Originally from Between East and West: Essays in Honour of Ulf Franke

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I. INTRODUCTION

The simplest institutional arbitration creates relationships between four “participants:” two disputing parties, one arbitrator, and the arbitral institution. Are these relationships contractual? If so, how and between which participants are they formed? This essay discusses answers to such questions.

It is appropriate to do this in honor of Ulf Franke, who for many years has been so involved in arbitration in general and institutional arbitration in particular.

Is the subject of any practical significance? Yes, it is. It is difficult to analyze and discuss concrete problems and situations that might arise in relationships created in institutional arbitration without an understanding of the rights and duties and powers that each participant has towards other participants. An example of a concrete situation is where after the award one of the disputing parties wishes to bring an action in court to reduce the fees due to the arbitrators as fixed by the arbitral institution. Should the party sue the arbitral institution or the arbitrators, or maybe all of them? Would it be a good defense for the institution or the arbitrators to say, in effect, “You have sued the wrong defendant”? Another example of a concrete problem has to do with tax law, such as VAT. Does an arbitrator in institutional arbitration provide services to the institution or to the disputing parties? In other words, who is the arbitrator’s counterpart for VAT purposes? Similarly, who is the arbitrator’s employer for income tax purposes: the disputing parties or the arbitral institution? A final example concerns insurance; the cover and cost of a participant’s policy may be different depending on the identity of the counterpart.