Scrutiny of the award by the ICC court of arbitration

B - The main task of the International Chamber of Commerce: scrutiny of the award

Under the International Chamber of Commerce Rules, the most important function of the Court is the scrutiny of arbitral awards. The International Chamber of Commerce Rules provide that the Court must approve all awards as to their form and that the Court may also, without affecting the arbitrators' liberty of decision, draw their attention to points of substance. In International Chamber of Commerce arbitration, scrutiny is a key element ensuring that arbitral awards are of the highest possible standards and thus less susceptible to annulment in the national courts than they might otherwise be. The scrutiny process provides the parties with an additional layer of protection that would not otherwise be available, since arbitral awards are generally not subject to appeal. This unique quality-control mechanism makes International Chamber of Commerce arbitration the world's most reliable arbitration system.

To understand how a mechanism of control like that has made the International Chamber of Commerce Court of Arbitration such a special institution of arbitration it seemed necessary to analyze the process of scrutiny of the award.

II - The process of scrutiny of the award

We are going to analyze the «step by step» process of scrutiny of the award^8(*), with a presentation of the different bodies of the institution acting in the process of scrutiny.

H. Scrutiny of an award, not a procedural order

The Court will scrutinize an Award, not a procedural order. The distinction is important since if it is a procedural order, the Court does not have anything to say about it.

The description that the Tribunal gives to the Award does not determine whether the decision is an Award or a procedural order. It is the Substance of the Tribunal's decision which determines it. As it has been held in a French decision, the Sardisud case^9(*), an Award is «the decision of an arbitral tribunal which finally settles, in whole or in part, the underlying dispute either on the merits, on jurisdiction or on any procedural issue which terminates the arbitral proceedings».

American courts and French courts made decisions about this distinction.

In the Publicis case^10(*), the US Court of Appeals decided that an order for production of documents rendered by a Tribunal in England could be enforced in the United States. The Court held that «the content of a decision, not its nomenclature, determines finality» and decided that «despite its designation as an «order» instead of an «award», the arbitral tribunal's decision, as to this chunk of the case, was final».

In the Braspetro case^11(*), a Tribunal in an International Chamber of Commerce arbitration had issued a document that entitled an order. The Tribunal did not submit the order to the International Chamber of Commerce Court of Arbitration for scrutiny and an application was made to annul it for failure to meet the procedural requirements of the Rules regarding scrutiny. The Paris Court of Appeal annulled the order and held that: «the qualification of award does not depend on the terms used by the arbitrators or by the parties». Therefore, the Tribunal's decision was an Award and not an order and was annulled because the procedure in article 27 had not been followed.

To determine if a decision of a tribunal is an award or a procedural order the Court will determine the nature of that decision. If the decision deals with an issue in the case, it will be viewed as an Award and if the decision is a procedural step in the organization of the proceedings, it will be viewed as a non-final procedural order.

If a Tribunal submits a draft Award to the International Chamber of Commerce Court, which is viewed by the Court as a procedural order, the mistake is not very important in this way, and the International Chamber of Commerce Court will often approve the Award instead of inviting the Tribunal to issue a procedural order. On the other hand, if the Tribunal submits a procedural order, which is viewed by the Court as an Award, the mistake must be resolved and the International Chamber of Commerce Court will invite the Tribunal to resolve the mistake and issue an Award. This difference in the treatment of an award or a procedural order makes sense as the International Chamber of Commerce Court of Arbitration is entitled to scrutinize an Award, and not a procedural order, which has been submitted to it by the Arbitral Tribunal.

