Le Quang Hung - Graduation Thesis Independence, Impartiality and Duty of Disclosure of Arbitrator
-
Upload
quang-hung-le -
Category
Documents
-
view
72 -
download
5
description
Transcript of Le Quang Hung - Graduation Thesis Independence, Impartiality and Duty of Disclosure of Arbitrator
-
i
Ministry of Foreign Affairs
Diplomatic Academy of Vietnam
International Law Faculty
GRADUATION THESIS
Independence, Impartiality and Duty of Disclosure of Arbitrator:
The Varying Approaches
Instructor: Hew R. Dundas
Name: L Quang Hng
Class: LQT36A
Hanoi, May 2013
-
ACKNOWLEDGEMENT
Foremost I would like to express my deep sense of gratitude towards thy Hew R.
Dundas, whose wisdom and kindness are truly inspiring. His instructions, along with
the enthusiasm and patience in the way he instructed, are truly helpful in all the time of
research and writing this thesis.
My sincere thanks go to my seniors in Vis Moot DAV community, who taught me the
very first lesson in arbitration; and Mr. Tran Anh Dung for all his insightful lectures of
commercial arbitration.
I am also extremely grateful to Ms Pham Lan Dung, Ms Nguyen Thi Lan Anh and all
other professors and lecturers of International Law Faculty of Diplomatic Academy of
Vietnam for their motivation and immense knowledge.
Last but not least, I would like to thank my family for all the love they gave me and all
the sacrifices they made for me.
-
i
Contents TABLE OF ABBREVIATION ...................................................................................... iii
TABLE OF AUTHORITIES ....................................................................................... viii
NATIONAL COURTS DECISION ........................................................................... viii
ARBITRAL INSTITUTIONS DECISION ................................................................... xi
INSTITUTIONAL RULES .......................................................................................... xiii
CONVENTION AND TREATIES ................................................................................ xv
I. INTRODUCTION .................................................................................................... 1
II. ARBITRATORS IMPARTIALITY, INDEPENDENCE AND DUTY TO
DISCLOSE: AN OVERVIEW ........................................................................................ 2
1. Impartiality, Independence and Neutrality ......................................................... 2
a. The Concept of Independence and Impartiality .............................................. 3
b. Impartiality distinguished from Neutrality, Partiality distinguished
from Sympathy and Neutral Nationality .............................................................. 4
c. Obligations of impartiality and independence in arbitration rules and
national laws ........................................................................................................... 10
2. Arbitrators Duty to Disclose Circumstances that may Give Rise to Justifiable
Doubts ........................................................................................................................ 13
a. Time of the Disclosure .................................................................................. 14
b. Content of the Disclosure .............................................................................. 15
c. Duty to Investigate Potential Conflicts of Interests ...................................... 24
d. Relation between Duty of Disclosure and Bias ............................................ 25
-
ii
III. PROBLEMATIC RIGIDITY AND DISPARITY IN APPROACHES FOR
DUTY OF DISCLOSURE ............................................................................................. 27
1. Non-Disclosure of Situations under IBA Guidelines Green List ..................... 28
a. Controversies in Courts Decision ................................................................ 29
b. Diversity in Culture and Legal Background ................................................. 37
2. Failure to Disclose in the constitution of Evident Partiality in U.S. Courts: A
Tale of Two Circuits .................................................................................................. 41
a. Standards for Evident Partiality and Disclosure under Commonwealth
case 42
b. Development of Evident Partiality in non-disclosure case over the years:
Disparity between Circuits ..................................................................................... 44
c. Absence of Consensus between Circuits: Time for one final approach? ...... 49
3. Concluding Remarks ........................................................................................ 50
IV. TOWARDS A COHESIVE APPROACHES ...................................................... 53
1. Establishment of Local and Binding Guidelines Based On IBA Guidelines ... 53
2. Publication of Challenge Decisions by Institution ........................................... 54
3. Adjustment to catch up with Internet and Social Network Era ....................... 55
BIBLIOGRAPHY .......................................................................................................... 56
Books .............................................................................................................................. 56
Articles ....................................................................................................................... 57
-
iii
TABLE OF ABBREVIATION
AAA American Arbitration Association
ABA American Bar Association
ASA Swiss Arbitration Association
CAS Court of Arbitration for Sport
CIArb Chartered Institute of Arbitrators
CIETAC China International Economic and Trade Arbitration Commission
DIS German Institute of Arbitration
HKIAC Hong Kong International Arbitration Centre
IBA International Bar Association
ICAC Moscow International Commercial Arbitration Court
ICC International Chamber of Commerce
ICCA International Council for Commercial Arbitration
ICDR American Arbitration Association International Centre for Dispute
Resolution
ICSID International Centre for the Settlement of Investment Disputes
LCIA London Court of International Arbitration
NASD National Association of Securities Dealers of the United States
-
iv
PCA Permanent Court of Arbitration at The Hague
SCC Stockholm Chamber of Commerce
SIAC Singapore International Arbitration Centre
UNCITRAL United Nations Commission for International Trade Law
UNIDROIT The International Institute for the Unification of Private Law
VIAC Vietnam International Arbitration Centre
General Abbreviations
Section
Paragraph
AAA/ABA Code AAA/ABA Code of Ethics for Arbitrators in Commercial Disputes
(1977, revised 2011)
ADRLJ Arbitration and Dispute Resolution Law Journal
Am Rev Int Arb American Review of International Arbitration
Arb Int Arbitration International
Art Article
BGG Swiss Federal Supreme Court Act 2007
BGH Bundesgerichtshof (Federal Court of Justice of Germany)
-
v
Cir. Circuit
Co. Company
Corp. Corporation
ECHR European Convention on Human Rights
ed. editor
edn edition
E.D. Pa. U.S. District Court, Eastern District of Pennsylvania
EWHC England and Wales High Court of Justice
FAA US Federal Arbitration Act (1925)
H.L House of Lords
IBA Guidelines IBA Guidelines on Conflicts of Interest in International
Commercial Arbitration (2004)
IBA Rules of
Ethics
IBA Rules of Ethics for International Arbitrators (1987)
IBA Rules of
Evidence
IBA Rules on Taking of Evidence in International Commercial
Arbitration (1999)
Ibid. Ibidem
ICA International Commercial Arbitration
-
vi
IDR International Dispute Resolution (Journal)
Inc. Incorporation
Ins. Insurance
Ltd. limited
Model Law UNCITRAL Model Law on International Commercial Arbitration
(1985) as amended in 2006
n Footnote
New York
Convention
The 1958 Convention on the Recognition and Enforcement of
Foreign Arbitral Awards
No. Number
OG Swiss Federal Judicial Organization Act
OLG oberlandesgericht (German Court of Appeal)
p. Page
Rep Report
Reins Reinsurance
Rev Arb Revue de l'arbitrage
RUAA Revised Uniform Arbitration Act (2000)
-
vii
S.D. Tex United States District Court for Southern District of Texas
Tex. App. Ct. Texas Court of Appeal
UKHL United Kingdom House of Lords (England)
UKSC Supreme Court of the United Kingdom
UNCITRAL United Nations Commission on International Trade Law
UNCITRAL Rules UNCITRAL Arbitration Rules (1976)
Vol. Volume
WLR Wisconsin Law Review
YCA Yearbook of Commercial Arbitration
-
viii
TABLE OF AUTHORITIES
NATIONAL COURTS DECISION
ENGLAND
ASM Shipping Ltd of India v. TTMI Ltd of England [2006] English Court of Appeal
AT&T Corporation and another v Saudi Cable [2000] England Court of Appeal
Jivraj v Hashwani [2011] UKSC
Laker Airways Inc. v. FLS Aerospace LTD. [2000] 1WLR 113
Lawal v. Northern Spirit Ltd. [2003] UKHL
R (Cummins) v Camden LBC [2001] EWHC
R v. Bow St. Metro. Stipendiary Magistrate, [2000] 1 A.C. 119, 139 H.L
Rental Trading Ltd v Gill & Duffus SA [2000] Lloyd's Rep
The Owners of the Steamship Catalina & The Owners of the Motor Vessel Norma,
[1938] 61 Lloyds Rep. 360
FRANCE
Cour dappel [CA] [regional court of appeal] Paris, Dec. 18, 2003, RG n 2002/09750
T.A.I. v. S.I.A.P.E, CA Paris June 2 1989, 1991 REV. ARB. 87
Gemanco v. S.A.E.P.A., CA Paris June 2 1989, 1991 REV. ARB. 87
Consorts Ury v. Galeries Lafayyet case, [April 13, 1972], Cour de Cassation
Raffineries d'Homs et de Banias case, [1985] Tribunal de grande instance de Paris,
March 28
-
ix
GERMAN
German Bundesgerichtshof, 4 September 1999, ZIP 859 (1999)
RUSSIA
Erick van Egeraat Associated Architects B.V. v. Capital Croup LLC, Court of Appeal,
27 August 2009 No. KG-40/8155-09
OAO NK Rosneft v. Yukos Capital S.a.r.l, Supreme Arbitrazh Court; decision of 10
December 2007, No. 14955/07
SWITZERLAND
Switzerland, Federal Supreme Court, 1st Civil Chamber, Decision of 20 March 2008,
4A_506/2007
THE UNITED STATES OF AMERICA
Amoco D.T. Co. v. Occidental Petroleum Corp., 343 S.W.3d 837 (Tex. App. Ct. 2011)
Andersons, Inc. v. Horton Farms, Inc., 166 F.3d 308, 328 (6th Cir.1998)
Applied Industrial Materials Corp. v. Ovalar Makine Ticaret Ve Sanayi, A.S., No. 06-
3297-CV, 2007 WL 1964955 (2d Cir. July 9, 2007)
Commonwealth Coatings Corp. v Continental Casualty Co. Et al, 393 U.S. 145 (US
Supreme Court 1968)
Crowe Construction v. Jeffrey M. Brown, 264 F.Supp.2d 217 (E.D. Pa. 2003)
Dealer Computer Services Inc. v. Michael Motor Co. Inc., 761 F. Supp.2d 459 (S.D.
