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• Issue
• Submissions
• Analysis And Recommendation

13 Immunity for appointing authorities

ISSUE

213 WE SOUGHT SUBMISSIONS on whether immunity from actions should be given to those bodies named in arbitration agreements to appoint arbitrators.²¹⁸ In paragraphs 63 and 64 of our preliminary paper we said:

63 Arbitrators are accorded judicial immunity when they act as arbitrators. A question which has been raised with us is whether similar immunity should he granted in favour of those required, under the particular arbitration agreement, to appoint arbitrators.
64 There is plainly public interest in professional bodies, such as the Arbitrators’ and Mediators’ Institute of New Zealand Inc, appointing arbitrators from those known to be qualified to undertake the particular task. The issue is whether there is likely to be any scope for argument that those bodies are liable for damages if a party turns out to be dissatisfied with the result achieved at arbitration. This may flow from dissatisfaction with the performance of the particular arbitrator (whether justified or not).

SUBMISSIONS

214 Submissions made to us trespassed on a further issue: whether the current provisions conferring immunity on arbitrators was sufficiently wide. We deal with that issue separately in chapter 17.

215 Submissions were divided on whether it was appropriate to enact a provision immunising an appointing authority from claims. However, the competing contentions were not analysed in detail in the context of relevant public policy factors.

ANALYSIS AND RECOMMENDATION

216 Before we address the competing public policy interests we note that, by section 74 of the Arbitration Act 1996 (UK), an appointing authority is provided with a degree of immunity. The essence of section 74 of the UK Act can be summarised as follows:

• An appointing authority is not liable for anything done or omitted in the discharge or purported discharge of that function unless the Act or omission is shown to have been in bad faith.²¹⁹
• An appointing authority is not liable, by reason of having appointed or nominated a person for appointment as arbitrator, for anything done or omitted by the arbitrator in the discharge or purported discharge of his or her functions as arbitrator.²²⁰
• The immunity granted in favour of an appointing authority extends to its agents or employees.²²¹

217 The Departmental Advisory Committee on Arbitration Law²²² outlined the policy reasons which it considered justified immunity in the United Kingdom. In essence there were two reasons:

• Without immunity parties would be encouraged to reopen disputes.
• As appointing authorities generally provide a useful service voluntarily, they may not have the resources to defend litigation or even afford insurance. Accordingly, they should be allowed immunity “so that their good work can continue”.²²³

218 The views expressed by the Departmental Advisory Committee (chaired by Lord Saville) preceded a decision of the House of Lords which removed barristerial immunity as a matter of English and Welsh law. We refer to Arthur Hall v Simons.²²⁴ In that case the House of Lords considered that the immunity could only be justified if there were compelling public policy factors in its favour.²²⁵ It held (at least in respect of civil cases) that there were not.

219 In our view, it is appropriate to consider immunity for appointing authorities by undertaking a similar analysis: are there public policy factors which provide compelling justification for the immunity proposed?

220 It seems to us that there are three specific issues that need to be considered in balancing public policy factors; viz:

• Whether parties would, in fact, be encouraged to reopen disputes if immunity was not granted; and even if they would, is this a sufficient justification for immunity?
• Whether the unavailability or cost of insurance for an appointing authority was likely to result in withdrawal of the service.
• Whether it is appropriate to decline immunity for appointing authorities when the High Court, exercising default jurisdiction under Article 11(3) of the First Schedule, would have no liability because of the doctrine of judicial immunity.²²⁶

221 We are not persuaded that the possibility of reopening the dispute should be given particular weight. While it must be accepted that speculative claims could well be brought against appointing authorities, circumstances in which proper claims may be brought can equally be postulated. For example, a multi-million dollar dispute arises between substantial companies and the appointing authority appoints someone with no experience in conducting large civil cases to act as arbitrator. If, because of a lack of competence on the part of the arbitrator, the parties are adversely affected (or perhaps just one of them) there may be justification in bringing a claim. Similarly, a claim may be justified if an appointing authority appoints as an arbitrator a person who turns out to have no integrity. If that person seeks to run the arbitration to achieve maximum payment for his or her services to the detriment of the parties, a claim may well be justified. We think it is significant that the threat of relitigation of a civil dispute was not considered a weighty factor by the House of Lords in determining to reverse the law relating to barristerial immunity in Arthur Hall v Simons.²²⁷

222 In relation to potential withdrawal of the service, we note the availability of insurance and the opportunity for appointing authorities to fix a fee for appointing arbitrators at a level which will recover both premium and potential excess. In addition, from a contractual point of view, the appointing authority could decline to act unless a waiver was signed by the people seeking an appointment so that no claims could be brought against the appointing authority. Such a waiver is also likely to trump a claim based on Hedley Byrne principles,²²⁸ there being no assumption of responsibility in such a case. A waiver may limit or exclude liability on the part of an appointing authority.

223 The point that has troubled us the most is whether appointing authorities should be treated differently from courts which exercise the final right of appointment if the parties cannot agree and there is no appointing authority. Courts will be protected by the doctrine of judicial immunity. But, in the end, the answer to this question lies in the ability of the appointing authority to decline to appoint in the absence of a suitable waiver. The High Court has no such ability.

224 For those reasons we have come to the view that there is no compelling justification for imposing immunity on appointing authorities from the public policy perspective.

225 By way of postscript we add this. There may well be justification in immunity being granted in favour of the appointing authority in a manner akin to section 74 of the Arbitration Act 1996 (UK) if the appointing authority is compelled to appoint by the terms of a particular statute. In that situation it would be difficult to differentiate the position of the High Court and the appointing authority in principle and we think the same immunity should apply to each.