The Rules of Procedure of the Arbitration Court attached to the Hungarian Chamber of Commerce and Industry have been amended as of 31 December 2022 ("2022 Rules of Arbitration"). The amendment was adopted by the Presidency of the Arbitration Court attached to the Hungarian Chamber of Commerce and Industry ("Hungarian Arbitration Court") on the basis of the recommendations of the working group chaired by Professor István Varga.
Among the amended provisions, there are several that directly or indirectly affect the issue of arbitrator liability, so in this paper will specifically deal with the provisions of the 2022 Rules of Arbitration that may affect the arbitrator's liability.[1]
Paragraph 22(1) of the Rules of Procedure has been amended and a new paragraph (3) has been added: "§ 22 [Adoption] (1) The arbitrator shall accept the nomination by signing and submitting to the Court of Arbitration a declaration accepting the nomination or appointment as arbitrator, as the case may be, in the Annex to these Rules, no later than 30 days from the date of the notification. The arbitrator shall ensure the accuracy of the terms of the acceptance throughout the proceedings and shall disclose to the Arbitration Council, the Parties and the Arbitral Tribunal any changes thereto that affect the proceedings. (2) The mandate of the arbitrator shall be established by the acceptance of the nomination or appointment. (3) By accepting the appointment of an arbitrator, the arbitrator undertakes to perform his/her duties as arbitrator in accordance with the provisions of the Rules of Procedure. (empahis added)"
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According to the internal working paper prepared for the Board of the Hungarian Arbitration Court, the rationale for these amendments can be summarised as the time limit for the submission of the acceptance statement to the Court of Arbitration in paragraph (1) and the new paragraph (3) are intended to ensure the efficiency and further expediting of the formation of the Board and the conduct of the proceedings.
While the author agrees with this reasoning, two important issues need to be mentioned with regard to the arbitrator's responsibility. If one accepts the general rule that the arbitration agreement is concluded by the signing of the arbitration statement - and, accordingly, by the arbitrator submitting it to the parties or to the arbitral institution - the obligation to deliver the acceptance statement to the institution within a certain time limit can be considered as the first actual contractual obligation of the arbitrator. In the author's opinion, this is part of the contractual and not of the pre-contractual relationship (to which culpa in contrahendo could apply), since the arbitral tribunal does not make any substantive statement with legal effect in relation to the arbitral relationship after the receipt of the statement of acceptance. It should be noted that not all arbitral institutions have such a rule. Among the major international arbitration institutions, the ICC is an example, where the selection process for the arbitrator is based on the fact that the arbitrator nominated by the parties, either individually or jointly, must be expressly confirmed by the Secretary General of the ICC in order to be appointed. The ICC Rules of Arbitration 2021 (as before) contain the following provision in this regard in Article 13(2):[2] "The Secretary General may confirm as co-arbitrators, sole arbitrators and presidents of arbitral tribunals persons nominated by the parties or pursuant to their particular agreements, provided that the statement they have submitted contains no qualification regarding impartiality or independence or that a qualified statement regarding impartiality or independence has not given rise to objections. If the Secretary General considers that a co-arbitrator, sole arbitrator or president of an arbitral tribunal should not be confirmed, the matter shall be submitted to the Court.[3]"
Under this Article, the ICC Secretary-General shall confirm the arbitrator in office if the statement of acceptance submitted by the arbitrator does not contain a qualification as to independence or lack of impartiality or a qualification which has not given rise to an objection. The Secretary General shall report the confirmation to the ICC Court at a subsequent session of the ICC Court. In the event that the Secretary General considers that the confirmation of an arbitrator, a sole arbitrator or the chairperson of a panel should not be confirmed, the matter shall be referred to the arbitral tribunal. All this is relevant to our topic because, in light of the above, the ICC provisions show that the arbitrator's statement of acceptance cannot in itself create an arbitration agreement, as constitution of the arbitral tribunal is required. It also follows that, until this is done, there is no contract, but at most
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a pre-contractual relationship in an ICC arbitration, which may have an impact on the arbitrator's liability at this stage of the legal relationship.
Our second comment relates to the new paragraph (3) of Rule 22 of the Rules of Procedure of 2022 The fact that by accepting the mandate of the arbitrator the arbitrator undertakes to perform his/her duties as arbitrator in compliance with the provisions of the Rules of Procedure of 2022 is a declaration that the Rules of Procedure of 2022, with all their provisions, including the rule on limitation of liability, are an unequivocal part of the arbitration agreement. Analysing the relevant rules of several arbitral institutions (e.g. ICC, AAA), Professor Emilia Onyema stresses the same in her monography.[4]
Paragraphs 43 and 44 have been amended in the context of the judgment. An important turn has been added to section 43(2) of the Rules of Procedure of 2022: "Article 43 (2) The award shall be in writing and signed by the members of the arbitration panel. In the case of proceedings of more than one arbitrator, the signatures of the majority of the members shall be sufficient, provided that the reasons for the lack of signature shall be indicated and certified by the Arbitral Tribunal on the award. (emphasis added)".
