959), pp5-12
Table Talk of John Selden , ed E Pollock (1927), p 43
12
Lord Chancellor 1673-1682
13
Lord Chancellor 1801-1806 and 1807-1827
11
interesting to see how this happened14. Parties to arbitrations needed the
assistance of the courts to enforce their rights – in particular to enforce
the arbitration agreement or any subsequent award. The courts were
prepared to oblige, but for a price, and that price was judicial intervention
and oversight to ensure that arbitrators adopted legally defensible
procedures and made awards which accorded with the parties’ legal
rights. The somewhat patronising “Big Brother” approach of the courts
towards arbitration was then set for the next two centuries or so. Indeed,
it was reflected in the first comprehensive statute dealing with the topic,
the Arbitration Act 1889.
6. Thus, in 1922, no less a judicial authority than Lord Justice Scrutton was
able to say this in one Court of Appeal case15:
“Arbitrators, unless expressly otherwise authorized, have to
apply the laws of England. When they are persons untrained
in law, and especially when as in this case they allow
persons trained in law to address them on legal points, there
is every probability of their going wrong, and for that reason
Parliament has provided in the Arbitration Act that, not only
may they ask the Courts for guidance and the solution of
their legal problems in special cases stated at their own
instance, but that the Courts may require them, even if
unwilling, to state cases for the opinion of the Court on the
application of a party to the arbitration if the Courts think it
proper. This is done in order that the Courts may insure the
proper administration of the law by inferior tribunals. In my
view to allow English citizens to agree to exclude this
14
15
Lord Parker of Waddington op cit, pp 12-14
Czarnikow v Roth, Schmidt and Company [1922] 2 KB 478, 487-488
safeguard for the administration of the law is contrary to
public policy.”
7. That attitude persisted when the Arbitration Act 1950 came to be enacted.
Indeed, the following rather evocative description of the judiciary’s
attitude to arbitrations is not a bad summary of the position until about
fifty years ago:
“The relationship between arbitration and the courts had all
the trappings of a Cinderella story or a Dickens novel.
Arbitral tribunals were thought of as the step-children of the
legal process, and it was believed they should recognise their
disabilities and lowly status and allow courts to supply the
lawful conclusion to litigation”16
8. If I may then build on the literary illusions, it took nearly thirty years
from the 1950 Act before arbitration, like Cinderella, could set off for the
ball of arbitral independence and legal responsibility, and started to rival
the importance of her ugly sister (or big brother) in the courts. With the
Arbitration Act 1979, the legislative fairy godmother waved her magic
wand, and an admittedly limited notion of party autonomy and arbitral
independence entered the picture. And, with the much more
comprehensive and radical Arbitration Act 1996, Parliament fitted the
glass slipper of arbitral independence and party autonomy on arbitrators.
In other words, the legal system acknowledged that arbitrators should be
16
T E Carbonneau Judicial Approbation in Building the Civilization of Arbitration in. Building the Civilization of
Arbitration ed Carbonneau & Sinopole (JCL Studies in Comparative Law No.3: 2010)
allowed far more independence than they had previously been accorded.
And, unlike in the banking sector, such modern light touch regulation is
not merely what the market wanted, but, nearly twenty years on, it is
generally seen to be working well.
9. The enormous change of attitude to arbitration in the legal and lawmaking establishment of this country over the last fifty years is
attributable no doubt to a number of factors. But I detect nine factors
(some of which may overlap) which can be identified or which are
invoked in order to justify a preference for arbitration over litigation.
10. The first is simply the growth in demand for arbitration – particularly
internationally – over the past thirty years. It is a demand to which this
country should be particularly sensitive in the light of its pre-eminence in
the field of international business and financial, legal and other services.
The second factor is the high professional standard which is, and has been
for many decades, generally attained by arbitrators. Third, there is the fact
that arbitrators can be selected for their expertise, whereas one takes pot
luck with national judges. The fourth factor is distrust of national courts
in the context of international disputes: each party fears that the other
party’s national court will favour its own nationals or may be
unsatisfactory in some other way. Fifthly, there is the ease of
enforceability of arbitration awards, when compared with domestic court
orders. The New York Convention is probably the most successful
international convention in terms of the extent of its national adoption.
