In the proceedings file No. 23 Cdo 3870/2015, the Czech Supreme Court dealt with the issue of commencement of the thirty-day period for the appointment of the presiding arbitrator by party appointed co-arbitrators pursuant to Section 9(1) of Act No. 216/1994 Coll., on Arbitral Proceedings and Enforcement of Arbitral Awards, as amended (the “Czech Arbitration Act”). Unlike the provisions contained in the rules of arbitral institutions (see e.g. Article 12(5) of 2012 ICC Rules of Arbitration[1] or Section 23 (4) of 2012 Rules of the Arbitration Court attached to the Economic Chamber of the Czech Republic and the Agricultural Chamber of the Czech Republic[2]), the Czech Arbitration Act does not explicitly determine commencement of this period. The provision of the Czech Arbitration Act states: “If the party, who is to appoint an arbitrator, does not do so within 30 days from receiving a notice from the other party, or if the appointed arbitrators are unable to reach an agreement on the presiding arbitrator within the same period, the arbitrator or the presiding arbitrator shall be appointed by a court, unless the parties agreed otherwise. The petition may be brought by any party or any of the already appointed arbitrators.”
In the first instance proceedings, the Municipal Court in Prague (the “Municipal Court”) rejected the petition by one of the parties on the appointment of a presiding arbitrator due to prematurity since, in the view of the Municipal Court, the commencement and subsequent failure of “contractual negotiations” regarding the agreement on the presiding arbitrator between the already appointed arbitrators constituted the necessary prerequisite for the appointment of the presiding arbitrator by the court. Therefore, the Municipal Court generally determined the commencement of the thirty-day period pursuant to Section 9(1) of the Czech Arbitration Act from the day of initiation of the negotiations between the already appointed arbitrators. In this particular case, based on the produced evidence, the Municipal court concluded that the arbitrators had not begun the negotiations and thus the thirty-day period had not yet commenced. For this reason, the Municipal Court came to the conclusion that the statutory conditions for the appointment of the presiding arbitrator by the court had not been met. The Municipal Court argued that in case the period for the appointment of the presiding arbitrator commenced on the day of the appointment of the last of the arbitrators appointed by the parties then objective impediments, such as summer holidays or administrative problems, would have resulted in the fruitless expiry of the thirty-day period without one of the arbitrators even having the possibility to initiate contractual negotiations concerning the presiding arbitrator. In extreme cases, one of the parties to the arbitration might be disadvantaged.
The High Court in Prague (the “High Court”) acting as the appellate court, proceeded on the basis of the factual findings of the court of first instance and concluded that the commencement of the negotiations regarding the presiding arbitrator between the already appointed arbitrators was not proved, since there was no specific proposal as to the person to be appointed as the presiding arbitrator. According to the High Court, the provision of Section 9(1) of the Czech Arbitration Act assumes the active role of the party appointed arbitrators in the appointment of the presiding arbitrator. Only in a situation where there is no agreement between the party appointed arbitrators can the appointment of the presiding arbitrator be conducted by the court (and always based on a petition, not ex officio). In line with the Municipal Court’s opinion, the High Court therefore concluded that in this particular case the period pursuant to Section 9(1) of the Czech Arbitration Act had not yet commenced.
Finally, the Supreme Court of the Czech Republic (the “Supreme Court”) addressed the issue of commencement of the period for the appointment of the presiding arbitrator pragmatically, and determined that the decisive moment for the commencement of the thirty-day period pursuant to Section 9(1) of the Czech Arbitration Act is the appointment of the second arbitrator.
Firstly, the Supreme Court’s solution corresponds to the text of the provision itself. It is clear that Section 9(1) of the Czech Arbitration Act distinguishes between (a) the appointment of an arbitrator by one of the parties and (b) a situation where the presiding arbitrator is appointed jointly by the two already appointed arbitrators. In the former situation, in case the party does not appoint its arbitrator within 30 days from receiving a notice by the other party the court will (based on a petition) appoint the arbitrator. However, the Czech Arbitration Act does not include any similar rule of “notice” for the latter situation where the two already appointed arbitrators should appoint the presiding arbitrator.
Moreover, if the period for the appointment of the presiding arbitrator was indeed supposed to commence from the day of initiation of the contractual negotiations between the appointed arbitrators, the parties to the arbitral proceedings would be left in considerable uncertainty as to its beginning. Ultimately, this period might not commence at all. In such a situation there would be a high risk of denial of justice (the constitutional right of the party to be heard could be breached). As the Supreme Court stated: “This period provides the already appointed arbitrators sufficient time to enable them to agree on the presiding arbitrator, but it also provides the parties to the arbitral proceedings with a sufficient guarantee that one of the arbitrators will not block the arbitral proceedings by his/her inactivity. The parties to the arbitral proceedings have therefore the opportunity, in case the arbitrators are inactive or their negotiations regarding the presiding arbitrator are taking too long, to ask the court to appoint the third arbitrator…”
It is also necessary to take into account that the negotiations regarding the presiding arbitrator may be difficult to prove in respect to the parties of the proceedings. The parties do not usually attend these negotiations in person and the results are only communicated to them. The parties do not, therefore, possess any knowledge about when, or even if, such negotiations have commenced or concluded. Moreover, the negotiations regarding the presiding arbitrator tend to be quite informal (e.g. telephone conversations) and the parties have no legal possibility to request any documents from the arbitrators. If the opinion of the lower courts were applied, then there would often be unclear situations which could not be resolved in court proceedings.
The interpretation chosen by the Supreme Court is also affirmed by Section 11(3) letter (a) of the UNCITRAL Model Law on International Commercial Arbitration which stipulates “in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two arbitrators thus appointed shall appoint the third arbitrator; if a party fails to appoint the arbitrator within thirty days of receipt of a request to do so from the other party, or if the two arbitrators fail to agree on the third arbitrator within thirty days of their appointment, the appointment shall be made, upon request of a party, by the court or other authority specified in article 6…” Nevertheless, the Supreme Court agreed in its decision with the High Court that the Model Law is not a source of Czech law since it is clearly merely a “Model Law” and it is up to the legislative power to decide which rules will be incorporated into the wording of the Czech Arbitration Act.
In the light of the above mentioned decision of the Supreme Court, it can be concluded that the conditions for the appointment of the presiding arbitrator by a court pursuant to Section 9(1) of the Czech Arbitration Act are fourfold, namely: (1) each of the parties to the arbitration proceedings appoints one arbitrator; (2) the arbitrators appointed by the parties do not agree on the presiding arbitrator within the thirty-day period after the appointment of the last of them; (3) the parties do not determine a different procedure; and (4) one of the parties or one of the already appointed arbitrators requests the court to appoint the presiding arbitrator.
[1] “Where the dispute is to be referred to three arbitrators, the third arbitrator, who will act as president of the arbitral tribunal, shall be appointed by the Court, unless the parties have agreed upon another procedure for such appointment, in which case the nomination will be subject to confirmation pursuant to Article 13. Should such procedure not result in a nomination within 30 days from the confirmation or appointment of the co-arbitrators or any other time limit agreed by the parties or fixed by the Court, the third arbitrator shall be appointed by the Court.”
[2] “The arbitrators appointed by the parties or by the chairman of the arbitration court select the presiding arbitrator from the list of arbitrators of the arbitration court. If the arbitrators do not select the presiding arbitrator within 14 days after the notice on their appointment (…) the presiding arbitrator will be appointed by the chairman of the arbitration court from the list of arbitrators of the arbitration court.”
