Tag: public policy rules

Arhive public policy rules - Quick Consulting

Table of  contents

Table of  contents

Introduction

I. History & brief summary

II. Public policy rules

III. Benefits &utility

IV. Disadvantages

V. Conclusions

Introduction Romanian public policy rules on arbitrability of disputes

The main questions to which this paper work will answer: What are the rules of public order? What is the role of public order rules? What is the usefulness of public order rules in arbitration?

In this essay, titled “Romanian public policy rules on arbitrability of disputes”, will be developd several theories based on the opinions of several jurists passing through my own filter of my thinking. I want to compare opinions between them, to criticize them and finally to present the opinion I have accepted, or to express my own opinion. I will motivate the choice made by explaining why and examples.

In this paper work will be presented some speeches settled by the Romanian Courts or the Arbitration Court to support the ideas. The jurisprudence of the arbitration courts is not public but will be used speeches written on certain forums and speeches within a law firm.

Rules of public order in arbitration proceedings are of particular importance. Subject to observance of public order and good morals, as well as mandatory provisions of the law, the parties may establish by arbitration agreement or written instrument subsequently concluded, at the latest with the arbitral tribunal being established, either directly or by reference to a specific regulation on arbitration, the rules on arbitration, the appointment, removal and replacement of arbitrators, the term and place of arbitration, the rules of procedure to be followed by the arbitral tribunal the settlement of the dispute, including any prior dispute settlement procedures, the allocation of arbitration costs between the parties and, in general, any other rules on the proper conduct of arbitration. That is, by convention, the arbitration clause, the parties may derogate from the general rules as long as they do not violate any public policy norm.

The article analyzes relevant legislation and practices in Romania and contrasts the approaches of common law jurisdictions to these issues. This paper discusses the possibility of arbitration to resolve corporate disputes, including litigation arising out of shareholder agreements.

At this time, the transfer of corporate litigation to arbitration in Romania involves substantial risks for participants in these litigations. In many cases, the Romanian state commercial courts consider that corporate litigation is not “arbitrary”, because state commercial courts have exclusive jurisdiction over such disputes.

In the case of common law jurisdictions, by contrast, corporate litigation (in particular litigation arising out of shareholder agreements) may be submitted to arbitration and may be judged in accordance with a foreign law as chosen by the parties. Only in a few cases will the jurisdiction of the arbitral tribunals be denied and the dispute settlement clauses and applicable law provisions will not be taken into account: according to the civil procedure code, the only way to appeal the arbitral award is the action for annulment to be introduced in a few cases which also violates the rules of public order.

The arbitral award may only be terminated by an action for annulment for one of the following reasons:

1. a) the dispute was not likely to be settled by arbitration;
2. b) the arbitral tribunal resolved the dispute without the existence of an arbitration agreement or under a null or inoperative agreement;
3. c) the arbitral tribunal has not been constituted in accordance with the arbitration agreement;
4. d) the party was deprived of the time at which the debates were held and the citation procedure was not legally fulfilled;
5. e) the award was pronounced after the expiry of the term of the arbitration stipulated in art. 567, although at least one of the parties stated that it understood to invoke the caducity and the parties did not agree with the continuation of the trial, according to art. 568 par. (1) and (2);
6. f) the arbitral tribunal has ruled on things that have not been requested or given more than was requested;
7. g) the arbitral award does not include the device and the reasons, it does not show the date and place of the ruling or is not signed by the arbitrators;
8. h) the arbitral award violates public policy, good morals or mandatory provisions of the law;
9. i) if, after the arbitration award has been handed down, the Constitutional Court has ruled on the exception raised in that case, declaring unconstitutional the law, ordinance or provision of a law or ordinance which was the subject of that exception or other provisions of the contested act, which, necessarily and obviously, can not be dissociated from the provisions mentioned in the referral.

The actions for annulment are tried in court and can be found on the portal site just. These speeches will be used to demonstrate that non-compliance with public order rules in arbitration entails the annulment of award.

I. History & brief summary

Arbitration is an alternative to private jurisdiction. In organizing this process, the parties may lay down derogatory rules from common law, provided they are not contrary to public policy rules and mood rules.

