THE ARBITRATOR – AS A NEUTRAL THIRD PARTY by Caroline Verbruggen

Much has been written upon arbitrators’ independence and impartiality[2].  The capacity of an arbitrator to act as a neutral party, rendering a decision which is based solely on the merits of the case, can be considered to be essential to arbitration.  At the same time, it raises many practical difficulties.  These difficulties are exacerbated in the current context of a rising number of challenges to arbitrators, which is the result, we believe, both of a broad trend towards the moralization of commerce generally, and at the same time of a more aggressive attitude of parties and counsel in international arbitration.

This article will begin with an introduction on the very notions of neutrality, impartiality and independence of the arbitrator(s), and their translation in a number of modern arbitration laws and arbitration rules (I).  The focus will then be on the practical questions called upon by this colloquium, i.e. what an arbitrator must do or must not do in connection with his obligation to be neutral and independent (II).  In a last chapter, some recent case-law will be specifically discussed (III).  We will then very briefly draw some conclusions (IV).

The arbitrator as a neutral third party [1]

Caroline Verbruggen

Member of the Brussels Bar – DLA Piper

Article published in Walking a thin line. What an arbitrator can do, must do or must not do.  Recent developments and trends.

Bruylant, 2010

Colloquium organised by CEPANI 40 CEPINA on 29 September 2010

www.cepani.be

 

I.- The concepts of neutrality,

impartiality and independence :

unanimity but not uniformity

  1. It is an essential element of any fair trial that the judge(s) hearing the case be independent and impartial (see art. 6 § 1 of the Convention for the Protection of Human Rights and Fundamental Freedoms; hereinafter “the Convention”).

This requirement may even be considered to be more stringent in the case of arbitration as in the case of state court proceedings.  Indeed, there are generally no professional requirements for being an arbitrator, as opposed to a judge: no condition of age, years of experience, or diploma, which are generally required from judges, with a view to guarantee that the judges will be competent[3].

On the other hand, unlike state judges, the professional life of the arbitrators is generally not restricted to their function as arbitrator.  Arbitrators are generally chosen among lawyers, who have a professional life full of encounters; this is especially the case of lawyers practicing within large multinational firms, if one counts all the encounters of the lawyers of those firms.

Also, arbitrators are generally chosen by one party (or both), and it can be expected that a party (and its counsel) will favour the nomination of someone it (or its counsel) has encountered before, or with whom it has some connection or share some background[4].  Indeed, the party will want to nominate someone it can trust, which is easier if it somehow knows that person.  At the same time, there is the risk that the mere satisfaction of being chosen by a party may entail in the arbitrator, even un-noticed to him or her, a favourable feeling towards that party.[5] The fact that the parties are paying the arbitrators for their services, although inherent to arbitration, may also be seen as problematic in terms of their strict independence.[6]

Lastly, arbitration leads normally to a decision that is final, with no appeal, a supplementary argument to be sure the persons rendering that decision are “au-dessus de tout soupcon“.

Hence the fact that the independence and impartiality of the arbitrator is more than an obligation imposed upon the arbitrator it is an essential element of the function and of arbitration itself.[7] In the international commerce, international arbitration is also precisely chosen over the submission to local courts, because of the parties’ desire to have their dispute decided by a neutral forum, not of any of the parties’ nationalities.

  1. It is commonly accepted, in most if not all arbitration laws and arbitration institutions rules, that all arbitrators are to be neutral, impartial and independent[8]. Looking closer, the concepts that are used are not always the same, nor are the sanctions for a lack of these qualities unanimous.

In Belgium, the impartiality and independence of the arbitrator, although a fundamental rule, is only implicit in the Judicial Code.  There is no express rule in that respect but, according to Article 1690 § 1 of the Code, arbitrators may be challenged “where there are circumstances likely to give rise to legitimate doubts about their impartiality or their independence[9].

There is no express duty for an arbitrator, prior to accepting his nomination, to sign a statement of independence and disclose any circumstance that may question that independence in the eyes of third parties[10].  A declaration of independence is, however, provided in the CEPANI Rules of good conduct and therefore will be signed by any prospective arbitrator in the case of a CEPANI arbitration[11].

The Code, on the other hand, expressly provides that the lack of independence or impartiality can never be invoked to justify the setting aside of an award (art. 1704.5 of the Code)[12].  A challenge to an arbitrator needs to be raised in a specific proceeding as soon as the party becomes aware of the circumstances it is invoking, and will be heard by the Tribunal of First instance, with an appeal possible to the Court of Appeals.[13]

  1. In France, the emphasis is, on the contrary, put on the duty to disclose.  According to art. 1452 of the Code of civil proceedings, the arbitrator who supposes a cause for challenge affecting him must inform the parties, and in this case, may only accept his mission provided the parties agree to it[14].

The Code further organises a challenge proceeding before the Tribunal of Grande Instance but without specifying the causes for recusal (art. 1463 of the Code).  At the same time, it is accepted that a lack of impartiality or independence of an arbitrator may lead to the setting aside of the award, on the legal basis of irregular formation of the arbitral tribunal or otherwise[15].

  1. The English Arbitration Act seems to be the more explicit legislation concerning impartiality.  Article 1 of the Arbitration Act provides that the object of arbitration “is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense“.  Also, article 33-1 provides that the tribunal shall “act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent (…)”.

A challenge proceeding is organised where circumstances exist that give rise to justifiable doubts as to the impartiality of the arbitrator[16].  The lack of impartiality may also be invoked as a serious irregularity justifying the annulment of the award[17].

The Arbitration Act does not provide for any disclosure obligation and the courts have not imposed such duty on the arbitrators[18].  On the other hand, a declaration of independence and disclosure is required in the case of a LCIA arbitration (cf. article 5.3. of the LCIA Rules).

It should be noted that the Arbitration Act does not refer to independence, but merely to impartiality.  Indeed, the idea is that what really matters is the impartiality of the arbitrator(s), and that the requirement for independence that it often provided for is just a tool to achieve impartiality.

  1. The ICC Rules, conversely, focus on the independence of the arbitrator.  Article 7.1. provides that “every arbitrator must be and remain independent of the parties involved in the arbitration“, without referring to impartiality.[19] Article 7.2. further requests any prospective arbitrator to sign a statement of independence – a document that has been pioneered by the ICC – and disclose “any facts or circumstances which might be of such a nature as to call into question the arbitrator’s independence in the eyes of the parties“.

The statement of independence has recently been revised to become a “Statement of Acceptance, Availability and Independence”.  It is now required that a prospective arbitrator should take into account, for the purpose of Article 7.2. of the Rules “whether there exists any past or present relationship, direct or indirect, between him/herself and any of the parties, their related entities or their lawyers or other representatives, whether financial, provisional or of any other kind”, and that “any doubt must be resolved in favour of disclosure[20].

Only after the submission of such statement of acceptance, availability and independence and its communication to the parties will the Court of Arbitration decide to appoint or confirm an arbitrator.  Where an allegation of lack of independence is raised after the arbitrator has been appointed or confirmed, the challenge is decided by the ICC Court of Arbitration, as the authority administering the arbitration[21].

  1. The UNICITRAL Rules provide likewise that a prospective arbitrator has a duty to disclose “any circumstances likely to give rise to justifiable doubts as to his or her impartiality or independence[22] and impose on any arbitrator, as from the time of his or her appointment, such disclosure obligation.  A Model statement of independence is provided in annex to the 2010 version of the Rules.

The ICSID Rules, on the other hand, request from arbitrators that they be “persons of high moral character and recognized competence in the fields of law, commerce, industry or finance, who may be relied upon to exercise independent judgment” (art. 14 of the Convention). The ICSID Rules provide also for a declaration by prospective arbitrators, containing an express undertaking to judge fairly as between the parties, and with information on the arbitrator’s past and present relationships (if any) with the parties and of “any other circumstance that might call [the] reliability for independent judgment [of the arbitrator] to be questioned by a party” (Rule 6.2.).

