Final report of the working party on dissenting opinions and interim and partial awards of the ICC Commission on International Arbitration

The Commission on International Arbitration is one of the ICC's Commissions charged with preparing policy on general and technical issues concerning world trade and investment. Chaired by Professor Ottoarndt Glossner, it is composed of international specialists appointed by ICC National Committees and Councils throughout the world. Several of the Commission's working parties have been concentrating their efforts on the following subject-matters of concern in international commercial arbitration: dissenting opinions and interim and partial awards, the ICC standard arbitration clause, multiparty arbitration, Terms of Reference, and the Rules of the ICC's International Centre for Technical Expertise.

INTRODUCTION

1. The Working Party, established by the Commission at its meeting on 25 October 1985, is composed of Mr J. Martin H. Hunter (England), Chairman, Mr Bernd Lindemeyer (Germany), Rapporteur, Mr Bengt Broms (Finland), Mr John Cochran (USA), Mr Yves Derains (France), Mr Francis P. Donovan (Australia), Mr Paul A. Gélinas (Canada), Mr Svetozar Hanak (Czechoslovakia), Mr D. Den Hertog (Netherlands), Mr Lars A.E. Hjerner (Sweden), Mr Sigvard Jarvin (Sweden), Mr Atef El Khoury (Lebanon), Mr D. S. Kumana (India), Mr Renato Roncaglia (Italy), Mr D. S. Singhania (India), Mr Tadeusz Szurski (Poland), Mr Stephen Bond (ICC HQ, Secretary of the Commission) and Mr Guillermo A. Alvarez (ICC HQ, Assistant Secretary of the Commission).

2. The Working Party submitted three interim reports to the Commission. The First Report (Doc. 4201298 of 9 September 1987), which contained a survey of 'nonfinal' ICC awards prepared by the Secretariat and a discussion of possible definitions, was considered by the Commission at its meeting on 27 October 1987. The Commission requested the Working Party to continue with its work, placing emphasis on practical aspects of the treatment of interim and partial awards under the ICC system of arbitration and, in particular, on practical problems that might arise in the context of scrutiny of awards under Article 21 of the ICC Rides (the 'Rules').The Working Party proceeded accordingly, and its Second and Third Reports were discussed at the meetings of the Commission in April 1988, October 1988 and April 1989 respectively. Various written commentaries were submitted by national committees and individuals during this period, and were taken into account by the Working Party in its deliberations.

3. At its meeting on 19 April 1989, the Commission approved the Working Party's Third Report subject to certain amendments. The Working Party was authorised to complete its work by incorporating these amendments into its Final Report. This Final Report incorporates the amendments as agreed by the Commission. The Working Party's task, begun in 1985, is thus completed.

OBJECTIVES

4. After the discussion of the First Report by the Commission, the Working Party determined that in continuing its work it would concentrate on three specific practical aspects:

Which decisions of arbitrators in ICC cases should be called 'awards'?

What problems, if any, are created either for the parties or for the Court of Arbitration by the increasing tendency of arbitrators in ICC cases to issue interim and partial awards? What steps should be taken to harmonise the present divergent practices of arbitrators in ICC cases in classifying their decisions?

These practical matters are now considered in turn.

Which Decisions of Arbitrators in ICC Cases Should Be Called Awards?

Present Practice of Arbitrators in ICC Cases

5. A survey of 'nonfinal' ICC awards was prepared by the Secretariat for the purposes of the First Report. This analysis revealed widely diverging practices of arbitrators in ICC cases in the way that their decisions are classified. The results of this analysis are contained in Appendix I to the First Report, and are summarised in paragraphs 7, 8 and 9 of the text of that Report. The most important features are that the Terms 'interim' and 'partial' are used virtually interchangeably, without any particular meaning being attributed to either expression, that procedural decisions and rulings have occasionally been categorised as 'awards'; and that, even more rarely, decisions on substantive or prejudicial issues have been classified as 'procedural decisions'.

