I

JUDGES TRANINING INSTITUTE

Arbitration and Mediation.

Justice L.K. Wimalachandra.

TABLE OF CONTENTS Page nos. Dispute resolution: alternative methods... 01 Mediation process and techniques 07 Litigation and mediation.. 13 Ethical constraints involved in meditation. 18 Arbitration Act No. 11 of 1995... 22

Dispute Resolution - Alternative Methods

In Sri Lanka, alternative mechanism for Dispute Resolution is not a new concept. In ancient Sri Lanka, the traditional dispute resolution process in many villages was a form of mediation, where persons in dispute would bring the dispute before the Chief Buddhist priest of the village temple, who was expected to use his knowledge on Buddhist Philosophy and the inflexible law of nature in assisting the parties to find a solution to their dispute. Sometimes the dispute was brought before the elders of the village and discussed with them to bring about a settlement. In this respect the Gamsabhava or Village Council which existed in the ancient Sinhalese Kingdom, engaged in the peaceful settlement of minor disputes among villagers. L.J.M. Cooray in his book An Introduction to the Legal System of Ceylon (1972 edition at page 104) has made the following observations. The gamsabhava or village tribunal whose origin dates back to the origin of the village itself was composed of the village elders. It is said to have met at an ambalama or under a shady tree. It dealt with very minor offences such as small debts, minor quarrels, boundary disputes and thefts. The gamsabhava attempted not so much to mete out punishment but to amicably settle disputes on the basis of common sense and compromise. The procedure was characterised by admonition, compromise and common sense, unsullied by legal technicalities and rigid rules of procedure. From the Western cultural view point such processes appear to be manipulative, unjustifiable and authoritarian and amounts to bringing forced or coercive settlements upon the parties to the dispute, violating the principles of natural justice. This is a misunderstanding among the people who know nothing about peaceful resolution of disputes and maintaining peace and harmony. Under the aforesaid mechanism, due to its voluntary nature both parties take the responsibility for resolving their own disputes. The ancient system of alternative dispute resolution, namely, by the village tribunal (gamsabhava) or the reference of the dispute to the elders in the village and very often

3 taking it before the Chief Priest of the Village Temple who would settle the dispute in a peaceful manner not only helped the parties to the dispute to live in peace and harmony but also helped the growth of our economy at the village level welding the people together and promoting social stability. In modern times alternative forms of dispute resolution are especially desirable due to various factors which will be discussed later in this essay. The term Alternative Dispute Resolution (ADR) is used to describe any method of resolving disputes, other than those adopted by the Courts of Law administered by the State. ADR is a noncompulsory method of resolving disputes. There has been a huge increase in the number of ADR procedures used in recent times. One reason for this phenomenon is that the benefits of ADR are tangible. The growing cost of litigation and delay has made the business community look for an alternative mechanism for dispute resolution. The traditional methods of litigation adopted today has been tainted by the opponent party adopting delaying tactics, overcrowded Courts and prohibitive cost of litigation by way of lawyers fees and expenses. Loss of management time has made the litigants look for quicker and cheaper methods of dispute resolution. Moreover in ADR unlike in traditional methods of litigation, there are no losers and there is a real prospect of both sides winning. The parties to an international contract often have confidence only in their own laws and usually have misgivings about the law of the country of the other party. This is mainly because the foreign laws are unfamiliar and not that they are less favourable. As a result parties involved in international contracts are often reluctant to take recourse to traditional litigation and resort to the use of ADR in international dispute resolution. The following passage from the book Law and Practice of International Commercial Arbitration by Alan Redfern and Martin Hunter (3rd edition at page 32) can be used to illustrate the distinction between ADR on the one hand and litigation and arbitration on the other.

4 ADR, like litigation and arbitration, will often involve an independent third party but his function in fundamentally different from that of judge or arbitrator and is best described as a neutral facilitator. He does not impose a decision on the parties but on the contrary, his role is to assist the parties to resolve the dispute themselves. He may give opinions on issues in dispute but his primary function is to assist in achieving a negotiated solution. Traditional method of litigation or Court resolution of disputes has been criticized for the following reasons: 1) Very often complicated commercial issues require expert determination. For an instance, disputes in e-commerce involving highly technological issues require expert knowledge. However most judges are not familiar with the technological aspects of e-commerce. Expert knowledge is necessary in many of the disputes relating to technical, economic, financial, regulatory and legal issues on the part of the dispute resolving Judges. The judges are not experts in those fields and they will have to depend on experts summoned before them to give evidence. Very often judges are not even familiar with the many terms used in modern technology. 2) The cost of conventional litigation is prohibitive and costs of experts and cost of data gathering is expensive. The cost of resolving a dispute must be well below the cost of not resolving it or of conventional legal proceedings. 3) Conventional Court procedure in most cases involves delay. 4) Litigation can be damaging to future business relations and frustrating to the parties. There are many ADR methods of settling commercial disputes without resorting to Court litigation. Direct negotiation between the parties has always been the most suitable way of settling commercial disputes. Both parties to the dispute are in a position to know the strengths and weaknesses of their cases, in such a situation. Although negotiations may resolve disputes, sometimes the settlements arrived at may not be fair due to the inequality of bargaining strength.

The two most common types of ADR methods are mediation and arbitration. Mediation is a process by which the parties, together with the assistance of a mediator, systematically identify disputed issues and reach a consensual settlement that will offer reconciliation. Arbitration is the submission by two consenting parties of their dispute to an impartial decision maker, usually for a binding determination. The latest form of ADR is the Online Dispute Resolution mechanism which is highly effective and cheap. In many international disputes where it is impractical to bring the parties together before an impartial third party mediator, there have been or are several projects for resolving disputes on-line. This method is particularly suitable for etransactions involving the sale of goods, copyright, defamation, fraud, deceptive trade practices, software development etc. The internet becomes the medium of communication in this instance. The On-line Ombudsmans Office is one such on-line mediation scheme which will handle any dispute arising from some on-line activity.

Advantages of Alternative Forms of Dispute Resolution 1) Flexibility One of the attractive features of ADR is flexibility. The ability of the

parties to select arbitrators or mediators who are qualified to deal with specific issues is a principal element of flexibility. Procedures can be adopted to fit the dispute. The arbitrator or mediator need not be an attorney, and the parties are permitted to select technical as well as legal experts. Arbitrators or mediators may be selected for their special skill and expertise in the field of commercial law, civil engineering or in intellectual property etc. so that they would be able to grasp the intricate problems in the dispute and this would save parties both time and money. Moreover the parties can expect a sensible solution to their dispute. 2) Confidentiality - Unlike in Court litigation privacy and confidentiality is maintained.

Conducting proceedings in private is important to the parties because expert systems,

6 agreements often contain highly sensitive, confidential and proprietary information and trade secrets of either or both parties. Accordingly the importance of confidentiality is one of the advantages of arbitration and mediation as opposed to litigation. ADR is preferable to litigation as neither the hearing nor the award or settlement is made public. 3) Less antagonism between the parties - This will preserve the business

relationship. ADR is more informal and relaxed than litigation. Accordingly, ADR offers an opportunity to minimize potential damage to the business relationship. 4) Cost saving - ADR is less costly. As it is faster, the costs involved are

considerably reduced. ADR focuses on issues rather than law. 5) Time Saving - ADR offers an opportunity to resolve a dispute expediously. For an

instance, ADR allows parties to prescribe in the Arbitration agreement, time limits on each of the various phases of the arbitration process. In a Court case pleading stage (filing the plaint, answer, replication etc.) can take several months, if not years. Delivering of interrogatories, discovery of documents, production of documents may take several months. Once the case is ready for trial, fixing a date for trial is often a difficult exercise due to the volume of cases. The trial may take years. Even so the decision of the Judge can be appealed to a higher court by either party, which would consume more time before the final decision is pronounced. 6) Informality - The informal nature of ADR produces several important benefits.