Tex. 2010)
-
x
Freeman v. Pittsburgh Glass Works, LLC, 2013 U.S. App. LEXIS 4561 (3d Cir. Mar.
6, 2013)
Gianelli Money Purchase Plan and Trust v ADM Inv. Services, Inc., 146 F3d 1309
(11th Cir. 1998)
Haworth v. Superior Court (Ossakow) (2008)164 California Court of Appeal 4th 930
Jean SCHMITZ; Leonard Schmitz v. Carlos J. ZILVETI, III; Nicholas S. Meris;
Prudential-Bache Securities Inc., aka Prudential Securities, Inc., 20 F.3d 1043 (9th
Cir.
1994)
Kaiser Foundation Hospitals, Inc. v. Superior Court (1993) 19 California Court of
Appeal 4th 513
Kiernan v. Piper Jaffray Cos, 137 F.3d 588, 593-94 (8th Cir. 1998)
Montez v. Prudential Securities, Inc., 260 F.3d 980 (8th Cir. 2001)
Morelite Const. Corp. v New York City Dist. Council Carpenters Ben. Funds, 748 F2d
79, 83 (2d Cir. 1984)
New regency Productions inc v. Nippon Herald Films Inc., 05-55224 (9th
Cir. 2007)
Peoples Sec. Life Ins. v. Monumental Life Ins., 991 F.2d 141, 146 (4th Cir. 1993)
Positive Software Solutions, Inc. v. New Century Mortg. Corp., 476 F.3d 278, 283, 286
(U.S. 5th Cir. 2007)
Rebmann v. Rohde, ___ (California Court of Appeal 2011)
Scandinavian Reinsurance Co. v. Saint Paul Fire and Marine Ins. Co., 668 F.3D 60
(2012)
Sunkist Soft Drinks Inc. v. Sunkist Growers, Inc., 10 F.3d 753 (11th Cir. 1993)
-
xi
Thomas Kinkade Co. v. White, __ F.3d __, 2013 WL 1296238 (6th Cir. April 2, 2013)
Trustmark Ins. Co. v. John Hancock Life Ins. Co., 631 F.3d 869 (7th Cir. 2011)
ARBITRAL INSTITUTIONS DECISION
INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT
DISPUTES
Tidewater Inc. v. The Bolivarian Republic of Venezuela (2010) ICSID Case No
ARB/10/5
Universal Compression International Holdings, S.L.U. v. The Bolivarian Republic of
Venezuela (2011) ICSID Case No ARB/10/9
LONDON COURT OF INTERNATIONAL ARBITRATION
LCIA Decision on the Challenge to Mr. Judd L. Kessler in Case No.UN 7949
LCIA Reference No.UN3490 October 21 and December 27, 2005
LCIA Reference No.1303 (November 22, 2001)
LCIA Reference No.5660 (August 5, 2005)
LCIA Reference No. 8086
LCIA Reference No.UN9155 (November 10, 1999)
PCA
Republic of Ghana v. Telekom Malaysia Berhad, District Court of the Hague (Civil
Law Section), Decision No. HAiRK 2004.778 5 November 2004
-
xii
NATIONAL LAWS
ENGLAND
Arbitration Act 1996
FRANCE
New Code of Civil Procedure 1981
GERMANY
German Arbitration Act 1998
Brgerliches Gesetzbuch (Civil Code)
PEOPLE REPUBLIC OF CHINA
Arbitration Law 1995
RUSSIA
Rules on Impartiality and Independence of the Arbitrators 2010
SWEDEN
Swedish Arbitration Act
THE UNITED STATES OF AMERICA
Federal Arbitration Act 1925
Revised Uniform Arbitration Act 2002
VIETNAM
Vietnam Law on Commercial Arbitration 2010
-
xiii
INSTITUTIONAL RULES
AMERICAN ARBITRATION ASSOCIATION
AAA/ABA Code of Ethics
AAA International Rules 2001
CHINA INTERNATIONAL AND ECONOMIC TRADE ARBITRATION
COMMISSION
CIETAC Rules
CIETAC Code of Ethics
HONG KONG INTERNATIONAL ARBITRATION CENTRE
HKIAC Rules
INTERNATIONAL BAR ASSOCIATION
IBA Guidelines on Conflicts of Interests in International Arbitration
IBA Code of Ethics
INTERNATIONAL CHAMBER OF COMMERCE
ICC Rules1998
ICC Rules 2012
INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT
DISPUTES
ICSID Rules
LONDON COURT OF INTERNATIONAL ARBITRATION
-
xiv
LCIA Rules 1998
NATIONAL ASSOCIATION OF SECURITIES DEALERS
NASD Code of Procedure for Arbitration
UNITED NATIONS COMMISSION ON INTERNATIONAL TRADE LAW
UNCITRAL Rules 1976
UNCITRAL Model Law 1986
UNCITRAL Model Law 1986 2006 amendment
WORLD INTELLECTUAL PROPERTY ORGANIZATION
WIPO Arbitration Rules 2002
VIETNAM INTERNATIONAL ARBITRATION CENTRE
VIAC Rules 2012
-
xv
CONVENTION AND TREATIES
European Conventions on Human Rights
The Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958
International Centre for Settlement of Investment Disputes Convetion
-
1
I. INTRODUCTION
This thesis is related to one of, if not the most, fundamental principle in arbitration that
every arbitrator must be and remain independent and impartial of the parties. No one
should serve as referee in a game after having decided which team should win1, nor
should anyone be the judge of his own case2. And while impartiality and independence
serve the utmost integrity of the arbitral award, the duty imposed on arbitrator to
disclose circumstances that may bring doubts as to his impartiality and independence
guarantees the integrity of the arbitral process. All parties in arbitration deserve the
fundamental rights of a fair hearing3, and the duty to disclose ensure the parties have
confidence and trust in a fair trial.
The duty of disclosure, especially the various approaches towards such duty, shall be
the main concern of this thesis. Whilst the arbitrators duty to disclose is entirely
undisputed, there are diverse approaches for disclosure i.e. what circumstance should
and should not be disclose what is the consequence of a failure to disclose; which has
constantly troubled the arbitration process. Unpredictability and Inconsistency arise as
a result, and the number of challenges of arbitrator due to his failure to disclosure may
justify the one famous outsiders complaint when there is a will, there is a lawsuit4.
The exponential growth of international law firms and multinational corporations, the
radical changes in how we communicate in the internet era, the increase in numbers of
legal organizations and legal events, etc. also address new issues regarding conflicts of
interests, and accordingly complicates the task of properly approaching the duty of
disclosure.
1 William W. Park, Rectitude in International Arbitration (2011) LCIA Arbitration International Vol.27 No.3
Special Edition on Arbitrator Challenges , p. 473. 2The more traditional formulation of this principle is the maxim Nemo judex in parte sua, represents a
fundamental principle of natural justice which provises that no person can judge a case in which he or she
participates as a party (i.e. having legal rights and obligations) - may also be called nemo judex in sua causa or nemo debet esse judex in propria causa. 3 See European Convention on Human Rights Art.6
4 Quote by Addison Mizner, best-known and most-discussed living American architect in 1920s.
-
2
Part II of this thesis will briefly introduce basic features of impartiality, independence
and the duty of disclosure of arbitrator. The concept, the obligation and grounds that
may give rise to doubts as to independence and impartiality will be discussed
beforehand. The duty to disclose i.e. time of disclosure, content of disclosure and the
duty to investigate information shall be mentioned subsequently.
Part III of this thesis will introduce the underlying problems from the disparity and
rigidity in standards for duty of disclosure. First, various approaches which fail to reach
a consensus between themselves, has consequently increases the inconsistency and
unpredictability (the disparity) of case law regarding duty of disclosure. Second, some
approaches, or at least some of their features, may arguably have failed to meet the
rapid growth of international business and the manner in which it is conducted (the
rigidity).
Finally, Part IV will discuss how we could proceed towards cohesive approaches for
duty to disclose of arbitrators. The writer shall adopt ideas and suggestions of
renowned scholars and practitioners within the field in order to present the best
solutions.
