Module 2 Arbitration under FCC A&A Rules

ARBITRATOR TRAINING COURSE

Module 2 - Arbitration under the FCC Arbitration and Appeal Rules

In the first module in this series I said it was important that arbitrators should understand what gives legitimacy to their work, what is the source of their powers, and in general terms what is the extent and limitation of those powers. As I explained the source of your powers is the agreement between the parties - the sale and purchase contract. Every FCC contract expressly incorporates the Contract Rules of the Federation and contains an arbitration clause. The Arbitration and Appeal Rules thus form part of the contract between the parties. The parties are bound by the rules they have agreed upon. In this lecture I am going to comment on some of the more important of the rules, which to give them their proper title are called the Arbitration and Appeal Rules, but which for short I shall refer to as the "Arbitration Rules". Please ensure to have a printed copy of the Arbitration and Appeal Rules available under “Resource Material”.

Rule 1 – General rules

1.1-1.2 [ ]Repeats the substance of the arbitration clause in the contract forms, providing that any dispute arising out of an FCC contract shall be referred to FCC arbitration in accordance with the FCC Arbitration Rules. This rule provides that there is a deemed agreement between the parties and the Federation and this is the basis for the liability of the parties to pay the Federation's costs and expenses in connection with the arbitration 1.4. [ ] As mentioned in the first Module this rule expressly provides that the 1996 Arbitration Act shall apply to every arbitration and appeal held under the Rules except as modified by or inconsistent with the Arbitration Rules..

Part 2 - Procedure for Claiming Arbitration and Time Limits

2.1 This Rule sets out the reference to the time limits stated in the relevant contract Rules (for cocoa beans or cocoa products) for the claimant to notify the other party that he is claiming arbitration. 2.2 This Rule sets out the procedure for applying to the FCC for arbitration Failure to comply with the time limits under Rule 2.2 means that under Rule 2.3 claims are "waived and absolutely barred unless the Arbitrators shall, in their absolute discretion, otherwise determine. The word "discretion" means that it is left to the individual choice and judgment of the arbitrators whether or not to admit the claim. Discretion should not be exercised arbitrarily. Certain principles should govern the choice which you have to make. But you should not apply any hard and fast rules.

fixed rule

If you do apply a this is not a proper exercise of discretion. You are not permitting yourself any element of choice. It is your duty to consider all the surrounding circumstances and to make a decision, which certainly should be based on some general principles but which should not be fettered by fixed rules. Some of the matters which you ought to take into account before deciding whether or not to exercise your discretion would be

1. The period of the delay. 2. The claimants' familiarity with FCC arbitrations. 3. Whatever explanation for the delay is proffered. 4. Any prejudice which the other party may have suffered as a consequence of the delay. 5. Generally any matter which either party asks you to take into consideration.

You may remember that in the first Module, I drew your attention to section 12 of the 1996 Act. This section gives the Court the power to extend time for commencing arbitration proceedings. Thus, a party who has failed to comply with the relevant time limit can ask the arbitrators to admit the claim, and if they refuse can apply on appeal to the Board of Appeal. If the Board also refuses he has one final chance - he can make an application to the Court under section 12. If the Court makes the required order extending time, arbitrators must then allow the claimant to proceed with the arbitration, despite the fact that under the Arbitration and Appeal Rules the claim is "deemed to be waived and absolutely barred".

Rules 2.4 to 2.8 – Constitution of Tribunal Rules 2.6 and 2.9

Only those who have been appointed by the Council to the Panel of Arbitrators may be appointed as arbitrators. The arbitrators are appointed to a Tribunal by the Federation and the tribunal appoints its Chairman.

Note those persons who are not eligible for appointment as an arbitrator in a particular dispute. These rules are designed to ensure "fair play" and to avoid any appearance of bias which we discussed in the first module.

Rule 2.4 d)Note the sequence of events for the valid appointment of arbitrators - the arbitrators should first be appointed, then notice of the appointment should be given to the parties. The parties then have one right of challenge to one of the arbitrators. The Federation will seek to make appointments on the basis that there is a balance of experience and opportunity to gain experience via the composition of the Tribunals. Rules 2.11-2.13 – Arbitration Procedure – Time limits for submitting evidence Documentary evidence and submissions to be submitted to the Federation within prescribed time limits in the Arbitration and Appeal Rules and promptly sent by the Federation to the arbitrators and to the other party.

