This blog was originally published on the Practical Law Arbitration blog on 18 May 2021. Practical Law is part of Thomson Reuters
Several recent court cases, in New York and in England and Wales, have highlighted the problem. In those cases, the arbitral tribunal realised after the award was final that it had made a mistake that ought to be remedied. However, the courts have limited (or no) ability to remedy an arbitrator’s substantive mistake under the New York Convention, the Federal Arbitration Act and other foreign domestic law. Therefore, the tribunals tried to fix the award themselves by issuing a revised or amended award.
An ancient doctrine from the 13th century, functus officio, gets in the way. This doctrine, which formerly applied to judges and arbitrators alike, holds that once a decider is done, they are done; their office is dead and defunct. The reasons for the rule are shrouded in the mist of time, but seem to have been designed to prevent bribes and political pressure to change a decision. The Committee report addresses the history in detail.
Judges on both sides of the Atlantic have long benefitted from court rules that substitute for the common law doctrine of functus officio and define when a party may ask a judge to reconsider a decision. Those rules, while varying in precise form, generally permit reconsideration when the original decision clearly erred by ignoring a controlling legal principle or decisive evidence.
When an arbitration is governed by an arbitral institution’s rules, such as AAA/ICDR, CPR, JAMS, LCIA, the institution’s rules (surveyed in an appendix to the report) replace the common law rule on error correction. However, most of those institutional rules are narrower than the court rules in what they will remedy. They require the error (often called a “slip” in non-US literature) to fall into enumerated correction categories, that is, clerical, typographical, computational. Sometimes they allow remedies when the mistake is “of a similar nature”. Ad hoc arbitrations not governed by institutional rules, or perhaps by the UNCITRAL Rules, do not even get the benefit of the enumerated categories as functus still applies in full force. The courts in the recent cases held that the rules applicable didn’t empower the tribunal to fix its mistake based on an error of law or fact.
The Committee concluded that something needed to be done. To paraphrase a 12th century English king, would no one rid us of this turbulent doctrine? The correct result in the case is more important than a hoary doctrine, but the Committee is not empowered to change the common law or institutional rules. The Committee also recognised that any change in this area might be subject to abuse. In cases where there is not even an arguable error, a motion would cost money to decide and delay the effectiveness of the award.
The Committee’s report proposes that as a first step, institutional arbitral providers should amend their rules to allow parties to replace the current slip rule with a new one. It also proposes that the question of whether the traditional or new slip rule is used be highlighted early in the process. The proposed rule removes the enumerated categories mentioned above. The scope of the proposed rule is “to correct any mistake affecting the outcome in the underlying award that the party claims arises from oversight, omission or misapprehension of a matter of fact or law presented by one or more of the parties”.
To discourage abuse, the proposed rule takes several precautions. If a motion is made under the rule, the other side need not respond until the tribunal decides it needs a response. The movant must bear all filing, arbitrators’ fees, its own counsel fees (no matter what), and the other side’s counsel fees unless the tribunal decides to grant rectification (the term the new rule uses for correction of a slip).
We will see how many institutions adopt the proposed rule, and once adopted, how parties may opt into the new rule.
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