Persons with full capacity can establish conventions to resolve disputes between them through arbitration. Such conventions can not be concluded for conflicts concerning: the civil status, the capacity of persons, the succession debate, the family relations, as well as the rights that the parties can not dispose of.

The state and state authorities may conclude arbitration conventions if they are authorized by law. State-owned legal entities having as their object economic activities may conclude such conventions unless otherwise provided by law or by the act of incorporation.

Arbitration in all aspects: the arbitral tribunal, the arbitrators, the arbitral tribunal, etc. shall be established by the arbitration agreement or according to the rules of the competent legal system.

These ideas have been extracted from the New Civil Procedure Code.

Advantages of arbitrage: speedy, international recognition of awards, confidentiality, procedural flexibility, arbitrariness of parties, neutrality, costs are lower for simple arbitrations and the possibility of settling the dispute in equity and / or according to commercial usage. Arbitral awards are not public, nor do processes so large companies do not pardon their reputation with certain processes. Traders who want to resolve a litigation as quickly as possible (mostly large amounts of money) have the interest that the court procedure lasts as little as possible. An arbitration process shall not last more than one year, including prior procedures,

Disadvantages of arbitrage: waiver of state authority, limiting the reasons for the dissolution of a judgment, excessive judiciary or high costs for complex arbitrations. Once state jurisdiction is called for, it is excluded. In very few cases (breach of public order rules in general) arbitration awards can be challenged. At first the costs of the arbitration were much lower, but the development of this branch increased the costs. C.M.H. is one of the lawyers who guides his clients to arbitration, but after losing a lawsuit due to an arbitration court error (they declared the non-existence of a document actually in the file), he gave up this path. In this case, the arbitral award could not be challenged. Another disadvantage is the credibility and impartiality of the referees. The parties have to choose an arbitration panel to trust. The judges strive to demonstrate their impartiality to encourage people to turn to their services (being a private service).

In the Old Code of Procedure commented and annotated by G. Boroi the arbitration of art 340 was regulated, and in the new code of Art 541. Other differences apart from the structure and re-expression of the ideas of the old code, the new code does not bring any significant news what should mentioned.

The current arbitration chapter of the Civil Procedure Code is aligned with: European Union law, the ICC rules and UNCITRAL Model Law.

II.Public policy rules

The public order is aimed at organizing the company, so arbitration must not affect the laws governing this organization. The arbitrators are directly responsible for observing fundamental principles such as equality and contradictory. The imperative rules to be observed are not only those of the Civil Procedure Code but all the norms, including those of the special laws.

Some examples of mandatory rules: those relating to the scope of arbitration, participants in the arbitration process or procedural principles, the rules of material jurisdiction of the courts of law notified to verify the arbitrary activity and the rules on the abolition of arbitral awards.

If you have an arbitrary convention, you can no longer address the courts. If a request is made to the court, for example, the judge will decline jurisdiction to the Arbitral Tribunal.

From their own experience, having an arbitration case, I can say about the National Health House that it concludes arbitration conventions in contracts with healthcare providers. My client CM DR BAM has previously tried to address himself to the courts. He did not trust the CNAS Arbitration Commission because it is made up of 3 members called CNAS and 3 members appointed by the college of doctors. Below we have the court solution:

Section: SECTION OF ADMINISTRATIVE AND FISCAL CONTENTS

Subject matter: Administrative and fiscal dispute

Subject: annulment of administrative act 42151 / 28.07.2017

Processual stage: Fund

Part

CM DR BAM Petent

HEALTH INSURANCE HOUSE WORK INCOME

Complete: C9NCA

Solution type: Decline case resolution

Solution in Brief: Admits the exception of material incompetence. Decline jurisdiction in favor of the Arbitration Commission of CNAS.

Document: Decision 2220/2017 31.10.2017

CASMB demanded a refund in 2013 because it was transferred without being covered by a contract at that time. From the CASMB practice at the beginning of each year, no contracts were concluded, but at the supplier’s request they agreed to provide medical services after signing the contract in March, April with January 1 thus becoming legally.