II. ARBITRATORS IMPARTIALITY, INDEPENDENCE AND DUTY
TO DISCLOSE: AN OVERVIEW
1. Impartiality, Independence and Neutrality
This part shall first define the two interrelated, sometimes overlapping, but not
interchangeable concepts of independence and impartiality (a), with the main purpose
to clarify the distinction of the two concepts. Furthermore, in order to provide a more
in-depth overview, these concepts shall be discussed in comparison with the concepst
of neutrality and sympathy (b).
-
3
a. The Concept of Independence and Impartiality
The notions of independence and impartiality must be subject to interpretation. It
is generally considered that dependence refers exclusively to questions arising out of
the relationship between an arbitrator and one of the parties5, co-arbitrators or
witnesses6. Dependence is also relating to the assessments of facts whether the
arbitrator have any interests in the outcome of the disputes7. Independence, therefore,
is an objective qualification that does not concern the arbitrators state of mind. By
contrast, Impartiality is considered to be a subjective qualification it refers to the
state of mind of the arbitrator as unbiased, disinterested towards one party in an
arbitration8. Impartiality is widely recognized as more abstract than
Independence9.
Despite the fact that several trends pertaining to the interchangeability of the
independence impartiality concept exist, it should be noted that the two
qualifications, often inter-related and overlapping, are different. The minor view which
suggests the non-differentiation of the two terms is illustrated by Lord Steyn as he
stated: the two crucial words are legally synonymous. In truth there is only one
meaning, deriving its principal force from the word impartiality.10 The major view
considers that the two concepts of independence and impartiality are not
interchangeable,11
though they have virtually been used as one package in practice.12
5 Alan Redfern/Martin Hunter/Nigel Blackaby/Constantine Partasides, Redfern and Hunter on On International
Arbitration (5th
edn Oxford 2009), 4.75; Redfern/ Hunter 2004, 4-55; See also LCIA Decision on the Challenge
to Mr. Judd L. Kessler in LCIA Case No.UN 7949, 77 6 Ibid. at Redfern/Hunter, 4.75.
7 Margaret L. Moses, The Principles and Practice of International Commercial Arbitration (Cambridge
University Press 2008), p. 130; Philippe Fouchard/ Samuel Gaillard/ Berthold Goldman, Fouchard Gaillard
Goldman on International Commercial Arbitration (Kluwer Law 1999), 1028 8 Blacklaw Dictionary Definition, See also LCIA Special Issue, p.287 (n 1)
9 Redfern/Hunter (n 5), 4.75.
10 Lord Steyn, England: The Independence and/or Impartiality of Arbitrators in International Commercial
Arbitration [2007] ICC International Court of Arbitration Bulletin Vol. 18, special supplement, 2007 11
Sam Luttrell, Bias Challenge in International Commercial Arbitration: The need for a real danger test (Kluwer Law International 2009), p.19. 12
Redfern/ Hunter 2004 (n 5), 4-54.
-
4
The two qualifications are parallel tools for assessing the potential for actual or
apparent bias. They are rarely used on their own, individually, but are usually joined
together as a term of art.13 Prof. M. Rubino-Sammartano added the two notions are
different even if on some occasions some overlapping may occur between them.14
The conceptual difference between Independence and Impartiality can be found in
practice. It has been evident for more than once that independent arbitrator may still
possibly favor one party. For example, one independent arbitrator was disqualified for
commenting Italians are all liars in these cases and will say anything to suit their
book. But in my experience the Norwegians generally are a truthful people in a
different case.15
Another instance would be one independent arbitrator calling
respondents counsel a thief, alleging him for breaking in and stealing grapes from
arbitrators break out room.16 The list of instance may go much longer. 17 On the other
hand, one arbitrator may still stay impartial despite being dependent. Lack of
independence is only regarded one pointer to lack of impartiality,18
especially at the
outset of one proceeding when it is difficult to have any idea of whether the
prospective arbitrator is impartial or not.
b. Impartiality distinguished from Neutrality, Partiality distinguished
from Sympathy and Neutral Nationality
The concept of independence and impartiality would not be addressed properly
without mentioning the term neutrality. This part shall briefly introduce the very
13
Ibid. 14
Mauro Rubino-Sammartano, International Arbitration Law and Practice (Kluwer Law International 2001), p.
330. 15
In re The Owners of the Steamship Catalina & The Owners of the Motor Vessel Norma, [1938] 61 Lloyds Rep. 360 (Eng.). 16
LCIA Reference No.UN3490 October 21 and December 27, 2005. 17
See for e.g., LCIA Reference No.1303 (November 22, 2001), where one arbitrator being challenged for lack of
independence, and the Court found he was independent. However, after that he started to have animosity towards
one party, which made him partial. 18
Ronnie King/ Ben Giaretta, Independence, Impartiality and Challenging the Appointment of an Arbitrator (2005) ICLG to International Arbitration Chapter 5; Art 7(1) ICC Rules 1998 it is independence that has to serve as a basic criterion for assessment.
-
5
basic concept of sympathy and neutrality. The different standards for party-appointed
arbitrator and presiding arbitrator shall be further discussed in I.1(d) of this thesis.
After that, this part shall discuss the difference between one arbitrators sympathy and
partiality towards one party. To conclude this part, the nationality of one arbitrator,
whether de jure or de facto, shall be mentioned since it is one prevalent issue under the
notion of neutrality in practice19.
(i) Impartiality and Neutrality
There are uncertainties over the terminology of neutrality.20
Professor Giorgio Bernini
suggests neutrality refers to the likelihood for arbitrator to be, and remain, wholly
equidistant in thought and action throughout the proceeding.21 Neutrality can also
be interpreted more broadly as one characteristic of whole arbitration process,
connected with not only the arbitrators but also the seat of arbitration.22
Meanwhile,
Professors Alan Redfern and Martin Hunter, joined by other scholars, limit the scope
for neutrality as merely predisposition towards one party who shares the same
cultural or legal background.23
The LCIA Courts seems to concur with this concept in
stating that the concept of neutrality involves an arbitrator taking a certain distance in
relation to his legal, political and religious culture.24 For the purpose of this thesis, the
approach of Professors Redfern and Hunter shall be used.
Despite attracting significant attention from all over the world,25
it should be noted that
the term neutrality under this approach is used mainly in the USA26, and this is a US-
19
Fouchard (n 7), 1037. 20
Amina Rustanova, Neutrality of Arbitrators (Central European University 2009), p.4. 21
GiorgioBernini, Report on the Conduct of Arbitral Proceedings: Standards of Behavior of Arbitrators in The Arbitral Process and Independence of Arbitrators (ICC Publishing 2001), p.31-32. 22
Julian M. Lew , Loukas A. Mistelis , et al., Comparative International Commercial Arbitration, (Kluwer Law
International 2003), 1-23. 23
Redfern/hunter 2004 (n 5) 4-56, See also Scott Dohaney, The Independence and Impartiality of Arbitrators (1992) Journal of International Arbitration, Vol.9 No.4. 24
LCIA Reference No.5660 (August 5, 2005) 4.5; See also Fouchard (n 7), 1036. 25
Redfern Hunter 2004 (n 5), 4-57. 26
Ibid.
-
6
only circumstance relating to the existence of partisan arbitrators in the US domestic
arbitration. It has no application otherwise. Partiality, in any country, is unacceptable
for obvious reason27
.
The American Bar Association/ College of Commercial Arbitrators introduce in The
Code of Ethics for Arbitrators in Commercial Disputes as follow:
it is preferable for all arbitrators including any party-appointed arbitrators
to be neutral, that is, independent and impartial, and to comply with the same
ethical standards. This expectation generally is essential in arbitrations where
the parties, the nature of the dispute, or the enforcement of any resulting award
may have international aspects. However, parties in certain domestic arbitrations
in the United States may prefer that party-appointed arbitrators be non-neutral
and governed by special ethical considerations.28 (emphasis added)
In the rest of the world, the party-appointed arbitrator must be neutral. Despite being
appointed contractually, the party-appointed arbitrator must not be the representative or
personal services of one party29
since the appointment, even when is made by one party
alone, is not a unilateral act30.
(ii) Partiality and Sympathy
The arbitrator, as introduced above, is not allowed to be non-neutral or to be under
circumstances that give rise to justifiable doubts about his impartiality and
independence. However, parties in arbitration are allowed, and even encouraged, to
choose the arbitrator who will best understand their cases. In such cases, partiality
27
Lew/Mistelis (n 22), 11-11 28
AA/ABA Code of Ethics, Note on Neutrality. 29
See Raffineries d'Homs et de Banias case, Tribunal de grande instance Paris, Mar.28 [1985]; Jivraj v
Hashwani [2011] UKSC 40. 30
Consorts Ury v. Galeries Lafayyet case, Judgement of April 13, 1972, Cour de Cassation
-
7
should be clearly distinguished with the term sympathy31 or the so-called lack of
neutrality.
First of all, the two terms are different in definition. The sympathy towards one
partys case only means that from the legal, social and cultural background, the
arbitrator may be favorably disposed towards the appointing party. In contrast,
partiality is constituted by bias in favor of, or prejudice against, a party or its case and
encompasses a willingness to decide a case in favor of the appointing party regardless
of the merits or without critical examination of the merits32
. Extensively, the concept of
Predisposition, one part of the concept sympathy, should not be mistaken with the
concept of Prejudgment or Predetermination which constitutes partiality.33
Second and most important, partiality and sympathy do have the same legal effect.