6. The terminology used by arbitrators in ICC cases is important because of Article 21 of the Rules, which provides that: [Page27:]

'Before signing an award, whether partial or definitive, the arbitrator shall submit it in draft form to the Court...' (emphasis added)

Furthermore, Article 19 of the Rules gives the chairman of a threemember arbitral tribunal alone the authority to make an award when there is no majority, but it is not clear that the chairman has the same authority in respect of other decisions of the arbitral tribunal.

7. In practice, arbitrators in ICC cases appear to be well aware that any decision that they wish to characterise as an award must be submitted to the ICC Court of Arbitration for scrutiny, since an award must be notified to the parties by the Secretariat pursuant to Article 23 of the Rules. The only questions that have very rarely arisen are when an arbitrator wished to characterise a decision as not being an award when the Court of Arbitration considered that it was an award; or, alternatively, when an arbitrator wished the Court of Arbitration to scrutinise a decision that, for whatever reason, the Court of Arbitration did not consider to be an award. Insofar as Article 19 is concerned, it has been rarely resorted to and then only on matters clearly suitable to being classified as awards.

8. Nonetheless, it is desirable that the Court of Arbitration should set out a clear policy as to which types of decisions by arbitrators should be scrutinised under Article 21. Guidelines should be given to assist arbitrators in classifying their decisions in an appropriate manner, and to send those decisions which fall within the proper categories (but not others) to the Secretariat for scrutiny by the Court of Arbitration.

Definitions

9. During the first stage of its work, the Working Party attempted to resolve the question of which decisions of arbitrators should be the subject of scrutiny under Article 21 of the Rules by proposing definitions of the Terms 'award', 'interim award' and 'partial award'. However, after discussion in the Working Party, and at the Commission itself, it became apparent that it is not possible to create definitions which are acceptable to everyone. For example, some say that decisions on jurisdiction questions may be the subject of an award; others say that such questions cannot. In practice such decisions are virtually always characterised as awards and are routinely submitted to the Court for scrutiny. The Secretariat is not aware of any instance in which scrutiny was refused, or where the parties objected to the procedure. Another factor is that the divergent usages of the Terms 'interim', 'partial' and 'interlocutory' in different countries is such that it is impossible to find a terminology acceptable to everyone. One member of the Working Party considers it inappropriate to proceed without a definition of award and wishes a definition to be adopted close to that contained in paragraph 15 of the First Report subject on Interim and Partial Awards. But a large majority of the Working Party (and the Commission itself) concluded, with some regret, that it is not practical to try to solve the 'Article 21 problem' by means of creating definitions.

10. The Working Party accordingly determined that, in order to make a recommendation as to which decisions of arbitrators should be scrutinised under Article 21, it is necessary to approach the question from a different direction. This is to place the different types of decisions of arbitrators into different categories; and then to decide which of those categories of decisions should be scrutinised under Article 21 and which should not. For ICC purposes the term 'award' should be applied (or not), correspondingly, in order to ensure that the Rules are strictly observed.

Terminology used in this Report

11. For the purposes of this Report only, an 'interlocutory decision' is one which, not necessarily in the form of an award, is made prior to the last or sole award; an 'interim award' is a general term used to describe any award made prior to the last award in a case; a 'partial award' is a binding determination, in the form of an award, on one or more (but not all) of the substantive issues. The term 'arbitrator' is used throughout to include arbitral tribunals composed of three arbitrators as well as sole arbitrators. A 'prejudicial' decision is one which must necessarily be decided before a final determination of the claims may be made.

Discussion

12. The first Report of the Working Party (see paragraph 7) categorised interim and partial decisions under the following headings:

(a) Jurisdiction;

(b) Applicable law;

(c) Other pre-judicial questions;

(d) Interim measures of protection;

(e) Procedural orders; and

(f) Decisions in respect of substantive claims.

