By Chief Adewale Adeniji1
International commercial arbitration is gradually becoming the preferred mode parties to cross border commercial transactions chose to govern the settlement of any disputes that may arise in their business dealings, for a myriad of reasons, one being the generally accepted fact that it is faster than litigation, and assumably less expensive. Another being that parties can, as it where, choose their own law and rules, free from the restrictive and settled nature of municipal courts.
It is against this background that I will examine if this freedom of choice is indeed at large.
Party autonomy is the right of parties to international commercial arbitration to determine the procedure to govern their contractual relationship. It is a central principle of an arbitral process that allows some contractual freedom to disputing parties. In essence, the principle allows parties to determine all the essential elements of arbitration. According to learned authors, Redfern and Hunter,
“Party autonomy is the guiding principle in determining the procedure to be followed in an international commercial arbitration. It is a principle that has been endorsed not only in national laws, but by international arbitral institutions and organizations. The legislative history of the Model Law shows that the principle was adopted without opposition…”2
Party autonomy has evolved over the ages – from when philosophers such as Aristotle began advocating the advantages of arbitration over litigation, through the works of 16th century French scholar, Dumoulin, who espoused the principle that parties’ will in contracts is sovereign. However, it is commonly accepted that the principle in its general sense started to develop in the 19th century3.
This principle of party autonomy has broader meaning in international commercial arbitration than in domestic arbitration because parties are free not only to choose laws but also to conduct the arbitration process by agreement. According to Elizabeth Shackelford, an arbitration agreement is the primary resource of arbitration and the strongest evidence of party autonomy4.
Party autonomy has therefore been codified in the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (the New York Convention)5, and the UNCITRAL Model Law on International Commercial Arbitration, 2006 (UNCITRAL 2006)6 ; and by extension in the municipal laws of various signatories to these conventions.7
Intrinsic in the principle of party autonomy are the values of Freedom, in parties’ unfettered rights to conduct their own contractual relationships within the law; Efficiency, which enables parties to reasonably foresee the results of their contractual relationships by independently selecting applicable law of their choice thereby improving the predictability of law, conducive settlement of the dispute, and maximizes the interest of the parties; and Justice8 , which refers to the ability of a weaker partner in the contract to choose the law which it believes would afford it a better chance for its dispute to be heard at minimal cost, and effectively.9
For party autonomy to work, there must be consensus ad idem of contracting parties to resolve their dispute by arbitration. This agreement of the parties to resolve their dispute by arbitration is what grounds the jurisdiction of an arbitral tribunal above the jurisdiction of national courts.10 That agreement is reached by the parties when they conclude to submit to arbitration disputes or disagreements which may arise, now or in the future.11 In essence, party autonomy can be described as the “freedom of parties to arrange their arbitration agreement, freely, without control from others”12
The principle of party autonomy is recognized and codified in Nigeria vide the Arbitration and Conciliation Act, 200413 (ACA, 2004), which provides in Section 15 for arbitral proceedings14. Section 15(1) provides that “the arbitral proceedings shall be in accordance with the procedure contained in the Arbitration Rules set out in the First Schedule to this Act”. This Arbitration Rules are a re-enactment of the UNCITRAL Model Arbitration Rules15.
The provisions of these conventions and Nigeria’s municipal law explicitly require respect for a party’s choice of procedural provisions, and where an award is shown to be out of sync with this provision, such an award is susceptible not to be enforced16.
The Supreme Court in MV LUPEX V. NIGERIA OVERSEAS CHARTERING & SHIPPING LIMITED17 appears to adopt this principle when it held that an arbitration clause is a written submission agreed by the parties to the contract which must be construed according to its language and in the circumstances in which it is made.
Party autonomy is such a crucial factor in arbitral process, in that where it is discovered that an arbitration agreement was not voluntarily entered into, Section 52 (2)(a)(ii), ACA, 2004 provides that recognition and enforcement of a foreign arbitral award under such agreement may be refused.
Freedom At Large?
Laudable as the principle of party autonomy is, and despite the oft touted opinion that contracts being self-sufficient, when combined with arbitration, leave out national laws (considering the options open to parties before, during and after arbitration), this author still believe the provisions of the UNCITRAL Model Law and the New York Convention make party autonomy limited in effect.
First, despite the fact that the legal framework for arbitration sees to it that the arbitral process enjoys some form of autonomy, such autonomy is surely not unlimited in scope. This is because national courts may still exercise judicial control in the area of enforcing arbitral awards18; or in the area of applicable law. Although party autonomy allow parties, while executing their contract, to choose what law they want applied, and an arbitrator is obliged to apply the law so chosen; where the choice of law was made mala fide, for example where the chosen law conflicts with the lex arbitri19, an arbitrator may disregard this duty, and apply the relevant law.
Second, Article 18 of the UNCITRAL Model Law uses mandatory word, “shall” in the treatment of parties. It provides that, “The parties shall be treated with equality and each party shall be given a full opportunity of presenting his case”. So, if while relying on party autonomy in Article 11(2) of the Model Law20, parties agree that only one side would be heard in the arbitration, a national court (empowered under Article 6 of the Model Law21) could strike down any such agreement as invalid on account of Articles 18 and 3622 – another limitation of party autonomy.