  1. Various authors have proposed various definitions of the related concepts of independence, impartiality, neutrality and objectivity.

Neutrality – to which the title of this contribution refers – is not a concept that is generally used in the arbitration laws or rules.  At the same time, international arbitration has been developed, precisely, with the aim of offering parties a dispute resolution mechanism that is neutral, in the sense that it is not linked to the country of one of the parties.  Neutrality is therefore important in international arbitration.  It may express itself in the form of a neutral seat of the arbitration, a neutral applicable law and, indeed, a neutral tribunal.

Certain arbitration rules express the neutrality of the tribunal by providing, such as the ICC Rules, that the sole arbitrator or the chairman of the arbitral tribunal shall be of a nationality other than those of the parties (art. 9.5. of the Rules).

Neutrality has been defined as a state of mind, a certain distance that the arbitrator establishes vis-à-vis his or her legal, political and religious background.[23] It is also the absence of parti pris vis-à-vis the parties or the dispute, and it is in that respect difficult to distinguish from impartiality.

Impartiality has indeed been defined as the aptitude of the arbitrator to be free of subjective biases, predispositions or affinities interfering with the conduct of his mission[24].

  1. On the other hand, independence is the quality of someone who does not depend upon someone else[25].  The idea is that independence is required from the arbitrator for him or her to be impartial, neutral, and exercise independent judgment on the case.  Conversely, it is presumed that dependence of the arbitrator towards a party would not allow him or her to exercise independent judgment. But the question that immediately arises is towards whom the arbitrator must be independent.  Indeed, the arbitrator is not independent per se, as he or she is an active professional, with many relationships, and is not working in an ivory tower with no dependence, links or relationships with any other individual or entity.

The starting point is obviously that the arbitrator may not be dependent on the parties.  The requirement of independence has however also grown to generally include the independence of the arbitrator and his law firm from the parties, the parties’ subsidiaries and counsel to the parties. In a new development, independence vis-à-vis the subject matter of the arbitration, including mere legal issues is sometimes referred to[26].

The question may arise whether the focus on independence does not go too far away from the primary aim, which is that the arbitrator acts impartially, and may render an independent judgment, i.e. a judgment not affected by concerns other than the merits of the case to be decided.

However, this primary concern does not appear in reality to be the only one at stake.  The appearance of impartiality is indeed also important, maybe as important as impartiality itself.  And, precisely, connections between the arbitrator or his firm and the parties or their counsel, may create the appearance that the arbitrator will not be able to render an impartial decision.  As per the famous words of Lord Hewart, “it is of fundamental importance that justice not only be done, but should manifestly and undoubtedly be seen to be done“.[27] If this is true for justice, it is even more so regarding arbitration, whose legitimacy stems from the agreement of the parties.  Hence it is important that both parties be at ease with the arbitrators and have confidence, during the whole proceedings, that their case will be decided impartially by the tribunal[28].

  1. It is generally considered that impartiality is a subjective notion, relating to the state of mind of the arbitrator and not to be measured easily, whereas independence is more objective, as it is appreciated on the basis of factual elements[29].  This allows a distinction to be made between those two notions, although they are generally used together, without any distinction.  The question of whether they need to be distinguished at all has been raised[30].  In Belgium, the view is generally expressed that impartiality is more important than independence and that the parties may validly waive the requirement that an arbitrator be independent, but not that he or she be impartial[31].  This position is along the lines of that of English law, as we have seen earlier.
  1. To help prospective arbitrators fulfilling their disclosure duty and to assist institutions or state courts deciding on challenges, the IBA produced in 2004 its famous IBA Guidelines on Conflicts of Interest in International Arbitration (hereinafter the “Guidelines” or “IBA Guidelines)[32].

The Guidelines contain general standards regarding impartiality, independence and disclosure, and a section dealing with the practical application of these general standards, listing a variety of circumstances.  These are divided among the “Non-waivable Red List”, i.e. situations of conflict that can not be waived, the “Waivable Red List”, i.e. situations which are waivable by express and informed consent of the parties, the “Orange List”, with situations that need to be disclosed to the parties, and the “Green List”, with situations the arbitrator has no duty to disclose.

The Guidelines state expressly that they do not purport to be exhaustive, nor to override statutory provisions of law.  They are merely guidelines, as their name indicates and they appear, six years after their enactment, to have exactly served that purpose, as they are used as a reference (not as mandatory provisions obviously) by arbitral institutions, notably by the ICC[33] and by tribunals that must decide on arbitrators’ challenges[34].  It even occurs that parties specifically provide that any challenge will be decided by sole application of the IBA Guidelines.[35]

II.- What an arbitrator must do or must not do :

practical questions

A.- Before his or her designation

  1. Where the dispute is to be resolved by three arbitrators, each party normally chooses to nominate “its” arbitrator, and will generally do so with the assistance of its counsel.  Which principles shall guide such choice?  We have seen earlier that a party will normally try to appoint as arbitrator a person it knows, or with whom it shares some background.  It can be expected that a party desires not so much to nominate an arbitrator who shall be able to render a fair or legally convincing decision, as to appoint an arbitrator likely to render decision that is favourable to it…[36]. This does however not mean a partial arbitrator, as any experienced party will know that a partial arbitrator will have a poor credibility within a tribunal, and hence may be counter-productive to the party who appointed him.

The party will normally look for a profile of arbitrator who will have the necessary qualities to understand the case and to be heard within the arbitral tribunal.  A research will also be conducted on the arbitrator’s writing or position, to assess possible affinities with the legal issues that are at stake, or to avoid the nomination of an arbitrator that has taken adverse positions.

Prior experience or contacts of any sort with this arbitrator are normally a plus, as these will allow the party or its counsel to assess the qualities of the arbitrators and to build the necessary trust.  Also, there is the general tendency to choose someone that is known, or at least with which some common background is shared.  Failing so, general reputation or recommendation will come into play.

  1. In this context, contacts between a party and the person that party contemplates appointing as arbitrator was in continental Europe generally limited to a mere phone call to ask the prospective arbitrator about his or her availability, and to request him or her to check conflicts.  Also, after the appointment of the two party-appointed arbitrators, each party had contacts with “its” arbitrator for the mere purpose of the selection of a person who may act as chairman.

Such preliminary contacts are still customary and accepted.[37] It is normal that, before accepting to intervene, the prospective arbitrator be informed of the name of the parties involved, the nature of the dispute, and the names of the other arbitrators, if already known.  These elements are necessary to allow the arbitrator to conclude that he or she may serve as arbitrator, possessing the necessary qualities and competence to act.

During such preliminary contacts, the prospective arbitrator must however immediately act as a (future) arbitrator, i.e. act towards the party (or its counsel) with the distance imposed by the (potential) function of arbitrator.  Indeed, impartiality and independence of the arbitrator is essential, and therefore pre-dates his or her nomination.[38]

  1. Originating from the U.S., a practice has developed in which the selection process takes a form close to a “beauty contest”, where several prospective arbitrators are being interviewed, and the results of these interviews compared before the selection is made.  This practice has been imported in Europe for large arbitrations.

While it is not certain that the aim of the parties conducting such preliminary interviews is clearly to influence the independence of the arbitrator[39], these preliminary interviews are obviously delicate and risky for the arbitrator and cannot be accepted as such without limitation or rules on their format, and a clear prohibition that legal issues be tested on the arbitrator[40].

A U.S. arbitrator, Gerald Aksen, has reported adopting the following personal guidelines for the conduct of such interviews[41]: 1°- the arbitrator will be interviewed in his own office; 2°- the interview is conducted by an external lawyer, not by the party; 3°- it will not last more than 30 minutes and will involve no meal or gratuities and 4°- the arbitrator will keep a note of the discussion and, if appointed, will disclose the fact of the meeting and its content.  These precautionary measures appear to guarantee the independence and impartiality of the (future) arbitrator, and should therefore be encouraged.

