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Published: Fri, 02 Feb 2018
The Arbitral Tribunal And Their Powers
I will hereby write a report to advise the arbitral tribunal of their powers regarding this case.
Is the Arbitration Clause valid?
The clause mentions the word ‘arbitration’  thus outlining the parties’ intention  . However the arbitration clause needs to be examined further as stating arbitration within the heading is not sufficient to prove that it’s an arbitration clause but needs to be arbitral in character  or can be assessed by being commercial in nature. 
The clause must be clearly worded to state the parties agreement to enter arbitral proceedings should a dispute arise and should not be wholly or partly ambiguous.  In this case if such badly drafted clauses as “arbitration in London – English Law to apply,”  and “arbitration to be settled in London,”  have been accepted as valid arbitration clauses then I would not foresee a problem in this case.
Whether the Arbitral Tribunal has jurisdiction?
The arbitration clause refers to ad-hoc arbitration in London but states that the governed law is by New York law. The parties are free to choose the “seat of arbitration,”  but in this situation there is confusion arising from the clause as the ‘seat’ being London means that the Arbitration Act 1996 is applicable but this may conflict with New York law? The procedural law of the arbitration is determined by the seat of the arbitration  , in this case giving English law jurisdiction. In the clause the parties have defined London as the juridical seat therefore that is “where the arbitrator or arbitrators are to be appointed.” 
In absence of an agreed location the agreement of institutional rules can determine the juridical seat, this was given when parties agreed for arbitration to take place under the LCIA Rules which was sufficient to prove they had agreed a juridical seat.  Furthermore the ICC Rules determines that “the place of arbitration shall be fixed by the International Court of Arbitration, unless agreed upon by parties,”  and the UNCITRAL states that “unless the parties have agreed upon the place where the arbitration is to be held, such place shall be determined by the arbitral tribunal, having regard to the circumstances of the arbitration.”  The international arbitration tribunal therefore in this situation have the power to determine the juridical seat and should this be London then the tribunal “or person vested by the parties,” can choose the juridical seat. 
Under the Act the parties are free to agree a foreign law which can be expressed or implied under a non-mandatory provision of the act.  Within this case the parties should have an agreed list of non-mandatory provisions  that New York Law is to replace, to ensure that the arbitration agreement is specific and there are no law conflicts or ambiguous wording. The use of foreign law with the Arbitration Act 1996, the parties should note “it is important to remember that matters in the foreign law which conflict with the mandatory provisions of the Act would not be effective at all.”  It is usually more popular to have the law, lex loci arbitri as there is less chance of error within the arbitration agreement, i.e. in this case that the seat is London and is governed by the Arbitration Act 1996. It is not uncommon for parties to choose a juridical seat which is neutral and outside of the country upon where the dispute originates, as this is a particular advantage of arbitration as opposed to litigation.
Furthermore within a recent case a joint venture of an Indian company but the arbitration clause referred to the venue as London (ICC Rules) but the substantive law of contract to be Indian Law, thus a confliction in law. The court held that “there is an express designation of the arbitration venue as London and no designation of any alternative place as the seat..the inexorable conclusion is…that London is the judicial seat and English law the crucial law.” 
Although the courts must determine the law attached to the contract and which has the closest and most real connection. As stated by the House of Lords that stating that arbitration is in London does not mean that a French contract was to be governed by English as opposed to French law.  As stated by Lord Mustill that the ‘critical’ law must be determined “it is by now firmly established that more than one national system of law may bear upon an international arbitration. Thus, there is the proper law which regulates the substantive rights and duties of the parties to the contract from which the dispute has arisen.” Thus “certainly there may sometimes be an express choice of a curial law which is not the law of the place where the arbitration is to be held, but in the absence of an explicit choice of this kind.” 
The clause does state it’s governed by New York law which could be interpreted as that the parties wish the dispute to be governed by country that is party to the New York Convection. In this case the place of arbitration (London) which is not in one of the contracting states,  thus any award might not be enforceable under the New York Convention, as stated “these Rules shall govern the arbitration except that where any of these rules is in conflict with a provision of the law,”  (UNCITRAL, Model Law). The Arbitration Act 1996 does however conform to the basic principles of Model Law and the Act is one of the most developed arbitration acts within the world.
Within a case in Hong Kong the parties had a dispute over monies outstanding and the claimant took the dispute to the Hong Kong court instead of through the referred arbitration clause in London. The courts referred the case to arbitration in London because the arbitration was international in nature and they “concluded that there had not been a clear and unequivocal admission as to liability and quantum to bar the defendant from referring the dispute to arbitration.” 
Should the courts or tribunal determine illegality of the contract?
The consultancy services agreement (the contract) between FFB and GO needs to be examined by the arbitral tribunal to assess whether the contract is void ad initio  (void from the beginning), as if it is then the arbitration clause maybe void. This has been disputed within case law upon whether the arbitral tribunal has a duty to determine whether a contract is void. In these cases it is suggested that the arbitral tribunal should dismiss the case on the basis that the arbitration clause itself is illegal. 
It is a more modern approach for the arbitral tribunal to have jurisdiction upon whether corruption would make a contract illegal  or not and is more commonly occurring within international arbitration, in the interest of public policy. 
