QUEEN’S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
| HUSSMANN (EUROPE) LIMITED||Applicants|
|- v -|
|(1) AL AMEEN DEVELOPMENT & TRADE COMPANY |
(2) HH JUDGE EUGENE COTTRAN
(3) J. ANTHONY MURRAY
(4) Dr A.K. ANVARI
Mr Andrew Bird (instructed by Messrs Pearson Lowe) for the First Respondents
Mr Mark Pelling (instructed by Messrs Edwin Coe) for the Second, Third and Fourth Respondents
Crown Copyright ©
Mr Justice Thomas:
The original agreement
The transfer of the business to a limited liability company
• By an agreement made on 25 December 1992, Mr Pharaon incorporated the business carried on by him through the Establishment into a limited liability company known as Al Ameen Development and Trading Company with a registration number 1010122156; this entity is the first respondent to this application and to distinguish it from the Establishment, I shall refer to it as the Company. Mr Pharaon’s family held 100% of the shares in the Company. After incorporation, the business of the Establishment was transferred to it and on 14 February 1994 the Ministry of Commerce of Saudi Arabia gave approval to the transfer.
• Mr Pharaon’s evidence was that a circular dated 4 April 1994 was sent to all those he did business with including HCN; that letter stated:
“Memorandum to Whom it may concern
We hereby inform that the name “Al-Ameen Establishment” is changed to read as “Al-Ameen Dev. & Trade Co.”. A copy of the Gazette paper is enclosed herewith.
Owner & General Manager”
The copy of the Gazette dated 26 October 1993 enclosed was in Arabic; no translation was then supplied. From a translation that was before the arbitration tribunal, the Gazette notice made clear that the business of the Establishment had been transferred to the Company.
• HCN did not know whether they had received the notification, but their position was that they did not know of the transfer from the Establishment to the Company.
As this issue goes to the jurisdiction of the tribunal, it will be necessary to examine the question in greater detail in due course.
The termination of the agreement and the appointment of the arbitration tribunal
“This agreement shall be governed under the commercial agencies regulation of Saudi Arabia, amendment and implementing procedures in accordance with the Royal Decree No. II dated 20.02.1382 Hijra. Any dispute arising out of or in connection with this agreement shall be finally settled in accordance with the arbitration provisions in the Rules of Conciliation, Arbitration and Expertise of the Euro-Arab Chamber of Commerce, by one or more arbitrator(s) appointed in accordance with the set rules.”
“Al Ameen” means Al Ameen Development & Trade Establishment (also known as Al Ameen Development & Trade Co.) a limited liability company incorporated under the laws of the Kingdom of Saudi Arabia (Commercial Registration No. 7415) and having a place of business at PO Box 166, Riyadh 11411, Saudi Arabia.”
Although the definition referred to it being a limited liability company, the number given was the registration number of the Establishment.
The pleadings, the hearing and the award
of the expert evidence; the tribunal in a ruling rejected this. HCN also raised an objection to the Company being party to the arbitration on the basis that it was not party to the distributorship agreement with HCN; they developed this later in the hearing after much more evidence was available. That objection was also rejected by the tribunal. The hearing lasted some 4½ days. On 11 June 1999 the tribunal signed their award. It was a lengthy document of some 68 pages with 9 annexes comprising the preliminary ruling and other documentation. They held:
• That HCN’s claim succeeded to the extent of $57,438.
• That the counterclaim for commission made by the Company succeeded to the extent of $660,287.32
• That HCN was therefore to pay the Company $602,859.32
• That the costs of Pearson Lowe in the amount of £54,310.50 be paid by HCN.
• That HCN was to pay the amounts paid by Pearson Lowe towards the costs of the Euro-Arab Arbitration System and the arbitrators’ fees and expenses which had been fixed by the Arbitration Board in the sum of £85,520.
(1) Did the tribunal have jurisdiction to make an award in favour of the Company ?
(2) Did the tribunal’s conduct of the proceedings amount to a serious irregularity
(a) in relation to the expert evidence, or
(b) by failing to deal with certain issues put to it?
