What happens in the case of a truncated tribunal? Is the tribunal able to continue with the proceedings?
International Arbitration (2nd Edition)
In domestic arbitration an appointed arbitrator may only cease in its functions in four cases specifically regulated in Article 240 of the Code of Judicial Organization. Such are when (i) the parties agree to recur to a local court or another arbitral tribunal for the resolution of the dispute, (ii) the arbitrators are mistreated or injured by one of the parties, (iii) the arbitrators become ill with a disease that prevents them from fulfilling her or his duty, and finally when (iv) the arbitrators must abandon the place of the arbitration.
If the affected arbitrator was appointed in virtue of a submission agreement, and such agreement does not provide for a substitute arbitrator, the agreement will become invalid. On the contrary, arbitration clauses allow for the appointment of a new arbitrator to continue the proceeding, in cases where the arbitrator originally designated is impeded to fulfill his or her duty.
The International Commercial Arbitration Law No 19.971 (ICAL) states in Article 14(1) that an arbitrator may resign or be removed by the parties if he or she is impeded to perform their functions by de jure o de facto reasons, or if the arbitrator fails to perform their duties within a reasonable period of time.
Under Article 15 of ICAL, in case of an arbitrators’ recusal, resignation or removal, the procedure applicable to the appointment of the substitute arbitrator shall be the same that was applied to the designation of the former arbitrator.
Finally, the Rules of International Commercial Arbitration of the Santiago Arbitration and Mediation Center (CAM Santiago) contain in Article 15 a substitution procedure for arbitrators that leave office for reasons such as recusal, resignation, incapacity or parties agreement. According to the said provision, the substitute arbitrator shall be appointed in accordance to the Rules of International Commercial Arbitration of CAM Santiago that were applicable to the appointment of the arbitrator being substituted, unless such institution decides as its own discretion, on the pertinence for applying a different procedure. As for the continuance of the procedure, Article 15(3) states that “a change in the composition of the arbitral tribunal does not invalidate by that mere fact the resolutions rendered by the arbitral tribunal prior to the substitution of an arbitrator”.
Yes, the arbitral tribunal is able to continue with the proceedings. Even within the pendency of a challenge to an arbitrator, the arbitral tribunal, including the challenged arbitrator, may continue the arbitral proceedings and issue an award (art. 14 (3) LAV).
On the other hand, if the challenge is accepted, it shall be nominated a substitute arbitrator according to the rules applicable to the appointment of the substituted arbitrator. Notwithstanding, the parties may agree that the replacement of the arbitrator is made in a different form and may even waive its right of substitution. The tribunal shall decide if any procedural acts should be repeated in light of the new composition of the tribunal (art. 16 LAV).
According to Article 1251 of NCPC, a truncated tribunal is not regularly constituted and cannot continue with the proceedings.
The authority of a truncated tribunal is not expressly stipulated by Swiss law. However, in both domestic and international arbitration, an arbitral award rendered by an arbitral tribunal that was not properly constituted may be challenged before the Swiss Federal Tribunal (art. 190 para. 2(a) PILA and art. 393(a) CPC).
The Swiss Federal Tribunal particularly held that in a case where the arbitrator resigned without cause the remaining arbitrators may only proceed with the consent of the parties or after a new arbitrator was appointed. Should the remaining arbitrators nevertheless proceed, the arbitral tribunal may be deemed no longer regularly constituted amounting to a violation of article 30 para. 1 of the Swiss Federal Constitution and article 6 of the European Convention on Human Rights. In a later decision, the Swiss Federal Tribunal clarified that the aforementioned circumstances should be distinguished from a situation where a party-appointed arbitrator, without formally tendering his or her resignation, is refusing to collaborate or obstructing the proceeding. The Swiss Federal Tribunal held that in such situation the arbitral tribunal is still considered to be regularly constituted and may continue if a majority of the members of the tribunal decide so.
The majority of the legal scholars consider that the resigning arbitrator must be replaced unless the parties agree otherwise or the applicable arbitration rules provide differently.