Informal proceedings are not burdened by detailed and inflexible rules of procedure, and as a result the tension may be lessened. Informal proceedings may therefore increase the possibility of facilitating a solution.

However there are certain limits to ADR. ADR is mainly concerned with compromise, but there are some disputes which cannot be compromised. There are some cases where one party is entirely wrong. In such an instance there is no justification for the other party who is one hundred percent correct to compromise. Further, if the business relationship has broken down completely, the party who is at fault may try to delay. In such a situation an attempt to mediate may not work.

Mediation Process and Techniques

Mediation (also known as conciliation) is a procedure in which a neutral intermediary, the mediator, endeavors, at the request of the parties to a dispute, to assist them in reaching a mutually satisfactory settlement of the dispute. The mediator has no power to impose a settlement on the parties. Mediation is voluntary in the sense that either party may, if he so chooses, abandon the mediation at any stage prior to the signing of an agreed settlement. Mediation involves helping people to decide for themselves, whereas arbitration or adjudication involves helping people by deciding for them. Mediation is an informal process in which a neutral third party assists the opposing parties to reach a voluntary, negotiated settlement. Mediation gives the parties the opportunity to discuss the issues, clear up misunderstandings, find areas of agreement and incorporate those areas of agreement into resolutions. The mediator helps the parties to agree on a mutually acceptable resolution. Thus mediation is a negotiation process between three (or more) parties. They are the disputants and a third party mediator. The mediator helps the disputants to negotiate among themselves. The first step in the mediation process is the preparation. The mediators role is much more than simply offering his services to arrive at a settlement. A good mediator shall be influential and effective in helping to assess the case. The disputants must be candid with the mediator in showing the strengths and weaknesses of their respective cases. It is always helpful to provide the mediator, the personal and candid assessment of the various positions taken by each party. The mediator must get to know each partys case. He must advise them comprehensively on how the mediation process works and encourage them to fully participate in the process. A mediator is engaged by the disputing parties not to act as a Judge to decide rights and wrongs, but to act as a catalyst for better communication and assist the parties to arrive at a solution. The key to successful mediation is the building of an environment of mutual respect and trust in the mediation process.

9 It is the duty of the mediator to reassure the parties about their choice of mediation to resolve their dispute. The mediator must take sufficient time to explain the process and inculcate in them that the successful settlement rate achieved through mediation is high. The mediator must make it clear at the outset that he will be impartial. He must also encourage the building of trust between parties to act in a way to develop faith in each other, such as making small concessions or considering the convenience of the other party in agreeing on the time and venue for the mediation. The mediator must encourage parties to acknowledge that they understand each others genuine concerns and to agree to help each other to reach an amicable settlement. The impartiality and neutrality of the mediator are prerequisites to the mediation. The impartiality of the mediator must be shown by his behaviour at every stage of the mediation process. The mediator must never express his personal views about the dispute, make no judgment on the dispute and place blame on any party. The mediator must have the ability to maintain control of the process throughout the entire process. He must help the parties and assist them in finding a just solution. It is always best to hold a preliminary conference before the main mediation session. It will provide an opportunity for all the participants to meet each other and to learn how the process works. Usually, the mediator will explain the mediation process to the parties. The mediator may then discuss with the parties and agree on a reasonable timetable. At the first stage of the mediation process the mediator will make an opening statement. This outlines the role of the participants and demonstrates the mediators neutrality. Sometimes he may comment about what he sees as the issue. Next, the mediator will define protocol and set the time frame for the process. In the opening statement he will set out ground rules for the mediation. After the opening statement, the mediator will give each party an opportunity to present their side of the story. This gives the parties an opportunity to frame issues in their own mind and the mediator more information

10 about the emotional conditions of each party. The opening statements will also have the following benefits: (i) (ii) it will allow both parties to assess the other partys real interests and needs ; it will help the mediator to understand the dispute and underlying conflicts and thereby he will get a deeper insight to the dispute ; (iii) it will highlight the reasons behind the differences, for an instance if were they are due to some mistake, misunderstanding or lack of communication further to what extent feelings as well as finances are involved; (iv) it will allow the mediator and the parties to identify positive aspects of their statements such as ; a hint of new understanding, a sign of mutual concern, a better past relationship, willingness to arrive at an amicable settlement etc..; (v) to identify areas where they agree ;

Before the commencement of the mediation proper, sometimes the mediator may comment on the opening statements made by the parties. This will help the parties to hear each others story repeated by a third party (mediator). This will assist them to know each others real concerns. It will also help to clarify issues and start working on them. Next phase is the commencement of joint sessions of negotiation. These this joint sessions will be helpful in assisting the parties to keep the discussions open and getting the parties to hear each other. The mediator should give an objective opinion regarding the reasonableness of each partys position. Such evaluations might be given privately to each party, or openly to all parties.

11 The facilitation ranges from insignificant issues, such as arranging meeting times and places, to very real issues on which an agreement will be difficult to reach from points on which an agreement can be easily reached and convincing the parties to tackle the hard issues last. An experienced mediator always carries out all or most of the methods listed below to achieve results: (i) (ii) breaking disputes into manageable parts and resolving each part separately ; postponing discussions of complicated issues to the latter part of the mediation process. Once the parties agree on simple issues, a trust between the parties will begin to grow, and then agreement on difficult issues will become easier ; (iii) (iv) (v) (vi) ensuring every one gets an opportunity to express their views ; being fair and impartial ; keeping discussions focused on the issues ; encouraging parties to explore changes to arrive at a consensus ; (vii) re-stating in neutral language those points on which the parties appear to agree. Verifying that they do in fact agree ; (viii) insisting that any agreement be entered in writing before the negotiation sessions end ; (ix) using humor to bring people together and defuse tension. It is also desirable to have private meetings with the parties to diffuse tense situations. In the final phase of the mediation process the aim should be to achieve a final agreement on all the issues. Some times it happens that most of the major issues have been resolved in the early stages but a few disputes remain unresolved. The mediator should remind the parties of progress already made by them and push the parties to clear the remaining obstacles by making them and encourage them to find a fresh remedial formula to break the final barrier.

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The mediator can help the parties resolve potentially difficult matters by helping them to discuss to here the parties may feel reluctant to speak directly to each other. When the parties are unable to reach a final agreement, the mediators sometimes adopt different techniques. One such technique is the Role reversal. This method will encourage the parties to understand each others point of view. This is a technique where each party is asked to present the others case on each settlement option. That is, each party is put in the shoes of the other party in order to visualize the other partys position. Sometimes the mediator speaks to each party individually in an attempt to resolve deadlocks. Sometimes the parties are more comfortable in discussing the final points individually with the mediator. At times the mediator may have to explain to one party, how far the other party is prepared to go and how much the other party is hopeful of a settlement. Another technique that the mediators adopt as a last resort when both parties are wasting the mediation time by acting in a totally in-cooperative manner is to give a stern warning that unless both parties take a genuine interest to settle the dispute, the mediator would abandon the mediation forthwith. When there is a final obstacle to clear, the mediator can get the parties talking. He must remind them of the great progress they have already made towards the final agreement and encourage them to find some method to break the barrier and reach the final settlement. At times, parties in a mediation session often start by engaging in an aggressive adversarial stance. In this situation the mediator must facilitate the transitions from I win, you lose bargaining to I win, you win negotiations.