The sixth factor is speed: it is and long has been often claimed that
arbitration is a speedier way of resolving disputes than litigation.
Seventhly, expense: it is frequently asserted that arbitration is a cheaper
way to resolve disputes than litigation. The eighth factor is that
arbitrations are confidential, whereas most court hearings take place
publicly. The last factor (appropriately) is finality, because of the
difficulty of appealing or otherwise challenging an arbitration award
compared with a court order.
11. Now, I am not sure about the extent to which all these reasons are valid,
and I am quite sure that some of them are not valid in many cases. Thus, I
would take a lot of persuading that arbitration is normally cheaper than
litigation – at least where lawyers are involved. And, when compared
with cases tried by judges of the English and Welsh Commercial Court,
the Chancery Division, and the TCC, I would have thought that litigation
could often easily be quicker than arbitration, and that the technical
quality and experience of the tribunal would often match that of many
arbitrators. And I hope and believe that the United Kingdom judiciary are
respected not only for their expertise and probity, and also for their openmindedness and international outlook. And, lest I appear ironically
insular, let me make it clear that the courts I have mentioned are taken as
an example. I have no doubt that what I have said about the English
specialist judges is equally true of a number of other other jurisdictions
most of which are represented here today. However, I can only speak
with first-hand and detailed confidence about the judiciary of the United
Kingdom – and, it should be added, of Hong Kong
12. Having said that, there is no doubt that at least some of the nine reasons
will have considerable force in many circumstances. And we Judges have
to remember that the courts are unusual in that they represent a service as
well as a constitutional institution. If there is a demand for arbitration as a
way of resolving disputes, then, save to the extent there is any unlawful,
unconstitutional or improper aspect, or there is some other good reason to
say no, the demand should, I think, be accommodated. That is consistent
with a liberal economy and with the concept of personal autonomy.
However, there can obviously be no question of such a desire being
accommodated if it involves anything which would be unlawful or would
be considered inappropriate by the courts. For instance, the criminal law
must be enforced through the courts, and the court’s duty to protect
children’s interests cannot be delegated to an arbitration tribunal. So, too,
I think that the court would have the power to step in to prevent what we
would regard as a breach of natural justice, or something akin thereto, on
the part of the tribunal.
13. The high quality of arbitrators is a tribute to organisations which educate
and train arbitrators and set standards for them. This is something which
the Chartered Institute has been doing literally for a hundred years, and
not merely in the UK: the Institute paints on an impressively broad
geographic canvass. That is a point which was powerfully brought home
to me when I attended your centenary conference in Hong Kong around
three months ago. And the international nature of the arbitration in
general and the Chartered Institute’s operation in particular is emphasised
by the contents of your programme for this conference and the many
different countries from which the participants come, and by the fact that
my friend and judicial colleague Sundaresh Menon, the Chief Justice of
Singapore, is the Institute’s patron. It is a tribute to both the institute and
Sundaresh that, despite his many commitments in Singapore, he is here
today to address you.
14. In Hong Kong, I talked about the importance of arbitration to the rule of
law. I noted that the role of arbitration in maintaining the rule of law was
a feature which had been emphasised by the Chartered Institute’s former
President, Lynden Macassey in a speech he gave over fifty years ago. In
that speech he said that “the case for independent arbitration is stronger
than ever” as “the need for maintaining the rule of law was never more
urgent”17. And such is the growth of international arbitration that you
arbitrators do have a very important function in maintaining, and indeed
advancing, the rule of law across the world. International courts are
17
Chartered Institute Luncheon Meeting Address, 26.11.53, [1953] Arbitration 101, 110
relatively few and far between, and they tend to have a limited function,
and it is not very often a commercial function.