Partiality is one of the fundamental grounds that lead to the disqualification of one
arbitrator. Meanwhile, sympathy is arguably acceptable and may even be necessary
to fulfil the special functions of a party appointed arbitrator in a transnational
arbitration34
. As long as the arbitrator does not let this override their professional
judgment, the qualification of such arbitrator is safeguarded35
.
The fact that sympathy is acceptable and even encouraged is reasonable. In arbitration,
domestic or international, as in other aspects of business life, parties often feel most
comfortable when they are on familiar ground36
. The freedom to choose an arbitrator
31
Doak Bishop & Lucy Reed, Practical Guidelines for Interviewing, Selecting and Challenging Party-Appointed Arbitrators in Interational Commercial Arbitration [1998] 10 Arbitration International Vol. 395, p.399. 32
Ibid. 33
James Maurici, Modern Approach to Bias [2007] Judicial Review Vol. 12 (4) 251260; See also R (Cummins) v Camden LBC [2001] EWHC at 256. 34
Lew/Mistelis (n 22). 35
Redfern/Hunter (n 5), 4-58. 36
Justin DAgostino/Martin Wallace, Impartial-Yes, Neutral-Maybe Not [2010] http://kluwerarbitrationblog.com/blog/2010/09/14/impartial-yes-neutral-maybe-not/
accessed 16 May 2013
-
8
who shares with that party the same background, tradition and culture, should therefore
be respected. Professor Martin Hunter shared his words of wisdom:
[w]hen I am representing a client in arbitration, what I am really looking for in a
party nominated arbitrator is someone with the maximum predisposition
towards my client, but with the minimum appearance of bias.37
The willingness to accept certain level of sympathy is evident in practice, notably
in Sunkist case38
. Sunkist simply acknowledges what is already accepted in
practice39: there is a difference between positive bias and general sympathy for the
party who appointed you40
, such distinction between so called lack of neutrality and
neutral arbitrators is eminently sensible and reflects the prevailing thinking that a
balance should be sought between the ideal of independence and the realities of the
world of arbitration.41
(iii) Neutral Nationality and Impartiality
This part shall focus on two questions: Is the arbitrator allowed to share the same
nationality with one party in international arbitration? and Does de facto nationality of
arbitrator count in considering such matter?
Regarding the first questions, the answer depends on the applicable For Model Law,
the answer is yes. The Model Law provides:
37
Martin Hunter, Ethics of international arbitration [1987] Arbitration Vol. 53 291-233, p. 219; See also Prof. Hans Smit lectures at Columbia University cited in Luttrell (n 11), p.139:
Professor Hans Smit teaches his students that the only consideration for a lawyer appointing a party-arbitrator is how sympathetic he or she is to the lawyer's client's case 38
Sunkist Soft Drinks Inc. v. Sunkist Growers, Inc., 10 F.3d 753 (11th Cir. 1993) 39
Luttrell (n 11), p.139 40
Sunskit [n 38] 41
El-Kosheri, M. & Youssef, K. The Independence of International Arbitrators: An Arbitrator's Perspective in ICC Bulletin 2007 (Special Supplement), p.49.
-
9
No person shall be precluded by reason of his nationality from acting as an
arbitrator, unless otherwise agreed by the parties.42
However, the world is not that perfect for one party to fully trust one arbitrator who
shares the same nationality with opposing party. The UNCITRAL Rules is more
realistic in suggesting considerations of neutral nationality in composition of the
arbitral tribunal:
In making the appointment, the appointing authority shall have regard to such
considerations as are likely to secure the appointment of an independent and
impartial arbitrator and shall take into account as well the advisability of
appointing an arbitrator of a nationality other than the nationalities of the
parties.43
In contrast, The ICC Rules go further than a consideration and impose strict standard of
neutral nationality.
The sole arbitrator or the chairman of an arbitral tribunal shall be of a
nationality other than those of the parties.44
The LCIA Rules take a similar line in providing:
Where the parties are of different nationalities, a sole arbitrator or chairman of
the Arbitral Tribunal shall not have the same nationality as any party unless the
parties who are not of the same nationality as the proposed nominee all agree in
writing otherwise.45
42
UNCITRAL Model Law 2006, Art.11(1). 43
UNCITRAL Rules 2010, Art.6(7). 44
A proviso allows an exception to this rule in suitable circumstances and provided that neither of the parties objects 45
LCIA Arbitration Rules 1998, 6(1).
-
10
The reason behind the strict requirement for nationality of the sole or presiding
arbitrator regardless of Model Laws provision is to make sure there is no appearance
of potential bias46
. At the outset, it is essential that parties have confidence and trust in
the proceeding.
Regarding the questions of de facto non-neutral nationality, such qualification is indeed
imposed on arbitrator under strict standards.In an arbitration under the LCIA Rules, the
respondent challenged the LCIA-appointed sole arbitrator on the ground that, although
he was not a British national, he was a de facto British national and that this was
contrary to Article 6(1) of the LCIA Rules. The LCIA division in deciding the
challenge first held that a challenge based on nationality should be substantive and not
merely formal.47 It further acknowledged that there may be circumstances where a
personal connection to a country may be so concentrated that the arbitrator's technical
nationality does not ensure neutrality. Such acknowledgement by LCIA Division
firmly supports the theory of de facto neutral nationality. However, on the facts of the
case, the division found that the respondent's contention about the arbitrator's de
facto British nationality was groundless and the challenge was therefore dismissed48
.
c. Obligations of impartiality and independence in arbitration rules and
national laws
Arbitrators have the obligation to remain impartial and independent. There can hardly
be any obligation that more central or fundamental than this.49
This mandatory
obligation is imposed by numerous arbitration municipal laws and institution rules,
though maybe explicitly or implicitly and by different wording. The controversial part
46
LCIA Reference No. 8086, 2.2 47
LCIA Reference No.8086, 3.8 48
See also, LCIA Reference No. UN9155 (November 10, 1999) implies paries nationalities are not affected by nationalities of their counsel 49
See Hew R. Dundas comments on Scotland Arbitration Act r.24: This is a mandatory rule so it is not open to the parties to agree anything else or to disapply it completely. It is
difficult to conceive of a rule which is any more fundamental to and central to the arbitral process. Arbitration
(Scotland) Act 2010 (r.24)
-
11
is how these rules and laws approach to independence i.e. whether lack of
independence to a certain extent can be acceptable.
(i) Obligation of impartiality and independence in different wording
To begin with, the slightly different provisions in different rules and laws regarding the
obligation of independence and impartiality should be reviewed with due care.50
The England Arbitration Act 1996 does not refers to the term independence as the 1996
Act only requires an arbitrator to act fairly and impartially as between the parties.51
However, it should not be interpreted as an omission of independence requirement
since England has adopted the European Convention on Human Rights. The ECHR
entitles everyone to a fair and public hearing by an independent and impartial tribunal
established by law52 and that is also the position of Englands Court53.
Meanwhile, the Vietnam Law on Commercial Arbitration used only the term
independent,54 whilst its arbitral institution the Vietnam International Arbitration
Centre uses the term objective in parallel with impartial.55
The use of term independence or/and impartiality are used most widely. Both the
UNCITRAL Rules and the AAA International Rules allow a challenge of arbitrator on
basis of justifiable doubts as to the arbitrators impartiality or independence.56 The
LCIA Rules require an arbitrator to remain at all times impartial and independent of
the parties.57 The ICC Rules in 1998 do not specifically require an arbitrator to be
impartial but instead to be and remain independent of the parties involved in the
50
Redfern/Hunter (n 5), 4-54. 51
Arbitration Act 1996 (of England), 33(1)(a). 52
ECHR, Art. 6(1). 53
See for e.g., Lawal v. Northern Spirit Ltd. [2003] UKHL. 54
Vietnam Law on Commercial Arbitration 54/2010/QH12, Art. 21. 55
Vietnam International Arbitration Centre Rules 2012, Art. 14(1). 56
UNCITRAL Rules 1976, Art.10(1) and AAA International Rules 2001, Art. 8(1). 57
LCIA Rules (1998), Article 5(2).
-
12
arbitration.58 Such provision has been modified in ICC Rules 2012 into must be and
remain independent and impartial of the parties involved in the arbitration.59 One
ground for challenge under the ICC Rules 2012 is whether for alleged lack of
impartiality or independence, or otherwise.60
Though it is important to pay attention the wording of the obligation, in any case it
goes with saying that arbitrator is obliged to stay impartial. The principle is so self-
evident that one can still consider arbitrator having synonymous meaning with
impartiality as in ancient Greek and Rome.61
(ii) Lack of independence to a waivable extent
The different provisions, though expressed in different wording, all lead to same
conclusion that one arbitrator must always remain impartial. The controversial part is
how these rules and laws approach towards requirement of independence - whether it
is an absolute, non-waivable term or whether any de minimis considerations apply62
.