13 During mediation very often the parties need encouragement and reassurance, especially in the final phase of the mediation process. The mediator should adopt such techniques to break the impasses and provide every assistance to get over the feelings of uncertainty faced by the parties. Once a final agreement on all the issues has been achieved, the mediator should work towards promoting the total commitment of all the parties to the terms of settlement.

Conclusion In comparison to other methods of dispute resolution, mediation provides more effective means of achieving a successful final resolution of disputes due to its voluntary nature. As the parties freely agree in their choice of mediator, freely decide to participate in the process and freely arrive at a settlement, they are likely to feel more committed towards carrying out the final agreement they have arrived at rather than giving effect to a determination imposed on them by a judge or an arbitrator.

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Litigation and Mediation

Litigation or Court resolution of disputes between parties has increasingly been criticized, especially with regard to the resolution of disputes related to commercial issues, partly because of the costs and delay involved. Very often business disputes develop into fiercely contested, expensive and prolonged law suits. Litigation process causes long delays in resolving a dispute and it can be damaging to future business relations. The legal proceedings have advantages but some parties believe that the ultimate outcome will outweigh these advantages. As a result, alternative dispute resolution mechanisms, mediation in particular, may be a better alternative. Mediation is a form of Alternative Dispute Resolution (ADR) mechanism to Court litigation. Mediation is an informal process in which a neutral third person assists and facilitates the parties to settle their disputes by negotiating. It is an alternative to submitting the dispute to a Court of Law liaising jurisdiction. In the Court process, either the Judge or jury will act as the fact finder in the trial of the disputed matter. The parties have little control over who the Judge presiding over the case will be. However if parties wish a dispute to be resolved in a binding manner, they should have recourse to the established Courts of Law rather than to mediation. Most disputes result from poor communication. Mediation gives an opportunity to communicate better and to search for mutually acceptable solutions. In mediation people communicate with each other better than in Court litigation. Besides, the disputants can jointly explore innovative solutions to their disputes. In mediation the parties decide for themselves rather than have someone else decide for them. Generally the outcome of mediation is more rewarding and more satisfactory for the disputants than those who resort to litigation.

15 Even Judges appreciate mediation for the following reasons. (i) Cases are resolved more expediously and effectively and thereafter no judicial attention is necessary which results in reduced judicial work. (ii) Some judges may be reluctant to make decisions that affect the lives of other people, especially the lives of children. (eg. Matrimonial cases involving the custody of children). (iii) Research conducted on ADR systems have confirmed that people are more satisfied and likely to comply with agreements reached by them through a mediation process, as against the determinations of Judges in Court litigation. In a Court case the pleading stage alone may take several months (the initial filing of the plaint, answer, replication and amendments of pleadings). Then comes the Discovery process. The service of interrogatories, application for further pleadings, discovery of documents, inspection of documents, production of documents etc., take years. Once the case is ready for trial, fixing a date for hearing depends on the volume of cases on the trial toll. Very often it is difficult to get a date convenient to all parties. It depends on the trial judges calendar and the lawyers diary. Once the trial commences there is no guarantee that it will be concluded within a given time. After a protracted trial, one party may appeal against the judgment and the appeal may take years. Mediation on the other hand saves time and money and is often available at no cost to the parties. The importance given to confidentiality is one of the advantages of mediation. Private proceedings are important to the parties because business agreements, commercial contracts etc, often contain sensitive and highly confidential proprietary information. Litigation is ill-equipped to protect such confidential information. When it is necessary to protect privacy and confidentiality mediation is preferable to litigation. Moreover in the mediation process agreements reached are not made public. The discussions in the mediation process are confidential and also legally privileged. The mediators do not report to any one about what is said in the sessions.

16 Mediation is the appropriate dispute resolution process when the parties are aware that they will need to deal with each other in the future. The preservation of the business relationship is often a primary goal of the parties. Unlike in Court litigation where proceedings are held in public, information disclosed during mediation will not be revealed to anyone. The privacy is maintained. Another attractive feature of mediation is the flexibility which is not available in litigation. Mediation gives the parties the opportunity to discuss the issues raised, clear up misunderstandings, find areas where they can agree on and then incorporate the areas of agreement into settlements. In litigation a Judge decides the issue for the parties. In mediation the parties make decisions for themselves. The mediator helps the parties to reach their own mutually agreed and practical settlement. Normally parties go for litigation when there is a complete breakdown of relationship. Scientifically, it has now been proven that people are more likely to comply with agreements reached by themselves as opposed to determinations made by a Judge after trial. Besides, a determination made by a Judge very often requires further legal action, such as execution of the decree. Mediation process lasts few days and costs are small compared to the costs of litigation. Mediation is more reasonable, rational and sensible than litigation. When parties resort to mediation to solve their disputes, they will benefit by maintaining the good relationship which would help them to continue to do business. Moreover when the dispute centers on a complex factual issue, mediation is eminently suitable than litigation. Mediation is a non-adversarial process, unlike Court litigation, where with a neutral mediator the parties can design an agreement that will benefit both parties. Mediation does not rely on legal issues. Unlike litigation, in mediation parties make every attempt to solve their own problems looking to the future instead of finding who is at fault.

17 Notwithstanding any shortcomings, there are benefits in Court litigation. The main benefit or advantage is the enforceability. Most mediations end with a written agreement that outlines the settlement reached by the parties. In rare instances a party may go back on the settlement. Litigation provides for the determination of disputes based upon precedents, objective fact finding and careful reasoning. In some cases the Court litigation is more sensible. In cases of intellectual property rights violations, such as infringement of trade marks or violation of copyrights. Sometimes the owner of the intellectual property right may file action against the infringer, in order to discourage any potential infringers. However, mediation is more preferable when the parties can benefit by continuing to do business together after the dispute is resolved. Factual disputes can easily be resolved by resorting to mediation when neither party requires a determination of legal issues. If a determination is required to a legal issue Court proceedings are appropriate. Successful mediation depends very much on the attitude of those involved. At the end after the comparison of litigation and mediation the following advantages may make settlements more palatable for both parties. Mediation gives parties a quick way to work out their differences. The privacy in mediation can make it easier for people to discuss emotional issues, such as matrimonial disputes, custody of children and access child support, dividing property, and maintaining relationship with step family members.

Conclusion In conclusion, mediation is more preferable to Court litigation as it encourages direct communication between the parties, helps people to decide for themselves, allow for the expression of emotions, explore creative means of solving problems and facilitate to solve the disputes by themselves. Mediation is more flexible and promotes to continue the relationship. It is always less expensive than going to trial. The outcome of mediation produces more satisfaction among the parties than those who resort to litigation. Mediation minimizes the unnecessary hurt and anger that often occur in Court

18 litigation. The most fundamental advantage of non-adversarial mediation is the mutual benefit they receive rather than the parties trying to justify their cause.

