An Arbitrator's Perspective - Balancing The Interests Of The Parties

April 2005

As an arbitrator, deciding the merits of a dispute and writing the Award at the end of an arbitration can be far more straightforward than dealing with the numerous exchanges and arguments that take place between the parties during the course of the reference itself.

Most maritime arbitrations in London are conducted on the current terms of the London Maritime Arbitrators Association, presently the LMAA Terms (2002). In contrast to some arbitral systems (for example, the ICC International Court of Arbitration and the Chambre Arbitrale Maritime in Paris), LMAA arbitrations are not administered by the LMAA but by the individual arbitrators appointed by the parties. The arbitrators are therefore responsible for making the arbitration run as smoothly as possible from start to finish and the writing of the Award is the mere tip of the iceberg.

Balancing the interests of the parties

The 1996 Arbitration Act requires the "fair resolution of disputes by an impartial tribunal without unnecessary delay or expense" (s.1). Arbitrators must therefore act fairly and even handedly and properly balance the interests of both parties in arbitration proceedings.

Because arbitrators are granted a wide discretion in the conduct of arbitrations, the reactions and decisions of different tribunals in similar situations may not always be exactly the same. In all cases, though, a balance has to be achieved between the sometimes contradictory needs for consistency and flexibility of approach to take account of the particular circumstances of each case.

In most arbitrations, of course, one party wants to push matters forward as quickly as possible and the other to delay or prolong them for as long as they can. Deliberate delays are usually easy to spot and, in such cases, arbitrators act firmly to avoid unnecessary delays by setting clear and prompt deadlines for steps to be taken in the reference.

While each party will view an arbitrator's actions from their own particular perspective, the arbitrators themselves must take both parties' interests into account. Thus, once a claim has been served the respondent must be allowed a reasonable opportunity to prepare and serve their response and any defence to the claim.

Matters are rarely as they seem

The Claim Submissions will only, of course, set out the claimants' side of the dispute and may offer little insight to the true nature of the dispute between the parties. It is to mitigate this situation that the LMAA Terms (2002) require the claimants to set out their case in as much detail as possible and to provide accompanying supporting documents to enable both the respondents and the tribunal to understand the nature of the claim.

Even where the claimants set out their case in detail, the arbitrators would still be "jumping the gun" if they were to take the Claim Submissions entirely at face value and assume that there is no defence to the claim and thus decide that the respondents' opportunity to respond should be limited. Experience shows that there is often a compelling answer to even those claims that appear watertight when first set out in Claim Submissions in arbitration. Each party must, therefore, be allowed a reasonable opportunity to respond to the submissions of their opponent. Obviously, if it becomes apparent that there is in fact no defence to a claim progress must be accelerated, but until then both parties must be allowed a reasonable opportunity to state and substantiate their case.

Proceeding in default

Even in cases where one party does not participate in an arbitration it remains important for the arbitrators to demonstrate that every reasonable opportunity was given to the party in default to participate before the decision was made to proceed to an Award. Then, the arbitrators should not merely rubber stamp the claimants' submissions but must look critically at the claim in order to satisfy themselves that it is properly documented and valid before proceeding to their Award.

Allowing more time

Arbitrators are often criticised for being too soft in granting extensions of time for submissions to be served or other steps to be taken in arbitrations. However, when considering requests for time extensions they are obliged to take the interests of both parties into account and balance the need for progress with that of fairness in allowing the party seeking more time a reasonable and proper opportunity to present their case.

The LMAA Terms (2002) establish guidelines for the periods to be allowed for the service of submissions in arbitration. Thus, for example, 28 days is considered a reasonable time for Defence Submissions to be served by respondents after receiving Claim Submissions. In an ideal world this would be time enough for this purpose. Arbitrators must recognise, though, that this is not an ideal world and that in busy shipping offices the dispute will not be the only one the case handler will be dealing with and that it is not always possible to drop everything else and ignore travel schedules in order to deal with one particular dispute. Also, by its very nature, shipping is an industry in which the relevant witnesses may well be on the high seas for extended periods of time and thus be unable to provide immediately the evidence needed by their lawyers or legal advisers.

