Applicant v Respondents

Applicant v Respondents - [2013] VSC 550 - VSC 2013 case summary — Zoe

[98]

34 The question which then arises is whether the provisions of s 8(1) of the CAA detract from or otherwise affect this position as a result of the reference in that section to the word "court", uncapitalised. Again, though for reasons which follow, it would not fit into the legislative scheme of the CAA if the word "court" were capitalised. Moreover, it was open to Parliament to refer to VCAT in the s 8 provisions had it intended VCAT to have a role. The same is true of the provisions of s 9 (arbitration agreement and interim measures by court), though these provisions are not relevant, directly at least, to the present application. Perhaps more significantly, the reference to "court", uncapitalised, in s 8 is, in my view, entirely consistent with the structure of the CAA. In terms of courts, s 8, which is directed to protecting arbitral proceedings, would not achieve this objective were it to be limited in application to one or more of the Supreme Court, the County Court or the Magistrates' Court. Clearly, its provisions are directed to courts generally and, had the word "court" been capitalised, then its operation would have been limited to the Supreme Court as a result of the definition contained in s 2(1). Additionally, there was no need for the provisions of s 8 to be specific with reference to the County Court or the Magistrates' Court, as it is not a situation where functions need to be separated between courts, as is the position with the matters dealt with in s 6 of the CAA. In other words, I am of the view that the provisions of s 8 do not indicate any lapse into generality on the part of the legislature with respect to the meaning of the word "court", but, rather, careful attention to language which, in the context of the provisions of the CAA to which reference has been made, simply indicates that its provisions apply to all courts in the sense of including the three courts to which reference has been made, specifically, in s 6. In my view, the same applies with respect to the provisions of s 9, provisions which are also intended to refer to all of the previously named courts.

[144]

authorities are, for present purposes, relevantly similar.[61] Under these Rules, where there is no agreement between the parties as to the appointment of the arbitral tribunal, and in the absence of agreement as to an appointing authority, either party may request the Secretary-General of the Permanent Court of Arbitration at The Hague to designate an appointing authority.[62] Regardless of whether the 2010 Rules or the 1976 Rules apply, delays are involved. A 30 day period is required to elapse during which the parties have not reached agreement on the choice of a sole arbitrator under the 1976 Rules (Article 6(2)) and with respect to the absence of agreement as to the choice of an appointing authority under the 2010 Rules (Article 6) before a request is made by a party to the Secretary-General of the Permanent Court of Arbitration at The Hague to designate an appointing authority. Once the requisite time periods have elapsed to allow a request to be made to the Permanent Court of Arbitration, the request may be made, together with payment of a fee which is currently set at €750.[63] The appointing authority designated by the Permanent Court of Arbitration must agree to accept the appointment. If the appointing authority refuses to accept the appointment, then a further request may need to be made to the Permanent Court of Arbitration to designate another appointing authority, and so the process commences once again. Designation of an appointing authority is, of course, only one step in the process of appointing the arbitral tribunal. Once the designated appointing authority has agreed to act, it must then appoint the arbitral tribunal and the person or persons appointed in that capacity must then agree to act. If the person or persons do not agree to act, or if the appointment is challenged for some reason, then the whole process must begin again. It is fair to say, in my view, that the whole process is quite elaborate and requires a degree of understanding of arbitration processes. The process and issues arising with respect to the provisions of both the 1976 Rules and the 2010 Rules are examined in some detail in A Guide to the UNCITRAL Arbitration Rules.[64]

[147]

"C. Subway's Unilateral Selection of ADRC Violates the Agreement

As an initial matter, the parties disagree as to whether a dispute over selecting the arbitrator is a subject for the Court or for the arbitrator to decide. Petitioner asks the Court to stay arbitration because Subway's selection of ADRC as the appointing authority was contrary to the Agreement. Subway asserts that whether the ADRC was properly designated is a matter for the arbitrator to decide.

'When parties have agreed to arbitrate, but disagree as to the operation or implementation of that agreement, under the Federal Arbitration Act it is properly a matter for the Court.' Stop & Shop Supermarket Co, LLC v United Food & Commercial Workers' Union Local 342, AFL-CIO, CLC, No 06 Civ 3201, 2006 WL 1148728, at *2 (SDNY May 1, 2006), aff'd, 246 F. App'x 7 (2d Cir. 2007). A dispute over a party's choice of arbitrator is properly submitted to the Court. It would be counterintuitive to allow the arbitrator in question to determine the propriety of his selection. See id. ('Here, a method of the arbitration (the selection of appropriate arbitrators) is called into question and the Court undertakes its duty under s 5 to correct the failure of a party to avail itself of the proper method. It would be contrary to s 5 to submit to the arbitrator in question the appropriateness of his selection.'); cf. Avis Rent a Car Sys, Inc v Garage Emp Union, Local 272[1986] USCA2 439; , 791 F.2d 22, 25 (2d Cir. 1986) (court has the power to invalidate an arbitration award 'if the arbitrator is not chosen in accordance with the method agreed to by the parties'); Serv Emp Int'l Union, Local 32BJ v Coby Grand Concourse, LLC, No 04 Civ 9580, 2006 WL 692000, at *5 (SDNY Mar 16, 2006) ('Since the unilaterally selected arbitrator in this case was chosen in complete contravention of the arbitration provision of the CBA, the arbitrator's award was without effect, and is therefore vacated.').