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Ethical Constraints Involved In Mediation

Mediation is a process whereby a neutral and impartial third person acts to encourage and facilitate the resolution of a dispute without prescribing what it should be. It is an informal and non-adversarial process intended to help disputing parties reach a mutually acceptable agreement. - Erwin I. Katz Mediation has become a popular form of Alternative Dispute Resolution due to several advantages. The outcome of mediation generally produces more satisfaction and compliance among the disputing parties. With mediation becoming more popular, standard ethical guidelines of behaviour for mediators and ethical standards for the disputants themselves have become necessary. These ethical constraints safeguard the mediation process and support the parties efforts towards fair and equitable settlements. Mediators must observe the basic ethical constraints to facilitate the parties to find their own creative solutions to their problems. If mediators fail to observe the standard guidelines of behaviour for mediation it might create the danger of deviating from their neutral roles and damaging the mediation process. Those ethical constraints are more descriptive than analytical. In this regard impartiality and neutrality are prerequisites to a valid process of mediation. Impartiality This involves a state of mind. The impartiality of the mediator should be seen at every stage of the mediation process. The mediator must build an environment to earn the trust of the parties in the process. Neutrality If the mediator shows some partiality towards one party in the process, then his neutrality is affected. Any previous relationship between the mediator and one of the

20 parties or any signs of receipts of future benefits by the mediator from one of the parties is a disqualification as a mediator. Neutrality means equal treatment extended to both parties during the mediation process. Neutrality does not mean that the mediator cannot have a personal opinion about the dispute. He must be able to recognize and separate his own views from the views and emotions of the parties. He shall not show any sympathy towards one party. He shall not allow his view of the dispute to override his neutrality and independence. Independence and impartiality are not interchangeable. It would be possible, for instance, for a mediator to have a relationship or financial connection with one of the parties and yet not be impartial. For example, he may have his own views and strong beliefs or convictions on the dispute in issue so as to be incapable of being impartial. Mediation is a process to facilitate an amicable settlement between parties in conflict and assist them in arriving at an acceptable solution for their dispute. A mediator must not substitute his solution or his judgment for the judgment of the parties. He shall not force or compel a party to make a decision. He shall not knowingly allow a party to make a decision on misrepresented facts. It is to be noted that ethical standards are violated when any conduct of the mediator serves to compromise the parties right to agree or not to agree. During mediation, a mediator shall maintain his impartiality, fairness and neutrality when he suggests any proposal for settlement. A mediator shall not mediate a matter that involves even a remote conflict of interest. Some of the situations where mediators encounter ethical constraints are as below: (i) (ii) The dispute involved goes beyond the mediators training skills. The mediators impartiality is challenged by prior relationships with the parties. (iii) The mediators emotional reactions to the behaviour of one of the parties (sympathy or antipathy). (iv) Tension between staying neutral and providing professional advice.

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Mediation requires a high degree of commitment by the parties as well as the mediator. In this respect parties themselves are expected to maintain a high ethical standard. The parties must realize the importance of high ethical conduct towards a fair and equitable settlement. Truthfulness is one of the most important elements in developing trust among the parties. If one party deceives the other the entire mediation process may fail. Deception creates mistrust. Lying and deception would derail the entire mediation process and lead to impasse. If the parties (disputants) intentionally lie during mediation, the mediation process becomes more complicated. They must understand that being un-cooperative or deceptive is counter productive to the mediation process. All parties must maintain honesty and recognize the importance of good faith. Some of the elementary ethical requisites for courtesy and respect are: (i) (ii) (iii) (iv) not interrupt when another person is talking show respect in words and gestures be willing to listen to the other side give honest, complete answers from ones perspective.

The purpose of mediation is to provide a forum for the resolution of disputes by the disputants themselves in a calm and peaceful atmosphere, and the mediators function is to assist them in voluntarily resolving their dispute. It is a fundamental rule in mediation that the mediator must not substitute his judgment for the judgment of the parties. Special care should be taken to preserve the parties right to find solutions by themselves. The mediator shall not force or compel a party to arrive at a decision and knowingly allow a party to make a decision based on misrepresented facts. The mediator is under obligation to maintain impartiality throughout the entire mediation process. It is the duty of the mediator to ensure that the parties reach the final agreement in a voluntarily manner and not as a result of force or threat.

22 The mediator has a firm obligation to disclose any conflicts of interest or any potential conflicts of interest such as, being an advisor to the Board of Directors of a Company which has close connections with a party involved in the mediation process. The duty to disclose also includes information relating to a mediators financial or professional relationship with any of the parties. Disclosure also involve past, present or prospective relationships with any party involved in the mediation process. Accordingly, full disclosure is an essential requirement on the part of the mediator. Another ethical issue faced by the mediator is the use of mediation by the parties to gain information or time for future Court litigation. The mediator must take necessary safeguards against such action. It is the responsibility of the mediator to protect the parties and ensure that any decision arrived at is well considered. Conclusion Although it is difficult to enforce ethical guidelines, such guidelines would undoubtedly strengthen the mediation process. In the absence of such ethical guidelines, the mediator should try to inculcate in the parties the importance of high ethical standards to the resolution of their own disputes.

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Arbitration Act No. 11 of 1995

Arbitration is a procedure in which a dispute is submitted, by agreement of the parties, to an arbitrator or to a tribunal of several arbitrators who give a decision on the dispute that is binding on the parties. Once the parties have agreed to submit a dispute to arbitration, a party cannot unilaterally withdraw from the Arbitration process. One of the common methods of dispute resolution aimed at a swift result is Arbitration. It is a popular form of alternative dispute resolution using knowledgeable persons to serve as arbitrators in resolving disputes. Russell on Arbitration, 22nd edition at page 10 comments thus: .. parties choose arbitration because of the flexibility and privacy of the proceedings, their ability to choose (directly or indirectly) the tribunal and the enforceability of the award. Prior to the enactment of the Arbitration Act No. 11 of 1995, the Civil Procedure Code governed both voluntary and compulsory arbitration. Further, the Arbitration Ordinance No.15 of 1866 also dealt with compulsory Arbitration. The basic principles found in these two statutes are similar to that of the English Arbitration Act of 1889. Presently in England the principal statute on arbitration is the Arbitration Act of 1996. Arbitration Act No. 11 of 1995 (Sri Lanka) was enacted as a comprehensive Act on arbitration to replace the antiquated legislation in existence, which were totally inadequate to make provisions for an alternative method of settlement of disputes through Arbitration. The Arbitration Act No. 11 of 1995 consists of 50 sections divided into 9 parts.

24 Part I Part I is the preliminary part that refers to the application of the provisions of the Act to all Arbitration proceedings commenced in Sri Lanka after the appropriate date.

Part II Part II of the Act deals with the arbitration agreement. Section 3 deals with the form of the arbitration agreement, while Section 4 speaks of the arbitrability of the dispute and Section 5 deals with the jurisdiction of Court in respect of a dispute covered by the arbitration agreement. The term Arbitration Agreement is defined in Section 50 as follows: Arbitration Agreement means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship whether contractual or not. Section 3 (1) of the Act recognizes two types of arbitration agreements; 1) Arbitration clause in the contract; and 2) In the form of a separate agreement. Any dispute which is not contrary to public policy and is capable of determination by Arbitration can be referred to Arbitration. Some disputes are not capable of determination by Arbitration while certain categories of disputes fall outside the domain of Arbitration. For example : Criminal matters, bankruptcy, or insolvency, any disputes as to the grant or validity of patents and trade marks, allegations of fraud, bribery or corruption in the performance of a contract raise important questions of public policy. Section 4 of the Act deals with the requirements of arbitrability of a dispute. They are; (i) an arbitration agreement and

25 (ii) the parties have agreed to submit to arbitration under such agreement.

