The extent to which a judge may be active in obtaining the facts necessary to adjudicate a dispute or in finding the legal norms on which a decision is based is a fundamental question of any legal proceeding. Can judges invite the parties to present facts which they consider essential? Or can a judge tell the parties that in his or her view the dispute can be settled on the basis of legal provisions which they have not invoked? These fundamental questions apply to arbitrators as well. In this respect, does arbitration give arbitrators a smaller or greater role than that which judges have? Perhaps surprisingly, arbitrators may in fact have stronger powers in this respect than state-authorized judges.
A key element of the procedural rules for litigation in national courts is the regulation of the statement of claim and defendant’s counter-claim, which determine the subject-matter of the dispute. Other important legal concepts, such as lis pendens, res judicata, and the extent and limits of judicial activity are also linked to these rules. The Hungarian Arbitration Act does not contain such rules; it merely defines the minimum contents of the claim and the defense in a general clause, without any details. It is a striking difference that the Arbitration Act does not require any indication of the law to be enforced; the claimant is merely required to state the nature of the dispute, what the claimant requests from the arbitral tribunal, and what facts support such request. There is no word on the activity of arbitrators.
Although the law does not resolve these important issues, arbitrators, while conducting proceedings, are confronted with them on a daily basis. For example, the parties may have a different legal view on the matter than the arbitral tribunal, and may even disagree as to what law should be enforced by the facts presented – and it may also happen that the facts presented are not in line with the specific law being enforced, or the parties present information to which they do not attach great importance but the arbitral tribunal does. A typical case is where the arbitral tribunal resolves a matter on the basis of a provision of the written contract filed in the case to which the parties failed to refer, or, if they did refer to it, the arbitral tribunal interprets it differently than the parties did. It may also happen that a party requests the arbitral tribunal to oblige its opponent to file a document or other evidence that the petitioner considers to be relevant but does not possess. These situations must be dealt with by the arbitrators in practice.
One possibility is that, even in the absence of specific rules, the arbitral tribunal will attempt to construct a dogmatic system similar to the procedure judges apply. Alternatively, the arbitrators may accept that the Arbitration Act does not regulate the above issues, and may therefore conclude that the arbitral tribunal has more freedom than the national courts to determine the manner of the procedure, and in particular to set the limits of its own activity. The arbitrators choosing this interpretation may argue that this greater freedom is rooted not only in the less-regulated legal environment but more importantly in the fact that the competence of the arbitral tribunal is based on the consensus and agreement of the parties, which provides a contractual basis for the view that the arbitrators should actively do everything necessary to carry out their task. The parties thereby implicitly undertake in the arbitration agreement to provide all assistance to this effect, to submit themselves to the target-oriented procedures of the arbitral tribunal, and to accept its active role. This contractual background provides a solid conceptual basis for the arbitrators to adopt a different approach and play a different role than the national courts. The only limit to this more informal and looser procedural regime is that the parties should be treated equally. As any step taken by an arbitrator in the spirit of active engagement may “favor” one party and “disadvantage” the other, the arbitrators must always act with great care when making such decisions.
By Lajos Wallacher, Counsel and Co-Head of Arbitration Practice at Wolf Theiss Hungary
This Article was originally published in Issue 7.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
