International Commercial Arbitration, its Application of the Law, and the Flexibility of its Process

By Dr Benjamin Hayward

Photo: Dennis Jarvis, Creative Commons

In a previous contribution to the ADRRN Blog, I argued in favour of taking a little bit of flexibility away from international commercial arbitration.

In my previous post, I noted that while arbitration is ADR, it remains a type of formal dispute resolution.  It also involves application of the law.  Still, where a contract doesn’t include a choice of law clause, arbitrators have to identify the law they will apply.  My doctoral research explored the significant discretion arbitrators have in this regard.

That discretion is a problem if parties chose to arbitrate because they want enhanced certainty about their legal rights.  It’s even more problematic in some particular categories of case where arbitrators have to identify the governing law even after the parties tried to agree on this issue themselves.

I’ve been thinking a bit more about this topic following a recent episode of The Arbitration Station podcast, which included a really great discussion about becoming an arbitrator.  Co-host Brian Kotick made some interesting observations about this issue, set in the context of how arbitrators decide their cases:

‘[I]t’s all discretionary at the end of the day and you can’t really predict universally what’s to be decided … I think it depends on how you approach being an arbitrator.  I know some arbitrators, their approach is “I’m only going to decide on the arguments – legal arguments and factual arguments – that are presented to me”.  And if you take that approach I think it’s much easier because your intellectual curiosity will not lead you in the wrong direction …

Another approach is finding justice – “capital J justice” – in which case you’re going to kind of take a more active role, do your own independent research perhaps … in which case it’s much more difficult of a task …”

So is arbitration about applying the law, or is it about more general notions of commercial justice?  Or is the true position somewhere in between?  Parties can specifically agree to give arbitrators the power to decide based on principles of equity and fairness, but this is extremely rare.  What, then, is the best view of arbitration’s decision-making process where they don’t do so?

In 2013, the High Court of Australia decided a constitutional challenge to the validity of an important part of Australia’s International Arbitration Act.  In upholding the legislation, it conceptualised the role of courts in enforcing arbitral awards as holding the parties to their initial agreement to arbitrate: rather than merely rubber-stamping arbitrators’ legal analyses.  The Court also held that there is no strict legal rule, in international commercial arbitration, that arbitrators must apply the law correctly.

This gets us part-way to the answer.  For a bit more, we can look to the grounds for challenging arbitral awards.

Under the Model Law and the New York Convention, both adopted in Australia, these grounds don’t include an error of law.  They do include public policy grounds.  Public policy doesn’t cover arbitrators’ ordinary legal errors, but it might cover very significant infringements of fundamental legal principles, such as the rule against double recovery.

Of more interest to me, however, is the ground relating to arbitrators not following the parties’ agreed procedure.  Application of the law is a matter of substance, but identifying what law to apply in the first place is a procedural question.  As I’ve discussed previously on this blog, arbitration laws and rules give arbitrators significant discretion in identifying the governing law.  However, they do still set out at least broad frameworks for making that decision.

While potential mistakes in the law’s application are just part and parcel of choosing arbitration as a form of ADR, in my view, parties remain protected against arbitrators violating the procedure required for identifying that law in the first place.

This is an idea I’ve been interested in for a while now.  What does it say about the exact nature of decision-making in international commercial arbitration?  I’m not yet sure, but I’m looking forward to exploring that question in my future research.

Nearly Neutral: A Mediator’s Best Bet

By Amanda Selvarajah

This post is the third in a series of posts on this blog written by students studying Non-Adversarial Justice at the Faculty of Law at Monash University. Students were invited to write blog posts explaining various complex areas of law relating to dispute resolution to ordinary readers. The very best post on each topic is published here.

 

the-gate-by-guillaume-delebarre

‘The Gate’ by  Guillaume Delebarre: Creative commons source

The National Mediator Accreditation System removed “neutrality” as a requirement on their list of ethical standards in 2015. This may suggest a trend away from the truly “neutral” mediator in the sense of a ‘detached third-party’. But does this mean we are to rule out neutrality entirely as an ethical consideration in mediation? With a trend of increasingly interventionist mediators, a complete disregard of the concept could place participants at great risk of being subjected to ethically dubious decisions.