Accordingly, an arbitration agreement is the contractual basis for the resolution of disputes by arbitration. For an arbitration agreement to be valid, the terms of such agreement must be clear and certain, without any ambiguity. The important features of an arbitration agreement are as follows; (i) (ii) (iii) (iv) (v) clear reference to arbitration place of arbitration (seat of arbitration) law governing the performance of obligation of parties choice of the procedural law appointment of the arbitral tribunal (vi) special qualifications of tribunal members; the requirement that tribunal members hold certain qualifications (vii) number of members of the tribunal (viii) language of proceedings (ix) privacy and confidentiality Where a party to an arbitration agreement institutes action against another party to such agreement, the Court shall have no jurisdiction to hear and determine such matter if the other party objects to the Court exercising jurisdiction in respect of such matter (Section 5). Russell on Arbitration, 22nd edition at page 35, paragraph 2 025, states: The Court seeks to give effect to the parties intention to refer disputes to arbitration, and to allow the tribunal full jurisdiction except in cases of hopeless confusion. Russell has referred to the judgment in Lorelock Ltd., Vs. Exportles (1968) 1 Lloyds Rep 86. An Agreement contained a clause, referring any dispute and or claim to arbitration in England. It was followed by a clause referring any other dispute to Arbitration in

26 Russia. It was held that the arbitration agreement was void for ambiguity, and was neither effective nor enforceable.

Part III Part III of the Act deals with the composition of the Arbitral Tribunal. The number of arbitrators and the manner of appointment are laid down in Sections 6 and 7. The parties are free to determine the number of arbitrators and where no such determination is made, the number of arbitrators shall be three. Where the parties appoint an even number of arbitrators, the arbitrators so appointed shall jointly appoint an additional arbitrator who shall act as Chairman. The rules as set out in Section 7 of the Act as to the appointment of arbitrators will arise only if there is no agreement between the parties as to the manner of appointment of the arbitrators. Where under an appointment procedure agreed upon by the parties, a party or the parties fail to act as required under such procedure, or the arbitrators are unable to reach an agreement required of them under such procedure or a third party fails to perform any function assigned to such third party, any party may apply to the High Court to take necessary measures towards the appointment of the arbitrator or arbitrators. In the case of Lanka Orix Leasing Company Limited Vs. M.J. Subramaniam and another reported in (2001) Bar Association Law Reports at page 48, it was held that arbitration proceedings can be held before a sole arbitrator if there was a provision in the arbitration agreement for the same. The facts are as follows: The High Court dismissed the appellants application for enforcement of an arbitration award on the basis that the arbitration sittings held before a sole arbitrator were contrary to the provisions of Section 7 of the Arbitration Act No. 11 of 1995.

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The award had been made by a single arbitrator on the basis of the reference to arbitration sent by the appellant on 3.6.1997. This communication required the respondent to nominate an arbitrator in terms of Article 25 of the Lease Agreement. The respondent did not nominate an arbitrator as required. The arbitration proceedings were held before a single arbitrator on the basis that the respondent refused to nominate an arbitrator. His Lordship S.N. Silva, C.J. held that arbitration proceedings can be held before a sole arbitrator if there was a provision in the arbitration agreement for the same. His Lordship observed: Section 7 of the Act relied on by the Learned High Court Judge specifically provides in subsection 1 as follows: The parties shall be free to agree on a procedure for appointing arbitrators subject to the provisions of the Act Article 25 of the Agreement specifically provides that if one party refuses to nominate an arbitrator the proceedings shall be held by the sole arbitrator nominated by the other party. It is not disputed that the Respondent failed to nominate an arbitrator pursuant to the references to arbitration made by the appellant. In the circumstances we are inclined to agree with the submission of Learned Presidents Counsel for the Petitioner that there is no basis to hold that Section 7(3) of the Arbitration Act No. 11 of 1995 would apply and that the appellant should have made an application to the High Court for the appointment of an Arbitrator. Such a course of action may have been necessary if there was no provision in the Arbitration Agreement for a sole arbitrator to proceed in the event of the failure to the other party to nominate an arbitrator.

28 The procedure as to the termination of an arbitrators mandate and the removal of arbitrators is found in Section 8. Section 9 provides for the appointment of a substitute arbitrator. There are no restrictions with respect to the eligibility of arbitrators. Where a person is requested to accept appointment as an arbitrator he shall disclose any circumstances that are likely to give rise to justifiable doubts as to his impartiality or independence. Throughout the arbitral proceedings he shall disclose without delay any circumstances referred to in this section to all parties and to other arbitrators (S 10 (1)). An arbitrator may be challenged only if circumstances exist that give rise to justifiable doubts as to his impartiality or independence (S 10 (2)). A party who seeks to challenge shall in the first place do so before the arbitral tribunal, within 30 days of his becoming aware of the circumstances which give rise to doubts about the arbitrators impartiality (S.10(3)). If the applicant is dissatisfied with the order of the tribunal, he may within 30 days of the receipt of the decision, appeal from the order to the High Court (Section 10(4)).

Part IV Part IV of the Act deals with the Jurisdiction of the Arbitral Tribunal. Section 11(1) of the Act states that an arbitral tribunal may rule on its own jurisdiction, including any question, with respect to the existence or validity of the arbitration agreement or as to whether such agreement is contrary to public policy or is incapable of being performed. However, a party to the arbitral proceedings may also apply to the High Court for a determination on any such question. In spite of such application the arbitral tribunal may continue the arbitral proceedings pending the determination of such question by the High Court. The power of an arbitral tribunal to decide upon its own jurisdiction is the inherent power vested with the arbitral tribunal. Even if neither of the parties raises any objection with

29 regard to jurisdiction the tribunal may on its own, consider whether it has jurisdiction or whether the particular dispute falls within the scope of the arbitration clause. An arbitral tribunal can examine the arbitration agreement and the terms of its appointment in order to decide whether the matter comes within its jurisdiction. Another important aspect of the arbitration agreement is the severability of the agreement (Section 12). That means the arbitration clause in a contract is treated to be separate from the main contract. Even if the main contract is terminated, the arbitration clause which forms part of the main contract would survive. Thus Section 12 of the Act recognizes the doctrine of severability. Lord MacMillan in Heyman vs. Darwins Ltd., (1942) A C 356 at 374 said, (Contract) It survives for the purpose of measuring the claims arising out of the breach, and the Arbitration clause survives for determining the mode of their settlement. The purposes of the contract have failed, but the Arbitration clause is not one of the purposes of the Contract. The House of Lords in this case dismissed the theory that an arbitration clause is terminated by breach of the contract. An arbitration clause which forms part of the main contract is considered to be a separate agreement independent of the main agreement. That is it constitutes a selfcontained contract ancillary to the underlying main contract. Section 13 of the Act deals with the power of the arbitral tribunal to issue interim orders at the instance of a party to arbitration proceedings. The arbitral tribunal cannot make any orders on its own motion, but may do so when an application is made by one of the parties. It can order interim measures to preserve evidence, protect assets, and all such orders to maintain the status quo. In this regard both the Court and the arbitral tribunal have the powers to grant interim orders such as injunctions to maintain the status-quo or prevent the disappearance of assets. However the proviso to Section 13 (1) states

30 that it is only in exceptional cases the arbitral tribunal can make such interim orders after hearing the opposite party. An order of an arbitral tribunal to a party to take such interim measures may be enforced by the High Court on an application made by the party requesting the enforcement of such measures.