In practice, too, correspondence in arbitration cases may pass through a chain of parties before reaching the actual party to the dispute. Thus, for example, submissions and documents may be served on a party's lawyers in London who will then pass them to the P&I Club involved who, in turn, will have to arrange for the documents to be copied and sent overseas to their members, the actual party in dispute. Those submissions and documents will then need to be considered, necessary investigations made, any employees, agents or brokers involved questioned and relevant documents collected and sent back with comments and instructions through the same chain before the lawyers can begin to put the information received into the form of draft Submissions to be approved and served on behalf of the respondents. Although some of the necessary investigations and preparations may have been undertaken beforehand, when the dispute first arose, all of these steps will nevertheless need to be taken or earlier work reviewed when submissions are received.

Arbitrators must also recognise and take into account the local bank and national holidays around the world that may delay steps in the collection of evidence and instructions in the reference as well as the occasional unavoidable personal circumstances of those involved that will justify the granting of more time.

Equally, in the more complex cases little benefit will be gained by insisting on the prompt service of submissions that are unlikely to shed any real light on the position when, by allowing a little more time, a full and detailed response may be served and time saved in the long run.

It may also be the case that by rigidly maintaining deadlines, the arbitrators will inadvertently increase the costs of the reference by prompting steps to be taken that would not otherwise be necessary. If, for example, arbitrators are unwilling to make any allowance even for the short absence of the case handler at the office of one party's lawyers, it may be necessary for another case handler there to take over the case. They will then have to read in to the case, duplicating the work already done by the original case handler (as will the original case handler to catch up with events when he or she returns to the office) with the result that the costs involved are increased. Whilst in some cases the urgency of the situation may justify this, in other, smaller, cases it may lead to a disproportionate increase of costs that benefits neither party.

Making Awards enforceable

Arbitrators must always keep in mind the fact that their awards may have to be enforced in other jurisdictions. When seeking to enforce an arbitration award it is necessary in most jurisdictions to show that a fair and reasonable opportunity was given to the respondents to respond to the claims made against them. If this can not be shown the Award may be unenforceable. In such circumstances a claimant's interests will not be well served by arbitrators proceeding to an Award too quickly and without giving both parties a proper opportunity to participate in the reference. For this reason, arbitrators may err on the side of caution when considering the time to be allowed for a party to respond to claims made against them: time allowed during the course of the arbitration may, therefore, be time saved when it comes to enforcement of the Award.

Last minute changes

Arbitrators are also often criticised for being too willing to allow last minute changes to a party's case or in agreeing to requests to postpone hearings that may have been fixed months earlier. Again, though, the need to balance the interests of both parties arises. Sometimes that balance will require the request to be rejected (where, for example, it arises simply from the delay or negligence of the party making the request). On other occasions, though, the request may be justified by, for example, late disclosure of documents or information by the other party that opens up new aspects of the case. Each application must be considered on its merits and the interests of both parties weighed before any decision is made. At the end of the day, though, it should be borne in mind that the arbitrators' function is to determine disputes as fairly as possible and on the basis of as much of the relevant evidence as possible. By excluding evidence, even if presented late in the day, or by refusing to allow a party to change the basis on which they argue their case, arbitrators move away from their intended function and run the risk of producing artificial results in Awards based on incomplete evidence or shaped fortuitously (or unfortuitously) by the manner in which one party's advisers may have originally decided to plead the case. Where, though, requests are granted to a party to amend a case or postpone a hearing, the interests of the other party will almost invariably be balanced by an order compensating them, win or lose, for any costs wasted or additional costs incurred as a result of the amendment or delay. If for any reason the prejudice likely to be caused by the order sought cannot be adequately compensated, the arbitrators may well decide not to allow the amendments or postponement requested.

In summary

The need to balance the interests of both parties to an arbitration may leave both feeling unhappy at different stages of the reference. As odd as it may seem, this may in some instances suggest that the appropriate balance has been achieved. Arbitrators in London are, however, sufficiently experienced to appreciate that matters may not always be quite as suggested to them by the parties and to strike the appropriate balance between firmness and flexibility in order to achieve the "fair resolution of disputes by an impartial tribunal without unnecessary delay or expense".

 

With thanks to Clive Aston, an LMAA Arbitrator, for preparing this article.

Also by Clive Aston: "Conduct of the Parties in Arbitration"