Babanifesi Ajetunmobi*
- INTRODUCTION
Precedent is a notable highlight in litigation, playing out as an unbundling of what was, what is and what should continue to be. Counsels find themselves lost in the battle for strength and credibility, adducing as much authorities as it takes to bring the court to their side. But in arbitration, the same cannot entirely be said. In fact, arbitrators generally did not follow precedent as it can be dispensed with in light of the peculiarities of the disputes at hand. To a large extent, an arbitrator could defy precedent, and still arrive at a decision which would be no less just and fair.
However, the recent trend in arbitration proceedings features the increased use of principles from earlier awards. They refer to them, put them to discourse and also rely on them. These citations have, in fact, grown exponentially leaving one with the questions:
- When is there an obligation to follow arbitral precedent?
- What kind of arbitrations require the use of precedent?
- What amount of caution should be applied when precedent is used?
- OBLIGATION TO FOLLOW PRECEDENT
Whether there is an obligation to follow precedent or not depends on the type of precedent in question. Precedent is categorised as being a de jure precedent or a de facto precedent.[1] The former operates mostly in a system where there is an established hierarchy of courts, thus embracing a vertical system of reference. As such, it is the principle obtainable within national legal systems where the lower counts are bound by the decisions of superior courts.
De facto precedent, on the other hand, means that the arbiter can follow precedent although the obligation is not binding.[2] The existence of the precedent is regarded as a fact and it is nonbinding. This is the approach employed in international law and it has conveniently been adopted in arbitration. For instance, the decisions of the International Court of Justice (ICJ) are only binding between the parties in respect of their particular case. But, there is still a heavy reliance on earlier cases because they are very persuasive to the court.[3]
- KINDS OF ARBITRATION AND USE OF PRECEDENT
The type of arbitration also defines the extent to which arbitral precedent is used. Arbitrators do not create rules that have effects beyond the disputes before them if they would not serve as a constant recall.
International Commercial Arbitration
In international commercial arbitrations, no particular practice has been established of the handling of arbitral precedents. Academic treatises have instead received more reference and attention from arbitral tribunals than arbitral precedent.[4] The usage of arbitral precedents, as studies show, barely rank beyond the tenth percentile.[5] The precedents can, nevertheless, be regarded as indirect references since they originally formed the backgrounds of the scholars’ works on the subject of international commercial arbitration.
Perhaps, what is most notable about the use of precedent in international commercial arbitration is recorded in a study of the International Chamber of Commerce awards by the Pace School of Law which considered 500 cases, 100 of which were available in full details, and only six of which referred to past awards.[6] In another survey by a Geneva University Law School arbitration research team, of 190 arbitral awards, about 15% which cited precedents made such reference on matters of jurisdiction, procedure, determination of applicable law, which are procedural and not even the substantial matters at hand.[7]
Sports Arbitration
Another relevant focus is sports arbitration. Since 2004, most awards contained the citation of an earlier award as precedent.[8] The Court of Arbitration for Sports (CAS) in June 2004 declared its policy in one of its awards that as long as evidence allows it, the CAS Panel would come to the same conclusions on matters of law as previous Panels did.[9] This has been demonstrated in awards involving strict liability for doping offences.
The CAS Panels have since then been consistent with applying precedents to disputes before them, establishing a long standing, somewhat mandatory operation of precedent when it comes to sports arbitration.
Domain Name Arbitration
Domain name arbitrations are also phenomenal in the application of precedents. These arbitrations employ the use of uniform rules known as the Uniform Domain Name Dispute Resolution Policy (‘UDRP’)[10] which allow the arbitrator to conveniently, practically, and desirably cite precedents. The precedents used are to the end of supporting their decisions and to provide realistic examples and applications of their decisions. To this extent, the use of precedents is almost mandatory.
