Gauging the Tension Between Finality and Fairness in Arbitration: An Assessment of the Scope and Limits of “Correction” and “Interpretation” of Final Awards

By Shalini Soopramanien

“And therefore, as when there is a controversy in an account, the parties must by their own accord, set up for right Reason, the Reason of some Arbitrator…to whose sentence they will both stand, or their controversy must either come to blowes, or be undecided, for want of a right Reason constituted by Nature; so is it also in all debates of what kind soever.”

Thomas Hobbes


 

Gauging the Tension Between Finality and Fairness in Arbitration: An Assessment of the Scope and Limits of “Correction” and “Interpretation” of Final Awards By Shalini Soopramanien

 

Table of Contents

PART I: INTRODUCTION

PART II: An Overview OF Functus officio and its limited exceptions

2.1. Functus Officio

2.2. The Three Limited Exceptions

2.3. Consequences of Violating the Functus Officio Principle

PART III:Requests for correction.

3.1. Methodology

3.2. National Arbitral Laws

3.2.1. Introduction

3.2.2. UNCITRAL ML

3.2.3. Switzerland

3.2.4. U.K.

3.2.5. U.S.A.

3.3. Institutional Arbitral Rules

3.3.1. Introduction

3.3.2. LCIA

3.3.3. ICC

3.3.4. ICSID

PART IV:Requests for interpretation.

4.1. National Arbitral Laws

4.1.1. Introduction

4.1.2. UNCITRAL ML

4.1.3. Switzerland

4.1.4. U.K.

4.1.5. U.S.A.

4.2. Institutional Arbitral Rules

4.2.1. Introduction

4.2.2.  LCIA

4.2.3. ICC

4.2.4. ICSID

PART V: ISSUES AND CHALLENGES FOR THE FUTURE.

PART VI: CONCLUSION.

BIBLIOGRAPHY.

 

Part I:  Introduction.

“And therefore, as when there is a controversy in an account, the parties must by their own accord, set up for right Reason, the Reason of some Arbitrator…to whose sentence they will both stand, or their controversy must either come to blowes, or be undecided, for want of a right Reason constituted by Nature; so is it also in all debates of what kind soever.”

Thomas Hobbes[1]

 

1.1.                  Efficient arbitration entails a balance between two competing considerations, finality and fairness.[2] At one end of the spectrum, finality is esteemed as one of the cornerstones of arbitration. One of the distinct advantages of arbitration is that it seeks to deliver the final determination of a dispute between parties by requiring that the award is ‘final and binding’. As Professors Alan Redfern and Martin Hunter summate, “By choosing arbitration, the parties choose, in principle, finality.”[3] Absent a contractual agreement to the contrary, a final arbitral award which disposes of all matters referred to arbitration, cannot be substantively reviewed save on limited grounds.  At the other end is the rival consideration of fairness, which calls for some latitude of judicial scrutiny over uncanny decisions rendered by arbitrators.

 

1.2.                  The tension between these two considerations manifests itself in the scope and extent of post-final award relief in international commercial arbitration. Once an arbitral tribunal issues its award, a dissatisfied party has limited avenues of redress against the final award. First, in many jurisdictions there are arbitration laws and institutional arbitral rules which enable a party to correct or clarify the award. Second, the dissatisfied party can initiate judicial proceedings before national courts at the seat of the arbitration (or lex arbitri) within a specified time-frame to ‘challenge’ or ‘set aside’ the award. Third, the losing party can wait until the successful party starts enforcement proceedings before a national court in order to resist enforcement. This paper addresses the first avenue of redress only, where the defeated party seeks to clarify or correct errors in the arbitral award.

 

1.3.                  In practical terms, correction requests are common and have increased over the past few years for a number of reasons. First, cases submitted to arbitrators are increasingly complex; accordingly there is more room for error in the operative part, or dispositif, of the arbitral award. Second, requests for interpretation have risen due to the growing acceptance of the United Nations Commission on International Trade Law (UNCITRAL) Model Law (“ML”) and Arbitration Rules.[4] Third, mistakes made by arbitrators are often beyond the scope of the correction mechanism and do not satisfy grounds for annulment because the mistake is regarded as not sufficiently serious to warrant a violation of due process or of public policy. As a result, these requests for correction oftentimes edge on reassessment. Whilst aggrieved parties are often tempted to use this form of relief as a pretense to review the merits of an award, it should be stressed that the correction and interpretation mechanisms should be used to remedy inaccuracies or ambiguities in the text of the award and nothing more.[5]

 

1.4.                  A further twist in the tale lies in the debate of who should be deemed responsible for remedying these errors. Should it be the arbitrator who issues the original award, the court of the lex arbitri or the authority that ultimately enforces the award?[6] Professor Roger Perrot has argued at length that it should be the arbitrator.[7]This appears to be the correct view, given that the arbitrator is the one who is familiar with the parties’ case and has read their written submissions. Moreover the arbitrator is more often than not the individual who drafts the original award and, as such, best suited to make the necessary corrections and/or clarifications.

 

1.5.                  However the arbitrator’s authority to remedy its errors has its limits, and a balance must be struck accordingly. In brief, there are two principal limitations on an arbitrator’s post-award relief power. First, the arbitral tribunal’s power is residual in character and limited by the doctrine of functus officio. The functus officio is a general principle which stipulates that a tribunal ceases to exercise jurisdiction over the award after having rendered its final award. Second, the principle of finality is tested with each correction and clarification request because each request opens the door to an implicit review on the merits, which would undermine res judicata.

 

1.6.                  Notwithstanding the well-established doctrines of ‘functus officio’ and ‘res judicata’, there have been repeated attempts – some more conspicuous than others – to use post-award relief in the form of correction and interpretation to revisit the substance of awards. The record of the courts in dealing with such attempts has been mixed at best. The purpose of this paper is precisely to undertake a comparative analysis of the theory and practice of correction and interpretation in selected jurisdictions, identify the common trends, if any, which are apparent in the case history and, going forward, outline potential issues and challenges for the future, along with proposed responses for future consideration.

 

1.7.                  Following this brief introduction, Part II of this paper seeks to provide a general analysis of the functus officio doctrine and its three limited exceptions. Parts III and IV focus on requests for correction and interpretation, respectively, of arbitral awards, comparing and contrasting rules and cases under different national laws and arbitral institutions. Part V refers to common themes which are relevant to the tension between finality and fairness, with suggestions for future direction. Last but not least, Part VI concludes with some general conclusions and a summary of findings on the practical application of the correction and interpretation mechanisms.

 

Part II: An Overview of Functus Officio and its Limited Exceptions.

 

2.1.                  Functus Officio


2.1.1.             Upon the delivery of a final award, there are several immediate effects which ensue. First, the parties can voluntarily perform the award.[8] Second, the arbitrator no longer has compétence-compétence, or jurisdiction, over the arbitral process which triggers the res judicata effect of the award. Third, the arbitral tribunal is functus officio, which is Latin for “office performed”, as to the issues decided in a final award.[9]

 

2.1.2.             Functus officio is a general rule in common law, which provides that “once an arbitrator has issued his final award he may not revise it”, and may no longer consider further claims.[10] As scholar Gary Born comments, functus officio must be distinguished from an arbitrator’s early withdrawal or resignation which terminates his mandate before it is completed.[11]Functus officio, on the other hand, refers to the full completion of the arbitrator’s mandate and corresponding submission of an award with full res judicata effect.

 

2.1.3.             There is no express provision for functus officio under the New York Convention or other international arbitration conventions.[12] However under most modern jurisdictions, indirect reference to functus officio is made in national arbitration legislation through the allusion to the completion of an arbitrator’s mandate after submission of the final award. Functus officio arises from specific provisions of the national law governing the arbitration, the rules of an arbitral institution or a party’s arbitration agreement.

 

2.1.4.             UNCITRAL ML 1985. UNCITRAL ML Article 32 expressly stipulates the termination of the arbitrator’s mandate, as follows: “arbitral proceedings are terminated by the final award” (Article 32(1)) and “[t]he mandate of the arbitral tribunal terminates with the termination of the arbitral proceedings” (Article 32(3)), subject to Articles 33 and 34 which provide for post-award relief and annulment of awards, respectively.

 

2.1.5.             USA Federal Arbitration Act (“FAA”)1925.The U.S. FAA, the legislation codifying arbitration at state and at federal level, neither directly nor indirectly refers to functus officio. Unlike most modern arbitration laws, the FAA leaves it to the judiciary, and not the arbitral tribunal itself to determine the jurisdiction of the arbitrator.[13] However case-law has clearly endorsed the functus officio doctrine.[14]

 

2.1.6.             Swiss Private International Law Act (“PILA”) 1987.As in the case of the FAA, Chapter 12 of the PILA does not make express reference to functus officio but Article 190(1) provides that the “award is final from its notification”.[15] Scholars Stephen Berti and Anton Schnyder clarified that the notification allows arbitrators to “perform their primary duty under the receptum arbitri” but that “this duty is only fully discharged once the award has become absolutely final”.[16]

 

2.1.7.             English Arbitration Act (“EEA”) 1996. Although express reference to functus officio is not made in the EEA, s.51(2) provides for the cessation of the arbitrator’s jurisdiction in the case of a settlement between parties, and as such acknowledges the existence of the doctrine.

 

2.1.8.             From the discussion above, it can be noted that the functus officio doctrine is uniformly defined and applied under domestic laws for several important reasons. First, it respects party autonomy and the arbitrator in turn respects its contractual mandate as set by the parties and by law. Second, it ensures the submission of an expeditious, final award which is an important objective of arbitration. Third, from a policy perspective, arbitrators are private persons who are “not subject to the discipline and training of a national judiciary” and as such cannot continue to review private parties’ rights when they no longer have jurisdiction.[17]To do otherwise would be to strip the advantage of flexibility that arbitration offers over traditional litigation.

 

2.2.                  The Three Limited Exceptions


2.2.1.             Despite the general rule that an arbitrator is functus officio upon the submission of an award, many jurisdictions as well as institutional arbitration rules provide for limited exceptions that alleviate the potential harshness of this rule to better reflect reality. Human fallibility makes it nearly impossible for arbitrators to render flawless awards. As such, a mechanism exists for post-final award relief and maintains that arbitrators, notwithstanding that they are functus officio, continue to exercise their jurisdiction in narrowly circumscribed circumstances: namely to correct, interpret or supplement an award. No reference is made to these circumstances under the New York Convention, but the Convention leaves the application of these exceptions to the lex arbitri, absent a contrary agreement.[18] The exceptions will now be briefly analyzed, in turn.

 

2.2.2.             Correction. The correction mechanism is the first exception to the functus officio rule. Clerical or typographical mistakes in an arbitrator’s ruling can potentially have a significant impact on the outcome of an award. An example of a serious mistake is where the arbitrator miscalculates the total amount of damages which leads to the farcical scenario where a party is obliged pay higher or lower damages than the arbitral tribunal had had intended.[19]

 

2.2.3.              Interpretation. The interpretation mechanism is the second exception to the functus officio doctrine. It helps to clarify any ambiguities or obscurities in the text of the award and, unlike correction, interpretation does not alter the original award. Interpretation is a useful tool where the award is “so ambiguous that the parties could legitimately disagree as to its meaning.”[20] In practice it is very difficult to have an interpretation request granted.[21]In contrast to correction, interpretation requires party agreement and in most countries, apart from France, does not allow tribunals to interpret awards on their own initiative.[22] As Professors Gabrielle Kaufmann-Kohler and Antonio Rigozzi explain, there are legitimate reasons underlying this recalcitrance to embrace interpretation, most notably because the dissatisfied party may use it as a dilatory tactic and as a justification to reopen the case.[23]

 

2.2.4.                Supplementation. Supplementation, or the issuance of an additional award, is the third exception to functus officio. This tool enables the arbitral tribunal to issue an additional award as to claims discussed in the arbitral proceeding but omitted from the original award. Where there is no such provision on supplementation of awards, omission of one of the heads of claim may be a ground for annulment of the award.[24]

 

2.3.                  Consequences of violating the functus officio principle

 

2.3.1.                The consequence of having an award annulled is dramatic: the parties to the arbitration will need to start the arbitration anew, which would entail expending significant amounts of money, time and resources. The three mechanisms outlined above seek to promote efficiency in arbitration. An arbitral tribunal has the authority to exercise these limited exceptions in order to circumvent annulment, and, in so doing, promote efficiency in the arbitral process.

 

Part III: Requests for Correction.


3.1.                    Methodology


3.1.1.                In this and in the next Part, I will in turn examine, first, national laws which are binding norms, and second, institutional rules which are soft law (unless parties make them part of their contract, in which case they become binding).

 

3.2.                    National Arbitration Laws

 

3.2.1.                Introduction

 

3.2.1.1.       Under national arbitration laws, rules on correction are relatively uniform and seek to correct clerical or computational errors in an award. As Kaufmann-Kohler and Rigozzi highlight, most modern international arbitration laws in Europe “permit the arbitral tribunal to correct manifest computing errors on its own initiative.”[25] There are, however, some jurisdictions, as in the U.S., where corrections are made judicially rather than by the arbitral tribunal. Where it is permitted as an exception, national arbitration legislation makes clear that errors having an effect on the merits of an award cannot be rectified under the correction mechanism.

 

3.2.2.                UNCITRAL ML

 

3.2.2.1.       Law.


3.2.2.2.       Article 33 of the UNCITRAL ML enshrines the legal basis upon which a party or the tribunal itself may resort to correction of an award. Pursuant to Article 33(1), a party, with notice to the other party, may request the tribunal to correct in the award “any errors in computation, any clerical or typographical errors or any errors of similar nature”. The provision clearly sets out a default time-limit of thirty days from receipt of the award in order to request this correction. In addition, the tribunal has jurisdiction to make these limited corrections on its own initiative, i.e. sua sponte, within thirty days of the date of the award (Article 33(2)). Under Article 33(4), the tribunal reserves the discretion to extend the time, if necessary, to make a correction. Article 33(5) stipulates that a correction must also satisfy the formal requirements under Article 31.

 

3.2.2.3.       An example of a country which has adopted the Model Law is Germany. Section 1058(1) of the German Arbitration Act 1998 (Zivilprozebetaordnung (ZPO))is closely modeled after Article 33(1) UNCITRAL ML. Unlike UNCITRAL ML, the ZPO specifies broader criteria for the correction of mistakes, as follows: “Only mistakes in the expression of the will of the arbitral tribunal may be corrected; the content of the decision may not be changed” (emphasis added).As in the case of the UNCITRAL ML provision, the German provision provides a short time-frame in which correction applications can be submitted to the tribunal. Parties have one month to make the request, absent a contrary agreement between the parties (s.1058(2)). The tribunal must make the correction within one month from receipt of the award, and if necessary, can exceed this time-frame (s.1058(3)). The tribunal is also competent to make a correction sua sponte (s.1058(4)). Corrections form part of the original award.[26]


3.2.2.4.       Policy


3.2.2.5.       Both Article 33 of the UNCITRAL ML and s.1058(1) No.1 ZPO aim to treat correction as a narrow exception to the general rule that the tribunal is functus officio after having submitted its original award. The reluctance to treat it more than an exception is evident in the short time-frame[27], restrictive language and limited scope of exceptions. The rationale underlying this reticence lies in the fact that a limited exception to the functus officio doctrine will not undermine finality of awards, and preserves the certainty and efficiency of the arbitral process. It also ensures the confirmation and recognition of the original award.