According to the reasoning in the internal working paper prepared for the Board of the Hungarian Court of Arbitration, the authority and integrity of the arbitral tribunal is protected if the reason for which an arbitrator did not sign the award is documented in an institutionalized way - declared by the arbitral tribunal. It also follows that the documentation of the lack of signature does not depend on the arbitrator refusing to sign and/or participating in the decision or being prevented from doing so.
The following paragraph (3) is added to Article 44 of. Rules of Arbitration: "(3) The arbitrator who signs the award may add a written dissenting opinion to the award, which shall be placed in a sealed envelope with the case file. The President of the Arbitral Tribunal may, in justified cases, allow access to the separate opinion. The separate opinion shall not contain information concerning the internal deliberations of the arbitrators."
This provision also aims to preserve the authority and integrity of the arbitral tribunal and to prevent, as the working paper puts it, the occurrence of unacceptable arbitral conduct that has occurred in practice and has led to the disclosure of the secret of deliberations.
The background to this amendment is with the purpose of being familiar with the practice of the MKIK (Hungarian Chamber of Commerce and Industry) in this regard and was made available in a letter by János Burai-Kovács, President of the Arbitration Court of the Hungarian Chamber of Commerce and Industry who noted that the dissenting opinion was placed in writing in a closed form in case file. Moreover, János BuraiKovács mentioned that during annulment proceedings the judges accessed the dissenting opinion and made it available to the parties. János Burai-Kovács also stresses that the dissenting opinion is an independent, dissenting professional opinion which the arbitrators have the right to communicate.[5]
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In connection with the above, we would also like to make clear that arbitral awards have also been annulled by Hungarian courts for reasons related to the closure of deliberations. In this respect, we refer to decision No. BH 2017.4.126. published in the Court Decisions 2017, issue IV. This decision stated that if, according to the Rules of Procedure of 2011 of the arbitral tribunal, the panel renders its judgment in closed session, the requirement of "closed session" means that the members of the panel must render the judgment in such a way that they can discuss the legal issues raised in the case in a meeting held in camera, at the same time, in direct argument with each other. Violation of this provision of the Rules of Procedure of 2011 is a ground for annulment of the arbitral award under Article 55(1)(e) of the fomer Arbitration Act of 1994.
All this naturally gives good reasons to the amendment of the new Rules of Procedure as described above As regards the liability of the arbitrator, the question arises whether, if the arbitrator intentionally violates the rules of closed deliberation, i.e., for example, by providing information on the dissenting opinion, he/she can be held liable for the damage caused, since the exception to the limitation of liability in Article § 50 the Rules of Procedure of 2022 (intent or gross negligence) may apply. In the author's view, it is also theoretically possible that a breach of the deliberative privilege may cause damage not only to the parties to the arbitration but also to third parties, and in that case, too, Article 50 of the Rules of 2022. would apply, as explained in detail here.
In Annex 2 (Schedule of Fees) to the Rules of Procedure, a paragraph (4) has been added to Article 53 as follows: "Article 53.4) The Court of Arbitration shall be entitled to reduce the fees of the arbitral tribunal if the arbitral tribunal fails to deliver the award to the Court of Arbitration within 45 days as provided for in Article 43.3 and has not requested an extension of this time limit. The difference in the fees in such a case shall be placed in the reserve fund"
As it is known, one of the most elementary obligations of an arbitrator is to render a judgment, however, the author's position is that the arbitrator's delay may cause harm to the parties not only by rendering the judgment, but also by other procedural acts in the proceedings.
A similar rule to the new paragraph (4) of Article 53 can also be found in the rules of arbitration of other arbitral institutions. On 17 December 2015, the decision of the Bureau of the Court of Arbitration (Bureau), which was promulgated by the Court of Arbitration in plenary session also held on the same day, deals with the legal consequences of draft judgments sent to the Court of Arbitration by arbitrators who were unlawfully late.
Under the ICC Rules of Arbitration, draft judgments are to be sent by the arbitrators to the ICC Court, where they are reviewed under the scrutiny procedure before being finalised.
