Functus officio

THE term functus officio describes a situation in which someone or something has fulfilled the purpose of its creation and is, therefore, of no further virtue or effect. In other words, once arbitrators have finally decided the submitted issues, they are, in common law language, functus officio, meaning that the authority over those questions is ended. The underlying rationale is that it will prevent the arbitrators from exercising a fresh judgment on the case and altering their award. It also prevents re-examination of an issue by a non-judicial officer potentially subject to outside communication and unilateral influence.

It certainly sounds like a simple concept, but nevertheless it raises difficult and novel issues. There are quite a few cases that make the law reports as well as the headlines because of this legal doctrine. Paraphrasing Mr Justice Holmes, it can be said that this concept has achieved immortality, is often repeated but rarely analysed.

Over the years, only two papers have been published on this topic, and both approached the matter in a practical, non-legalistic fashion. The papers recommended that arbitrators should take a proactive role in cases where clarification or correction was required.

In a recent case, Judge Haight, under reference to an earlier decision, held that the arbitrators had the inherent power to deal with their error once it was pointed out to them, "notwithstanding recitation of that dread common law Latinism functus officio, a doctrine which did not and could not abrogate the arbitrators' inherent power." These words of encouragement do not come unexpectedly from this particular judge, and indeed they reconfirm the judiciary's positive attitude towards arbitration.

The functus officio argument can arise when one party in arbitration is not quite happy with the result and wants it changed. A party may also wish to introduce additional matters for the panel's consideration after an award has been rendered. Another scenario - and this may be embarrassing to the arbitrators - is when the panel has overlooked a point of claim, dealt with it in an incomplete fashion or simply made an error.

The first time I encountered functus officio was back in 1981 in a case involving the Solstad. The arbitrators had issued an award which failed to address the matter of interest on a particular claim item. When this was brought to the attention of the panel and they realised the oversight, an appendix was issued by the arbitrators granting appropriate interest. Charterers opposed the supplementary award.

Judge Sweet in Clarendon National Insurance Co v TIG Reinsurance Co, stated that the doctrine of functus officio did not prevent arbitrators from clarifying their original arbitration award after its issuance, based upon a mathematical mistake, as long as it did not modify the spirit and basic effect of the award.

Owners then argued that, while it is undisputed that, after a final decision by an arbitrator, the arbitrator becomes functus officio and lacks the power to reconsider or amend the decision, it has also been held that, where the award fails to address an issue which has been submitted, then, as to such issue, the arbitrator has not exhausted his functions and it remains open to him for subsequent determination. Since the supplementary award for interest did not involve any re-examination of an issue previously considered by the panel, the rationale of the functus officio doctrine did not apply, and thus the lower court confirmed the arbitration award. In 1982, the Second Circuit affirmed the lower court's ruling.

It appears that certain jurisdictions take a much narrower view on the matter. In Colonial Penn Insurance Co v Omaha Indemnity Co, the court stated, "The exception for mistakes apparent on the face of the award is applied to clerical mistakes or obvious errors in arithmetic computation." It should be obvious that an equation of 2 + 2 = 5, even if rendered by commercial arbitrators, is wrong, and it should not require court proceedings to resolve this obvious error.

This clerical error argument also arose in Danella Construction Corp v MCI Telecommunications Corp. The district court held that the arbitrators did not have the authority to correct the fact that they had reversed the parties in the award. The court refused to confirm the amended award and instead confirmed the panel's initial, erroneous award. Upon review by the Court of Appeals, the lower court's ruling was reversed and remanded.

It had been my understanding all along that an arbitrator was empowered to correct an award when there was an evident mistake, apparent on the face of the award. But when I was confronted with such a situation, I found out that things are not always as they appear to be or what I thought them to be.

In the case of the Bluestone, I was appointed as sole arbitrator to address a relatively small demurrage claim. One of the issues was whether or not Teddy Gleason's birthday should count as laytime. When I rendered the award, I decided in the narrative section that the day was to be a local stevedoring holiday and, as such, would not count as laytime. In the actual demurrage calculation, however, I overlooked this point, counting the holiday as laytime used. When this was pointed out to me, I revised those award pages which contained the demurrage calculation and forwarded them to counsel for insertion into the award originally issued.

Because of my embarrassment over having made this obvious blunder, I did not follow up on the matter of unpaid fees and considered the matter closed. To my surprise, I found a synopsis of a court proceeding in the 1990 American Maritime Cases dealing with the September 9, 1988 award. The surprise was even greater when I realised that the matter had been the subject of a motion in the State of New York Court and not in the federal court, which, in my opinion, should have been the appropriate forum to address this matter.

The head note stated that "Under NY law, once an arbitrator has rendered an award, he may not thereafter issue a second award for a different amount because his original laytime/demurrage calculations were erroneous".

The decision characterised my revision as a modification of the award, substantially expanding the arbitration award and thereby exceeding my authority. The judge stated that it was "not clear that what the arbitrator did was a mere recalculation of figures. It appears that there was a re-analysis of the substance of the claims to compute the number of 'running days,' with allowances for Sundays and holidays . . . .".

It seems elementary to me that when a certain day is considered a holiday, it must follow that it will influence the running of laytime and ultimately the quantum of the demurrage. The judge, however, did not see it this way, and the case was remanded to a panel of three arbitrators.

