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Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
Arbitration – Applicable procedure in arbitration – Competence of arbitrators – Indivisibility of award – Pending litigation – Taking the oath – Validity of arbitration proceedings
The Petitioner and the Respondent had a dispute over property in Jordan and were litigating their dispute in court. While the litigation was pending, the parties executed an agreement to submit the dispute to arbitration and appointed a sole arbitrator. The arbitrator issued an award on 15 November 1993 directing the Petitioner (1) to register the subject property in the name of the Respondent’s representative and (2) to pay damages to the Respondent.
The Respondent petitioned the Court of First Instance to ratify the arbitral award. The Petitioner resisted ratification of the award, and the Court nullified the first element of the award while ratifying the second element. The Petitioner appealed the decision ratifying the second element, and the Court of Appeal upheld the judgment. The Petitioner then lodged a petition to cassation with the Court of Cassation. The Petitioner argued:
The appealed judgment was overturned.
An existing lawsuit between litigants considered before courts does not legally prevent those litigants from agreeing to enter into arbitration to resolve the same disputed subject matter of that lawsuit as long as the court has not passed a judgment preventing such a referral.
Petitions to recuse an arbitrator who has become incompetent must be made in compliance with Article 207.4 of the Civil Procedure Code. Failure by a party to comply with Article 207.4 is regarded as a waiver of the party’s right to rely on the alleged incompetence as grounds for nullifying an arbitral award.
Arbitrators are not bound to follow court procedures. They are bound to observe the procedures applicable to arbitration, assure the rights of defence and of equal treatment and follow any procedures agreed to by the parties.
Whether to nullify an entire arbitral award because part of the award is beyond the scope of the arbitration agreement is a question of fact that should be considered by the trial court.
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The petition to cassation was based on two grounds.
In the first item of the first ground, the Petitioner argued that the judgment of the Court of First Instance approved the ratification of the arbitration award despite its invalidity for being rendered pursuant to an invalid arbitration agreement, as the parties agreed to submit their dispute to arbitration while the dispute was already submitted before the courts.
This argument was rejected. An existing lawsuit between litigants considered before the courts does not legally prevent those litigants from agreeing to enter into arbitration to resolve the same disputed subject matter of that lawsuit, as long as the court has not passed any judgment preventing the referral of the same dispute before another entity authorized to adjudicate upon it. Hence, the litigants’ agreement beyond the court’s intervention to refer the dispute to arbitration while the same dispute was being considered before a court of law was legally valid in principle.
In the second item of the first ground, the Petitioner argued that the challenged judgment involved a contradiction with the law, as it ignored the Petitioner’s argument regarding the invalidity of the arbitration award. This argument was based on the fact that the arbitrator was incompetent to adjudicate the dispute due to bias, because the Petitioner refused to pay certain fees demanded by the arbitrator. To deny this argument, the judgment relied on the non-compliance of the Petitioner with the legal procedures stipulated in Article 207.4 of the Civil Procedure Code relating to recusal procedures.
This argument was also rejected. The incompetence of the arbitrator to adjudicate the dispute is among the grounds enumerated in Article 216 of the Civil Procedure Code allowing the involved litigants to request the invalidity of the arbitration award. However, Article 207.4 of the Code stipulates that the arbitrator may not be recused except for reasons occurring or appearing after the appointment of the arbitrator and when recusal, in this case, is requested for the same reasons for which a judge is recused or considered incompetent for delivering a judgment. The recusal request shall be raised before the court originally having jurisdiction to examine the lawsuit within five days from the date of notifying the litigant of the appointment of the arbitrator or the date on which the recusal reason emerged or became known following notification of the appointment of the arbitrator. This shows that the lawmaker has fixed a limited period of time within which the litigant can submit a request for the arbitrator’s recusal or to consider whether the arbitrator is incompetent to examine the litigation. Hence, the condition of adhering to the incompetence of the arbitrator to adjudicate a dispute as a reason for requesting invalidation of that arbitrator’s award is that the party making this claim must adhere to the legal process for the recusal of the arbitrator within the stipulated period of time. As the challenged judgment dismissed the Petitioner’s plea in this regard in accordance with the above, the argument made against this judgment shall be inadmissible.
In the first and second items of the second ground, the Petitioner argued that the challenged judgment provided an insufficient reply to the Petitioner’s argument that the oath taken by the Respondent’s representative in the arbitration was invalid because it was administered in the absence of the Petitioner and based on an amended wording.
According to Article 212 of the Civil Procedure Code and what is established in the adjudication of this Court, the arbitrator is not initially required to follow the procedures applicable to lawsuits filed before courts of law. However, arbitrators are required to observe the procedures stipulated under the arbitration chapter of the Civil Procedure Code as well as any other procedures agreed upon between the [Page22:] parties. Additionally, the arbitrator shall observe the right to defence (i.e., allowing each party to submit its petitions and pleas to prove its claims and deny the claims of the other party). Arbitrators shall also follow the necessary procedures vis-a-vis the disputing parties, such as notifying them of the date of the session for determining evidentiary procedures. It is also legally established that the trial judge may amend the wording of the oath upon an objection from a litigant or at his own discretion without referring the amended wording to the official administering the oath, as long as the amendment is limited to a clarification of the wording of the oath and the facts about which the oath is to be taken without any alteration of the subject of the oath. The person who is required to comply with the evidentiary procedures, including the oath, must be a party to the dispute. The oath is only required to be taken by the litigants in the action. In cases where a litigant is a juridical person, the oath shall be administered to the litigant’s legal representative. According to Clause 6 of the arbitration document, both parties have agreed that “an arbitrator shall determine the procedures to be followed in pleadings, submission of evidence, documents and memorandums, and both parties have agreed to execute whatever the arbitrator requires them to do…”. The challenged judgment established that the Petitioner was aware of the date of the session scheduled for administering the oath. Hence, the arbitrator shall be deemed to have observed the basic principles of litigation with respect to the summons of the disputing parties. It is established from the arbitration file that the award included the Petitioner’s acceptance of administering the oath to [ _______ ] alone, in his capacity as a partner and general manager of the Respondent’s company, after amending the wording of the oath as mentioned in the case papers. Hence, the argument made against the challenged judgment as mentioned above was rejected.
In the third item of the second ground, the Petitioner argued that the trial court’s determination that the first part of the award was invalid, as it was beyond the scope of the arbitration agreement, necessitates the invalidation of the entire award.
The above argument was accepted. It is established that nullification of a part of the award for being beyond the limits defined in the arbitration document inevitably entails the nullity of the remainder of the award, because both parts of the award are indivisibly related. It is also established that whether there is an indivisible connection between the parts of the award is a matter of fact subject to the discretionary determination of the Court of Appeal. The Court of Appeal did not address this argument and must therefore treat it as an essential plea that could have changed the course of litigation. Hence, the challenged judgment shall be deemed to have involved a defective causation in this respect and shall be overturned with no need to investigate other aspects of the petition to cassation.
Accordingly, the challenged judgment was overturned.