The common assumption is that one arbitrator must be both impartial and
independence. Such assumption has gradually become less correct as now
independence lending itself to waiver up to the point where litigant actually becomes
judge of its own cause.63 This may arguably happen for good reason.64 Admittedly,
lack of independence may give rise to lack of impartiality65
, however it is not always
the case and parties are allowed to let go trivial conflicts of interests if they deem fit.
58
ICC Rules 1998, Art.7(1). 59
ICC Rules 2012, Art.11(1). 60
ICC Rules 2012, Art.15(1). 61
Gary Born, International Commercial Arbitration (Kluwer Law International 2009), p. 1466 62
See Dundas, Commentary on Scotland Arbitration Act 2010 [n 49]. 63
Park (n 1), p. 480 . 64
Park (n 1), p. 481. 65
King/Giaretta (n 30), p.27.
-
13
Independence works for the sake of the parties as a rights, and thus should be
waivable.66
2. Arbitrators Duty to Disclose Circumstances that may Give Rise to
Justifiable Doubts
If an arbitrator has a serious conflict of interest with one party, he or she should not
accept an appointment. If the arbitrator deems the possible conflict not serious, he must
disclose it to the parties and appointing authority. An arbitrator has to disclose any
circumstances that may lead the parties to question his independence and impartiality.
Such duty is imposed by every arbitration rules as well as national laws and is regarded
as the cornerstone of arbitrators duty of independence.67
Besides being of significant importance in assessing the question of an arbitrators
independence, disclose duty also help to increase the efficiency of arbitration process
by flushing out any potential problems with an arbitrator at the outset of proceedings68
.
On the one hand, disclosure rule provides an opportunity for the parties to consider and
waive at the outset conflicts of interest that might otherwise provide the basis for a
losing party to challenge the award. If the arbitrator discloses a potential conflict and
no objection was filed, none of the party can challenge the award based on disclosed
circumstances69
. On the other hand, one nondisclosure being discovered after the
render of the award, the losing party always finds such circumstances more doubtful70
and it is highly unlikely that they would accept their defeat and would not claim for a
vacatur. Even if some of these attempts may be frivolous and the motions are denied,
66
Judge Dominique Haschner, Independence and Impartiality of Arbitrators: 3 Issues [2011] The American University Law Review Vol.27 No.4, p.793. 67
El-Koshari/Youssef (n 41), p. 51; Haschner (n 66), p.793; Fouchard (n 7), 1058. 68
King/ Giaretta (n 30), p.26-27. 69
See, e.g., Kiernan v. Piper Jaffray Cos, 137 F.3d 588, 593-94 (U.S. 8th Cir. 1998). 70
Philip J. Loree Jr., Arbitration Nuts & Bolts: Vacating Arbitration Awards Part III.A: Evident Partiality (Expectations of the Parties) [8th December 2009], online academic paper http://loreelawfirm.com/blog/arbitration-nuts-bolts-vacating-arbitration-awards-its-all-in-the-agreement/
accessed 16th
May 2013
-
14
time and money will surely be wasted71
on a process which can be described as a
losing game for both sides.
In this part, this writer shall discuss (a) the time of disclosure, (b) the content of
disclosure, (c) the duty to investigate circumstances to disclose and (d) the relation of
disclosure and bias. The duty to disclose of arbitrator presented in this thesis should not
be mistaken with, and diluted by, the same duty to disclose imposed on the party.
a. Time of the Disclosure
Since the duty of impartiality remains throughout the whole process, the requirement of
disclosure is a continuing one. If new circumstances arise, the arbitrator is obliged to
divulge at any time of the arbitration.
It should be noted that, however, the timing of disclosure may affect the standards for
disclosing.72
In a recent American case Thomas Kinkade v. White decided by Six
Circuit Court of Appeal this April,73
disclosure at later stage of arbitration is well
described as a lose-lose situation by the appellants counsel. The primary issue was
that five years into the arbitration proceedings, after closing of hearing but before the
award, the presiding arbitrator Mr. Kowalskys law firm took on two significant new
matters from the Whites, the respondent, and their appointed arbitrator. Kowalsky
informed the parties of these new financial ties between his firm and the Whites.
Kinkade, the opposing party, request to disqualify Kowalsky but was denied by the
AAA. Courts, as well as many commentators74
, never understand the peculiar logic
71
David Foster/David Edwards, Challenges to Arbitrators [2008] The European & Middle Eastern Arbitration Review 2008 Section 3, p.2. 72
IBA Guidelines General Standard 3[d]; Redfern/Hunter (n 5), 4.81 73
Thomas Kinkade Co. v. White, __ F.3d __, 2013 WL 1296238 (U.S. 6th Cir. April 2, 2013). 74
See for e.g.,Liz Kramer, Six Circuit paints a vivid picture of Evident Partiality [2013] Leonard Street and Deinard Arbitration Nation Blog on Appealing Arbitration Decisions
http://arbitrationnation.com/sixth-circuit-paints-vivid-picture-of-evident-partiality-sufficient-to-vacate-
arbitration-award/
accessed 16th
May 2013
-
15
behind AAAs denial as they decided otherwise. Return to the issue of disclosure in
closing stage in this case, the brilliant75
brief of Kinkade's counsel, Dana Levitt, in his
May 9, 2007 objection to the AAA, astutely sum up the situation:
...Once the disclosure was made the harm was done regardless of the outcome.
The disclosure put our clients in the awkward position of either objecting to or
appearing to approve the representation by the neutral arbitrator's firm of a party
adverse to our client in another arbitration. If we object, we run the risk of
offending the neutral; if we don't object, we appear to condone a clear conflict.
We should never have been put in this position.
Conclusively, it is of best interests to both the arbitrators and the parties that it should
be fulfilled at the earliest convenience.76
b. Content of the Disclosure
The real problem is not the existence of a duty of disclosure but determining which
facts prospective arbitrators should disclose.77
Many experts or drafters of code of
ethics have consistently expressed their concerns of errors in disclosing i.e. disclose too
little or too much. As a famous quote by former U.S. president Abraham Lincoln, half
the truth is often a whole lie, arbitrators non-disclosure or failure to disclose fully,
whether intentional or not, always raises doubts in the eyes of the parties over the
impartiality of the arbitrator and subsequently the integrity of the process. Meanwhile,
overly excessive disclosure may fuel opportunistic challenge as part of delaying
tactic.78
Parties occasionally use delaying tactic when facing possible adverse award
and challenging the divulged circumstances, regardless of its proximity, would likely
75
Kinkade (n 73), Circuit Judge Kethledges Opinion, 27. 76
King/ Giaretta (n 30), p.28. 77
Fouchard (n 7), 1060 78
Nathalie Allen/Daisy Mallett, Arbitrator Disclosure: No Room for Colour Blind [2011] Asian International
Arbitration Journal, Vol. 7 No. 2, Pages 118-147; Moses (n 7), p.131
-
16
be part of that tactic.79
Another frustrating result of excessive disclosure would be the
excluding of a knowledgeable arbitrator, at times just because he does not want to put
up with such challenge.80
Such conundrum has sparked off many debates over years
regarding what should one arbitrator disclose with the only general accepted point in
such situation maybe that when there is a possibility to make error in disclosing,
arbitrator should always err in favor of excessive disclose.81
In order to thoroughly address all the underlying issues, this part shall firstly introduce
the objective test and subjective test of duty to disclose whether the arbitrator should
put himself in the position of a reasonable third party or in the eyes of the parties in
dispute to divulge the circumstances. Secondly, what circumstances that may give rise
to justifiable doubts as to arbitrators impartiality and independence shall be clarified.
(i) Objective Test and Subjective Test
The majority of institutional rules provide that an arbitrator must disclose any
circumstances likely to (or may) give rise to justifiable doubts as to his
independence82
. Such provisions are considered as the objective test as it is required
that the arbitrator only have to put himself in the position of a reasonable third party to
disclose. In contrast, the ICC and ICSID Rules required the prospective arbitrator to
walk in the shoes of the parties to decide what should be disclosed. This requirement
under ICC and ICSID Rules and like-minded institution are called the subjective test.
Article 7(2) ICC Rules provides that, prior to appointment, a prospective arbitrator
must sign a statement of independence and disclose in writing any circumstances
which might be of such a nature as to call into question the arbitrators independence
79
Alain Frecon, Delaying Tactics in Arbitration [2005] Dispute Resolution Journal November 2004 January 2005 , p. 6. 80
J.J. Marshall/ M.E. Comeau/A.R. Sparkes, Six Degrees of Separation: Arbitrator Independence in International Arbitration [2008] Transnational Dispute Settlement Vol. 5, issue 4, p.2 81
Positive Software Solutions, Inc. v. New Century Mortg. Corp., 476 F.3d 278, 283, 286 (U.S. 5th Cir. 2007) 82
See AAA International Rules 2001, Article 7(1); LCIA Rules 1998, Article 5(3); UNCITRAL Rules 1976,
Article 9; WIPO Arbitration Rules 2002, Article 22(b).