3.2.2.6.       Case-law.


3.2.2.7.       In a 2001 German case[28], the arbitral tribunal notified the parties that it had decided sua sponte to make a correction to the original award after having realized that it had applied an incorrect mathematical formula while assessing damages. The Stuttgart Court of Appeal set aside the second award on the ground that the arbitral tribunal lacked competence to make the correction because it became functus officio after having issued the original award.[29]

 

3.2.3.            Switzerland

 

3.2.3.1.       Law.

 

3.2.3.2.       Switzerland’s PILA is a rare example of an arbitration law in Europe that does not contain rules on the correction, interpretation or supplementation of awards.[30]

 

3.2.3.3.       Notwithstanding this ‘gap’ in the PILA, the authority to correct arbitral awards has been implied through case-law.[31]In the seminal case of Philipp Holtzmann AG and Nord France SA v. L’Enterprise Industrielle SA, Department El-Seitha, the Swiss Federal Tribunal held that an arbitral tribunal has an inherent discretion to correct or interpret an award, in the absence of legislative or contractual authority.[32]As a result there is no defined time-frame within which to submit these correction requests; however this remains subject to the agreement of the parties.[33] Furthermore, a request for correction of the award does not suspend the time period within which to annul the original award as this would open the door to dilatory tactics.[34]Therefore the better approach for the aggrieved party is to apply simultaneously for correction and annulment of the award.

 

3.2.3.4.       More recently, the power to correct an award has been embodied in Article 145 of the Federal Judicial Organization Act (“OJ”), as well as in Article 129 of the new Swiss Federal Tribunal, or the loi sur le tribunal fédéral (“LTF”).

 

3.2.3.5.       Swiss scholars describe the correction mechanism as an ‘accessory’ to the original award.[35]Under Swiss law, the correction or interpretation of an award constitutes a separate award which may be subject to annulment under Article 190(2) PILA, but only with respect to elements that are supplementary to the original award.[36]

 

3.2.3.6.       Policy.

 

3.2.3.7.     The Swiss Federal Tribunal found that, absent a contractual or legislative provision to the contrary, an arbitrator has an inherent authority to correct a material error in the original award in limited circumstances. As the Federal Tribunal explained, “[T]here is no reason to rule out the idea that contractual clauses can be supplemented by the provisions that govern international arbitration at the seat of the tribunal”, and that it would “fall into excess formalism if [the law] prevented an arbitral tribunal from correcting a blatant inadvertent error, which would be tantamount to preventing it from deriving the meaning of what it was competent to decide.”[37]

 

3.2.3.8.       In addition, correction of a material error (typographical, clerical or computational), which is accepted as a limited exception under Swiss law, should not be confused for correction of an error that affects the merits of the award.[38] These strict limitations help to ensure conformity with the finality of awards.

 

3.2.3.9.      Case-law.

 

3.2.3.10.    In a recent case, the Swiss Federal Tribunal reaffirmed the limited exceptions of correction (‘rectification’ in French) and interpretation of awards, and clarified the scope of a correction request.[39] This case involved a dispute with regard to a share purchase agreement in a Swiss company. The buyer was a Dutch company and the seller was a company from Guernsey. Their contract included an International Chamber of Commerce (“ICC”) arbitration clause with Geneva as the lex arbitri with a panel of three arbitrators. In 2001 the seller initiated arbitral proceedings under the ICC Rules. In 2004, a partial award was rendered with regard to the value of the shares which the arbitral tribunal determined to be in the amount of U.S. $73.1 million. The seller submitted a request for correction of the partial award under Article 29(3) of the ICC Rules. The buyer then filed an application to the Swiss Federal Tribunal to set aside the partial award pursuant to Article 190(2) PILA. Soon thereafter, the ICC arbitral tribunal corrected the value of the shares to U.S. $107.5 million after having spotted a computational error. The buyer submitted a second application to have the corrected partial award set aside before the Swiss Federal Tribunal pursuant to Article 190(2) PILA.

 

3.2.3.11.   The Federal Tribunal rejected the buyer’s annulment applications, expounding upon the nature of set aside and correction proceedings. First, the Tribunal explained that a corrected award is a ‘derivative’ form of the original award, and consequently a corrected award will share the same fate of an annulled original award. However an annulled corrected award does not affect the validity of the original award. Second, the Tribunal clarified that the procedures for annulment and for correction of awards are two distinct procedures, and that the correction mechanism does not offer to parties an additional avenue to challenge the award (§§1.2.3 – 1.2.4). In its reasoning, the tribunal explained that the correction mechanism should not be misused; otherwise there was a risk of affecting the efficiency of the annulment procedure under Article 190(2) PILA, as well as the finality of arbitral awards (§1.2.3).

 

3.2.4.                U.K.

 

3.2.4.1.       Law.


3.2.4.2.       At common law, arbitrators in England did not have authority to correct their awards.[40] Recognizing that this rule was too strict, the British parliament enacted legislation which enabled arbitrators to correct errors in their awards. Today, the EEA is the applicable arbitration legislation.

 

3.2.4.3.       Under the EEA, power of correction is enshrined under s.57. Two general observations can be made about this provision: first, this section applies where the lex arbitri is the law of England or Wales or Northern Ireland (s.2(1)). However, the court has discretion to extend powers under this section to other cases, pursuant to s.2(4). Second, s.57(1) bolsters party autonomy by allowing parties to contractually agree upon the scope of the tribunal’s power to correct awards. If there is no such private agreement, then default rules under s.57(2) apply whereby the tribunal may either, sua sponte or at the request of a party, correct an award.

 

3.2.4.4.       An exhaustive list of permissible corrections is provided under s.57(3)(a) (‘clerical mistake; error arising from an accidental slip or omission’). Section 57(7) stipulates that the correction forms part of the original award.[41] There is a time-frame of 28 days from the date of the award to request correction, absent an agreement to the contrary (s.57(4)). Furthermore, s.57(2) provides that the default rules for correction and interpretation should not be exercised without first affording the other parties a reasonable opportunity to be heard. Moreover, unlike the UNCITRAL ML which grants the tribunal the discretion to extend time limits, s.79 EEA only permits the English courts to extend time limits in the case of interpretation requests.


3.2.4.5.       It would appear that the correction provision is somewhat broader in scope than the Model Law because the EEA includes the correction of ‘accidental slips’ which arise from a mistake in the expression of the will of the arbitrator whereas the Model Law merely allows for the ‘correction of typographical or clerical errors’. According to Rowlatt J., the ‘accidental slip’ rule only applies to errors “affecting the expression of the tribunal’s thought, not an error in the thought process itself…The fact that the error…was an elementary error is not sufficient to make it accidental.”[42] Moreover, in the case of Fuga v. Bunge[43], Donaldson J. found that the ‘slip rule’ is “confined to errors of transcription and does not encompass errors by the arbitrators ‘in forming the intention to write down what they did.’ ”[44]


3.2.4.6.       Policy.


3.2.4.7.       Section 57(3) of the EEA is based broadly on the Model Law. Scholars have commented that the mechanisms outlined under s.57do not enable the arbitrator to “change his mind on any matter which has been decided by the award, and attempts to use the section for this purpose should be firmly resisted.”[45] The limited application of s.57 can be attributed to the goal of preserving finality and certainty in arbitral awards. In fact in the recent case of CNH Global v PGN Logistics[46] (see infra), Burton J underscored the importance of respecting finality in arbitration as follows: “[A]rbitrations are intended to be considerably more final in their conclusions even than those of the courts.”[47]

 

3.2.4.8.       Case-law.

 

3.2.4.9.       Two cases will be analyzed to illustrate the correction of awards under the EEA. The first case is a clear example of how the English courts treat a correction request that has an effect on the original award. The second case is a more recent decision regarding the challenge of an award for ‘serious irregularity’ under s.68 of the EEA, which has generated much controversy.

 

3.2.4.10.   GannetThe first case is Gannet Shipping Ltd v Eastrade Commodities Inc.[48]In Gannet, there was a dispute arising from a voyage charter-party. The owners claimed demurrage at two discharge ports, and the arbitration was held under the London Maritime Arbitrators Association (“LMAA”) 1997 terms with one umpire. In his final award, the umpire found that, based on the demurrage claims, the owners were owed U.S. $35,330.85, which included a sum of U.S.$21,958.33 for ‘loadport’ demurrage. However the umpire had made a mistake because the parties had agreed to a loadport demurrage figure of U.S. $860 in their agreement. The parties agreed to have the error corrected. Once the umpire accepted that he had a made a mistake as to the amount of damages, he amended the cost in the original award to reflect the different outcome.[49] The owners moved to have the umpire’s award set aside whereas the charterers applied to remit the award for reconsideration of the cost issue under s.68 of the EEA in the event that the owners’ application was successful.

 

3.2.4.11.    English High Court. In its decision, the English High Court held that as the parties had agreed to arbitrate under the LMAA 1997 terms, they had conferred on the arbitral tribunal the competence to correct awards under s.57(1) of the EEA. As a result, the court dismissed the owners’ application and upheld the umpire’s correction as to the amount and costs under s.57(3) (§21).Furthermore, Langley J. adopts a logical analysis of the correction mechanism, as follows:

 

“I… think it would be most unfortunate if there was no power in an arbitrator to address ancillary cost orders which might have been decided otherwise had a mistake within section 57 not been made…. If such a power did not exist the only available route to correct a costs award would be [remission under section 68]…[S]uch a course…is a potentially expensive route…if the arbitrator has not expressed his view on the merits of changing his order. Much better, it might be thought, to go to the arbitrator first.” (§22).

 

 

3.2.4.12.    The High Court characterized the umpire’s correction as an ‘accidental slip’ under s.57(3), because as Langley J explains, “It was a slip because it was wrong. It was accidental because [the umpire] did not mean to use the wrong figure and he misread some manuscript amendments” (§19). As such the court upheld the umpire’s correction as a permissible exception to the general rule that the arbitrator, in this case the umpire, is functus officio when the final award is made and published.

 

3.2.4.13.    In this regard it was not necessary to consider the charterers’ application for remission under s.68. However the court noted in obiter dicta that had it been necessary to consider the charterers’ application, it would have granted their application for remission. An application for remission under s.68 requires a showing of both serious irregularity and substantial injustice. The court found that in this case, both conditions would have been satisfied. First, the court found that the arbitrator had admitted an irregularity in the original award under s.68(2)(i) and that this irregularity amounted to a failure of the arbitrator’s duty of fairness toward the parties under s.68(2)(f). Second, the court stated that these serious irregularities could have caused substantial injustice per s.68(2). The court found that the “wholly and understandably unforeseen” error which involved a significant amount of money had caused the parties substantial injustice.[50]

 

3.2.4.14.  CNH Global v PGN Logistics[51].This recent decision highlights the added complexity of the recourse against an award under s.68 of the EEA. In CNH, a dispute arose from a premature termination of an agreement, which contained an ICC arbitration clause. Accordingly, the defendant instituted arbitral proceedings against the claimant under the ICC Rules. By a partial award issued in July 2007, the tribunal found that the claimant had wrongfully repudiated the contract and it awarded the defendant damages for loss of future profits following the termination of the contract. However the tribunal erred in its award on quantum, failing to properly compute the interest on payments. Therefore the defendant sought to have the error rectified pursuant to Article 29 of the ICC Rules[52], including a declaration that the interest should be calculated as from the date of payments under the contract, and not accruing from the date of the award. The tribunal accepted the claimant’s application for correction. It conceded that it had made a substantive error, awarding interest to the defendant of between £1.5 million and £3 million. The claimant applied to have the award set aside under s.68 of the EEA for ‘serious irregularity’ on the ground that the arbitrator had acted beyond his jurisdiction (ie. ultra vires) and caused the claimant substantial injustice because it was obliged to pay additional interest not mentioned in the original award.

 

3.2.4.15.   English Court. In its decision, the Court held that the ICC tribunal had indeed exceeded the jurisdiction conferred upon it under Article 29 ICC Rules by making the correction. However the application to set aside the correction under s.68 of the EEA was ultimately rejected because the Court did not find that the correction had caused the claimant substantial injustice.

 

3.2.4.16.    Section 68 of the EEA enables parties to challenge awards for ‘serious irregularity’. Under s.68(2)(b), one of the grounds of challenge based on serious irregularity is that “the tribunal exceed[ed] its powers.” In order to set aside an ultra vires award under s.68(2)(b), however, the applicant must successfully demonstrate, first, that the award was issued ultra vires, and, second, that it had caused substantial injustice to the applicant.

 

3.2.4.17.   With respect to the first element, the Court agreed that the tribunal had lacked competence to correct the error.[53] Burton J. analyzed Article 26 of the ICC Rules allowing for corrections and found that the arbitrator’s correction could not be classified as a clerical error because it “was an error affecting the [arbitrator’s] thought process itself” and not the expression of his thought.[54] Nor did Burton J find that the arbitrator had made a computational or a typographical mistake.[55] As a result Burton J concluded that it was a correction that simply did not fall within the ambit of Article 26 of the ICC Rules, and consequently held that the tribunal had exceeded its powers under s.68(2)(b) of the EEA.

 

3.2.4.18.   The second element involved an analysis of whether the amended award had caused the applicant substantial injustice. The Court held that it did not cause the claimant substantial injustice because the procedural irregularity (i.e. the addendum) placed the parties in the position they should have been had there been no breach. In reaching this conclusion, the Court relied on the Departmental Advisory Committee (“DAC”) report which clarifies the policy objectives underlying the ‘substantial injustice’ condition of s.68.[56] As such, the Court rejected the action to set aside the award under s.68 of the EEA because there was no substantial injustice to the claimant.

 

3.2.4.19.   Commentary. Commentators have criticized the decision of the High Court for allegedly “opening the door for substantive amendments to arbitral awards” and in so doing “eroding the principle of finality of awards.”[57] However a more cautious reading of the judgment would suggest otherwise. First, the decision did not amount to a rejection of the principle of finality by the court but was based on its interpretation of the ‘substantial injustice’ requirement ofs.68. The Court’s narrow interpretation of the correction mechanism and its analysis of the serious consequences of the ‘irregularity’ reflect its endorsement of the principle of finality.[58] Second, given the court’s interest in balancing the considerations of finality and fairness, this decision should be confined to the specific provisions of s.68. A report on the EEA notes that s.68 was “designed as a long stop, only available in extreme cases where the tribunal has gone so wrong in its conduct that justice calls out for it to be corrected”.[59]

 

3.2.4.20.    Comparison. There are many differences to be drawn between the cases of Gannet and of CNH. First, Gannet involved an arbitration which was conducted under the LMAA 1997 which contained a correction provision that deferred to s.57of the EEA; whereas the ICC conducted the arbitration in CNH and thus ICC rules on correction were applicable. Second, the error in Gannet was characterized as an ‘accidental slip’ because the arbitrator had made an error of transcription by not taking into account the parties’ special agreement in the base contract. Indeed, it was an error in the expression of the arbitrator’s thinking, and not of his thought process, and as a result it fell within the ambit of s.57(3) of the EEA. In contrast, the error in CNH cannot be categorized as an accidental slip because the arbitrator had made an error in the thought process itself. In this respect the arbitrator had adopted an incorrect formula to compute interest and as a result the error could not be remedied without risking a review on the merits. Third, it is interesting to note that the court in Gannet adopted a broader interpretation of ‘substantial injustice’ than in CNH. In Gannet, the court commented in obiter that if the parties would or might have known that the tribunal had made an error which deprived them of a more favorable decision, then this would constitute injustice. Moreover such an injustice would be considered ‘substantial’ as the error concerned a significant amount of money. However the court in CNH relied heavily upon the legislative policy underlying s.68 of the EEA which aims to restrict parties’ recourse to challenge procedures, and as result denied the applicant’s submission for annulment.