Conduct of the Arbitral Proceedings. (Sections 15 24). It is a basic principle in Arbitration that the members of the arbitral tribunal must be and remain impartial and independent. Section 15 (1) of the Act provides that the Arbitral tribunal shall deal with any dispute submitted to it for Arbitration in an impartial, practical and expeditious manner. The concept of partiality relates to the bias of an arbitrator either in favour of one of the parties or in relation to the issues in dispute. It occasionally happens that an arbitrator nominated by a party shows his sympathy towards that party. In such an event, the other party may challenge the arbitrator who had shown bias towards the party who nominated him. In this regard Alan Redfein and Martin Hunter in Law and Practice of International Arbitration 3rd edition at page 213, paragraph 4 53, have made the following observation : There are two remedies if this situation occurs. The first, which is extreme and in any event rarely successful, is for the aggrieved party to make a formal challenge of the offending arbitrator. The second, which is usually followed in practice and is generally more constructive, is to rely upon the other members of the arbitral tribunal, and in particular upon the

31 presiding arbitrator to correct the bias in the arbitral tribunal by separating the good argument from the bad, the wheat from the chaff. Section 15 (2) states that the parties shall be given equal opportunity to present their respective case in writing and/or orally before the arbitral tribunal. The choice of the place of arbitration is for the parties to select. The parties may select the place of arbitration at any time before the arbitration begins. The arbitral tribunal has the power to determine the admissibility, relevance and weight of any evidence. (Section 16 and 17) In the case of Oberoi Hotels (Pvt) Limited Vs. Asian Hotels Corporation Ltd. 2002 BLR 23 at 25 His Lordship Sarath N. Silva said: Section 18, which provides for the commencement of arbitral proceedings, states that an arbitration shall be deemed to have been commenced if(a) a dispute to which relevant arbitration agreement applies has arisen; and (b) a party to the agreement(i) requiring that (ii) arbitration; or (iii) . Hence, if a general question is asked, what is the dispute referred to arbitration? The answer should be, on the basis of the words underlined by me in reproducing paragraph (a); the dispute which has arisen relevant to the arbitration agreement. The words has arisen connotes a dispute that has sprung or occurred. The nature and the parameters of a dispute should be discerned from the reference to arbitration by one or more of the parties. party to refer or to concur in the reference of the dispute to has received from anther party to the agreement a notice

32

Section 15 (1) which gives the duties of an arbitral tribunal should be construed on the same vein. The section reads as follows: An arbitral tribunal shall deal with any dispute submitted to it for arbitration in an impartial, practical and expeditious manner. The words any dispute submitted to it for arbitration should be understood consistent with the provisions of section 18 as meaning, any dispute that had arisen relevant to the arbitration agreement and submitted by way of a reference to arbitration by the parties Any decision made in the course of arbitral proceedings are taken by the majority of the arbitrators and failing majority, the decision of the Chairman is binding. The Chairman also has the power to administer the arbitration proceedings. (Section 19(1) and (2)) In the case of refusal or failure to appear before the arbitral tribunal for examination when required under summons or by the arbitral tribunal to do so, or having appeared refuses or fails to answer a question or refuses or fails to produce a document, the High Court may, upon the request by a party, order a defaulter to appear before the Court for examination or to produce to the Court the relevant document, provided that the arbitral tribunal has given prior sanction or consent. Such sanction and consent is, however not necessary if the Court after hearing the defaulter considers that it is necessary in the circumstances to make such order. (Section 21) The evidence before the tribunal may be given orally, in writing, or by affidavit. Parties are not bound by the provisions of the Evidence Ordinance, unless otherwise agreed upon by the parties. [Sections 22 (1) and (2)] The arbitral tribunal shall decide the dispute in accordance with such rules of law as are chosen by the parties as applicable to the substance of the dispute. Failing such choice the arbitral tribunal shall apply the law determined by the conflict of law rules which it considers applicable. (Section 24)

33

Settlement of Disputes Section 14 provides for settlements. If the parties have settled their dispute during the pendency of arbitration proceedings, the arbitral tribunal shall if requested by the parties, record the settlement in the form of an arbitral award on agreed terms. It is not incompatible with arbitration proceedings for an arbitral tribunal to encourage the settlement of disputes, and with the agreement of parties the arbitral tribunal may use mediation, conciliation or any other procedure at any time during the arbitral proceedings to encourage settlement.

Part VI This part deals with Awards. The form and content of the award is given in Section 25 (1) of the Act. Accordingly, the award must be made in writing and shall be signed by the arbitrators constituting the arbitral tribunal. If there had been more than one arbitrator, the signatures of the majority of the arbitral tribunal would suffice, provided that the reasons for any omitted signature is stated. The award shall state the reasons upon which it is based, unless the parties have agreed that no reasons are to the given or the award is an award on agreed terms under Section 14 (Section 25 (2)). In the case of Lanka Orix Lesing Company Ltd. Vs. M.T.F.N. Pinto and others reported in [2001] Bar Association Law Reports 51. The Supreme Court dealt with an appeal preferred from the High Court where it refused enforcement of a settlement purported to be an arbitral award because it held that there had been no compliance with the provisions of Section 25 (4) of the Arbitration Act.

34 The Supreme Court held that a) when Section 25(2) of the Arbitration Act refers to an award on agreed terms

under Section 14 it means the recording of the settlement between the parties in the form of an Arbitral Award on agreed terms; b) c) the arbitrator is expected to look into the validity legality enforceability etc. of the whether the Award is one which carried the reasons for the order or no reasons terms of settlement and enter a formal arbitral award on the basis of the agreed terms; due to agreement of parties on an Award on agreed terms, the delivery of a signed copy of the award on the parties has been mandated by the provisions of the Section 25(4). Subject to the provisions of Part VII, the award made by the arbitral tribunal shall be final and binding on the parties to the arbitration agreement (Section 26), Correction and interpretation of the award and additional awards could be made within 14 days of receipt of the award in terms of Section 27 of the Act. Where an arbitral tribunal makes an award for the payment of money, it may also award the payment of interest at the rate agreed upon by the parties or in the absence of any such agreement, at the legal interest prevailing at the time of making the arbitral award, to be paid on the principal sum awarded (Section 28). An award to be valid, must be final, certain, consistent and possible and must decide the matters submitted, and no more than the matters submitted. (Vide Russell on Arbitration 20th edition, P. 303) The award must be a complete decision and it must not leave any part to be determined subsequently or by another forum. To be valid, an award must comprise a decision by the tribunal on the matters referred with which it deals. An award must also be final, in the sense of being a complete decision without leaving matters to be dealt with subsequently or by a third party, and it

35 must be certain. Further an award may also be susceptible to challenge if the tribunal exceeds its powers, or if the award is obtained by fraud or is contrary to public policy, or if the requirements as to form are not complied with. Accordingly, the converse of these grounds should be considered as requirements for a valid award. (emphasis added) [Russell on Arbitration 21st edition pages 277, 278]