I agree with the conclusion of learned authors, Holtzmann and Neuhaus that, “the freedom of the parties [under the Model Law} is subject only to the provisions of the Model Law, that is, to its mandatory provisions”23
Third, public policy is a limitation on party autonomy. It is a good ground to challenge an arbitral award – Article V(2)(b), New York Convention, 1958. Although public policy is fluid, depending on each state court’s interpretation, it has been judicially interpreted in Nigeria to mean anything injurious to public welfare and against public good24. So, where party autonomy is exercised contrary to public policy, or an award is ultra vires public policy, it would be regarded as of no effect.
Fourth, part of the principle of party autonomy is the freedom parties are given to choose the number and composition of arbitrators. One would therefore think that this should be unassailable. Except that Article 34(2) of the Model Law allows for the setting aside of an arbitral award if the party applying furnishes proof that the composition of the arbitral tribunal or arbitral procedure was not in accordance with the agreement inter parties or was in conflict with a provision of the Model Law which parties cannot derogate from. Another limitation of party autonomy.
Fifth, there are other ‘mandatory’ provisions in the UNCITRAL Model law apart from those mentioned above which further limits party autonomy. These include (a) arbitration agreement must be written25; (b) arbitration award must be in writing and signed by the arbitrator, with copies delivered to parties26; (c) advance notice of tribunal must be given to parties27.
Absence of any of these provisions make any award liable to be set aside, that is voidable.
It is my respectful view that party autonomy is not absolute. Although parties to arbitration enjoy a wide latitude of freedom because the base of any arbitral proceeding (the arbitration agreement) is a consensual conduct of the parties, such freedom is tempered by the provisions of the UNCITRAL Model Law, the New York Convention; and in the case of Nigeria, by the Arbitration and Conciliation Act, 2004; which laws have basic mandatory provisions that parties can only ignore or violate at their own peril.
1 Adewale Adeniji is a legal practitioner in Nigeria. Qualified in 1988 and has been in active practice since then. He is also a chartered arbitrator and a member of the Lagos Court of Arbitration.
2 Redfern and Hunter with Blackaby and Partasides, Law and Practice of International Commercial Arbitration, 4th Edition, 2004 at p. 315.
3 Okezie Chukwumerije, A Choice of Law in International Commercial Arbitration (Quorum Books 1994) 161.
4 Elizabeth Shackleford, “Party Autonomy and Regional Harmonization of Rules in International Commercial Arbitration” (2006) vol. 67 University of Pittsburg Law Review 897, 900.
5 Article II (1) of the New York Convention, 1958 recognizes party autonomy in a written arbitral agreement (or a clause in a general agreement) by the parties where they agree to submit to arbitration all or any of their differences, present or in the future.
6 Article 19(1), “subject to the provisions of this law, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting the proceedings”
7 Such as Nigeria’s Arbitration and Conciliation Act, CAP. A18, Laws of the Federation, 2004.
8 Principles which characterize natural justice being (a) no party should be a judge in his own cause, (b) no party should be condemned unheard, meaning each party must be given an opportunity to cross-examine witnesses of the other side (c) each party is entitled to know the reasons for the decision and award etc.
9 Xie, F Wang, Analysis on the principle of autonomy in Law of Law Application of Foreign Relations. Legal System and Society, 2013.
10 Redfern and Hunter., op.cit. 131.
11 This has found judicial expression in REILY V. RUSSEL (1864) 34 MO 5124 @ 528
12 Abdulhay, S., Corruption in International Trade and Commercial Arbitration, (London: United Kingdom: Kluwer Law International, 2004) 159
13 Cap. A18, Laws of the Federation, 2004. The ACA was modelled on the UNCITRAL Model Law on International Commercial Arbitration 1085 (UNCITRAL Model Law) and first came into force on 14th March 1988.
14 See also Article 19(1), UNCITRAL Model Law which allows party free choice of procedure.
15 https://www.uncitral.org/pdf/english/texts/arbitration/arb-rules/arb-rules.pdf (accessed on 29th June 2019).
16 Article 5, the New York Convention.
17 (2003) 15 NWLR (Pt. 844) 569
18 Article Section 31 and 32, ACA, 2004
19 Law of the place of arbitration
20 Article 11(2): “The parties are free to agree on a procedure of appointing the arbitrator or arbitrators, subject to the provisions of paragraphs 4 and 5 of this article”
21 Article 6: “The functions referred to in articles 11(3),11(4),!3(3),14,16(3) and 34(2) shall be performed by … [Each State enacting this model law specifies the court, courts or, where referred to therein, other authority competent to perform these functions]”
22 Model Law, 2006.
23 Holtzmann and Neuhaus, “A Guide to the UNCITRAL Model Law on International Commercial Arbitration: Legislative History and Commentary, p. 583.
24 Total Nigeria Plc. V. Omoniyi Ajayi (2004) 3 NWLR (Pt. 860) 270
25 Article 7(1), Model Law; s. 1, ACA, 2004
26 Article 13, Model Law; s. 26, ACA, 2004
27 Article 24(2)(3), Model Law; s. 20(2)(3), ACA, 2004.