15. So when it comes to the rule of law internationally, particularly in the
commercial field, arbitrations and arbitrators in many ways can be said to
have a similar role to that of courts and judges domestically. That means
that arbitrators, and indeed all those involved in international arbitrations
have a real responsibility for carrying out, and being seen to carry out,
their functions to a consistently high standard, in terms of probity,
efficiency, fairness, honesty and lawfulness. And that in turn means that
organisations responsible for training, educating and validating
arbitrators, and for promoting arbitration and best practice in arbitrations,
have a duty which is greater than it ever had been. Pre-eminent,
internationally
renowned,
and
well-established
and
experienced,
organisations, such as, indeed perhaps above all, the Chartered Institute
therefore have a particularly heavy responsibility.
16. The duties I have been discussing are all the greater in the light of the
development of Investor-State Dispute Settlement Clauses, on which the
Chief Justice of Australia, Robert French, spoke so interestingly at the
Hong Kong conference18. Such clauses are routinely included in
international trade agreements, such as the now well-established North
American Free Trade Agreement (NAFTA), or the Trans-Atlantic Trade
18
R French ISDS – Litigating the Judiciary, 21 March, 2015
and Investment Partnership (TTIP) and the Trans Pacific Partnership
Agreement (TTP), both of which are controversially being negotiated by
the United States with most Eastern Asian and most European countries
respectively. The most significant rule of law concern to which they give
rise is that they can apparently result in private arbitration tribunals
having jurisdiction superior to that of national courts – even the highest
national court - of a signatory country.
17. Thus, it would seem that such arbitral tribunals can require national
courts to take, or to refrain from taking, certain steps, and to determine
that some rulings of national courts are unlawful. Thus, an arbitral
tribunal ordered an Ecuadorian court to suspend a judgment for US$9bn
against the petroleum company Chevron in respect of a claim in
environmental tort. And when the Ecuadorian court nonetheless formally
entered the judgment on the record, the tribunal invited the Ecuadorian
Government to explain why it should not compensate Chevron for any
loss suffered as a result of the court’s refusal to stay its order19. Another
example: Eli Lilly has a pending arbitration claim against Canada for
over US$500m based on the proposition that the Canadian Supreme
Court’s decision invalidating certain patents on the basis of a wellestablished patent law principle violated Canada’s obligation to afford
19
M. Goldhaber The Rise of Arbitral Powers over Domestic Courts in (2103) 1(2) Stamford Journal of Complex
Litigation, pp 373-383
“fair and equitable treatment” to foreign investors under a provision of
NAFTA20.
18. These cases at least arguably raise cause for concern on the constitutional
front as Chief Justice French said, but for today’s purposes their
relevance is that they demonstrate the financial and political importance
of international arbitration, the vital role it can play in relation the rule of
law, and the shift which may be occurring in the balance of power
between the courts and arbitration. It can be said to show that arbitration
in the 21st century has, at least in some significant respects, turned the
tables on the courts. Lord Justice Scrutton’s perception that “the Courts
may insure the proper administration of the law by inferior [arbitration]
tribunals” has given way to the sight of arbitration tribunals purporting to
require courts to apply the law as the arbitrators assess it – at least when it
comes to international trade agreements.
19. The duties which this development casts on all organisations concerned
with promoting arbitration agreements and arbitration standards, and
particularly the leading organisation or organisations, are considerable. It
seems to me that developing and promoting the London Principles of
2015 is just the sort of thing that the leading professional arbitration
organisation should be doing. The principles are described as being
“necessary for an effective, efficient and ‘safe’ Seat for the conduct of
20
Eli Lilly v Canada Case No UNCT/14/2
International Commercial Arbitration”, and they set an appropriately, but
not unattainably, high standard, without being too prescriptive. Bearing in
mind the identity of those who were involved with preparing the
principles21, it is scarcely surprising that they are very impressive, pretty
comprehensive and patently well-thought out, and both clearly and
concisely expressed. You will be discussing these Principles very fully
later, so I will limit myself to one or two points
20. The first principle concerns the state of the law of the seat, and it must
respect the parties’ choice of arbitration, and therefore it must (a) provide
a proper framework for a “fair and just” arbitration process and (b) limit
the court’s intervention subject to supporting the arbitration process. The
devil is, of course, as usual, in the detail, and it is a question of degree:
how narrow are the limits of the court’s powers of interference? Any
formula raises issues of opinion, but I suppose that, in the light of the
requirement that the framework is to enable “fair and just resolution”
through the arbitral process, one useful guide might be that the court
should be ready to interfere when the arbitration has for some reason
ceased to be “fair” or “just”, but rarely should the court otherwise
interfere.