Enforcement of Arbitral Awards Once the award has been made the arbitral tribunal has nothing more to do with the dispute, unless it is required to make an additional award, or correct or interpret its award. The majority of awards are performed voluntarily. However the enforcement of the arbitral award becomes necessary when the loosing party fails to carryout the award. In such an instance the winning party will have to take steps to enforce the performance of the award. Before taking steps under the Arbitration Act to enforce the award very often the successful party exerts commercial pressure on the party who fails to perform the award. This method is usually adopted before resorting to enforcement of the award through Courts. Recognition and enforcement are involved with giving effect to the award. The difference between recognition and enforcement is clearly illustrated by Allan Redfern and Martin Hunter in Law and Practice of International Arbitration at page 448 by referring to the English case of Dallal vs. Bank Mellat (1986) Q.B. 441 where it was held that an award of the Iran U.S. Claims tribunal was not enforceable under the New York Convention, but should nevertheless be recognized as a valid judgment of a competent tribunal. (The case is also reported in (1986) XI Yearbook Commercial Arbitration 547 at 553.)

36 In our Arbitration Act the award is recognized as binding on the persons as between whom it was made (vide Section 26) so that it may be used by the parties in any legal proceedings in Sri Lanka. A party to an arbitration agreement pursuant to which an arbitral award is made may, within one year after the expiry of 14 days of the making of the award, apply to the High Court for the enforcement of the award. (Section 31 (1)). Where an application is made under section 31(1) and if there is no application for the setting aside of the award and the Courts sees no reason to refuse the enforcement, the Court shall give judgment according to the award and decree will be entered accordingly. The various grounds for the setting aside of an arbitral are set out in Section 32 (1) of the Act. They are as follows: (1) (2) Lack of capacity to conclude an arbitration agreement or there is no valid arbitration agreement. Where the aggrieved party was not given proper notice of the appointment of the arbitral tribunal or the arbitral proceedings or otherwise unable to present his case. (3) Where the award deals with a dispute not contemplated by or falling within, the arbitration clause or submission agreement, or contains matters beyond the scope of what was submitted. (4) (5) Where the composition of the arbitral tribunal or arbitral procedure was not in accordance with the agreement of parties or with the provisions of the Act. The subject matter of the dispute is not capable of settlement by arbitration under the law of Sri Lanka. (6) Where the arbitral award is in conflict with the public policy of Sri Lanka. In the case of Fab Construction Co. Ltd. Vs. H.W. Gunasekara reported in [2002] Bar Association Law Reports at page 31, the Supreme Court held that;

37 the absence of a formal answer to issues raised by the parties in an arbitration cannot be taken as the for vitiating any arbitral award on grounds set out in Section 32 (1)(a) and Section 32 (1)(b) of the arbitration Act which contemplate situations where the award is tainted by not merely an error but something far more serious such as incapacity of parties, invalidity of the arbitration agreement, illegality which renders an award ex facie bad. It can be noted that an arbitral award can be set aside only on very narrowly defined procedural grounds thus enhancing the finality of the arbitral award. An application under the Act for setting aside an award must be made within three months from the date on which the aggrieved party receives the award.

Incapacity or invalid agreement to arbitrate (Section 32(1) (a) (1)) Parties to a contract must have the legal capacity to enter into that contract. For

example, a minor cannot be a party to a contract. The rules governing the capacity to enter into a contract can be found in any standard text book (see Law of Contract by Dr. C.G. Weeramantry.) Generally, any natural or legal person who has the capacity to enter into a valid contract has the capacity to enter into an arbitration agreement. The parties to such agreement include individuals as well as partnerships corporations and state agencies. Formal validity of an arbitration agreement is dealt with by Sections 3, 4 and 5 of the Act. The agreement shall in plain language indicate that the parties intended to refer the dispute to arbitration. Intention to submit to arbitration must be clearly stated. Proper notice of the appointment of an arbitrator or of the arbitral proceedings (Section 32(1) (a) (ii)

38

The giving of such notice is a matter inter partes and is a procedural step. Therefore its firm and terms do not call for strict scrutiny. What is required to give is a fair hearing and the failure to observe this principle creates a ground for setting aside an award or refusing to enforce it. Dispute Not Contemplated By or Not Falling Within the Terms of Submission to Arbitration, or Contains Matters Beyond the Scope of Submission to Arbitration. (Section 32(1) (a) (iii) This contemplates a situation in which an award has been made by an arbitral tribunal which exceeded its powers by dealing with matters that had not been submitted to it. If those matters of the award, that means that part of the award which contains decisions on matters not submitted, could be separated, the rest of the award could be saved. In the case of Oberoi Hotels (Pvt) Ltd Vs. Asian Hotels Corporation Ltd [2002] BLR 23 the Supreme Court has considered the setting aside of an award. In this case the petitioner made an application for leave to appeal from the judgment of the High Court allowing in part an application by the respondent made in terms of Section 32(1)(a) of the Arbitration Act No.11 of 1995 to set aside an arbitral award. Hon. Sarath N. Silva, C.J. after considering the validity of the award in the light of the relevant provisions in the Arbitration Act [Sections 4, 15(1), 18. 24, 25, and 50 (1)] made the following observations; it is in this background that section 32(1) which deals an application to set aside an arbitral award, has to be considered Section 32(1)(a)(iii), being the specific provision at issue, empowers the High Court to set aside an award where a party marking the application furnishes proof that-

39 the award deals with a dispute not contemplated by or not falling with the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration. Provided however that, if the decision on mattes submitted to arbitration can be separated from those not so submitted, only that party of the award which contains decisions on matters not submitted to arbitration may be set aside. The main paragraph has a negative formulation and sets out matters that an award should not contain or deal with. What the award should contain is stated in the proviso viz., a decision on the matters submitted to arbitration. Thus we are referred back to the provisions dealt with above as to what constitutes a submission to arbitration. However, in the main paragraph, the legislature has provided some leeway to uphold the validity of an award. This is understandable considering that the award is often the product of considerable time and expense to the parties and should not be set aside lightly. If the provisions of the main paragraph are restated in affirmative language, there would be three situations in which an award is not set aside. They are; (a) (c) where the award deals with a dispute contemplated the submission to arbitration; where the award contains decisions on matters that come within the scope of the (b) where the award falls within the terms of the submission to arbitration; submission to arbitration, It is seen that the touchstone in all situations is, the submission to arbitration. Therefore the question as to the validity of the award or any decision contained therein has to be decided primarily on the basis of the dispute that had arisen and submitted to arbitration by way of a reference by the parties. The leeway that is provided in paragraph (iii) in that the High Court should not look at only the strict letter of the submission to arbitration. But, look at the entirety of the submission and ascertain whether the award deals with a dispute as envisaged by the parties or whether

40 decisions contained in the award come within the terms of or the scope of the submission to arbitration. In brief, the test is to ascertain whether the award contains matters which the parties could reasonably be said to have intended, to be decided by the arbitral tribunal. When they submitted the dispute, that had arisen, to arbitration. This is in keeping with the basic principle that an arbitral tribunal derives jurisdiction solely from the submission to arbitration by the parties.