The UDRP itself does not contain rules requiring the mandatory use of precedent. The positive leaning towards precedent is only encouraged by the content of the rules which deems a decision to be established once it is in writing and it provides the reasons on which it is based as well as been fully published on a publicly accessible web site. To put the rules to effect, the Index of the World Intellectual Property Organization (WIPO) UDRP Panel Decision provides a comprehensive database of the important decisions relied upon as precedents.[11] This avoids information overload as there have been over 40000 cases decided under the UDRP RULES.[12] The WIPO Index compiles the important decisions using more than 200 criteria.
There is also the WIPO Overview of WIPO Panel Views on Selected UDRP Questions which serves as the informed and codified jurisprudence of the UDRP.[13] It identifies the consensus view reached by Panels on the most significant issues under the UDRP, summarizes these consensus views in simple terms, and lists the leading decisions that provide persuasive analysis and reasoning on those issues.
International Investment Arbitration
In the case of international investment arbitration, there is no established obligation to use precedents. However, arbitrators take earlier decisions into consideration. This was expressed by the International Centre for the Settlement of Investment Disputes (ICSID) Tribunal that there is no provision establishing an obligation of stare decisis.[14] It is nonetheless a reasonable assumption that international arbitral tribunals, notably those established within the ICSID system, will generally take account of the precedents established by other arbitration organs, especially those set by other international tribunals.
An example of the trend of precedents here features the cases of regulatory expropriation wherein the sole effects test is used to assess the deprivation of the investor and to validate the position that the damage to an investor is of utmost relevance – and that the motive of the host country, good faith or malice, was irrelevant. The often cited cases are Biloune v Ghana[15] and Metalclad v Mexico.[16]
- EXERCISING CAUTION
Arbitral precedent and the consistency it brings has been shown to be clearly desirable in foregoing paragraphs but this desirableness demands exercise of caution. This is in light of prominent arguments against the use of arbitral precedents. It has been strongly posited, for instance in investment arbitration, that consistency leads to a sacrifice of accuracy, sincerity and transparency; and that a focus should be placed on the merits of the award itself.[17] Complementing this position is the argument that international law does not recognize precedents. The generality of these thought prescribes that the arbitrator should devise tailored mechanisms to ensure the best resolution for each case, rather than to embrace uniformity.
While the purpose of this brief exposition is not to analyse the divergent views, there is still a leaning towards the embrace of precedence. The other view will thus be employed to propose necessary restraints to the use of arbitral precedents.
The argument on the sacrifices made because of consistency may come off as an exaggerated theme, but it points to an important factor, which is that precedent must ‘have some observable relevance to future conduct’.[18] This means that precedent should not be employed as a means of restricting the reasoning of law. This is relevant because the actors and circumstances in various cases can, at best, be similar but never the same; and these differences should highly qualify the results of the disputes. Following closely is the discretional restraint that must be exercised when the complexity of economic activities involved in the arbitration are considered.
While accepting that consistency is an advantage, credibility should be the bigger advantage. Even in the fields where there is a greater development of arbitral precedents, arbitrators should fulfil the ethical obligation to exercise rationality and full reasoning to not follow a precedent which is not conclusively relevant, as this would impact the credibility of the process. They should instead set a new pace based on the current situations to guide the jurisprudence as it pertains to that subject. Consistency should therefore, only serve to improve credibility, a higher standard which arbitrators should seek to achieve with their decisions.[19]
Restraint should also be exercised in light of the jurisdictions which produced the precedents to be relied upon. That is, the arbitrator should take into consideration the peculiarities in different jurisdictions, and the impact of impact of importing precedents to guide the settlement of disputes at hand. An illustration is when an arbitrator goes on to rely on precedent from a developed country in an arbitration in a third-world country, in a case where the jurisdictional differences are glaring and will/can necessarily impact the result of the matter at hand. This will not only stagnate the development of law and ridicule the system of arbitral precedent, but also will impose an unnatural pace on the development of law in that third-world country which is futile and counter-effective.