  1. The question was raised during the drafting of the IBA Guidelines what to do with a situation involving such interviews.  It was decided to list it in the Green List, i.e. among the situations that need not to be disclosed, provided the initial contact was “limited to the arbitrator’s availability and qualifications to serve or to the names of possible candidates for a chairperson and did not address the merits or procedural aspects of the dispute” (4.5.1.).

This has been criticized by some authors, who consider that all interviews and beauty parades should at the very least be disclosed.[42] This seems to be a prudent attitude that must be recommended.  Where however the contact is limited to one or two phone call(s) to discuss availability, there should be unanimity that this preliminary contact does indeed not need to be disclosed.[43]

  1. A prospective arbitrator may however not, in the context of such preliminary contact, express an opinion on the merits of the case, even a first impression orally, or give his opinion on a legal issue related to the dispute.  As expressed recently by two arbitrators: “here more than elsewhere, silence is golden”.[44]

The (future) arbitrator should even avoid hearing the party describing the merits of the case, apart from a general reference to the type of dispute, and should stop a party trying to give him or her too much information on the case[45].  Also, quite obviously, the individual who is contacted to give an external opinion on a case or serve as mock arbitrator may normally not thereafter accept to serve as real arbitrator[46].

B.- At the time of acceptance

  1. It is commonly agreed, even in jurisdictions that currently do not provide for express disclosure requirements, as for example Belgium, that before accepting an appointment, an arbitrator must check that he or she has no conflict of interest.  The arbitrator has an active duty to carefully review his or her situation to assess his or her ability to act, and make the necessary enquiries in that respect[47].

In the case of an institution arbitration, the institution will generally request the arbitrator to fill in and sign a form which shall expressly refer to that obligation, mention the type of undertakings that are made, and the type of information to be disclosed.  Even if no express obligation is formulated, the arbitrator should, we believe, take into account (i) his or her present and past activities, (ii) the activities of the law firm he or she is working with[48] and (iii) the activities of his or her close family (spouse, parents, children), and identify any connection these activities have with:

– the dispute itself;

– parties in the arbitration and their subsidiaries, mother companies or affiliates[49];

–     the counsel to the parties appearing in the arbitration[50];

–     the other arbitrators, when known at this early stage;

– any fact-witness, when known at this early stage.

  1. As a next step the arbitrator should, in view of the information he or she has gathered, decide whether or not he or she may accept the nomination. The arbitrator who has identified a link between him or herself and one of the parties[51], or who has somewhat been involved with the facts of the case should normally decline to intervene.

If on the other hand the arbitrator estimates that the circumstance does not impact on his or her independence and impartiality, he or she will accept the nomination, but should disclose any situation or link he or she has identified that might give rise to justifiable doubts as to his or her independence or impartiality, or even more broadly, which might give an appearance of connection likely to cause a bias.

Disclosure should be made not only in jurisdictions or institutional arbitration whose arbitration law or rules provide for same, but also where no rule exists.  Indeed, disclosure is, in fact, a preventive measure to avoid future incidents in the arbitration, in the form of challenge, setting-aside proceeding or otherwise (infra, third chapter), and should therefore always be encouraged from the arbitrator.

  1. The arbitrator is however faced with a dilemma, as he may fear that going too far with disclosure might prevent him from getting a nomination, or might be interpreted as a recognition that the circumstance disclosed does indeed give rise to doubts about the arbitrator’s independence or impartiality, although the arbitrator sees it as trivial.

The links of the arbitrator or the arbitrator’s law firm vis-à-vis the parties should be quite easy to identify and to report, taking into account the internal proceedings for conflict-check that exist in all major law firms.  Attention should however be paid by the arbitrator to any past assignment or involvement he may have had with the parties.

The situation is however more complex in terms of relationship between the arbitrator and counsels to the parties or the other arbitrators. Should the arbitrator disclose, for example, that he attended law school with counsel to one of the parties ? That they are friends ? That he has spent in the past vacation with such counsel ? That he co-authored an article with him or her ? That he was a speaker at a conference sponsored by the law firm representing a party[52] ? That he is a member of the same barristers’ chamber as a counsel [53] ? Or similar connections with a co-arbitrator or the president of the tribunal?

  1. Fortunately for the arbitrator, he or she may today turn to the IBA Guidelines, in addition to any wording or guidelines expressly provided by the institution under which the arbitration is conducted.  The Guidelines will provide guidance to both the young arbitrator as the most-experienced arbitrator, helping them to understand the extent of disclosure that is expected from them by today’s standards.

As they mention themselves, the IBA Guidelines are however, by nature, neither exhaustive, nor mandatory.  Hence the arbitrator should disclose any circumstance he or she is not at ease with, even if not mentioned in the Guidelines, or even if mentioned in the Green List.  The arbitrator should follow his or her instinct or best judgment.  He or she may be assisted in doing so by imagining him or herself in the shoes of the parties or as their counsel : would he or she be comfortable with the arbitrator appointed by the adverse party not disclosing similar circumstances ? Or the arbitrator may alternatively imagine how it would look on the front-page of a newspaper if such circumstances would be revealed in public.

Disclosure is certainly encouraged.  At the ICC, for example, disclosure is encouraged and it is said that a disclosure in the statement of independence will no longer lead to non-confirmation of the arbitrator, and offers the advantage of saving him the burden and embarrassment of a challenge proceeding[54].  The statement of acceptance, availability and independence of arbitrators provides in that regard expressly that “any doubt must be resolved in favour of disclosure”.

The arbitrator should in principle not rely on the fact that his or her activities or connections are in the public domain because they are easily identifiable through a quick internet search or otherwise known to the parties or their counsel.  Indeed, disclosure also serves to protect the arbitrator and the arbitration from challenges and if no disclosure is made, the arbitrator will often not be in a position to establish actual knowledge by the party raising the challenge of that circumstance.  Also, where the arbitrator had an actual duty to disclose, the fact that the information is in the public domain normally does not excuse a breach of his or her duty.[55]

  1. The recent Tecnimont case, decided by the Paris Court of Appeals on 12 February 2009, should also serve a signal for prospective arbitrators and for multinationals law firms to have conflict-checks conducted in the most exhaustive way possible, and disclose any link there may exist between the arbitrator’s law firm and any of the parties or their affiliates (infra, third chapter of this contribution).

Once the arbitrator finds there is a link to be disclosed and makes such disclosure, he or she should use utmost care to be sure that the disclosure is comprehensive and adequate.  Indeed, incomplete disclosure may sometimes appear worse than non-disclosure.

Also, an arbitrator may find it prudent to indicate in his or her statement of independence and disclosure form the degree of research he or she has conducted.  For example, he may indicate that the conflict search system of the firm he or she is working with only examines current, open case, and that therefore no research has been conducted regarding past case, except that the arbitrator confirms he or she has not, in the three previous years, worked for any of the parties.  The arbitrator may also confirm that conflict has also been cleared for mother companies or subsidiaries, but that the search has not been conducted concerning entities in which one of the parties may have a minor shareholding.

C.- During the course of the arbitration

  1. The arbitrator may not loose his or her vigilance after having been nominated.  A prudent arbitrator should indeed keep a continuous monitoring of connections he or his law firm may have that may be regarded as impacting on his independence, and disclose any such circumstance arising during the course of the proceeding.

New circumstances may in particular happen due to new activities within the law firm (such will normally be brought to the arbitrator’s attention by the internal conflict check procedure, but he or she should keep his eyes wide opened), a change of law firm by the arbitrator himself, new parties arising in the arbitration, the intervention of new counsel in the arbitration or changes of ownership of clients of his law firm or of the parties to the arbitration.

  1. The arbitrator has also, during the whole duration of the proceeding, the important duty of acting impartially (and appearing so) in the arbitral proceeding.  This duty is linked to the corresponding rights of defence of the parties.

