HOW CAN TERMS OF REFERENCE IMPACT ARBITRATION?
When a dispute is referred to ICC, the first task of the arbitral tribunal is to draw up the Terms of Reference (“TOR”) [1] as soon as it has received the file of a new dispute from the Secretariat on the basis of documents or in the presence of the parties and in the light of their most recent submissions [2].
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TOR include key contents such as names and contact details of the parties, a summary of the parties’ respective claims and of the relief sought by each party, together with the amounts of any quantified claims and, to the extent possible, an estimate of the monetary value of any other claims… and “unless the arbitral tribunal considers it inappropriate, a list of issues to be determined” [3]. In addition, the TOR also covers the source of the tribunal’s power to decide?ex aequo et bono, where relevant.
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ICC Arbitration Rules don’t provide for a specific form for the TOR. However, any TOR drawn up must cover the following mandatory below information (For greater details, please see Model of ICC Terms of Reference: Model of ICC Terms of Reference - ICC - International Chamber of Commerce (iccwbo.org)):
a) the names in full, description, address and other contact details of each of the parties and of any person(s) representing a party in the arbitration;
b) the addresses to which notifications and communications arising in the course of the arbitration may be made;
c) a summary of the parties’ respective claims and of the relief sought by each party, together with the amounts of any quantified claims and, to the extent possible, an estimate of the monetary value of any other claims;
d) unless the arbitral tribunal considers it inappropriate, a list of issues to be determined;
e) the names in full, address and other contact details of each of the arbitrators;
f) the place of the arbitration; and
g) particulars of the applicable procedural rules and, if such is the case, reference to the power conferred upon the arbitral tribunal to act as?amiable compositeuror to decide?ex aequo et bono.
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The question is how can the TOR impact arbitration?
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The TOR can help promote efficiency in arbitration
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Main purpose of the TOR is to make sure that the dispute can be identified in a clear manner and the agreement of the parties on the procedural matters can be recorded once the arbitrators and the parties sign the TOR. Therefore, with a clear TOR, relevant parties and arbitrators can have the same understanding on, amongst others, the terms of dispute in question, the scope and limits of the duties of the arbitrators, and procedures to resolve the dispute. The arbitration proceedings, therefore, can be progressed fast and efficiently.
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The TOR also can keep the arbitral proceedings in order and do so early enough to avoid any procedural issues or any disruption in the proceedings which may arise at a later stage. They enable the tribunal to clearly state the issues, and the cases of the parties reach a critical juncture where they can effectively settle or advance.
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To further promote efficiency in arbitral proceedings, ICC Arbitration Rules also provide that once the TOR are signed, no party shall make new claims which fall outside the limits of the TOR unless it has been authorized to do so by the arbitral tribunal, considering the nature of such new claims, the stage of the arbitration and other relevant circumstances [4]. This definitely help to avoid circumstances that one party takes every possible opportunity to delay arbitral proceedings by submitting new claims.
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The TOR can help minimize the possibility that the arbitral award is to be challenged at a later stage
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Arbitration ended with an arbitral award being rendered by the arbitral tribunal. The arbitral award is final and binding upon the parties to the dispute. However, in many cases, the parties still have to go further for the dispute when one of the parties submits its claim to set aside or to challenge the arbitral award. ?
Under the UNCITRAL Model Law on International Arbitration, the grounds for setting aside an arbitral award include [5]:
§? Lack of capacity of a party to conclude an arbitration agreement;
§? Lack of a valid arbitration agreement;
§? Lack of notice of appointment of an arbitrator or of the arbitral proceedings or inability of a party to present its case;
§? The award deals with matters not covered by the submission to arbitration;
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§? The composition of the tribunal or the conduct of the arbitral proceedings was contrary to the effective agreement of the parties or, failing such an agreement, to the UNCITRAL Model Law;
§? Non-arbitrability of the subject matter of the dispute;
§? Violation of public policy.
The above are also grounds under the New York Convention [6], based on which courts may refuse recognition and enforcement of a foreign arbitral award.
When any of the above grounds is included in the TOR, it is unlikely that the arbitral award can be set aside or challenged on such ground. The parties cannot argue that the arbitration clause is invalid, there is a lack of notice of appointment of an arbitrator or of the arbitral proceedings or the composition of the tribunal or the conduct of the arbitral proceedings was contrary to the effective agreement of the parties or the arbitral tribunals' ruling on matters not covered by the submission to arbitration … once these kinds of things are clearly provided in the TOR and the parties make no objection or reservation upon signing the TOR.
In?DHL v Gemini [2022] EWCA Civ 1555, DHL and Gemini were charterparties who reached a simple agreement?subject shipper/ receiver’s approval?(a condition precedent involving the approval of two third parties), for a putative journey from Australia to China in September 2020. There was an arbitration clause in the agreement providing that the arbitration would take place in London and be governed by English law. A single arbitrator was given jurisdiction by the arbitration agreement to decide whether or not there was a charterparty. No contract or arbitration agreement was ever reached, and the "subject" was never lifted. Gemini referred the case to an arbitral tribunal, which convened in the absence of DHL. The arbitrator held that Gemini was granted damages totaling $USD 283,416.21 for DHL's repudiatory violation. In an attempt to have the award set aside, DHL filed an application with the High Court under section 67 of the UK Arbitration Act 1996, citing the arbitrator's lack of substantive competence. Alternatively, DHL filed an appeal under?section 69?on a point of law, submitting the subject clause was not qualified by other contract terms. The High Court judged that the arbitrator had no jurisdiction to decide the dispute, and the arbitral award was set aside.
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Assuming that the above dispute was referred to ICC and the TOR was put in place to cover jurisdiction of the arbitral tribunal, then it is unlikely that DHL can challenge the arbitral award for reason that the arbitrator had no jurisdiction to decide the dispute.
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The above is only one of the cases illustrating that once the TOR is signed by the parties, the grounds such as invalidity of the arbitration clause, appointment and composition of arbitral tribunal contrary to the parties’ agreement or matter falling out of scope of the arbitration agreement…on which the parties normally rely to challenge the arbitral award are unlikely accepted by the court of law. Therefore, the TOR can help minimize the possibility that the arbitral award is to be challenged at a later stage.
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[2] Article 23(1)?of the ICC Arbitration Rules.
[3] Articles 23(1) (c) and (d) of the ICC Arbitration Rules.
[4] Article 23(4) of the ICC Arbitration Rules.
[5] Article?36 of the UNCITRAL Model Law.
[6] Article V of the New York Convention.