(3) Does the court have jurisdiction to review the fees and expenses of the tribunal and, if so, should the court direct an adjustment?
The Company, as the first respondent to the application, sought to uphold the award on the first two issues; however, they adopted a neutral position on the third issue. Their solicitor made it clear in his affidavit that they were not suggesting that the fees were excessive, but would have no objection if the court reviewed the fees downwards; they addressed no argument to the court on this issue as ultimately advanced by HCN. The arbitrators, as the second third and fourth respondents to the application took no part in the first two issues; on the third issue they contended that the court had no jurisdiction and that in any event the court should not adjust their fees and expenses. HCN’s application also included an application for leave to appeal under s.69 of the Arbitration Act, but this was not before the court and determination of that part of the application is to take place, without an oral hearing in accordance with this court’s usual procedures, after the determination of the issues presently before the court.
Issue 1: The jurisdiction of the tribunal to make an award in favour of the Company
The law of Saudi Arabia
(1) Contractual rights can be assigned. The agreement between the Establishment (or Mr Pharaon) and the Company was an effective agreement to assign the rights and obligations under the contract made between the Establishment and HCN.
(2) An assignment does not become binding on the other party to the contract unless that other party consents. There was no clear evidence as to what constituted consent under Saudi law, but it was agreed that to establish consent under the law of Saudi Arabia it would be necessary to show that HCN knew of the transfer of the agreement from the Establishment to the Company and expressly or impliedly consented to that transfer.
HCN’s knowledge of the transfer of the business to the limited company
(1) Prior to April 1994 Mr Pharaon had written to HCN on notepaper which was headed “Al-Ameen Development & Trade Est.” in English with the equivalent in Arabic. At the foot of the notepaper, there was a notation in both English and Arabic which set out the commercial registration number of the Establishment and its branches.
(2) I accept that, on the balance of probabilities, the circular of 4 April 1994 was sent to HCN; they do not deny receiving it. However the notice did nothing more than to state that there had been a change of name. It was signed by Mr Pharaon as “Owner and General Manager”. It did, however, enclose the Gazette but only in Arabic; all the correspondence between the parties had been in the English language. I therefore cannot accept that the sending to HCN of the document in Arabic was in those circumstances sufficient to give them notice that there had been a change from a sole proprietorship into a limited liability company, particularly when the letter referred to this as a change of name only. The letterhead did contain the new name “Al-Ameen Dev. & Trade Co.” and at the bottom stated in addition to the address and the list of branches the words “Limited Liability Company - Paid up Capital S.R. 500,000”. It also gave the new commercial registered number. In view of the text of the letter and the necessity under Saudi law for knowledge of and consent to the transfer, I hold that this letter did not set out the change in a way in which it could be argued that HCN had the necessary knowledge. It certainly did not seek their consent.
(3) Mr Pharaon said in a statement that was before the tribunal that he told Mr Stowell of HCN at the FMI exhibition in 1993 that the name Al Ameen Est would be changed to read Al Ameen Co; however this evidence was no more than evidence of a change of name and not a change of the legal status of the person with whom HCN had done business and there was no evidence that the consent of HCN had been sought. There was a meeting between Mr Pharaon and Mr Morgenthaler (representing HCN) at the FMI exhibition at Chicago in 1994. That meeting was the subject of evidence by Mr Morgenthaler and Mr Wallace Fairweather (also representing HCN) set out in witness statements served in the arbitration. Those statements dealt solely with discussions at that meeting relating to settlement of the outstanding balance and the dispute over commission; nothing was said about the change to a limited company. That is not surprising as, at the time the witness statements were prepared, the issue was not a live issue at the arbitration, as HCN did not know of the change. However, when, as I shall explain, the issue became a live one at a late stage at the arbitration hearing, no further evidence was adduced then or was adduced for the purpose of the hearing before me. Instead it was submitted that a letter written by Mr Pharaon on 8 May 1994 confirming the agreement reached at that meeting and the subsequent correspondence demonstrated that HCN knew of the change to a limited liability company. Apart from the use of the new notepaper, there was nothing in that letter, or the subsequent correspondence which, in my view, would have brought the change to the knowledge of HCN. It was argued that, by use of the terms such as “we agree to settle our account with you concerning the old debt” and “Hussmann agreed to co-operate with Al Ameen Co... as before”, the offer was being made by Mr Pharaon that the Company should take on the old debt and that the Company should act as before. It is quite clear however from the context in which this letter was written that these references were to the dispute over the outstanding balances and the desire of Mr Pharaon to continue as the distributor in the light of that dispute. I therefore find nothing in the correspondence at this time to suggest that HCN had knowledge of, let alone consented by their continued dealing to, the assignment.