 

3.2.5.         U.S.A.

 

3.2.5.1.      Law.

 

3.2.5.2.      Historically, the U.S. as a common law jurisdiction recognized no legislative guidance on the correction of errors in awards. In an early case, it was held that “if an arbitrator makes a mistake either as to law or to fact, it is the misfortune of the party and there is no help for it.”[60] However the enactment of the FAA has mitigated this harsh rule.

 

3.2.5.3.      Unlike other international arbitration laws, the FAA leaves the decision to correct an award within the ambit of the court and not the arbitral tribunal. Pursuant to s.11 of the FAA, the court “in and for the district” in which the award was made may make an order to modify or correct the award upon request by any party to the arbitration. One ground for correction arises “where there was an evident material miscalculation of figures or an evident material mistake in the description of any person, thing, or property referred to in the award” (s.11(a)) or “where the award is imperfect in matter of form not affecting the merits of the controversy” (s.11(c)).

 

3.2.5.4.      The FAA has many shortcomings and there are numerous arguments in support of reforming the Act. First, as Born points out, the FAA fails to expressly provide whether parties can derogate from its rules to conform with party autonomy.[61] This ‘gap’ in the rules, however, has been clarified by case-law which allows for such derogations.[62] Second, consideration should be given to have s.11 amended to confer jurisdiction in arbitral tribunals to make corrections or modifications, in order to fall in line with international arbitral practice. Some U.S. courts have already embraced this approach, allowing tribunals to correct their own awards, when circumstances so demand.[63] Third, the scope of errors giving rise to an application for correction under s.11 is vaguely defined and requires further clarification. Fourth, unlike the other countries analyzed thus far (with the exception of Switzerland), s.11 strangely does not provide a time-frame within which parties to an arbitration must submit requests for correction.  In some U.S. cases the time-frame has been as much as three months after the final award is issued, putting in jeopardy the principle of finality and increasing the length and costs of the arbitration, thereby rendering the arbitral process inefficient.[64]


3.2.5.5.      Policy.

 

3.2.5.6.       According to s.9 of the FAA, the court must confirm an award “unless it is vacated, modified, or corrected as prescribed in [s]ections 10 and 11.”[65] Under s.10 of the FAA, a party can make a motion to the district court to ‘vacate’ or annul the award on four different grounds.[66]With regard to s.11, as discussed supra, the grounds for correction of an error are limited.[67]

 

3.2.5.7.      There are three important considerations which justify the narrowness of the limitations under the FAA. First, it serves to safeguard the finality of the arbitral process. As one commentator explains, “While review is limited, it is still permitted, and it is vital to ensuring that the contractual agreements of parties are honored.”[68] Second, it upholds the separation of powers in government. Congress reserves the power to enact legislation and the law must accordingly be applied by the courts, not to be dictated by private parties. As Professor James Alford explains, “[B]ecause Congress has determined that federal courts are to review arbitration awards only for certain errors, the parties are powerless to select a different standard of review— whether that standard entails review by seeking facts unsupported by substantial evidence and errors of law.”[69] Third, expanding the scope of judicial review would undermine the policy behind the enactment of the FAA as well as compromise the appeal of resolving disputes through “one-stop” arbitration.

 

3.2.5.8.      Case-law.

 

3.2.5.9.      In this section, I will discuss two cases on corrections under the FAA. The first case is a straightforward example of a correction. The second is a more recent, contentious case of the U.S. Second Circuit court, upholding a disputed correction that was previously vacated by the district court.

 

3.2.5.10.   National Shipping Co. of Saudi Arabia v. Transamerica SS Corp.[70]This case involved a dispute between two companies arising from their shipping arrangement. The parties submitted their dispute to arbitration pursuant to their maritime agreement. National claimed outstanding freight and Transamerica claimed indemnification for cargo shortage. The tribunal treated each of the parties’ claims separately, awarding two partial awards wherein National received $52,686.08 and Transamerica obtained $182,083.67. Amongst other matters discussed in the case, Transamerica made a motion to the district court to modify the award under s.11 of the FAA in order to correct, as it claimed, an ‘evident miscalculation of figures’.[71] National did not object to the modification of Transamerica’s award.

 

3.2.5.11.   The Court granted Transamerica’s motion to modify the award under s.11 of the FAA, based on the fact that the tribunal had granted a surplus amount of $645.74 than originally agreed upon under the base contract between the parties. As a result the overall award was reduced from $182,083.67 to $175,626.17. The Court subsequently granted Transamerica’s motion to confirm the modified award under s.9 of the FAA.

 

3.2.5.12.   T.Co. Metals v Dempsey Pipe & Supply.[72] This case illustrates the contemporary trend of using the correction mechanism as a guise to expand the scope of judicial review of an award. In T.Co. Metals, there was a dispute which concerned allegedly defective steel pipes that T.Co. Metals (the seller) delivered to Demspey (the buyer), in accordance with the terms of their sales contracts. T.Co initiated an arbitration against Dempsey for partial nonpayment for the steel pipes, pursuant to the International Arbitration Rules of the International Center for Dispute Resolution (“ICDR”) clause embedded in the contract. Dempsey counterclaimed for damages based on the diminished value of the steel pipes delivered by T.Co. The sales contract included a warranty clause which excluded T.Co’s liability for any consequential loss or damage arising from the shipment of the supply pipes. In its final award, the arbitral tribunal awarded damages to both parties, and held that the damages for diminution of value awarded to Dempsey did not qualify as consequential loss. Both parties submitted a request to the tribunal to correct certain mistakes made in the award, per Article 30(1) of the ICDR Rules. The arbitrator stated that he was empowered under Article 30(1) to correct the alleged ‘clerical errors’.[73] In the arbitrator’s Amendment Order, he justified his corrections on the three following grounds: first, he “misread” an important invoice; second, he used the wrong data in his computations; and third, in his damage calculations he imputed amounts for a more costly pipe variety that was not even used in this case. The amended final award had the effect of reducing the amount of damages awarded to Dempsey, thereby benefiting T.Co. Both parties applied separately to have the award vacated before the U.S. District Court under s.10 of the FAA.

 

3.2.5.13.   The District Court decision.[74]Amongst other issues that were discussed, Dempsey filed a motion to vacate the award per s.10(a)(4) of the FAA, on the ground that the arbitrator had exceeded his powers when correcting the final award. The district court granted the motion to vacate the amended award and confirmed the original award in full.[75] The court agreed that the errors were not apparent on the face of the award, nor were the errors in the arithmetic computations sufficiently ‘obvious’ to qualify as a correction under Article 30(1) ICDR.[76]The arbitrator’s errors were not obvious because they “required interpretation, analysis, and reference to extrinsic evidence”, as well as reassessment of the record.[77]As such, the district court held that the arbitrator had exceeded his jurisdiction when he amended the award, which ran counter to the functus officio principle.[78]T.Co. filed a motion to appeal the decision, seeking, inter alia, to reverse the vacation order of the district court.

 

3.2.5.14.   The Second Circuit decision.[79] The Second Circuit overturned the district court’s decision to confirm the original award, and remanded with instructions that, upon application, the amended award should be confirmed. The Second Circuit based its reasoning on two main arguments. First, the district court had erred in its interpretation of the functus officio doctrine because functus officio is a default standard that only applies absent an agreement to the contrary by the parties.[80] The court alleged that in this case, the parties had agreed to submit their dispute under the ICDR Rules and this would necessarily imply their acceptance of the correction mechanism within the Rules. Second, arbitrators are entitled to deference, as acknowledged both under the FAA and under the ICDR Rules. The court explained that, “[G]iven that the FAA permits parties to authorize an arbitrator to determine the scope of his own jurisdiction, we see no justification for this Court interfering with the power granted to an arbitrator to interpret his powers of reconsideration under the applicable arbitral rules of procedure.”[81]  In short, as the parties had granted the arbitrator authority to assess their dispute, it was not for the court to question any of the arbitrator’s decisions.

 

3.2.5.15.   Commentary. The decision of the Second Circuit triggered alarm within the arbitration community. One commentary noted that the court made a veritable “mishmash” of affairs in understanding the arbitrator’s powers under s.10 of the FAA.[82]In light of the facts, the better view is that the arbitrator fell foul of his correctional powers under Article 30(1) ICDR because the error went beyond a mere clerical or computational issue. Unlike the case of National Shipping Company of Saudi Arabia which dealt with a clear computational error, the arbitrator in T.Co. exceeded his jurisdiction by reinvestigating and reassessing evidence to correct errors that were not apparent on the face of the award, and which ultimately altered the result of the award. Accordingly, the district court’s decision to vacate the amended award should have been upheld because to hold otherwise would entail a deviation from the principle of functus officio and the finality of awards.

 

3.2.5.16.    It is submitted that the Second Circuit court circumvented the issues of functus officio and finality of awards by unduly focusing on, first, the parties’ contractual agreement and, second, the notion of deference. On the first point, the court quoted a previous decision which concluded that arbitration was “a matter of contract.”[83] It also agreed with a previous decision treating functus officio as a default agreement that can be contractually excluded by parties, and that there was “no legal bar to authorizing arbitrators to reconsider their decisions, and some rules for arbitrators … do authorize reconsideration.”[84] This proposition is appealing, on the face of it. Parties do have a right to modify and tailor the arbitration process as they see fit in their contractual agreements. However, once an award is final, the parties and arbitrators are powerless to dictate the conditions under which a court should review the award. Congress has defined criteria to be used by federal courts to review a final award on certain enumerated grounds. It has set very limited bounds for judicial review of arbitral awards under ss.10 and 11 of the FAA and they are limited for good reason. They guarantee both the principle of functus officio, which restricts the arbitrator’s post-final award jurisdiction, as well as the finality of awards which guarantees the certainty and efficiency of the arbitral process. The Second Circuit’s decision seemingly supports the expansion of the scope of judicial review, which is contrary to the policy underlying the enactment of the FAA.

 

3.2.5.17.   On the second point, it is not the first time that the court has used deference to contradict the doctrine of functus officio.[85] The Second Circuit contends that once parties agree to submit a dispute to arbitration, the arbitral tribunal cannot in principle exceed its jurisdiction and as such, the court cannot vacate the tribunal’s award under s.10 of the FAA. Arbitration, the court makes clear, entails complete deference to the arbitrator. Although it is a basic principle in arbitration that an arbitrator can determine his own competence, this power is not boundless. The power which the parties delegates to the arbitrator can just as readily be withdrawn. Where an arbitrator has wrongly assumed jurisdiction, or has exceeded his jurisdiction, the award which he renders can be set aside (as permitted under s.10 of the FAA). The case of First Options[86], which the Second Circuit in T.Co. had relied heavily upon in its judgment, also highlights the importance of s.10 of the FAA which, inter alia, protects parties from an arbitrator who exceeds his jurisdiction. In T.Co., the arbitrator did exceed his jurisdiction by making a substantive correction to an award. It is submitted that the Second Circuit in T.Co. missed a golden opportunity to clarify the state of the law on the correction of arbitral awards under the FAA.

 

3.3.               Institutional Arbitration Rules

 

3.3.1.          Introduction

 

3.3.1.1.      Most modern arbitral institutional rules stipulate for a correction mechanism which by and large draw inspiration from the UNCITRAL ML. Many arbitral institutions have rules which supersede the national laws. There are also some institutions that have an internal administration to scrutinize requests for correction or interpretation of awards. Ultimately, the goal of these arbitral institutions is to ensure the enforcement of awards rendered under their rules.

 

3.3.1.2.      In this section, I will analyze in turn the correction mechanism in three of the world’s leading arbitral institutions: the London Court of International Arbitration (“LCIA”); the International Chamber of Commerce (“ICC”); and the International Centre for Settlement of Investment Disputes (“ICSID”).

 

3.3.2.          LCIA

 

3.3.2.1.      Pursuant to Article 27 of the LCIA Rules, a correction request may be made at the behest of a party or by the tribunal sua sponte within 30 days from receipt of the original award, absent an agreement to an earlier deadline. Article 27(1) specifies a narrow category of instances where correction is warranted (i.e. ‘errors in computation, clerical or typographical errors or any errors of a similar nature.’) In fact, the LCIA correction provision mirrors the language of Articles 33(1) and (2) of UNCITRAL ML. Moreover, in terms of the form of the correction, a memorandum is issued which forms part of the award.

 

3.3.3.          ICC

 

3.3.3.1.       Prior to 1998, the ICC Rules did not provide for the correction or interpretation of awards. This initial reluctance stems from concerns that Article 29 of the ICC Rules would encourage parties to delay proceedings and undermine the principle of finality by rearguing the substantive matters of an arbitral award.[87] Article 29 of the ICC Rules 1998, which brought the ICC in line with other major arbitral rules and laws, provides a legal basis whereby a correction or interpretation can be made without referring to the applicable law. The arbitral tribunal can carry out these corrections sua sponte or at the request of a party to the arbitration. However, unlike the situation under national laws, the ICC limits the authority of the arbitral tribunal to implement these corrections by requiring any potential rectifications to be presented to the ICC Court for approval within 30 days from the date of the original award.

 

3.3.3.2.     Furthermore, the ICC rules on correction adopt language similar to the corresponding provisions under the UNCITRAL ML, and in so doing limit the scope of correction of typographical errors and other unintended errors. In contrast to the UNCITRAL ML, the ICC rules are unique for their supplementary rules of procedure known as the ‘Note Regarding Correction and Interpretation of Arbitral Awards’. This note expands the scope of post-award relief beyond correction and interpretation provided that the applicable law allows for it. Such post-award remedies address issues associated with fraud, forgery or concealment of evidence.[88]

 

3.3.3.3.      A clear example of the practicality of the ICC correction mechanism is case 10386.[89] This case involved confusion over alleged typographical errors; the claimant submitted a correction request in order to replace a decimal with a comma in an English numerical notation, and the award was subsequently confirmed.

 

3.3.3.4.      However an illustration of the correction mechanism’s potential for abuse by parties is case 9908.[90] Here, the claimants sought a correction from the tribunal on the basis that the arbitral tribunal erred in its calculation of interest owed by the respondents. The claimants alleged that the interest should have accrued as from an earlier date than the tribunal had used, which made a difference of approximately U.S. $1 million in favor of the claimants. Ultimately, the tribunal rejected the claimants’ request and emphasized that it had based its choice of the earlier date on the terms of the parties’ agreement. In this respect, the parties were seeking a reassessment on the merits rather than a mere correction of an inadvertent error.

 

3.3.4.          ICSID

 

3.3.4.1.       Established by the ICSID (or Washington) Convention, ICSID is an autonomous dispute settlement body whose purpose is to provide facilities for the arbitration of international investment disputes and which operates under the auspices of the World Bank.[91] Its autonomous nature stems from the fact that, unlike other major arbitral institutions, ICSID has a self-contained appeals procedure for arbitral awards.

