Nigeria: Transnational Arbitral Awards- The Clamour For A Centralised Appellate Review Body

Abstract

Generally, the benefits of an appellate review system in law can never be overestimated. Whether in formal legal settings or in the most remote forms of family or customary methods of dispute resolution, the importance of appeals remains high in ensuring the enthronement of fairness and equity in the adjudicatory system as well as upholding the integrity and confidence in such system. Granted, the feature of finality in arbitration seems laudable and a good reason to opt for it because of the certainty involved. This is particularly so, as unlike the normal dispute resolution system where the parties have no say in choosing their umpire, in arbitration and other ADR systems the umpire is selected based on a guided consensual process by the parties.

Also, for some, endless and protracted appeals if introduced into arbitration, may steal the gloss of the nature of arbitration as a smooth and less cumbersome method of dispute resolution. However, the assurance that in the event of a grave and manifest error or injustice, an appeal or review is available (at least a one- tier appeal) creates some satisfaction and confidence in the mind of parties.1

This article attempts to critically discuss the issue of absence of a formally established review arbitration body or institute to which unsatisfied parties can appeal. The writer in a bid to advocate for the creation of an appellate body in international arbitration gives consideration to the dearth of a centralized body to review arbitral awards either for error correction, law making or for the purpose of setting legal precedents.

International Arbitration and Right of Appeal

Court judgments in commercial cases can usually be appealed at least once, often more than once, to higher courts; this is however not true for arbitration, as one of the most striking features of international arbitration is the absence of a review body2. There is generally no appeal at all permitted from an arbitral tribunal's award in an international arbitration. The result is absolutely final, subject only to a request to set aside the award due to procedural irregularities such as an unfair procedure or arbitrator lack of independence.3

Thus, in most cases, parties are left to 'lick their wounds' in the event that they or the arbitrators fail to get it right. Consequently, academics, stakeholders and practitioners alike in recent years have vigorously advocated for the establishment of a unified body saddled with the task or responsibility of revisiting, reviewing and the impeachment of arbitral awards in line with the dictates and demands of necessity. Today, the dogma of finality in international arbitration has come under attack, as practitioners and academics have advocated for the introduction of appeals mechanism.4

A dispassionate observer taking a keen observation of the arbitration landscape in international commerce would easily take notice of one obvious fact- the inexhaustible list of international arbitration institutions with expertise in alternative dispute resolution. For instance as at today, a host of such institutions exist in different parts of the world. Some of these institutions include the American Arbitration Association (AAA), Lagos Court of Arbitration (LCA), Arbitration Institute of the Stockholm Chamber of Commerce (SCC), Dubai International Arbitration Centre (DIAC), International Centre for Dispute Resolution (ICDR), International Centre for Settlement of Investment Disputes (ICSID), International Chamber of Commerce (ICC), London Court of International Arbitration (LCIA), Permanent Court of Arbitration (PCA), Singapore International Arbitration Centre (SIAC), Swiss Chambers Arbitration Institution, United Nations Commission on International Trade Law (UNCITRAL), to mention a few. However, it is to be observed that these bodies are to a large extent, "apex" tribunals when it comes to arbitration as awards made or rendered by them are final decisions from which no appeal may lie. In the words of Eli Lauterpacht,

"A domestic lawyer [...] might be forgiven for thinking it strange that the international community, apparently so well- equipped with means of judicial settlement, appears to lack what seems to be a natural or inherent feature of national judicial systems, namely a comprehensive system of appeal".5

From Lauterpacht's comment above, one may then require to know what makes an appellate system so important generally and indeed specifically for an arbitration system.

Why Have an Appellate System in Arbitration

Appellate review fulfills two principal functions- error correction and lawmaking6. While these functions are intertwined in operation; the purposes they serve are distinct. Error correction protects litigants against erroneous decisions and safeguards the integrity of dispute resolution. Law making clearly refers to the function of appellate courts in the development and harmonization of standard practices or norms, what is termed in common law as the doctrine of stare decisis. The basis on which these arguments are made are that international commercial transactions and investments are as well as ensuing arbitration are of high stakes. Hence, it is considered imperative that recourse be had to another arbitrator when awards seem to, or manifestly contain errors. More so, considering the risk involved in such finality of awards, proponents have argued that there could not possibly be a reason why an aggrieved party should be totally barred, foreclosed from or denied the option of an appeal, especially where the circumstances clearly requires one. A host of possibilities exist that could turn the justice of an award on its head. According to James M. Gaitis:

"The arbitral tribunal might wrongly determine that the applicable law does not permit an award of prejudgment interest in a particular arbitration, or the tribunal might apply an incorrect statute of limitations. The tribunal might inadvertently fail to recognize that the parties' contract mandates and the law permits, an award of attorneys' fees to the prevailing party, or might misinterpret the law relating to fiduciary duties. The tribunal might misapprehend the doctrine of respondeat superior, or incorrectly describe the force and effect of administrative regulations-for example, oil and gas regulations regarding the correlative rights of interest owners. Allusions to the law of other jurisdictions, and the ensuing reliance on the law of those jurisdictions, might be based on a misunderstanding of that law. The tribunal might incorrectly conclude dicta in a decision actually constitute a formal holding. Simple statutes and complex bilateral investment treaties might be misread, and the language of cases and statutes alike might be misquoted and misapplied".7

These arguments are highly convincing considering the value of most international arbitrations and arbitral awards which in many cases run into billions of dollars. Such awards, where given erroneously, if not reviewed or set aside could be the basis for grand scale injustice, manifest unfairness, hardship on the losing party as well as a parody of the entire objective of the practice of arbitration and non-adjudicatory settlement of disputes. In the end, the long run effect on how arbitration would be viewed can never be positive. Consequently, litigation, regardless of its relative "difficulty" might turn out a better option after all.

To What Extent Has the Clamour for Reform Been Incorporated in Modernizing the International Arbitration System?

Currently, some arbitral institutions like the ICSID provide for what could be termed a "review" process in their arbitral rules.8 Under the ICSID Rules, either party may request annulment of the award by an application in writing addressed to the Secretary-General on one or more of the grounds that:

  1. The Tribunal was not properly constituted;
  2. The Tribunal has manifestly exceeded its powers;
  3. There was corruption on the part of a member of the Tribunal;
  4. There has been a serious departure from a fundamental rule of procedure;
  5. Or that the award has failed to state the reasons on which it is based.

The application shall be made within 120 days after the date on which the award was rendered except that when annulment is requested on the ground of corruption such application shall be made within 120 days after discovery of the corruption and in any event within three years after the date on which the award was rendered.9 On receipt of the request the Chairman shall forthwith appoint from the Panel of Arbitrators an ad hoc Committee of three persons. None of the members of the Committee shall have been a member of the Tribunal which rendered the award, shall be of the same nationality as any such member, shall be a national of the State party to the dispute or of the State whose national is a party to the dispute, shall have been designated to the Panel of Arbitrators by either of those States, or shall have acted as a conciliator in the same dispute. The Committee shall have the authority to annul the award or any part thereof on any of the grounds set forth in paragraph (1)10.

Also, under the United Nations Commission on International Trade Law ("UNCITRAL or UML"), a successful challenge of an arbitral award will usually result in the award being 'set aside,' 'vacated,' or' annulled,' and therefore ceasing to exist, at least within the jurisdiction of the court setting it aside.11

In spite of the above, it suffices to state that this procedure falls short of a full fledge appeal which ought to lie to an independent and totally separate body from the ICSID as it were. Using the analogy of courts of coordinate jurisdiction not being allowed to sit on appeal against the decision of the other court of coordinate jurisdiction, as well as the nemo judex rule of natural justice, the write is of the view that to the extent that the review is from an ICSID panel rather than an independent and higher body with only appellate jurisdiction, it is arguable that the review panel is merely another version of the same arbitral tribunal whose award is being appealed against. More so, convincing the aggrieved party or 'appellant' of the objectivity of the review panel might prove to be impossible or at best an uphill task.

Of note is the recently concluded CIArb's Centenary Conference held in Singapore on the 4 September 2015, where the new CIArb Arbitration Rules 2015 was launched.12 The Rules take effect from 1 December 2015 and supersede the current CIArb Arbitration Rules 2000 considered by many to be otiose and long overdue for amendment given their limited application to domestic arbitrations in some jurisdictions especially under the English Arbitration Act 1996.

The new Rules are perceived to be more suitable for international application and are largely tailored in line with the internationally recognised and widely used UNCITRAL Arbitration Rules 2010. This is a welcome development as it appears to be a direct response to the longstanding yearnings of stakeholders in arbitration.

Conclusion and Recommendations

This work has briefly attempted to advocate or at least lend some support to the clamour for the creation of an independent arbitral review or appellate body for international awards.