During the arbitration process we proved that CASMB was not mistaken at the time of payment, the service was provided and the payment was due. My client was in a situation of subordination and could not decide the moment of signing the contract and provided the service under a simple agreement between him and the CASMB.

The parties are free to choose the way of arbitration, the tribunal and the arbitrators can not be bound by any aspect, but when they have agreed to choose the way of arbitration, they are obliged to respect the arbitral award.

If one of the parties does not wish to comply with the arbitrarily arbitrary award, enforcement may be carried out. As an example I found the following:

Section: Civil Section

Subject matter: Civil

Subject: Enforcement of enforcement force JUDGMENT 16/2016

Processual stage: Fund

Part

Name Quality part

BTS petitioners

AS SRL Debitor

Meeting

Complete: C27 IES

Solution type: Admits the request

Solution in Brief: Admits the request for enforcement of forced execution formulated by B.E.J. “TS”. Approves simultaneous / successive forced execution, in all manner prescribed by law, of the enforceable title represented by the arbitral award no. 16 / 10.11.2016, pronounced by the Court of Commercial Arbitration attached to the Chamber of Commerce, Industry and Agriculture Galati, file no. 16/2016 at the request of the creditor S.C. CM AND DISTRIBUTION S.R.L., against the debtor S.C. AS S.R.L., for the obligations resulting from the said enforcement title. Authorizes the creditor to enforce forced execution of the obligations contained in that enforceable title. No way to appeal. Pronounced in public sitting, today, 19.12.2016.

Document: Closure – forced execution 10128/2016 19.12.2016

Individuals or individuals who use arbitration must have full exercise capacity (as in court processes). Exclusively non-patrimonial disputes are excluded, the most common use of arbitration is for litigation of traders. Certain commercial litigations are expressly given in arbitrary jurisdiction.

One party may address the court in respect of any obstacle that may arise in the organization and conduct of arbitration. The activity of arbitration is monitored by the Tribunal.

The arbitral convention must be concluded in writing under the condition of absolute nullity.

The term of the arbitration term is strictly regulated at six months with the possibility of suspension and extension of maximum three months in the situations stipulated by the law, under sanction of the arbitrariness of the arbitration.

The judgment of the arbitration on: the fundamental principles of the civil process and the rules of procedure are the same as those of the courts of law.

The arbitrary procedure approaches the judicial one by manifesting the legislator’s wish to take over the fundamental principles of the civil process. In the chapter on arbitration, reference is made to Article 575 of the New Code of Civil Procedure expressly indicating:

(1) The arbitral tribunal shall be conducted in accordance with the procedural rules set out in art. 576 – Applicable Rules of Procedure (1) The parties may set arbitration rules in the arbitration agreement or may instruct the arbitrators to lay down these rules. These rules shall be supplemented, where appropriate, by the provisions of this book.

(2) When the parties resort to institutionalized arbitration, the provisions of art. 619 paragraph (3). (Unless otherwise agreed by the parties, the rules of the institutionalized arbitration procedure in force at the time of the referral shall apply.)

(3) In all other cases, the arbitration procedure shall be the one set out in this book.

Art. 576 (2) However, the fundamental principles of the civil process set out in art. 5 par. (2), art. 8-10, art. 12-16, art. 19-21, art. 22 par. (1), (2), (4), (5) and (6) and in art. 23 are also applicable in the arbitration procedure.

Article 5 (2) which requires the judge to judge whether the law is unclear or incomplete, and in Article 601 of the Arbitration Judgment chapter, Art. 5 is taken up in its entirety; the settlement of the dispute is settled under the contract of the applicable law in accordance with the provisions of Article 5 – Obligations to Receive and Solve the Applications

(1) Judges are required to receive and settle any request for jurisdiction by the courts, according to the law.

(2) No judge may refuse to judge on the grounds that the law does not provide, is unclear or incomplete.

(3) If a cause can not be resolved either by law or by custom, and in the absence of the latter, nor by the legal provisions relating to similar situations, it shall be judged on the basis of the general principles of law, taking into account all its circumstances and taking into account the requirements of equity.