21
Anthony Abrahams, James Barrett, Lise Bosman, Judith Gill QC, Lord Goldsmith QC, Toby Landau QC, Julian
Lew QC, Wendy Miles QC, Karyl Nairn QC, Constantine Partasides QC,Sir Vivian Ramsey, Peter Rees QC, Maxi
Scherer and Audley Sheppard QC
21. The second principle is concerned with the judiciary, and the judges of
the seat should be “independent … experienced … and respectful of the
parties’ choice of arbitration”. I suppose it might be worth adding
something about them being good or respected judges as well: after all
none of the three specified qualities guarantee a high quality judiciary.
Maybe it is too obvious or too controversial to include such a stipulation.
I also wonder whether it is worth adding something about an accessible
and efficient court system. Delay and poor administration in the courts
are, I would have thought, inimical to commercial arbitration, and I am
not sure that it is dealt with by either of the first two principles which are
entitled “law” and “judiciary”.
22. The third principle is concerned with the legal profession, and it must be
“experienced” and “providing significant choice”. As in relation to the
judiciary, it can be said that neither of those adjectives cover competence
or repute; indeed, there is no reference to the profession being
independent. Again, these features may be self-evident or controversial. It
should perhaps be added that I doubt whether it can be safely assumed
that these concerns are assuaged by principle 8, which is concerned with
ethics.
23. The fourth principle refers to a “commitment” to educate all those in “the
character and autonomy of international commercial arbitration”. Again,
it may be an impractical or insensitive suggestion, but I can see force in
the suggestion that there should be more than a mere commitment. Surely
what one needs is action not words – such as “an implemented
commitment”.
24. Having made these rather tentative suggestions in relation to the first four
principles, I have nothing to add to the fifth to tenth principles, “right of
representation”, “accessibility and safety”, “facilities” , “ethics”,
“enforceability” and “immunity”. As I have said, the principles seem
admirable and attainable, and represent just the sort of document which
the Chartered Institute should be promulgating. It accords with the
Institute’s responsibilities particularly bearing in mind the role that
international arbitration now plays in the rule of law.
25. The fact that international arbitration, and indeed to some extent,
domestic arbitration, plays such a part in the rule of law, can give rise to
problems as well as responsibilities. Those problems include the issue of
confidentiality. It is a fundamental principle of justice and the rule of law
that trials are heard in public, and particularly in a common law system, it
is an equally fundamental principle of justice and the rule of law that the
judgment of the court is publicly available. Of course, there are
exceptions, but they must be fully justified, and any secrecy must be
necessary and kept to a minimum22. In order to ensure public confidence
in the justice system and the judges, the public need to see how and why
22
See eg Pink Floyd Music Ltd v EMI Records Ltd [2010] EWCA Civ 1429, paras 62-69
we reach our conclusions. One of the big criticisms of the notorious court
of the Star Chamber was that evidence was taken in secret23, and it was
no coincidence that it was abolished in the same century as compulsory
regular elections, no taxation save through parliament, habeas corpus,
and judicial security of tenure – ie many of the fundamental aspects of the
rule of law - became part of our constitutional settlement.
26. So long as one regards arbitration as a purely private contractual
arrangement, considerations such as open justice are of little weight, but
the international rule of law function and status which international
arbitration is starting to achieve means that it is by no means so clear that
arbitration can always properly be a confidential process. Once
arbitrations start to become disputes in which there is a public interest,
even though that interest may be indirect or contingent, then the argument
that the public should know what is going on, what the decision is and
why and how it was arrived at, becomes stronger and harder to resist.