 

3.3.4.2.      Pursuant to Article 49(2) of the ICSID Convention, a party may submit a request to the tribunal within 45 days from the date the award is dispatched, with notice to the other party, for a correction of “any clerical, arithmetical or similar error in the award.” In contrast to other major arbitral rules and laws, the ICSID Convention stipulates that a correction request can only be made by a party to the arbitration and not by the tribunal sua sponte. Furthermore, if the original tribunal is not available to correct the award, then a rectification request under Article 49(2) cannot be used and the aggrieved party can seek a remedy under the interpretation or annulment provisions of the Convention as possible alternatives.

 

3.3.4.3.      If the correction request is considered justified, the tribunal must correct the error in an addendum. This addendum forms part of the award. As in the case of other arbitral institutional rules and national laws, a correction request does not amount to a substantive review of the award itself. An example of a minor error that warranted correction is in the Vivendi v Argentina (DSR) decision where the tribunal accepted a request to rectify the name of the respondent.[92] This can be contrasted with the case of Enron v Argentina[93], where a mistake on the calculation of interest payments could not be remedied under the correction mechanism. In such a case, it is more appropriate to have the award annulled.[94]

 

3.3.4.4.      Unlike the situation under Swiss national law, a rectification request under ICSID has a strategic advantage: it suspends the time-limit for a revision or annulment procedure. However where it is found that a party had invoked Article 49(2) as a pretext for a revision of the merits, that party may have to pay for the full costs incurred in relation to that correction request.[95] Moreover, pursuant to Rule 49(2) of the ICSID Arbitration Rules, the Secretary-General has the authority to refuse to register a request made under Article 49(2) of the Convention where the application has not been submitted within the stipulated timeframe.

 

Part IV: Requests for Interpretation.


4.1.                    National Arbitration Laws

 

4.1.1.                Introduction

 

4.1.1.1.       In contrast to correction, interpretation requests are more controversial because they raise even more serious concerns that the aggrieved party may use the mechanism as a pretense to review the substance of its award, harass the tribunal and delay proceedings.[96] Indeed, not all national arbitration laws and arbitration rules provide for interpretation of awards. Some provide for ‘clarification’, which has been held to mean ‘interpretation’.[97] Ultimately these terms seek to achieve the same objective, that is, to clarify an ambiguous award which would otherwise not be enforced.[98]

 

4.1.1.2.       Furthermore, some national laws and arbitral rules do not provide for interpretation.[99]In other cases, correction and interpretation are simply indistinguishable from one another.[100] At first glance, correction and interpretation may appear to achieve the same objective, that is to reveal the true meaning of the original award, however there are notable differences between the mechanisms.

 

4.1.1.3.       In an oft-quoted passage, Perrot explains in clear terms the effect of an interpretation request, as follows: “[I]nterpretation…in legal terms seeks to clarify the obscurities in a judgment already rendered. Interpretation is therefore not a judgment. The arbitral tribunal who interprets its own decision does not render another judgment: it is merely highlighting a doubt, clarifying inconsistencies, explaining a word, or correcting the structure, without ever altering the merits…[which is] the aspect that has been irrefutably decided.”[101] As such, interpretation does not modify the award and thus does not impinge upon the finality or res judicata effect of an award.

 

4.1.2.               UNCITRAL ML

 

4.1.2.1.      Law.


4.1.2.2.      Pursuant to Article 33(1)(b) ML, a party may request the tribunal for an interpretation of a “specific point or part of the award,” with notice to the other party. Unlike the correction of an award under the ML, it is necessary to secure the agreement of all parties to the arbitration in order to make an interpretation request. If the tribunal finds the interpretation request justified, it will render an interpretation within 30 days of receipt of the award. The interpretation will form part of the original final award. In addition, Article 33(4) provides that the tribunal has the discretion to extend, if necessary, the period of time in which it will make an interpretation.


4.1.2.3.      As explained in para. 3.2.2.3 supra, the German ZPO is closely modeled after the ML. In addition, the German Institution of Arbitration, or the Deutsche Institution für Schiedsgerichtsbarkeit (DIS”), adopts provisions which mirror those of the ZPO. In fact, the provision on correction and interpretation of awards in the ZPO (s.1058) is identical to the provision under the DIS (s.37). The DIS and the ZPO do not permit arbitral tribunals to render sua sponte interpretations of an award which reflects the general principle under the ML. However, unlike the ML, neither the DIS nor the ZPO conditions interpretation requests on an agreement or notification amongst the parties. Instead, an interpretation can simply be made upon the request of one of the parties to the arbitral tribunal (s.37(1) No.2 DIS/ s.1058(1)No.2 of the ZPO). However as in the case of a correction, a request for interpretation must be made within the stipulated deadlines, as will be discussed in para. 4.1.2.8., infra.



4.1.2.4.       Policy.


4.1.2.5.      In contrast to the correction mechanism, recourse to the interpretation mechanism under the ML is more circumscribed. Article 33(1)(b) commences with the condition, “if so agreed by the parties,” which would require that the parties either reach prior agreement on the need for interpretation, usually by way of the arbitration agreement, or agree at the time of the request for interpretation. This narrow limitation aims “to avoid abuse resulting from requests made for delaying purposes, or requests aimed at obtaining a revision of the entire award” which is res judicata.[102] In addition, unlike correction, interpretation requests cannot be made by the arbitral tribunal sua sponte.


4.1.2.6.      It also important to underscore the limited scope of the interpretation provision under Article 33(1)(b) ML, which covers a “specific point or part of the award”, and prevents the revision of a reasoned award. Born argues that interpretation provision in the ML applies only to the dispositif portions of an award, and not to the tribunal’s reasoning.[103]


4.1.2.7.       Case-law.


4.1.2.8.      Under s.1058(1) No.2of the ZPO, requests for interpretation must be filed within one month after receipt of the award, and the DIS clause on interpretation is limited by a similar time-frame of 30 days (s.37(1) No.2). A recent award on correction in case no.SV-B-652/06 concerns a correction/interpretation request under the DIS Rules.[104] It highlights the notion that the arbitral tribunal is bound not only by time-limits but also by the scope of s.37 DIS Rules.


4.1.2.9.      In case no. SV-B-652/06, the DIS arbitral tribunal issued its award on 18 January 2008. The tribunal ruled in favor of the claimant and awarded interest for delay of payments at the rate of “five percent over the current basis legal rate”[105]. Three months later, on 26 March 2008, the claimant sought correction and interpretation of the award, arguing that the tribunal should replace the term ‘percent’ for ‘percentage’. The tribunal denied the claimant’s requests for correction and interpretation in their entirety. In terms of the correction request, the tribunal did not find that the award contained any computational, clerical or typographical errors, and therefore did not fall within the ambit of s.38(1) No.1 DIS Rules.

 

4.1.2.10.   With respect to the interpretation request, the tribunal found that the terms ‘percent’ and ‘percentage points’ were virtually synonymous, and that the text of the award was clear.[106] Moreover, the tribunal indicated that procedurally, the post-award request was filed past the stipulated time-frame and as such the tribunal lacked jurisdiction over the award. The tribunal explained that if it were to exceed its jurisdiction, it would “risk [rendering] an arbitral award that can be annulled”.[107]As such, time-limits play a key factor in assuring the finality of an arbitral award.


4.1.3.                Switzerland

 

4.1.3.1.      Law.


4.1.3.2.      As previously discussed, neither the PILA nor the Concordat contains a provision on the interpretation of awards.[108] This legislative gap has been resolved through the Swiss courts, where in an important decision the Swiss Federal Tribunal found that it retains the power to correct or interpret errors in an award.[109]

 

4.1.3.3.      The principle that an arbitrator has inherent authority to correct or interpret an arbitral award draws inspiration from Article 145 of the Federal Judicial Organization Act (“OJ”), and more recently, from the new Swiss Federal Tribunal Act (“LTF”). The LTF was enacted on 1 January 2007 and deals with annulment proceedings subject to the PILA.[110]Article 129 of the LTF stipulates that the Federal Tribunal has the authority to ‘clarify’ or ‘rectify’, upon the request of one party or sua sponte, a judgment of the Federal Tribunal which is either unclear, incomplete or ambiguous, or contradictory, or that contains computational or clerical errors.[111]Two observations can be made from this provision. First, the wording of Article 129 of the LTF appears to mesh interpretation and correction mechanisms into a single process. As Kaufmann-Kohler and Rigozzi explain, although correction and interpretation may, at first blush, appear to have the same purpose, they operate differently in practice.[112] Second, the LTF rules on interpretation are broader than those under the UNCITRAL ML because the Federal Tribunal is permitted to render an interpretation sua sponte.


4.1.3.4.      Policy.


4.1.3.5.      In contrast to correction, there is more scrutiny on the tribunal to carefully ensure that it is only interpreting or clarifying the reasoning of the original award and not rendering an implicit review on the merits.[113] These restrictions help to ensure that the tribunal does not exceed the limits of its competence and preclude the aggrieved party from reopening the case, thereby not infringing the res judicata effect.[114] According to Article 190(1) of the PILA, an award has res judicata effect when the parties have been notified of the award, rendering the award final and binding under Article V(1)(e) New York Convention.


4.1.3.6.      Case-law.


4.1.3.7.      The case of 4G_2/2009[115] illustrates the difficulty for a party to seek an interpretation from the Federal Tribunal under Article 129(1) of the LTF. In this case, a dispute arose in connection with an alleged extension of a services contract. The respondent was a sports marketing company and the petitioner was a national football association. The respondent claimed that it had concluded a contract with the petitioner on 4 September 2007 and that the petitioner’s acceptance implied an extension of the existing contract. As such, the respondent filed a request for arbitration against the petitioner under the ICC Rules with the proceedings being held in Zurich, as provided under the contract. Amongst other claims raised, the respondent sought damages of at least U.S. $3 million, as well an injunction to prohibit the petitioner from taking actions that could jeopardize the respondent’s rights under the contract. The petitioner filed a counterclaim of U.S. $500,000 with interest.


4.1.3.8.      The ICC tribunal delivered its award in January 2009, finding that a new contract was indeed concluded in September 2007 but that the acceptance did not imply an extension of the existing contract. The tribunal denied most of the parties’ claims and submissions. However, the tribunal partially upheld the respondent’s claim for damages (§4 of the award) whilst rejecting the petitioner’s counterclaim on the basis of set off with the respondent’s claim for damages (§5 of the award). Both parties filed an application to appeal the award before the Swiss Federal Tribunal. The respondent submitted that the Federal Tribunal should annul certain provisions in the award and remit to the original tribunal. The petitioner submitted that the award should be annulled in its entirety. In June 2009, the Federal Tribunal decided under para.3 of its judgment to set aside §4 and §§6-8 of the ICC award, only. In so doing, the Federal Tribunal rejected the petitioner’s claim for damages from set off, which was embedded under §5 of the original award.

 

4.1.3.9.      Subsequently, in September 2009, the petitioner filed a request for interpretation under Article 129 LTF, seeking a clarification of para.3 of the judgment of the Federal Tribunal on the basis of an alleged contradiction between the reasoning and the final decision. The petitioner claimed that para.3 of the judgment should be clarified to include §5 of the original ICC award amongst those provisions that needed to be annulled.


4.1.3.10.   The Federal Tribunal dismissed the petitioner’s submission, finding its interpretation request under Article 129 unfounded[116]. It highlighted that interpretation is a tool that is employed to clarify ambiguous provisions, and should not be used as a pretext to revisit the substance of a decision. The Federal Tribunal rejected the petitioner’s submission that the June 2009 judgment of the Federal Tribunal was contradictory, and instead found the judgment to be rather consistent. Under §1.3, the Federal Tribunal reprimanded the petitioner’s use of the interpretation mechanism as a guise to reassess the merits of the previous judgment, and held that it was “unacceptable within a clarification procedure to question the legality of the judgment by reference to this brief in the appeal.” Furthermore, the Federal Tribunal explained that it could not reevaluate the 2009 judgment’s decision to reject the petitioner’s claim for set off because it was res judicata.[117]


4.1.4.                U.K.

 

4.1.4.1.      Law.


4.1.4.2.      Some scholars contend that interpretation is not recognized under English law.[118]Notwithstanding the fact that the EEA does not expressly adopt the terminology of ‘interpretation’, s.57(3)(a) of the EEA stipulates that an arbitral tribunal has the authority to sua sponte or on the application of a party “clarify or remove any ambiguity in the award”, absent an agreement of the parties. Given that the EEA expressly provides that a correction forms part of the award (s.57(7)), it would be presumed that this provision also applies to the clarification, or interpretation, of awards.[119]In contrast to UNCITRAL ML which permits the arbitral tribunal to extend the time-frame in which to accept interpretation requests, the EEA grants this authority to English courts by virtue of s.70 of the Act.


4.1.4.3.      The test for deciding whether an award is ambiguous or unclear is if the award contains inadequate rationale or incomplete reasons for a decision.[120]

 

4.1.4.4.      Section 70(1) of the EEA provides that an aggrieved party should first exhaust all available recourse under s.57(3) prior to any judicial action for annulment of the award. However the aggrieved party need not exhaust its options under s.57(3) where the nature of its request cannot be remedied by the arbitral tribunal, and can instead directly apply to have the award set aside. [121]


4.1.4.5.      Policy.


4.1.4.6.      The clarification provision embedded in s.57(1)(a) of the EEA reflects the position under Article 33(1)(b) ML. In contrast to the ML provision, the EEA meshes the correction and interpretation mechanisms under the same subsection. As such, s.57 not only deals with correction of errors but also covers requests for reasons from the tribunal itself to clarify or remove ambiguities in its award. In the words of Cooke J, the policy under the EEA is to “enabl[e] the arbitral process to correct itself where possible, without the intervention of the Court” (emphasis added).[122] This pro-arbitration policy seeks to uphold the finality of arbitral awards albeit still recognizing the three exceptions of correction, supplementation and interpretation.


4.1.4.7.      Case-law.


4.1.4.8.      The case of Torch Offshore[123] illustrates the general principle that, by virtue of s.70(2), an application to set aside an award under s.68 cannot be brought if the applicant has not first exhausted any available recourse under s.57.


4.1.4.9.      In this case, a dispute arose in connection with a charter agreement between two parties. The claimant filed a request for arbitration, alleging that the respondent had made two misrepresentations which induced him to enter into the charter agreement. In the award, the arbitrator rejected the request for arbitration, finding that the representations were false but innocently made. In response, the claimant alleged that there was a serious irregularity in the award because the arbitrator had failed to consider whether he had been induced by the respondent to enter into the contract. Accordingly, the claimant sought, inter alia, to set aside the award under s.68 EEA or to have it varied. The respondent argued that s.70(2) precluded the claimant from setting aside the award because recourse under s.57 had not been exhausted.


4.1.4.10.    The Commercial Court rejected the application for set aside, explaining that the claimant had not exhausted the available recourse under s.57(1)(a) to clarify ambiguity in the award. Under §28 of the judgment, the court elaborated on the nature of interpretation requests, stating that they can be used to gain “further reasons from the arbitrator or reasons where none exist.” It is submitted that Torch Offshore and several other English cases on clarification requests fail to define the exact scope of the tribunal’s power to clarify its award. This omission has the effect of giving the tribunal wide discretion to expand upon and exploit its ‘clarification’ power, thus leaving open the door for an implicit review on the merits.