As to ADRC, Petitioner submits that Subway failed to follow the procedures set out in the Agreement for selecting the arbitrator. The Court agrees. The arbitration provision of the Agreement is ambiguous. Paragraph 10(c) provides in part:

[149]

(Semel Aff. Ex. B Franchise Agreement 10(c).) The Agreement does not specify an arbitrator but provides for a method of selection and suggests one possible choice. Under the FAA, '[i]f in the agreement provision be made for a method of naming or appointing an arbitrator ... such method shall be followed; but if no method be provided therein, or if a method be provided and any party thereto shall fail to avail himself of such method ... then upon the application of either party to the controversy the court shall designate and appoint an arbitrator.' 9 USC s 5. Thus, federal law directs that the Court enforce the selection of the arbitrator in accordance with the terms of the Agreement, and here, the Agreement states that UNCITRAL Rules govern.

Article 6 of the UNCITRAL Arbitration Rules covers 'Appointment of Arbitrators'.[68] Under Article 6, the parties must agree on the arbitrator and/or the appointing authority. If the parties cannot agree, then either party may request the Secretary-General of the Permanent Court of Arbitration at The Hague to select an appointing authority. (Semel Aff. Ex. C, UNCITRAL Rules at 271.) The parties do not dispute UNCITRAL's application. Instead, Respondent asserts that Section 10(c) allows for the unilateral selection of any 'agency "such as" the ICDR, capable of and willing to use the UNCITRAL rules.' (Mem. of Law in Opp'n to Petition to Stay Arbitration at 13.)

Respondent's reading of the arbitration provision has no limitation - any arbitration agency may be appointed unilaterally. Respondent ignores the beginning clause of the sentence that states that '[t]he arbitration will be held in accordance with the United Nations Commission on International Trade Regulations and Law (UNCITRAL) Arbitration Rules.' These rules include a process for the selection of arbitrators. Nothing in the Agreement suggests that all aspects of the arbitration except for the selection of the appointing authority or arbitrator would be governed by the UNCITRAL Arbitration Rules. Petitioner did not agree to the selection of ADRC; under UNCITRAL Rules, the parties could either agree on an alternate arbitration agency or apply to The Hague for assistance. Because ADRC was not selected in accordance with the Agreement the arbitration is stayed, pursuant to the FAA and the Convention, so that the parties may pursue arbitration before a properly selected arbitrator.[69]

[176]

67 I accept the submissions by the Irelands that the provisions of the Franchise Agreement to which reference was made do appear to be intrinsically connected with the provisions of the occupation agreement, construed as a sub-lease. However, I am of the view that SSA is correct in submitting that s 94(3) does not operate, in effect, to treat the related "other agreement" or "arrangement" as incorporated by reference into the retail premises lease, thereby rendering all of the provisions, both of the lease and the "other agreement" or "arrangement", subject to the operation of the RLA.[84] This does not mean that a specific provision or provisions of an "other agreement" or "arrangement" which would, if contained in a retail premises lease, be rendered void is or are not rendered void under the provisions of s 94(3) of the RLA but, in my opinion, the operation of these provisions is no broader than that. Consequently, the Irelands would need to identify a specific provision or specific provisions of the Franchise Agreement which are said to be rendered void under particular provisions of the RLA. This, they did not do, apart from referring to a variety of provisions in support of the submission that the Franchise Agreement provisions were to be, in effect, "consolidated" with the provisions of the occupation agreement and treated as one for the purposes of the RLA. Consequently, I express no view on the possible effect, or the possibility of effect, of the RLA provisions, with respect to the provisions of the Franchise Agreement. In this context, it probably should be observed that the mere fact that an arbitration agreement, if included in a retail premises lease, would be rendered void by the provisions of the RLA does not mean that this would be the fate of the arbitration agreement as contained in the Franchise Agreement; as there is no suggestion that it would not otherwise have work to do with respect to the provisions of that Agreement, rather than with respect to the occupancy agreement, as a sub-lease.

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