I. The submission of a draft Award to the Counsel by the Arbitral Tribunal

The first step that takes place is the submission by an Arbitral Tribunal of a draft Award to the Counsel in charge of supervising the Arbitration. The Counsel studies the proposed draft and prepares a written report describing the arbitration in general terms and noting any obvious mistakes such as typing errors, mathematically flawed calculations, failure to deal with a particular claim or any other obvious error. A copy of the draft will also be given to the Secretary General, the Deputy Secretary General and the General Counsel of the Court for a review. The counsel in charge of the file will then discuss with the Secretary General, Deputy Secretary General or the General Counsel whether the Award should be submitted for scrutiny or not to the Court's monthly plenary session or to one of the Court's Committees, which are held four times each month. Normally, most Awards are referred to Committees of the Court and the submission to the plenary session is reserved for cases presenting particular difficulties.

J. Designation of a Reporter by the Court

The Court then designates a Reporter among its members who is requested to prepare a written report setting forth the reporter's recommendations concerning the approval or modification of the draft. The Reporter will be chosen for his familiarity with the applicable law, the legal questions involved and his familiarity with the language of the case. He will be the same Reporter during all the process of scrutiny of the award. He will prepare a written report and an oral exposition for the meeting at which the award is considered.

K. Transfer of the Report and the draft Award to the Court

Usually at least ten days prior to the Plenary Session of the Court, during which the «scrutiny» takes place, a copy of the report with the draft Award are laid out for oral discussion. Any previous Awards rendered in the Arbitration, the Terms of Reference and a report from the Secretariat describing the relevant facts and the arbitral procedure are also laid out for the discussion.

This step is paramount as it is at this particular moment, during the Plenary Session, that the award is literally «scrutinized» by the entire Court.

L. The Plenary Session

At the Plenary Session, the Reporter makes an oral presentation of his conclusions following which there is an open discussion with respect to the Award in question. During this Plenary Session, the Court will have to deal with several arbitral awards to be scrutinized and the discussion can go up to an hour for a particular Award, considering the seriousness of the case and the multitude of legal systems and points of views represented on the Court.

M. The Court decision

Following the Court's oral discussions, a decision is formulated that sets forth the Court's position and that is then communicated by the Secretariat to the Arbitral Tribunal, but not the parties, who are not informed of the Court's deliberations.

We can argue that the parties are deprived of due process as they are not included in the exchanges between the Court and the Arbitral Tribunal. This concept of due process came from the chapter 39 of Magna Carta 1215 which stipulates that "No free man shall be taken or imprisoned or disseised of his Freehold, or Liberties, or free Customs, or be outlawed, or exiled, or any other wise destroyed, nor will we go upon him nor send upon him, except by the lawful judgment of his peers or by the law of the land». This concept of due process defines and guarantees fundamental fairness and justice. Regarding this principle the parties should be informed of the Tribunal Award and the modification that the International Chamber of Commerce Court try to make to this award. But this principle is applicable regarding litigation. Arbitration is a private form of dispute resolution and by its privacy it includes that the parties are looking for a result, a final award and therefore they are not intended to be part of the negotiation.

After the Plenary Session, the Court can accept the Award or return it to the Arbitral Tribunal requiring modifications of the form of the Award or draw the Tribunal's attention to points of substance.

a. Distinction between issues of form and issues of substance

In the article 27 of the International Chamber of Commerce Rules, the authors of the rules made a distinction between issues concerning the form of the award and issues concerning the substance of the award. In other words, article 27 permits the International Chamber of Commerce Court to approve the form of the award or to comment on the substance of the Awards «without affecting the Arbitral Tribunal's liberty of decision».

1. Issue of form

In order to approve the form of an award, the International Chamber of Commerce Court of Arbitration can make modifications in several matters such as^12(*):

- whether the Award deals with all issues in Terms of Reference

- whether reasons have been provided with respect to all issues to be decided, including quantum and interest

- a reference to the parties

- the date of various procedural steps such as the beginning of the arbitration

- the date of constitution of the Tribunal in particular by whom each arbitrator was appointed and when

- a recital of the extensions of time granted by the International Chamber of Commerce Court for rendering the Award

- details of the hearings

- aspects relating to the drafting of the dispositive provisions

- aspects relating to decisions on costs, in particular as regarding the distinction between International Chamber of Commerce costs of arbitration (fixed by the International Chamber of Commerce Court) and party cost, fixed by the Tribunal, which in both cases will also have to decide upon the allocation of these costs.