The arbitral tribunal therefore has to the determine the following;
That FFB/NFFB and GO have agreed to have any disputes referred to arbitration  which is as previously evaluated. Should this case go to a Delaware or Lyngola domestic court then issues such as foreign judgements, domestic courts jurisdiction and estoppel under private international law can then become further issues. 
That the arbitral tribunal has power to determine its own jurisdiction  under the doctrine of “kompetenz-kompetenz,”  therefore enabling the tribunal to decide whether the contract is illegal or not?  A challenge of the tribunal’s lack of substantive jurisdiction can be given by the parties after the arbitration award.  If the parties make an application to the courts for a determination of a preliminary point of jurisdiction prior to arbitration, this could give savings to time and costs.  If the arbitral tribunal have no substantive jurisdiction  then the case will then go to litigation under a challenge of the award under S67(3)  thus costing more. In this case if an appeal is issued to the courts under S67, then the arbitration could continue then if the court determines any award is invalid then the court will refer it back to the competence of the tribunal to rule on its jurisdiction under S30.  NFFB would need to raise an objection prior to any award and not wait to see if the award is favourable. 
The doctrine of severability as the arbitration clause might not be illegal but the contract is illegal in substance.  Even in cases of corruption as long as the corruption does not directly affect the arbitration clause, the clause remains valid. 
Severability of the arbitration agreement was evolved to recognize that an arbitration clause is separate from the main contract and thus can survive main contract termination.  Furthermore this was evolved further within Harbour v Kansa (1993) when an arbitration clause could apply to an illegal contract.
In this case I would see that the arbitral tribunal could assume jurisdiction and hear the evidence and decide upon whether the contract is illegal based upon that it is a dispute arising from an arbitration clause not an corrupt contract.  The arbitration agreement cannot be regarded as “invalid, non-existent or ineffective because that” the contract is “invalid.” 
Is the contract illegal?
NFFB claim that the contract is illegal, contrary to public policy and against its charter thus the arbitral tribunal must then decide whether corrupt payments were to be made and whether the contract is unenforceable.
GO could argue that the contract is legal as bribes are illegal but commissions or agreements to exert personal influence is legal. “Small “facilitation” payments do not constitute payments made “to obtain or retain business or other improper advantage” within the meaning of paragraph 1 and, accordingly, are also not an offence. Such payments, which, in some countries, are made to induce public officials to perform their functions.” 
The arbitral tribunal must therefore ‘weigh up’ all of the evidence and then determine upon whether the contract is illegal, with the use of experts  and cross-examination of witnesses, as a mere suspicion of corruption will not suffice.  “A complete defence to any attempted appeal or litigation of such decision in the absence of fraud or collusion.” 
Challenging any award
NFFB have already stated their intention to challenge any award on the basis that the arbitral panel does not have jurisdiction. This occurred similarly within a recent case upon where the parties had the seat of London for arbitration, governed by New York law but did not state the law applicable to the arbitration agreement. The losing party wanted to appeal against the award and bring proceedings to New York, although the UK Court of Appeal ruled that English Law should govern any challenges to the award and dismissed the appeal, “an agreement as to the seat of an arbitration is analogous to an exclusive jurisdiction clause.” 
NFFB can also challenge any award or enforcement which is contrary to public policy  or that they can argue is public policy.  As in this case an award which is deemed to be one a corrupted contract is contrary to public policy “In my judgment, the English courts should not enforce an English law contract which falls to be performed abroad where: (i) it relates to an adventure which is contrary to a head of English public policy which is founded on general principles of morality, and (ii) the same public policy applies to the country of performance so that the agreement would not be enforceable under the law of that country.” 
As stated above by Judge Phillips the right of that state must be taken into consideration by the arbitral tribunal as they have a responsibility to public policy of that state. The arbitral tribunal therefore have an arduous task of placing the domestic laws into consideration with the chosen arbitral rules.
My recommendation to the arbitral tribunal is that they are aware that NFFB could potentially (and are likely if they lose) to challenge their decision on that their award is contrary to public policy. “Losers often think that injustice has been perpetrated when their factual case has not been accepted.”  They need to ensure that the award covers their assessment of the corruption allegations and that they carefully consider all allegations during the proceedings. Although the purpose of arbitration is for non-interference of the court, they can interfere in some situations as the lex arbitri is of the seat of the arbitration and the courts will expect to see fairness in the form of public interest.  The arbitral tribunal needs to act independently  and impartially  to ensure that their award is not challenged. 
My final recommendations to the arbitral tribunal that they need to assume jurisdiction and explore within detail the corruptive nature of the contract as if the contract is corrupt in nature then the courts will not enforce the award should it be challenged due to potentially being contrary to public policy.  The arbitral tribunal need to act as an “impartial tribunal without necessary delay or expense,”  whilst “safeguards as are necessary in the public interest,”  expose the truth in order for justice to be done and no substantial injustice. 
