After the amendments to the Arbitration Act 1996 in 2016 and 2019, the appointment of AMINZ as the default appointing body under article 11, and the promulgation by AMINZ of an appointment protocol, Guidelines on Awarding Costs in Arbitration and the new AMINZ Arbitration Rules, the last 12 months has seen a return to normality … of sorts.
It would be hard to conduct a review of the last 12 months without being dominated, or even overwhelmed by covid related issues and the predominant use of Zoom and MS-Teams for meetings and hearings. Arbitration is no different in that respect.
The first lockdown, announced in March and not let up in any significant way ‘til late May, put pressure not only on the hospitality and tourism sectors, it also threw the spotlight on lease agreements across the country, across all sectors. Some had the ADLS-style rent abatement clause, which gave cause for some relief if agreement could be reached. Others could do little but throw themselves on the mercy of their landlords, who similarly had bills to pay and were facing a large, uncertain hole in their rental incomes.
The Government came to the rescue in June with a proposal for funded, rental abatement arbitration. That proposal included, as a matter of necessity, an amendment to the Property Law Act, implying a rental abatement clause into all commercial leases. As the detail was debated, and the proposal developed, the pain suffered by tenants and landlords alike continued, until the idea had become so emasculated, it died a death at the end of July. Such is the fate of good ideas in election years.
Then in August, a truncated scheme was announced, providing for funded mediation and arbitration (by agreement, in lieu of an arbitral abatement clause), with $40 million in Government funding. Service providers were appointed, including Mike Heron QC’s online dispute resolution organisation, CODR. Sadly, however, there are a considerable number of flies in this particular ointment, not least limiting access to that funding and requiring the agreement of the parties. Time will tell, but there is not a lot of optimism that the scheme will help those who actually need it.
At the end of January 2021, the Trusts Act 2019 comes into force. Included in sections 142-148 are provisions for the arbitration of trusts disputes – between trustees, trustees and unrelated third parties, and disputes involving trustees and beneficiaries. This has been another welcome intervention by the Government, particularly in the context of the high-profile disputes involving high value estates which have littered the press over the last few years.
As with many such initiatives, the devil will be in the detail, particularly as regards unascertained beneficiaries and those lacking legal capacity. The Trusts Act applies only to express trusts, leaving the law relating to implied trusts, constructive trusts, resulting trusts, Quistclose trusts (for those who remember what they are) somewhat uncertain; the Court appoints representatives for any unascertained beneficiaries; and any award is binding on such beneficiaries only where such representatives agree on their behalf. While many counsel will probably accept such appointment, agreeing to an unfavourable award is unlikely, thereby giving counsel an effective veto if their arguments prove to be unpersuasive.
Time will tell if arbitration under the Trusts Act gets traction. The procedure does put NZ in the vanguard of jurisdictions tackling this issue, and that in itself says something about our being arbitration friendly.
In the Courts, there is the ongoing diet of appeals on questions of law, competing claims in summary judgment and conflicts of interest. In Milk NZ (Shanghai) v Miraka [2020] NZHC 2713 and Napier City Council v H20 Management [2020] NZHC 1913, the Court had to reinforce that appeals are only available under clause 5(10) of the Second Schedule to the Arbitration Act 1996 on questions of law, which do not include findings of fact. There again seems to have been confusion over whether a dispute should be heard in Court or arbitration in Mayhew v Future Mobility Solutions [2018] NZHHC 3112 and Van Leeuwen Group v A-G [2020] NZHC 215.
More fertile ground was covered in relation to conflict of interest in the case of Youssef v Maiden [2019] NZHC 3471. While not an arbitration case, the dispute concerned an adjudicator’s determination under the Construction Contracts Act 2002, the case did provide an opportunity to consider the point at which an arbitrator, or in this case an adjudicator, might consider that a conflict may have arisen and that it should be disclosed and waived, if waiver was an option.
In this case, Mr Maiden was nominated by an authorised nominating authority under the CCA. At that point, he had to make a determination under section 35(3) as to whether or not he had a conflict. It appears that he did not, and his determination was subsequently challenged when it became apparent that, unbeknownst to the partner acting for the successful party in the adjudication, Mr Maiden had acted as an independent expert in a number of disputes for another partner in that firm.
Applying the test adopted by the Supreme Court in Saxmere, of whether a fair-minded and informed observer would conclude that there was a real possibility of bias, the Court found that Mr Maiden enjoyed an income stream (albeit unascertained) from one of the firms representing a party and therefore had a conflict which he should at least have disclosed. Bearing in mind that Mr Maiden had presumably discharged his obligations as an independent expert in relation to those other appointments, the firm had no part in the appointment, and the responsible partner had no knowledge of Mr Maiden’s prior engagements (involving unrelated parties), this case represents a highpoint in the moral stand on conflicts of interest.
In arbitration, the accepted standard for assessing such matters is the IBA Guidelines on Conflicts of Interest in International Arbitration, with its green (no notification), orange (disclosure and potential waiver) and red (a conflict which is not capable of waiver). Under those guidelines, Mr Maiden’s position would have been green, not requiring disclosure.
The decision may have been more supportable had Mr Maiden been in a position of capture by the firm, deriving most of his income from such appointments or if there was some other level of relationship other than the fact that he had been appointed as an independent expert by another partner in unrelated matters for unrelated clients on an indeterminate number of occasions. Presumably Mr Maiden enjoyed such appointments from a number of other firms. Sadly, the construction industry and the available pool of experts is not so large in this country that such purity is workable.
We are likely to get further guidance on this issue when the decision of the UK Supreme Court is released in the case of Halliburton v Chubb later this year. In that case, an arbitrator accepted appointment in relation to the Deepwater Horizon fire in the Gulf of Mexico, without disclosing that he had been appointed by other parties in relation to disputes over the same event.
[Stop Press - the Supreme Court released its decision in Halliburton v Chubb, holding that there was no conflict of interest, but where there is a perceived conflict, it should be disclosed. See article.]
Also internationally, another appeal to the Supreme Court to look out for is that of Enka v Chubb. While such issues tend only to keep international arbitrators awake at night, it does raise an issue which is of relevance here – one of applicable law. In arbitrations involving parties from different States (not uncommon here), there will be provision for the applicable law (often an independent State like the laws of England and Wales) and a different seat (for example, Singapore or for that matter Auckland). While the applicable law will typically govern the matters in dispute, the law applicable to the arbitration agreement and the conduct of the arbitration itself may not be so apparent.
Recent cases in the Courts of Appeal in Singapore (BNB v BNA [2019] SGCA 84) and the UK (Kabab-Jl v Kourt Food Group [2020] EWCA Civ 6) take different approaches to whether or not the governing law agreed by the parties impliedly extends to questions concerning the arbitration, as opposed to the issues in dispute. The UK Supreme Court decision should also be released later this year.
[Stop Press - in its decision, the Supreme Court held that, in lieu of a choice of law clause, the laws of England were most closely associated with the dispute as arbitration in London, at the IDRC in Fleet Street, was the chose seat.]
For those drafting arbitration agreements, and dispute resolution clauses more generally, this is one of those small, but ultimately critical points of drafting to take note of.