Other than litigation, number ofalternative dispute resolution (ADR) mechanisms can be found. Mediation,Negotiation, Conciliation, Arbitration, etc. Due to the adversarial nature ofcourts ADR methods are always faster. Apart from that adopting an ADR mechanismcan confidential and also be conducted in private. However when compared toArbitration, it usually imposes a binding award on the parties. Parties to commercial contracts andagreements prefer Commercial Arbitration as a means of settling disputes byreferring them to a neutral third party, referred to as an Arbitrator. Contractingparties tend to prefer Arbitration over Litigation due to its proceduralflexibility. The Law of Arbitration permits the contracting parties of acontract or an agreement to choose and adopt the applicable law, rules,appointing of arbitrators, etc.
This allows the parties to structure the mannerof Arbitration upon their autonomy. Perepelynska defines Party Autonomy as”Party Autonomy is with regarded to the agreement of the parties to concerned,gives the latter possibility to determine the procedure of resolution of theircase”1. Theprinciple of “Party Autonomy” is considered as the core principle ofArbitration. “Party autonomy is the guiding principle in determining theprocedure to be followed in an international commercial arbitration”2. As mentioned, in Arbitration parties arefree to agree upon the rules of the dispute resolution mechanism. This includesbut not limited to Choice of Law, place of Arbitration, appointing Arbitrators,Arbitrable disputes, language of the proceedings and agreements.
It can beobserved that this freedom has been recognized by the international arena.United Nations Commission on International Trade Law (UNCITRAL) Model Law onInternational Commercial Arbitration (“Model Law”) in Art. 19 (1) states “Subject to the provisions of this Law, the parties arefree to agree on the procedure to be followed by the arbitral tribunal inconducting the proceedings”3.Due to its international validation most of the countries in the contemporary commercial world tend torecognize and accept Party Autonomy Rule as a mechanism for investor attraction.Foreign investors are reluctant to engage with local dispute resolutionmechanisms including litigation. Arbitration with extensive recognition toParty Autonomy provides a fair ground for both local and foreign parties totailor the provisions to fit their purpose.
This article will concern the reliabilityof Party Autonomy principle.Analysis It iswidely accepted that autonomy of the parties to be reflected through themutually agreed terms and conditions of the Arbitration Agreement. Scholarshave identified two main characteristics of the Party Autonomy Principle.
Firstbeing the freedom to decide contractual terms without the influence orintervention of judicial power and secondly the mutual consent of the partiesto enter in to the contract.Indeciding contractual terms, even though the parties are free from judicialintervention the Law itself has imposed limits and restrictions. Even from thewording of the Model Law it provides, that the parties’ ability tailor theproceeding is not absolutely boundless4.On the other hand the extent of the party autonomy enjoys by the parties maydiffer at several levels of the Arbitration process. Apart from that there arecertain restrictions to the party autonomy depending on the agreement as well. ArbitrationAgreement being the fundamental document to the Arbitration process, the Lawimposes basic requirements to ensure the validity of the Agreement, where itshould complies with. Though it may depend on the jurisdiction, it isrecognized that there to be a common framework in general.
Arbitration Law doesnot permit the parties to alter or modify fundamental norms of Arbitration orexclude the principles of Natural Justice. Inillustrating the above limitations, there is a fundamental requirement that theArbitration Agreement to be in written format. While retaining the validity ofthe agreement it enhances the practicality when refereeing to the agreement.Most importantly, this evident the existence of an agreement for Arbitrationand the consent of the parties. The absence of validityrequirements is a issue vitiating the validity of the arbitration agreement andconstitutes limitations to party autonomy a sit may be invoked to render theresulting award unenforceable as these requirements constitute mandatory provisionsunder the legislations. Nonetheless, the recent judgments have affirmed thatsuch mandatory requirements can be excused owing to the bonafide intention of the parties to refer to arbitration. In thecase of Elgitread Lanka (Private) Ltd.
vs. Bino Tyres (Private) Ltd5,Justice Marsoof held that there can be no agreement to arbitrate without amanifestation of consent of the parties to submit to arbitration any disputethat may arise from a contract entered into by them or other defined legalrelationship. Capacityof the parties to contract is another fundamental requirement, where lackof such capacity invalidates the contract. In considering the fundamental principles, parties do not have adiscretion but to respect them . Principles such as equality, fair hearing areto be incorporated in the Agreement. As the process being a private mechanismthere tendency of biased to one party.