     Perhaps the reason for the mediation community’s shift from neutrality is not because of a flaw in neutrality itself, but rather a failure to grasp a version of neutrality that can and should be an important element of an ethical mediation. Instead of defining neutrality as an unattainable attribute intrinsic in the nature of a mediator, perhaps we should be viewing neutrality as a constant practical endeavour throughout the mediation process, a mediator who’s nearly neutral.

Why Neutral At All?

A mediator in its simplest description is a ‘trained, impartial third party’ who assists parties in making their own decisions. However, mediation remains unregulated and virtually unmonitored as it is typically conducted in private with assurances of confidentiality. Mediated parties are expected to relinquish a guarantee of the principles of justice and fairness that would be inescapable in a common law court. It is these qualities of mediation that leave participants particularly vulnerable to a biased decision in the event of a potentially opinionated, interventionist mediator. Therefore, it is the consensual participation in the process and the assurance of “neutrality” that many consider the source of the process’s legitimacy.

On the spectrum of mediator involvement in mediation, the facilitative approach, which focuses a mediator’s role to procedural stages, leaves parties with as much freedom and control in the substance and outcome of the mediation as possible. The evaluative approach, on the other hand, has even been disregarded by some, like the Victorian Association for Dispute Resolution, as being a form of mediation at all. They argued that the mediator’s ‘input into the content, and sometimes the outcome’ of the mediation made the process inherently contrary to the core principles of mediation.

Such or any mediator involvement may suggest, as critics of the evaluative mediation approach do, an immediate breach of neutrality. But this is only the case if neutrality is restricted to a ‘strict, dualistic sense of the mediator either being or not being neutral.’

Why Not Be Absolutely Neutral?

To truly make the case for a re-imagined concept of neutrality, one must first accept the bold suggestion that mediations are not neutral in its literal sense and could likely never be so. Mental health professionals have found that ‘there is no such thing as total impartiality, neutrality, or lack of bias when working with people, even though as practitioners they may strive for such ideals.’ In mediation specifically, research has shown that in practice, mediators may affect and influence mediation at almost all stages of the process. Examples include ‘the ways they structure the interchange between the parties, in terms of the sequencing of storytelling and the framing of responses and what needs to be responded to.’ It follows then that any assessment of a mediator’s success in reference to their ability to be neutral, in the literal sense of the word, would set almost all our mediators up for failure.

However, regardless of a mediator’s ability to be neutral, there is the added consideration that absolute neutrality may not even be conducive to the goals of a truly successful mediation. For example, in the case of the simultaneous expectations that a mediator be both absolutely neutral but also committed to facilitating an equal conversation, one often comes at the cost of the other.

Mediated parties often experience a power imbalance. Therefore, a hands-off mediator may in these cases fail to protect ‘vulnerable parties from inappropriate pressure’. In family law mediation (family dispute resolution or FDR), for example, parties often meet at very unequal terms. Mediators in these cases may be caught between either claiming a position of absolute neutrality, thereby stripping them of the power to ‘redress imbalances’, or recognising a role in sometimes having to take ‘affirmative action… to achieve a balanced agreement.’

Family dispute resolution practitioners must consider if ‘family dispute resolution is appropriate’ before mediation is undergone. This may allow for vulnerable parties to be excluded from the mediation process, sparing mediators the struggle of balancing these competing expectations. But some victims still ‘feel that FDR processes fail to identify and manage the risk of family violence effectively.’ The exclusion also does nothing for parties beyond family abuse dynamics who may still be more vulnerable than the other party due to cultural, societal or financial factors.

This concept of absolute neutrality is similarly challenging for indigenous mediators, to whom Western notions of neutrality may not make sense. In indigenous mediation it has been recommended that a respected elder would likely be the more appropriate choice of mediator than a neutral third-party. Selecting a mediator for their ability to intimately understand the parties as opposed to their ability to detach themselves from them is arguably in direct opposition to Western expectations of a successful mediator. A commonality in our understandings of a successful mediation, however, may be the increasing interest in addressing the conflict at the heart of mediations.

Therapeutic jurisprudence, a philosophy focused on critically viewing our legal systems to maximise the health and wellbeing of those who engage with it, has been applied to improve and direct law reform throughout Australia’s legal system. Critically assessing the purely facilitative mediation process through a therapeutic jurisprudence lens unearths the potentially anti-therapeutic effects of having a non-interventional, solution-centric mediator who as a result, fails to address and redress the underlying tensions at the heart of parties’ relationships. The development of therapeutic jurisprudence throughout Australia is proof that the indigenous community’s focus on rebuilding and strengthening relationships is not unique and could be facilitated in mediations with a more involved mediator.