(4) It is forbidden for the judge to establish general binding provisions by the judgments he makes in the cases before him.

Article 8 – Equality In the civil process, parties are guaranteed the exercise of procedural rights, on an equal and non-discriminatory basis. This principle of equality is imposed in the branches of law of: European Union law, Treaties and Constitution.

Article 9 – Right of disposal of the parties

(1) Civil proceedings may be initiated at the request of the person concerned or, in the cases specifically provided by law, at the request of another person, organization or public authority or institution or public interest.

2. The subject matter and the limits of the proceedings shall be determined by the parties’ requests and defense.

(3) Under the terms of the law, the party may, as the case may be, waive the judgment of the request for legal action or the right itself, may recognize the claims of the adverse party, may agree to terminate, in whole or in part, , may waive appeals or enforce a judgment. The Party may also enjoy its rights in any other manner permitted by law.

This right was indisputable because, in my opinion, it expresses the limits and conditions of a process from which the parties can not be allowed to deviate. The parties have a right of action on the action they are doing: to do, not to do, to give up any interested person to intervene in the case.

Article 10 – Obligations of the parties in the process

(1) The parties have the obligation to perform the procedural acts under the conditions, order and deadlines established by the law or by the judge, to prove their claims and defense, to contribute to the process without delay, and also to complete it.

2. If a party has evidence, the judge may, at the request of the other party or of his own motion, order his appearance, subject to the payment of a judicial fine.

The smooth running of the process depends on the procedural parties that sometimes are tempted to delay the trial. Especially in arbitration, where there is a deadline for solving the process, it was necessary to impose art.10 of the NCPC, which sanctions the actions of delaying the process.

Article 12 – Good faith

(1) The procedural rights must be exercised in good faith, according to the purpose for which they were recognized by law and without infringing the procedural rights of another party.

(2) The party exercising its procedural rights in an abusive manner is liable for the material and moral damages caused. She may also be required, under the law, to pay a fine.

(3) Also, the party who fails to fulfill his procedural obligations in good faith according to par. (2).

As any right and procedural rights must be exercised in good faith. Your freedom ends where the freedom of your neighbor begins, any excess or bad faith can create unlawful benefits to one party.

Article 13 – Right to defense

(1) The right of defense is guaranteed.

(2) The parties have the right throughout the process to be represented or, as the case may be, assisted under the law. In the appeal, the claims and conclusions of the parties can only be formulated and supported by a lawyer or, as the case may be, a legal counsel, unless the party or the trustee, a spouse or relative up to the second degree included, is licensed in law.

(3) Parties shall be given the opportunity to participate in all stages of the process. They can get acquainted with the file, submit evidence, defend, present their written and oral submissions, and exercise legal remedies, in accordance with the law.

(4) The court may order the parties to appear in person, even when they are represented.

The right to defense is a right that is found in the Constitution and must be guaranteed. In situations of inferiority where a small trader contracts with a larger trader, there could have been abuses of clauses prohibiting the hiring of a representative. Thus the legislator provided in arbitration the right to defense.
Article 14 – Contradictory

(1) The court may decide on an application only after the citation or appearance of the parties, unless the law provides otherwise.

2. The parties shall make known to each other and in due time, directly or through the courts, as the case may be, the factual and legal grounds on which their claims and defense are based, as well as the means of proof which they use to be used, so that each of them can organize their defense.

(3) The parties have the obligation to state the factual situation to which their claims and defense relate in a correct and complete manner, without distorting or omitting the facts which are known to them. The parties have an obligation to set out their own point of view regarding the relevant party’s allegations concerning the relevant facts of the case.

(4) The parties have the right to discuss and argue any matter of fact or law invoked during the trial by any participant in the process, including by the court of its own motion.

(5) The court is obliged, in any proceedings, to submit to the parties’ discussion all the applications, the exceptions and the factual or legal circumstances invoked.

(6) The court shall base its decision only on factual and legal grounds, on explanations or on evidence which have been subject to the contradictory debate in advance.

Article 15 – Oralities

Proceedings shall be debated orally, unless the law otherwise provides, or where the parties expressly request the court to proceed only on the basis of the documents submitted to the file.

