Undue paranoia over due process
21 Aug 2019
Twin duties of fairness and efficiency
Most arbitrators are keenly aware that their award may be set aside or refused recognition under the New York Convention if the losing party was not accorded due process. It can be tempting to allow parties to file last minute submissions on peripheral issues, or to admit irrelevant documents into evidence, if it means that parties are less likely to claim they have been unfairly treated or deprived of the right to be heard.
This lingering fear that a more proactive or robust approach may endanger the final award – known colloquially as “due process paranoia” – often causes arbitrators to neglect their concurrent and equally mandatory duty to run the arbitration efficiently. These twin duties are set out in all the major institutional arbitration rules, including Rule 17 of the UNCITRAL Arbitration Rules, which states that an arbitrator shall “provide a fair and efficient process for resolving the parties’ dispute.”
In fact, an arbitrator who fails to efficiently resolve a dispute may also have failed to conduct the arbitral procedure in accordance with the parties’ agreement (i.e. as expressed under the institutional rules likely adopted in their arbitration agreement), which is itself a ground to set aside an arbitral award under most national laws and to refuse recognition under the New York Convention.
A balancing exercise
Due process requires that parties be treated equally and be given the right to present their case. Equal treatment is readily understood, but the scope of the right to be heard appears initially to vary across different national laws and institutional rules, from a “full” (UNCITRAL Model Law) to a “reasonable” (ICC Rules 2017) or “fair” (ICDR Rules 2014) opportunity to be heard. However, most commentators and national courts agree that there is no fundamental difference in the standard
required: a “full” opportunity simply means a “reasonable” or “fair” opportunity to be heard.
What constitutes a “reasonable” opportunity to be heard cannot be determined in a vacuum, but must be balanced against other aspects of the arbitral procedure, including the arbitrator’s duty to run an efficient arbitration. It does not mean every opportunity one desires or even a reasonable opportunity to optimally present everything to the tribunal. What matters is that each party is effectively offered the chance to be heard in light of all relevant considerations.
While an arbitrator should take steps to preserve both parties’ right to be heard, this does not mean that all efficiency must be sacrificed to accommodate a party’s unreasonable demands. Arbitrators should also remember that parties who agree to arbitrate trade the procedures and appellate processes of the court for the speed, simplicity and informality of arbitration, and therefore should not expect the same procedures as the court room.
Judicial support for a proactive approach
Support for a more proactive approach to arbitral procedure can be found in studies of international cases. Professor Klaus Berger and J. Jensen recently found that most national courts – whether in setting aside or enforcement proceedings – rarely interfere with the tribunal’s procedural decisions, even when more robust procedures are adopted. Instead, most courts afford the tribunal a very wide discretion to determine the most suitable procedures to resolve a dispute.
This is consistent with another review of recent English cases conducted by Constantine Partasides and Ben Prewett, which failed to find a single decision where an award was set aside due to complaints about case management decisions. Gary Born has also observed that the court will strike down an award only in exceptional cases, which tend to be those that immediately strike the court as unreasonable, such as where the parties’ explicit procedural agreement is ignored, or where one of the parties is not heard at all.
The only way for an arbitrator to effectively balance fairness against efficiency is to act boldly, without excessively worrying about due process. A robust and proactive approach is generally supported by the courts, expected by the parties, and increasingly encouraged under many institutional arbitral rules. Any other approach risks the feared outcome at the heart of due process paranoia – an invalid and unenforceable award.