Over the years, I may have disagreed with a few decisions rendered by judges but, when possible, I did not take issue with these decisions. I rather used language that permitted me to perform the task at hand based upon the court's directions. But even after ten years, the Bluestone still gives me trouble. Maybe if it had been addressed in the federal courts and by judges who are more familiar with the subject matter, the outcome may have been different, or at least the reasoning could have been better. Forcing the parties to live with an arbitration award which the arbitrator himself declared erroneous can only be a regrettable miscarriage of justice.

In addition to Judge Haight's commentary in the Mountain Blossom, Judge Sweet addressed the concept in Clarendon National Insurance Co v TIG Reinsurance Co, where he stated that the doctrine of functus officio did not prevent arbitrators from clarifying their original arbitration award after its issuance, based upon a mathematical mistake, as long as it did not modify the spirit and basic effect of the award. In fact, the court lauded the arbitrators for their efforts in the complicated proceeding and their endeavours to give effect to the intentions of the parties, and, although somewhat imperfectly executed, he enforced their findings. He also stated that the functus officio doctrine should be stretched beyond the mistake category, as the error was not obvious on the face of the award.

In the Mountain Blossom, Judge Haight concluded that "where . . . a material miscalculation of figures by arbitrators is evident upon the face of the award, or compelled by the circumstances of the case, and the arbitrators have themselves explicitly conceded their use of an erroneous figure, [the Federal Arbitration Act in 11(a)] gives the court the power to remand the case to the arbitrators with directions to reopen the proceedings and to make further findings."

The functus officio doctrine may have outlived its usefulness. The Seventh Circuit stated that the doctrine originated in the bad old days when judges were hostile towards arbitration and ingenious in hamstringing it. We are certainly well beyond that stage, and although there never will be parity, arbitration has made great strides and has become a major factor in dispute resolution. Being an option to the highly regulated and structured court proceedings and being more of a court of equity, it may be worthwhile to liberalise the review process to the point that it maximises the benefits of arbitration and minimises legalistic manoeuvres.

Arbitration is sought out to resolve commercial disputes without the sometimes inevitable delays encountered in litigation. This expectation should not be lost in post-arbitration disputes that revolve around technicalities or blindly adhere to principles, and, more often that not, overlook the commercial realities.

Arbitrators' mistakes happen and, since they are unintentional, they are not avoidable. When it happens, the arbitrator should not ruefully sit back, but rather be proactive. In the words of Judge Sweet, ". . . arbitrators should simply be permitted to correct errors - but only errors - upon remand even if the particular issue was not remanded. This holding in no way gives arbitrators carte blanche to alter any decision previously rendered. Given the unusual circumstance - namely, that the arbitrators acknowledged a mathematical error, one that neither party disputes - equitable factors in this case weigh in favour of claimant".

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Watching your Ps and Qs

The lessons of creative writing

AS years go by, the excuse about being a foreigner sounds less and less convincing. When I came to the US more than 35 years ago, I had difficulty with the language. Not so much with the writing part, because you could always look up the correct word or phrase in a dictionary or thesaurus. Speaking the language was the difficult part. American idioms or slang were not taught in German schools in those days, and we did not have the ready access to American television and movies that exists today.

I tried a short-cut by reading Mickey Spillane and James Jones but ultimately they were no great help because I could not find many of the unknown words in my school dictionary. Therefore, whenever I got an expression wrong or pronounced it incorrectly, I blamed it on being a foreigner. But how long can that last? By now it is a family joke, and I still get good?natured ribbing about my erstwhile pronunciation of 'southern', when I am overwhelmed by the 'th' sound.

I remember an incident in 1976 when a panel chairman, known as an authoritarian, with the demeanor of a fleet commander (which he in fact was), submitted an award to me for signature. I made a number of grammatical changes and returned it, prompting the outcry, "I thought I spoke the Queen's English, and here comes this foreigner with his bloody corrections".

There was another case, in 1980, when I was the chairman of a consolidated, five-man arbitration. The difficult part of that arbitration was not to reach a decision, but to reconcile the writing styles of four prominent New York arbitrators.

These two recollections address the essentials of writing - style and grammar. Style is part of the creative aspect of writing. It is a gift that some have, and for them it comes naturally. Others struggle, and sometimes, in order to solve their problems, end up adopting someone else's writing style.

In the end, it becomes a personal choice, whether to write like Ernest Hemingway or Thomas Mann. As far as the writing of the arbitration awards is concerned, we know that the style of e e cummings is out and, for all practical purposes, one should not adopt Thomas Mann's style either. Charter party language is archaic enough, and we need not compound it with run?on sentences or Schachtels├Átze (sentences within sentences). When in doubt, keep it short and in logical sequence.

For bad grammar, including typographical errors, however, there is little excuse. Grammar is the mechanical part of writing and can be taught more readily. It is also that part of writing over which one has the easiest control. When in doubt, look it up or have the computer spell-check it. Proofreading may not be stimulating, but it is necessary.

At this stage I enjoy writing, and - like everybody else - I may have at least one book in me. For the time being, however, I will continue to write arbitration awards and to champion clear and concisely written decisions. Nobody will ever win a Pulitzer Prize for the best?written arbitration award but, on the other hand, arbitrators do get paid better than aspiring authors do. This is also one of the reasons that, in my opinion, arbitrators/panels should endeavour to produce near?perfect writings.

I have seen arbitration awards where the authors have capitalised and/or excessively underlined words for emphasis. One should keep in mind that awards are not comic strips. The logical order of thought and writing should lead to the conclusion, which, if properly drafted, should become obvious to the reader. There should be no need to import advertising gimmicks or cartoon language into an arbitration award. It is a serious document that deserves a serious approach and treatment.