4.1.5.               U.S.A.

 

4.1.5.1.     Law.


4.1.5.2.      There is no provision for interpretation in the FAA. The only provision that enables a tribunal to clarify its reasoning is s.10(b) of the FAA, which permits a court to remand a vacated award to the tribunal provided that the time within which the agreement required the award to be made has not expired. Furthermore, U.S. courts have proclaimed a common law right to clarify awards.[124] This lack of a clear statutory basis to address the issue of clarification of awards has led to conflicting case-law under the FAA.

 

4.1.5.3.      To some extent, the new Revised Uniform Arbitration Act (“RUAA”) seeks to clarify this gap in the rules. Unlike the FAA, the RUAA provides a mechanism whereby the parties can directly request the arbitrator to clarify an award. Section 20(a)(3) of the RUAA stipulates that, “On [motion] to an arbitrator by a party to an arbitration proceeding, the arbitrator may modify or correct an award:[…]to clarify the award.” In contrast to the time-frame of 30 days under Article 33(1)(b) of UNCITRAL ML, the RUAA provides a shorter deadline of 20 days from receipt of the award to make a motion for clarification under the Act. Unfortunately the RUAA has been adopted by few U.S. states and is generally preempted by the FAA in international matters.[125]


4.1.5.4.      Policy.


4.1.5.5.      The court’s remand to clarify authority under the FAA has been recognized as an important and very narrow exception to the general principle of functus officio.[126] The remand authority is available “so that the court will know exactly what is being asked to enforce.”[127]It helps the court to clarify whether the arbitrator’s holding evidences a manifest disregard of the law, and not to express disagreement.[128] As scholar Thomas Carbonneau explains, the action to clarify is “a pragmatic answer to a stark choice: enforcement or vacatur for indefiniteness”.[129] An ambiguous award should not be enforced by the court.[130] As such, the court should exercise its remand authority to clarify ambiguities which would otherwise hinder enforcement of the award.[131]


4.1.5.6.      Case-law.


4.1.5.7.      Two cases will be analyzed to shed light on the application of the remand to clarify authority in the U.S. The first case reveals a relatively straightforward application of the remand authority and an understanding of its limits. The second case, however, exemplifies the power’s potential for abuse and the dangers of excessive judicial interference in arbitration.


4.1.5.8.      Brownsville General Hospital[132]. In this case, a dispute arose in connection with a unionized employee’s suspension and eventual termination on the basis of alleged sexual harassment. The dispute was submitted to arbitration and the arbitrator decided that the employee should be reinstated after completing therapy. However there was a breakdown in the relationship between the employee and his therapist, which rendered reinstatement unfeasible. Facing possible termination from the hospital, the employee’s union petitioned to have the unforeseen circumstances in the case assessed by the arbitrator. The district court accepted this request, which the U.S. Court of Appeals reaffirmed. The U.S. Court of Appeals agreed with the district court’s statements on functus officio and the arbitrator’s power to remand. First, in §40 of its judgment, it held that “[R]emand is permitted only in those limited circumstances that justify departure from the functus officio rule…in which there is no opportunity to revisit the merits of the dispute.” Second, the Court of Appeal clarified the extent of the power of remand by stating that although an aggrieved party can request for reasons underlying the tribunal’s decision, he cannot reconsider the contentions of both parties (§41). This decision’s sensible and practical application to the remand to clarify authority has been commended for “exhibiting ‘a high degree of common sense’ and…‘afford[ing] the parties arbitral justice.”[133]

 

4.1.5.9.      Hardy v Walsh Manning[134]. In contrast to Brownsville, the Second Circuit in Hardy construed the remand authority in a different light. Hardy demonstrates the interplay between the remand authority and vacatur for manifest disregard of the law. Although manifest disregard of the law is by and large considered to be defunct,[135] it is nonetheless still important to analyze the dangers that an intrusive judiciary poses on the legitimacy and efficiency of arbitration.

 

4.1.5.10.   The case of Hardy involved a dispute which arose in connection with certain improprieties that took place in the claimant’s bank account. Hardy, the claimant, opened a bank account at the brokerage firm Walsh Manning, the respondents. The claimant filed an arbitration action under the National Association of Securities Dealers (“NASD”) against the respondents, alleging that the latter had urged him to purchase ‘house shares’, which the respondents failed to disclose they had an interest in selling. The NASD tribunal consisted of three arbitrators, only one of whom was an attorney. In the award, the tribunal found the respondents, Walsh Manning and an employee, ‘jointly and severally liable’ under a theory of respondeat superior. The claimant made a motion to confirm the award but the respondents moved to vacate the award on the basis that, under New York tort law, an employee cannot be liable on the basis of respondeat superior. The district court confirmed the award despite its legally inaccurate terminology.

 

4.1.5.11.   The Second Circuit. However the Second Circuit vacated the portion of the award which applied to the employee respondent, holding that the tribunal had issued a “problematic” and “manifestly intelligible” award that satisfied the high ‘manifest disregard of the law’ threshold. Furthermore, it directed to remand to clarify the basis on which liability can be imposed upon an employee, highlighting that “substantial financial liability should not be imposed upon an individual without a clear basis in law.”[136]

 

4.1.5.12.   First, the Second Circuit analyzed the decision of the district court and justified its reasons for vacating a portion of the award. Notwithstanding the Second Circuit’s initial acknowledgment that the respondeat superior slip may have been the result of a grammatical mistake, the court referred to this error in the award unremittingly throughout its judgment. Under §27, the court adopted strong language to emphasize the gravity of the tribunal’s blunder, “In our case, we have crossed the line from confusion to inexplicability, and we can discern no reading of the Award that resolves its apparent contradiction with the law of respondeat superior.” The Second Circuit’s judgment became increasingly confusing to understand. At one point the court describes the tribunal’s slip as “ ‘a stray and unnecessary remark’[which] only the Panel [i.e. the tribunal] can tell us” but later colors the mistake as “an intentional statement” on the part of the tribunal.[137] At another point, the court states that the award is void of any ‘legal reasoning’, but contains a ‘fundamental mistake of law’.[138]

 

4.1.5.13.   It is the dissenting opinion of Judge Straub which helps to shed light on this seemingly ‘inexplicable’ error in the award. Judge Straub emphasizes that the majority’s decision undermines the pro-arbitration policy underlying the FAA, and indeed “fatally frustrates the very goals which arbitration seeks to advance, [that is] the efficient resolution of disputes and the avoidance of prolonged expensive litigation.”[139] Furthermore, Judge Straub provides his ‘plausible’ interpretation of the award, supported with evidence during the arbitral hearing, that the award merely sought to state that the respondents were ‘jointly and severally liable’ and that only the employer, Walsh Manning, was respondeat superior. At most, Judge Straub contends, the award could be described as ambiguous.


4.1.5.14.   Second, once the majority decision concludes that the award pertaining to the employee must be vacated, it invokes its authority to remand for clarification under the guise of interpreting the arbitral judgment with the ‘most liberal reading possible’.[140] Indeed, the Second Circuit applies the clarification exception despite finding that the tribunal has manifestly disregarded the law, which as Judge Straub highlights, has “little support in prior precedence.”[141] In so doing, the majority misunderstands and misapplies the limitations on judicial review of awards which  should be narrowly construed. These narrow limitations serve to promote the efficiency and the legitimacy of the arbitration system.


4.1.5.15.   Third, the majority misconstrues the objective of a motion to remand for clarification. It is the goal of the court to remand for clarification where an award is unclear or ambiguous in order to receive clear instructions from the arbitral tribunal on how it is to proceed in terms of the enforcement of the award.[142] In this case, it is submitted that the majority went beyond a mere request to clarify unclear or ambiguous terms in the award. Rather, in the court’s instructions for remand, the majority effectively directs the tribunal on how it should clarify the award in order to avoid vacatur of the award, including an admission of the arbitrator’s finding of liability itself. Such instructions appear to expand the scope of the clarification exception, opening the door to an in-depth review of the merits. As Judge Straub comments, “[Such] a step…would clearly interfere with the arbitral process and directly contradict[s] our prior precedent which holds that an ambiguous award may be confirmed, so long as any plausible reading of the award is legally sustainable.”[143]

 

4.1.5.16.   Commentary. To quote Carbonneau, the case of Hardy had the “potential of generating an entire new sector of vacatur litigation” based on ambiguity.[144] A mere misapplication of a legal term by the arbitral tribunal appears to have left the Second Circuit court in disarray. Ambiguity and unclear reasoning, it seems, can justify expanding the judicially-created vacatur ground of manifest disregard of the law. In an attempt to salvage this award otherwise destined for annulment, the majority found solace in a contorted application of the clarification exception. This application gave rise to a reassessment of the merits, which contradicts the notions of functus officio and finality of arbitral awards.


4.1.5.17.   In contrast to the previous decision of Brownsville, the case of Hardy illustrates the harmful effects of an intrusive judiciary on arbitration. The majority in Hardy, having lost sight of the policy and goals underlying arbitration, reviewed the arbitral tribunal’s decision in a critical and at times reproachful tone. However it must be emphasized that it is not the court’s duty to express its disapproval with the arbitral tribunal’s reasoning either in its judgment or in a motion to remand. The court’s duty is to interpret awards in a liberal manner in order to facilitate the enforcement of arbitral awards, and in so doing, promote the legitimacy of the arbitral system and respect the parties’ expectations with respect to their bargain for arbitration.

 

4.2.                    Institutional Arbitration Rules

 

4.2.1.                 Introduction

 

4.2.1.1.       As in the situation under national law, the acceptance of interpretation provisions in arbitral institutions has not come without controversy. In fact some institutions do not provide at all for the interpretation of awards. An example which reflects this reluctance is the drafting of the UNCITRAL Arbitration Rules 1976.[145] Some delegates found that inserting an interpretation provision would serve no useful purpose as its application by the tribunal would have no ‘legal effect’. Ultimately, however, the drafting committee came to the recognition that the introduction of interpretation rules would comprise an important tool to clarify ambiguities in the award where the arbitrator had become, in principle, functus officio.[146]

 

4.2.1.2.       The UNCITRAL Rules have inspired other arbitral institutions, as well as national laws, to adopt similar interpretation mechanisms. However, as the discussion will reveal, some arbitral institutions are averse to the inclusion of such a provision in their rules.

 

4.2.2.                 LCIA

 

4.2.2.1.       The LCIA does not provide for interpretation in its rules. It is curious to note that, despite the enactment of the EEA in 1996, which provides for interpretation, the LCIA Rules have not been modified to include a provision on interpretation or clarification of arbitral awards. Notwithstanding this express lacuna in the rules, the tribunal is still deemed to have inherent competence to accept requests for interpretation for a reasonable time after the making the award.[147]

4.2.3.                ICC

 

4.2.3.1.       Initially averse to the introduction of interpretation, the ICC amended its rules in 1998 to include such a provision. Although the ICC does not supply a definition of interpretation, commentary has indicated that it remains consistent with international arbitration literature. It has been stated that the provision applies “when the terms of an award are so vague or confusing that a party has a genuine doubt about how the award should be executed.”[148] Moreover the ICC Rules do not specify the scope of the interpretative power, and as a result scholars have noted that the arbitral tribunal has complete discretion to decide whether a particular request requires a clarification of the reasons for an award or, alternatively, of the dispositif.[149]A request for interpretation, however, should not give rise to a reconsideration of the underlying claim.[150]

 

4.2.3.2.       ICC case 10172[151] emphasized the importance of the interpretation mechanism which is to promote the enforcement, and consequently, the finality of arbitral awards. In this case, the claimant applied for an interpretation under Article 29 of the ICC Rules because he sought to distinguish claims in which the arbitral tribunal still retained competence from those in which it no longer had jurisdiction. The respondent retorted that there was no need for a clarification because the dispositif of the award was very clear, and that such an interpretation request would result in a pure commentary of the tribunal’s reasoning. Ultimately, the tribunal accepted the claimant’s request for an interpretation, explaining that it had a duty to “clarify issues which do not seem clear to one of the parties.[152]

 

4.2.4.                ICSID

 

4.2.4.1.       Under the ICSID Convention, the interpretation mechanism was never a bone of contention, and indeed was considered an important provision in all drafts leading to the Convention.[153]The interpretation mechanism is enshrined under Article 50 of the Convention, as well as Rules 50 and 51 of the ICSID Arbitration Rules. Article 50(1) stipulates that any party to the arbitral proceeding may request in writing for an authoritative interpretation where a dispute exists between the parties as to the “meaning or scope” of an award. This precondition of an existing dispute between the parties distinguishes the ICSID interpretation mechanism from other major arbitral rules and laws. Scholar Christoph Schreuer comments that the dispute must be sufficiently concrete and not raise new arguments in order to warrant a request for an interpretation.[154]

 

4.2.4.2.       Unlike the rectification provision in ICSID which can only be made by the tribunal that rendered the award, interpretation under ICSID goes further than any other arbitral institution. An interpretation may be rendered “if possible” by the original tribunal (Article 50(2)). This implies that if the original tribunal is not available, then a new tribunal can be formed in order to consider the interpretation request.

 

4.2.4.3.       In contrast to rectification and other provisions such as annulment and supplementation of awards under the Convention, Article 50 requests do not have an express time-limit. This is because negotiations leading up to the drafting of the Convention were marked by the intense disagreements over the length of the timeframe.[155]As a result, the absence of a time-limit suggests that parties can submit interpretation requests at any time after the award has been rendered. Consequently, the Secretary-General cannot refuse an interpretation request on the basis of a late submission, which it can in the case of an application for rectification. Instead, the Secretary-General has limited authority to ensure that the interpretation request relates to the award.[156] Furthermore, an interpretation request has great tactical advantage to an aggrieved party in so far that, by virtue of Article 50(2), the tribunal may suspend the enforcement proceedings pending the decision on an interpretation request, if circumstances so require.

 

4.2.4.4.       It is interesting to note that there is not much case-law on Article 50.[157] As yet, there are only two cases which have invoked this provision: Wena v Egypt[158]and Tanzania Electric[159]. In fact, the case of Wena was the first ever case which involved an application of Article 50(1). In Wena,a dispute arose in connection to the alleged unlawful expropriation of the claimant’s two hotels by the respondent, an Egyptian public-sector company. The ICSID tribunal ruled in favor of the claimant and awarded him over U.S. $20 million in damages and costs. Following its victorious decision, the claimant filed an application for interpretation under Article 50 to request a clarification of the tribunal’s finding of expropriation. In the decision on interpretation, the ICSID tribunal conducted research on interpretative practices under different jurisdictions and formulated a two-step test, as follows: first, a dispute must exist between the parties; and second, the purpose of an application must be to obtain an interpretation.[160] As a result, the tribunal has crafted limits to a party’s recourse to the interpretation mechanism in order to prevent reassessment of the merits and uphold finality of the arbitral award.[161]

 

Part V: Issues and Challenges for the Future.


