MEI Perspectives Series 10: Empowering Universities as Arbitration Centres: A Global Perspective
03 Apr 2018A Note from the Editorial Team
In this article, Dr Hamid Sultan Bin Abu Backer, Judge of the Court of Appeal, Malaysia, and Arun Kasi, Advocate and Solicitor of the High Court of Malaysia, propose empowering universities to act as arbitral centres. They call for developing a model rule for university arbitration based on UNCITRAL Arbitration Rules; establishing secretariats in universities to administer arbitrations; training interested university lecturers and professors to act as arbitrators, and developing a website for university arbitration. The authors argue that “Universities have great unexplored potential to act as arbitration centres at affordable cost.” They hope that their proposal will stimulate academic interest and debate given that conventional arbitration has become expensive and lengthy due to the appointment of busy practitioners that are often involved in several arbitrations. Academics, it is suggested, may offer better value for money, given their flexible working hours, and specific skill sets.
By Dr. Hamid Sultan bin Abu Backer [1] and Arun Kasi [2]
Abstract [3]
A proposal for research to be done to empower Universities as Arbitration Centres or Arbitral Institutions, as conceived and advocated by Dr. Hamid Sultan bin Abu Backer.
This paper invites consideration of the proposal by stakeholders of Alternative Dispute Resolution (ADR – arbitration, mediation, adjudication, etc.) and universities globally. The paper proposes that universities be empowered to function as Arbitration Centres or Arbitral Institutions. Universities as ADR centres can draw on their professoriate as experts in their fields to act as arbitrators, mediators and adjudicators, if given the necessary formal training. University premises can also be utilized as hearing centres, where feasible. To facilitate this, we suggest that: (i) legislation be made for courts to refer suitable cases fit for ADR to approved and/or participating universities; (ii) existing arbitral institutions or relevant bodies provide guidance and training support for University Arbitration; and (iii) laws be amended to provide for arbitration clauses and University Arbitration in relation to suitable civil and commercial contracts.
Universities as Arbitration Centres
Universities have a great unexplored potential to provide ADR services. Their permanent and visiting lecturers and professors, as well as retired faculty members, can qualify to sit as arbitrators, mediators, conciliators, adjudicators, etc. if given the necessary formal training. They have the facilities, support staff and diversified talents to conduct arbitrations and other ADR services, including those technical in nature. Tapping their expertise for the administration of justice will relieve courts of the corresponding workload and thus save public money and limited resources. In addition, it will also expose students to the benefits of ADR at an early stage, which will help arrest the growth of a litigious society. Furthermore, members of the public opting for University Arbitration are more likely to experience a less stressful atmosphere, in contrast to city-based Arbitration Centres. In universities, there will also be the possibility of conducting arbitration hearings outside working hours and during holidays. University Arbitration will also generate extra income for universities, staff and participating faculty members.
The two setbacks that prevent disputants from going to arbitration are high costs and long delays involved in arbitration. Both these setbacks can be overcome in University Arbitration. This paper is a proposal for the global consideration and adoption of an alternative system of arbitration and other ADR mechanisms, under the caption ‘University Arbitration’. Universities can be an effective, economical and expeditious alternative to litigation, and can take arbitration to the next level.
University Arbitration shifts the compensation structure for ADR services from an emphasis on legal expertise towards an emphasis on expertise in the subject matter of the dispute. This shift harbours the potential for higher efficiency, i.e. optimal outcomes at lower cost, as academic expertise is generally compensated at lower levels than legal expertise.
The advantages of arbitration, as opposed to litigation, are many. In essence, administration of justice in both differs. In litigation, common law courts are concerned with what is right according to the Rule of Law, and not necessarily according to what is just. For example, if rules of pleadings, evidence, etc. are not complied with strictly, the courts may not provide substantive justice. In arbitration, procedural methodology is less stringent, and the arbitral tribunal, as far as practicable, will move towards what is right as well as just, taking into consideration the dispute before them. Furthermore, party autonomy plays an important role in arbitration. That is to say, the parties can choose the arbitrator, the law, rules, seat, etc. These choices are not available in litigation.