As provided by article 15.2. of the ICC Rules: “In all cases, the Arbitral Tribunal shall act fairly and impartially and ensure that each party has a reasonable opportunity to present its case”.   Similar rules may be found in most arbitration laws or rules[56].  This means that the arbitrator must, in all his or her actions and decisions in connection with the arbitration, be impartial and appear so.  This general duty will apply when the arbitrator takes procedural orders for the purpose of organizing the proceeding, decides on preliminary issues, administers the hearings, the audition of testimonies, experts, etc.  The arbitrator should always have in mind that he or she must act with the aim of allowing each party the opportunity to present its case, treat them equally and avoid any pre-judgment of the case.  Challenges are sometimes based on the arbitrator(s) decisions themselves, but occurrences where they will be retained are scarce.[57]

  1. As part of this general duty, an arbitrator is prohibited from having ex parte contacts with a party after his or her appointment[58].  This rule is not expressed by many arbitration rules. The CEPANI Rules of good conduct express it for the party-appointed arbitrator, by requiring that: “Once nominated by CEPANI, the arbitrator appointed upon the proposal of a party undertakes to have no further relation with that party, nor with its counsel, in the course of the arbitration. Any contact with this party shall take place through the chairman of the arbitral tribunal or with his explicit permission”.[59]

The prohibition of ex parte contacts applies however not only to a party-appointed arbitrator vis-à-vis the party that appointed him or her, but to all arbitrators, vis-à-vis all parties, subject to the qualifications that will be made hereafter concerning the President or sole arbitrator.  It means that an arbitrator may never discuss the arbitration with a party or with its counsel; contacts that may occur accidentally, especially between arbitrators and counsel at social events, colloquium, bar association meetings, etc…, should never involve any discussion of the case, neither the merits of the case, nor the proceedings.

It may occur, however, that the sole arbitrator or tribunal wishes to have a quick contact by telephone with the parties or their counsel in order to deal with various practical questions linked to the organisation of the proceedings.  Such contacts should normally occur through a conference call to allow that all parties are present or represented.  Pure organisational or material issues may also be voiced to the parties through the administrative secretary, where such a secretary has been appointed[60].

In practice, we can however not exclude situations where there is no administrative secretary, a conference call is not appropriate, or a party or its counsel takes the initiative to call the sole arbitrator or president of the Tribunal.  We believe such telephone contacts between a party or its counsel and the sole arbitrator or president of the tribunal is not prohibited, provided it is short and limited to a question concerning the organisation of the proceedings. Good practice would also recommend, we believe, that such contact be acknowledged by the chairman or sole arbitrator in a later correspondence to both parties, to keep a record of it, and avoid any suspicion that may result from undisclosed contacts.

  1. The arbitrator has also a duty to remain neutral outside of the arbitral proceeding, which may be considered a part of his general duty of impartiality and independence, or a parallel, distinct duty of discretion (“devoir de réserve”).

For this reason we believe that an arbitrator should normally refrain from commenting or discussing any current arbitration.[61] Where the arbitrator however does so, or alludes publicly to cases or to parties to his or her current arbitrations, he or she should be very prudent, avoiding any negative comment or any view that may give the appearance that he or she has prejudged the case.  An experienced arbitrator was recently successfully challenged in precisely this context, having referred to a party not complying with provisional measures in terms that were considered by the authority deciding the challenge as giving rise to justifiable doubts about his impartiality.[62]

D. When the arbitrator is challenged

  1. A situation that has up to now not received wide attention is that of the arbitrator that is faced with a challenge.  The question that arises is whether the mere existence of the challenge does constitute a threat to the arbitrator’s impartiality.  Indeed, it could be considered that a challenge creates the risk of antagonizing the arbitrator against the author of that challenge.  Will it then be considered that the arbitrator will have lost his impartiality or independence?

The answer needs to be negative, as challenges would otherwise be encouraged, and self-serving.  At the same time, one should not ignore the risks posed by a challenge, on the arbitrator’s needed continuous impartiality.

  1. An arbitrator should have the necessary character not to let himself affected by the challenge, and keep the necessary distance with this unpleasant incident.

Arbitration laws and rules generally request the arbitrator to react to the challenge.  The arbitrator should, we believe, avoid a too quick reaction, and take at least one day or two to examine the situation carefully.  The arbitrator should indeed avoid responding to the party while he or she is still emotional about the incident, as he or she might express, even unnoticed to him or her, negative feelings towards that party.  The arbitrator should also avoid responding too rapidly, as this may be seen as reflecting the fact that he did not even seriously considered the challenge, and did not duly investigate the situation.  If the arbitrator needs to disclose something at the time of the challenge, he or she should also avoid doing it too quickly, as any disclosure should be complete and accurate.[63]

It may be the case that the circumstances invoked in the challenged were unknown to the arbitrator and, if proven accurate after due verification, will lead him or her to resign.  Such could be the case, for example, where the arbitrator becomes aware of involvements of his law firm he or she was unaware of.

Should on the other hand the arbitrator who thinks, after due verification, that the challenge is without merits, however offer his or her resignation[64], for the sake of the arbitration, upon the belief that he or she will so spare the arbitration the time and costs of the challenge?  Again, we believe the answer is negative.  The arbitrator’s resignation will not necessarily limit the delay in the arbitral proceeding, as time will be needed to find a suitable arbitrator to replace him or her and have that new arbitrator cleared of any conflict and confirmed by the institution, if any.  Also, a resignation in a situation where no real conflict is at stake would weaken the position of the remaining arbitrators, and that of the arbitral proceeding itself, as the author of the challenge would achieve success where his action was without merit.

  1. In the hypothesis where the arbitrator, after careful consideration, considers the challenge without merits, he or she will therefore generally refuse to step down, and the formal challenge proceedings will be initiated.

In the case of institutional arbitrations, the rules of the institution normally provide for a challenge proceedings that is both quick and of an administrative nature. In an ICC arbitration, for example, under Article 12 of the Rules, the Secretariat will afford the arbitrator concerned, the other party or parties and the other arbitrators the opportunity to comment in writing on the challenge.  Shortly thereafter, the challenge will be decided by the Court itself, at a plenary session.  The decision of the Court is limited to accepting or rejecting the challenge, and is not reasoned, which is viewed by the ICC as the best way to achieve a quick and efficient decision[65].  In such a situation, the impact on the arbitration will normally be limited, as the problem raised by the challenge will be solved in a short number of weeks.

  1. Whereas on the other hand the challenge proceeding is heard by judiciary courts more difficulties arise, both in terms of delays and because of the judicial nature of the proceeding.  A challenge before the national courts may indeed last longer than an institutional challenge, making the period of discomfort for the arbitrator and the arbitral proceeding longer. Also, the challenge will normally result in a judicial proceeding initiated by the plaintiff against the arbitrator, making the arbitrator an adverse party to the plaintiff, a circumstance which, in other circumstances, would in itself normally disqualify the arbitrator[66].  We have seen above that it cannot be accepted that the situation itself is considered to impair upon the arbitrator’s necessary impartiality and independence.  We believe that the arbitrator should however act with extreme care in this proceeding.

The arbitrator may decide to default in the proceeding, to let the judicial court decide outside of his or her presence, as will normally be the case where his lack of impartiality is invoked at the stage of a challenge to the award itself, where the legal system concerned allow this possibility[67].  However, this choice may be difficult when the challenge is based upon facts that are to be explained by the arbitrator, and where therefore his or her intervention before the judicial court appears desirable for the sake of proper information of the judicial Court.  For this reason, we believe the arbitrator may choose to intervene in the proceeding, which he or she will do through representation by external counsel, but should do so merely for informational purpose, not letting him or herself dragged upon in the position of an adversary to the party having initiated the challenge and referring to the justice and wisdom of the Court to decide on the challenge.