These are mandatory benchmarks from which the parties can not derogate. If we resume 544 paragraph (2) stating that the parties may derogate by convention from the rules of the process after we have analyzed all the imperative rules from which the parties can not derogate, we will find that the freedom of the parties is insignificant.

Article 16 – Disregard

Samples shall be administered by the court hearing the case, unless the law determines otherwise.

Article 19 – Continuity

The judge in charge of dealing with the case can not be replaced during the trial but for good reasons, under the law.

Article 20 – Respect for fundamental principles

The judge has the duty to ensure compliance and to observe the basic principles of the civil process under the sanctions provided by law.

Article 21 – The attempt to reconcile the parties

(1) The judge shall recommend to the parties amicable settlement of the dispute through mediation, according to the special law.

(2) Throughout the trial, the judge will try to reconcile the parties by giving them the necessary instructions, according to the law.

Article 22 – The Judge’s Role in Finding the Truth

(1) The judge shall settle the dispute in accordance with the applicable rules of law.

(2) The judge has the duty to enforce, by all legal means, to prevent any mistakes in finding the truth in question, on the basis of establishing the facts and by the correct application of the law, in order to give a sound and lawful decision. To that end, with regard to the facts and the grounds of the law invoked by the parties, the judge is entitled to ask them to provide oral or written explanations to discuss any factual or legal circumstances, if not mentioned in the application or in the pleadings, to order the administration of the evidence they consider necessary, as well as other measures provided by the law, even if the parties oppose it.

(4) The judge gives or restores the legal classification of the acts and facts inferred from the judgment, even if the parties have given them another name. In this case, the judge is obliged to bring the exact legal qualification to the parties.

(5) However, the judge may not change the name or legal basis if the parties, by virtue of an express agreement on rights which they may, according to the law, order, have established the legal qualification and the legal grounds on which they have agreed to restrict the debate if this does not violate the legitimate rights or interests of others.

(6) The judge shall decide on everything that has been requested, but without exceeding the limits of the investment, unless the law otherwise provides.

Article 23 – Respect for justice

(1) Those present at the hearing shall be obliged to show due respect to the court and not disturb the proper conduct of the trial.

(2) The President shall ensure that the order and the solemnity of the meeting are observed, and may take any measures provided for by law.

Infringement of these provisions may lead to the termination of the arbitral award under Article 608 (1) (h)

These are rules of public order in arbitration indispensable to any form of justice on which the right to a fair trial is based. The legislator ensured compliance with these rules, including the sanction of the annulment of the arbitral award at the General Court. We can not imagine a fair trial without one of the rules listed above.

From the course of Camelia Toader I extract some ideas for this essay about UE law in arbitration:

CJUE has also developed a concept of public policy on norms of EU law, holding that certain of those norms are so essential to the EU itself, that where a Member State allows its courts to apply one relating to domestic public policy. It must also apply one relating to EU public policy under the “principle of effectiveness” of EU law. The CJEU has explicitly applied this notion in the context of the enforcement of the arbitral awards.

In Eco Swiss case law (C-129/97) the CJUE held that certain rules of EU competition law constitute part of the public policy of the EU, and consequently that an award which violates EU competition law can be annulled or refused enforcement on that basis.

In Mostaza Clara (C-168/05) the CJUE held that a national court seized of an action for the annulment of an arbitration award involving a consumer must determine whether the arbitration agreement constituted “unfair term” under Council Directive 93/13/EEC of Unfair Terms in Consumer Contracts, even if this objection was never raised by the consumer in the arbitration, and annul the award if it did.

Under Article V(2)(b) of the New York Convention, public policy is one of the limited grounds on which courts asked to enforce an arbitration award may refuse to do so.

When the public policy exception was included in the New York Convention, there were concerns that it would be used by courts around the world to reject enforcement of any award that contradicted domestic policy norms in some way. Overwhelmingly, however, courts have interpreted the exception narrowly, and in the light of the pro-enforcement bias of the New York Convention, rejecting the view that the public policy exception applies whenever an award is inconsistent with domestic law. Rather, Article V(2)(b) is applied where the policy violated was one recognised as fundamental to international commerce, to due process and a fair trial, or tot he most fundamental norms of the State in which enforcement is sought. Thus, to be annulled, the award has to offend or contradict a norm of the legal system that is deeply rooted in the most fundamental values or notions of justice and morality of society.

