BCICAC :: The Appeal of Appeals

In our continuing efforts to promote the use of ADR and the Centre, I am faced from time to time with various negative responses, particularly when it comes to arbitration.

The main concerns expressed to me include the limited opportunity to appeal an arbitral award and the experience of arbitrations which have taken as long and been as expensive as litigation.

The second of these concerns is addressed in a large measure elsewhere in this issue of The Advocate, by the Centre's Governing Trustee, Rod Germaine. In his article he sets out the value of an administered arbitration, and how a good administrator will ensure that the arbitration moves forward in a timely and effective way. The process criticisms I have heard generally relate to ad hoc arbitrations, which do not have the benefit of a neutral administrative body such as the Centre.

It is the concerns expressed around the limited right of appeal that I wish to address here.

Parties agree to arbitrate for many reasons. In so doing they are agreeing to abide by the decisions of their chosen tribunal. Nevertheless there have been, and will continue to be, cases where parties will challenge the awards of the tribunal.

Section 14 of the Commercial Arbitration Act, S.B.C. 1986, reads "The award of the arbitrator is final and binding on all parties to the award". Having said that, the Act then sets out the way the award may be challenged, as follows:

Appeal to the court
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I do not propose to discuss the provision in depth or to review the cases which have interpreted it (which an accountant/mediator should not attempt to do in a legal periodical). Suffice it to say that right of appeal is clearly limited.

But this may not preclude parties from appealing an award if they agree to do so.

The principal thing about ADR is that it is driven by party autonomy: the parties are empowered to deal with their disputes in their own way. I am aware of a dispute around a contract which includes a straight forward arbitration clause. But the parties decided between themselves that they would first attempt mediation. If they could not reach a resolution through mediation they might ask the mediator to render a binding decision, otherwise they would proceed with arbitration under the rules of the Centre. They could also have also agreed that the arbitrator's award may be appealed to the court of appropriate jurisdiction, in circumstances they select.

Andreas Lowenfeld, a professor of international law at New York State University, in an article for the American Arbitration Association (Volume 3, No. 3) notes the US experience is that parties may indeed agree, as part of an ADR clause, to "contract out" of the standard restrictions to appeal on certain grounds. An agreement to allow for appeal is not usual but it is not unknown. A US Federal Court decision recently held that it is the duty of the courts to enforce such agreements (LaPine Technology Corp. v. Kyocera Corp. 130 F.3d 884. 9th Cir. 1997).

Professor Lowenfeld discusses the English approach under their new Arbitration Act which came into effect in 1996, noting that "unless all parties to the arbitration agree that the High Court should review the award, appeal is always discretionary". Otherwise, similar to the BC Act, parties have a right to appeal questions of law arising out of an arbitral award, subject to obtaining leave from the High Court.

The essence of my response to those who express concerns about the lack of appeal is: if parties wish a right of appeal, they can write it into the ADR clauses of their contracts. In the event that such an option is not written into the contract, they can also reach agreement, with the other party, presumably before commencement of the arbitration, that appeal may be an option.

Interestingly, section 45 of the Ontario Arbitration Act specifically provides for parties to agree whether an appeal will be allowed and, if so, on what grounds. This is not expressly provided in the B.C. arbitration legislation. However, as far as I am aware, there is no obstacle to the enforcement of an agreement between the parties to allow for appeal.

Having said all of that, the notion of "writing in" a right of appeal forces me to admit my personal views of the arbitration process. One of the major advantages of arbitration is that it is (just about) final. Allowing for appeal may well result in an extended period of time, possibly many years, before a matter is finalized. Since one of the main benefits of arbitration is that it is relatively fast and inexpensive, adding the right to appeal may indeed reduce its value. Of course there remain other benefits (confidentiality, choice of arbitrator, flexibility) to the process, which should not be forgotten and some of which could be eroded with the provision of a full right of appeal.

Conclusion
I have been told by more than one solicitor that they are anxious about recommending a process to their clients which removes the right of appeal. Lawyers are familiar with litigation and suspicious of a process which may leave them open to the criticism of their client down the road, when things don't work out as they would have liked. Most people aren't really interested in thinking about how to deal with problems which may occur in the future when agreements are being drafted; they're anxious to get on with their business and have the details worked out by counsel. The answer to my mind is that clients need to be educated about the options available to them, even if it takes a little more time on the part of their solicitor. If the lack of ability to appeal an arbitral award is all that is getting in the way of including an arbitration clause in a contract, then consideration should be given to specifically allowing for appeal, in situations which can be spelled out.