-
17
in the eyes of the parties. Meanwhile, the ICSID rules use the term mightbe
questioned by the parties.83
The leading applier of objective test is UNCITRAL Model Law.84 The standard for
disclosure under Model Law is circumstances likely to give rise to justifiable doubts
as to his impartiality and independence85. Under the Model Law, the only difference
between the standard of disclosure and the standard for a successful challenge is that
with regard to disclosure, the facts and circumstances are only likely to give rise to
justifiable doubts, whereas for a successful challenge, the circumstances do actually
give rise to such doubts.86
Such test is applied in countries which adopted Model Law
by statute, namely Australia, Canada, Mexico, the Netherlands, New Zealand and
Singapore. Tunisia and Germany has adopted a virtually identical rule with exclusion
of the word justifiable87.
Many institution rules also adopted the objective test under the UNCITRAL Model
Law.The LCIA provides in Article 5(3) that before appointment by the LCIA Court,
each arbitrator shall furnish to the LCIA Registrar a written resume of his past and
present professional positions, and that he shall sign a declaration to the effect that
there are no circumstances known to him likely to give rise to any justified doubts as to
his impartiality and independence, other than any circumstances disclosed by him in
the declaration. The SCC adopts the objective test with slight but notable difference88.
Article 14(2) of the SCC Rules provides that an arbitrator shall disclose any
circumstance which may give rise to justifiable doubts as to his/her impartiality or
83
ICSID Rules 2006, Rules 6(2). 84
Redfern/Hunter (n 5), 4.83 85
UNCITRAL Model Law 2006, Art.12(1). 86
Otto L O de Witt Wijnen/Nathalie Voser/Neomi Rao (IBA Working Group), Background Information on the IBA Guidelines on Conflicts of Interest in International Arbitration [2004] Business Law International Vol. 5 No. 3, 3.1 87
German Arbitration Law 1998, 1036(1); See also Fouchard (n 7), 1057. 88
Karel Daele (ed), Challenge and Disqualification of Arbitrators in International Arbitration, International Arbitration Law Library, Volume 24 (Kluwer Law International 2012) pp. xix - xxi, 1076
-
18
independence. Under the SCC Rules, circumstances that may give rise to such
doubts are to be disclosed, whereas the UNCITRAL Rules and the LCIA Rules only
require the disclosure of circumstances that are likely to give rise to such doubts. The
word may refers to a mere possibility, whereas the word likely refers to a higher
threshold of probability89
. Less clearly, the SIAC Code of Ethics only requires
disclosure of close relationship90 without shedding any light on how to decide the
closeness.
Meanwhile, The Working Group for IBA Guidelines on Conflicts of interests sides
with ICC and ICSID Rules regarding the application of subjective test. The Working
Group states its reasons:
because of varying considerations with respect to disclosure the proper
standard for disclosure may be differentthe Working Group recognizes that
the parties have an interest in being fully informed about any circumstances that
may be relevant in their view.
In America, courts even take it further than the subjective test: arbitrators must disclose
all conceivable relationship, regardless of its nature and magnitude. U.S. Courts
granted parties, not arbitrators, the rights to decide what should be disclosed. The U.S.
Court of Appeal the Fifth Circuit explained:
It cannot therefore be left to the fox, who is the potential arbitrator, to guard
the arbitration henhouse, secretly identifying to himself alone all prior or
present relationships, then just as secretly deciding which are worthy of
disclosure and which are not. On the contrary, avoidance of partiality in the
selection of the arbitrator can be achieved only if, in discharging his duty of
disclosure, the potential arbitrator objectively disgorges absolutely every
89
Deale (n 88), 1076. 90
SIAC Code of Ethics for an Arbitrator 2009, 2.2.
-
19
conceivable fact of prior or present relationships with parties or counsel,
regardless of how tenuous or remote they might seem to him. He must leave to
the parties the value judgment as to which (if any) among those fully disclosed
facts constitutes a basis for rejecting the potential arbitrator for bias or the
appearance of bias.91
Finally, there are also tests which are hard to be listed merely as objective or
subjective including the tests applied in France, England and, to some extent,
Sweden.92
The IBA Working Group sum up situations in France and England as
followed:
France requires the disclosure of any facts encompassed by the statutory
grounds for challenge, provided that the facts involved are not common
knowledge and that they raise reasonable doubts as to the arbitrators
independence. The duty to disclose is restricted by the statutory list of grounds
for challenge.
Under English case law, an arbitrator should disclose any facts that could
arguably give rise to a real danger of bias. This exceeds a purely objective
disclosure requirement and comes close to a subjective test with regard to the
arbitrator.93
(ii) Categorizations and Enumerations of Circumstances that give rise to
justifiable doubts
The arbitrators, before concluding any Statement of Independence, should meticulously
log in his facebook and linkedin, check out his CV, his education process, his love
91
Positive Software (n 81) 92
See Swedish Arbitration Act, Art.9, stating
A person who is asked to accept an appointment as arbitrator shall immediately disclose all circumstances which,
pursuant to sections 7 (legal capacity) or 8(circumstance which may diminish confidence in the arbitrator's
impartiality), might be considered to prevent him from serving as arbitrator. 93
IBA Background (n 86), 3.1
-
20
affair history, his published opinion and also his firms list of customers to find out
these kinds of circumstances that may give rise to justifiable doubts as to his
impartiality and independence. Such term, despite being used widely by both
subjective and objective test, is hard to define precisely. This part shall introduce some
circumstances classified and enumerated into types by recognized author, guidelines
and code of ethics. It should be noted, though, that it is not always as straightforward in
practice as in such categorization or enumeration - one relationship is complicated and
should be approach cumulatively.94
To begin with, Prof. William Park divides the circumstances into two categories of
concern namely problematic relationship and pre-judgment. The problematic
relationship often includes ties form financial dealings (such as business transaction
and investments), ties of a sentimental quality (such as friendship and family) and links
of group identification (shared nationality and professional or social affiliations).95
Prof. Parks categorization shares certain similarities with The IBA Guidelines Code of
Ethics 1987.96
According to this source, the following may be considered as giving rise
to justifiable doubts as to an arbitrator's impartiality or independence:
(1) a material interest in the outcome of the dispute;
(2) a position already taken in relation to the dispute;
(3) current direct or indirect (i.e., via a member of family, firm or partner) business
relationships with a party or a potentially important witness;
(4) past business relationships of such a magnitude or nature as to be likely to affect an
arbitrator's judgment; and
94
LCIA Special Volume, p. 288 95
Park, p. 478 [n 1] 96
IBA Code of Ethics for International Arbitrators 1987, 3.1.
-
21
(5) continuous and substantial social or professional relationships with a party or a
potentially important witness.
More thoroughly, Dr. Sam Luttrell, in his inspiring book Bias challenge in
International Arbitration: The need for a real danger test, sum up the circumstances
give rise to lack of impartiality as when arbitrator has a preference in the outcome or a
preference towards one party. According to his study, outcome preference is equivalent
to pre-judgment, and party preference is arbitrators inclination to decide in favour of
one party than the other.97
Dr. Luttrell further classified the relationship that incents
party preference into two types:
(1) the characteristics of the party (relative to the characteristics of the decision maker
(identity characteristics), which include the following: Nationality or domicile, Race
and Political persuasion/association
(2) the familiarity of the relevant party with the decision maker (party familiarity),
which includes Professional familiarity, Commercial familiarity, Social familiarity and
Representative familiarity
However, it should be noted that Dr. Luttrell approaches these circumstances as
grounds for bias challenge and based on courts decision in practice. In contrast, this
thesis approaches the circumstances as ones that should be disclosed at the
commencement of the proceeding the stage where more sensitivity are needed to
safeguard future integrity of the process. Therefore, Codes of Ethics for Arbitrator and
the IBA Guidelines on Conflict of Interests thus seem more suitable.
The ABA Code of Ethics categorized the circumstances on the basis of interests,
relationship and knowledge. Under the ABA Code, there are two kinds of interests:
direct and indirect, and there are four kinds of relationships: financial, business,
97
Luttrell (n 11), p.18.
-
22
professional or personal relationships.98
Prior and extended knowledge of the dispute
must also be divulged. Since the three provisions is connected with the word and,
this writer believe the relationship must be considered collectively with the interests
attached to it. ABA further proves that point in its example:
prospective arbitrators should disclose any such relationships which they
personally have with any party or its lawyer, with any co-arbitrator, or with any
individual whom they have been told will be a witness. They should also
disclose any such relationships involving their families or household members
or their current employers, partners, or professional or business associates
Rather than categorizing the circumstances based solely on their nature, The IBA
Guidelines on Conflicts of Interests also takes into account the proximity and intensity
of the circumstances. It provides a non-exhaustive enumeration of situations which,
depending on the facts of each case, may give rise to justifiable doubts as to the
impartiality and independence of the arbitrators. The Working Group divides these
situations into three lists: Red, Orange and Green List. The Red List is composed of
Non-waivable Red List, which includes situations deriving from the overriding
principle that no person can be his or her own judge, and the waivable Red List, which
encompasses situations that are serious but not as severe. Arbitrator under situations
listed in Non-Waivable Red List must not arbitrate in any case, whilst parties mutual
and expressed consent may help arbitrators who fall in Waivable Red Lists
circumstances. The Orange List is a non-exhaustive enumeration of specific situations
which in the eyes of the parties may give rise to justifiable doubts as to the arbitrators
impartiality and independence. Arbitrators in Orange situations shall be disqualified
only when a timely and expressed objection is made. Both the Orange and Red lists
address situation justifiable doubts may exist, which is if there is an identity between a
98
ABA/AAA Code of Ethics, Canon II.A.