Rule 2.11 Each party shall submit to the Federation its in five copies in a clear and concise form in accordance with the following standard timetable. The standard timetable below may be varied by the Tribunal in accordance with its general duty under Rule 1.7. Rule 2.11.1 For Quality and/or Condition Arbitrations (i) The Claimant’s statement of case shall be submitted at the same time as the Claimant’s application for FCC Arbitration under Rule 2.2.(ii) The Respondent’s statement of defence shall be submitted no later than 21 days from receipt by the Respondent of the Claimant’s statement of case.

written submissions

The Secretary shall then forward each party’s submissions to the Tribunal and to the other party.

On completion of the exchange of the parties’ submissions and documentary evidence, including the exchange of any further statements and documentary evidence permitted by the Tribunal, pursuant to Rule 2.11 above, and on completion of any hearings which may be ordered by the Tribunal pursuant to Rule 2.14 below, the Tribunal will proceed to determine the issues referred to it and make its Award.

The Secretary will advise all parties accordingly.

Rule 2.11.2 For other than Quality and/or Condition Arbitrations (i) The Claimant’s statement of case shall be submitted no later than 21 days from the date of the Claimant’s application for FCC Arbitration under Rule 2.2. (ii) The Respondent’s statement of defence (and counterclaim submissions if any) shall be submitted no later than 21 days from receipt by the Respondent of the Claimant’s statement of case. (iii) The Claimant’s reply to the Respondent’s statement of defence ( ) shall be submitted no later than 21 days from receipt by the Claimant of the Respondent’s defence submissions (and counterclaim submissions if any).

Rule 2.12On completion of the exchange of the parties’ submissions and documentary evidence, including the exchange of any further statements and documentary evidence permitted by the Tribunal pursuant to Rule 2.11 above, and on completion of any hearings which may be ordered by the Tribunal pursuant to Rule 2.14 below, the Tribunal will proceed to determine the issues referred to it and make its Award, and the Secretary will advise all parties accordingly. Rule 2.13The Tribunal shall have the power to make an award dismissing any claim or counterclaim on the grounds of inordinate and inexcusable delay.

Rules 2.14 - 2.15 HearingsNote that FCC Arbitrations may proceed and be determined and awards be made without a hearing being required. However, a party can make an application for a hearing or the Tribunal, on its own initiative, may fix a hearing in order to hear oral evidence and/or oral submissions from the parties. At the hearing either party is entitled to make further oral submissions. As I mentioned in the first modules, the Arbitration Rules, and in particular Rules 2.11 to 2.12 are guidelines for arbitrators. Arbitrators may not do anything which is contrary to an express rule but within the guidelines laid down by the Rules arbitrators are masters of their own procedure. The most important rule for arbitrators to be aware of is Rule 1.7 which refers to the arbitrators’ duty to act fairly and impartially and adopt the procedures suitable to the circumstances of the case.

Rule 2.16 Consolidated arbitrations Rules 2.17 -2.19 - String Arbitrations for Quality and/or Condition

This rules provides for two or more arbitrations between the same parties to be consolidated. This is to keep costs down – avoid unnecessary expense (Rule 1.7)

The procedure for string arbitrations is clearly set out in these Rules. The aspect that needs further consideration is whether quality include the condition of the goods.

Rules 3.1 -3.16 Appeal Procedure Either party has the right to appeal against an arbitration award issued by the Federation provided the appellant shall comply with the conditions set out in Rule 3.1, otherwise the right of appeal is lost. The Secretary, at his discretion, requests 3 arbitrators from the FCC Arbitration & Appeal Panel to constitute the Board of Appeal to determine the appeal – Rule 3.2) The Secretary of the Federation has no power to extend time limits to appeal. Note that there is no discretion to be exercised by the Arbitrators – an appeal out of time is not permitted.

Rules 3.3 Replacement Provision is made as to what should happen in the event of illness, death, incapacity, refusal or inability to act. Rule 3.5 – Eligibility of Board MembersNote the circumstances which disqualify a member of the FCC Arbitration & Appeal Panel from being appointed to the Board of Appeal. Rule 3.8 – 3.10 - Time limits for submitting evidenceNote the detailed provisions for the exchange of submissions: statement of case, statement of defence and statement of reply.Rule 3.14 – Postponement of Hearings Note the power which the Board of Appeal has, as a condition of granting a request by the appellant for a postponement by more than 14 days of the date fixed for the haring of the appeal, to direct that the whole or any part of the sum awarded by the arbitrators shall be deposited in a bank. If this payment is not made the appeal is deemed to be withdrawn.

