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April 02, 2018

Looking for Law in All the Right Places

Reproduced below are the Power Point slides that accompanied an oral presentation by Mr. Goldstein to the International Arbitration Club of New York on March 19, 2018. A transcript of the presentation is expected to be available in the week of April 9 and will be uploaded to a revision of this post.

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1/21

Looking for Law In All the Right Places: A Modern Spin on Jura Novit Arbiter

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2/21

JNC – US & CANADA JUDICIAL POSITION

“The concept of jura novit curia is not directly part of the law of Canada and a search of the usual Canadian legal databases for that phrase turns up no court case in any province ever referring to ‘jura novit curia’, let alone ‘jura novit arbiter’.” J. Brian Casey

US situation evidently is much the same as in Canada (as we shall see…)

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3/21

JNC —  A Canadian Judicial Perspective

It is generally accepted that judges can conduct research beyond the materials provided by counsel. One cannot argue, for instance, that we are limited to case precedents submitted by counsel or that we cannot conduct our own legal research.”

Hon. Wayne K. Gorman, Judge of the Provincial Court of Newfoundland and Labrador

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4/21

JNC – U.S. Judicial Position

FRCP 44.1 – “In determining foreign law, the court may consider any relevant material or source, including testimony, whether or not submitted by a party or admissible under the Federal Rules of Evidence.”

CPLR 4511(b): “Every court may take judicial notice without request…[of] the laws of foreign countries or their political subdivisions.”

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5/21

JNC – U.S. Judicial Position

  • “There is no requirement that the court give formal notice to the parties of its intention to engage in its own research … Ordinarily the court should inform the parties of material it has found diverging substantially from the material which they have presented… To require, however, that the court give formal notice from time to time as it proceeds with its study of the foreign law would add an element of undesirable rigidity to the procedure….”

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6/21

JNC – U.S. Judicial Position

Kamen v. Kemper Fin. Servs., 500 U.S. 90, 99 (1991)

“T]he court is not limited to the particular legal theories advanced by the parties, but rather retains the independent power to identify and apply the proper construction of the governing law.”

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7/21

JNC – U.S. Judicial Position

Hampton v. Wyatt, 296 F. 3d 560 (7th Cir. 2002) (Easterbrook, J.) :

“That the judges did some research beyond the boundaries set by the briefs shows industry rather than the sort of indolence that might deprive the parties of a fair hearing. … [I]t is the sleepwalking judge, not the diligent one, who deprives the litigant of the personal right to careful, individual consideration.

Any time a judge does independent research there is a risk of error, but judges  with some initiative probably err at lower rates than judges who naively believe that the briefs cover everything worth considering. Courts frequently decide cases on lines of reasoning that can’t be found in the briefs. There is no federal entitlement to have a case decided strictly on the basis of precedent cited to the tribunal.”

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8/21

JNC – U.S. Judicial Position

Rowe v. Gibson, 798 F.3d 622, 628 (7th Cir. 2015) (Posner, J.):

“[J]udges and their law clerks often conduct research on cases, and it is not always research confined to pure issues of law, without disclosure to the parties. We are not like the English judges of yore, who under the rule of ‘orality’ were not permitted to have law clerks or other staff, or libraries, or even to deliberate ….”

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9/21

Risk of Non-Recognition or Set Aside of Award?

  • US & Canada: No case law directly on point. To determine whether and when an award may be set aside or refused recognition because of Tribunal initiatives on the content of law, one must extend/transpose principles developed in other contexts concerning: (1) preventing party from having fair presentation opportunity, (2) violation of public policy, (3) exceeding powers.
  • Should sustainability of the award be the relevant conduct standard?
  • Or something else? “Legitimacy” of arbitration process in eyes of users?

***

10/21

Placing the JNC/JNA Issue in Perspective

  • Five Variants
  • 1) Tribunal awards on non-pleaded cause of action
  • 2) Tribunal awards on non-pleaded remedy or remedial formula
  • 3) Tribunal awards under law other than agreed governing law
  • 4) Tribunal awards on point of law not raised by partie
  • 5) Tribunal awards on same point of law but different precedents/authorities

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11/21

Variant #1: Award on Non-Pleaded Cause of Action (or Defense)

For the experienced and impartial US Arbitrator…

  • 1) violates autonomy of parties
  • 2) suggests Tribunal bias (in providing recourse where pleaded claims would fail)
  • 3) therefore, not a genuine, recurring, or controversial issue.

***

12/21

Variant #2: Non-Pleaded Remedy or Remedial Formula

For the experienced and impartial US Arbitrator…

  • 1) seen as violation of party autonomy
  • 2) suggests Tribunal bias (in providing remedy more favorable to party than what is pleaded)
  • 3) unless broad “notwithstanding” remedial authority found in contract or Rules
  • 4) in exceptional “unless” “notwithstanding” case
  • would ask parties to comment on power of Tribunal to award on non-pleaded remedy,
  • if such power found after full hearing on that question, then provide for full hearing on the Tribunal-conceived potential remedy

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13/21

Variant #3: Award Under Law Other Than Governing Law

For the experienced and impartial US Arbitrator…

1)Will not be done expressly… exceeds powers conferred

2)Controversial Question: arbitrator technique for applying the governing law (##3-5 below)

3)“Cross check” of CAL law against NY law via Tribunal research where Tribunal has one or more NY admitted arbitrators?