Composition of the Arbitral Tribunal and the Arbitral Procedure The composition of the arbitral tribunal and the arbitral procedure must be in conformity with the arbitral agreement. If the arbitral agreement does not speak as to the arbitral procedure, the arbitral tribunal can lay down a procedure. selected according to the applicable law. Similarly, if there is no agreement between the parties as to the composition of the tribunal, arbitrators are

Arbitrability (Section 32 (1) (b) Some disputes are not capable of settlement by resorting to Arbitration. Those disputes are reserved for courts to decide, such as criminal matters, issues of fraud and corruption etc.

Public Policy (Section 32(1)(b)) Arbitral award may be set aside if the Court finds that the award is in conflict with the public policy of Sri Lanka. It is possible to envisage a dispute over the division of profits from a brothel house. In some countries this could be regarded as a normal commercial transaction. However, in Sri Lanka as it is illegal to run brothel houses, such an award will be set aside on the basis that it is illegal and against public policy.

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Recognition and enforcement of foreign arbitral awards (Section 33) A foreign arbitral award irrespective of the country in which it was made, shall subject to the provisions of section 34 be recognized as binding and, upon application by a party under section 31 to the High Court, be enforced by filing the award in accordance with the provisions of that section. Grounds for refusing recognition or enforcement of a foreign arbitral award (Section 34 (1) ) are almost identical to those for setting aside arbitral awards made in an arbitration held in Sri Lanka (Section 32(1) ) namely; lack of capacity of parties to conclude an arbitration agreement or lack of a valid arbitration agreement, lack of notice of appointment of an arbitrator or of arbitral proceedings or inability of a party to present his case, award dealing with matters not covered by submission to arbitration, composition of the arbitral tribunal or conduct of arbitral proceedings being contrary to effective agreement of parties, non-arbitrarily of the subject violation of public policy of the state. Although the grounds for setting aside arbitral awards in terms of Section 32(1) are almost identical to those refusing recognition or enforcement of foreign arbitral awards in Section 34 (1), two practical differences exist. Firstly, the grounds relating to public policy, including non-arbitrability, may be different in substance, depending on the country in question. Different countries have different perceptions concepts of their own public policy. This means that there is a risk that one country may set aside an award that another country would regard as valid. However when it comes to the enforcement of foreign awards in terms of Section 33 and 34 of the Act, the Court does not have the power to review on the merits of an award. The scope of the inquiry is limited to the grounds referred to in Section 34 (1) of the Act. The Supreme Court of India in Renusagar Power Co. Ltd., Vs. General Electric matter of dispute and

42 Co. (1995) XX Year book Commercial Arbitration 681 at 691 expressed the opinion that the scope of enquiry before the Court in which the award is sought to be enforced is limited to the grounds mentioned in the Act and does not enable a party to the said proceedings to impeach the award on merits. The grounds set out in Section 34 (1) as the grounds for refusal of recognition and enforcement are exhaustive. They are the only grounds on which recognition and enforcement of foreign awards may be refused. As regards the grounds which relate to the public policy of Sri Lanka and the subject matter of the dispute not being capable of settlement by arbitration under the law of Sri Lanka, they are grounds which may be involved by the Court on exmere moto.

Applications to enforce an award and to set aside an award. Where applications filed in Court to enforce an award and to set aside an award are pending, the court shall consolidate the applications. (Section 35 (1)). Where an application to set aside the award under Section 32 has been refused, the Court shall not permit a party to an arbitration to object to the enforcement of the award on any of the grounds specified in Section 34.

Appeals The judgment, decree or order of the High Court is final and conclusive. However Section 37 (1) of the Act provides that on a question of law it is possible to appeal to the Supreme Court, for which leave must first be obtained from the Supreme Court (S. 37 (1) and (2)). However, such shall not be granted if the parties have agreed in writing to exclude any right to appeal in relation to the award (Sec. 38(1)). Every application to the High Court is by way of a petition and affidavit.

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Delay in Presenting Claims. Section 39(1) deals with delay in prosecuting claims. Where there has been undue delay by a claimant in instituting or prosecuting a claim pursuant to an arbitration agreement, then on an application of any party to the dispute, the arbitral tribunal may make an order terminating the arbitration proceedings. A valid Arbitration Agreement constitute a bar to Court proceedings. Where a party to an arbitration agreement institutes legal proceedings in a Court against another party to such agreement in respect of a matter agreed to be submitted for arbitration under such agreement, the Court shall have no jurisdiction to hear and determine such matter if the other party objects to the Court exercising jurisdiction in respect of such matter. (Section 5) The power of Court to intervene in Arbitrations has been greatly curtailed by the Arbitration Act No. 11 of 1995. Earlier the Court had wide powers to review arbitration proceeding. The present Act has restricted the intervention of the Courts. Does the Prescription Ordinance apply to arbitration? This question has been discussed in the case Phil-East Asia Construction Corporation Vs. Galadari Hotels Lanka (Ltd) and another reported in [2001] Bar Association Law Reports at 78: Briefly, the facts were: the plaintiff referred to arbitration its clam in respect of monies due from the defendant and the defendant contended that the claim was prescribed under the Prescription Ordinance and objected to the jurisdiction of the arbitrator.

44 The only matter that was argued before the Court of Appeal was whether the arbitration was time barred. The Court of Appeal held that the Arbitrator was not bound to give effect to the limitations set out in the Prescription Ordinance which dose not apply to arbitration and therefore the reference to arbitration was valid. In the case of Galadari Hotel (Lanka) Ltd. Vs. A.C. Visvalingam & another (2002) Bar Association Law Reports page 67. the Supreme Court held that the Prescription Ordinance does not apply to claims in arbitration proceedings. There are no provisions in the Arbitration Act which impose a time limit within which the arbitral tribunal must make the award. However such limits may be imposed by agreement of the parties. In any event the Arbitration Act imposes a time limit of one year for the enforcement of the award.

Proceeding before the High Court: Every application to the High Court is by way of petition and affidavit. All parties other than the petitioner will be named as respondents and the Court is required to give notice to each person named as respondent (Section 40 (1)). On the appointed date the respondent is given an opportunity to state his objections, if any, in writing supported by affidavit (Section 40 (2)).

Interpretation Section:

45 Section 50 is the interpretation section. The words arbitration, arbitration tribunal, award, foreign arbitral award, High Court and legal interest have been comprehensively defined in this Section.

Conclusion It can be submitted in conclusion that the Arbitration Act No. 11 of 1995 has been successful in laying down a comprehensive legal framework with regard to arbitration in place of the piecemeal legislation in existence till its enactment. Minimizing Court intervention, (Section 5) enhancing the finality of arbitral awards (section 26, 32 and 34), recognizing and accepting the autonomy of the parties concerned (Sections 6,7,16,17 and 24 (1)) and the efficient enforcement procedure (Section 31,33,and 41) can be highlighted as some of the positive features enshrined in the new Arbitration Act.

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Bibliography
Cooray L.J.M. An Introduction to the Legal System of Ceylon, Colombo; Lake House Investments Limited, (1972) Sutton D., Kendall, J., and Gill, J., Russell on Arbitration, 21st ed., London; Sweet Maxwell, (1997) Markand, P.C., Arbitration and Conciliation, Nagpur; Wadhwa & Co., (2003). Noone, M., Mediation, London; Cavendish Publishing Limited, (1996). Redfein, A., and Hunter, M., Law and practice of International arbitration, 3rd ed., London; Sweet & Maxwell, (1999).