Rule 3.15 Powers of the Board of Appeal Boards of Appeal are expressly given the freedom to regulate their meetings and the proceedings as the majority of members shall decide. Note that an appeal involves a new proceedings. The parties may submit completely new evidence. They may argue completely new points. They are in no way fettered by what has happened at the original arbitration proceedings. The arbitrators' award may, by a majority, be confirmed, varied, amended or set aside.Rule 3.16 - Appeals on String Arbitrations I do not propose to make any comment about beyond asking you to note what the detailed provisions are.

string appeals

Rules 4.1 -4.15 - Jurisdiction, Arbitrators and Boards of AppealArbitrators may rule on their substantive jurisdiction, that is whether there is a valid arbitration agreement, whether the tribunal is properly constituted and what matters have been submitted to arbitration in accordance with an arbitration clause in a contract or by other written agreement. Arbitrators must deal with an objection ( ) by one of the parties, at the outset of proceedings, that the tribunal lacks jurisdiction. Any objection during the course of the proceedings that the tribunal is exceeding its substantive jurisdiction, must be raised as soon as possible. In either case the Tribunal has discretion to admit an objection later if it considers the delay justified. (s. 31(3) M)

Rules 4.1 -4.15 - Jurisdiction, Arbitrators and Boards of Appeal (Cont'd)These rules provide that arbitrators may decide that the dispute is not one arising out of a contract incorporating the Arbitration Rules, and that if they do so decide they shall issue an award confirming that they have no jurisdiction to arbitrate on the dispute. There is a right of appeal to a Board of Appeal from this decision. The Rules do not expressly say so but arbitrators should not reach a decision about their jurisdiction without inviting both parties to make submissions, and allowing an oral hearing if either party asks for this. The most usual situation where the jurisdiction of the arbitrators becomes an issue is when one of the parties maintains that no contract was ever concluded. Although under the Arbitration Rules arbitrators and appeal boards are given the power to determine their own jurisdiction with finality this power is ineffective unless the parties, at the time when the issue is raised, confer jurisdiction on the arbitrators to determine the issue.

Rules 4.1 -4.15 - Jurisdiction, Arbitrators and Boards of Appeal (Cont'd)It may not be obvious at first sight why this should be the case. However, English law is very clear on this point. The logic of the argument is in fact inescapable. Legitimacy is conferred on the arbitration and on the arbitrators by the agreement of the parties.If the dispute between the parties is whether or not any contract incorporating the Arbitration Rules was made, where can the power of the arbitrators to determine this fundamental issue come from? They only have the power if it is given to them by a contract between the parties. A doubt about the existence of that contract raises a similar doubt about the powers of the arbitrators. If the arbitrators should decide that there was no contract, it follows that they have decided that they had no power to determine this issue. Thus, unless the parties expressly confer jurisdiction on the arbitrators at the time when this issue is raised, the question of the arbitrators' own jurisdiction is a matter that can only finally be resolved by the Court.

Rules 4.1 -4.15 - Jurisdiction, Arbitrators and Boards of Appeal (Cont'd)In summary, the Tribunal shall award as to whether it has jurisdiction. The Tribunal’s decision is final and binding unless either party appeals to the Board of Appeal. The Board of Appeal’s award on jurisdiction can be challenged before the court under section . Rule 5 Awards of Arbitration Rule 5.16 – DefaultersThis is the Rule which gives the Council the power to circulate to all members and to post on the Federation’s website a notice to the effect that a party has failed to comply with a final award. Usually the failure will be failure by one of the parties to pay the other as stated in the award.

67 of the Act

Additional Arbitration Rules you should also be aware of:

Rule 1.12 - Notices Rule 1.13 - Discretion to Extend Time Limits Note that this is a discretion which is given to the Council to extend time limits (both in relation to arbitrations and in relation to appeals), but only in the situation where a state of war, war-like operation, strike, lock-out, riot or civil commotion has prevented a party from exercising his rights