The appointment of an umpire in Arbitrations

Although uncommon, it is open to parties to appoint an even number of arbitrators. As the Arbitration Ordinance (Cap.609) (AO) provides that any decision of an arbitral tribunal (other than one consisting of a sole arbitrator), unless otherwise agreed by the parties, shall be made by a majority of its members, a deadlock may occur in decision-making of an arbitral tribunal consisting of an even number of arbitrators. To resolve this difficulty, section 30 of the AO provides that where there is an even number of arbitrators, the arbitrators may, unless otherwise agreed by the parties, appoint an umpire at any time after they are themselves appointed.

As the appointed umpire will (subject to any agreement of the parties or arbitrators) attend the arbitral proceedings, be supplied with the same documents and other materials as are supplied to the arbitrators and will determine matters which cannot be agreed by the arbitrators, there is often confusion between the role of an umpire and that of the presiding arbitrator in arbitration proceedings. An umpire, who is a third-party appointed by the arbitrators to settle differences between the arbitrators, is to be distinguished from the presiding arbitrator, who is one of the arbitrators.

The scope of functions of an umpire and those of the presiding arbitrator in a three member arbitral tribunal may be different. The parties (and, if or to the extent that there is no such agreement of the parties, the arbitrators) are free to agree on the umpire’s functions. Subject to any agreement of the parties or arbitrators, where the arbitrators cannot agree on a matter relating to the dispute submitted to arbitration, they must immediately give written notice of that fact to the parties and the umpire, in which case the umpire replaces the arbitrators as the arbitral tribunal and has the power to make orders, directions and awards, in respect of those matters which the arbitrators cannot agree on as if the umpire were the sole arbitrator. Subject to the agreement of the parties or the arbitrators, the arbitrators may still make orders, directions and awards in respect of the other matters relating to the dispute if they consider that it would save costs, or the arbitrators may refer the entirety of the dispute to the umpire for arbitration. In comparison, the presiding arbitrator, as one of the three arbitrators in the arbitral tribunal, may not determine questions of procedure on his own, unless so authorised by the parties or all members of the arbitral tribunal (section 65 of the AO). The aim of so authorising the presiding arbitrator is to expedite the decision making process of the arbitral tribunal in procedural matters of the arbitration.

Although deadlocks encountered by an arbitral tribunal with an even number of arbitrators may ultimately be resolved by the appointment of an umpire as provided under the AO, extra time and costs will inevitably be incurred in enforcing the said deadlock resolution process, including obtaining the arbitrators’ joint notice to refer the matter of disagreement to the umpire for resolution. This is especially so if any of the arbitrators fails to join in the giving of notice to the parties and the umpire, in which case a party may apply to the Court for determination of the referral, which will be a lengthy and costly process.

Bearing the above in mind, when drafting the dispute resolution clause, contracting parties should pay special attention to the provision for the appointment of arbitrator(s) and ensure that where more than one is to be appointed, an odd number of arbitrators are appointed, to avoid the need to resort to the umpire provision. Otherwise, it has to be left to the arbitrators appointed by the parties to agree to modify the functions of the umpire to make him the presiding arbitrator, as empowered by section 31 of the AO.

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