Emergence of Modern Commercial Arbitration [4]
Resolution of disputes through arbitration and other alternative dispute resolution mechanisms has been practiced for centuries. The jurisprudence and methodology involved have evolved over time, and continue to do so. Historically, common law courts were slow in recognising arbitration as an effective medium of dispute resolution. As a result, arbitration did not gain popularity as an effective dispute resolution mechanism.
The first milestone in making arbitration an effective dispute resolution mechanism was the New York Convention of 1958 [5] (the “Convention”); this was the birthplace of modern arbitration. The Convention required the States which subscribed to it to enact laws to recognise an arbitration agreement in writing, and at the request of any party, to refer the parties to arbitration [6]. It also required the Member States to recognise an arbitral award made in a foreign State [7] as binding, and to enforce it [8]. The Convention, although imposing an obligation on Member States to enact the necessary laws, did not itself guarantee that an arbitral award made in one State would be enforced in another Member State. The arbitration referred to in the Convention included civil and commercial arbitrations.
The success of the Convention was limited. Although the Convention, when enacted as a law in any member State, required recognition of arbitration agreements and foreign arbitration awards, it did not provide the full framework to facilitate an effective arbitral process. Such a framework would include provisions for interim measures, appointment of arbitrators and challenge thereto, competence of the arbitral tribunal to deal with matters touching their jurisdiction, determination of rules of procedure and administration of the rules including issues concerning default awards, court’s assistance in taking evidence, etc. As a result, the Convention, by itself, was not instrumental in promoting and encouraging settlements of disputes by arbitration as a matter of choice of parties. National courts, even after their respective State had subscribed to the Convention, were readily interfering in the process of arbitration and with arbitral awards. In consequence, the growth of arbitration as an effective dispute resolution mechanism was curtailed.
At this juncture, the second milestone came in the form of the UNCITRAL [9] Model Law of 1985 (amended in 2006) [10] to advance the objectives of the Convention. The Model Law was a model template for a full-fledged arbitration statute for Member States to adopt, with desired modifications. The Model Law provided the full framework for an effective international commercial arbitration. It was not part of the Convention’s obligation of the member States to adopt the Model Law; rather, the Model Law was a convenient model for member States to adopt. Another benefit delivered by the Model Law was that it provided uniformity in arbitration laws [11] across the member States that in substance adopted the Model Law [12]. The arbitration referred to in the Model Law was only related to international commercial arbitration [13].
The Model Law saw a leap in the number of players with keen interest to promote arbitration as an effective alternative dispute resolution mechanism. A number of States adopting and enacting the Model Law took additional advantage of it by rendering the enactment applicable to both international and domestic arbitration, whether civil or commercial [14]. Many countries have now subscribed to pro-arbitration and pro-ADR policies, and promote arbitration and other ADRs as effective mechanisms to resolve disputes.
At present, about 157 States have subscribed to the Convention, of which about 75 have in substance adopted the Model Law by enacting laws substantially based on the model. Such countries are called Model Law countries. The number of States subscribing to the Convention and adopting the Model Law is continuously growing.
This has resulted in the increasing adoption of standard form contracts including arbitration clauses. The inclusion of an arbitration clause is now becoming almost inevitable in international agreements, construction contracts and shipping contracts. Domestic and international arbitration are now growing geometrically, hence the need to marshal all talents available to participate in meeting and managing the challenges created by that growth.
Significance of Arbitration [15]
The significance of arbitration is multi-fold. From the parties’ perspective, it facilitates the disputes between them being resolved by arbitrators appointed by them; if necessary, by experts in the relevant technical field. Parties may choose the applicable seat, law and procedure. The award is binding and final, and is not generally appealable. It is private and can be confidential too. The award can be registered [16] and enforced as a judgment of court in the numerous Member States of the Convention. This is the unmatched benefit of resolving disputes in international transactions through arbitration. In contrast, a decision of court may only be enforced in the country in which the order or judgment of the court was made, and in the countries with which the country has reciprocity arrangements for registration and enforcement of judgments [17].
From a State’s perspective, the development of arbitration relieves the courts of the caseload which would otherwise fall upon the courts. When parties resolve their commercial disputes by a private forum, i.e. arbitration, public monies and limited resources available to administer justice are saved. The courts, thus relieved of a part of their workload, can dispense justice in the needy cases before them in a timely manner.