III.- Consequences of a lack

of impartiality or independence

A.- General

  1. There is a diversity of approaches in the legal systems concerning the sanctions to a lack of impartiality or independence of one arbitrator.  There are countries, such as Belgium, where the lack of impartiality or independence can only be invoked in a challenge proceeding initiated during the lifetime of the arbitration, and no more once the final award has been rendered by the Tribunal.[68]

Others, like France or England, allow both a challenge proceeding and a proceeding for setting aside of the award based upon an arbitrator’s lack of impartiality or independence.  More curious to us, in the U.S., there is under the Federal Arbitration Act no challenge proceeding available during the course of the arbitration, the remedy being limited to the setting-aside of the award in the case of “evident partiality” of the arbitrator pursuant to Section 10(a)(2) of the Federal Arbitration Act[69].

Arbitration rules also provide for a diversity of systems.  The proceedings provided by the ICC have been discussed before.  Under the ICSID Rules, on the other hand, the challenge is normally decided by the remaining members of the arbitral Tribunal, a situation which may raise questions as, even if the remaining members may be considered to be well placed to appreciate the impartiality of their colleague, the power that is granted to them puts them in a delicate situation, and their independence and impartiality to render such a decision might itself be questioned.[70]

Apart from a challenge to the arbitrator or a challenge to the award, the lack of independence or impartiality of the arbitrator[71] may further be invoked as a ground for liability of the arbitrator[72], where the lack of independence or impartiality has been recognised trough a successful challenge proceeding[73], or at the stage of the annulment of the award[74].  It is also not excluded that the criminal liability of the arbitrator might be invoked, on the allegation that an erroneous or incomplete statement of independence would constitute forgery[75].

  1. The differences discussed above, combined with differences in arbitration laws on the duties imposed upon the arbitrators, result in caution, when trying to analyse or compare case-law from various jurisdictions or authorities.

Another element we believe should be factored in when examining case-law, is the timing of the challenge.  The same circumstances affecting an arbitrator may lead to different decisions depending on the time the plaintiff raised his challenge, and the impact on the arbitral proceeding.  Is the challenge raised at an initial stage, before confirmation of the arbitrator by the arbitral institution? Is it initiated during the course of the arbitration before an award has been rendered, or just after the issuance of a preliminary award which has precisely been rendered against the plaintiff in the challenge? Or is it one out of many other arguments to try to obtain the setting-aside of an award?

An early challenge can in normal circumstances be presumed to be based upon the plaintiff’s actual doubts about the arbitrator’s independence or impartiality.  Conversely, a late challenge, especially a challenge that is motioned after the plaintiff has received an unfavourable award, might create doubts about his legitimacy, and the actual motivation of the plaintiff[76].  The authority deciding on the challenge may, in case of doubts, take these elements into consideration, and also weigh the balance of interest.   Doubts might more easily be resolved against the arbitrator in an initial phase of the arbitration, and against the plaintiff in a later stage of the arbitration[77].

B.- Focus on certain topics dealt with by recent case law

 

  1. The general increase in challenges to arbitrators has been noted in the introduction to this contribution and it may be added that the trend towards challenges has moreover extended its scope [78].  Although many challenges are decided by the arbitral institutions and therefore will normally not be given wide publicity, there are also many decisions of the judicial courts rendered either in a proceedings for recusal of the arbitrator, or in the context of a proceeding seeking the annulment of the award.  We have selected three subjects, on which the courts of the Netherlands, Belgium and France have rendered interesting decisions, to be examined hereinafter.

(i) The ‘issue conflict’ or ‘vertical conflict’ (The Netherlands)

  1. We have seen that a prospective arbitrator should check, before his appointment, that neither he nor his law firm gave an advice or were otherwise involved in the subject-matter of the dispute between the parties, and that he should refrain from acting if he discovers this was the case, or at least not act without proper disclosure and proper waiver granted by the parties[79].

But what if, on the other hand, the arbitrator is involved at the same time as the  arbitration as counsel for a client that is not related to the parties, in an un-related arbitration or litigation, but which raise the very same legal issues as those he must decide on as arbitrator ? This circumstance is not taken into account in the IBA Guidelines.[80] The view has been expressed that, where he or she is acting as counsel in one arbitration or litigation where one legal issue is at stake, the arbitrator does not have the required impartiality and independence to rule upon the very same issue as arbitrator in another case.  The arbitrator might indeed have an interest in solving the legal issue in a sense favourable to his or her client in the other arbitration. Or, saying it differently, the fact that he or she is acting as counsel for a client defending one legal position may prevent him or her from remaining un-biased towards that very same legal position. For this very reason, the fact that arbitrators generally also intervene as counsel in other arbitration has been criticised in the context of investment arbitrations[81].

  1. The District Court of The Hague was faced with this new form of conflict of interest, referred to as an ‘issue conflict’ or ‘vertical conflict’, in the two decisions it rendered on 18 October 2004 and 5 November 2004 in the case of The Republic of Ghana versus Telekom Malaysia Berhad.[82]

In this dispute, it became clear during the oral hearings of an arbitration involving these parties that The Republic of Ghana was basing his case on the authority of a judgment rendered recently in a case opposing consortium RFCC and the Kingdom of Morocco.  Arbitrator Prof. E. Gaillard, who had been appointed by Telekom Malaysia Berhad, made at that time a disclosure that he had been instructed to act as one of RFCC’s counsels to reverse the judgment rendered in its case against Morocco[83].  Immediately thereafter, The Republic of Ghana sought to challenge Prof. Gaillard.

The District Court considered that the intervention of counsel to RFCC was not compatible with that of arbitrator in the dispute, as the arbitrators had to be unbiased in examining the merits of the case.  It noted also that “Even if the 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 separated”.  The decision of the District court was however original, as it did not remove Prof. Gaillard, but stated that “there will be justified doubts about his impartiality if Prof. Gaillard does not resign as attorney in the RFCC/Morocco case”.  Responding to this invitation, Prof. Gaillard thereafter notified the parties that he had resigned as counsel to RFCC.

Notwithstanding his resignation, The Republic of Ghana initiated a second challenge, arguing that Prof. Gaillard’s role as counsel to RFCC had already tainted his intervention as arbitrator, as shown in preliminary decisions rendered by the arbitral tribunal.  This second challenge was rejected, on the grounds that decisions rendered so far by the tribunal were of a procedural nature and that Prof. Gaillard’s recent involvement as counsel to RFCC lead to no appearance of partiality.

  1. Some have interpreted the decisions of the The Hague District Court in the Gaillard challenge as a condemnation of the practice of sitting both as arbitrator and as counsel in investment arbitration[84].  This does however not appear to be correct.  The decision was justified by the very specific circumstances of the case, i.e. that an arbitrator was acting as counsel seeking the nullity of a decision used as an important legal authority by one party in the arbitration.  We believe that, indeed, in such circumstance, it is difficult for the arbitrator not to have his appreciation of the legal authority presented to him tainted by circumstances foreign to the case, in particular the arguments he has developed to obtain the nullity of that precise decision.  The question is fact-dependent and remains always the same: does the intervention of the arbitrator as counsel in another proceeding affect his independence of judgment as arbitrator? Or alternatively, does it give the appearance that his independence of judgment is affected?

Especially in its second decision, the District Court of The Hague was cautious not to prohibit, per se, the practice of sitting both as arbitrator and as counsel, stating that: “(…) it is generally known that in (international) arbitrations, lawyers frequently act as arbitrators.  Therefore, it could easily happen in arbitrations that an arbitrator has to decide on a question pertaining to which he has previously, in another case, defended a point of view.  Save in exceptional circumstances, there is no reason to assume however that such an arbitrator would decide such a question less open-minded than if he had not defended such a point of view before.  Therefore, in such a situation, there is, in our opinion, no automatic appearance of partiality vis-à-vis the party that argues the opposite in the arbitration”.

  1. A conflict resulting from the intervention of the arbitrator as counsel in a distinct unrelated, investment arbitration was also alleged by The Republic of Poland in its challenge against Judge Schwebel (see our discussion of this case hereinafter).  It was however not examined by the Brussels Court of Appeals as, raised only at the stage of appeals, the ground was considered inadmissible.