5.1.                Introduction

 

5.1.1.        In the concluding Part of this paper, I will allude to a number of potential issues and challenges pertaining to the debate on the continuing tension between finality and fairness, and outline the broad elements of possible responses for future direction. First, however, there are a number of recurrent themes which have emerged from the analysis that has preceded and which are critical for a better understanding of the issues involved. None of these themes is free from controversy or represents settled law; but given their critical relevance of these themes, I will proceed to examine them in turn.

 

5.2.            Functus officio

 

5.2.1.        Functus officio is a crucial doctrine which serves to foster finality and certainty in arbitration. It has been recognized for centuries and to this day continues to play an important role. As the discussion in para. 2.1 supra reveals, the consistent application of functus officio reflects its continuing relevance in national laws and arbitral rules. Functus officio is not, as some commentators deem, a ‘harsh doctrine’ that renders arbitration without ‘safety valves’.[162] Rather, it is a doctrine that supplies safety valves to the arbitral process.

 

5.2.2.       The justification for functus officio is consistent with the policy considerations underpinning the rationale for arbitration. Parties opt for arbitration over traditional litigation for several reasons. First, the presence of an arbitration clause provides certainty and flexibility in resolving international commercial disputes. In broad terms, it represents a simpler, faster, less costly, and generally more effective means of settling a dispute than litigation. Second, the arbitration agreement, as the product of contractual interpretation, gives effect to the parties’ intentions and expectations under the contract.[163] An arbitrator who exceeds his mandate runs counter to parties’ expectations, raising important public concerns of an illegitimate authority deciding on the rights of private persons. Third, a liberal interpretation of arbitration clauses helps to encourage more efficient ‘one-stop’ arbitration.[164] Thus, arbitration promotes finality of arbitral awards, which in turn enhances the prospect of an expeditious resolution of international commercial disputes. These considerations give rise to the presumption that, absent legislative or institutional authority, the principle of functus officio should be treated as an implied element of the parties’ arbitration agreement.[165]

 

5.2.3.        However, as this paper has suggested, the principle of functus officio is not absolute and is subject to three limited exceptions, correction, interpretation and supplementation, which in most cases are only available for a short period of time after submitting the final award. These exceptions have been crafted in order to safeguard procedural fairness in the arbitration process. Moreover, the exceptions have been narrowly drawn because to do otherwise would risk jeopardizing the finality of arbitral awards. It would also render the limited mechanisms of correction and interpretation susceptible to abuse by the parties, tribunals, and the courts. Parties who attempt to expand the existing correction and interpretation mechanisms in order to accommodate substantive changes to an award which is res judicata, risk circumventing the annulment procedure and, in so doing, threatening the legitimacy of the arbitral process as a whole. This would invite disaster not only to the principle of functus officio but also to the institution of arbitration as an attractive alternative to traditional litigation.

 

5.3.           Party Autonomy and Inherent Authority

 

5.3.1.        In the absence of legislative authority, parties can contractually provide for limited exceptions to the arbitrator’s mandate by incorporating correction, interpretation, and/or supplementation mechanisms in their arbitration agreement. This is consistent with the principle of party autonomy which is deemed fundamental in instilling flexibility in the arbitral process. Furthermore, the concept of party autonomy is consistent with Article II(1) of the New York Convention 1958 which provides that Contracting States to the Convention are under an obligation to recognize and give effect to the material terms of the parties’ arbitration agreement. This includes a provision on correction, interpretation or supplementation of an award. Thus if a Contracting State refused to recognize an arbitration agreement on the basis of a provision on correction, interpretation or supplementation, then the parties would have a potential claim against the state for a violation of Article II of the New York Convention. In practice, however, Born notes that correction mechanisms are more prevalent in institutional arbitration than in ad hoc arbitration because institutional rules almost always have a provision on correction, and at times provide for interpretation.[166]

 

5.3.2.        Furthermore, absent contractual and statutory authority, an arbitrator should be considered to have inherent powers to correct or to interpret an arbitral award. Inherent powers are more than implied powers under the arbitration; they are powers that are non-assignable from the arbitral tribunal. As one commentary aptly describes it, “Inherent powers…are those powers that are not explicitly granted to the tribunal but must be seen as a necessary consequence of the parties’ fundamental intent to create an institution with a judicial nature.”[167] Moreover, parties to the arbitration can limit the arbitrator’s inherent powers in order to reflect their expectations under the contract. This is because obvious errors or ambiguities in the award should be capable of correction or interpretation by the arbitral tribunal. To do otherwise would be to infringe basic principles of procedural fairness because it would be unconscionable for the parties to incur delays and extra costs at the expense of the tribunal’s mistakes.

 

5.4.            Time-Limits

 

5.4.1.        There is a debate on the time-limit within which parties should submit a request for correction or interpretation of an arbitral award to the tribunal (or court, in the case of the U.S.). In many jurisdictions the arbitral laws and institutional rules follow the UNCITRAL ML that provide for a default 30-day window within which either a tribunal can ex officio or an aggrieved party can apply for a correction or interpretation of the award. However, many scholars have criticized this time-frame for being unduly restrictive. Scholars Jean-François Poudret and Sébastien Besson have emphasized that the statutory time-limit of 30 days is “regrettable” because many errors in the award only surface at the enforcement stage.[168] Instead, they argue, a deadline of one-year following notification of the award to be more appropriate, following the model of the new Italian Code of Civil Procedure (ICCP), Article 826.Scholar Brooks Daly also submits that as errors are common traits of human fallibility, they should be corrected at any point beyond the 30-day deadline.[169]Professors Albert van den Berg, Robert van Delden and Henk Snijders suggest that the deadline for correction or interpretation should be triggered upon the discovery of an error in the award.[170]

 

5.4.2.          These are strong arguments in favor of extending the time-limits for correction and interpretation, but on balance there must also be an end to the process. An endless or prolonged time-limit would cause the parties to the arbitration to incur further costs and delays, and more seriously, it would risk undermining the principle of finality of arbitral awards. There is no magical time limit capable of meeting the circumstances of every case. Whether it is of one year or of one month, a time-limit is always arbitrary. On balance, the better view is probably to preserve the short time-limit, but with the proviso that, where the arbitral tribunal (or the courts, in the case of the U.S. and the U.K.) deems it necessary, it has the discretion to extend this deadline to suit the parties.

 

5.5.           Procedural Fairness

 

5.5.1.         A central feature of the correction and interpretation mechanisms is the need to ensure audi alterem partem, or procedural fairness. A party who applies for the correction of an error or for the interpretation of an ambiguity is required to ensure that the other party is able to comment on the application. This guarantees the right to be heard, which is a fundamental procedural requirement. Arbitral laws and rules generally provide that the remedies of correction and interpretation should not be exercised by any party without first affording the other party a reasonable opportunity to comment on the representations submitted to the tribunal.[171]

 

5.5.2.        It is curious to note that neither the UNCITRAL Rules nor Model Law expressly acknowledges the other party’s right to comment. Furthermore, neither Article 49 (rectification) nor Article 50 (interpretation) of the ICSID Convention expressly provides for the other party’s right to be heard.[172] Despite the absence of an express stipulation, it is good practice for parties to adhere to this fundamental requirement of allowing the other party to comment on submissions presented to the tribunal without exceeding the stipulated time-frame. This would satisfy both procedural fairness and the finality of arbitral awards.

 

5.6.           Way Forward

 

5.6.1.        As the discussion in Parts III and IV of this paper has revealed, it is not unheard of for the aggrieved party to an arbitration to invoke the correction and interpretation mechanisms as a guise to review claims that would otherwise not be grounds for annulment because they are not sufficiently grave to warrant a violation of due process or public policy.

 

5.6.2.        In order to address this apparent ‘loophole’ in the arbitral process, a possible way forward would be to require the arbitral tribunal to circulate a draft version of the award to the parties, giving them an opportunity to provide their feedback on it prior to the final award. This would allow the arbitrator to rectify errors, clarify any ambiguities and address concerns that the parties may have at a much earlier stage than would otherwise be the case. That would in turn help to facilitate the enforcement and safeguard finality and certainty in the arbitral process. Such an approach would not be unprecedented.

 

5.6.3.        Under Article 15 of the Dispute Settlement Understanding (“DSU”) of the World Trade Organization, there is provision for the panel to circulate the factual and legal sections of its draft report before the parties to the dispute, inviting them to comment on it and giving them a deadline for their submissions in writing. Following the expiration of this deadline, there is also provision for the panel to incorporate the parties’ comments and submit an interim report for the parties to review anew within a period of time set by the panel. Prior to circulation of the final report among WTO Members, the parties can also submit a request to the tribunal to review specific aspects of the interim report. Provision is also made for the panel, at the request of a party, to hold a meeting with the parties to clarify or correct any errors in the report.

 

5.6.4.        Admittedly, there are disadvantages to such a complex system involving lengthy delays and additional costs which would accrue to the parties, not to mention the possibility of having the proceedings derailed. Clearly not every arbitral tribunal will be able to accommodate or process such complexity. Nonetheless there will be cases in which the benefits of a final award free from obvious errors or ambiguities will outweigh the disadvantages that the initial complexity entails. For every opportunity which is given to the parties to identify errors and ambiguities at pre-final award stage, there is a later potential request for correction or interpretation which is avoided.

 

Part VI: Conclusion.

 

6.1.                    Lack of Uniformity. The UNCITRAL ML notwithstanding, there is no uniform law or practice applicable to the correction or interpretation of arbitral awards. Every jurisdiction comes with its own specificities. In the case of corrections, even though most national arbitration statutes empower the arbitral tribunal to clarify or correct an award, the FAA stipulates that U.S. district courts are the competent authority to conduct judicial review of awards. In the U.K., the added requirement of ‘substantial injustice’ under s.68 of the EEA has had the effect of turning on its head the outcome of an otherwise clear case which could have been used to re-affirm the finality principle. The scope of correction under the EEA is significantly broader than under UNCITRAL ML – not least because it accounts for errors arising from “accidental slips”. By contrast Switzerland’s PILA does not expressly acknowledge the tribunal’s powers of correction and interpretation but instead relies on case-law to clarify this lacuna in the statute.

 

6.2.                    Similar divergences are to be found in the adoption and application of interpretation mechanisms. Many statutes do not even incorporate a power of interpretation. As has been seen already, a general power of interpretation does not even feature in the LCIA Rules. The ICC Rules have only recently vested authority for correction and interpretation in arbitral tribunals. This statutory reluctance stands in sharp contrast with the more liberal approach adopted in the ICSID Convention which not only provides expressly that the original tribunal can render an authoritative interpretation, but even permits an entirely new tribunal to exercise such authority.

 

6.3.                    Common Trends. Despite these divergences, there are many common trends that are apparent in the case law and will continue to inform future debate. One of them is the doctrine of ‘functus officio’ which remains a continuing focus of attention. Another is about the role of time-limits.

 

6.4.                    Both national arbitration statutes and institutional rules uniformly apply and uphold the doctrine of functus officio, treating it as a core principle which supports the concept of finality in arbitral awards. Respect for the doctrine manifests itself in provisions that affirm the ‘final and binding’ character of an award. The jurisdictions that have been analyzed are by and large pro-arbitration and their national courts rarely miss an opportunity to accord deference to the arbitral tribunal. However, there have been the odd cases in which courts have tended to interfere in the outcome of arbitration in order to guarantee fairness. The courts’ appetite to interfere varies from jurisdiction to jurisdiction. The cases of T.Co v Dempsey and CNH have been discussed at length. They are the concrete demonstration that the courts’ drive for fairness comes at the price of finality of arbitral awards. Even as courts continue to re-affirm the pre-eminence of finality, the tension between fairness and finality will not go away.

 

6.5.                    Then there is the emerging debate on time-frames. Most national laws and institutional rules which draw inspiration from the drafting of the UNCITRAL Arbitration Rules provide a common time-frame of 30 days for an aggrieved party to submit a correction or interpretation request to the tribunal. But there are those who have argued in favor of a longer time-frame. This is another debate which is not about to go away and on which – for obvious reasons – there will be no easy compromise. A short ‘waiting’ time upholds the principle of finality while a relatively longer one keeps it on hold.

 

6.6.                    What is Next? There is little doubt that current trends will continue to inform future debate on the tension between finality and fairness. First and foremost, the finality principle is bound to remain front and center of the debate as its pre-eminence continues to be reaffirmed by one jurisdiction after another. But even as jurisdictions uphold the finality principle, there will be inroads in its day-to-day application, driven in part by continuing attempts to expand the scope of exceptions to accommodate considerations of fairness.

 

6.7.                    The other factor to bear in mind is the emergence of new arbitration centers around the world, ready and willing to compete for their fair share of the arbitration business. As competition intensifies, states and arbitral institutions will do what it takes to make their arbitration forum both attractive and competitive. An attractive forum is one which offers a package of benefits which potential users have come to expect from arbitration. A competitive forum is one which combines a basic package of benefits with added features which others do not have on offer. A forum which is characterized by ‘excessive judicial interference in arbitration’ is likely to be frowned upon and shunned by potential clients. So would one which fails to uphold due process or keeps finality ‘on hold’ for an indefinite period. It goes without saying that competition will be a factor in the lingering tension between finality and fairness, keeping differences to a strict minimum and promoting harmonization of arbitration rules and procedures amongst competing jurisdictions.

 

6.8.                    Looking Forward. In this paper I have already outlined a number of proposals for future consideration. First, I have alluded to the possibility of having a draft final award circulated amongst the parties to the arbitration for their review and consideration prior to the final award in order to pre-empt potential errors and ambiguities and address them at an early enough stage. Second, I have supported calls for more flexibility in the time-frames within which to submit a correction or interpretation request, bearing in mind, however, that there is not a magical time-frame which will address all situations and that, on balance, it may be best to leave the ultimate discretion to the courts. Third, I have alluded to the need for national arbitration laws and arbitral institutions to expressly acknowledge and apply rules of procedural fairness, including a party’s right to be afforded a reasonable opportunity to be heard before the tribunal.

 

6.9.                    Concluding Remark. Finality is undisputedly one of the core principles of arbitration. There are exceptional situations where the principle of finality must accommodate considerations of fairness but these instances have to be severely circumscribed. The efficacy and legitimacy of arbitration requires that arbitral awards should be final and not subject to undue delays and challenges.

 

“I hereby confirm that this thesis is my personal work product and that I have not used any input from others without reference to the relevant source.”