(4) As I have already set out, when HCN gave notice of arbitration, they referred to the Establishment as a limited liability company. It was submitted this showed they had knowledge of the transfer. I do not accept that submission. It is clear that they were referring to the Establishment by its original number and that at that stage they thought that an Establishment had separate legal personality from its owner. There is nothing to suggest that they knew of the transfer to the Company. They had simply made a mistake as to the legal status of the Establishment; it is clear from their reference to the correct number that they were referring to the original party to the agreement.
(5) I do not find it surprising that Mr Pharaon did not draw the matter specifically to the attention of HCN because his own view expressed in November 1998 was the following:
As there were no major change in status and I am holding partner of Al-Ameen Co & other partners were my Sons & Daughters (All Minors). In Sharia (Islamic thoughts) Sons & Daughters will be the successor of their father in terms of Assets, Liabilities & all other obligations. I do not deemed necessary to inform officially to every one about this, in other words we would say that only change was the word “establishment” to “Company”.
That statement goes on to refer to the conversation with Mr Stowell of Hussmann at the FMI exhibition in 1993, but again, as I have set out, that was in terms of merely the change of name from Establishment to Company.
(6) In August 1998, prior to the arbitration hearing, HCN obtained legal advice in relation to the status of the Establishment as set out in the statement of Mr Yousef Al-Jadaan a lawyer practising in Riyadh. Mr Al-Jadaan advised that the Establishment was an individual establishment and had been deleted from the commercial register on 16 February 1994; that the Company had been incorporated as a limited liability company as a separate entity from the Establishment. He added that the Establishment no longer existed as a legal entity and it had had no legal capacity since 16 February 1994. The advice was not accurate in stating the Establishment no long existed as a legal entity and had no legal capacity since 16 February 1994. That is because the Establishment had never had a separate legal personality; it was no different from Mr Pharaon. What obviously must have been meant in the advice was that Mr Pharaon could not trade as a commercial agent under the name of the Establishment as it was not registered in the Commercial Register.
(7) HCN’s solicitor stated in his witness statement (which was before the Court) that as soon as the information from Mr Al-Jadaan was drawn to HNC’s attention, consideration was given as to whether or not to proceed with the arbitration, as it appeared that the party to the distributorship agreement (the Establishment) was not and could not be a party to the arbitration. His statement explained that the arbitration had been commenced by HCN, not only to recover the substantial sum owed by the Establishment, but also because it wanted to appoint another distributor in Saudi Arabia; there was a real concern on their part that, without a declaration from the tribunal that the agreement had been terminated or was no longer in effect, attempts would be made by Mr Pharaon to prevent the appointment of a new distributor by way of proceedings in Saudi Arabia. Because of this concern, HCN decided it would proceed with the arbitration with a view to getting the matter dealt with in an arbitral award from the tribunal.
(8) In the note of his opening submission handed to the tribunal at the commencement of the hearing on 2 November 1998, counsel for HCN made the point in the first paragraph of that note that the parties to the arbitration were HCN and the Establishment; that no other entity was entitled to be represented or heard or bring any claims or to obtain any relief or to have an award entered against it. A footnote to the paragraph stated:
“Paragraph 1.2 of the Statement of Claim fails to distinguish between two separate legal entities: Al Ameen (as defined above) which ceased to exist on 16/02/94 (see statement of Mr Al-Jadaan) and Al Ameen Development & Trade Co. Ltd. (Company registration number 1010122156), which came into existence at about the same time. The Statement of Claim is wrong not to make the distinction. The latter entity will be referred to by Hussmann as “Al Ameen Company Limited” to distinguish it from the unincorporated Al Ameen”.