In its arts. 13 and 14 the Swiss Rules provide for a specific procedure in case an arbitrator has to be replaced. According to art. 13 of the Swiss Rules, the Arbitration Court established by the Swiss Chambers' Arbitration Institution and comprising experienced international arbitration practitioners set a time-limit for the parties to appoint a new arbitrator pursuant to the regular procedure stipulated in arts. 7 and 8 of the Swiss Rules. The Arbitration Court may only in exceptional circumstances and after consulting with the parties and the remaining arbitrators either directly appoint the replacement arbitrator or, after the closure of the proceedings (pursuant to art. 13 para 2 of the Swiss Rules), authorise the remaining arbitrator(s) to proceed with the arbitration and render any decision or award. Finally, art. 14 of the Swiss Rules stipulates that as a rule the proceeding shall resume at the stage reached when the replaced arbitrator ceased to perform his or her function, unless the arbitral tribunal decides otherwise.
Yes, under certain circumstances, a truncated tribunal may continue with the proceedings until the appointment of a substitute arbitrator as per section 1039 (1) ZPO. Reasons for the appointment of a substitute arbitrator are laid out in section 1039 (1) ZPO, including impartiality issues (section 1037 ZPO), the arbitrator fails or is incapable to perform the assigned tasks (section 1038 ZPO), or the arbitrator’s resignation based on other circumstances or the parties’ agreement that this arbitrator’s appointment shall be terminated.
According to the ICAC Arbitration Rules the truncated tribunal is allowed to continue the arbitral proceedings, however, in a different way depending on the point of the arbitral proceedings when such issue arises. In particular, if it happens before the closure of the hearings of the case, a new arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced. After the closure of the hearings, the ICAC Presidium may, taking into account the opinions of the remaining members of the arbitral tribunal and of the parties as well as the circumstances of the case, make the decision to continue the arbitration with the truncated tribunal.
The Panama Arbitration Law provides that, in case of a truncated tribunal, a substitute arbitrator will be appointed pursuant to the same rules used for the appointment of the original arbitrator. Moreover, once the tribunal has been reconstituted, it will determine, after hearing all the parties, if and to what extent prior proceedings shall be repeated.
Article 212 of the UAE CPC confirms that as long as the majority of the Arbitral Tribunal sign the award, it will be considered as validly issued. The absence of any arbitrator’s signature must however be recorded within the body of the Arbitral Award.
Alternatively, the DIAC Rules (Article 15) provide for the revocation of appointment of the absent arbitrator and appointment of a replacement thereof (Article 14).
The above procedures do not however cater for the risk that the arbitrator is not replaced and remaining arbitrators cannot reach a consensus on liability or quantum.
UAE Off-Shore Jurisdictions
The Arbitral Tribunal, on permission of the LCIA Court, may continue proceedings and issue an arbitral award. Alternatively, in the event that the remaining arbitrators do not wish to continue, the LICA Court may direct for the revocation of the delinquent arbitrator’s appointment and the replacement thereof (Articles 10 to 12 of the DIFC-LCIA Arbitration Rules).
According to the Arbitration Act, the case of a truncated tribunal does not mean that the arbitration proceeding collapses, but that a new arbitrator shall be chosen before the proceeding continues. Depending on the reason regarding why the tribunal is truncated, the new arbitrator is either chosen by the party choosing the original arbitrator or by the district court.
The SCC Rules stipulates that a new arbitrator shall be appointed if the tribunal is truncated. If the tribunal consists of three or more arbitrators, the Board has the authority to decide that the remaining arbitrators shall continue with the arbitration, without appointing a new arbitrator.
The truncated tribunal doctrine has an essential purpose which is to combat intentional arrangements between an arbitrator and the party that appointed him or her; arrangements that result in the need to reappoint the arbitral tribunal by engaging a new arbitrator, which entails an objective delay and, as the case may be, the need to conduct again the proceedings before the reconstituted tribunal, on account of the strategic resignation or withdrawal of that party-appointed arbitrator.
