John Redmond considers the role and responsibilities of party-appointed arbitrators
A client from another European jurisdiction recently commented that now that he had appointed an arbitrator in a substantial Uncitral arbitration involving a complex construction dispute, there would be no need for further legal representation. The arbitrator would, he assumed, take over, investigate the case and argue it before the chairman of the tribunal.
That mistake would not be made by anyone with any experience of commercial arbitration (which that client now has), but there remains an expectation that if you have retained one of the three arbitrators constituting the tribunal and are paying him a substantial fee, he should be looking after your interests.
The Arbitration Act 1996 of England and Wales requires the tribunal to act impartially between the parties (section 33), and enables a party to apply to the court for removal of an arbitrator if there justifiable doubts as to his impartiality (section 24). Similar provisions exist in the law of most commercial jurisdictions. But that has not always been the case. The tradition in the US has been quite different.
Whilst arbitration in the UK has grown out of the needs of commerce to have speedy and authoritative decisions by impartial tribunals, US arbitration owes much of its history to labour disputes, providing a forum for negotiation between unions and employers. Little chance of impartiality there. In 1962, New York's highest state court declined to remove an arbitrator for apparent bias: "There has grown a common acceptance of the fact that party-designated arbitrators are not and cannot [be expected to] be neutral" (In re Arbitration between Astoria Medical Group et al v Health Insurance Plan of Greater New York, 11 N.Y.2d 128, 182 N.E.2d 85 (1962)).
Despite this tolerant judicial approach, which is not universal throughout the states, there is generally a requirement of impartiality imposed by American institutions. Rule 17 of the Commercial Arbitration Rules of the American Arbitration Association, for example, provides that a party appointed arbitrator is to be impartial (but only since 2004).
Whilst the requirements for impartiality are now common to commercial arbitration under most systems, interpretation of the word can be subject to some variation. In the UK, it would be considered improper for a party appointed arbitrator to have any conversation with the party appointing him about any aspect of the case, except purely administrative matters such as the venue for the hearing. Any conversation should be reported to the other arbitrators and party. No email, correspondence or document is received without being copied to the others. That is not necessarily the case in jurisdictions such as the US, where there is less tradition of impartiality.
There is however a distinction to be drawn between partiality and sympathy. In an arbitration between, for example, a British construction company and a Russian developer, the British party is likely to want to appoint a British arbitrator with some experience of the construction industry. Such a person will be able to read the company's documents without needing translation, and should be able to understand the practicalities of the issues in the case. Some arbitrators are particularly well known for being generous in awards to contractors, and may therefore be on the short list. Published papers on technical issues may suggest that an arbitrator is likely to be sympathetic to the contractor's case, and it would not be bias for him to apply a technical opinion previously expressed. The ability for each party to appoint an arbitrator that the party believes to be sympathetic (but impartial) is one of the great strengths and benefits of tripartite commercial arbitration. Each party can have some confidence that the tribunal will understand its case. At least one of the arbitrators will understand it, and can inform the others.
As well as wishing to appoint an arbitrator who will have sympathy for its position, a party may well be looking for an arbitrator with a predictable attitude to procedural issues. The practice with regard to disclosure of documents varies considerably in different legal jurisdictions (see the article by Guy Wilkes in the Spring 2007 edition of Arbitration Matters). An American arbitrator may be amenable to an application for very wide ranging disclosure, whereas a French arbitrator may be much less interested. If the party hopes to engage in a substantial fishing expedition, trawling through the other side's files, it could be helpful to ensure that at least one of the arbitrators comes from the US.
This desire to ensure that the arbitrator is sympathetic, has led to the growth in the practice of interviewing potential arbitrators. There has been a debate about whether or not this is acceptable, and in response to that debate the UK's Chartered Institute of Arbitrators has recently published a practice guideline. Members of the CIArb are expected to adhere to the guidelines. They are detailed, but in essence:
- The interview should be taped, or a detailed note prepared and disclosed to the other party and (if there is one) the appointing body such as the LCIA or ICC
- The general nature of the dispute can be discussed and the anticipated timetable and arrangements for the arbitration
- The interviewee's experience, expertise and availability can be discussed, and the interviewee can be asked questions to test his knowledge and understanding, but not to ascertain his views on points in issue
- There should be no discussion of the detail of the case
These guidelines are similar to the relevant section of the ABA's Code of Ethics for Arbitrators in Commercial Disputes.
You should choose your arbitrator with care. If you have chosen well, you can expect your arbitrator not to be naturally antagonistic to your case, but there is no guarantee that your investment of fees will be repaid in the award.
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.