27. And the fact that it is so difficult to appeal against arbitrators’ awards is
another reason why awards, at least if they are reasoned, should be
published. The law, and particularly the common law, develops through
the medium of judicial decisions. In the absence of a good number of
cases on some topics passing through the common law courts, there is a
grave danger of the law on those topics atrophying – failing to keep pace
23
E P Cheyney, The Court of Star Chamber The American Historical Review, Vol. 18, No. 4 ( 1913), p 738
with social, commercial and technological developments. And that is a
particularly grave problem when the topics concerned are many aspects
of commercial law and when the problem occurs in the 21st century when
social, commercial and technological changes are occurring at a rate
which is far greater than ever before. One only has to think of the
enormous long-term beneficial changes made to the commercial common
law by the decisions of the great Lord Mansfield in 18th century England
to make the point good.
28. In these circumstances, particularly in the light of the high quality of
expert and experienced arbitrators, many of them thanks to the Chartered
institute, it seems to me that very serious consideration should be given to
open arbitration, and particularly published awards. There has for some
time, I am glad to say, been a move towards publishing at least excerpts
of international awards since 1976, in the annual Commercial Arbitration
Yearbooks24. And there have even been some public hearings of
arbitrations relating to international trade agreements. It is, I think, no
coincidence that it is in relation to such arbitrations that publicity is most
advanced. The public interest in such arbitrations is self-evident, in the
light of the two examples I gave earlier, namely the Chevron-Ecuador and
Eli Lilly-Canada cases. Further, the strong public debate in and out of
Congress the USA in relation to the proposed TTIP and TTP agreements,
24
Published by Kluwer Arbitration
and the public debate about the TTIP agreement in the UK, demonstrate
the general interest in, and concern over, such agreements more widely.
29. As a final parting shot in relation to the responsibilities of arbitrators,
may I refer to a problem which bedevils both arbitration and litigation,
namely the thorny issue of costs. When I addressed the Chartered
Institute briefly on the opening of the Arthur Marriott room, the very ill
but very plucky Arthur Marriott spoke for five minutes in clear and
ringing terms, and what he concentrated on was the high cost of
commercial arbitration. The complaint is one which applies equally to
litigation. Research I have seen suggests that the cost of the arbitrators
and overheads is under 15% of the total costs of a typical commercial
arbitration, so the principal problem, as of course with litigation, lies with
the charges of the lawyers to the parties.
30. In court proceedings, at least in England and Wales, judges have a duty to
ensure, as far as they can, that costs are kept to a level which is
proportionate to the issues at stake. Such a role is, of course, easier in
many ways for judges than it is for arbitrators, given the consensual
nature of arbitration and an arbitrator’s desire for appointments to other
arbitrations. However, I suggest that, along with the other duties which
come with the increasing rule of law role of international arbitrators, is a
duty not to let costs get out of hand, and to ensure that any award of costs
is proportionate both in outright quantum and in terms of the justifiability
of the work for which it is sought. Such an attitude also ultimately reflect
self-interest. If arbitration attracts a reputation for being over-expensive,
arbitration will start to fall away, whereas if arbitration maintains a
reputation for affordability, there will be more work for arbitrators and
for all those involved in arbitration.
31. The attraction of arbitration because the costs are less has, as I have
mentioned, long been said to be an advantage of arbitration over
litigation, and therefore a reason to arbitrate rather than to litigate. Let me
end where I began, namely by citing Derek Roebuck. This time, I have in
mind his story of25 “John Wheathampstead, abbot of St Alban’s”, who “in
1431 boasted that he had saved his house a thousand marks by avoiding
litigation with William Fleet of Rickmansworth and opting instead for
arbitration”. According to an apparently reliable website26, the Abbot
saved his abbey the modern equivalent of around £400,000. Well, if
Abbot Wheathampstead’s 21st century equivalent comes to arbitrate
before one or more members or fellows of this Institute, I hope that the
costs are managed sufficiently well for him to be able to repeat the 15th
century boast of his predecessor.
32. Finally, I take this opportunity to congratulate the Chartered Institute on
its 100th birthday, and to thank all its officers and members for the work
25
26
D Roebuck, Mediation and Arbitration in the Middle Ages, op cit, p 402
http://www.measuringworth.com/ukcompare/relativevalue.php
that they have done and are doing to ensure that, as far as is possible,
arbitrations are conducted to the highest possible standards.
33. Thank you all very much indeed.
David Neuberger
2015
Guildhall, London, 2 July