It must be noted that in many countries, the courts are overloaded with cases, and the resources, including human resources, available to deal with them are in short supply. That results in the timeline for disposal of cases stretching to many years. In some countries, it would not be unusual for a case to take 10 or 20 years to hit the day of trial. At this juncture, it is worth recalling the popular legal maxim, “justice delayed is justice denied”. An effective distribution of business between courts and arbitral tribunals would make the limited resources of the courts available for effective employment in administering justice in a speedy manner in deserving cases which may be of public or constitutional importance.
The benefits of arbitration in the administration of justice are many. While the Model Law is effective in promoting arbitration, there are limitations and setbacks to arbitration. Some of the prime setbacks are as follows: (i) high cost of arbitration, which includes the fees of arbitrators and arbitral institutions; and (ii) length of time required to complete an arbitration. The latter is inevitable particularly when busy practitioners in respective fields are engaged as arbitrators, and more so when more than one arbitrator is appointed to the arbitral tribunal hearing a particular matter.
Finding an effective solution to address the setbacks to arbitration will take arbitration to the next level, and correspondingly relieve courts of workload and reduce the funding required to operate courts.
Empowering Universities as Arbitration Centres
One of the key benefits of resolving disputes through arbitration is that parties may appoint experts in the relevant field as arbitrators, whether as a sole arbitrator or as a co-arbitrator. Arbitration centres have diversified talents on their panel of arbitrators, such as civil engineers, electrical engineers, architects, lawyers, etc. In jurisdictions subscribing to common law courts, judges have been well trained to handle technical cases with the assistance of expert evidence. However, this may not be the case in many jurisdictions, where the legal framework of the country or its judges may not be well equipped to hear technical matters. In such cases, well-established state universities may indeed have the necessary talent to do so. Lecturers and professors, permanent or visiting, will potentially have the ability and time to act in ADR matters. University Arbitration can tap on the vast talents available in universities for the administration of justice.
An arbitral institution, apart from having talented arbitrators on its panel, must be able to provide the venue and facilities for conducting arbitration hearings. Universities generally will be able to meet this requirement, as they will have the space and facilities within their premises to provide suitable venues for the conduct of hearings. Moreover, universities will generally be able to offer such facilities even at flexible hours.
Another key benefit of University Arbitration is that the cost can be significantly lower than that incurred in conventional arbitral institutions. The fees charged by the universities for the administration and provision of venue and facilities within their premises can be nominal compared to conventional arbitral institutions. Similarly, the fees charged by university lecturers and professors can be considerably lower than those charged by practitioners.
The faculty members, with proper training as well as exposure to ADR over a short period of time, will be able to handle the most complex ADR cases in parallel to conventional arbitral institutions. The system subsumed under the Convention, the Model Law and the Model Rules, [18] is in principle sufficient to promote University Arbitration.
Delay in arbitration can be overcome with University Arbitration by academics, who may be more readily available than busy practitioners. There can be more flexibility in the time of conduct of proceedings, as lecturers and professors may be willing to have arbitration hearings outside office hours, or even on weekends.
In effect, empowering universities as centres for arbitration and other ADRs will effectively transform arbitration and other ADRs as effective, economical and expeditious alternatives to litigation.
Implementing University Arbitration
The first step in implementing University Arbitration is to develop a model rule in general for University Arbitration based on the UNCITRAL Arbitration Rules (as revised in 2010). A scale of fees for the university arbitrators and for the university as the institution administering the arbitration should be incorporated as a schedule to the rules. The scale should be set much lower than the scale found in conventional arbitral institution rules. The scale must provide an affordable arbitration for the parties, i.e. an effective, economical and expeditious alternative to litigation, and at the same time provide a reasonable extra revenue for universities and their faculty arbitrators.
The second step is to have a small secretariat to administer arbitrations. It may not be necessary to separately man this secretariat; initially, arrangements can possibly be made for the staff in some departments or faculties to act as the secretariat.
The third step is to train interested university lecturers and professors under a specially tailored certificate course to enable them to act as university arbitrators, mediators, adjudicators, etc.