It is thus recommended that a separate appellate body be established to review arbitral awards- a body totally extricated from and independent of any currently existing institutions. There is an inherent frailty in the concept of finality in international arbitration. The lack of formal appeal does not bring finality13. Hensce, to better sustain the confidence in arbitration and enable parties enjoy the benefits of appeal generally, it is recommended that a formal or unified appellate body be established to review awards arising from international arbitration. Like the International Court of Justice (ICJ), the Court of Arbitration for Sports (CAS) an appellate body with such centralized powers and function to review arbitral awards from different institutions would certainly do more good to the world of international arbitration. In what appears to be concurrence with the above, in 2002, the United States legislative branch of the ICSID instructed its treaty negotiators through the "Trade Dispute Act" to improve mechanisms used to resolve disputes between an investor and government through ... [the] the establishment of a single appellate body to review decisions in investor-to- government disputes and thereby provide coherence to the interpretations of investment provisions in trade agreements"14

Furthermore, going by the huge monetary cost involved in international commercial transactions and the resulting arbitral proceedings, it may be unjust to foreclose, shut out an aggrieved party, or deprive him the opportunity to seek redress or to apply for the award to be overturned and corrected. In most civilized constitutions of the world, the right to appeal is enshrined15; indicative of the fact that the right of appeal is indeed sacrosanct. If the right to be heard fairly or the right to fair hearing and access to justice are taken seriously, it would only be wise and smack of commonsense to create a right to redress or review, if the initial hearing is flawed with manifest injustice and errors.

Footnotes

1. For example, in traditional African societies, recourse is often made to the eldest or alpha male in the family where a family member feels dissatisfied with the outcome of a settlement conducted either by younger members or by the matriarchal head of the home.

2. Irene M. Ten Cate, "International in Arbitration and the Ends of Appellate Review". INTERNATIONAL LAW AND POLITICS [Vol. 44:1109

3. http://www.iccwbo.org/products-and-services/arbitration-and-adr/arbitration/; assessed on 02/16/2015 at 13.12pm; http://www.mcmillan.ca/international-commercial-arbitration-awards--no-deference-on-questions-of-jurisdiction.

4. http://www.iccwbo.org/products-and-services/arbitration-and-adr/arbitration/; assessed on 02/16/2015 at 13.12pm; http://www.mcmillan.ca/international-commercial-arbitration-awards--no-deference-on-questions-of-jurisdiction. There is generally no appeal from an international commercial arbitral award. However, under UNCITRAL's Model Law on International Commercial Arbitration (the "Model Law") (which is incorporated by reference in the international commercial arbitration legislation of each province), parties may bring an application to set aside an award on certain grounds. One of the more frequently invoked grounds is that the arbitral tribunal made a decision about something that is outside of its jurisdiction (Article 34(2) (a) (iii) of the Model Law).

5. Lauterpacht, Aspects of Administration of International Justice, 99.

6. David Frisch, Contractual Choice of Law and the Prudential Foundations of Appellate Review, 56 VAND. L. REV. 57, 74 (2003) ("[T]he distinction between error correction and law development . . . has been the keystone upon which our whole system of appellate courts has been built."); Chad M. Old father, Error Correction, 85 IND. L.J. 49, 49 (2010) ("Most depictions of appellate courts suggest that they serve two core functions: the creation and refinement of law and the correction of error."); Irene M. Ten Cate, "International in Arbitration and the Ends of Appellate Review". INTERNATIONAL LAW AND POLITICS [Vol. 44:1109

7. C Okeke, Judicial Review of Foreign Arbitral Awards: Bane, Boonor Boondoggle; 10 Y. INT'L L. REV29(1997)

8. Under Article 52 of the ICSID Rules

9. Article 52(2) ICSID Rules

10. Article 52(3) ICSID Rules

11.F Leila. 2010. "Setting Aside an Arbitration Award" The Selected Works of Fernando Leila; Available at: http://works.bepress.com/fernando_leila/2 assessed on 02/17/2015.

12. https://www.ciarb.org/news-views-events/ciarb-news/news-detail/news/2015/09/08/new-ciarb-arbitration-rules-launched-in-singapore ( accessed on October 5, 2015)

13. William H. Knull, III & Noah D. Rubins, Betting The Farm on International Arbitration: Is It Time To Offer An Appeal Option? 11Am. RevInt'l Arb.531 (2000).

14. Tams J, An Appealing Option? The Debate about an ICSID Appellate Structure, Essays in Transnational Economic Law. No. 57/ June 2006 5

15. See section 241 of the 1999 Constitution of the Federal Republic of Nigeria (As amended). See also Article 1, section 8 of the Constitution of the United States of America.

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