WORDCOUNT FOR PART A OF COURSEWORK: 2,168 words excluding foot notes
PART B – ESSAY
The English and Scottish Arbitration Acts offer a similar in majority view on international arbitration however there are some differences in the approaches within the act, in particular challenging arbitration awards upon which I will be exploring within this essay.
I will be undertaking a critically analysis upon each jurisdiction and the approach which is undertaken. I will explore whether the English approach is somewhat conservative, onerous and obsolete  and the Scottish approach is more contemporary and radical  in challenging substantive jurisdiction, serious irregularity and a point of law. The hypothesis of this essay being is the English Arbitration Act over onerous and too traditional on the basis that it accepts that an error in law is to stand?
The English Arbitration Act
The Arbitration Act 1996 “introduces a radical new approach designed to keep arbitration in England, Wales and Northern Ireland in the forefront of choice for international parties, and new powers for arbitrators to permit them to redefine arbitration as a dispute resolution process with unique qualities.”  The Arbitration Act 1996 is the most internationally acknowledged and most developed arbitration act and puts London at the heart of arbitration as a jurisdiction seat.
Section 67 provides provision for parties to challenge the award on substantive jurisdiction and gives the parties an option to challenge the award on its merits.  The parties would have to challenge the tribunal as to its substantive jurisdiction  or whether they did have any substantive jurisdiction.  The parties have a 28 day limit  and grounds for the challenge must be included in the application as the parties will not be “permitted to introduce,” additional grounds “after the expiration of the period of 28 days from the award.”  If no new grounds are introduced under s.67 the application should be a complete re-hearing of the original jurisdiction case before the arbitrator,  thus lengthening the process and subsequent costs.
The English Act provides an onerous and complex method of challenging a decision on the basis of a serious irregularity  which is a mandatory clause and no institutional rules  can override or amend this provision. The parties have the onerous task of proving that a ‘serious’  irregularity has occurred, as stated by Lord Waller,“ in my view the authorities have been right to place a high hurdle in the way of a party to an arbitration seeking to set aside an award or its remission by reference to section 68.”  Lord Waller point within this case is that the English Act proves a ‘high hurdle’ in order to challenge the act, thus I think this discourages parties from challenging the award.
Furthermore the act becomes more complex with section 68 (2) which refers to substantial injustice.  This definition has been assessed within law reports  and case law which describes it as testing the reasonable expectation of the parties,  reasonableness of the arbitrator to assess  and whether the irregularity is likely to have effect on the issue determined by the arbitrator.  This provision again provides a further burden for the parties to challenge the award, as stated by Judge Dyson “in my judgment, an applicant who invokes a s.68 must show that the irregularity has caused, or will cause him to suffer substantial concrete or substantive prejudice.”  This only restricts the parties view of successfully challenging the award. This point was clarified further within the Icon case as the Court of Appeal stated that in order to challenge on a serious irregularity the tough test of persuading “the court that it would be unfair to give the owners leave to appeal, the characters would have to show that if the appeal were allowed the would suffer injustice as a result of having been denied the opportunity,” must be successfully undertaken.  The philosophy is that the irregularity must be shown it would have made a “real difference to the result,”  which is an arduous task and will only rarely occur in really serious cases as a “corrective intervention.” 
The statement states ‘error in law to stand’ which is covered by the act by challenging an award by appeal on point of law under s.69.  This provision does not have to be applied by the parties and can be contracted out.  This section applies only to English law  not any other jurisdiction, which has been in case law where there has been a conflict with law of a jurisdiction thus voiding the provisions of this section.  This section lacks adaption and flexibility with other international laws and institutional rules.  Section 69 is a “jurisdictional hurdle,”  as the party must satisfy the stringent tests set out within the act,  and then have the appeal granted which is a prolonged and costly task for the party when the chances of success are minimal.
In some situations of failure to challenge an award under S.69 has been due to that the arbitrator was never asked to determine the question of law  or that there is no evidence to support particular findings in fact.  The Act or Courts cannot be blamed for an error in law to stand if these fundamental party errors have occurred within the arbitration, thus meaning that the arbitrator’s decision was correct but perhaps the parties submission were not? Within a report by Harris exploring the views of S.69, these were generally found to be supportive as 60% of the respondents of the survey felt that the section should be retained on its current basis, 20% wanted it changed and 15% wanted it abolition. 
Section S.67, S.68 & S.69 offer a large advantage of having a “high hurdle,”  of a successful challenge as it is more difficult for the courts to interfere in arbitral decisions. The courts only intervene where they absolutely have to,  thus protecting the privacy of arbitration and benefit of the arbitrator’s skills, knowledge and expertise  which is why it is widely chosen over litigation. This has been shown in history with the English Arbitration Act 1950 which allowed a right to appeal to litigation without difficulty and thus the Arbitration Act 1979 was passed to give a more restrictive approach to appeal.  If arbitration is not binding and the parties feel that they can challenge the decision at ease it removes some of the robust and sanctuary in the arbitrators decisions. Notwithstanding there have been some mistakes in law made by arbitrators which have gone to the Court of Appeal for overturning.  It is important to note that if an error in law has occurred then it should be corrected under s.57  prior to award as this can jeopardize any application under s.67 – 69 as s.57 should have been firstly undertaken. [99
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