-
23
party and the arbitrator, if the arbitrator is a legal representative of legal entity that is a
party in the arbitration, or if the arbitrator has a significant financial or personal interest
in the matter at stake.99 By contrast, in the Green List, no conflict of interests exists.100
The IBA Working Groups brilliance is undeniable as they continuously receive
international recognition and even won prestigious award101
for their outstanding
contribution in a minefield full of rigidity and disparity.102
One special list of circumstances that worth mentioned is from The China Arbitration
Law as well as many Codes of Conducts from Chinese arbitration institutes. Besides
familiar circumstances, they add one specific situation of when arbitrator has received
gift from one party or its agent, or accepted invitation to entertainment by one party or
its agent.103
In China, after the disclosure of circumstances named in the list, the
arbitrator is required by law to submit his/her withdrawal instantly.
As demonstrated above, there are many categorizations as well as enumerations for the
term circumstancesdoubts as to impartiality and independence. In conclusion, it
should be mentioned that in any event, the circumstances that give rise to justifiable
doubts must be approached cumulatively104 and with proper flexibility105 - as cautious
as the wording of IBA Guidelines suggests: any consideration is depending on the
facts of a given case106.
99
IBA Guidelines, General Standard 2. 100
IBA Guidelines Part II, 1- 9 101
At the 22nd Annual Awards Program of the CPR Institute for Dispute Resolution, the International Bar
Association (IBA) was presented with the distinguished arbitration bodys 2004 Outstanding Practical Achievement Award. 102
Leon Trakman, The Impartiality and Independence of Arbitrators Reconsidered [2007] University of New South Wales Faculty of Law Research Series 25, p.1 103
China Arbitration Law Art.34(4); See Jingzhou Tao , Arbitration Law and Practice in China (2nd
Edn Kluwer
Law International 2008), 364. 104
LCIA Special Volume (n 1), p. 288. 105
IBA Guidelines, General Standard 2. 106
IBA Guidelines, Part II 2-6.
-
24
c. Duty to Investigate Potential Conflicts of Interests
One of the duties arise as consequence of duty to disclose by arbitrator is the duty of
investigation.107
To be more specific, the arbitrator may be obliged to investigate and
disclose any potential conflict of interests, or at least reasonably attempt to do so.
The General Standard 7(c) of the IBA Guidelines states:
An arbitrator is under a duty to make reasonable enquiries to investigate any
potential conflict of interest, as well as any facts or circumstances that may
cause his or her impartiality or independence to be questioned.
The IBA Guidelines put the same obligation of investigate on the party. The practice in
French, though, suggests that such obligation rest primarily on the arbitrator108
.
In America, the ABA Code of Ethics, the RUAA109
and NASD Code110
expressly
impose such requirement in demanding the arbitrator to ascertain facts by reasonable
efforts111
. Not just in the black-letter law, the duty of investigation is also widely
recognized in the U.S. Courts, especially in the Ninth Circuit.
Notably, The Ninth Circuit applies the theory of constructive knowledge situation
if the arbitrator should have known the circumstances by reasonable investigation112
.
Black's Law Dictionary defines constructive knowledge as if by prudent action one
should have known a fact they are deemed to have knowledge of that fact. By virtue of
such theory, the Ninth Circuit held that an arbitrator who lacks actual knowledge of the
conflict can still have constructive knowledge of the conflicts. He shall subsequently be
107
Haschner (n 66), p. 794 108
Cour dappel [CA] [regional court of appeal] Paris, Dec. 18, 2003, RG n 2002/09750 109
The Revised Uniform Arbitration Act 2002 110
National Association of Securities Dealers Code of Procedure for Arbitration 111
ABA/AAA Code of Ethics, Canon II.A(2). 112
Jean SCHMITZ; Leonard Schmitz v. Carlos J. ZILVETI, III; Nicholas S. Meris; Prudential-Bache Securities
Inc., aka Prudential Securities, Inc., United States Court of Appeals, Ninth Circuit 20 F.3d 1043 (1994); New
regency Productions inc v. Nippon Herald Films Inc., United States Court of Appeals, Ninth Cirtcuit No. 05-
55224 (2007)
-
25
responsible for his failure to investigate, and thus failure to disclose113
. The IBA
Guidelines concurs on this point, providing: Failure to disclose a potential conflict is
not excused by lack of knowledge if the arbitrator makes no reasonable attempt to
investigate.114
d. Relation between Duty of Disclosure and Bias
To understand the relation between Duty of Disclosure and Bias, this part shall
analyzed such situation in two circumstances: in case of a disclosure and in case of a
failure to disclose
(i) In case where the duty of disclosure is fulfilled
Disclosure does not automatically mean a ground for rejection exists115
, and disclosed
facts are not indication of potential bias or an admission of a conflict of interest. An
arbitrator who has made a disclosure to the parties considers himself or herself to be
impartial and independent of the parties, despite the disclosed facts, or else he or she
would have declined the nomination or resigned.116
Disclosure does not guarantee that an arbitrator is entirely impartial, either. After the
arbitrator disclosed circumstances that may give rise to justifiable doubts as to his
impartiality and independence, the parties shall consider such facts to decide whether
to file a challenge. The challenge shall be decided by the institution117
or other
appointing authority, or the arbitrator may opt to recuse himself from the process
seeing the party does not have enough confidence in his impartiality and
independence.118
113
Schmitz v. Zilveti (n 112), 1048-49 114
General Standard 7(c) 115
Karl-Heinz Bckstiegel/Stefan Michael Krll , et al. (eds), Arbitration in Germany: The Model Law in
Practice [2007], Kluwer Law International, p.35 116
IBA Guidelines, Explanation to General Standard 3(b). 117
See for e.g., ICC Rule Art.7(2); ZPO 1037 (1); DIS Rules 18.2. 118
See for e.g., R v. Bow St. Metro. Stipendiary Magistrate, [2000] 1 A.C. 119, 139 (H.L.) (appeal taken from
England), Lord Nolan's opinion: judge may have to disqualify himself by reason of his association with a body
-
26
(ii) In case where the duty of disclosure is not fulfilled
The implications of a failure to disclose are measured by the same standards as other
allegations of bias119
. The outcome of one failure to disclose, whether it is non-
disclosure or partial disclosure, shall consequently depends on which bias test shall be
applied by the deciding authority, along with the facts of the given case120
.
In countries where the law allows a successful challenge of an arbitrator if there is
reasonable suspicion or a threat of an appearance of lack of independence, failure
to disclose creates the impression of bias and thus disqualify the arbitrator.121
For
example in America, where judges tend to dig into every aspect of arbitrators personal
and professional life,122
partiality was rightfully found based on an omission of the fact
that an arbitrator, when he was a sitting judge, received a public censure by the
California Supreme Court for disparaging his female employees and colleagues based
on their physical attributes, sexuality, and ethnicity.123
Under other tests which come closer to actual bias, the non-disclosure shall be
considered cumulatively with the undisclosed fact in deciding whether or not an
arbitrator was bias.124
For instance, the Court of Appeal held in AT&T Corporation v
Saudi Cable that an inadvertent non-disclosure of a fact which might have affected the
that institutes or defends the suit, and Lord Hope of Craighead's opinion: absent waiver by both sides, judge must recuse himself if "anything which can even by remote imagination infer a bias or interest in the judge"
exists. 119
LCIA Special Volume (n 1), p. 289. 120
Lew/Mistelis (n 22), 11-44 121
Ibid. 11-45 122
Katarna Chovancov, Independence and Impartiality of International Arbitrators http://www.paneurouni.com/files/sk/fp/ulohy-studentov/2rocnikmgr/extract-ind-imp-3.pdf
accessed 16th
May 2013 123
Haworth v. Superior Court (Ossakow) (2008)164 California Court of Appeal 4th 930 (U.S.); See also Kaiser
Foundation Hospitals, Inc. v. Superior Court (1993) 19 California Court of Appeal 4th 513 (U.S.), 516-517 124
LCIA Special Volume (n 1), p. 289
-
27
appointment process is not sufficient to lead to a real danger of bias. Consequently
the non-disclosure did not lead to a sanction.125
III. PROBLEMATIC RIGIDITY AND DISPARITY IN APPROACHES
FOR DUTY OF DISCLOSURE
Professor William W. Park once argued that there are two courses to disrepute
arbitration: allowing service by bias arbitrator and setting unrealistic standards of
impartiality126. Many established standards have been walking the tight rope127 in
balancing the two courses. The standards for duty of disclosure, while remains
different and less complex from standards for bias, is undoubtedly affected by them
and consequently piled up with its own setbacks.128
This writer humbly contend that
approaches towards duty of disclosure have to confront with two main obstructions: its
disparity arising out of the lack of one cohesive and clear standard, and its rigidity
arising out of the inability to adjust to drastic changes in international business and the
manner in which it is conducted.
