Public‐Private Arbitration and the Public Interest under English Law

DOIhttp://doi.org/10.1111/1468-2230.12241
AuthorStavros Brekoulakis,Margaret Devaney
Publication Date01 Jan 2017
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Public-Private Arbitration and the Public Interest under
English Law
Stavros Brekoulakis and Margaret Devaney
Together with the increase in the number of public-private contracts, recent years have seen
a marked proliferation in public-private arbitrations. This article explores the public interest
implications which may arise in such arbitrations and examines how public-private arbitration
is treated under English law. We argue that, due to the lack of a developed administrative law
sphere in England and the historical development of arbitration as an exclusivelypr ivatemode of
dispute resolution, the current legal framework of arbitration in England has developed around
the private law paradigm of a commercial dispute involving private actors. This private law
paradigm results in a conceptual and legal void in respect of how public interest is accounted
for, and protected, in arbitrations involving public bodies under English law. Therefore, we
suggest that English arbitration law needs to be amended to adequately protect the private
interest in public-private arbitration.
INTRODUCTION
The last forty years have witnessed an increased interaction between public
and private sectors and increased reliance on private actors to perform public
functions in a wide range of areas, including complex infrastructure projects,
welfare accommodation, crime and justice and military and defence. These
developments have led to a substantial increase in the number of public-private
contracts, many of which favour arbitration and other private forms of dispute
resolution over the traditional resolution of disputes in the national courts.
Although, like a typical commercial arbitration between private parties, public-
private arbitrations arise out of a contractual dispute, the crucial point of
distinction is the public interest implications associated with the latter and it is
these implications that make public-private arbitration important to examine.
This article aims to clarify the concept of public-private arbitration and to
critique the way in which public-private arbitration is treated under English
arbitration law. The main thesis of this article is that the private law paradigm
upon which English arbitration law is based leaves the public interest both
unaccounted for, and unprotected, in respect of public-private arbitrations.
The article proceeds as follows: the first section offers an account of the rise
of public-private arbitration and the next examines more closely the definition
Stavros Brekoulakis is Professor in International Arbitration and Commercial Law and Director of
Research at the Centre for Commercial Law Studies, Queen Mary University of London and an
Attorney-at-Law. Margaret Devaney holds a PhD from the Centre for Commercial Law Studies,
Queen Mary University of London and is a practising solicitor. We would like to thank RoyGoode,
Michael Lobban, Philip Rawlings, Maksymilian Del Mar and Caroline Morris who kindly reviewed
the original version of this article. We would also like to thank the anonymous MLR referees for
their very helpful comments on an earlier version of this article.
C2017 The Author. The Modern Law Review C2017 The Modern Law Review Limited. (2017) 80(1) MLR 22–56
Published by John Wiley& Sons Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA
Stavros Brekoulakis and Margaret Devaney
of public-private arbitration and, in particular, the concept of the public inter-
est. The third part examines the treatment of public-private arbitration under
English law and demonstrates that English law fails to distinguish between pri-
vate arbitrations and public-private arbitrations and has developed around the
private law paradigm of a commercial dispute.
While English law applies a private law paradigm to public-private arbitra-
tions, as the next section shows, other jurisdictions have recognised the distinct
nature of public-private arbitration. The lack of a distinct legal and concep-
tual framework for public-private arbitration in England raises two important
questions. The first question is why such a framework is lacking under English
law. As the next section, covering the reasons underlying the English approach
to public-private arbitration, argues, this can be attributed to the lack of a
developed administrative law sphere in England and to the fact that English
arbitration law has developed as an exclusively private mode of dispute reso-
lution. The second, possibly more important, question is whether the existing
private law paradigm on which English arbitration law is based can adequately
protect the public interest. This question is addressed in the final section, which
argues that the private law paradigm underlying English arbitration law leaves
the public interest both unaccounted for, and unprotected,in respect of public-
private arbitrations. The concluding section makes specific proposals as to how
this deficit may be addressed by amending the Arbitration Act 1996 (1996 Act).
THE RISE OF PUBLIC-PRIVATE ARBITRATION
Traditionally, arbitration has been the predominant mode of dispute resolution
for contractual disputes between two private parties, typically corporations.
However, in recent years with the collapse of the non-arbitrability doctrine, the
scope of arbitration has greatly expanded. In the area of commercial arbitration,
for example, it is now accepted that arbitrators have authority to determine
not only claims pertaining to the formation, inter pretation and performance
of commercial contracts, but also statutory claims that may have crucial social
implications,1such as competition law claims, tax claims or claims arising out
of securities transactions.2Similarly, in the area of investment law, international
arbitration tribunals regularly review investor claims concerning government
measures, including financial and environmental measures, which concern the
regulatory sovereignty of the host nation and would normally fall within the
exclusive jurisdiction of national courts.3
Concurrent with this development, a combination of economic and ide-
ological factors has led to increased interaction between public and private
1 T. Carbonneau, ‘Cartesian Logic and Frontier Politics: French and American Concepts of
Arbitrability’ (1994) 2 Tul J Intl & Comp L 196.