We believe it will often be the case that similar grounds for challenges will be considered untimely. Indeed, in particular in investment arbitration, the identity of counsel to the parties in dispute is frequently in the public domain, or at least known from the small investment arbitration community, as cases are publicly reported.  Hence, the intervention of the arbitrator as counsel in distinct investment arbitration proceedings will generally be known by the parties from the start.[85]

A prudent arbitrator may wish to draw the parties’ attention when signing his or her statement of independence that he or she is also acting as counsel for clients in a number of other unrelated arbitrations or litigations.  Disclosing more precisely a list of those interventions would be a possibility, but it may prove a temptation for the other party to object at the early stage of the proceedings; also, if the arbitrator makes such a disclosure, he or she should be certain to keep the list up-to-date, and disclose any further intervention[86].  The arbitrator should on the other hand, precisely as was done by Professor Gaillard in the case of Telekom Malaysia Berhad v. The Republic of Ghana, specifically disclose his or her involvement as soon as it appears that the case where he or she is intervening as counsel becomes critical in the arbitration.

(ii) Limit to the assimilation of the arbitrator with his law firm where such law firm does not act for a party but against a party in the arbitration (Belgium)

  1. It is sometimes considered that, for the purpose of identifying conflicts of interest, an arbitrator must entirely be assimilated with his law firm, or conversely. Yet we believe the Court of Appeals of Brussels has, in two recent cases, shed light on reasonable limits to such assimilation.

In the first case, decided on 14 January 2003[87], a challenge was raised against the sole arbitrator who had rendered a first award on the merits which was unfavourable to the petitioner and had re-opened the debate to hear the parties on the quantification of damages.  The challenge was based upon the fact that a lawyer partner with the arbitrator in the same law firm in Brussels was acting as counsel for a third party in a litigation against a sister company of the petitioner of the challenge, in a proceeding unrelated to the arbitration.

The Brussels Court of Appeals considered first that there was no allegation of subjective impartiality of the arbitrator himself, and that it was not demonstrated that the arbitrator had any personal interest in the case.  It examined thereafter the “objective impartiality” of the arbitrator, i.e. whether the involvement of his law firm partner as counsel in a proceeding against a sister company of the petitioner, did give rise to justifiable doubts about his impartiality and independence in the eyes of the petitioner.  The Court found that the adverse feelings his partner may have developed as acting adversary to the petitioner’s sister company was personal to his partner, and not transferred upon the arbitrator, who had his own professional integrity.  Accordingly, the Court rejected the challenge, deciding that the circumstance did not give rise to reasonable doubt about the impartiality or independence of the arbitrator.

  1. A similar type of reasoning was adopted by the Brussels Court of Appeals in its decision of 29 October 2007 in the case of The Republic of Poland v. Eureko B.V. and Judge Schwebel[88].

Judge Schwebel had been appointed as arbitrator by the Dutch company Eureko B.V., and was challenged some weeks after the arbitral tribunal had rendered an award recognising the liability of The Republic of Poland towards Eureko B.V.  The allegation was that Judge Schwebel had acted as co-counsel, together with the law firm of Sidley Austin, to a third party (the Canadian company Cargill) in a distinct investment arbitration against The Republic of Poland, as was mentioned in a web report.  However, the web report was erroneous and was corrected.  The Republic of Poland thereafter based its challenge on the fact that Judge Schwebel had a close relationship with the law firm of Sidley Austin, and that it was not disputed that Sidney Austin was acting as counsel to Cargill in the separate investment arbitration against the Republic of Poland.

Judge Schwebel was neither a partner with, nor of counsel with Sidley Austin, but had developed a close relationship with that firm following his retirement as President and judge at the International Court of Justice, and had initially been mentioned in the firm’s web site.  The Brussels Court of Appeals considered however that, even if he had been a partner with Sidley Austin, the challenge would be without merits.  Indeed, as in its first decision, the Court considered that the psychological attitude that may have been developed by the lawyers acting against The Republic of Poland remained theirs, and would not be transferred to Judge Schwebel acting as arbitrator. In a second line of reasoning, the Court considered that Judge Schwebel was not a partner of Sidley Austin and was moreover independent from that law firm.

The Court further considered irrelevant the fact that Judge Schwebel had not disclosed his relationship with Sidley Austin or the fact that some lawyers at Sidley Austin were acting adversely to The Republic of Poland, considering that an absence of disclosure did not lead to automatic challenge.  The Court referred in that regard expressly to the IBA Guidelines, whereas The Republic of Poland had argued that the circumstances of the case were those of clause 3.4.1. of the Orange List of the Guidelines and that the absence of disclosure itself raised doubts about the arbitrator’s impartiality and independence.

  1. It can be observed that the IBA Guidelines themselves treat differently the situation resulting from the involvement of the arbitrator’s law firm as counsel to a party or affiliate of a party in the arbitration, and that resulting from the involvement against a party in the arbitration.

Whereas current involvement of the arbitrator’s law firm as counsel to a party or an affiliate of a party is included in the Waivable Red List where the commercial relationship is regarded as significant (clause 2.3.6.), the involvement of the law firm against a party in the arbitration or one of its affiliate is only mentioned in the Orange List (clause 3.4.1.).  Also, past involvement needs to be disclosed when it is in favour of a party (Orange List, clause 3.1.4.), whereas it needs not to be disclosed in the case of a past involvement against a party (Green List, clause 4.2.1.).

We believe these differences are justified by the very reasons that were taken into account by the Brussels Court of Appeals in its two decisions.  There is a risk of bias favourable to a client of the law firm for all lawyers of that law firm, for the reason that it can be considered that there is a general expectation of a satisfactory business relationship with that client, which may be impaired by the client’s dissatisfaction towards an award rendered by a member of the firm, hence the fact that the situation may prevent the arbitrator from exercising an independent judgment.  On the other hand, where the law firm is acting for a client against a party to the arbitration, there might be a bias unfavourable to the adverse party, but this bias being of mere psychological nature will remain personal to the lawyers involved in that case, and will not be transferred to the other lawyers of the firm.  The other lawyers of the firm and the firm itself remain completely neutral vis-à-vis the adverse party, as they are not expecting business from that party, nor have they any personal experience with such party.

(iii) The adverse consequences of incomplete disclosure (France)

  1. A case that has also attracted wide attention is the Tecnimont case, rendered by the Paris Court of Appeals on 12 February 2009 in circumstances involving incomplete disclosure by an arbitrator of his law firm’s interventions[89].

The arbitration involved an Italian company (Tecnimont) and a Greek company (Avax), in an ICC proceeding with a seat in Paris.  Each party had appointed its arbitrator and the two party-appointed arbitrators had selected the Chairman, a prominent arbitrator who was of counsel with a large law firm, and seated in Paris.  In his statement of independence of 30 October 2002, the Chairman had disclosed that, in the preceding year, the Washington and Milan offices of his law firm had given assistance to the mother company of Tecnimont, adding that the matter was closed, and that he had himself never worked for that client.

In July 2007, in the period preceding the rendering of a preliminary award on liability, Avax requested information from the Chairman about his firm relationship with Tecnimont, after having gained knowledge of some connection on the internet[90].  The Chairman replied to that enquiry by two separate letters revealing involvements of his law firm that had not been disclosed from the start. This information was not considered satisfactory to Avax, which challenged the chairman before the ICC.  The ICC denied the challenge and the arbitration thereafter proceeded, Avax reserving its rights and requesting again further information from the Chairman.  The arbitral tribunal rendered shortly thereafter, on 10 December 2007, a preliminary award on liability, unfavourable to Avax.  New requests for information were submitted by Avax to the Chairman, who revealed new occurrences of his firm’s intervention towards affiliates of Tecnimont, or corrected previous information given in that respect. As Avax initiated the annulment proceeding on 3 March 2008, the Chairman offered his resignation, which was accepted.  In his letter, the Chairman, was quoted to say that he “did not exclude that a party may see in the situation an incompatibility with the requirement of independence”.

