It is essential that all arbitrators are and remain, independent and impartial throughout the arbitration. Almost all institutional rules contain a provision requiring arbitrators to be impartial and independent. Examples include Article 14 of the ICC Rules where "lack of impartiality or independence" is a ground for challenging the arbitrators and Article 10 of the LCIA Rules and Article 12 of the UNCITRAL Arbitration Rules where "justifiable doubts as to the arbitrator's impartiality or independence" is foreseen as a valid ground for challenge. Other grounds for challenge include arbitrators acting contrary to the arbitration agreement and the arbitrator's qualifications.
However, there are no criteria set as to the standard required in order to uphold an application challenging the arbitrator's independence and impartiality. The LCIA and UNCITRAL Rules make reference to "justifiable doubts" which is not defined. IBA Guidelines on Conflicts of Interest in International Arbitration serve as a guide, and is generally taken into account when an arbitrator is challenged. Nevertheless, neither arbitrators, nor the authority (i.e Secretariats of arbitral institutions) determining the result of the challenge are bound by the IBA Guidelines.
Under institutional arbitration proceedings, such challenges are submitted to the relevant Secretariat and once a decision is made, this is notified to the parties and the arbitrator(s). In cases conducted under the ICC Rules (the new rules which entered into force on 1 March 2017), parties may ask the ICC Court to provide reasons for its decision. However, these decisions are only available to the parties.
LCIA Publishes Challenge Decisions
Last month, the LCIA has made online digests of 32 challenge decisions covering the period from 2010 to 2017. The LCIA has stated that they will update the website and add new decisions. The aim of the publication is to shed light on the challenge procedure, and the reasons to uphold or reject challenges. This is in line with LCIA's ongoing commitment to transparency in arbitration. Furthermore, it is hoped that such decisions are used as a significant tool for research.
The first page of the decisions LCIA has published includes a table which gives information about the subject of the challenge, the division or court member who has decided the challenge, and a summary of the decision. This is followed by background information of the case and excerpts from the original decision. All decisions are anonymized.
Over 1,600 cases were registered with the LCIA between the above-mentioned period. As stated by the LCIA and upon reviewing the decisions, it is clear that challenges are rare and succeed even rarer considering that less than 2% of these cases were challenged and a mere one-fifth of them were successful.
LCIA Challenge Procedure
According to Article 10.1 of the LCIA Rules, an arbitrator's appointment may be revoked in three instances: (i) the arbitrator recuses him/herself, (ii) the arbitrator falls seriously ill, refuses, or becomes unable or unfit to act; or (iii) circumstances exist that give rise to justifiable doubts as to that arbitrator's impartiality or independence.
The LCIA Court may determine that an arbitrator is unfit to act under Article 10.1 if that arbitrator: (i) acts in deliberate violation of the Arbitration Agreement; (ii) does not act fairly or impartially as between the parties; or (iii) does not conduct or participate in the arbitration with reasonable efficiency, diligence and industry (Article 10.2 of the LCIA Rules).
The LCIA Court may revoke an appointment upon its own initiative, or when either all other members of the Arbitral Tribunal, or one of the parties, make a written request to the Court.
The Rules provide for a 14-day time limit. This time limit starts following the formation of the Arbitral Tribunal, or when the requesting party becomes aware of any of the above-mentioned grounds. The challenged arbitrator and the other party are given an opportunity to comment on the challenge. Where the parties do not agree on the challenge, or the challenged arbitrator does not resign, the Court decides the challenge.
Main Grounds for Challenge
The main ground for challenge relates to the arbitrator's independence and impartiality. In most cases, the requesting party makes reference to a procedural decision that was contrary to its interest. Such procedural decisions are used as evidence of bias. Another ground the parties have relied on is alleged conflict of interest.
Notes from Decisions Where the Challenge is Upheld
Not surprisingly, in one of its decisions, the LCIA Court has concluded that arbitration practitioners who act as both arbitrator and counsel should be aware of potential conflicts1.
It is generally accepted that the mere fact that an arbitrator who has acted as counsel against one of the parties in a previous case does not give rise to a justifiable doubt as to that arbitrator's independence or impartiality. This has been acknowledged by the LCIA Court. However, in the previous case where the arbitrator was acting as counsel against one of the parties, he/she had alleged that party's fraud, albeit the issue remained undecided. The Court concluded that since there was such an allegation, there was a real possibility or danger that, the arbitrator would consciously or unconsciously be influenced by the evidence submitted in the present case when determining the issue involving that party2.
Arbitration practitioners need to be careful when they publicly make comments regarding companies. In one of the cases, the arbitrator had publicly made negative comments about the parent company of one of the parties in such a way that justifiable doubts arose as to his/her impartiality. The test was an objective one where "a fair-minded and informed observer would conclude that there is a real possibility that the arbitrator is biased vis-à-vis that party."3 The requirement of objective factors was reiterated in another case4.
The issue as to the role of tribunal secretaries is a delicate one which has caused few awards to be challenged. The LCIA has revised its Notes for Arbitrators and added notes regarding the tribunal's mandate and the tasks tribunal secretaries may perform. In one of the decisions, tribunals were cautioned about the tribunal secretary's involvement, particularly, their contribution to the decision-making process. In the same case, importance of confidentiality was reiterated, as breach of confidentiality could be a ground to revoke an arbitrator if it qualified as a breach of the arbitration agreement. However, it was stated that the breach should be deliberate for it to be a ground for removal of the arbitrator under the Rules 5.
Notes from Decisions Where the Challenge is Rejected
The arbitrator's disclosure obligation is still an issue which is debated. There are different views as to the scope of the disclosure and the consequences of non-disclosure. In one case, one of the grounds for the challenge related to an arbitrator not disclosing the fact that he/she was a member to an organization to which one of the parties' former lead counsel and a lawyer who acted against the same party, were members as well. The LCIA Court concluded there were no appropriate grounds for the arbitrator to have disclosed such circumstances, and that since there were no specific allegations of conflict, this would not qualify as a valid ground, and rejected the challenge.6 In another case, an arbitrator who was a barrister rejected to disclose information regarding other barristers in his/her chambers. In that case, the Court concluded that arbitrators were not obliged to disclose the activities of other barristers in their chambers and non-disclosure would not be considered as a valid ground for challenge and rejected the challenge.
In one of the cases, a challenge was rejected by the Court where the arbitrator had represented one of the parties over 17 years ago, and had conducted proper investigation and disclosed such circumstances to both the parties and the LCIA Court. The Court concluded that such circumstances did not give rise to a justifiable doubt as to the arbitrator's impartiality of independence7.
In sum, these decisions illustrate how the LCIA decides on challenges. The well-reasoned decisions provide good examples for all participants, as well as some form of certainty as one may be better placed to analyze the merits of their own challenges.
1 LCIA, No. 101689 and 101691, 22 June 2012.
2 LCIA, No. 122053, 31 July 2012.
3 LCIA, No. UN152998, 22 June 2015.
4 LCIA, No. 142862, 2 June 2015.
5 LCIA, No. 142683 (First challenge), 4 August 2016.
6 LCIA, No. 153149, 12 April 2017.
7 LCIA, No. 173566, 21 July 2017.
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.