Counsel for HCN was making the clear point that the jurisdiction of the tribunal only extended to disputes between HCN and the Establishment, though he was repeating the incorrect advice of Mr Al-Jadaan that the Establishment had ceased to exist.
(9) It was in this way that the issue before the court which relates to the jurisdiction of the tribunal in respect of the claim by the Company was first raised between the parties and before the tribunal. It must have been this which caused those advising the Respondents to enquire into the transfer and the contention that this had been notified to HCN. This resulted in the provision of much of the information which I have set out above.
(10) At this stage no formal application was made to the tribunal; instead it appears that counsel for HCN pointed out that there were two separate parties and that the Establishment did not appear to exist. The initial reaction of the tribunal was that there was insufficient evidence and the tribunal was not prepared to dismiss the counterclaim based on this submission. However, questions were asked of the expert on Saudi Arabian law in relation to the transfer. These elucidated answers which I have summarised in paragraph 15 above.
(11) After that evidence was given and the further information provided by the Respondents, an application was made by HCN for leave to amend the definition of Al Ameen in their request for arbitration and statement of claim which I have set out in paragraph 8 above so that it was made clear that it referred to Mr Pharaon trading as the Establishment; they also sought leave to amend the defence to the counterclaim to plead that notice of the assignment had not been given to HCN and that therefore the Company had not become a party to the agreement; that the Company was therefore not entitled to claim the commission and the Establishment had disabled itself from performing the agreement in February 1994 and was therefore not entitled to commission after that date. The tribunal refused leave, giving reasons in its award.
The jurisdiction of the tribunal over the Company under the arbitration agreement
We do not know if this point is taken seriously in the context of an Arbitration in the Euro Arab System. …..
The loss of the right to object
“unless he shows that at the time he took part or continued to take part in the proceedings he did not know and could not with reasonable diligence have discovered the grounds for the objection”.
The purpose of the provision is to ensure that a party does not keep a point “up his sleeve” and wait and see what happens while considerable expense is incurred. A party cannot be allowed to take part in proceedings and then challenge the award if he is dissatisfied with it on the basis of a point about which he knows or ought with reasonable diligence to have discovered. (see the judgment of Moore-Bick J in Rustall v Gill and Duffus  1 Lloyd’s Rep 14 at page 20).
Issue 2 (a): Serious procedural irregularity; the tribunal’s handling of the expert evidence on Saudi Arabian law
The appointment by the tribunal of the expert
The instructions given by the tribunal to the expert
The content of the expert’s report
The ruling by the tribunal
The allegation of serious procedural irregularities
(1) The tribunal should not of its own motion and without consulting the parties have instructed Dr Al-Qasem in the terms they did.
(2) They should not have instructed him to cover the issues raised in the terms of reference but only deal with Saudi law.
(3) They should not have met with him and discussed the report in the absence of the parties without obtaining their consent.
The manner of giving instructions
First the arbitrator should recall that it is for the parties to allege that the foreign law differs from English law. If they are content to have their disputes decided according to English law, it is no part of his function to multiply trouble and expense by suggesting that the two laws differ. Furthermore, when it has become plain that one or other party had raised a serious issue as to foreign law, the arbitrator will be well advised to adopt a rigorous attitude towards the particularisation of the claim however informal the remainder of the proceedings may be....
The obvious good sense of this needs no elaboration. Experience has shown that in many cases, recourse to foreign law adds very considerably to the expense of an arbitration and in very many cases makes little difference; where there are genuine points of difference (as in this case in relation to the admissibility of evidence of post contractual conduct as an aid to construction), the point can generally be isolated and often be agreed. A general request to a foreign lawyer to review the entire case and opine on the principles of foreign law where the parties have not raised specific issues is a course that a prudent tribunal should not embark on without considerable hesitation.
Meeting with Dr Al-Qasem to discuss his draft report
The parties shall be given a reasonable opportunity to comment on any information, opinion or advice offered by any such person.
