When these projects go wrong – as projects anywhere can and will – their contracts will commonly prescribe arbitration, as Neil Aitken recently pointed out (11 January, page 64).
The arbitration is usually held in a neutral country to which neither party has close affiliations, and the parties will usually choose what procedural rules govern it. For instance the rules of the International Court of Arbitration (the ICC rules) and the UNCITRAL rules are commonly chosen.
Underpinning these internationally accepted arbitration rules are the basic principles of natural justice, which recognise the unbiased independence of the arbitral tribunal and the right of the parties to have a fair hearing. Although such rules leave the arbitrators substantial leeway and discretion as to how a given arbitration is run, the structure of most cases should be familiar. The parties are set out their case or their defence and provide for witness and documentary evidence and may insist on a full face-to-face hearing. The big difference is that the rules are drafted in such a way as to prevent, or at least make difficult, appeals against arbitrators’ awards.
The courts of the country in which the arbitration is required to be heard retain, to a greater or lesser extent, an element of control over the arbitration proceedings. Although most of countries will support the finality of substantive awards, many will exercise some control in respect of any misbehaviour by arbitrators or where jurisdictional difficulties arise.
The English courts will treat parties arbitrating under ICC rules as having waived their rights to appeal
For instance, in France, challenges can be made on jurisdictional grounds (if the arbitrator had no jurisdiction to deal with the dispute), when due process has not been followed or where international public policy has been infringed in some significant way.
There are obstacles facing a party that challenges an international arbitration award. Not only do many jurisdictions (including England) set out procedural obstacles to discourage appeals, one often faces the additional hurdle that the arbitrators have applied a substantive or proper law that is different from that of the country in which the arbitration is held. The local courts are not equipped or inclined to deal with such disputes.
In England and, indeed, in most common law jurisdictions, findings of foreign law are dealt with effectively as findings of fact; and as only questions of law can form the subject matter of appeals to the English courts (even if leave to appeal is granted), the question of law will relate to foreign law, with which the court will not be interested.
In the case of Reliance Industries vs Enron Oil & Gas India (Commercial Court, 20 November 2001), international arbitrators, sitting in London on a dispute between Indian parties involving questions of Indian law, decided the case in accordance with English law because the parties had agreed that English law was the same as Indian. The court held that the arbitrators’ findings could not even be the subject matter of an application for leave to appeal because no question of English law was raised. The English courts will treat parties that have agreed on arbitrations subject to ICC rules as having effectively waived their rights to appeal against the substantive awards of arbitrators, even if the award is obviously wrong in law (see Sanghi Polyesters (India) vs The International Investor (KCFC) Kuwait).
Postscript
Robert Akenhead QC is a barrister specialising in construction law at Atkin Chambers and is joint editor of Building Law Reports.
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