13. The next stage is to allocate these types of decisions into three broad categories:

Those decisions which should, whenever made, be scrutinised by the Court of Arbitration pursuant to Article 21 and which should therefore be made in the form of an award.

Those which should not be scrutinised pursuant to Article 21, and which should therefore not be made in the form of an award.

Interlocutory decisions which may (or may not) be in the form of an award at the time they are made, but which, if not so made, must ultimately be incorporated into an award to be scrutinised by the Court of Arbitration pursuant to Article 21.

14. In determining which types of decision fall within which of the above three categories, it is useful to discuss two matters briefly. Why should arbitrators or parties wish to call an interlocutory decision an 'award'?; and what is the purpose of Article 21 and scrutiny of awards by the Court of Arbitration?

15. It is hard to envisage any reason why arbitrators occasionally classify purely procedural orders as awards, other than by error or an imperfect understanding of the arbitration process.

The most common reasons for making interlocutory [Page28:] decisions on substantive issues in the form of an award are that:

a definitive determination of some (but not all) of the claims may enable a deserving party to collect some money before the final award deals with all of the remaining issues in dispute; and

a determination of a particular issue (e.g. liability) may either avoid the need for, or at least simplify, the remaining stages of the arbitration.

In the first case it will normally only be the claimant who has an interest in asking for a partial award in respect of some (but not all) of the claims; it is when the second of the reasons mentioned above applies that it is most likely that the parties themselves will jointly request the arbitrator to make an interim award.

16. Another, perhaps more nebulous, reason for making an interim or partial award is where the arbitrator wishes to invoke a sense of finality on a particular issue. This may be in a formal sense, in creating a decision which operates as res judicata between the parties. However, there are other aspects of finality. Arbitrators may wish to 'lock into place' on an irreversible basis a particular decision on a claim or other issue to be determined. This may have the benefit of streamlining and simplifying the later stages of the arbitration, thus saving time and money as well as avoiding the repetition of 'dead' arguments. It also means that the proceedings do not have to go back to the beginning in the event that an arbitrator has to be replaced during a long-running arbitration.

17. There are also circumstances in which the parties, or at least one of them, may wish to achieve 'interim finality'. For instance, where there is a jurisdiction issue one of the parties may wish to have a positive decision from the arbitrator in the form of an award for the purposes of recognition under the New York Convention, thus creating a bar to parallel proceedings in national courts. Equally, because decisions on jurisdiction issues are frequently reviewable by the national courts at the place of arbitration, parties may wish to have a decision on jurisdiction in the form of an interim award so that the appellate procedure will not have to wait until the end of the arbitration. This is the philosophy underlying Article 16 of the UNCITRAL Model Law. (The UNCITRAL working papers on this point are particularly thorough and informative.) In a Model Law country it would not matter whether or not the decision is in the form of an award, because the decision would be appealable in any event. But in many countries the courts would only have jurisdiction to review the decision if it is in the form of a reasoned award.

18. The point is not solely a matter of whether or not any particular decision by an arbitrator can, under the law of every country in the world, be characterised in law as an award; but that in certain instances the arbitrator (or the parties) may wish to have the decision partake of the solemnity and generally accepted consequences of an award.

19. As to the role of the Court of Arbitration under Article 21, scrutiny of an award in draft form is intended to be a 'quality control' device, directed essentially at internal coherence and consistency, in order to aid the arbitrators in issuing awards capable of withstanding efforts to have them set aside or refused enforcement by national courts. ICC awards should be so sound in form and substance as to lead parties to honour them voluntarily because they know that efforts to set them aside would be futile. Thus, an ICC award should literally be 'final', as stated in Article 24 of the Rules, and ICC arbitration should be the first and last process a party has to go through in order to establish his rights.

20. Taking these elements into consideration, the Working Party recommends that the six types of decisions set out in paragraph 12 above should be categorised as follows.