The fourth step is to develop a separate website for the university’s arbitration centre with information usually sought by parties. Such information should detail the expertise of academic staff on the roster of the university’s arbitration panel.
Benefit to Stakeholders
To university lecturers and professors, University Arbitration will provide an avenue for additional revenue by employment of their specialized expertise in the administration of justice. It will expose lecturers and professors to the administration of justice in their specialization, and to the practical problems and issues arising in that field. It will have direct impact on the teaching of related subjects in the universities, as the faculty arbitrators will not only have academic strength but also gain practical exposure. This in turn will enhance teaching as well as research. This exposure of faculty members will have a flow-through impact on students in their academic and vocational development, and will help them understand and appreciate ADR at an early stage in their careers.
Conventional arbitral institutions [19] can play a role by providing training to university arbitrators; by making rules for University Arbitration; and by acting as points of internal reference and guidance to university arbitrators in the matter of arbitral procedures. For example, in the Middle East, Arbitral Institutions and Courts such as DIFC Courts in Dubai and the Qatar International Court and Dispute Resolution Centre (QICDRC) of the Qatar Financial Centre (QFC) can play a vital role in the project of empowering universities as arbitration centres by providing training and continued guidance and support to participating university arbitrators. This will help to ensure that they deliver awards particularly enforceable in all the Middle Eastern countries, if not beyond as well.
The ‘Feeder’ to University Arbitration
The above steps will set universities up as arbitration centres, create the infrastructure enabling them to function in that capacity, and allow their faculty members to act as arbitrators in their fields of expertise. This institutional setup will be a new dimension in the development of arbitration and establish a new regime in arbitration. The next question is: who will feed this new arbitration regime?
University Arbitration can be fed in the regular way, by agreement of parties to submit to a University Arbitration. The reason parties to an agreement may opt for University Arbitration is that it will be cost and time effective, without compromising the talent available at hand. University Arbitration may capture matters which would otherwise not go to arbitration on account of high cost and time involved but would go into courts instead. This will effectively reduce the workload of courts. However, parties-feeding alone may not be sufficient to take fair advantage of the potential of University Arbitration, with this being a new regime in arbitration. Hence, it is proposed that a system of courts feeding the University Arbitration be implemented.
Such a system of courts-feeding can be implemented in a number of ways, and in stages. In the first stage, courts may encourage parties, with respect to matters before them with a dispute involving an amount or subject matter whose value does not exceed a certain sum, to go for University Arbitration. This can be done in the same way as the courts generally encourage, during case management conferences, settlement by mediation.
It must be remembered that the court’s intervention in this manner can be effective as the power to award costs, if the matter proceeds at the court, is with the court. This must particularly be the case where the court suggests University Arbitration in a matter which can suitably be arbitrated through University Arbitration, but the parties or one of them refuse to agree to it.
To facilitate a practice of courts encouraging University Arbitration in suitable matters where the amount in dispute or the value of subject matter does not exceed a certain sum, a practice direction to that effect should be issued. Similar amendment to the relevant rules of court will be desirable [20].
Such a practice implemented in courts will, in the passage of time, encourage lawyers and litigants to consider commencing their actions at the University Arbitration centres by agreement of the adversaries.
At the second stage, the necessary modification can be done to the relevant statutes [21] to enable the courts to stay the proceedings before them on their own motion or upon application of a party, and to refer the parties to University Arbitration subject to certain conditions. Below is a model for such a statutory provision:
Power of Court to Refer to Arbitration
When the amount in dispute or the value of the subject matter does not exceed the amount prescribed therefor by a relevant practice direction, and the court is satisfied that it is a proper matter to be resolved by University Arbitration, taking into account:
- the issues involved;
- the complexity of the case;
- the potential cost and time that will be involved by arbitrating at university arbitration;
- the ability, and where applicable, commercial viability of the parties to bear the cost that will likely be involved by arbitrating at university arbitration;
- the availability of a university which will be able to provide the facilities for the University Arbitration in the vicinity of residence or place of business, as applicable, of the parties, their counsels, and the court in which the action has been filed;
- the potential availability of suitable university arbitrators in the university to hear and decide the matter;
- the balance of convenience;
- any prior agreement between parties to submit the dispute to arbitration, in breach of which the action was instituted before the court, and the defendant failed to apply for stay of court proceedings before taking any step in the proceedings that will disentitle him to apply for such a stay;
- such other matters as may appear to be relevant to take into consideration in the circumstances of the case, the court may on its own motion or upon application of any party refer the parties to University Arbitration and may impose such conditions as it deems fit.