Bibliography


a)    Books ~

  • B. Berger & F. Kellerhals, Internationale und interne Schiedsgerichtsbarkeit in der Schweiz (Berne, 2006)
  • N. Blackaby, C. Partasides, et. al. Redfern and Hunter on International Arbitration (Oxford University Press, 2009).
  • G.B. Born, International Commercial Arbitration (Kluwer Law International, 2009).
  • P. Fouchard, E. Gaillard, B. Goldman, On International Commercial Arbitration (Kluwer Law International, 1999).
  • T. Hobbes, Leviathan (Oxford University Press, 1909).
  • F. Knoepfler and P. Schweizer, Arbitrage international—Jurisprudence Suisse commentée depuis l’entrée en vigueur de la LDIP (Schulthess, 2003).
  • C. Liebscher, The Healthy Award: Challenge in International Arbitration (Kluwer Law International, 2003).
  • M. Mustill and S. Boyd, Commercial Arbitration 2nd ed.(Butterworths, 2001).
  • J.-F. Poudret and S. Besson, Comparative Law of International Arbitration (Sweet & Maxwell, 2007).
  • J.-F. Poudret and S. Besson, Droit comparé de l’arbitrage international (Schulthess, 2002).
  • C. Schreuer, The ICSID Convention: ACommentary (Cambridge University Press, 2001).
  • A.J. van den Berg (ed), Yearbook Commercial Arbitration 2009 – Volume XXXIV, Volume XXXIV (Kluwer Law International, 2009).
  • A.J. van den Berg, H. J. Snijders, R. van Delden and B. Rujsenaars, Netherlands Arbitration Law (Kluwer Law International, 1993

 b)    Chapters or parts of books ~

  • S. Berti and A. Schnyder, in S. Berti et al. (eds.) International Arbitration in Switzerland (Kluwer Law International, 2000).
  • G. Petrochilos, S. Noury, et al., “ICSID Convention, Chapter IV, Section 5, Article 50 [Interpretation]” in L.A. Mistelis (ed), Concise International Arbitration, (Kluwer Law International, 2010).

 c)     Scholarly articles ~

  • ·      “Appendix: Extracts from ICC Addenda and Decisions on the Correction and Interpretation of Arbitral Awards” 13(1) ICC International Court of Arbitration Bulletin 87 (2002).
  • Décision (institutionelle) du Comité d’Arbitrage du 27 septembre 1999 dans l’arbitrage no.133”, 18(2) ASA Bulletin 301-310 (2000).
  • J. Alford, 29 August 2003 – Federal Court of Appeals for the Ninth Circuit, Digest by ITA Board of Reporters (2003).
  • R. Bamforth and K. Maidment, “Has the Door Been Opened for Substantive Amendments to Arbitral Awards? How a Recent Decision of the English Court Erodes the Principle of Finality of Awards” 15(1) IBA Arb. News (2010).
  • S. Besson, “Le Recours contre la Sentence Arbitrale Internationale selon la Nouvelle LTF (Aspects Procéduraux)”, 25(1) ASA Bulletin 2 (2007).
  • A. Buchanan and D.A.R. Williams, “Correction and interpretation of awards under Article 33 of the Model Law” 4(4) Int. A.L.R. (2001).
  • T.E. Carbonneau, “At the Crossroads of Legitimacy and Arbitral Autonomy” 16 Am. Rev. Int’l Arb 214 (2005).
  • D.D. Caron and L.F. Reed, “Post Award Proceedings under the UNCITRAL Arbitration Rules” 11(4) Arb. Int’l 431 (1995).
  • B. Daly, “Correction and Interpretation of Arbitral Awards under the ICC Rules of Arbitration” 13 ICC International Court of Arbitration 63 (2002).
  • H. Holtzmann and J. Neuhaus, A Guide to the UNCITRAL Model Law on International Commercial Arbitration: Legislative History and Commentary (Kluwer Law International, 1989).
  • G. Kaufmann-Kohler and A. Rigozzi, “Correction and Interpretation of Awards in International Arbitrations Held in Switzerland” 16(4) Mealey’s International Arbitration Report (2001).
  • J. Kirby, “T.Co. Metals, LLC v. Dempsey Pipe & Supply, Inc.: Are There Really No Limits on What an Arbitrator Can Do in Correction an Award?” 27(5) J. Int’l. Arb. 526(2010).
  • A.J. Kufler and L.B. Nelson, “The Authority of the Arbitrators to Interpret the Rules under which the Arbitration is Conducted” 41(3) The Arbitrator 21 (2010).
  • W.W. Park, “Why Courts Review Arbitral Awards” 16(11) Mealey’s International Arbitration Report (2001).
  • R. Perrot, “L’interprétation des sentences arbitrales” Rev. arb. (1968).
  • M.K. Sims and R.A. Bales, “Much Ado About Nothing: The Future of Manifest Disregard After Hall Street” 62 S.C.L. Rev. (2010).
  • D. Vidal, Droit français de l’arbitrage commerce international, Édition bilingue Français/Anglais (Gualino éditeur, 2004).

 d)    Cases ~

  • Germany
    • OLG Stuttgart 20 December 2001 1 Sch 13/01 in DIS databank.

 

  • Switzerland
    • Judgment of 2 November 2000, ATF 126 III 524 (Swiss Federal Tribunal).
    • o   Judgment of 9 December 2003, ATF Ière Cour (Ière Cour de droit civile).
    • Judgment of 12 January 2005, ATF 131 III 164.
    • o   Judgment of 10 November 2005, 4P.98/2005 (Ière Cour de droit civile).
    • o   Arrêt nº 4G 2/2009 de Ire Cour de Droit Civil, 21 octobre 2009.

 

  • United Kingdom
    • Sutherland & Co. v Hannevig Brothers Ltd [1921] 1 K.B. 336.
    • Fuga v. Bunge [1975] 2 Lloyd’s Rep. 192.
    • Gannet Shipping Ltd v Eastrade Commodities Inc. [2001] EWHC 483 (Q.B.).
    • Al-Hadha Trading Co v Tradigrain SA [2002] 2 Lloyd’s Rep. 512.
    • World Trade Corporation Ltd. v C Czarnikow Sugar Ltd.[2004] APP.L.R. 10/18.
    • Torch Offshore LLC v Cable Shipping Inc.[2004] EWHC 787 (Comm).
    • Fiona Trust & Holding Corp v. Privalov [2007] EWCA Civ 20.
    • CNH Global  v PGN Logistics [2009] EWHC 977 Comm.
    • Buyuk Camlica Shipping Trading & Industry Co. Inc. v Progress Bulk Carriers Ltd. [2010] EWHC 442 (Comm).

 

  • United States of America
    • Bayne v. Morris, 68 U.S. (1 Wall.) 97, 99 (1863).
    • Leslie v Leslie, 24 A. 319, 320 (N.J. Ch. 1892).
    • Mercury Oil Ref. Co. v. Oil Workers, 187 F.2d 980, 983 (10th Cir. 1951).
    • Cleveland Paper Handlers and Sheet StraightenersUnion No. 11 v E.W. Scripps Co., 681 F.2d 457, 460 (6th Cir. 1982).
    • Oil Chemical & Atomic Workers Int’l Union, Local 4-367 v Rohm and Hass, Texas, Inc., 677 F.2d 492, 495 (5th Cir. 1982).
    • Colonial Penn Ins. Co. v. Omaha Indem. Co., 943 F.2d 327, 334 (3d Cir. 1991).
    • Robbins v. Day, 954 F.2d 679, 683 (11th Cir., 1992).
    • In the Matter of Arbitration Between National Shipping Co. of Saudi Arabia, Transamerica SS Corp., 1993 A.M.C. 684 (S.D.N.Y. 1992).
    • Glass, Molders, Pottery, Plastics & Allied Workers Int’l Union, Local 182B v. Excelsior Foundry Co., 56 F.3d 844, 848 (7th Cir. 1995).
    • Montes v Shearson Lehman Bros., Inc., 128 F.3d 1456, 1461-62 (11th Cir. 1997).
    • Gianelli Money Purchase Plan & Trust v. ADM Investor Services, Inc., 146 F.3d 1309, 1312 (11th Cir.1998).
    • Office and Professional Employees International Union, Local 471 v Brownsville General Hospital, 186 F.3d 326 (3d Cir. 1999).
    • Am. Postal Workers Union, AFL-CIO v. U.S. Postal Service, 254 F.Supp.2d 12, 15 (D.D.C. 2003).
    • Hardy v. Walsh Manning Securities LLC, 341 F.3d 126, 133 (2d Cir. 2003).
    • Local 2322, Int’l Bhd of Elec. Workers v Verizon New England, Inc., 464 F.3d 93, 97 (1st Cir. 2006).
    • Hall Street Associates L.L.C. v Mattel, Inc., 552 U.S. 576 (2008).
    • Eastern Seaboard Construction Co., Inc. v. Gray Construction, Inc., No. 08-1679 (1st Cir. Dec. 31, 2008).
    • T.Co. Metals, LLC v Dempsey Pipe & Supply, Inc., 592 F.3d 329 (2d Cir. 2010).
    • World Trade Corporation Ltd. v Czarnikow Sugar Ltd.[2004] APP.L.R. 10/18.

e)    Internet articles and document(s) ~

 f)     Theses and dissertation(s) ~

  g)    Official documents ~

  • Document(s)
    • Departmental Advisory Committee (DAC) on Arbitration Law: Report on the Arbitration Bill (February 1996).
  • Decisions from international organizations
    • ICSID
  1. Amco Asia Corporation and others v. Republic of Indonesia (ICSID Case No. ARB/81/1), Decision on Jurisdiction (May 10, 1988), 3 ICSID Review —Foreign Investment Law Journal 166 (1988), Decision on Annulment, 16 May 1986, 1 ICSID Reports 509.
  2. Compañía de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic (ICSID Case No. ARB/97/3), Decision of the ad hoc Committee on the Request for Supplementation and Rectification of its Decision Concerning Annulment of the Award (28 May 2003).
  3. Wena Hotels Limited v Arab Republic of Egypt(ICSID Case No.ARB/98/4) Decision on Interpretation (Oct. 31, 2005). Retrieved from <http://www.asil.org/pdfs/ilib/ilib0512011.pdf>.
  4. Tanzania Electric Supply Company Limited v. Independent Power Tanzania Limited (ICSID Case No.ARB/98/8) Decision on Interpretation (July 3, 2008).
  5. Enron Creditors Recovery Corporation and Ponderosa Assets, L.P. v. Argentine Republic (ICSID Case No. ARB/01/3) Decision on the Application for Annulment of the Argentine Republic (30 July 2010).
  • Iran-U.S. Claims Tribunal
  1. Paul Donin de Rosere v Islamic Republic of Iran, Iran-U.S. Claims Tribunal, Dec. No. 57-498-I, para. 6 (Feb. 10, 1987), reprinted in 14 IRAN-U.S. C.T.R. 100.


[1] T. Hobbes, Leviathan (Oxford University Press, 1909) p.33.

[2] W.W. Park, “Why Courts Review Arbitral Awards” 16(11) Mealey’s International Arbitration Report (2001) 27.

[3] N. Blackaby, C. Partasides, et. al. Redfern and Hunter on International Arbitration (Oxford University Press, 2009) p.588.

[4] L.O. Baptista, Correction and Clarification of Arbitral Awards. Paper presented at the ICCA Congress – Rio de JaneiroConference (2010, May). Retrieved from <http://www.josemigueljudice-arbitration.com/en/arbitration-texts/?aID=139>.

[5] Blackaby/Partasides, note 3 supra, p.590.

[6]J.-F. Poudret and S. Besson, Comparative Law of International Arbitration (Sweet & Maxwell, 2007), p.685.

[7] R. Perrot, “L’interprétation des sentences arbitrales” Rev. arb. (1968).

[8] P. Fouchard, E. Gaillard, B. Goldman, On International Commercial Arbitration (Kluwer Law International, 1999) p.775.

[9] G.B. Born, International Commercial Arbitration (Kluwer Law International, 2009) p.2513.

[10]Glass Molders, Pottery, Plastics & Allied Workers Int’l Union, AFL-CIO, CLC, Local 182B v. Excelsior Foundry Co., 56 F.3d 844c (7th Cir. 1995).

[11]Opp cit., p. 2513.

[12]Ibid., p.2514;

[13] Under s.9 FAA, the court reserves its jurisdiction over the parties to the dispute and emphasizes its power to confirm awards, subject to ss.10 and 11.

[14]Mercury Oil Ref. Co. v. Oil Workers, 187 F.2d 980, 983 (10th Cir. 1951); See Bayne v. Morris, 68 U.S. (1 Wall.) 97, 99 (1863) (per curiam): “Arbitrators exhaust their power when they make a final determination on the matters submitted to them. They have no power after having made an award to alter it; the authority conferred on them is then at an end.”

[15]Poudret/Besson, Droit comparé de l’arbitrage international (Schulthess, 2002), p.843, n.853.

[16] S. Berti and A. Schnyder, in S. Berti et al. (eds.) International Arbitration in Switzerland (Kluwer Law International, 2000) Article 190, §13.

[17] Born, note 9 supra, p.2520.

[18]Ibid., p. 2522.

[19] An example of a clerical error, which was easily resolved as a rectification under an autonomous dispute system body, is ICSID Case No. ARB/81/1, Amco Asia Corporation v Republic of Indonesia (5 INT’L ARB. REP. D1 (Nov. 1990); XVII Y.B. COM. ARB. 73 (1992)).

[20] P. Fouchard, et. al., note 8 supra, p.776.

[21] Born, note 9 supra, p.2537.

[22]Ibid.

[23]Ibid.

[24] P. Fouchard, et. al., note 8 supra, p.779.

[25] G. Kaufmann-Kohler and A. Rigozzi, “Correction and Interpretation of Awards in International Arbitrations Held in Switzerland” 16(4) Mealey’s International Arbitration Report (2001) 27.

[26] C. Liebscher, The Healthy Award: Challenge in International Arbitration (Kluwer Law International, 2003), p.144.

[27] It has been argued that the purpose behind the short time-frame is to “help limit delays in the disposition of a part’s request and thereby to limit the period of uncertainty about the content of the award.” H. Holtzmann and J. Neuhaus, A Guide to the UNCITRAL Model Law on International Commercial Arbitration: Legislative History and Commentary (Kluwer Law International, 1989), p.889.

[28] OLG Stuttgart 20 December 2001 1 Sch 13/01 in Deutsche Institution für Schiedsgerichtsbarkeit (“DIS”) databank.

[29] Liebscher, note 26 supra, p.145

[30] Kaufmann-Kohler/Rigozzi, note 25 supra, p.25; it is interesting to note that under Swiss national arbitration legislation, Article 39 of the Concordat, like s.68(3)(a) of the EEA, provides that domestic courts in annulment proceedings can remit the award to the arbitral tribunal which will then rectify or complete it (See Poudret/Besson, note 6 supra, p.689).

[31]Judgment of 2 November 2000, ATF 126 III 524 (Swiss Federal Tribunal) (2001): this judgment marked the Swiss Federal Tribunal’s express acknowledgment that it did have power to correct or interpret its award; Judgment of 10 November 2005, 4P.98/2005 (Ière Cour civile), confirmed by a second decision rendered on November 10, 2005 (case 4P.154/2005); the Geneva Chamber of Commerce also filled this gap by allowing a request for correction (“Décision (institutionelle) du Comité d’Arbitrage du 27 septembre 1999 dans l’arbitrage no.133”, 18(2) ASA Bulletin 301-310 (2000)).

[32] ATF 126 III 524, ibid.

[33] Some authors argue that the standard 30-day limit applies in correction requests (See Wirth, in S. Berti et al. (eds.), International Arbitration in Switzerland (2000)); contra, there are other scholars who deem this ‘gap’ in the rules as an opportunity for a more flexible time-frame (See B. Berger & F. Kellerhals, Internationale und interne Schiedsgerichtsbarkeit in der Schweiz (Berne, 2006)); note also that a strict time-limit of 30 days is “regrettable” as many errors in the award surface at the enforcement stage (see Poudret/Besson, note 6 supra, p.692).

[34] F. Knoepfler and P. Schweizer, Arbitrage international—Jurisprudence Suisse commentée depuis l’entrée en vigueur de la LDIP (Schulthess, 2003), p.541.