Consequently, it is now considered that this withdrawal of the party-appointed arbitrator, usually by agreement, with an illegitimate procedural strategy, “truncates” the existing arbitral tribunal, forcing its reconstitution or reintegration with the resulting financial losses because of the new payments that must be made, and the objective procedural delay, which entails a burden on the pending dispute and litigation (see the Provincial Court of Madrid’s Ruling issued on the 27th of October 2014 and the Spanish Supreme Court ruling issued on the 15th of February 2017).
Serbian law does not provide for a possibility that a truncated tribunal may continue with the proceedings. Consequently, the legal thory is on the stand point that in case of a truncated tribunal, it would be necessary to replace the missing arbitrator before the proceedings can continue.
While a challenge is pending, the arbitral tribunal, including the challenged arbitrator, may continue the arbitral proceedings and make an award.
In case of a truncated tribunal, a substitute arbitrator can be appointed by either of the parties by moving an application under Section 15 Arbitration & Conciliation Act, 1996. In case of a truncated tribunal, the tribunal cannot continue with the proceedings.
The LAM sets forth that, if because of death, justified excuse, or any case in which an arbitrator is definitively absent, the arbitrator will be replaced by the alternate arbitrator, who will become a principal arbitrator, and another alternate arbitrator will be appointed pursuant to the Law. Under the doctrine and principles of law, the tribunal is not able to continue with the proceedings if one of its members is permanently missing.
Not in accordance with the provisions of the Arbitration Law. However, similar to the issue of recusal, this point is also being challenged through court cases.
When the mandate of an arbitrator terminates, for instance due to lack of impartiality, a substitute arbitrator shall be appointed according to the rules that were applied when appointing the arbitrator who is being replaced.
All previous arbitral proceedings forming part of the basis upon which the case shall be decided, shall be repeated if a substitute arbitrator is appointed.
In case of termination of the arbitrator’s mandate during the arbitration proceedings, due to any reason provided by the Arbitration Act, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced. Prior to the appointment of a substitute arbitrator the tribunal cannot continue the proceedings.
In the event where a challenging procedure pursuant to section 13 of Cap.4 Law as described above, is pending before the Cypriot Court, the arbitral proceeding continues with the participation of the arbitrator who is being challenged, even up to the issue of the arbitral award. If an arbitrator’s reference is terminated pursuant to sections 13 or 14 of the Cap.4, then the parties may appoint a replacement pursuant to the provisions of section 11. If the parties fail to agree on a replacement, then the Cypriot Court will decide on the matter.
In 1997, the Paris Court of Appeal (Paris Court of Appeal, 1 July 1997, 1999 Yearbook Commercial Arbitration 281) decided to set aside an ad hoc award rendered by only two arbitrators (one of the party-appointed arbitrators had resigned in protest against how the tribunal’s deliberations were conducted), on the ground that the award at issue had been rendered by an arbitral tribunal lacking one of its members and the composition of which no longer conformed to the agreement on which its jurisdictional power was based. In addition, the president of the Court of First Instance had been seized of the issue and a party had already appointed a new arbitrator.
However, the situation is different where the parties have chosen to apply arbitration rules which have provisions on this matter. For example, under Article 15(5) of the ICC Rules, if an arbitrator has died or has been removed, the ICC Court may decide, when it considers it appropriate, that the remaining arbitrators shall continue the arbitration – but only “[s]ubsequent to the closing of the proceedings”.
Pursuant to Article 811 CCP, an absentee arbitrator shall be substituted in accordance with the procedure established by the parties in the arbitration agreement or, lacking any indication therein, in accordance with Article 810 CCP.
Only upon replacement of the absentee arbitrator, proceedings should continue. In general, the prevailing view is that all the activities – including any partial award – carried out before his/her replacement maintain their validity.
Under the ACA, where the appointment of an arbitrator is terminated by the parties, or an arbitrator dies or resigns in the course of the arbitral proceedings, or fails to act or is unable to perform his or her functions, a substitute arbitrator will be chosen in accordance with the rules and procedure by which the replaced arbitrator was appointed. Under the Lagos Law, an application to remove an arbitrator can also be made to the court on any of the above grounds. However, the court will not act until the arbitral tribunal has exercised its powers to resolve the issue. Once the replacement is made, the tribunal will continue with the proceedings.