Such a statutory provision should be supplemented by a strong practice direction and/or rule to the effect that the courts shall consider at case management conference the suitability of the case to be referred to arbitration under the statutory provision.
It must be noted that such a statutory provision will take arbitration to the next level, since such an arbitration may be directed irrespective of agreement of parties. However, such a leap has been proposed only with appropriate safeguards, namely, that the reference be at the discretion of the court, and secondly, that the relevant preconditions be satisfied before the court may exercise the discretion.
In this context, it must be further noted that compulsory submission to a particular tribunal is not something new to the legal system in a number of countries. A number of countries have legislated construction industry payment and adjudication statutes, which allow the contractor to institute adjudication claims against his employer for payment for work done or services rendered under a written construction contract [22]. These actions will be instituted in the appointed arbitral institution [23], wherein the adjudicator will be appointed by the parties or the arbitral institution. The adjudicator will make a decision binding on the parties which can be registered and enforced as a judgment of court.
Regimes of Islamic Finance and China’s Belt and Road Initiative (BRI) [24]
Disputes in Islamic finance regimes will be a potential feed for University Arbitration. The regular judiciary or even regular arbitral institutions may lack or have limited talent in dealing with disputes of this regime. Lecturers and professors from the relevant Islamic faculties will be among the most suitable arbitrators to determine such disputes. Financial institutions, be they Islamic or conventional, will welcome University Arbitration if legislation is in place to say that, where the financial institution has advanced money to the borrower, it is incumbent upon the arbitral tribunal to ensure, in the event the arbitral tribunal holds the finance facilities to be invalid for any reason, that the money advanced by the financial institution to the borrower be directed to be repaid with an assessment of damages for the period the money or any part of it was held by the borrower. Thus, any defence pleaded by the borrower that the facility is tainted with illegality or is against public policy, even if it succeeds, will neither help the borrower keep the money nor avoid having to pay compensation for the period during which the money was in his hands.
Similarly, disputes arising from China’s Belt and Road Initiative (BRI) are potential feeds for University Arbitration. There is a potential to hold discussions with relevant stakeholders to develop universities as preferred centres for arbitrating disputes related to this initiative. University Arbitration will be one of the best options in countries where the legal framework is not conducive to dealing with technical issues arising from BRI-related matters.
Conclusion
Universities have a great unexplored potential to act as arbitration centres at an affordable cost. Actualizing that potential, whether by way of parties-feeding or courts-feeding, will encourage and enable parties to settle their disputes through University Arbitration. University Arbitration will particularly cater to matters which would otherwise go to court rather than to conventional arbitral institutions on account of cost and time factors. University Arbitration will be an effective alternative not only to dispute resolution by courts but also, in some cases, to arbitration at the conventional arbitral institutions.
It would relieve the courts of workload which would otherwise be on the courts and free up the resources of the courts to be available to the needy, to enable speedy resolution of matters before them, and to save public money. We propose that universities, rule makers and lawmakers seriously consider, research and implement University Arbitration. The idea and suggestions advocated in this paper may appear to be new and unusual, but when seen in the proper perspective, will be judged practicable. If implemented, it will enhance the administration of justice as well as benefit the public. It will benefit countries where the court process is perceived to be slow or ineffective, and countries where costs of Institutional Arbitration and/or litigation for small claims (domestic claims) are perceived to be high.
This paper calls for due research and consideration, as well as conferences and debates, by the stakeholders in ADR and litigation to formulate the law and rules needed for University Arbitration to evolve as one of the preferred modes of dispute resolution in civil and commercial matters according to the needs of each country.
[1] Judge of the Court of Appeal, Malaysia; author of International Arbitration with Commentary to Malaysian Arbitration Act 2005, Kuala Lumpur, Janab Law Publications, 2016.