21. Prejudicial questions, including decisions relating to jurisdiction, and decisions on the applicable law, may be treated together for the purposes of this discussion as falling within the category of decisions which, in theory, may be the subject of an award but are not required to be so by legal principles. In general, however, since such decisions are intended to be final, and can normally be challenged before national courts, it seems desirable that they should be reasoned and drawn up in the form of an award. The attention of the Working Party bas been drawn to the present policy of the Court of Arbitration that, regardless of any agreement of the parties, decisions on jurisdiction and the applicable law should be made in the form of an award to be scrutinised pursuant to Article 21 of the Rules, whenever they are made.

22. Whilst there is no evidence that any difficulties have arisen in relation to this practice of the Court, a potential conflict would arise where the parties expressly agreed that an informal and speedy decision should be taken, for example, on the question of the applicable law. Which should prevail-the will of the parties, or the practice of the Court of Arbitration? It could be argued that it is not open to the parties to agree upon a procedure that renders the provision for scrutiny under Article 21 of the Rules virtually meaningless, but it may nevertheless be desirable in due course to make an amendment to the Rules in order to clarify the position.

23. A particular point that arises in relation to negative decisions on jurisdiction relates to the question of costs. The Working Party is of the opinion that '100% negative' decisions on jurisdiction, which have the effect of terminating the arbitration, should be scrutinised by the Court (and that, therefore, such decisions should always be in the form of an award), and that the arbitrator has jurisdiction to make an award of costs against the claimant even where he has ruled that there is no valid arbitration agreement between the parties. This jurisdiction is easily justified where the claimant has signed Terms of Reference which will normally be the case. Where he has not signed the Terms of Reference, jurisdiction to award costs against him may perhaps be implied from the fact that he has submitted a Request for Arbitration to the ICC.

24. Jurisdiction to award costs (or any part of them) against a defendant who has successfully pleaded lack of jurisdiction seems hard to justify, even where the defendant has signed Terms of Reference, and an arbitrator who wishes to take this course might reasonably be expected to give very full reasons for doing so. Where the arbitrator's decision on jurisdiction is not '100% negative'-that is, where some [Page29:] claims remain to be determined-the question of costs should be left over to the final award in the normal way.

25. Interim measures of protection are, by definition, not intended to be final and irreversible. Moreover, such decisions are generally not accompanied by detailed reasons. Scrutiny by the Court of Arbitration cannot therefore make any meaningful contribution. Moreover, as great speed is normally of the essence in a request for an interim measure of protection, scrutiny would sometimes render the remedy ineffective. On the other hand, in some countries an order for an interim measure of protection might only be enforceable if it is made in the form of an award. If it is made in the form of an award, then it must of course be scrutinised under Article 21 of the Rules-otherwise, the validity of the order might be called into question.

26. Accordingly, orders for interim measures of protection fall into the category of decisions which may be made in the form of an award if the arbitrator considers it appropriate; however, the presumption should be that such orders should not be scrutinised under Article 21 of the Rules, and therefore should not normally be made in the form of an award.

27. The Working Party is of the opinion that procedural orders should never be made in the form of an award. Most such orders are not reasoned; are intended to be flexible; and often may be modified in the course of an arbitration in the light of subsequent events. Scrutiny of procedural orders would usually serve no purpose, even if on rare occasions such orders may be brought before national courts for assistance in enforcement (such as orders relating to the production of documents or other evidence).

28. It should be noted that an arbitrator may wish to designate as a 'procedural order' an interlocutory decision which can be dispositive of a case, and can also clearly be the subject of an action before the courts of the place of arbitration. This has apparently happened in Switzerland under the Concordat. Since such a decision can be decisive in an arbitration and can be (and often is) challenged in the local courts, any such decision should be in the form of an award and should be subject to scrutiny under Article 21 of the Rules. In other words, the arbitrator's own classification of an interlocutory decision as a 'procedural order' should not be decisive for the purposes of the operation of the Rules. When such a situation is known to the Secretariat, the attention of the arbitrator should be drawn to the fact that his decision should be incorporated into a reasoned award to be submitted for scrutiny, and not left in the form of a 'procedural order'.