And also if one is having a higherbargaining power it more likely to cause a prejudice to other parties. Thisprovide evidence that regulating bodies has imposed these mandatory rules toensure that the process of arbitration meets the standard of a courtlitigation. UnderParty Autonomy, parties are free to determine the law applicable forArbitration. The Sri Lankan Arbitration Act6incorporates express provisions under section 24 for the determination of thelaw applicable to the substance of the dispute between the parties. Section 24(1)of the Act provides that an arbitral tribunal “shall decide the dispute inaccordance with such rules of law as are chosen by the parties as applicable tothe substance of the dispute. Thus Section 24(1) is sufficiently wide to permitthe parties to select either a national law or even transnational rules of lawas the law that would govern the substance of the dispute.
If the agreement isclear with the provisions of “lex arbitri”,Arbitrators’ shall conduct the proceeding in accordance. Chukwumerije in his work “Choice of law ininternational commercial arbitration”7suggests that the Arbitrator may disregard the choice of law provision if itbrings a prejudice to any party. This prejudice may be due a legal restriction.For instance if Arbitration agreement confers powers to the arbitrators beyondthe limit which the jurisdiction permits a conflict of interest arises. If thearbitrators are not in a position to exercise and execute the vested powersthat will certainly not meet the desired outcome. Here it can be concludedthat, certain restriction may come across as the process of arbitration shouldmeet the requirements of lex arbitri.Furtado8states that in India it established that every legal entity under the law ofIndia should comply with Indian legal system at the first instance.
Thisimposes a huge barrier upon the contracting parties as they have to comply withdomestic laws at first. This leaves no room for party autonomy relating to lex arbitri. In respecting the principle of PartyAutonomy the process of Arbitration and Arbitral Tribunal stands free from Judicialinterference. However it is observed that this veil is removed in fewcircumstances, where the Judiciary intervenes to the matter in assisting theprocess.
This may include deciding the validity of the agreement, appointingand removal of arbitrators etc. The court holds the supreme authority determinethe validity of the agreement. Either a party or the Arbitrator may refer thematter to the courts. In situations where the parties fail to agree upon thecomposition of arbitrators nor their appointment, the matter shall be referredto the courts. On the other hand it the parties are not satisfied with thearbitrator nor if a party with reasonable grounds believes that the Arbitratorhas caused prejudice, may seek the assistance of the court. In the SupremeCourt case “Reliance Industries Ltd. & Ors.
Vs. Union of India9″it was held that independence and impartiality are important factors inappointing arbitrators. Though the Arbitration tribunal may haveexclusive powers to impose awards in accordance with the terms and conditionsof the agreement, it lacks the power to grand orders to the parties compellingto perform the award. In a scenario where a party refuses to accept the award,the party itself or the other shall seek the assistance of the Courts, wherewith reasonable grounds courts may either issue an order compelling the partiesto act in accordance with the award of the tribunal or review the award. TheArbitration Tribunal has no power over third parties who are outside of thecontract. For instance the tribunal cannot compel third parties to attendhearing. Only the parties to the contract are binding, as a result they cannotagree upon terms which directly affect third parties.
Sec.3310of the Sri Lankan act states that, it is mandatory to file a petition in HighCourt in order to enforce a foreign arbitral award. This might not beapplicable in other jurisdictions, but it up holds the doctrine of publicpolicy. The principle of Public Policy ois thefar framed limitation to the principle of Party autonomy. In differentjurisdictions, there may be different policies establish in order to secure thesmooth run of the society. These policies are to be adhered by all componentsthe society with no exception to the foreign bodies.
There may be instanceswhere either the issue or the award of the arbitration is contrary to publicpolicy, which may cause injury to the public good. Public policy in commonlyconnected with the culture, moral values and beliefs of the society. As a resultof this importance where any violation to the public policy principles may leadthe award null and void. The term “public policy” has been generally acceptedas any conduct, which violates fundamental conceptions of legal order in thecountry concerned.
The Supreme Court of India in the case of “Bharat HeavyElectricals Vs. C.N.
Garg”11,has interpreted the term contrary to public policy to mean any agreement thatis against the fundamental policy of the country, interest of the country, morality,justice and legal norms. Thus, the term “public policy” has been generallyaccepted as any conduct, which violates fundamental conceptions of legal orderin the country concerned. As the basis for public policy aresociological factors courts from different jurisdictions have interpreted theterm public policy in different ways. This has left a vague nature to theconcept of public policy.
