The Human Rights Dimensions of Commercial Arbitration

Arbitration is the preferred means of means of resolving international commercial disputes mainly because of its perceived advantages over ligation in national courts, including party autonomy, privacy, neutrality, internationally enforceable awards, and procedural flexibility. The laws that govern arbitration in most countries are sourced from local statute, international conventions and, in England for example, the common law. International arbitral proceedings are guided also by increasingly standardised procedures and practices that help to maintain arbitration’s attraction over litigation for many commercial enterprises. This paper examines some of the issues raised (mainly in a European context) in relation to the adherence of arbitration laws, procedures and practices to transnational standards of human rights.

Arbitration Law and Procedures: Definition and Sources

Arbitration is defined in Halsbury’s Law of England as

“a process used by the agreement of the parties to resolve disputes. In arbitrations, disputes are resolved, with binding effect, by a person or persons acting in a judicial manner in private, rather than by a national court of law that would have jurisdiction but for the agreement of the parties to exclude it.” [1]

Most countries rely on a similar mix of sources for their respective arbitration laws. For example, in France the main sources are specific provisions of the Code Civil and the Code de Procédure Civile [2] , via cases decided by the French courts (primarily the Cour de cassation and the Cour d’appel de Paris), and various international conventions such as the European Convention of 1961 [3] , the New York Convention [4] and the European Convention of Human Rights [5] . In England [6] , the principles of fairness, party autonomy and limited court intervention that underlie the Arbitration Act 1996 Act are largely sourced from the UNCITRAL Model Law [7] and the New York Convention.

The procedures and practices that guide international arbitral proceedings, including the arrangements for appointment of arbitrators, the procedure for the conduct of the arbitration, and the form and content of awards, are often derived from multiple sources. The UNCITRAL Rules [8] are widely used in ad hoc arbitrations as well as administered arbitrations.

Contracts signed by commercial parties invariably contain an express clause detailing how they would prefer to settle any disputes between them. Any agreement to resolve disputes through arbitration is usually either contained in a clause in a larger contract or a separate arbitration agreement. Either method imposes certain obligations and restrictions on parties in relation to dispute resolution through arbitration.

Arbitration Law and Procedures: Human Rights Dimensions

There are two main human rights dimensions in relation to international commercial arbitration, namely (i) the effect of human rights obligations on the conduct of arbitration and (ii) the relationship between due process and human rights.

A fundamental human right is the right to fair trial which is enshrined in various international laws and declarations. Article 10 of the Universal Declaration of Human Rights (UDHR) [9] states that:

“Everyone is entitled in full equality to a fair and public hearing by an independent and impartial tribunal, in the determination of his rights and obligations and of any criminal charge against him.”

Certain provisions of the ECHR [10] are considered to be relevant to arbitration [11] . These include Articles 1, 6(1), 8 and 34 of the ECHR and article 1 of Protocol No 1 to the ECHR. The most significant provision is Article 6(1) which defines certain procedural rights and ensuring a right to fair trial:

“In the determination of his civil rights and obligations …everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law…”.

These fair trial rights apply to all civil rights and obligations created under domestic law and accordingly to all civil proceedings [12] , including court proceedings related to arbitration such as reviewing an arbitral award or appointing an arbitrator [13] .

Signing an Arbitration Agreement: When can Article 6(1) of the ECHR apply?

Many courts, including English and other European ones, have determined that arbitration is not contrary to Article 6 of the ECHR, unless the agreement to arbitrate was entered into as a result of duress, mistake, or included unusual terms that should have been highlighted to the other party.

For example, in X v Federal Republic of Germany, [14] the ECHR determined that an arbitration clause included in an employment contract did not infringe the German teacher’s Article 6(1) rights. In Sumukan Limited v Commonwealth Secretariat [15] , the Court of Appeal held that an agreement in an arbitration clause to exclude an appeal to a court on a point of law under s69 of the 1996 Act did not breach the party’s right to a fair trial particularly since exclusion clauses were common provisions in commercial contracts, applied equally to both parties and should not be considered onerous requiring the application of the Interfoto principle of fairly bringing it to the attention of the other party [16] . In Bramelid and Malmstrom v Sweden [17] , the ECHR distinguished voluntary from compulsory arbitration and stated that in the case of the former it was unlikely that infringement of Article 6(1) rights could be successfully contested. In Paul Stretford v The FA [18] , the Court of Appeal held that there was no conflict between an arbitration agreement that contained a stipulation for the mandatory resolution of disputes using arbitration and the player’s agent Article 6(1) rights, particularly since this amounted to a “voluntary waiver” [19] .