A New, Nearly Neutral Approach

Neutrality was seen as a cornerstone of mediation’s procedural fairness, the idea that ‘what is required by procedural fairness is a fair hearing, not a fair outcome’. The facilitative approach has, therefore, been described as having the highest regard for procedural fairness on the basis of perhaps a rather simplistic equating of a fair hearing with a decision-maker who allows parties to make their own case with as little intervention as possible.

This argument assumes, however, that participants of mediation are always equally capable of articulating and pursuing their own interests and that they are always more concerned with a practical outcome than a resolution of the underlying feelings and conflict which brought on the mediation in the first place.

However, research has shown that in mediation ‘the basis of authoritativeness (e.g. of the ability to gain voluntary acceptance from members of the public) is changing from neutrality-based to trust-based.’ This suggests that contrary to advocates for neutral mediators, parties may actually prefer a more interventionist mediator who is willing to foster openness and build a relationship of trust over a detached one.

So perhaps instead of aligning neutrality with a mediator who never intervenes, it would be best to hold mediators’ interventions to standards ‘of non-partisan fairness or impartiality’ instead. For example, weighing, as an objective third-party, whether an intervention would make sense to ‘facilitate a productive dialogue by encouraging or even coaching reticent or inarticulate parties’ to promote a generally more just proceeding. After all, in the immortal words of Theodore Roosevelt, ‘Impartial justice consists not in being neutral between right and wrong, but in finding out the right and upholding it, wherever found, against the wrong.’

 

Amanda Selvarajah is (@amanda_darshini) currently in her third year of the Bachelor of Law (Honours) program at Monash University. Her research has focused on questioning the limits of the law and its rooms for improvement across a variety of fields. Last year, her research into the abuse of forensic evidence in court was selected for presentation at the International Conference of Undergraduate Research.

 

The ‘fairness fairy’ in mediation: mediators, parties or lawyers?

Who bears the responsibility for fairness in mediation?

It is generally accepted that every dispute resolution process should have fairness as one of its goals and that there are several theories of fairness: procedural, substantive, restorative, informational, retributive, distributive etc. While mediation might not be designed to achieve all of these ideas of fairness, there is agreement that mediators are responsible for procedural fairness. This requires ensuring that parties are given the opportunity to speak and to be heard, and in addition, the opportunity to negotiate on the basis of informed consent (cl 9 NMAS Practice standards, 2012). As such, it is arguable that mediators are informational ‘fairness fairies’ in that they are required to support the parties to reach agreements on the basis of informed consent (cl 9.1 NMAS Practice Standards, 2012).

However, mediators are generally not viewed as bearing responsibility for substantive fairness: they are not substantive ‘fairness fairies’. They, on the other hand, are to support a party to assess the ‘feasibility and practicality’ of proposed agreements ‘in accordance with the participant’s own subjective criteria of fairness’ (cl 9.7 NMAS Practice Standards, 2012).The responsibility for achieving fairness thus lies with the parties. They are to satisfy themselves that they have achieved, what to them, is fair in the circumstances of their dispute. In doing this, they are supported by the mediator who is not to pressure them into any form of agreement. Parties are thus, the substantive ‘fairness fairies’: they must have ‘the eye’ for fairness of the outcome.

But it is not in all cases that parties know exactly what fairness might represent or require in their disputes. This is particularly so when they are not well or fully informed, are not in a position to obtain relevant information due to lack of resources, or have diminished capacity as result of disability etc. In these situations, what options are open to the mediator to support parties to assess the feasibility and practically of a proposed agreement? Who takes the role of the substantive ‘fairness fairy’?

Possibly the role of the ‘fairness fairy’ shifts to the support person(s) present at the mediation, or where a party is legally represented, to the legal representative who is expected to act in the best interest of her client. But are lawyers always fulfilling this role in mediations? Should the responsibility for fairness become solely that of legal representatives? Should mediators always assume that lawyers will act as ‘fairness fairies’ in mediations?

For a view on the role of lawyers in mediations, see post dated 27 March 2015: “On Mediation, Legal Representatives and Advocates by Bobette Wolski” (Post by Dr Olivia Rundle)