- details of the place of arbitration

- issues of jurisdiction

- issues relating to the applicable rule of law

- any formal requirements of the place of arbitration to the extent known by the Secretariat

Usually, points of form raised by the International Chamber of Commerce Court are minor. In these cases, the Court may approve the draft award, subject to modifications of the form. Then the revised Award is received by the Secretariat and does not need to be resubmitted to the Court. But if the Tribunal disapproves the order of modification and does not make it, in other word if the Tribunal does not change the form, the Secretariat will resubmit the draft Award to the International Chamber of Commerce Court for a decision. If the explanation given by the Tribunal is convincing, the International Chamber of Commerce Court will approve the draft Award. If the explanation given by the Tribunal does not convince the International Chamber of Commerce Court, the Court will not approve the draft Award and will return it to the Tribunal with comments.

For major issues of form, which are rarer, the Tribunal is expected to resubmit the draft for the approval of the International Chamber of Commerce Court after having corrected these issues.

If the issue of form is such as it called into question the enforceability of the Award, then the issue will be whether the Award should be approved if it does not meet the formal requirements of the International Chamber of Commerce Rules.

However, in practice the issues of form are not the main tension between the International Chamber of Commerce Court and Arbitral Tribunals but the comments on substance.

2. Issue of substance

Contrary to issues of form, issues of substance are ordinarily major issues. This is the reason why issues of substance give rise to most of the difficulties in practice. Like the issues of form, there are several types of issues of substance, such as:

- contradiction in certain elements of the draft Award

- contradiction of the applicable law

Because of the importance of issues of substance, such issues will go up to the Plenary Session of the Court. Then the Court returns the draft Award with suggestions. The Tribunal then re-submits the Award.

3. Issue of form and substance

In some cases, the comments as to form overlap with comments as to the substance. In these cases the Court can deal with both the comments at the same time.

4. A third power: respect of the parties' fundamental right to be heard

A third power not specifically mentioned in Article 27, but explicit in Article 35, is that of assuring that the proceedings have respected the parties' fundamental right to be heard.

b. No consideration by the Tribunal of the International Chamber of Commerce Court of Arbitration recommendation

For an issue of form or substance, after the discussion during the Plenary Session and if the Court does not approve the draft Award and decides to return it with suggestions, it happens that the Tribunal re-submits the Award without taking the suggestion into consideration. In this case, it will re-start the process and the Award will be presented again to a Plenary Session for approval with a Reporter once again presenting its conclusions to the Court.

But for an issue of form, the Tribunal is not obliged to follow the Court suggestion. Indeed, the Tribunal is free to disregard the comments of the International Chamber of Commerce Court and the Award will still be approved, as the International Chamber of Commerce Court is approving the Award solely as to form.

c. Award approved by the Court: final and enforceable

Once approved by the Court notification of such approval is given to the Arbitrators who then sign the Award rendering it final and enforceable. The award so signed is deemed to have been made instead of the Arbitral proceedings on the date of signature. The parties are then notified by the Secretariat of the Court.

N. Conclusion on the process of scrutiny of the award

As one of the members of the Court puts it, some of the awards are «so perfect that it calls for no comment other than the admiration of the members of the Court»^13(*). It is a labor-intensive process involving many people from the Court and the Secretariat. These modifications brought by the Court save a lot of time and money as they avoid the delays that might result if an Award was set aside due to a defect that would not have been noticed otherwise and avoid the possible intervention of a national Court.

But this examination of the Award by the International Chamber of Commerce Court brings some difficulties. The first problem is to determine if by scrutinizing the award, the International Chamber of Commerce Court is interfering in the arbitrators' functions.

III - The prima facie examination of the judgment or the questioning of the impartiality of the arbitrator? (Did the Court interfere in the arbitrators functions?)