[35]L. Hirsch, “Recours contre une sentence rectificative”. Jusletter, 22 (2005, August). Retrieved from <http://jusletter.weblaw.ch/article/fr/_4155#titel_2_15>; Judgment of 10 November 2005, 4P.154/2005 (Ière Cour civile).

[36]Judgment of 9 December 2003, ATF 130 III 125 (Ière Cour de droit civile).

[37] ATF 126 III 524, note 31 supra.

[38] Poudret/Besson, note 6 supra, p.733.

[39]Judgment of 12 January 2005, ATF 131 III 164.

[40] Born, note 9 supra, p.2525.

[41]Al-Hadha Trading Co v Tradigrain SA [2002] 2 Lloyd’s Rep. 512.

[42]Sutherland & Co. v Hannevig Brothers Ltd [1921] 1 K.B. 336 at §341.

[43][1975] 2 Lloyd’s Rep. 192.

[44] Liebscher, note 26 supra, p.142.

[45] M. Mustill and S. Boyd, Commercial Arbitration 2nd ed.(Butterworths, 2001), p. 341.

[46] [2009] EWHC 977 Comm.

[47]Ibid., at§21.

[48][2001] EWHC 483 (Q.B.).

[49] In §13 of the judgment, the Court cites the umpire’s “Correction” addendum, wherein the umpire clarified the reasons for his correction as set forth: “There is no question that an arbitrator has, in principle, no entitlement to review a decision. However, when the arbitrator’s decision on a particular point, in this case liability for costs, is based on an admitted mistake, then surely as a matter of common sense the arbitrator must have power to review his decision in the light of that mistake.”

[50]Opp. cit., at §30.

[51]CNH Global v PGN Logistics, note 46 supra.

[52] Article 29 of the ICC Rules grants authority to the Arbitral Tribunal to “correct a clerical, computational or typographical error, or any errors of a similar nature contained in an Award.”

[53] An error which Burton J. had comically described as a ‘howler’ (opp. cit., at§15).

[54]Ibid., at §29.

[55]Ibid., at §30.

[56] Paragraph 58 of the Report of the DAC describes the test for substantial injustice as the following: “Having chosen arbitration, the parties cannot validly complain of substantial injustice unless what has happened cannot on any view be defended as an acceptable consequence of that choice.” (World Trade Corporation Ltd. v Czarnikow Sugar Ltd.[2004] APP.L.R. 10/18, §10).

[57] R. Bamforth and K. Maidment, “Has the Door Been Opened for Substantive Amendments to Arbitral Awards? How a Recent Decision of the English Court Erodes the Principle of Finality of Awards” 15(1) IBA Arb. News (2010) 115.

[58]CNH Global v PGN Logistics, note 46 supra, at §31.

[59]Departmental Advisory Committee (DAC) on Arbitration Law: Report on the Arbitration Bill (February 1996), chapter 2, para. 280.

[60]Leslie v Leslie, 24 A. 319, 320 (N.J. Ch. 1892).

[61] Born, note 9 supra, p.2528.

[62]Local 2322, Int’l Bhd of Elec. Workers v Verizon New England, Inc., 464 F.3d 93, 97 (1st Cir. 2006).

[63]Leslie v Leslie, note 60 supra; under s.20 of the Revised Uniform Arbitration Act, state laws may provide that parties to an arbitration have 20 days from receipt of the final award in order to file a request for correction or modification. There is not much authority on the conflict between these state laws and the FAA.

[64] Born, note 9 supra, p.2530.

[65]Gianelli Money Purchase Plan & Trust v. ADM Investor Services, Inc., 146 F.3d 1309, 1312 (11th Cir.1998).

[66] The four grounds for vacation under s.10 FAA are listed as follows: (1) where the award is procured by corruption or fraud; (2) where there is evidence of corruption in the arbitrators; (3) where the arbitrators are guilty of procedural misconduct that prejudiced the rights of the parties; or (4) where the arbitrators are ultra vires.

[67]Robbins v. Day, 954 F.2d 679, 683 (11th Cir., 1992).

[68] M.K. Sims and R.A. Bales, “Much Ado About Nothing: The Future of Manifest Disregard After Hall Street” 62 S.C.L. Rev. (2010) 412.

[69] J. Alford, 29 August 2003 – Federal Court of Appeals for the Ninth Circuit, Digest by ITA Board of Reporters (2003).

[70]In the Matter of Arbitration Between National Shipping Co. of Saudi Arabia, Transamerica SS Corp., 1993 A.M.C. 684 (S.D.N.Y. 1992).

[71]Ibid.

[72]T.Co. Metals, LLC v Dempsey Pipe & Supply, Inc., 592 F.3d 329 (2d Cir. 2010).

[73] Under Article 30 ICDR, the tribunal has the power to correct “any clerical, typographical or computational errors” within 30 days after receipt of an award.

[74]T.Co Metals, LLC v Dempsey Pipe & Supply, Inc., 07 Civ. 7747 (PAC), 2008 U.S. Dist. LEXIS 112087 (S.D.N.Y. July 8, 2008).

[75]Ibid., at §17, 20.

[76]Ibid., at §15-17; under §16, the district court explained that an ‘obvious’ mathematical computation is one “where an arbitrator concludes that two-plus-two equals five.”

[77]Ibid., at §16.

[78]Ibid., at §17.

[79]T.Co Metals, LLC, note 72 supra.

[80]Ibid., at §342-343.

[81]Ibid., at §345.

[82] J. Kirby, “T.Co. Metals, LLC v. Dempsey Pipe & Supply, Inc.: Are There Really No Limits on What an Arbitrator Can Do in Correction an Award?” 27(5) J. Int’l. Arb. 526(2010).

[83]ReliaStar, 564 F.3d at §85; there is a theoretical debate on whether arbitration is purely ‘contractual’ in nature, given that arbitrators also apply procedural rules, which renders arbitration more ‘jurisdictional’ in character (Born, note 9 supra, p.186).

[84]Glass, Molders, Pottery, Plastics & Allied Workers Int’l Union, Local 182B v. Excelsior Foundry Co., 56 F.3d 844, 848 (7th Cir. 1995) (Posner, C.J.).

[85]Eastern Seaboard Construction Co., Inc. v. Gray Construction, Inc., No. 08-1679 (1st Cir. Dec. 31, 2008).

[86]First Options of Chicago, Inc. v Kaplan, 514 U.S. 938 (1995).

[87] B. Daly, “Correction and Interpretation of Arbitral Awards under the ICC Rules of Arbitration” 13 ICC International Court of Arbitration 63 (2002).

[88]Ibid., p.69.

[89] “Appendix: Extracts from ICC Addenda and Decisions on the Correction and Interpretation of Arbitral Awards” 13(1) ICC International Court of Arbitration Bulletin 87 (2002).

[90]Ibid., p.79.

[91] The World Bank. (2011) ICSID – International Centre for Settlement of Investment Disputes. Retrieved July 20, 2011, from <http://icsid.worldbank.org>.

[92]See Compañía de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic (ICSID Case No. ARB/97/3), Decision of the ad hoc Committee on the Request for Supplementation and Rectification of its Decision Concerning Annulment of the Award (28 May 2003), §11.

[93]Enron Creditors Recovery Corporation and Ponderosa Assets, L.P. v. Argentine Republic (ICSID Case No. ARB/01/3) Decision on the Application for Annulment of the Argentine Republic (30 July 2010).

[94] C. Schreuer, The ICSID Convention: ACommentary (Cambridge University Press, 2001), p. 853.

[95]Vivendi v Argentina, note 92 supra.

[96] A. Buchanan and D.A.R. Williams, “Correction and interpretation of awards under Article 33 of the Model Law” 4(4) Int. A.L.R. (2001), p.125.

[97]Paul Donin de Rosere v Islamic Republic of Iran, Iran-U.S. Claims Tribunal, Dec. No. 57-498-I, §6 (Feb. 10, 1987), reprinted in 14 IRAN-U.S. C.T.R. 100.

[98]See D.D. Caron and L.F. Reed, “Post Award Proceedings under the UNCITRAL Arbitration Rules” 11(4) Arb. Int’l 431 (1995). The drafters of the UNCITRAL Rules 1976 (which contained provisions similar to the present UNCITRAL ML) had considered replacing ‘interpretation’ for ‘clarification’ or ‘explanation’.

[99]See Poudret/Besson, note 6 supra, pp.686-687; note: Italian and Dutch laws do not provide for interpretation, neither do the LCIA, the NAI or WIPO.

[100] ATF 126 III 524, note 37 supra.

[101] Perrot, note 7 supra, p.8 (note: translated from French).

[102] Born, note 9 supra, p.2537.

[103]Ibid., p.2538.

[104]Award on correction in case no. SV-B-652/06 in A.J. van den Berg (ed.), Yearbook Commercial Arbitration 2009 – Volume XXXIV, Volume XXXIV (Kluwer Law International, 2009) pp. 27–31.

[105]Ibid., at §4.

[106]Ibid., at §8.

[107]Ibid., at §7.

[108]See para. 3.2.3.1 supra; Article 39 of the Concordat does not enable the court in challenge proceedings to remit the award to the arbitral tribunal on the basis of a clarification or interpretation request (See Poudret/Besson, note 6 supra, p.689).

[109] ATF 126 III 524, note 31 supra.

[110] S. Besson, “Le Recours contre la Sentence Arbitrale Internationale selon la Nouvelle LTF (Aspects Procéduraux)”, 25(1) ASA Bulletin 2 (2007).

[111]Federal Statute of June 17, 2005 organizing the Federal Tribunal, RS 173 110.

[112] Kaufmann-Kohler/Rigozzi, note 25 supra, p.28.

[113] Perrot, note 7 supra, pp.7-8.

[114] ATF 126 III 524, note 31 supra.

[115]Arrêt nº 4G 2/2009 de Ire Cour de Droit Civil, 21 octobre 2009.

[116]Ibid., §2.

[117]Ibid., at §1.3.

[118] Liebscher, note 26 supra, p.142.

[119]Ibid.

[120]Torch Offshore LLC v Cable Shipping Inc.[2004] EWHC 787 (Comm), at §28.

[121]Ibid.; See also Buyuk Camlica Shipping Trading & Industry Co. Inc. v Progress Bulk Carriers Ltd. [2010] EWHC 442 (Comm).

[122]Opp. cit.

[123]Ibid.

[124] T.E. Carbonneau, “At the Crossroads of Legitimacy and Arbitral Autonomy” 16 Am. Rev. Int’l Arb 214 (2005).

[125]Ibid., p.216.

[126]Am. Postal Workers Union, AFL-CIO v. U.S. Postal Service, 254 F.Supp.2d 12, 15 (D.D.C. 2003).

[127]Hardy v. Walsh Manning Securities LLC, 341 F.3d 126, 133 (2d Cir. 2003).

[128]See Oil Chemical & Atomic Workers Int’l Union, Local 4-367 v Rohm and Hass, Texas, Inc., 677 F.2d 492, 495 (5th Cir. 1982) (per curium) (“[R]emand to the arbitrator is the appropriate disposition of an enforcement action when an award is patently ambiguous, when the issues submitted were not fully resolved, or when the language of the award has generated a collateral dispute.”)

[129] Carbonneau, note 124 supra, p.233.

[130]Cleveland Paper Handlers and Sheet StraightenersUnion No. 11 v E.W. Scripps Co., 681 F.2d 457, 460 (6th Cir. 1982) (per curiam) (“An ambiguous award may not be enforced but should be remanded to the arbitrator.”)

[131]Montes v Shearson Lehman Bros., Inc., 128 F.3d 1456, 1461-62 (11th Cir. 1997).

[132]Office and Professional Employees International Union, Local 471 v Brownsville General Hospital, 186 F.3d 326 (3d Cir. 1999).

[133] Carbonneau, note 124 supra, p.232.

[134]Hardy v Walsh Manning, note 127 supra.

[135]Hall Street Associates L.L.C. v Mattel, Inc., 552 U.S. 576 (2008).

[136]Opp. cit., at §134.

[137]Ibid., at §34.

[138]Ibid., at §35.

[139]Ibid., at §45.

[140]Ibid., at §33.

[141]Ibid., at §45.

[142]Colonial Penn Ins. Co. v. Omaha Indem. Co., 943 F.2d 327, 334 (3d Cir. 1991).

[143]Ibid., at §51.

[144] Carbonneau, note 124 supra, p.231.

[145]The UNCITRAL Rules have since been revised in 2010, separating the correction, interpretation and supplementation mechanisms into three distinct provisions.

[146] Caron/Reed, note 98 supra, p.431.

[147] Born, note 9 supra, p.2540.

[148] Daly, note 87 supra, p.64.

[149]Ibid, p.64.

[150] ICC case 8810, “Appendix: Extracts from ICC Addenda and Decisions”, note 89 supra, p.72.

[151]Ibid., p.79.

[152]Ibid., p.80.

[153] Schreuer, note 94 supra, p.857.

[154]Ibid., p.857.

[155]Ibid., p.860.

[156]Ibid.

[157]G. Petrochilos, S. Noury, et al., “ICSID Convention, Chapter IV, Section 5, Article 50 [Interpretation]” in L.A. Mistelis (ed.), Concise International Arbitration, (Kluwer Law International, 2010), p.126.

[158]Wena Hotels Limited v Arab Republic of Egypt(ICSID Case No.ARB/98/4) Decision on Interpretation (Oct. 31, 2005). Retrieved from <http://www.asil.org/pdfs/ilib/ilib0512011.pdf>.

[159]Tanzania Electric Supply Company Limited v. Independent Power Tanzania Limited (ICSID Case No.ARB/98/8) Decision on Interpretation (July 3, 2008).

[160]Opp.cit., at §76.

[161]Ibid., at §87.

[162] A.J. Kufler and L.B. Nelson, “The Authority of the Arbitrators to Interpret the Rules under which the Arbitration is Conducted” 41(3) The Arbitrator 21 (2010).

[163]D. Vidal, Droit français de l’arbitrage commerce international, Édition bilingue Français/Anglais, Gualino éditeur, 2004, p.145

[164]Fiona Trust & Holding Corp v. Privalov [2007] EWCA Civ 20 (Longmore LJ).

[165] Born, note 9 supra, p.2519.

[166]Ibid., p.2530.

[167] Caron/Reed, note 98 supra, p.444.

[168]Poudret/Besson, note 6 supra, p.692; Daly takes note that the correction provision under Article 29 of the ICC Rules should correct errors beyond the 30-day time-limit because many errors are only detected at the enforcement stage. If the losing party does not voluntarily comply with the award, then the onus is on the competent authority to remedy the error in order to ensure enforcement of the award. (Daly, note 90 supra, p.289).

[169] Daly, note 87 supra, p.289.

[170] A.J. van den Berg, H.J. Snijders, R. van Delden and B. Rujsenaars, Netherlands Arbitration Law (Kluwer Law International, 1993), p.97.

[171] Section 57(3)(b) of the EEA; Article 29(2) of the ICC Rules; Rule 49(3) of the ICSID Arbitration Rules; Article 37(1) of the Swiss Arbitration Rules; §20(c) of the RUAA; contra. Article 37-39 of the UNCITRAL Rules; Article 33 of the UNCITRAL ML; Article 50 of the ICSID Convention.

[172] Schreuer, note 94 supra, p.845.

Published by

blogadmin

Blog Administrator