4)“Cross check” of UK law against NY law, via Tribunal research, where Tribunal has one or more NY admitted arbitrators?

5) GKK view expressed … and controverted.   No harm/no foul??

***

14/21

Variant #4: Award on Point of Law Not Raised

Hypothetical Award:

  • “While Claimant’s breach of contract claim is fatally deficient by reason of Claimant’s own non-performance, the Tribunal finds that on the evidence presented a valid and sufficient claim for breach of fiduciary duty exists. While Claimant asserts no such claim, our duty to apply New York law to the facts before us compels us, in our view, to enter an award in Claimant’s favor on this basis.”

For the experienced and impartial US Arbitrator…

1)Violates party autonomy (adversarial process)

2)Promotes an impression of bias even if there is no actual bias

3)A party-appointed arbitrator who suggests in deliberations an unpleaded theory of liability or defense favoring the party that appointed her is seen as biased by her colleagues.

4)For these reasons, this possibility does not arise, unless perhaps in exceptional case of manifest injustice if all relief were denied to Claimant…

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15/21

Variant #5:  Tribunal Finds And Cites Authorities Not Cited by Parties

For the experienced and impartial US Arbitrator:

1)Prevailing view that this is OK, but permit party comment if authorities found are not merely corroborative of those cited

2)Alternative view sometimes expressed that Tribunal’s application of governing law is bounded by parties’ submissions  (canard??)

3)Controversial points concerning equality of parties:

  1. a) Does Tribunal unfairly aid a party with less competent counsel if it does research that clearly should have been done and was not done?
  2. b) Does Tribunal unfairly aid a party that evidently elects to raise and issue but not address it thoroughly?

4) Reluctance to independently research non-US law (risk of error, language barriers, cultural barrier re civil law)

***

16/21

JNA When the Seat is in Civil Law Jurisdiction

Switzerland as Example:

  • JNA not formally codified in Swiss arbitration law
  • JNC however is well established in Swiss courts
  • JNA accepted in Swiss courts’ arbitration jurisprudence — by analogy to JNC in courts — subject to overarching norms of due process: equal treatment and right to be heard. JNA may to some extent trump hearing rights if Tribunal conclusions were foreseeable.
  • JNA (like JNC) sometimes seen in Swiss jurisprudence/commentary as duty to ascertain the content of applicable law, not merely power to do so. But this is controversial.
  • JNA/JNC meaning: Legal consequences of presented facts are for arbitrators to decide, notwithstanding limits of what is pleaded.

***

17/21

JNA in Your Next Geneva Arbitration

  • Swiss-seated Tribunal that adopts/proposes unpleaded legal solutions takes rather less risk than in USA that annulment court views this as evidence of bias.
  • But note: unpleaded legal solution does mean unpleaded claim – award on the latter violates basic principles.
  • US arbitrators should understand the difference
  • US arbitrators might wish to alert Tribunal (e.g. Swiss chair) to manage the possible misperceptions of US/common law counsel.
  • No impediments to Tribunal research to verify or modify legal conclusions based on party submissions.
  • Suggestion to invite comments from parties on potential unpleaded legal solutions – even foreseeable solutions — likely to be taken seriously by Swiss co-arbitrators.

***

18/21

JNA In Your Next London-Seated Arbitration

  • EAA Article 34(2)(g): The Arbitral Tribunal shall decide “whether and to what extent the tribunal should itself take the initiative in ascertaining the facts and the law.”
  • Article 22.1(iii) of LCIA Rules: Article 22.1(iii) gives Tribunal the power (but not the duty) “upon its own initiative, but … only after giving the parties a reasonable opportunity to state their views and upon such terms (as to costs and otherwise) as the Arbitral tribunal may decide,”… to “conduct such enquiries as may appear to the Arbitral Tribunal to be necessary or expedient, including whether and to what extent the Arbitral Tribunal should itself take the initiative in identifying relevant issues and ascertaining relevant facts and the law(s) or rule of law applicable to the Arbitration Agreement, the arbitration and the merits of the parties’ dispute.”

***

19/21

JNA in Your Next New York-Seated Arbitration

  • No applicable arbitration law, rules, or norms counsel arbitrators sitting at a US seat not to conduct corroborative legal research (as US judges would do, directly or via their law clerks or both).
  • Sometimes expressed view that the governing law should be or must be derived from the parties’ submissions exclusively appears to be a canard, propagated by a minority (?) of arbitrators who cannot, or prefer not to, conduct legal research. “Jura Novit Arbiter Sine Lexis”
  • A suitable role for Tribunal Secretary where all Tribunal members lack skills or resources or inclination to conduct legal research ? — Probably yes, with full transparency.
  • Read the ILA 2008 Recommendations in 26(2) Arbitration International (2010)

***

20/21

ILA Recommendations

15 recommendations, of which two are critical takeaways today:

  • #7: “Arbitrators are not confined to the parties’ submissions about the contents of the applicable law. Subject to Recommendation 8, arbitrators may question the parties about legal issues the parties have raised … and review sources not invoked by the parties relating to those legal issues and may, in a transparent manner, rely on their own knowledge as to the applicable law as it relates to those legal issues.”
  • #10: “If arbitrators intend to rely on sources not invoked by the parties, they should bring those sources to the attention of the parties and invite their comments, at least if those sources go meaningfully beyond the sources the parties have already invoked and might significantly affect the outcome of the case.”

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21/21

THANK YOU