Arbitration

Contractual Foundation to Arbitration

 Arbitration is most commonly used for resolving disputes arising out of a contract
between parties, frequently with the agreement to arbitrate being found in a clause
in the substantive contract
 Where such dispute is referred to arbitration, from a technical point of view, there
will be 4 contracts:
o The underlying substantive contract on which the dispute is based (‘the
substantive contract’);
o The Agreement to arbitrate. Even where the agreement to arbitrate is in
point form just one of many contractual clauses in the substantive contract,
as a matter of arbitration law the clause is a separable contract, distinct from
the substantive contract;
o The agreement between the parties and an arbitral institution referring the
dispute the arbitration under the aegis of that institution. Often the
institution’s arbitral rules will apply to the arbitral proceedings;
o The agreement between the parties and/or the arbitral institution and the
individuals who will act as arbitrators appointing those individuals to preside
over the arbitration and make a decision on the dispute.
 Separability of arbitration clause
o An important principle.
o Prevents arbitral proceedings becoming frustrated in cases where the
arbitrators make a finding to the effect that the substantive agreement is
invalid or discharged.
o Without s.7, such a finding would result in arbitration clause being
ineffective, which mean that there would be no decision to any dispute arise
in the substantive contract.
o In essence, arbitration agreement should be treated as a separate agreement
 Mandate of the agreement
o An arbitral tribunal will not have jurisdiction unless the dispute comes within
the terms of the particular reference to arbitration.
o This will be limited by the terms of the arbitration agreement (which may be
a standard clause in the substantive contract, or an agreement after the
dispute has arisen to refer that dispute to arbitration), and the separate
agreement between the tribunal and the parties appointing the tribunal.
[cannot matter the matters that are not covered by the arbitration
agreement]

Contractual Basis of the Arbitrator’s Mandate

 When a person accepts an appointment as an arbitrator they enter into a contract
with the parties in the terms that are agreed. These will usually include:
o The identification of the dispute or difference that has to be adjudicated
upon;
o The terms on which the adjudicator is prepared to act, which will include the
fees payable to the arbitrator;
 o The basis on which the arbitration is to be conducted, which will usually be in
accordance with the terms of the arbitration agreement between the parties
and any institutional rules that have been incorporated or otherwise agreed
between the parties;
o An agreement by the arbitrator to conduct the arbitration and to issue award
without undue delay or within any time frame agreed with the parties or in
accordance with the relevant institutional rules.
 Once appointed, the arbitrators are contractually bound to complete their mandate,
limiting the extent of their jurisdiction on to the matters that are referred to them.
 Qualifications of arbitrators
o No requirements in general law to impose minimum qualification on
arbitrators but it is common for arbitration agreement to specify such
qualifications.
 Impartiality and independence
o Arbitrators must be impartial.
o Possible to be impartial even not independent
o An arbitrator is liable to be removed if their impartiality is compromised
o This may happen if there is actual bias or possibility of bias
o The approach is on the basis whether a fair-minded and informed observer
would conclude there is a real possibility of bias.