Consensual arbitration is an arbitration proceeding which includes an arbitration agreement executed at the outset, an appeal instance, review, objection or re-examination (hereinafter: “appeal”), which is intended to review the arbitration award and instruct, if necessary, as to an appropriate rectification thereof.
By Dr. Israel Shimony
Consensual commercial arbitration focuses on consensual arbitration proceedings that are designed to resolve commercial disputes. We have elected to use the term “consensual arbitration” for this purpose.
The Arbitration Law in its new format represents a very real transformation in the new method it offers of resolving disputes. It creates a reliable, effective and safe manner of judicial adjudication, as follows:
1. It serves as a safety valve that enables a proper review where necessary and can be controlled by the litigants:
1.1 Will permission be granted to intervene in the factual findings? And if so, when?
1.2 Will there be authorization to rectify the arbitration award or will it be necessary to return it to the first instance?
1.3 What will be the composition of the appeal panel?
1.4 What will be the specialist area of the members of the appeal panel?
2. It streamlines the process in the first instance since, with no way back in the non-appeal arbitration route there is a tendency to “split hairs”. The appeal instance gives litigants and their attorneys peace of mind and assurance that it is possible to focus on the gist of the matter and prove it, instead of grasping at every shred of evidence in hope that it will portray the picture better for the arbitrator. In the event that the arbitrator exercises his discretion in a manner that is unreasonable under the circumstances, the litigants have an option to refer to appeal. Unreasonable exercise of discretion does not depend on a shred of evidence that will occupy valuable time for which the litigants will be charged. Thus the arbitration proceeding will be conducted more efficiently.
The Consensual Arbitration Revolution
In recent years not much attention was paid to arbitration. Broad social movement is afoot and it is appropriate for such social change – the “arbitration revolution” – to come into its own. After all, many are the perils along the road of the arbitration revolution; the greater the phenomenon, the greater the risks of its failure. Everything possible should be done to deter untrained arbitrators from infiltrating the field, while ensuring supervision and advanced qualification; at the same time arbitrators acting in good faith to fulfill their assignment should be guaranteed proper protection; the culture of out-of-court settlement of disputes should be disseminated at all levels of society; and a suitable level of training should be ensured for arbitrators.
This is a time of transition: if the arbitration revolution succeeds, it will flourish and the culture of arbitration will spread to become an integral part of our overall business culture. To this end, all possible government bodies (the Knesset, the government and the courts) and private entities should be recruited to ensure the success of the revolution. The legislation of the new Arbitration Law must be supplemented, prescribing appropriate normative frameworks for conducting judicial proceedings and guaranteeing that arbitrators are trained to a suitable level. For their part, the courts should contribute to the success of the arbitration revolution – which in turn will contribute to the success of the courts – by increasing the volume of cases referred to arbitration proceedings. Academic research and education in arbitration should also be encouraged.
The Principle of Consent
Consent forms the very foundation of arbitration proceedings - from beginning to end they are based on consent.
The essence of the new Arbitration Law – the promotion of certainty, autonomy and security in the world of commerce – requires a high degree of consent in the proceedings, along the lines of “informed consent”. This type of consent is required in connection with the procedural aspects of the essence of the dispute in conducting arbitration proceedings, and in connection with material matters related to the content of the decision, which are significant to the commercial future of the litigants.
The Concept of Consent in Civil Law
The concept of consent is relevant in a variety of contexts of civil law in the world of commerce. This refers to resolve in contracts law. The concept of “resolve” in contract laws refers to the presence of preparedness in a party to take upon itself the legal obligation embodied in the contract. Resolve is examined objectively; the question is whether a party appears to have assumed a contractual undertaking in order to protect the other party’s reliance interest. Hence, it is not impossible that a contract may be signed and a party will find itself obligated thereunder, even if there were informative and voluntary disruptions in formulating the subjective resolve. It is true that in certain cases a party whose demands were not answered may be released from the contract pursuant to Chapter B of the Contracts Law (General Part), 5733-1973; however, the right to annul is limited to defects of sufficient severity and is also dependent on the mental status of the other party regarding the defect. In terms of form, consent to enter into a contract does not for the most part entail any special format and it may be done verbally or by conduct, expressly or tacitly. What is the common and proper model for consent in the area of arbitration and where should it be positioned?
If a key rationale for favoring arbitration proceedings as a means of resolving disputes is the reinforcement of personal autonomy, as suggested above, then it follows that the level of consent required from the parties should be high, so as to reflect a fitting exercise of individual will.
And indeed, in light of such rationale American literature offers the opinion that arbitration proceedings require consent at a higher level than is usual in civil law.
One suggested version is the presence of “high quality consent”. Another version is found in various ethical codices in the United States. The literature rightly points to the essentiality of informed consent in arbitration as an element protecting human dignity.