Much has been written about iura novit curia or, as it has been rephrased for arbitration purposes – the iura novit arbiter principle in international arbitration. There are three main areas of debate. The first of these areas deals with the different approaches to the role and duties of the decision-making body and the parties between civil law and common law jurisdictions. Traditionally, civil and common law systems arrive at different answers to the question of whether the decision maker has a right or even a duty to investigate and apply the law ex officio. Secondly, there is the underlying issue of the status of the applicable substantive law, which largely boils down to the distinction between facts on one hand and the law on the other. In other words, the issue is whether the applicable law is a matter of law to be determined by the decision maker or rather a fact to be proven by the parties. Finally, the discussion moves to the inherent feature of international arbitration, namely a forum where arbitrators and parties from different legal cultures, often foreign to the applicable substantive law and not necessarily being trained lawyers in the first place, need to coexist. These discussions usually arise when a court decision is rendered in enforcement or annulment proceedings concerning an arbitral award (e.g. an interesting contribution to this blog). The post-award stage seems however somewhat late to raise such fundamental issues. What, therefore, can be done earlier in the proceedings in practical terms in order to prevent the reoccurring concerns of iura novit arbiter?
Aside from Article 34(1) and (2)(g) of the English Arbitration Act 1996 there is virtually no express regulation as to the application of iura novit curia in national arbitration law. This principle has not gained the status of a universally applicable principle, nor it is mandatory procedural law or even understood in the same way in different jurisdictions. While the jurisdictions which implement the principle in domestic litigation have a tendency to recognise it also in international arbitration, there is no common one-size-fits-all solution regarding the iura novit arbiter principle.
At the same time, most arbitration rules are of little help as they do not regulate the issue of who carries the burden of determining the content, interpretation and application of the law. There are, however, examples of rules that address the problem more openly.
Unsurprisingly, the 2014 LCIA Rules provide for a regulation corresponding to Article 34(2) of the English Arbitration Act 1996 (Article 22.1(iii)). Another example which goes even further than the LCIA Rules are the Arbitration Rules of the Court of Arbitration at the Polish Chamber of Commerce (PCC Rules), which came into force on 1 January 2015. The PCC Rules contain the following provision (in §6 item 2):
An award may not be based on legal grounds different from those relied on by either of the parties, unless the Arbitral Tribunal notifies the parties in advance and gives them an opportunity to be heard concerning such legal grounds.
This provision should not be construed as limited to the legal grounds indicated in the statement of claim or statement of defence, but it provides for a general prohibition of rendering an award based on legal grounds other than those identified “by either party”. The obvious question that arises is: what should the arbitrators do if the parties do not state the legal grounds for their respective claims and responses, especially since there is no obligation to do so in the PCC Rules, or if the legal grounds identified by the parties are incorrect or incomplete?
If it were not for the express regulation of §6 item 2 of the PCC Rules there could be two radical ways to answer this question: the arbitral tribunal could follow the strict civil law procedure which allows the arbitral tribunal to establish the content of the substantive law and to apply the law ex officio; or the arbitral tribunal could follow the common law influenced mechanism by assuming the role of an umpire and deciding the case as pleaded by the parties. The PCC Rules in §6 item 2 provide for a unique and much-desired compromise when compared with these two far from ideal solutions in the context of international arbitration. It takes into account both the inquisitorial and the adversarial systems, yet it is sufficiently flexible so as to encompass arbitration cases depending on the given circumstances.
The compromise essentially provides that as a rule the parties are to submit complete legal arguments, including supporting these with research materials, court rulings and academic studies, and usually independent expert reports. In addition, the arbitral tribunal has the authority to request further details about the applicable substantive law and to decide for itself as to the content of the law. Importantly, the regulation in §6 item 2 of the PCC Rules is designed to avoid surprising the parties with a decision on legal grounds, however it does not limit the tribunal’s power to independently inquire into the content of the applicable law within the limits of the parties’ respective claims and defences and their submissions on legal grounds.
Giving the limited regulation of this issue at the level of national arbitration law, arbitration rules as well as in arbitration agreements, at a practical level the question of who should know the law should be addressed as early as possible in any arbitration proceedings where this is relevant. Preferably, such issues should already be covered in the first procedural hearing. For example, James H. Carter has suggested the following wording to be included in the first procedural order (terms of reference):
The arbitral tribunal is to resolve all issues of fact and law that shall arise from the claims and counterclaims and pleadings as duly submitted by the parties, including, but not limited to, the following issues, as well as any additional issues of fact or law which the arbitral tribunal, in its own discretion, may deem necessary to decide upon for the purpose of rendering any arbitral award in the present arbitration. [Carter, James H.; after Waincymer, J., International Arbitration and the Duty to Know the Law, Journal of International Arbitration, The Hague, London, New York 2011, Vol. 28, Issue 3, footnote No. 25, p. 209.]
Another example to consider in the context of terms of reference is:
The parties shall establish the contents of the applicable substantive law. The Arbitral Tribunal shall have the power, but not an obligation, to make its own inquiries to establish such contents. If the contents of the applicable law are nor established, the Arbitral Tribunal is empowered to apply any rules of law which it deems appropriate. [Arroyo M. (ed.), Arbitration in Switzerland, The Practitioner’s Guide, The Hague, London, New York 2013, p. 174.]
