Arbitral tribunal undertaking its own research
Can an arbitral tribunal undertake its own research? The answer is ‘ “it depends” – as is often the case in international arbitration. The question of whether a tribunal has gone beyond the scope of the arbitration will often arise in a challenge to the enforcement of an arbitral award.
Article V(1)(C) of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards allows for the recognition and enforcement of an award to be refused if the award (or part of it) “deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration”. Whilst Article V(1)(C) makes reference to issues which are outside of the terms submitted to arbitration or outside the scope of the arbitration, when it comes to what should have been “contemplated” by the parties or how the “scope” of the arbitration is delineated, there will clearly be nuances for domestic courts to consider.
The institutional rules
Various of the institutional rules provide some guidance as to whether or not a tribunal may undertake its own research. The presumption of some institutes seems to be that tribunals may do so, although the guidance may not be explicit.
The ICC Rules 2021 (“the ICC Rules”)
The ICC Rules give tribunals a general power to establish the facts of a case. However, that power is tempered by a duty to afford the parties equal treatment.
Article 25(1) of the current ICC Rules (and of the ICC Rules 2017) provides that:
The arbitral tribunal shall proceed within as short a time as possible to establish the facts of the case by all appropriate means.
In addition, Article 22(4) of the ICC Rules provides that:
In all cases, the arbitral tribunal shall act fairly and impartially and ensure that each party has a reasonable opportunity to present its case.
The Secretariat’s Guide to the ICC Rules advises arbitrators who consider information falling outside of the proceedings to give the parties an opportunity to comment on that information “in the interests of fairness and due process”.
The 2016 SIAC Arbitration Rules (“the SIAC Rules”)
The SIAC Rules allow tribunals to consider issues other than those put expressly before the tribunal but subject to the other party having an opportunity to respond. Rule 27(m) provides that:
Unless otherwise agreed by the parties, in addition to the other powers specified in these Rules, and except as prohibited by the mandatory rules of law applicable to the arbitration, the Tribunal shall have the power to:…
…(m) decide, where appropriate, any issue not expressly or impliedly raised in the submissions of a party provided such issue has been clearly brought to the notice of the other party and that other party has been given adequate opportunity to respond…
The LCIA Arbitration Rules 2020 (“the LCIA Rules”)
The LCIA Rules do envisage tribunals taking it upon themselves to explore other issues. Article 22.1(iii) gives the tribunal power to:
…conduct such enquiries as may appear to the Arbitral Tribunal to be necessary or expedient, including whether and to what extent the Arbitral Tribunal should itself take the initiative in identifying relevant issues and ascertaining relevant facts and the law(s) or rules of law applicable to the Arbitration Agreement, the arbitration and the merits of the parties’ dispute…
The UNCITRAL Arbitration Rules of 2013 (“the UNCITRAL Rules”)
The UNCITRAL Rules, the rules most often chosen for ad hoc arbitration, give tribunals power to conduct an arbitration as they see fit but subject to the parties receiving equal treatment. Article 17.1 provides that:
…the arbitral tribunal may conduct the arbitration in such manner as it considers appropriate, provided that the parties are treated with equality and that at an appropriate stage of the proceedings each party is given a reasonable opportunity of presenting its case.
Approaches under different jurisdictions
Of course, the provisions of any of the institutional rules will be subject to the relevant procedural law, the law of the place of the arbitration.
England and Wales
A challenge to an award under section 68(2)(b) of the Arbitration Act 1996 (“the Arbitration Act 1996”) for serious irregularity was allowed when the arbitrator was found to have made his own investigations.
Fleetwood Wanderers Ltd v AFC Flyde Ltd related to the termination of a footballer’s employment contract and his subsequent employment with another club. The dispute itself centred around the Football Association (“the FA”) Rules and whether particular rules relating to the transfer of footballers were incorporated in the FA Rules. The arbitrator had, unknown to the parties, consulted with the FA with regards to this question. The court found that, by making his own investigations and not sharing communications between the arbitrator and the FA, the arbitrator had breached his duties under Section 33 of the Arbitration Act 1996 – that being to “act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent”. In failing to give the parties an opportunity to comment on the outcome of his investigations, he failed to give the claimant an opportunity to adduce evidence which might have led him to a different decision.
The award was remitted to the arbitrator for reconsideration.
In England and Wales, the Arbitration Act 1996 provides for a tribunal’s own investigations. Section 33(1)(b) provides, subject to a tribunal’s duty to “act fairly and impartially as between the parties”, that a tribunal may “adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay or expense, so as to provide a fair means for the resolution of the matters falling to be determined”. Section 34(2)(g) then envisages tribunals being permitted to “take the initiative in ascertaining the facts and the law”.