At the end, it appeared that, during the period of the arbitration, the law firm of the Chairman had been involved as counsel to Tecnimont or affiliates of Tecnimont in quite a number of occasions, through its Washington office, in a project in China, and also through the Paris office of the firm.  The Paris Court of Appeals concluded from these numerous interventions and the total of fees paid by affiliates of Tecnimont to the law firm of the Chairman during the period of the arbitration, that a conflict of interest was established, and that due to the lack of independence of the chairman, the arbitral tribunal had not been regularly constituted, justifying the annulment of the award.

  1. This decision is original in two respects.  From a procedural point of view, it raised interesting questions as it was apparently the first time the French Courts had to examine whether a party that had failed in a challenge before the ICC could still invoke (partially) the same circumstances to justify the later annulment of the award.

On the merits on the other hand, the decision illustrates the importance the French courts attribute to the duty to disclose, and the dangers of non-disclosure or, may be worse, incomplete disclosure.  It stresses also the requirement that the disclosure be continuous. As observed by a commentator, the decision did not even examine whether the arbitrator had lacked impartiality and whether the circumstances that were invoked created a risk that his independent judgment in the case be impaired.  The focus was only on disclosure, and his failure to operate a full, complete and continuous disclosure[91].

  1. The links between the recusal proceeding and the annulment proceeding, and between a decision on recusal by an arbitral institution and the powers of judicial courts in the annulment proceeding raise interesting questions that are not always clearly resolved. These questions are influenced by the contractual nature of arbitration on the one hand, hence the fact that the parties may in principle validly organise their arbitration, including the recusal proceeding trough reference to the arbitral institution’s rules, and on the other hand by the fact that the impartiality and independence of the arbitrator is a fundamental feature of arbitration, linked to the guarantee of due process.

Where the recusal proceeding occurs before the judiciary court and such court rejects the challenge, the French Court would normally not accept that the claimant raise the same alleged lack of impartiality or independence as a ground for setting aside the award rendered thereafter by the arbitral tribunal, because of the res judicata effect of the first decision[92].  The Paris Court of Appeals seems to have decided in the Tecnimont case that claimant may however normally do so where the challenge of the arbitrator was not heard by a judiciary court, but by the arbitral institution[93].

The difference of treatment between the two situations appears to be justified, as the decision taken by the arbitral institution, in this case the ICC, is generally considered to be of an administrative nature, as opposed to a jurisdictional nature[94]. In practice, it appears however somewhat unsatisfactory, as its consequence is that the rejection of a challenge by the ICC will not definitely cure the incident, which may be used months or years later to obtain the annulment of the award.[95]

In this case, Tecnimont had also claimed that Avax was to be denied the right to invoke the particular circumstances of the case as it had, according to Tecnimont, failed to raise the ICC challenge proceeding within the strict delay of 30 days provided for by art. 11.2. of the Rules.   The ICC Court of Arbitration had rejected the challenge but without indicating whether its decision was based upon non compliance with this strict delay, or whether it had found the challenge without merits.  The Paris Court of Appeals did not directly address this interesting question[96].

  1. On the merits, the decision has received wide attention due to the apparent severity of the sanction of incomplete disclosure by the arbitrator of his law firm’s involvement with affiliates of the parties.

It does not appear to have been even alleged by Avax that the Chairman of the tribunal knew of the circumstances that led to him being considered non-independent.  If independence is expressed in terms of being deprived of any links likely to impair the arbitrator’s judgment, how is it even conceivable not to be independent when being unaware of these links? Against this, it is often alleged that precisely, independence must be assessed objectively, on the basis of the existence of those links, as what counts is that there be no appearance of lack of impartiality or independence, and no circumstances casting justifiable doubts on the arbitrator’s impartiality or independence[97].

The Paris Court of Appeals did not justify its decision by the existence of justifiable doubts about the arbitrator’s independence or impartiality, but, rather, by the existence of a conflict of interest, adopting the terminology which is generally used by lawyers, but not used traditionally for assessing the arbitrators’ independence and impartiality[98].

The decision does not contain any reference to the IBA Guidelines, and we don’t know if these were invoked by the parties in the proceeding.  Analysing the facts of the case through the Guidelines, we believe however that the circumstances revealed by the arbitrator may have been likely to fall within the “Waivable Red List”, under clause 2.3.6., i.e. “The arbitrator’s law firm currently has a significant commercial relationship with one of the parties or an affiliate of one of the parties[99], or alternatively within the “Orange List”, under clause 3.2.1., depending on whether the relationship of the arbitrator’s law firm with the affiliate company of Tecnimont was to be considered as “significant”.  In this regard, the Paris Court of Appeals noted that the arbitrator’s law firm had invoiced to Tecnimont and its affiliate Sofregaz legal fees for an amount of 116.057 USD[100]. Hence, it results from the comparison of the situation with the IBA Guidelines that the decision of the Paris Court of Appeals was maybe not so innovative after all.

  1. From a practical point of view, we believe this decision is useful to remind to arbitrators, prospective arbitrators and law firms generally, the importance of checking all conflicts before accepting an appointment, and of closely monitoring any conflict during the whole duration of the arbitration.  Also, particular attention should be paid to the ownership structures of clients, in order to identify affiliates of the parties and to changes to such ownerships.

One commentator considers that an element that has certainly played against the arbitrator in that case was the fact that, irrespective of the fact that he had not spontaneously informed the parties of links that he ignored, he failed in his duty to provide in one time accurate information about his law firm’s activities, upon being questioned by Avax [101].  Indeed, the Paris Court of Appeals noted that the arbitrator had not given an up-front answer to the interrogation that were made to him, but had given numerous answers, each time with new information[102].   We remind the recommendation we made in the preceding chapter, that the arbitrator faced with a challenge (or even with mere questions) acts very carefully and that his responses be accurate and complete.  The arbitrator has indeed the duty to respond to the parties’ interrogation.  We are however not sure we can agree with L. Degos that an arbitrator looses at that moment any discretion as to the content of what he should disclose.  We believe that, where the interrogations of a party would address subjects that are clearly beyond the scope of a reasonable enquiry, the arbitrator should retain his ability to decline the request.  Going too far in the answering of questions may indeed take him to a never-ending process.

We believe also that the fact that the arbitrator offered himself his resignation, even more by stating at that occasion that he understood Avax’s doubts about his independence, weighed in favour of the recognition by the Court of a lack of independence.  As expressed in the preceding chapter, we believe an arbitrator should be very cautious before considering offering his resignation when his is challenged or, if he reasonably believes the challenge has merits after discovering circumstances he was unaware of, he should resign as soon as possible, before rendering the award.

IV.- Conclusions

  1. The subject of the impartiality and independence of the arbitrator and its practical consequences is a wide and very interesting subject, and we believe in constant evolution concerning its applications.  Rising awareness of the issue by prospective arbitrators and arbitrators and the development of common set of standards such as the IBA Guidelines should contribute to application by arbitrators of the best practices, and increasing anticipation of the decisions in the case of challenges.  A decline in the number of challenges is however difficult to expect, in the current environment, but more likely a rise in the number of decisions addressing these interesting issues.

___________________________


[1]This article is dedicated to the memory of André Faurès.

[2] Without any exhaustivity, reference can be made, apart from relevant treatment of this subject in all major books on arbitration, to the more specific following contributions. In Belgium: D. Matray and A.J. van den Berg, “L’indépendance et l’impartialité de l’arbitre”, in L’arbitre: Pouvoirs et statut, Colloquium CEPANI, Bruylant, 2003, p. 83 et seq.- G. Keutgen, “Propos sur le statut de l’arbitre”, in Mélanges P. Van Ommeslaghe, p. 921 et seq.- G.A. Dal, “De la récusation des arbitres”, in Liber Amicorum Guy Keutgen, Bruylant, Bruxelles, 2008, p. 447 et s. In France, M. Henry, “Les obligations d’indépendance et d’information de l’arbitre à la lumière de la jurisprudence récente”, Revue de l’arbitrage, 1999, p. 193 et seq. and Le devoir d’indépendance de l’arbitre, LGDJ, Bibliothèque de droit privé, tome 352, 2001 – T. Clay, L’arbitre, Dalloz, 2001, pp. 321 et s.  Our focus in this contribution for the CEPANI will on the other hand be on Belgium and a number of jurisdictions that are close to it.