If the ICC arbitral award is delivered by the arbitrators beyond the period provided under Article 31 of the ICC Rules 2021, the ICC Court may, unless it finds that the delay is justified by factors beyond the control of the arbitrators or exceptional circumstances exist, reduce the arbitrators' fees under paras. 152- 155 of the ICC Note to Parties and the
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Arbitral Tribunal on the Conduct of the Arbitration under the ICC Rules of Arbitration (2021) by certain percentages going up to 20% or more depending on the extent of delay[6]:
Emanuela Truli points out that, according to her own interpretation, the 1987 IBA Rules of Ethics propose an alternative remedy for the loss of the arbitrator's misconduct - the loss of entitlement to remuneration.[7] In Truli's view, however, this is an insufficient remedy. Although the aggrieved parties do not have to pay the arbitrator's fees, they must bear the other costs incurred in connection with the arbitration, as well as the consequences of delay. This remedy also provides little incentive for the arbitrator to avoid misconduct, as a party who has benefited from the arbitrator's misconduct may be willing to compensate the arbitrator or pay his fees in other ways. Thus, the arbitrator may even effectively waive the arbitrator's remuneration in the main case as described above in order to possibly obtain future arbitration assignments from the party that benefited from the arbitrator's misconduct.[8]
Although this arbitral conduct is essentially based on a presumption, it can certainly be agreed that setting aside the award of an arbitrator alone cannot compensate for the damages caused by the arbitration. We would like to reiterate that, according to the new provision of the Hungarian Court Rules of Arbitration analysed here, the reduction of fees resulting from the delayed delivery of the award will not be returned to the parties to the proceedings, but will be paid into the Court of Arbitration's reserve fund, which is intended to cover the arbitrator's fees of a new panel in the event of a new arbitration following a possible annulment proceeding.
A Magyar Kereskedelmi és Iparkamara Mellett Szervezett Állandó Választottbíróság Eljárási Szabályzata 2022. 12. 31. napi hatállyal módosult. A módosított Eljárási Szabályzatnak több olyan pontja van, amely közvetlenül vagy áttételesen érinti a választottbíró felelősségét. A jelen tanulmány röviden ezeket a szabályokat mutatja be. Ekként említésre kerül az, hogy a választottbírói elfogadó nyilatkozat megtétele immáron határidőhöz
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kötött, hogyan kell eljárni abban az esetben, ha valamelyik választottbíró az ítéletet nem írja alá, miként lehet hozzáférést biztosítani a választottbírósági különvéleményekhez. Bemutatásra kerül az is, hogy új lehetőségként a választottbírói ítélet írásba foglalásával késedelembe eső választottbírói tanács tiszteletdíjának csökkentésére sor kerülhet. Az új eljárási szabályoknak természetesen számottevő gyakorlata jelenleg nincsen, csak következtetni lehet arra, hogy a módosított szabályok a gyakorlatban miképpen kerülnek alkalmazásra. ■
NOTES
[1] For a full description of the amendment to the Rules of Procedure, see Schmidt Richard: More Than a Facelift? New Hungarian Arbitration Rules Take Off in 2023. Available at https://arbitrationblog.kluwerarbitration.com/2023/01/05/more-than-a-facelift-new-hungarian-arbitration-rules-take-off-in-2023/ (last accessed on 25. 01. 2023.).
[2] For a presentation of the ICC Rules of Procedure 2021 in Hungarian, see Boóc Ádám: Észrevételek az ICC 2021. évi Választottbírósági Eljárási Szabályzatához (ICC Arbitration Rules 2021). In: Udvary Sándor (szerk): 70 Studia in Honorem Imre Szabó. Károli Gáspár Református Egyetem Állam- és Jogtudományi Kar. Budapest, 2021, 56. p.; Korom Veronika: Az ICC Nemzetközi Választottbíróság 2021-es Választottbírósági Szabályzata. Gazdaság és Jog 2021/3. 8-10. pp.
[3] For the text of the ICC Rules of Procedure 2021. see: https://iccwbo.org/dispute-resolution-services/arbitration/rules-of-arbitration/ (last accessed on 25. 01. 2023.).
[4] See Onyema, Emilia: International Commercial Arbitration and the Arbitrator's Contract. Routledge. Abingdon, 2010. 104-117. pp.
[5] See Burai-Kovács János: A megújult Kereskedelmi Választottbíróság első három évének gyakorlati tapasztalatairól. Ajánlások. In: Tájékoztató Füzetek. (szerk.: Szakál R.). Budapest, 2022. pp. 132-133.
[6] Available at https://iccwbo.org/content/uploads/sites/3/2020/12/icc-note-to-parties-and-arbitral-tribunals-on-the-conduct-of-arbitration-english-2021.pdf (last accessed on 25.01.2023.)
[7] For the text of the IBA Rules of Ethics for International Arbitrators. https://www.acerislaw.com/wp-content/uploads/2021/03/iba_publications_ethics_arbitrators_1987.pdf (last accessed on 25.01.2023.)
[8] See in this regard Truli, Emmanuela: Liability v. Quasi-Judicial Immunity of the Arbitrator. The Case Against Absolute Arbitral Immunity. The American Review of International Arbitration 2006. 19-20. pp.
Lábjegyzetek:
[1] The author is PhD, full professor, Head of the Institute of Private Law Studies, Vice-Dean, Karoli Caspar University of the Reformed Church in Hungary.
Visszaugrás
