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1 October 2024

The Impartiality Test: How Unbiased Can An Arbitrator Truly Be?

Aceris Law

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Aceris Law is a leading boutique international arbitration law firm. It provides the highest-quality legal representation for complex international commercial arbitrations, investor-State arbitrations and international construction disputes, combining competitive legal fees with an outstanding track record. It covers all jurisdictions, arbitral institutions and industry sectors, working for clients globally.
"It is not merely of some importance but is of fundamental importance that justice should not only be done but should manifestly and undoubtedly be seen to be done"[1], Lord Hewart said and made history.
Switzerland Litigation, Mediation & Arbitration

"It is not merely of some importance but is of fundamental importance that justice should not only be done but should manifestly and undoubtedly be seen to be done"1, Lord Hewart said and made history.

How unbiased can an arbitrator truly be? This note showcases the tests and challenges of impartiality in arbitration. The "Impartiality Test", known to verify an arbitrator's independence, is primarily used in international arbitration. It establishes an arbitration's fair and independent resolution, overlooking individual motives, marks of favouritism, and other challenges of our societies.

Approaches on Impartiality

Impartiality, as defined in the Oxford English Dictionary, is "freedom from prejudice or bias; fairness".

According to the IBA Guidelines on Conflicts of Interest in International Arbitration 2024, under the Explanation to General Standard 1, "each arbitrator must be impartial and independent [...] and must remain so during the entire course of the arbitration proceeding".

Disclosure by the Arbitrator under the IBA Guidelines on Conflicts of Interest in International Arbitration 2024 states that: "If facts or circumstances exist that may, in the eyes of the parties, give rise to doubts as to the arbitrator's impartiality or independence, the arbitrator shall disclose such facts or circumstances to the parties, the arbitration institution or other appointing authority".

Different Forms of Impartiality

What are the challenges that can arise concerning an arbitrator's impartiality?

First and foremost, the most evident indication of bias, as indicated in the IBA Guidelines on Conflicts of Interest in International Arbitration 2024, is the existence of relationships with the parties or counsel. The arbitrator must disclose any past or ongoing relations with any of the parties or counsel. Non-disclosure can lead to perceptions of bias and favouritism while raising doubts about impartiality.

For example, in a case ruled upon by the Court of Appeal of Madrid (n. 506/2011), "the arbitrator was a director and proxy in a number of companies which had participated in joint ventures and had commercial relationships with one of the parties to the arbitration. The arbitrator had disclosed the fact that he was a director [...] but had failed to explain the links that those companies had to one of the parties".2 The failure to disclose more information regarding his relationship with one of the parties led to doubting his independence and impartiality.

A second indication of dependence can be any kind of interest, either financial, professional or personal. For instance, an arbitrator may have "a direct financial interest in one of the parties or even the outcome of the arbitration [...] or [may have] a pre-determined decision rather than considering the merits of the case".3

A possible third indication would be the constant effort of the arbitrator to delay proceedings or disrupt the arbitration process.

That said, opportunistic challenges of arbitrators should generally be discouraged. Arbitral institutions and courts typically dismiss speculative challenges and vexatious attempts to cause delay or disruption.4

Methods of Spotting a Deficiency in Impartiality

Each country, following its own legal framework, establishes methods or "tests" to recognise whether there is an issue with the impartiality of the appointed arbitrator in an international arbitration proceeding.

A ubiquitous method of testing the impartiality of the appointed arbitrator is the "Reasonable Apprehension of Bias" test.5

According to Porter v Magill [2002], the test is "whether those circumstances would lead a fair-minded and informed observer to conclude that there was a real possibility, or a real danger, [...] that the tribunal was biased."6 In other words, the "Reasonable Apprehension of Bias" test takes into consideration the view and impression of an independent observer. This neutral observer has no interest in the case or its facts.

Another method of spotting impartiality deficiencies is the "Real Danger of Bias" test.7 This method was initiated by the House of Lords in R. v. Gough in 1993.8 Almost ten years later, the International Bar Association established a new test in its Guidelines, based on whether "there is a likelihood that the arbitrator may be influenced by factors other than the merits of the case".9 However, it was doubted that this test would offer any concrete results. Consequently, the House of Lords replaced the "Real Danger" test with the "Real Possibility" test. The latter determined that it must consider the circumstances which bear on whether there was bias and if this would cause a "fair-minded and informed observer to conclude that there was a real possibility, or a real danger" of bias.10

The abovementioned tests are applied in many jurisdictions. However, both tests are fairly vague. They do not specify any distinctive criteria that the external observer can use to spot these deficiencies conveniently.

Conclusion

To avoid impartiality discrepancies, arbitrators must maintain both independence and impartiality during the entire arbitration proceeding, from their appointment until the final award is rendered. To accomplish this, they need to disclose any relations with the parties/counsels or, in general, any circumstances that may raise doubts about their impartiality. Without such transparency, it would be impossible to build a space of trust in international arbitration proceedings.

Footnotes

1. Rex v. Sussex Justices, [1924. 1 KB 256.

2. S. P. Boggs, International approaches to the independence and impartiality of arbitrators (30 December 2011), https://larevue.squirepattonboggs.com/international-approaches-to-the-independence-and-impartiality-of-arbitrators_a1754.html (last accessed 26 September 2024).

3. R. Ardagh, Full disclosure – what do we really need to know?, International Quarterly — Issue 38, https://www.fenwickelliott.com/research-insight/newsletters/international-quarterly/full-disclosure (last accessed 26 September 2024).

4. J. J. Lu, If you aim at the king, don't miss: the challenge of arbitrator challenges (5 April 2016), http://arbitrationblog.practicallaw.com/if-you-aim-at-the-king-dont-miss-the-challenge-of-arbitrator-challenges/ (last accessed 26 September 2024).

5. J. Kunstyr, S. Gupta, Applicable Tests For Arbitrator Bias: Recent Practice In Select Common Law Jurisdictions (24 November 2022), https://arbitrationblog.kluwerarbitration.com/2022/11/24/applicable-tests-for-arbitrator-bias-recent-practice-in-select-common-law-jurisdictions/ (last accessed 26 September 2024).

6. Magill v. Porter [2001. UKHL 67 (13th December 2001).

7. J. Kunstyr, S. Gupta, Applicable Tests For Arbitrator Bias: Recent Practice In Select Common Law Jurisdictions (24 November 2022), https://arbitrationblog.kluwerarbitration.com/2022/11/24/applicable-tests-for-arbitrator-bias-recent-practice-in-select-common-law-jurisdictions/ (last accessed 26 September 2024).

8. R v Gough (Robert) [1993. UKHL 1 (20 May 1993).

9. M. L. Smith, The New "Real Danger" Test for Arbitrator Bias in British Columbia (2019), https://smithbarristers.com/files/Advocate_Article_2019.pdf (last accessed 26 September 2024).

10. E. Garrett, Independence and impartiality: Australia's arbitrator bias test, Arbitration International, Volume 40, Issue 2 (June 2024) pp. 135–155, https://doi.org/10.1093/arbint/aiae004 (last accessed 26 September 2024).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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