Arbitration: Right to a Fair Hearing

Article V(1)(b) requires that parties be afforded a fair hearing that meets the minimal requirements of fairness. The applicable minimum standards of fairness were described by the United States Court of Appeals for the Seventh Circuit as including “adequate notice, a hearing on the evidence, and an impartial decision by the arbitrator” . Thus the arbitrators have a broad discretion as to how they may conduct proceedings, etc.

It is unusual for a party not to be given notice of the appointment of the arbitrator or of the arbitration proceedings. If a party has actively participated in an arbitration, it is impossible for it to complain later that notice was inadequate. In proceedings where the respondent defaults, on the other hand, proof of notice must be given serious attention at all stages. There can be no notice, for example, where one party has changed address without informing the other party or is located in a part of the where faxes or other means of communication cannot be reliably received. In those cases, the arbitrators and the claimant in the arbitration should do all that is reasonably possible to bring the existence of the arbitration and the appointment of the arbitral tribunal to the attention of the respondent and to have independent evidence of such efforts. If they fail to do so, enforcement of the resulting award may be denied. In one such case, the Swedish Supreme Court denied enforcement, finding that the arbitrators ignored the fact that communications sent to an earlier address of the Swedish party had been returned undelivered.1
Default, however, may be simply the choice of the party. Where actual notice of an arbitration has been received by the respondent but the respondent fails or refuses to participate in the arbitration, courts hold that there is no violation of Due Process under Article V(1)(b). If a party chooses not to take part in the arbitration, this is not a ground for refusing enforcement.

The well-known United States case of Iran Aircraft Industries v. Avco Corp. is an example of where recognition and enforcement were refused because the respondent was unable to present its case. 2 After consulting with the chairman of the tribunal (who was subsequently replaced), the respondent had decided on the chairman’s advice not to present invoices to support an analysis of damages by an expert accounting firm. The respondent relied only on its summaries but indicated that it was prepared to furnish further proof if required. The tribunal eventually refused the damages claim on the basis that there was no supporting evidence. The United States Court of Appeals for the Second Circuit denied recognition and enforcement of the award on the basis that the losing party had been unable to present its case on damages.

A number of awards have been refused recognition and enforcement where the arbitrators have failed to act fairly under the circumstances. Examples of these include:

– The Naples Court of Appeal refused enforcement of an Austrian award on the ground that one month’s notice given to the Italian
respondent to attend the hearing in Vienna was insufficient because during that time the respondent’s area had been hit by a major earthquake; 3

– The English Court of Appeal upheld a decision refusing to enforce an Indian award on the ground that the serious illness of one of the parties, unsuccessfully raised by the party during the hearing when seeking an adjournment, meant that it was unrealistic to expect him to participate in the arbitration including to file a defence; 4

– The Hong Kong High Court refused enforcement of an award holding that the China International Economic and Trade Arbitration Commission (CIETAC) had not given the respondent an opportunity to comment on the reports from the expert appointed by the arbitral tribunal. 5

1. Sweden: Hügsta Domstolen, 16 April 2010 (Lenmorniiproekt OAO v. Arne Larsson & Partner Leasing Aktiebolag) Yearbook XXXV (2010) pp. 456-457 (Sweden no. 7)

2. United States: United States Court of Appeals, Second Circuit, 24 November 1992 (Iran Aircraft Industries and Iran Helicopter Support and Renewal Company v. Avco Corporation) Yearbook Commercial Arbitration XVIII (1993) pp. 596-605 (US no. 143).
3. Italy: Corte di Appello, Naples (Salerno Section), 18 May 1982 (Bauer & Grossmann OHG v. Fratelli Cerrone Alfredo e Raffaele) Yearbook Commercial Arbitration X (1985) pp. 461-462 (Italy no. 70).

4. United Kingdom: Court of Appeal (Civil Division), 21 February 2006 and 8 March 2006 (Ajay Kanoria, et al. v. Tony Francis Guinness) Yearbook Commercial Arbitration XXXI (2006) pp. 943-954 (UK no. 73).

5. Hong Kong: Supreme Court of Hong Kong, High Court, 15 January 1993 (Paklito Investment Ltd. v. Klockner East Asia Ltd.) Yearbook Commercial Arbitration XIX (1994) pp. 664-674 (Hong Kong no. 6).

Author: international

Mentioned in these Entries

Due Process.