This part shall only introduce two issues: (1) debates over the inclusion of situation that
unnecessary to disclose in IBA Guidelines, and (2) the different approaches towards
non-disclosure in US Court 45 years after the Commonwealth case. Hopefully, these
two issues will well illustrate the rigidity and disparity concerning approaches for duty
of disclosure. After all, the world is of stubbornly hetero-generous legal cultures and
each country has its own view of proper conduct,129
including duty of disclosure; but in
125
AT&T Corporation and another v Saudi Cable [2000] England Court of Appeal; see also the decision of the
same effect by the German Bundesgerichtshof, 4 September 1999, ZIP 859 (1999); Rental Trading Ltd v Gill &
Duffus SA [2000] Lloyd's Rep 14 11-44. 126
Park (n 1), p. 476. 127
Ibid. 128
Karel Daele (n 88), 1-028 129
Pak (n 1), p. 475.
-
28
reaching a decision over this issue, transnational standards, soft law and professional
guidelines have always been more or less taken into account.130
1. Non-Disclosure of Situations under IBA Guidelines Green List
The Cautious Seldom Err
- Confucius -
The IBA General Standard 3(c) requires any doubts as to whether an arbitrator should
disclose certain facts should be resolved in favor of a disclosure. However, in its
Explanation, the IBA remind the arbitrator the negative effect of unnecessary
disclosure:
Unnecessary disclosure sometimes raises an incorrect implication in the minds
of the parties that the disclosed circumstances would affect his or her
impartiality or independence. Excessive disclosures thus unnecessarily
undermine the parties confidence in the process131
The Green List comes along in the Practical Standard as an enumeration of situations
where disclosure is unnecessary. Nevertheless, even the IBA Guidelines Working
Group worried about the inconsistent to have the Green List on the IBA Guidelines.132
Some argued that the subjective test rendered the Green List redundant. Arbitrator must
see the potential conflicts in the eyes of the parties, and it made no sense to have a list
of situations beyond the disclosure requirement.133
Sarah Francois-Poncet, an arbitrator
and counsel in Paris, also observed that If, as an arbitrator, you have any possible
130
Ibid. p. 476. 131
IBA Guidelines, General Standard 3(c) Explanation. 132
IBA Background (n 86), 3.1; See also Ramon Mullerat, The IBA guidelines on conflicts of interest revisited: Another contribution to the revision of an excellent instrument, which needs a slight Daltonism
treatment [2009] Internacional Workshop on ADR/ODRs. Building bridges: legal framework and principles. Universitat Oberta de Catalunya (UOC), Internet Interdisciplinary Institute (IN3), September 15, 2009
http://www.uoc.edu/symposia/adr/
Accessed 16th
May 2013 133
IBA Background (n 86), 3.1
-
29
concern about a conflict, you sleep better at night if you disclose and though over-
disclosure may open the door to abusive challengesyou cant guideline away from
bad-faith134. Ms. Nathalie Allen and Ms. Daisy Mallet even suggested the removal of
Explanation to General Standard 3(c)135
concerning excessive disclose.
Should the IBA Guidelines need such amendment? The answer should be No.136
However, the arbitrators are required to apply it with robust common sense, and among
which great sense of caution is critically needed. It is due to two main reasons:
First, national courts may not reach the same conclusion regarding the necessity of
disclosure as the Working Group.137
The practice of arbitration has seen numerous
situations where relationship, which is less serious than Green List, lead to the
disqualification of one arbitrator and/or vacatur of the award.
Second, the diverse culture and legal background should always be dealt with
cautiously in considering what should be disclosed. Despite being a set of principles
with which most international arbitrators seek to comply138, the IBA Guideline cannot
be expected to deal with such diversity flawlessly.
a. Controversies in Courts Decision
(i) Telekom Malaysia v. Ghana139 (2005) and Urbaser v. Argentina140 (2010)
ICSID Cases: Non-disclosure of Item 4.1.1 Green List
In 2002, Telekom Malaysia commenced arbitration against the Republic of Ghana
under the investor protection provisions of the Malaysia-Ghana BIT. The parties
134
Moses (n 7), p.141 135
Allen/Mallett (n 78), p.135 136
Lew/Mistelis (n 22), 11-38 137
Moses (n 7), p.140 138
Redfern/Hunter (n 5), 4.87 139
The Republic of Ghana v. Telekom Malaysia Berhad, District Court of the Hague (Civil Law Section),
Decision No. HAiRK 2004.778 5 November 2004 (PCA) 140
Urbaser and another v. Argentina, ICSID Case No ARB/07/27 (Decision on Claimants Proposal to Disqualify)
-
30
submitted to UNCITRAL Rules arbitration at PCA in The Hague, with the Secretary
General of the PCA as designated appointing authority.
In November 2005, Ghana challenged Arbitrator Emmanuel Gaillard on the basis that
he was serving as counsel in a similar but unrelated investor-state dispute in which he
was representing RFCC, a foreign consortium, against Morocco. Ghanas challenge
was arising out of their concern of merits-prejudgment by Prof. Gaillard. Judge Von
Maltzahn of District Court of Hague sum up Ghanas case as followed:
Ghana's challenge was therefore based on a risk of merits pre-judgment by
involvement in concurrent (but unrelated) investor-state proceedings. The
question was whether a decision against Ghana would strengthen Professor
Gaillard's position as counsel for RFCC against Morocco, or as E.R. Meerdink
put it, whether by deciding for Ghana (and against Telekom Malaysia) Professor
Gaillard would be generating case law against his client's position141.
Telekom Malaysia argued that the facts of the RFCC v. Morocco arbitration were
different from the claim against Ghana, and that the situation at hand was analogous to
that dealt with in Item 4.1.1 of the Green List of the IBA Guidelines.142
Item 4.1.1
cover the situation where the arbitrator has previously published a general opinion
concerning an issue which also arises in the arbitration and such situation is deemed
to be unnecessary to disclose as it does not give rise to conflict of interest.
Judge Von Maltzahn disagreed with Telekom Malaysias argument. In upholding the
challenge, he held that:
Account should be taken of the fact that the arbitrator in the capacity of
attorney will regard it as his duty to put forward all possibly conceivable
objections against the RFCC/Morocco award. This attitude is incompatible with
141
Telekom Malaysia (n 139), 2. 142
Ibid. 4.
-
31
the stance Prof. Gaillard has to take as an arbitrator in the present case, i.e. to be
unbiased and open to all the merits of the RFCC/Morocco award and to be
unbiased when examining these in the present case and consulting thereon in
chambers with his fellow arbitrators. Even if this arbitrator were able to
sufficiently distance himself in chambers from his role as attorney in the
annulment proceedings against the RFCC/Morocco award, account should in
any event be taken of the appearance of his not being able to observe said
distance. Since he has to play these two parts, it is in any case impossible for
him to avoid giving the appearance of not being able to keep these two parts
strictly separated143
.
Nevertheless, the case Telekom Malaysia v. Ghana cannot be said as a successful
challenge based merely on the ground of Item.4.1.1 Green List. However, it is highly
recommendable that arbitrator should be cautious with Item 4.1.1 Green List as such
Item under certain circumstances can give rise to justifiable doubt.
In another ICSID case involving Item 4.1.1, Urbaser v. Argentina, the two-member
tribunal emphasized that there is no distinction between general and specific in
describing academic work in contending scholars opinion may be a factor of influence
when it comes to considering the same or similar issues in a particular dispute. Their
reasoning was as follow:
the Two Members are not convinced that distinctions like the one based on
the notion of "general opinion" as it is used to define the attitudes to be put on
the "green list" according to the IBA Guidelines make much sense. Such a
distinction between "general" and "specific" views is of little value when it
comes to characterizing academic work. The hypothesis of research done by a
scholar on a merely "general" level is a description more caricatured than that of
143
Ibid.
-
32
actual academic work. As well, it is not much more convincing to draw a strict
dividing line between opinions expressed as a scholar and those to be formed as
an arbitrator. While it is correct to say that a scholars opinion might change
and is unrelated to the pattern of facts and arguments related to a particular
case, Claimants are right to the extent that they argue that such opinion may
nevertheless be a factor of influence when it comes to considering the same or
similar issues in a particular dispute144
(emphasis added)
Prof. Ramon Mullerat also voiced his concern over Item 4.1.1 Green List. He observed
that the content of the publicly published view may affect the impartiality and
independence of the arbitrator. He argued that the more extreme these views, the
greater the grounds for challenge on the basis of lack of impartiality. Furthermore, he
observed that the issue is more sensitive where there is a political or philosophical
element to the question in dispute145
.
The outcome of the Telekom Malaysia v. Ghana and Urbaser v. Argentina, in addition
to Prof. Mullerats opinion, suggests that Item 4.1.1 Green List is not that unnecessary
to disclose. One arbitrator should not therefore automatically opt for a non-disclosure
in such situation. Rather, he should apply Item 4.1.1 with robust common sense and,
in this case, with caution to be exact.
(ii) ASM Shipping v. TTMI146 (2005): non-disclosure of circumstances far
beyond the Green List
This is the case that marks an inauspicious debut in the English courts of the IBA
Guidelines on Conflicts of Interest in International Arbitration147. ASM shipping was
represented by Zaiwalla & Co (Solicitors), TTMI by Waterson Hicks & Co