- CONCLUSION
Ultimately, and for most reasons, arbitral precedent is desirable as it aids and guides the thoughts of the arbitrator. However, this desirability should only go so far. The type of arbitration and the subject matter goes to the foundation of any determination so reached by the arbitrator and this should take precedence over any other matter including existing practice. More so, the use of arbitral precedent is better appreciated when it is employed as of a necessity. And the capacity of the arbitrator to follow or to defy precedent should be in full contemplation of the necessity of that precedent or otherwise.
[1]*Law Student, Nigerian Law School, BL, Class ’20.
Raj Bhala, The Myth about Stare Decisis and International Trade Law (Part One of a Trilogy), 14 Am. Union Int’l L. Rev., 845, 940-42 (1999).
[2] See id.
[3] Land and Maritime Boundary between Cameroun and Nigeria (Cameroon v Nigeria: Equatorial Guinea intervening) Preliminary Objections, ¶ 28 (Dec. 18, 1998), https://www.icj-cii.org/files/case-related/94/8598.pdf.
[4] F. Ferrari, H. Fletchner & R.A. Brand (eds), The Draft UNCITRAL Digest and Beyond: Cases, Analysis and Unresolved Issues in the UN Sales Convention (2004).
[5] Pace School of Law’s online database of CISG cases. http://cigw3.law.pace.edu.
[6] See id.
[7] Gabrielle Kaufmann-Kohler, Arbitral Precedent: Dream, Necessity or Excuse? 3 Arbitration International, 362 (2007) n. 30-1.
[8] Sebastien Besson, William McAuiliffe, Antonio Rigozzi & Levy Kaufmann-Kohler, International Sports Arbitration, GLOBAL ARBITRATION REVIEW (2015). https://globalarbitrationreview.com/insight/the-european-middle-eastern-and-african-arbitration-review-2016/1036935.
[9] International Association of Athletics Federation (IAAF) v USA Track & Field (USATF) & Jerome Young, CAS 2004/A/628, ¶ 73, Award, 28 June 2004.
[10] Rules of the Uniform Domain Name Dispute Resolution Policy (June 17, 2020). https://www.icann.org/resources/pages/udrp-rules-2015-03-11-en.
[11] Legal Index of WIPO UDRP Panel Decisions. (June 17, 2020). https://www.wipo.int/amc/en/domains/search/legalindex/.
[12] Domain Name Dispute Resolution. WIPO ADR. (June 17, 2020). https://www.wipo.int/amc/en/domains/.
[13] WIPO Overview of WIPO Panel Views on Selected UDRP Questions, Original Edition. (June 17, 2020). https://www.wipo.int/amc/en/domains/search/oldreview/.
[14] El Paso Energy International Co. v Argentine Republic, ICSID Case No. ARB/03/15, Decision on Jurisdiction, ¶ 39 (Apr. 27 2006), https://www.italaw.com/sites/default/files/case-documents/ita0268_0.pdf.
[15] Antoine Biloune (Syria) and Marine Drive Complex Ltd (Ghana) v Ghana Investments Centre and the Government of Ghana, Award on Compensation and Costs, Ad Hoc UNCITRAL, (June 30, 1990).
[16] Metaclad Corporation v The United Mexican States, ICSID Case No. ARB(AF)/97/1, Award (Aug. 30, 2000), https://www.italaw.com/sites/default/files/case-documents/ita0510.pdf.
[17] Irene Ten Cate, The Costs of Consistency: Precedent in Investment Treaty Arbitration, 51 Columbia J. Transnat’l L. & Pol’y, 418, 420 (2013).
[18] W. Mark, C. Weidemaier, Towards a Theory of Precedent in Arbitration, 51Wm & Mary L. Rev., 1895 at 1900-01 (2010); Judging-Lite: How Arbitrators Use and Create Precedent, (2012) 90 N.C. L. Rev., 1091.
[19] Frederick Schauer, Precedent, (1987) 39 Stan. L. Rev., 571.