The terms of the provision are clear. A tribunal should generally not hear evidence in the absence of the parties. As the Act sets out the principle in clear user-friendly language, it is therefore not necessary any longer to refer to the number of cases decided prior to the Act which made that principle clear: Giacomo Costa Fu Andrea v. British Italian Trading Co.  2 Lloyd’s Rep 392, Royal Commission on the Sugar Supply v. Trading Society Kwik-Hoo-Tong (1922) 38 T.L.R. 684, London Export Corporation v. Jubilee Coffee Roasting Company  1 Lloyd’s Rep 197 and Mediterranean & Eastern Export Co Ltd v Fortress Fabrics (Manchester) Ltd  2 All ER 186. I agree with the observation of Professor Merkin in his work on Arbitration at paragraph 13.46(e):
“.... consultation with the experts should not take place after the close of the hearing or otherwise in the absence of the parties as this deprives the parties of their right to comment”.
The point was taken that in the meeting with Dr Al-Qasem, the tribunal was not taking evidence and so the provisions of s 37(1)(b) did not apply; I do not agree. They were plainly discussing with him the law of Saudi Arabia and the content of his report; in my judgment the provisions of the section were applicable to this meeting at which his evidence was discussed.
The failure to excise part of Dr Al-Qasem’s report
“It would be almost impossible for any expert on foreign law to give his opinion on law divorced from the facts and issues in the case. We are of the view that this is precisely what Dr Anis Al-Qasem has done giving his views on the law in the light of the issues and written materials with which he was supplied. Of course Dr Anis Al-Qasem’s opinion on factual matters will have no room in our deliberations. These will be the subject of submissions in the light of the evidence and both his factual and legal views can be, and no doubt will be, if the Claimant wished to cross examine him before us. At the end of the day the tribunal will come to their own conclusions on the evidence as a whole and make their own findings on Saudi law without we hope being coloured in any way by the views of Dr Anis Al-Qasem or anyone else.”
It is clear from reading the report of Dr Al-Qasem and the award that the tribunal followed a process of reasoning that is quite different to the reasoning which Dr Al-Qasem had set out in his report. Thus, in my view not only did the tribunal state that they would reach their own decision, but they in fact did so. I cannot therefore discern any irregularity in what the tribunal did in this respect, though it may have been more prudent for them to have made clear that they would totally ignore that part of his report where he expressed his views on the very issues which the tribunal had to determine.
Was there a serious irregularity?
An irregularity of one or more of the following kinds which the Court considers has caused or will cause substantial injustice to the Applicant -
(a) Failure by the tribunal to comply with section 33 (general duty of tribunal).
(d) Failure by the tribunal to deal with all the issues that were put to it.
“The Court does not have a general supervisory jurisdiction over arbitrations. We have listed the specific cases where a challenge can be made under this Clause. The test of “substantial injustice” is intended to be applied by way of support for the arbitral process, not by way of interference with that process. Thus it is only in those cases where it can be said that what has happened is so far removed from what could reasonably be expected of the arbitral process that we would expect the Court to take action. The test is not what would have happened had the matter been litigated. To apply such a test would be to ignore the fact that the parties have agreed to arbitrate, not litigate. Having chosen arbitration, the parties cannot validly complain of substantial injustice unless what has happened simply cannot on any view be defended as an acceptable consequence of that choice.”
It is not sufficient to show that the irregularity has demonstrated incompetence on the part of the arbitrator and has undermined the confidence of the applicant in the ability of the arbitrator. Loss of confidence is neither a sufficient nor a necessary condition of substantial injustice. It is simply not the test. It is possible for an arbitrator to commit an irregularity which raises a question as to his competence and yet which causes no injustice to either party, still less any substantial injustice.
Conversely it is possible for a competent arbitrator to make a mistake which causes substantial injustice and which needs to be put right by the court but in circumstances where, in the general sense, the applicant retains full confidence in the arbitrator. After all, Homer does sometimes nod.
The tribunal made, in the circumstances of this case, an error in meeting with Dr Al-Qasem and in failing to tell the parties, but that is all. The conduct goes no further than that and certainly does not raise a question about the competence of the tribunal. Furthermore no prejudice or injustice flowed in fact from their error as the fact of the meeting became known to the parties during the evidence of Dr Al-Qasem.