29. Finally, decisions disposing of substantive claims and issues, whether interlocutory or otherwise, should always be made in the form of an award for reasons that need not be elaborated upon.

Increasing Tendency of Arbitrators to Issue Interim and Partial Awards

30. The number of interim and partial awards coming before the Court of Arbitration for scrutiny has been increasing discernibly over the last few years. The reasons for this trend can only be guessed at, but it appears that an important consideration is the increasingly adversarial character of arbitration with a consequently greater emphasis on disputing such matters as jurisdiction, applicable law, etc. In addition, the increasing complexity of international commercial transactions may make it seem more desirable for parties and arbitrators to 'lockin' decisions on such matters as jurisdiction and liability prior to engaging in the costly and time-consuming process of quantification of damages, which may involve engaging the services of experts. Equally, decisions on applicable law may in particular cases avoid the parties having to argue their cases based on several alternative systems of law. It is therefore recognised that in appropriate situations an interim award may contribute towards achieving economy of time and cost.

31. However, where an interim or partial award may be challenged in the local courts, literally years of time may be consumed before the arbitration progresses, since in many, if not most, such cases the arbitrator will decide to suspend the arbitration until a final judgment of the national court is made.

32. Furthermore, whilst scrutiny of an award has the advantages set out earlier in this Report, the arbitrator must normally await approval of the interim or partial award by the Court of Arbitration before proceeding further. It is also likely that the time and effort to produce several interim or partial awards is generally greater than that needed to produce a single final award. The key question, then, is to determine the factors the arbitrator should take into account when considering whether or not to issue one or several interim or partial awards rather than a single final award.

33. One factor is the will of the parties, as reflected by the Terms of Reference or otherwise. Where both wish to have an interim or partial award on an issue susceptible of being incorporated in an award, the Working Party is of the opinion that the arbitrator is bound to render such an award (unless forbidden to do so by the relevant 'ordre public'). Equally, where both parties expressly reject the making of any interim or partial award, the arbitrators are obliged to respect their agreement.

34. Where only one of the parties asks for an interim or partial award, the Working Party is of the opinion that the arbitrator should make such an award only if, on balance, he is concerned that it serves the interests of the effective and efficient conduct of the arbitration. Where the parties are not agreed the Working Party considers that the arbitrator should look primarily to the following factors for guidance:

Article 26 of the ICC Rules, which calls upon the arbitrator to 'make every effort to make sure that the award is enforceable at law'.

Whether the law of the place of arbitration permits a party to challenge an interim or partial award (either generally or dependent upon the subject of the particular award).

Whether the circumstances of the particular case are such that finality and/or enforceability of a decision on a particular point is in the interests of the effective and efficient conduct of the arbitration. [Page30:]

35. In general, the Working Party is of the opinion that in ICC arbitrations the presumption should be in favour of a single final award which decides all of the claims and issues to be determined; and that-except when the parties have indicated a joint wish to the contrary-the arbitrator should examine the justification for issuing an interim or partial award in a critical manner, and should not do so unless there are circumstances which weigh clearly in favour of taking this course. These circumstances should be set out in the interim or partial award itself.

Harmonisation of Practices of Arbitrators

36. It is obviously desirable that arbitrators in ICC cases should have a common understanding of ICC practice with regard to interim and partial awards, se that the question may be handled consistently in both the Terms of Reference and the subsequent conduct of the arbitration. To this end, the Working Party suggests that the substance of the main conclusions and recommendations contained in this Report should be incorporated into the Handbook for Arbitrators which, at the time of submission of this Report, is in the course of preparation by the ICC Secretariat.

Conclusions and Recommendations 1

1. In ICC arbitrations the presumption should be in favour of a single final award in which all of the claims and issues are determined.