The manner in which new legal issues should be handled in practical terms means the involvement of the parties. As a matter of good practice, the view that the arbitral tribunal should clarify that it may at times put questions to the parties on legal issues and that it may research legal sources independently and apply its own knowledge as to the content of the applicable law, should be promoted.
Another practical observation would be to raise the legal issues as soon as they arise. This should, however, be balanced on a case-by-case basis since the arbitrator should not go so far as to become an advocate for one party, unfairly hinting to a party as to the legal grounds that could advance that party’s case. The most challenging task before arbitrators is therefore to strike a balance between the fundamental principles of the right to be heard and the equality of the parties, with the ultimate aim of rendering a fair and enforceable award that does not exceed the claims pursued.
Ultimately, international arbitration is a service industry the further development of which is dependent on the trust and consent of its users – the parties. They are more likely to accept an arbitral tribunal’s decision if they can follow the rationale and are not surprised by a justification on legal grounds that they have not raised. A much-needed compromise as to the iura novit curia principle, transposed for the purposes of international arbitration, is to provide confidence in the arbitral process and its outcomes.
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See the The 73rd Conference of the International Law Association held in Rio de Janeiro, Brazil, 17-21August 2008: RESOLUTION No. 6/2008 :
INTERNATIONAL LAW ASSOCIATION RECOMMENDATIONS ON ASCERTAINING THE CONTENTS OF THE APPLICABLE LAW IN INTERNATIONAL COMMERCIAL ARBITRATION
1. At any time in the proceedings that a question requiring the application of a rule of law (including a question of jurisdiction, procedure, merits or conflicts of laws) arises, arbitrators should identify the potentially applicable laws and rules and ascertain their contents insofar as it is necessary to do so to decide the dispute.
2. In ascertaining the contents of applicable law and rules, arbitrators should respect due process and public policy, proceed in a manner that is fair to the parties, deliver an award within the submission to arbitration and avoid bias or appearance of bias.
3. When it appears to the arbitrators that the contents of applicable law might significantly affect the outcome of the case, arbitrators should promptly raise that topic with the parties and establish appropriate procedures as to how the contents of the law will be ascertained (in submissions with materials attached, through experts, witnesses or otherwise).
4. Arbitrators attempting to ascertain the contents of applicable law should bear in mind that the rules governing the ascertainment of the contents of law by national courts are not necessarily suitable for arbitration, given the fundamental differences between international arbitration and litigation before national courts. In particular, arbitrators should not rely on unexpressed presumptions as to the contents of the applicable law, including any presumption that it is the same as the law best known to the tribunal or to any of its members, or even that is the same as the law of the seat of the arbitration.
Interaction with parties
5. Arbitrators should primarily receive information about the contents of the applicable law from the parties.
6. In general, and subject to Recommendation 13, arbitrators should not introduce legal issues – propositions of law that may bear on the outcome of the dispute – that the parties have not raised.
7. Arbitrators are not confined to the parties’ submissions about the contents of applicable law. Subject to Recommendation 8, arbitrators may question the parties about legal issues the parties have raised and about their submissions and evidence on the contents of the applicable law, may review sources not invoked by the parties relating to those legal issues and may, in a transparent manner rely, on their own knowledge as to the applicable law as it relates to those legal issues.
8. Before reaching their conclusions and rendering a decision or an award, arbitrators should give parties a reasonable opportunity to be heard on legal issues that may be relevant to the disposition of the case. They should not give decisions that might reasonably be expected to surprise the parties, or any of them, or that are based on legal issues not raised by or with the parties.
Making use of information about law’s content
9. In ascertaining the contents of a potentially applicable law or rule, arbitrators may consider and give appropriate weight to any reliable source, including statutes, case law, submissions of the parties’ advocates, opinions and cross-examination of experts, scholarly writings and the like.
10. If arbitrators intend to rely on sources not invoked by the parties, they should bring those sources to the attention of the parties and invite their comments, at least if those sources go meaningfully beyond the sources the parties have already invoked and might significantly affect the outcome of the case. Arbitrators may rely on such additional sources without further notice to the parties if those sources merely corroborate or reinforce other sources already addressed by the parties.
11. If in the course of deliberations arbitrators consider that further information about the contents of applicable law is necessary to the disposition of the case, they should consider reopening the proceedings to enable the parties to make further submissions on the open legal issues, but only to the extent necessary to address the open legal issues and taking into account considerations of relevance, time and cost.
12. In applying the rules of the applicable law, arbitrators should give due regard to available information about the application of the rules in the jurisdiction from which the rules emanate.
13. In disputes implicating rules of public policy or other rules from which the parties may not derogate, arbitrators may be justified in taking measures appropriate to determine the applicability and contents of such rules, including by making independent research, raising with the parties new issues (whether legal or factual), and giving appropriate instructions or ordering appropriate measures insofar as they consider this necessary to abide by those rules or to protect against challenges to the award.
14. In applying the foregoing Recommendations, arbitrators may take account of the nature of the proceedings, in particular regarding default and expedited interim relief proceedings, and may take a more active role than might otherwise be the case in questioning legal submissions.
15. If after diligent effort consistent with these Recommendations the contents of the applicable law cannot be ascertained, arbitrators may apply whatever law or rules they consider appropriate on a reasoned basis, after giving the parties notice and a reasonable opportunity to be heard.