October 2, 2022 E.C.
I. Core Holding and Principle:
Where parties have agreed to resolve their dispute through arbitration by a tribunal comprised of three arbitrators, and one party objects to a decision rendered by a single arbitrator (contrary to the agreement), a cassation appeal may only be lodged after a petition for setting aside the arbitral award has been filed and a final decision has been rendered on that petition.
If the cassation appeal is presented jointly based on procedural defects and res judicata arguments (challenging the substance of the arbitral award), neither the procedural defect claim nor the substantive challenge can be reviewed by the Cassation Division without a petition for setting aside having been filed and a final decision rendered thereon.
II. Grounds for Setting Aside and Jurisdictional Basis:
Among the reasons for seeking to set aside the decision of an arbitral tribunal is whether the number of arbitrators is less than or different from the number agreed upon by the parties. This is clearly indicated by the content of Articles 355(1) and 356(b) of the Civil Procedure Code.
As stipulated in Articles 3325 et seq. of the Civil Code, where parties have agreed that a matter be decided by an arbitrator, they have the right to select the arbitrator and determine their number. This demonstrates that the jurisdiction of the arbitral tribunal derives fundamentally from the agreement of the contracting parties.
Therefore, a complaint asserting that the arbitral tribunal’s decision was made by an incomplete panel of arbitrators constitutes a basis for a petition for setting aside the arbitral award under Articles 355(1) and 356(b) of the Civil Procedure Code. It is not a matter to be reviewed through an ordinary appeal.
Accordingly, a petition for setting aside the arbitrator’s decision is filed pursuant to Articles 355(2) and 352 of the Civil Procedure Code, with the court that would have had appellate jurisdiction over a decision from the court of first instance had the matter been heard in ordinary court proceedings.
III. Distinction Between Appeal and Petition for Setting Aside:
The content of Articles 350(3), 351, and 355 of the Civil Procedure Code indicates that the reasons and time limits for appealing a decision or award rendered by an arbitral tribunal (or by family elders acting as mediators), and for petitioning to set aside the award, are distinct. This clarifies that the procedure for appealing and petitioning to set aside a decision or award of an arbitral tribunal is specifically prescribed separately:
- Regular Appeal (Appeal):
- Article 350(2) of the Civil Procedure Code shows that disputing parties may expressly agree that the decision of the arbitral tribunal shall be final or not subject to appeal.
- If they agree accordingly, they cannot appeal on any grounds, including those listed in Article 351 of the Civil Procedure Code.
- However, if the parties have not waived the right of appeal in their arbitration agreement, they may appeal based on the reasons stated in Article 351 of the Civil Procedure Code.
- Important Note: The Cassation Division has rendered a binding decision stating that an agreement to waive the right to appeal does not preclude the filing of a cassation appeal on legal arguments relating to fundamental errors of law. (See Cassation Decision No. 42239, Volume 10).
- Petition for Setting Aside the Judgment or Award (Setting Aside of Award):
- Even if the contracting parties agree that the decision of the arbitral tribunal is final, this agreement only limits the right of appeal.
- As stipulated under Article 355(1) of the Civil Procedure Code, an agreement to waive the right to appeal in this manner does not preclude the filing of a petition to set aside the arbitral award.
- The specific reasons for filing a petition to set aside an arbitral award are stipulated in Article 356 of the Civil Procedure Code.
IV. Rationale for Arbitration and Limited Judicial Intervention:
Unless otherwise restricted or prohibited by law, contracting parties have the freedom to agree to resolve disputes that have arisen or may arise between them through alternative dispute resolution mechanisms outside of court. Some common reasons for preferring alternative dispute resolution mechanisms include:
- Selecting professionals or institutions with sufficient knowledge and experience in the specific field.
- Maintaining confidentiality of proceedings.
- Achieving expedited and efficient decisions.
It is well-known that, particularly in arbitration, the selection of arbitral institutions and arbitrators is made at the free will of the disputing parties, providing a wide opportunity for self-determination.
Therefore, the role of ordinary courts, or complaints or appeals brought to court regarding decisions made by an arbitral body, are limited in time and content to specific cases, respecting the parties’ autonomy in dispute resolution.