5/23/13: UPDATED! CPR on the June NYSBA Journal Article; Author Marrow Responds
May 23, 2013
The CPR Institute published the item below late Thursday afternoon, May 23, responding to the interpretation of CPR's Non-Administered Arbitration Rules in a New York State Bar Association magazine article by Chappaqua, N.Y., attorney-neutral Paul Bennett Marrow. Marrow responded immediately to the CPR Institute posting on Thursday evening. His rebuttal appears on this page, after the CPR posting.
Apply the law? That’s what the tribunal must do under CPR’s Non-Administered Arbitration Rules—notwithstanding a recent well-circulated article to the contrary.
The CPR Institute believes that a recent prominent article by Paul Bennett Marrow misinterprets or misunderstands the CPR Non-Administered Arbitration Rules with regard to the obligations of arbitrators to apply law.
In the article—see Paul Bennett Marrow, “Can an Arbitrator Conduct Independent Legal Research? If Not, Why Not?” NYSBA Journal 28 (May 2013) (Available here)--the author states that under the CPR rules, “applying law isn’t necessarily a given.”
Specifically, Marrow notes,
International Institute for Conflict Prevention and Resolution (CPR) Rule 10 requires that the arbitrator apply whatever law the parties designate; absent a designation, the arbitrator has the power to select whatever law or rules he or she deems appropriate. . . . [A]pplying law isn’t necessarily a given. In theory at least, the arbitrator is not barred from concluding that no law need be applied and instead may opt to do whatever seems fair and just. The CPR rules grant the arbitrator authority to vary from the prescribed procedures as necessary. But that authority is not unlimited. It is confined by the scope of the rules themselves, meaning that which is “reasonable and appropriate.”
But CPR Non-Administered Arbitration Rule 10.1 is clear—and contrary.
The rule states: “The Tribunal shall apply the substantive law(s) or rules of law designated by the parties as applicable to the dispute. Failing such designation by the parties, the Tribunal shall apply such law(s) or rules of law as it determines to be appropriate.” (Emphasis added here.)
By contrast, Marrow concludes that the International Chamber of Commerce Rules of Arbitration require an arbitrator to follow the rule of law—specifically, the “[a]pplication of a law being a given.”
In support of this statement, ICC Article 21 is cited: “The parties shall be free to agree upon the rules of law to be applied by the arbitral tribunal to the merits of the dispute. In the absence of any such agreement, the arbitral tribunal shall apply the rules of law which it determines to be appropriate.”
Yet CPR Non-Administered Arbitration Rule 10.1 and ICC Article 21 do not differ in any material respect, and questions the apparent conclusion that one requires the application of law, while the other does not.
The Commentary to CPR’s Non-Administered Arbitration Rules back up the view that law must be chosen and applied:
- The Commentary’s “Salient Features of the Rules” states: “8. The Tribunal is required to apply the substantive law chosen by the parties to govern the merits of their dispute (Rule 10.1)."
- Moreover, the Commentary to Rule 10 states that “unless the parties shall have agreed in their contract or otherwise as to which law shall govern, the Tribunal is free to apply the law(s) or rules of law as it determines to be appropriate to govern the dispute. . . . Arbitrators may not simply do as they please, however; any remedy or relief granted must be permissible under the contract and applicable law and Rule 15.2 requires arbitrators to explain the reasoning on which their awards rest.”
- The Commentary to Rule 15, requiring a written, reasoned arbitration award, says that “Unless the parties have agreed in their business agreement or otherwise which law shall govern, the Tribunal is free to determine the law which is to govern the award.”
In short, the application of a law is a given under the CPR Rules, as it is under the ICC Rules.
NYSBA author Paul Bennett Marrow responds:
My problem with the interpretation set forth in the CPR Response [above] is that it ignores the context in which the word "shall" is used in Rule 10.1. The context in which the word "shall" is used makes all the difference because the context modifies what the word "shall" is intended to mean. If the draftsman had intended that the word "shall" was to be modified as CPR suggests, the rule would have said so.
CPR Rule 10.1 is composed of two sentences and each speaks to a different scenario. In the first sentence the word "shall" is used in the context of a directive that forecloses any possibility for arbitrator discretion. In the second sentence the word "shall" is used in the context of broad arbitrator discretion. There is nothing in the second sentence that restricts this discretion.
Indeed, it is the other way around. The spectrum of choice includes whatever rules of law the tribunal feels is appropriate and included therein is the possibility that the tribunal could determine that doing what is deemed to be fair and just is appropriate. Again, and respectfully, if the draftsman had wanted to limit the discretion, the draftsman would/should have said so.
The interpretation of Rule 10.1 suggested in the CPR Response could only be achieved if a third sentence was included, preferably at the beginning of the Rule perhaps as follows:
"Arbitrators are required in every instance to apply law when evaluating a claim and granting an award. The Tribunal shall apply the substantive law(s) or rules of law designated by the parties as applicable to the dispute. Failing such designation by the parties, the Tribunal shall apply such law(s) or rules of law as it determines to be appropriate.”
(Emphasis and first sentence added.)