Fairness in International Commercial Arbitration

Arbitration Rock

Introduction

The importance of fairness in International Commercial Arbitration cannot be underestimated. This is because it is not the outcome or the result that is important. Reaching to the right outcome or result is an only part of the substantive fairness whereas the procedural fairness also must be kept into mind which talks about the ‘right way’.[1]

The concept of ‘fairness’ has been mentioned and prescribed in various international conventions and domestic legislations. Let us discuss some of them:[2]

UNCITRAL Model Law

Article 18 of the UNCITRAL Model Law states that:

“Article 18 Equal Treatment of Parties

The parties shall be treated with equality and each party shall be given a full opportunity of presenting his case.”

This has been described as the Magna Carta of arbitration.[3] This provision clearly demands fairness in the arbitration process. There are two sides of this provision. It can simply be interpreted as implementing a procedure that both the parties consider as just and fair. On the other hand, Article 18 also implies that all the parties must be given full chance of presenting their case.

 UNIDROIT

Article 1.7 of the UNIDROIT Principles states that:

“Article 1.7 (GOOD FAITH AND FAIR DEALING)

(1) Each party must act in accordance with good faith and fair dealing in international trade.

(2) The parties may not exclude or limit this duty.”

This clearly shows that good faith and fair dealing are one of the fundamental ideas underlying these principles. Considering the private nature of arbitration, the standards of good faith and fair dealing are not be applied blindly or lightly to it.[4] This is the reason why the phrase ‘good faith and fair dealing in international trade’ is being used in the UNIDROIT Principles. This clearly shows that the standards of ‘good faith and fair dealing’ are to be construed in the light of the special conditions of international trade. This is because the standards of business practice may vary from jurisdiction to jurisdiction and from one trade sector to another.

United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention)

“Article V (1) (b) – 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:

(b) 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;”

We see that Article V (1) (b) clearly provides an opportunity to the parties to be heard when they were denied fair hearing or where the parties were not treated equally. These are nothing but defenses meant to ensure fairness and justice in the system. However, it is to be remembered that this provision nowhere implies that stringent judicial or domestic standards of fairness be introduced into the arbitration process.

In the next post, we shall talk about the importance of good faith in International Commercial Arbitration.

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[1] Richard W. Naimark & Stephanie E. Keer, International Private Commercial Arbitration: Expectations and Percep-tions of Attorneys and Business People, 30 Int'l Bus. Law 203 (2002).

[2] Nana Japaridze, Fair Enough? Reconciling the Pursuit of Fairness and Justice with Preserving the Nature of International Commercial Arbitration, 36 Hofstra L. Rev. 1415.

[3] H Holtzmann and J Neuhaus, A Guide to the UNCITRAL Model Law on International Commercial Arbitration, Kluwer, 1999 at 550 and noted by the Court in Methanex Motunui Ltd v Spellman, [2004] 1 NZLR 95 at 139.

[4] Karyn S. Weinberg, Equity in International Arbitration: How Fair is “Fair”? A Study of Lex Mercatoria and Amiable Composition, 12 B.U. Int'l L.J. 227, 252-54 (1994).