Article 6(1) of the ECHR and its application regarding Arbitration Tribunals

There appears to be no clear consensus on whether or not the ECHR must be considered by an arbitration tribunal. Many argue that as arbitration is based on and organised by law, the ECHR should apply [20] , however a few have argue otherwise [21] . Transado Transportes v Portugal [22] concerned the deprivation of possessions as the result of the manner in which an arbitration tribunal interpreted a clause in a concession contract. In this case, the European Court of Human Rights (ECtHR) held that an arbitral tribunal is under an undisputed duty to act compatibly with Convention rights. In Nordsee v Reederei [23] , the ECJ, in considering the direct applicability of provisions of EC competition law, held that ‘Community law must be observed in its entirety throughout the territory of all the Member States; parties to a contract are not, therefore, free to create exceptions to it’.

“Due process” and Arbitration

In any dispute resolved through arbitration, the enduring success of a tribunal is based on its adherence to two basic principles, namely (i) ensuring due process and fair hearing and (ii) the independence and impartiality of arbitrators [24] .

Most arbitration laws and international conventions deal expressly with the principle of due process and fair hearing without having to rely on the direct applicability of the ECHR. For example, Article V(1)(b) of the New York Convention states:

[Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that:]…..The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case;

Other examples of how the principle of due process and fair hearing is applied in practice includes (i) minimizing delays in the presentation of written submissions and oral arguments, (ii) respecting the parties’ Article 8 ECHR right to confidentiality in relation to evidence, and (iii) treating parties to the arbitration equally and fairly.

The ECHR and impartiality of arbitrators

Lord Hewart CJ wrote that it is ‘‘of fundamental importance that justice not only be done, but should manifestly and undoubtedly be seen to be done’’ [25] . This standard can be seen in many of the laws, procedures and rules to which arbitrators submit in carrying out their arbitral duties. For example, Article 12(1) of the UNCITRAL Arbitration Rules state that “Any arbitrator may be challenged if circumstances exist that give rise to justifiable doubts as to the arbitrator’s impartiality or independence.” An ICC tribunal has an overriding duty to ‘‘act fairly and impartially and ensure that each party has a reasonable opportunity to present its case’’ (Article 15(2) of the ICC Rules [26] ) and an arbitrator can be challenged on the grounds of ‘‘lack of independence or otherwise’’ (Article 11(1)).

Arbitrators come from all walks of life including those are retired judges or members of a supreme court. The ECHR’ decision in McGonnell v UK [27] which dealt with a planning application before the courts of Guernsey had impliedly considered the issue of potential conflicts of interest among arbitrators. In this case, the European Court found a violation of the applicant’s Article 6(1) when it determined that the Bailiff was not impartial when he presided over the passage of a planning policy document and later was the sole judge of law in the applicant’s subsequent planning appeal. Since 2004, IBA Guidelines [28] have been used as a guide in assessing impartiality, independence and disclosure in relation to arbitrators.

The ECHR and the limited right to appeal an arbitration award

A key advantage of arbitration over litigation mentioned already is that, in general, awards are final and there is only a limited right of appeal. Section 69(8) of the 1996 Act prohibits an appeal to the Court of Appeal where the lower court has refused to give permission for the appeal. There is however a lingering discretion for the Court of Appeal to grant leave to appeal in exceptional circumstances, for example unfairness of the decision making process that initially refused permission and that was substantial enough to constitute a breach of Article 6 of the ECHR [29] 30.

The European Courts have been reluctant to review questions of conflict of interest of arbitrators once arbitration has ended, as evident in Nordström-Janzon [31] .

Conclusion

Courts encourage the upholding of arbitration agreements and international commercial arbitration. To support this, many of the procedures and practices that govern arbitration have either built-in safeguards to protect against potential breaches of human rights conventions so do not necessitate the Court’s intervention to consider human rights’ impact.

In some areas however, for example the right to appeal an arbitral award and the work of arbitration tribunals, the role of transnational standards of human rights is still unsettled.