Issue 2 (b): Serious procedural irregularity: failure by the tribunal to deal with the issues that were put to it
The issue of whether the Establishment was entitled to the discount for prompt payment.
The products on which commission was payable
The identification of the fact subsequent to the agreement which imposed upon HCN an obligation to pay commission on sales made by Hussmann USA.
Conclusion on this issue
Issue 3: The fees of the tribunal
The fees of £85,520 charged by the tribunal are excessive.
The fees charged
(1) The administrative charges and costs were fixed at £15,520
(2) The arbitrators fees were fixed at £70,000.
Correspondence followed in which HCN’s solicitors attempted to obtain a breakdown of the fees; explanations were given. On 19 April 1999, the Legal Advisor to the Euro- Arab Arbitration System gave the following explanation of the arbitrators’ fees:
As you know, the Rules provide that these shall be fixed by the Board taking into account the complexity of the case, the amount in dispute and the hourly rates of £150-£200 per hour stipulated in Appendix II.
For your information, each of the arbitrators spent a total of over 150 hours on this case. Having regard to this and other criteria, the Board fixed the Arbitrators’ fees at the total sum stipulated in my letter of 1 April 1999 of £70,000
Further information was provided; in a letter of 28 April 1999, the Legal Advisor stated that although the Arbitrators’ fee was fixed by the Board, it was the minimum that could have been fixed having regard to the Rules. Further correspondence ensued. This did not satisfy HCN’s solicitors. The total fees were, however, paid by the Respondents’ solicitors and the award made available to the parties on 9 September 1999.
|Charge based on the value of the matters in issue based on the scale of charges
|Costs incurred by the system (including hire of rooms, photocopying, secretarial costs, fax, lunch and beverages)
|Out of pocket expenses of Mr Murray
|Out of pocket expenses of Dr Anvari
|Chairman’s expenses (largely related to word processing and typing)||£3,500.00|
The fees of the arbitrators of £70,000 were made up of £30,000 paid to the chairman and £20,000 paid to each of the other two arbitrators. The total number of hours spent by the arbitrators were: the chairman 185 hours, Mr Murray 160 hours and Dr Anvari 150 hours. On this basis the average hourly rate was just over £140 per hour. In a witness statement jointly signed by the members of the tribunal they explained that the numerous hours were spent over four periods:
(1) Pre-hearing between November 1997 and November 1998 in correspondence, considering the documents and pleadings, dealing with the preliminary objection in relation to the service of the defence and ruling on it, settling the terms of reference, framing issues, directions, discovery of documents, witness statements and the appointment of the expert.
(2) Five days for the hearing.
(3) Post hearing they had several meetings, and the chairman drafted the award; they considered the award and its annexes and sent it to the Board. In a further statement, the Chairman explained that although the decision of the tribunal was unanimous, it was reached after necessary deliberation and minute and thorough examination and discussion of the evidence, documentation, correspondence, arguments of counsel and Saudi law. They had several meetings; drafts were discussed with the arbitrators and sent back to the Chairman with comments. Where agreement could not be reached, a meeting was held. The final award took time and careful reasoning.
(4) The cost problems between March and May 1999.
The letters written by the officers of the Euro-Arab Arbitration System and the witness statements of the tribunal made it clear that the expenses of the arbitrators had been approved by the Board of the Euro-Arab Arbitration System and the Board had fixed the arbitrators’ fees.
The challenge made by HCN
(1) the sum paid to the chairman by way of expenses in respect of typing and word processing and
(2) the overall amount of the fee paid to the arbitrators.
(1) The court had no jurisdiction under the Arbitration Act 1996 to review the amounts as the fees had been fixed by the Euro-Arab Arbitration System under the terms of their Rules.
(2) The court ought not to adjust the fees in any event.
They also contended that it would in any event be unjust to order repayment of the fees as two of the arbitrators had been paid and had expended the sums.
The rules of the Euro-Arab Arbitration System
Article 23.4 provides:
23.4 No application for arbitration shall be submitted to the arbitrator unless it is preceded or accompanied by payment of a deposit on account of costs, expenses and fees, as determined in accordance with Article 29.
