Can a Tribunal Proceed if One Party Refuses to Participate?

In international arbitration, the participation of both parties is essential for the fair and orderly conduct of the proceedings. However, there are situations where one party may refuse to participate in the arbitration, either by not attending hearings, failing to respond to communications, or outright rejecting the process. In such cases, the question arises whether the tribunal can proceed and make an award despite the absence of one party. Arbitration rules are designed to address this issue, ensuring that the arbitration can continue without sacrificing fairness, and allowing the tribunal to issue an award even in the absence of one party's participation.

What Happens When One Party Refuses to Participate?

Arbitral Tribunal’s Power to Proceed

Arbitration rules (such as those of the ICC, LCIA, or UNCITRAL) typically allow the tribunal to continue proceedings if one party refuses to participate, provided that the participating party is still afforded due process. This means the tribunal can move forward with hearings and issue an award even in the absence of one party, though steps must be taken to ensure the rights of the non-participating party are still protected.

Defaulting Party’s Responsibility:

If a party refuses to participate, the tribunal may treat this as a default. However, the tribunal will usually take all reasonable steps to notify the defaulting party and ensure they have an opportunity to engage in the proceedings.

Tribunal’s Steps to Ensure Procedural Fairness

Notification and Communication:

The tribunal will usually send formal notifications to the non-participating party, reminding them of their obligations under the arbitration agreement. This is to ensure that the defaulting party is aware of the ongoing proceedings and the potential consequences of non-participation.

Opportunity to Participate:

Even if a party initially refuses to participate, the tribunal may give them another opportunity to engage, typically by extending deadlines or scheduling new hearings. However, if the party continues to fail to engage, the tribunal can proceed.

Ex Parte Hearings:

If the non-participating party continues to refuse involvement, the tribunal may hold ex parte hearings with the participating party. In such cases, the tribunal will make efforts to ensure the absent party’s rights are considered, including reviewing their case as presented by the other side.

Legal Implications for the Non-Participating Party

Risk of Losing the Case:

The defaulting party risks losing the case if they fail to participate, as the tribunal may make a decision based solely on the evidence presented by the participating party. A failure to participate does not usually prevent the tribunal from issuing an award.

Potential Waiver of Rights:

By refusing to participate, the non-participating party may waive certain rights, including the right to present their arguments, respond to claims, or challenge the final award. This could weaken their position considerably.

Exclusion of Evidence:

The non-participating party may not be allowed to introduce evidence or make submissions after their default, which can further disadvantage their position.

Ex Parte Decision-Making and Award Issuance

Issuing an Award Without the Defaulting Party:

The tribunal can issue an award in the absence of one party. This is done after ensuring that the participating party’s claims and evidence are carefully examined. The tribunal will still apply the law and the facts to make a fair decision.

Award’s Enforceability:

The fact that one party did not participate does not necessarily affect the enforceability of the award. International treaties like the New York Convention allow for the recognition and enforcement of arbitral awards, even if one party was absent from the proceedings.

Possible Challenges to the Award

Appeals and Annulments:

In some jurisdictions, the non-participating party may challenge the award by arguing that their due process rights were violated. However, the tribunal’s duty is to ensure fairness, and as long as reasonable steps were taken to allow the defaulting party a chance to participate, the chances of a successful challenge are reduced.

Setting Aside the Award:

Under certain circumstances, the non-participating party may seek to have the award set aside by a court on the grounds of a procedural irregularity, such as a violation of the right to be heard. However, tribunals are generally allowed to proceed in ex parte situations if the non-participating party has been duly notified and has chosen not to engage.

Arbitration Rules and Institutional Guidance

Different arbitration institutions may have specific rules regarding the non-participation of one party. For example:

• ICC: The ICC rules allow the tribunal to continue the proceedings if one party fails to appear or participate, provided the tribunal ensures fairness by giving reasonable notice and opportunity to the absent party.
• LCIA: The LCIA rules permit a tribunal to proceed in the absence of one party, provided that the participating party presents sufficient evidence to support their case.
• UNCITRAL: Under the UNCITRAL Model Law, the tribunal is authorized to continue arbitration if one party refuses to participate and can issue an award based on the evidence presented by the participating party.

Example

Suppose in a dispute between a construction company and a supplier, the supplier fails to attend multiple hearings and does not respond to the tribunal’s communications. Despite multiple reminders, the supplier does not participate. The construction company, however, is present at the hearings and submits evidence to support its claims.

Steps the tribunal takes:

• The tribunal formally notifies the supplier of the hearings and the consequences of non-participation.
• The supplier fails to respond or attend any hearings.
• The tribunal proceeds with the hearing in the presence of the construction company, reviewing the evidence presented by the company.
• After considering the arguments and evidence presented by the construction company, the tribunal issues an award in favor of the participating party.
• The supplier may attempt to challenge the award in court, arguing that they were denied a fair hearing. However, the tribunal can justify its actions by demonstrating that the supplier was given sufficient opportunity to participate and chose not to.