Though it provides a limitation to the principle ofparty autonomy it prevents the execution of illegal or immoral contracts andawards. Apart from public policy National lawsof many of jurisdictions provide that certain categories of disputes are notbeing capable settled by arbitration. These disputes are viewed as non-arbitrabledisputes which to referred to litigation or other legal body as prescribed bythe domestic laws. Article V(ii)(a) ofNew York Convention12provides that a state can refuse enforcement and recognition of an arbitralaward if it finds that “the subject matter of the difference is not capable ofsettlement by arbitration under the law of that country.” here, the Conventiononly refers lex arbitri where theaward is sought to be enforced.
This doctrine rests on the idea that certainpublic rights and interests of third parties require extensive protection thatcan only be produced by governmental authorities. As a result, agreements tosolve disputes on these rights and interests cannot be given effect. In otherwords with regard to those specific disputes, the arbitrator has no competencewhatsoever to deliver a verdict.
As a result the parties do not retain theirgiven freedom to exclude the jurisdiction of national courts. In mostjurisdiction disputes relating to intellectual property, public relations, laborrelations are viewed as non-arbitrable disputes. Conclusion Party autonomy is not unlimited in commercialarbitration. Though it gives authority to the parties to decide the process ofthe arbitration towards resolve their dispute, one of the major restrictions tothe party autonomy is that it subject to the Public Policy.
Most of the timesparty autonomy is used for international commercial arbitrations agreements. Onsuch circumstances parties subject to different jurisdictions and they shouldselect one of those foreign jurisdiction to the arbitration process. Accordingto this fact final award from arbitral tribunals would affect to the publicpolicies of that particular Jurisdiction. If the parties to the contract arebona fide it should go on the General Law proceedings. Considering thissituation party autonomy was clearly restricted and limited under thiscircumstances. When considering most of the Arbitration enactment doesn’tprovide clear view of the party autonomy rule.
But go through such provisionsit was impliedly on there. But in some circumstances it was clearly restricted.According to the Sri Lankan Arbitration Act section 3313clearly stated that parties filing a petition to High Court for enforcement offoreign arbitral award.
On Such situation In Sri Lankan Arbitration Act limitthe choice of place in arbitration (lex arbitri). This is very important factwhen consider about the party autonomy rule. But Indian Arbitration andConciliation act not restricted the above mentioned fact but in practicalscenario some case laws decided to limit this choice of place situation inparty autonomy principle. To sum up, one can definitelyacknowledge the existence and effect of the above mentioned restricting factorsover parties’ autonomy in international commercial arbitration. However,minimizing the restrictive effect of these factors is effortlessly achievableonce the parties are sufficiently aware of their existence and the boundariesthese factors generally create over parties’ autonomy. Regardless, outside theconsiderably narrow frame of these restrictions, business parties enjoy asignificant amount of freedom in international arbitration through which theycan perfectly tailor their arbitral settlement to suit the needs andcircumstances of their relationship and dispute Party Autonomy rule is one of the best practicesin commercial arbitration though it subjects to criticisms and limitation. Recommendations · When considering the enforcement of thearbitral award it is important claimant to recover his lose from other party incommercial matters.
Parties in commercial dispute always go to the arbitrationprocess to acquire the commercial values. On such ground if the arbitral awardgiven in favor of the claimant the opposite party can refuse such decision madeby the arbitral tribunal. On such circumstances the claimant has to go for a courtlitigation process under general law to acquire his previous award granted bythe arbitration process. This should be change and implemented new mechanism tobinding such parties to that particular award was made by the arbitraltribunal. · The Law should further more specify theappointment and qualification of the Arbitrators. Because arbitrators to thesearbitral tribunal should have thorough knowledge about the field of arbitrationand its binding principles.
On such circumstances act should furthermore specifiedwhat qualifications minimum for selecting as an arbitrator. This should supportfor the betterment of decisions and the much more important establish goodstandards of party autonomy principle where it lowers the necessity of judicialintervene. 1Olena S.
Perepelynska, ‘Party Autonomy vs Mandatory Rules in InternationalArbitration’ 2012 38 The Ukrainian Journal of BusinessLaw