Under Austrian law, a tribunal is entitled to continue with the proceedings when an arbitrator is challenged (which may be considered a kind of truncation), it may even issue the award.
If the tribunal actually loses one of its members, a new member is to be appointed according to the rules applicable to the appointment of the arbitrator to be replaced. Absent specific agreement(s) by the parties, it is generally up to the tribunal whether it continues or repeats all or part of the proceedings.
The FAA is silent regarding the authority of truncated tribunals. U.S. decisions under the FAA have held that truncated tribunals lack authority to decide disputes unless the parties’ agreement states otherwise (for example by reference to institutional rules that address this situation). The majority of institutional rules, including those of the AAA/ICDR and CPR, permit a truncated tribunal to proceed to a decision. Where the parties have failed to incorporate rules with this feature or to otherwise agree to a truncated tribunal, the arbitral process must be repeated. See, e.g., Marine Prods. Exp. Corp. v M.T. Globe Galaxy, 977 F.2d 66, 68 (2d Cir. 1992).
In domestic arbitration, absent an agreement to the contrary, the arbitration agreement is deemed terminated in case the appointment of a substitute arbitrator is for any reason not feasible (article 885 GrCCP). The rule applies only to arbitrators jointly appointed by the parties either in the arbitration clause or subsequently. This is because the law presupposes that an arbitrator appointed by one of the parties or by a third party may always be substituted in the same way. Said rule undeniably encompasses a strong presumption against a truncated tribunal’s authority to continue with the proceedings: A truncated tribunal is deemed incapacitated. The situation must be remedied by the appointment of a substitute arbitrator. In case this is not feasible the arbitration agreement ceases to exist.
In international commercial arbitral proceedings having their seat in Greece article 15 L. 2735/1999 applies. As noted above however (see answer under Question 4) said provision incorporates a rule unknown to the Model Law, according to which, once the replacement arbitrator is appointed, absent an agreement by the parties, the arbitral tribunal may by virtue of a unanimous decision decide that arbitral proceedings will resume from the point of “interruption”. The very notion of “interruption” of proceedings suggests that a truncated tribunal may not proceed. This is the only plausible interpretation of the Greek law, even though article 15 of the Model Law does not explicitly foreclose such authority.
When arbitration is held before several arbitrators, insofar that the parties did not agree otherwise, the arbitration must be held before all arbitrators. Therefore, if, for instance, sessions were held with partial presence of the arbitrators and an arbitral award was given, it is void, even if the arbitrator who was not present in the sessions was invited to them.
With regard to a truncated tribunal, a differentiation must be made between several cases. If the parties agreed in advance that the arbitrators may also deliberate if one of them is absent without a reasonable cause, the partial tribunal has the power to continue with the proceedings. However, if the absence is caused as a result of the resignation of one of the arbitrators appointed and the other arbitrators continue with the sessions on their own, this is a truncated tribunal, and therefore the truncated tribunal cannot continue with the proceeding, as this is not a case of agreement to deliberation upon the absence of an arbitrator. Similarly, a sole arbitrator who was appointed by other arbitrators and resigns would lead to a situation of a truncated tribunal that makes it impossible to continue with the proceeding.
The 1996 Act allows the parties to agree what should happen in the case of a truncated tribunal (s.27). If there is no agreement, the provisions of s.16 (procedure for appointment of arbitrators) and 18 (failure of appointment procedure) apply in relation to the filling of the vacancy as in relation to an original appointment (s.27(3)).
The tribunal is given the power to determine whether and if so to what extent the previous proceedings should stand (s.27(4)).
The Code of Civil Procedure provides that in any case in which an arbitrator is impeded to fulfil its obligations, another arbitrator must be appointed in accordance with the provisions set forth in this respect. A similar provision can be find in CICA Rules. Therefore, in all cases the number of arbitrators should be restored, the truncated tribunal not being able to continue the proceedings.