[2] Advocate and Solicitor of the High Court of Malaya; author of Arbitration: Stay of Court Proceedings and Anti-Suit Injunctions, Kuala Lumpur, CLJ Publication, 2014.
[3] This paper is dedicated to the faculty members and students of: (i) The Middle East Institute (MEI) of the National University of Singapore (NUS); (ii) The International Islamic University Malaysia (IIUM); (iii) Damodaran Sanjivayya National Law University (DSNLU), Visakhapatnam, India; and to the Dubai International Financial Centre Court (DIFC). Special thanks to H.E. Justice Shamlan Al Sawalehi of DIFC; Former Chief Justice of Malaysia and now Judge at DIFC, Tun Zaki Azmi; Justice Lim Chong Fong of Malaysia, Justice Dato’ Mah Weng Kwai, former Judge, Court of Appeal, Malaysia; Dr. Engseng Ho, MEI, NUS; Datuk Dr. Sundra Rajoo of the Kuala Lumpur Regional Centre for Arbitration (KLRCA); Dr. Ashgar Ali, Dean of Law, IIUM; Dr. Rani Kamarudin (IIUM) and Dr. Venkat Iyer (U.K.). Acknowledged are the contributions made or to be made by S.V. Parvin Rathinam and V. Saratha Devi, Advocates and Solicitors of the High Court, Chennai; Appukutan, Nizam Basir, Thaya Bhaskaran, Dinesh Bhaskaran, Advocates and Solicitors of Malaysia; and Dr. Umar A. Oseni, for disseminating this paper to all relevant stakeholders globally and for obtaining reviews from the relevant jurists. Consent is given to all to republish this paper in arbitration and/or law journals, etc. in the pursuit and dissemination of knowledge.
[4] See Hamid Sultan Bin Abu Backer, “Bird’s Eye View of International Arbitral Process: Malaysian Chapter”, KLRCA Newsletter 19/ July-Sept 2015.
[5] Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958.
[6] Article II of the Convention.
[7] The Convention allows member States to limit its application of the Convention only to other contracting States on grounds of reciprocity (Article I(2) of the Convention).
[8] Article III of the Convention.
[9] United Nations Commission on International Trade Law.
[10] Model Law limits its own application to international commercial arbitrations. However, there is nothing to stop a Member State from making the provisions made in line with the Model Law to be applicable in other arbitrations.
[11] Applicable to international commercial arbitration.
[12] Such States are called ‘Model Law Countries’.
[13] In contrast, the arbitration referred to in the Convention covered both civil and commercial arbitration. It applied to the enforcement of all foreign awards covering both domestic and international arbitrations. It also applied to the enforcement of an award made domestically in an international arbitration.
[14] E.g. Malaysian Arbitration Act 2005.
[15] See Hamid Sultan Bin Abu Backer, “Astro Lippo: Is ‘Passive Remedy’ Anathema to the Enforcement of the International Arbitration Award? – Malaysian Chapter”, KLRCA Newsletter #20 / Oct – Dec 2015.
[16] Judgment of court can be entered in terms of an award made by the arbitral tribunal.
[17] E.g. Reciprocal Enforcement of Judgments Act 1958.
[18] UNCITRAL Arbitration Rules (as revised in 2010).
[19] Such as the Kuala Lumpur Regional Centre for Arbitration (KLRCA), the Singapore International Arbitration Centre (SIAC), etc.
[20] In the Malaysian context, O.3 4 r. 2(2)(a) of the Rules of Court 2012.
[21] In the Malaysian context, Courts of Judicature Act 1964 and Subordinate Courts Act 1948.
[22] E.g. Malaysian Construction Industry Payment and Adjudication Act 2012 (CIPAA 2012).
[23] In Malaysia, KLRCA.
[24] See (i) Hamid Sultan Bin Abu Backer, “Malaysia as a Choice Jurisdiction for Dispute Resolution in the Global Islamic Finance Industry”, Current Law Journal, LNS Articles, [2016] 1 LNS(A) xcviii; and (ii) Hamid Sultan Bin Abu Backer, “Arbitration Clause in Islamic Finance Facilities”, LNS Articles, [2016] 1 LNS(A) xcvii.