In a recent German ruling (Docket No 26 Sch 18/20), a party applied for the annulment of an arbitration award when it transpired that the arbitral tribunal had undertaken its own research after proceedings had closed. The arbitration was seated in Frankfurt and subject to the ICC Rules of Arbitration 2017.
The party against whom damages were awarded, PEC, objected to the tribunal undertaking its own internet research into the method used to calculate damages relied upon by the other party. The tribunal’s research came to light in a footnote in the award and, as the proceedings had closed, PEC was not afforded an opportunity to comment on the information that the tribunal now relied on. In fact, neither party was able to comment on this new information.
However, the application for annulment was rejected. In addition to the provisions of Article 25(1) of the ICC Rules of Arbitration 2017 (as set out above), the German civil procedure rules permit a German tribunal to make and rely on its own research provided that doing so does not result in what is described as a “surprise decision”.
In this case, the result was not thought surprising. It was held that PEC could reasonably have anticipated that the tribunal might look at this information – the other party had referred to the website used by the tribunal and the relevant method was established in German case law.
It should be added that German mandatory procedural rules mean that a domestic arbitral award, such as the award in this case, will be enforced in all but rare cases, for example where there has been a serious violation of one party’s right to be heard.
Singapore’s International Arbitration Act, which makes provision for the conduct of international commercial arbitrations and is based on the UNCITRAL Model Law, does not expressly comment on independent research of the arbitral tribunal. (Please note that section 12(3) of the International Arbitration Act does allow the arbitral tribunal to adopt inquisitorial processes for the purposes of fact finding, rather than researching a point of law, but in any event this is rarely done.)
However, in the case of CIM v CIN , the High Court of Singapore dealt with this point briefly in relation to an ICC arbitration seated in Singapore. The court noted that if an arbitrator takes their own steps to “polish or hone the law relied on by counsel” it “may be an indulgence, but it does not begin to amount to a breach of natural justice”. Then, with regards to the tribunal having considered alternative scenarios with respect to the calculation of damages and not mooted by the parties, “an arbitrator is not required to slavishly follow one or other of the alternatives presented, but may apply his own reasoning to assess them and make adjustments that he considers just, so long as he does not… [answer the] question in a way that is so far removed from any position which the parties have adopted that neither of them could have contemplated the result”. The judgment implies a similar approach to other countries. That is in the sense that an arbitral tribunal refining knowledge on a point of law arising in the proceedings is not problematic, but researching an entirely new, unforeseeable point of law as a basis for a decision would not be permissible.
Under the long-standing case law of the Federal Court of Switzerland, arbitrators may conduct research and apply the law on their own motion. In the leading case of BGE 130 III 35, the Swiss Federal Court highlighted the principle of jura novit curia (“the court knows the law”) and referred to a tribunal’s ability to “freely assess the legal relevance of the facts and may also decide on the basis of other rules of law than those invoked by the parties”. This means that arbitrators are not restricted by the legal arguments submitted by the parties and a tribunal is allowed to apply provisions not referenced in the parties submissions.
There are, however, certain exemptions to this principle. The parties can, for instance, expressly exclude the applicability of the jura novit curia principle. Moreover, in BGE 130 III 35, the Swiss Federal Court also noted that parties “must be asked when the judge or the Arbitral Tribunal considers basing the decision upon a norm or a legal consideration which was not invoked during the proceedings and the pertinence of which the parties could not anticipate”. Thus, if the parties could not reasonably have foreseen such norm or legal consideration being invoked, the arbitrator may not apply the law on its own motion, but must grant the parties the opportunity to comment (BGE 130 III 35 para 6.2). With this said, it needs to be emphasised that the Swiss Federal Court adopts a narrow approach when considering the question of whether the application of a norm or legal consideration came as an unforeseeable surprise to a party. One successful challenge on this ground was the decision of Bger. 4A_400/ 2008 where the tribunal had applied a Swiss Statue, applicable to Swiss residents only, to a dispute between parties located in Spain and Portugal with no connection to Switzerland whatsoever.
Parties must be alive to the possibility of arbitrators founding their decisions on research, legal principles or alternative outcomes that might not have explicitly arisen in the hearing room or, indeed, at any time during the proceedings. It is apparent though that the possibility of arbitrators doing so is tempered by rights to a fair hearing and to natural justice and arbitrators must balance their duties with those rights.
Those rights may, in turn, be qualified. Generally, if it should not be surprising to the parties for arbitrators to research or consider particular issues not heard at a hearing, then the parties may be deemed to have been afforded a fair hearing and natural justice has been applied.
As we started, the answer as to whether a tribunal can carry out its own research is “it depends”. Of course, a better understanding of the position relating to any arbitration can be taken from full consideration of the laws and rules applicable to that arbitration but this analysis underlines a need for parties and their legal advisers to explore every aspect of a dispute.