2 K. Youssef, ‘The Death of Inarbitrability’ in L. Mistelis and S. Brekoulakis (eds), Arbitrability:
International and Comparative Perspectives (Alphen aan den Rijn: Kluwer, 2009) 47. See generally,
Mistelis and Brekoulakis (eds), ibid.
3UNCTAD,World Investment Report 2015: Reforming International Investment Governance (New
York and Geneva: UNCTAD, 2015) xi.
C2017 The Author. The Modern Law Review C2017 The Modern Law Review Limited.
(2017) 80(1) MLR 22–56 23
Public-Private Arbitration
sectors and increased reliance on private actors to perform public functions
in virtually every industrialised state.4In the UK, the transfer of government
powers to the private sector gathered pace during the 1980s.5Such outsourcing
arrangements can take various forms including entrusting pr ivate partners with
the legal responsibility to provide such services (‘contracting out’) and collabo-
rating with private parties for the purpose of achieving a public function, albeit
that ultimate legal responsibility to the public remains with the public body.6
Legislative developments have lent impetus to this movement by, for exam-
ple, requiring local authorities to engage in competitive tendering processes7
and by facilitating the exercise of certain public powers by private entities.8
These developments, in turn, have led to a marked increase in the number of
public-private contracts (ie contracts entered into by public bodies with private
entities).9
The connection between these two developments - the expansion of arbi-
tration’s domain and the rise of the ‘contracting state’ - is the fact that many
public-private contracts favour arbitration and other private forms of dispute
resolution over resolution of disputes in the national courts.10 For example,
the Model Terms and Conditions of Contracts for Goods issued by the UK
Office of Government Commerce provide for a multi-tiered dispute resolu-
tion process which ends in arbitration in the event that informal negotiation
and mediation are unsuccessful11 and similar dispute resolution provisions are
common in standard forms of international construction contracts, typically
adopted for procurement of public works.12 Recent years have therefore seen
both the general expansion of arbitration’s domain as well as an increase in the
number of public-private contracts providing for arbitration.
The expansion of arbitrations arising under public-private contracts has been
accompanied by an increase in other forms of arbitration between public and
private entities. In particular, since the registration of the first dispute under
4 J. Freeman, ‘The Private Role in Public Governance’ (2000) 75 NYU L Rev 543; J. B. Auby,
‘Contracting Out and ‘Public Values’: A Theoretical and Comparative Approach’ in S. Rose-
Ackerman and P. L. Lindseth (eds), Comparative Administrative Law (Cheltenham: Edward Elgar
Publishing, 2013) 512.
5 A.C.L.Davies,Accountability: A Public Law Analysis of Government by Contract (Oxford: OUP,
2001) 3.
6 See M. Freedland, ‘Public law and private finance – placing the Private Finance Initiative in a
public frame’ [1998] PL 288; C. Harlow and R. Rawlings, Law and Administration (Cambridge:
CUP, 3rd ed, 2009) ch 9.
7 SeeDirective 2014/24/EU of the European Parliament and of the Council of 26 February 2014
on public procurement and repealing Directive 2004/18/EC, OJ L 94, 28.3.2014, 65–242.
8 See Deregulation and Contracting Out Act 1994.
9 J. B. Auby, ‘Comparative Approaches to the Rise of Contract in the Public Sphere’ [2007] PL
40, 41. See also A. Davies, The Public Law of Government Contracts (Oxford: OUP, 2008) 61.
10 G. S. Tawil, ‘On the Internationalisation of Administrative Contracts, Arbitration and the Calvo
Doctrine’inA.vandenBerg(ed),Arbitration Advocacy in Changing Times, ICCA Congress Series
No 15 (Alphen aan den Rijn: Kluwer, 2011) 325.
11 Office of Government Commerce, ‘OGC Model Terms and Conditions of Contracts for Ser-
vices’ (OGC, 2009) clause I2. See also HM Treasury, Standardisation of PFI Contracts (London:
TSO, 4th ed, 2007) ch 28.
12 See, for example, FIDIC,‘Conditions of Contract for Constr uction, which arerecommended for
building or engineering works designed by the Employer or by his representative, the Engineer’
(FIDIC, 1999) clause 20.6.
24 C2017 The Author. The Modern Law Review C2017 The Modern Law Review Limited.
(2017) 80(1) MLR 22–56

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