2. In considering whether or not to issue an interim or partial award, the arbitrator should seek and be guided by the will of the parties, especially as reflected in the Terms of Reference. Thus, where both parties expressly agree that there should be no interim or partial awards, the arbitrator should not issue any. Where both parties agree that there should be one or more such awards, the arbitrator should also respect that agreement.

3. If there is no agreement between the parties as to whether or not any interim or partial award should be issued, the arbitrator must exercise his discretion, but bearing in mind that the presumption is in favour of a single final award. Potential savings of time and costs for the parties, the effective and efficient conduct of the arbitration and the need to make every effort to ensure that an award is enforceable are the primary factors to be taken into consideration by the arbitrator. The arbitrator should also take into account practical considerations, such as the need for an interlocutory decision to be made in the form of an award to permit challenge in the courts at the place of arbitration. In any interim or partial award the arbitrator should set out the circumstances which in his view justify the making of such an award.

4. In ICC arbitrations, decisions on substantive issues; decisions which dispose of any claim in the arbitration; decisions on jurisdiction (negative or positive); and decisions on the applicable law should, whenever made, be in the form of an award for scrutiny by the Court of Arbitration pursuant to Article 21 of the Rules, in order that the process of scrutiny may perform its function effectively.

5. For the same reasons there is a general presumption that decisions on other prejudicial questions should also be made in the form of an award for scrutiny by the Court of Arbitration pursuant to Article 21 of the Rules.

6. Orders for interim measures of protection may be made in the form of an award at the discretion of the arbitrator, and if so must be scrutinised under Article 21 of the Rules, but there is a general presumption that such orders should not be made in the form of an award.

7. Procedural rulings and directions should not be scrutinised by the Court of Arbitration pursuant to Article 21 of the Rules and, if submitted for scrutiny (whether or not classified by the arbitrator as an award), should be returned to the arbitrator with an explanation.

8. The Secretariat of the Court is available for consultation on questions that may arise as to the classification by arbitrators of their decisions.

9. In determining whether or not the decision of an arbitrator should be scrutinised pursuant to Article 21 of the Rules the Court of Arbitration should give weight to, but not be bound by, the parties' or an arbitrator's classification as to what is or is not an award.

10. Orders in relation to costs, including any proposed allocations of costs between the parties, should be left to the final award. It should be noted that there is a discrepancy between the French and English versions of Article 20.1 of the Rules, which should be rectified in the next version of the Rules.

11. Where an arbitrator decides that he has no jurisdiction, thus terminating the arbitration, his decision (which should be made in the form of an award for scrutiny under Article 21 of the Rules) should contain an order as to costs. Power to make an order against the claimant is based on signature of the Terms of Reference, or implied by the claimant's submission of the Request for Arbitration. The Working Party finds it difficult to envisage circumstances in which an order for costs might be made against the party who has successfully pleaded lack of jurisdiction, but any such order should be justified with full reasons, including a justification by the arbitrator for taking jurisdiction to make such an order.

12. At the next revision of the Rules, consideration should be given to incorporating provisions to clarify precisely which decisions are to be scrutinised by the Court of Arbitration pursuant to Article 21 of the Rules; in any event, the terminology used in Article 21 of the present Rules 'partial or definitive' ('partielle ou définitive') should be revised.

13. At the next revision of the Rules, consideration should be given to incorporating a provision specifically to deal with the question of decisions on jurisdiction issues.

14. At the next revision of the Rules, consideration should be given to amending Article 6(1) of the Rules to ensure the already widespread practice that copies of communications from the arbitrator to the parties should be sent to the Secretariat, so that the Court of Arbitration may be assured that interlocutory decisions which should be made in the form of an award for scrutiny under Article 21 of the Rules are not made in an alternative manner.

15. Arbitrators in ICC cases should be informed of the practice of the Court of Arbitration in connection with interim and partial awards through the proposed Handbook for Arbitrators.

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The conclusions and recommendations of the Working Party have been approved by the ICC Commission on International Arbitration, but do not amend or supersede the ICC Arbitration Rules or bind the International Court of Arbitration