The impartiality and independence of an arbitrator are essential features of the quasi-judicial process that is arbitration. But under an institutional arbitration, the International Chamber of Commerce Arbitration in particular, the issue can be partial and the International Chamber of Commerce Court of arbitration can challenge the independence of the arbitrator.

The term partiality refers more to the dependence of the arbitrator to one of the parties and his favor in relation to the issues in dispute. «Partiality arises where an arbitrator favors one of the parties or where he is prejudiced in relation to the subject-matter of the dispute»^14(*).

Independence is measured in terms of degree of the relationship between an arbitrator and one of the parties. The article 2.7 of the International Chamber of Commerce Rules of Arbitration requires each arbitrator to declare whether there exists any past or present relationship, direct or indirect, with any of the parties or any of their counsel, whether financial, professional, social or of another kind and whether the nature of the relationship is such that disclosure is called for considering the arbitrator's independence in the eyes of the parties.

The power of the institution to administer the arbitration is conferred by the International Chamber of Commerce Rules. Therefore, the institution, through the International Chamber of Commerce Court, has the right to scrutinize the arbitrators services (the award). In case of mistakes from the arbitrator, the institution can remove him. This power of scrutiny of the award does not seem to go against the impartiality and independence of the Arbitrator, because by scrutinizing the award, the International Chamber of Commerce Court does not go against these powers. Indeed, the arbitrator is (and must be) independent and impartial vis à vis the parties and not the institution which is there to administrate the arbitration procedure.

Under a French case^15(*) it has been held that this requirement of independence and impartiality of the arbitrator came from the article 6 paragraph one of the European Convention on Human Rights. This article is part of the Convention which protects the right for a fair trial. The French Court said that the jurisdictional function of arbitration is the task of the arbitrators and that the International Chamber of Commerce Court of Arbitration is only liable for the administration, the organization of the arbitration. Therefore, as far as the International Chamber of Commerce Court remains in its prerogative of the administration of arbitration, the arbitrators can stay independent and impartial in their jurisdictional function and the trial will be fair. The Court held that the Control exercised by the Court of Arbitration «does not lead to any interference into the jurisdictional task of the arbitrators, but only aims at ensuring the efficacy of the arbitration». By scrutinizing the award, the International Chamber of Commerce Court does not interfere in the jurisdictional function of the arbitrator, it stays in its organizational function and does not hurt the impartiality and independence of the arbitrators.

But the essential conflicts of opinion do not concern the questioning of the impartiality of the arbitrator. Indeed, the question which is now resolved but was subject to a lot of doctrinal conflicts is to determine whether the Court of Arbitration of the International Chamber of Commerce exercises a second or appellate level of arbitral jurisdiction or not.

* ⁸ David T. McGovern, «Scrutiny of the award by the ICC Court» the ICC International Court of Arbitration Bulletin Vol 51Number 1 - MAY 1994

* ⁹ Paris, March 25, 1994, Société Sardisud et autre v société Technip et autre, (1994) Rev Arb No.2 p.391

* ¹⁰ Smith and Turner, «Enforcement by US Court of International Arbitration Interim Orders and Awards under the New York Convention».

* 11 Braspetro Oil Services Company & Anor v FPSO Construction Inc & Anor, Court of Appeal - Commercial Court, June 24, 2005, [2005] EWHC 1316 (Comm)

* ¹² W. Laurence Craig, Coudert Freres, Paris , William W. Park, Boston University School of Law , and Jan Paulsson, Annoted Guide to the 1998 ICC Arbitration Rules, Article 27, Freshfields, Paris.

* ¹³ Michael W. Buhler, Thomas H. Webster, Handbook of ICC Arbitration, Chapter 20, «The Court's Scrutiny of Awards», Second Edition - Sweet & Maxwell, 2008

* ¹⁴ Article 3 of IBA's Ethics for International Arbitrators

* ¹⁵ Cour de cassation première chambre civile 20 février 2001 n° 99-12.574 (n°255FS-P) [French Supreme Court of Civil cases]