III. Benefits &utility

The character of the arbitration tribunal’s private order should not be seen as a chance of avoiding the courts of law (the coercive power of the state). Arbitrary trials are different because of the parties’ ability to change the way they are organized by convention, but not on the fundamental elements.

Law subjects are protected by public order rules. They are free from any abuse that arbitrators may exercise.

The role of these rules is to ensure a uniform structure for the arbitration procedure.

The fact that arbitration is controlled by the Tribunal at the request of the interested party provides a trustworthy dose to those who make use of this form of litigation.

If any party could demonstrate the existence of the arbitration agreement by any means of proof, it would result in a chaos in practice that would arise in determining the jurisdiction of the Arbitral Tribunal.

Any clause giving a privilege to one of the parties with regard to the appointment of arbitrators, the right to appoint more than one arbitrator or to designate arbitrators in place of the other. This rule excludes the obvious possibility of a party to defeat the arbitrariness of the arbitrators and to attract its arbitral tribunal.

One of the advantages of arbitration is its speed and the fact that things go much faster than in normal courts. This is guaranteed by Article 567 of the Civil Procedure Code, which sanctions the exceeding of the six month period plus three months of extension in certain situations with its caducity.

Arbitration as a component of justice must confer on subjects of law whether or not the ideal of “justice” at least “fair”. Thus the balance of society is maintained.

IV. Disadvantages

The disadvantages of mandatory public policy rules and imperative norms are insignificant compared to the advantages they offer.

There may be a possibility for two Contracting Parties to want to exclude defense through a representative in the case of a dispute. The two may be interested in solving their disputes by personally speaking to the referees. Practically in situations of subordination, in particular, it could be abused, and the right to defense would be violated.

Sometimes, due to negligence, the parties may forget to sign the arbitration agreement in writing. They really want to conclude at the beginning, but when a litigation occurs, the interested party can take the imperative rule of law that the arbitrary convention is null if it does not have the written form.

The nullity of the clause conferring advantages on appointing the arbitrators of one of the parties is necessary to ensure impartiality and credibility by protecting the right to a fair trial.

Sometimes debating a trial takes time, and the rule by which arbitration becomes obsolete in overcoming the term prescribed by the Civil Procedure Code may force arbitrators to hurry up a case by omitting certain things or to negligently decide in a hurry. There are cases in which the arbitrators did not take into account certain evidence or did not understand the case and gave an erroneous award (I think they were probably pressured by time).

The parties’ freedom to organize the arbitration process is a false representation of reality, because according to the public order we analyze, we find that the parties do not have as much to regulate as they please.

V. Conclusions

Even if it is a private jurisdiction, certain values are guaranteed by the state. By public order rules, a minimum of protection against abuse is guaranteed. Like any man’s creation, arbitration has its advantages and disadvantages. I believe that in law, any law, principle or even system can be circumvented and the most important factor is their application in good faith by the subjects of law. But if everyone respected the laws and applied them in good faith, there would be no need for sanctions.

Arbitration of a private nature can be seen from two perspectives:

First of all we can consider a private service, the referee will want to get maximum satisfaction from both parties demonstrating certain qualities with a higher degree of involvement. The Referee has the interest that his current clients recommend him / her further and eventually appeal to his / her services. Instead, the judge is not affected if the parties will or may not appeal to the court.

Secondly, the judge has a “presumed” impartiality in people’s minds, and yet often the one who loses the trial, not accepting the situation that he is not right, accuses the judge of himself or his close associates of corruption. The referees have this well-known issue of credibility and impartiality, and the loser has more beliefs than ever that arbitration has been arranged.

Finally, we conclude with a final conclusion by resuming a paragraph of this essay. Arbitration as a component of justice must confer on subjects of law whether or not the ideal of “justice” at least “fair”. Thus the balance of society is maintained.