Article 29 then provides:
The charges, costs and fees payable on an arbitration under Article 23.4 and 23.5 of the Rules shall include:-
(a) Administration costs, including the fee for registration for the application.
(b) Arbitrators’ fees, together with their costs and expenses.
29.4.1 Each arbitrator’s fees shall be fixed according to the amounts in dispute, by reference to the scale applicable to the date on which the request for arbitration is submitted.
Where the parties have not specified the amounts in dispute when submitting their requests, the Board shall fix the amount of the advance to be paid on account of fees at its discretion.
29.4.2 As an exception to the above provisions, the arbitrators’ fees may be calculated at an hourly rate, according to the amount of time spent by them in the matter, provided that the parties so request the Board at the commencement of the arbitral proceedings and likewise at the time of the appointment of the sole arbitrator or the arbitrators appointed by each of them, or on their behalf, in accordance with Article 21 of the Rules.
29.4.3 These fees shall be determined by taking into account, in particular, the complexity of the case and any other significant factors.
29.5 Reimbursement of the arbitrators’ personal expenses:
Expenses incurred by the arbitrators’ relating directly to the arbitral proceedings shall be reimbursed by deducting them from the sums advanced by the parties or from the inclusive amount, calculated as above, on presentation of proof of expenditure and in accordance with the guidelines given by the Secretariat/Registry, which the arbitrator will receive on his appointment.
The fees of Conciliators, Arbitrators or Experts appointed or nominated under these Rules shall be based upon hourly rates of £150 - £200 per hour plus a percentage of the value of the subject-matter.
|Value of the sum in dispute
(IN US DOLLARS)
$300,001 to $500,000
$500,001 to $1,000,000
The power of the Court to review fees
(1) The parties are jointly and severally liable to pay to the arbitrators such reasonable fees and expenses (if any) as are appropriate in the circumstances.
(2) Any party may apply to the Court ... which may order that the amount of the arbitrators’ fees and expenses shall be considered and adjusted by such means and upon such terms as it may direct.
(3) If the application is made after any amount has been paid to the arbitrators by way of fees or expenses, the Court may order the repayment of such amounts (if any) as is shown to be excessive, but shall not do so unless it is shown that it is reasonable in the circumstances to order repayment ...
(4) Nothing in this section affects ...any contractual right of an arbitrator to payment of his fees and expenses.
S.28 is a mandatory provision listed in Schedule 1 and takes effect by reason of s.4(1) notwithstanding any agreement to the contrary.
The starting point is section 28(5), which recognises that the arbitrators are entitled to be paid, by way of fees and expenses, the amount (or on the basis) agreed by them with the parties, thereby following section 19(2) of the Arbitration Act 1950 in preventing that agreement from being challenged by the parties. The Arbitration Act 1996, unlike the July 1995 Bill, does not refer expressly to fees as determined by an arbitral body, but it must be assumed that acceptance of the terms of such a body amounts to an agreement to pay fees and expenses in accordance with those terms.
The DAC Report, however, contains no direct observations. It is plainly an important point for arbitral bodies and arbitrators appointed under their rules, but it is not necessary for me to decide whether this view is right.
Should the fees be adjusted by the Court?
(1) As the hearing lasted 4½ days, the time occupied by each would have been 27 hours, allowing for dealing with the applications that took place during it.
(2) The Chairman dealt with the interlocutory matters prior to the hearing and it would be reasonable to allow 12 hours for that.
(3) The documentation before the tribunal was limited and a reasonable amount of time to allow was 24 hours.
(4) It would be reasonable to allow 4 hours discussion between the arbitrators and then a further 10 hours for the Chairman to draft the award.
They therefore contended that the Chairman should have spent 77 hours and the other members 55 hours each, as opposed to the 185, 160 and 155 hours actually spent. On the basis of an 8 hour day (which is generally accepted to be the working day for fees charged at these rates), this represented an average of about 20 days spent by each arbitrator, only 4½ of which they had spent at the hearing in November 1998.
Would it have been reasonable to order repayment by Mr Murray and Dr Anvari?