[3] See D. Matray and A.J. van den Berg, o.c., p. 85, n° 2.- see also G. B. Born, International Commercial Arbitration, Wolters Kluwer, 2009, p. 1672, Discussing, and refuting, proposals that arbitrator be subject to licensing requirements, to ensure minimum standards of quality, experience, training and ethical conduct.  For Born, a standard of quality of arbitrators is on the contrary achieved by the parties’ autonomy and freedom to choose their arbitrators.

[4] See C. Salomon, “Selecting an international arbitrator: five factors to consider”, in Mealey’s International Arbitration Report, vol. 17, October 2002: among the five factors identified, factor two recommends the choice of an “impartial but known party-appointed arbitrator”: “(…) it is very common to appoint an arbitrator who is able to respond that he or she is ‘independent’ but who has at least a historical connection to counsel by virtue of bar association activity, prior cases or other business contacts.” See also D. Hascher, “Comparison between the independence of state justice and the independence of arbitration”, in ICC Special Supplement 2007: independence of arbitrators, p. 81-82: “Arbitration practice clearly shows that when it comes to choosing arbitrators, the parties regularly opt for people who have or have had dealings with the parties or their advisers and that it cannot really be otherwise”.

[5] See D. Matray and A.J. van den Berg, o.c., p. 89, n° 5, referring to the “équivoque de l’arbitrage“.

[6] The fact that the arbitrators are paid by the arbitral institution or directly by the parties does not change the situation we believe.

[7] See T. Clay, o.c., p. 232, n° 276, and the references and developments that follow.  Attention could also be paid to the independence of the arbitral institution within which the arbitration is administered, but this would go beyond our subject.  On this interesting question, see e.g. the developments of D. Hascher, o.c., p. 78 et seq.

[8] We will not discuss herein differences of conception that have existed or may still exist in certain countries between the chairman or sole arbitrator and the party-appointed arbitrators, as these differences no longer exist in the vast majority of countries.

[9] See article 1690 § 1 of the Judicial Code: “Les arbitres peuvent être récusés s’il existe des circonstances de nature à soulever des doutes légitimes sur leur impartialité ou leur indépendance“.  This text has been adopted following the last reform of 1998, and was based upon a CEPANI proposal made after the UNCITRAL Model law (article 12.2), whereas Belgian law previously referred to the list of causes of recusal for judges from the judiciary courts.

[10] The Code has therefore not followed the UNCITRAL Model Law on that respect (see article 12.1 of the Model law on disclosure: “When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose any circumstances likely to give rise to justifiable doubts as to his impartiality or independence.  An arbitrator, from the time of his appointment and throughout the arbitral proceedings, shall without delay disclose any such circumstances to the parties unless they have already been informed of them by him”).

[11] See article 3 of the Rules of good conduct for proceedings organized by CEPANI (Schedule II to the CEPANI Rules of arbitration): “The prospective arbitrator, chairman of the mini-trial committee, mediator, expert or third person shall accept his appointment only if he is independent of the parties and of their counsel. If any event should subsequently occur that is likely to call into question this independence in his own mind or in the mind of the parties, he shall immediately inform the Secretariat which will then inform the parties. After having considered the parties’ comments, the Appointments Committee or the Chairman of CEPANI shall decide on his possible replacement. It or he shall make the decision alone and shall not disclose the reasons.” On the analysis of this provision and its comparison with the ICC statement of independence, see G. Keutgen, o.c., p. 928 et seq., n° 12 et seq.

[12]The compatibility of this rule with article 6.1 of the Convention is however debated, depending on the consequence of the rule.  Does it mean that a lack of independence or impartiality can never be invoked to justify the setting aside of an award, or is it possible to invoke it when the party becomes aware of the circumstance it invokes only after the award has been rendered?  See G. Keutgen, o.c., who seems to limit the rule of art. 1704.5 to the situation where the party had prior knowledge of the lack of independence or impartiality, and failed to invoke it.  See also H. Boularbah, who considers that a lack of impartiality can always be invoked through the allegation of a violation of public policy (“Ouvertures à cessation des décisions judiciaires et causes d’annulation des sentences arbitrales: brèves comparaisons sur le contrôle de deux catégories d’actes juridictionnels”, in Mélanges John Kirkpatrick, Bruylant, Bruxelles, 2003, p. 73 et s., spec. p. 96, n° 22). See a thorough discussion of this question by D. Matray and A.J. van den Berg, o.c., p. 97 et seq., n° 15 et seq.

[13] This is the current situation under the Judicial Code, with the adverse consequence of allowing important delays in the case of an ad hoc arbitration with a seat in Belgium, as the Judicial Code further provides that a challenge results in a stay in the arbitral proceedings.  See, criticizing this situation: G.A. Dal, o.c., p. 448 et seq.  The situation should however hopefully change with the next reform of Belgian arbitration law, where it can be expected that either a single jurisdiction will hear challenges, or at the very least summary proceedings will be provided for to hear challenges, as is the case for judges of the judiciary courts.

[14] The provision applies to domestic arbitration and also to international arbitration, by virtue of article 1495 of the Code, save derogatory provisions.  The rule has been recognised as being a general rule, certainly applicable to international arbitration (Fouchard, Gaillard et Goldman, Traité de l’arbitrage commercial international, Paris, Litec, 1996, p. 596, n° 1056).

[15] Fouchard, Gaillard et Goldman, o.c., p. 603 et seq., n° 1072 et s.- T. Clay, o.c., p. 372 et seq., n° 442 et seq., noticing that nearly all legal grounds for setting-aside have been used in connection with an alleged lack of independence or impartiality or an arbitrator, whereas he suggests that all challenges should normally be related to violation of public policy (in the same vein, see M. Henry, Petites Affiches, 21 July 2009, n° 144, n° 7).  There are quite a number of French decisions annulling an award for lack of impartiality or independence of an arbitrator, the most recent known to us being the decision rendered by the Paris Court of Appeals in the Tecnimont case (discussed infra, in the third chapter of this contribution).

[16] Article 24 of the Arbitration Act: “A party to arbitral proceedings may (upon notice to the other parties, to the arbitrator concerned and to any other arbitrator) apply to the court to remove an arbitrator on any of the following grounds: (a) that circumstances exist that give rise to justifiable doubts as to his impartiality, (…) (d) that he has refused or failed (i) properly to conduct the proceedings (…)”.

[17] Article 68 of the Arbitration Act indeed provides that an award may be challenged in the case of “serious irregularities affecting the tribunal, the proceedings or the award” and that “serious irregularity means an irregularity of one or more of the following kinds which the court considers has caused or will cause substantial injustice to the applicant- (a) failure by the tribunal to comply with section 33(…)”.  It seems to be disputed whether the test for challenging an arbitrator and an award is the same, or whether a stronger irregularity is needed for setting aside an award; on this discussion, see L. Epstein, “Arbitrator Independence and bias: the view of a corporate in-house counsel”, in ICC Special Supplement 2007: Independence of arbitrators, 2008, p. 55 et seq.

[18] L. Epstein, o.c., p. 61, making a reference to the case of AT§T v. Saudi Cable, and the rejection by the Court of Appeals of the challenge made to the arbitrator based upon his failure to disclose his charge as non-executive director of a competitor of one party.

[19] Such is the current situation.  It was said at a recent ICC colloquium on Arbitrator independence (Paris, 4 June 2010) that an express provision concerning impartiality was among the changes being contemplated by the ICC working group on the revision of the Rules.  The future will tell us whether the new version of the Rules will incorporate such reference.

[20] See the new form (which entered into effect as from January 2010) in ICC International Court of Arbitration Bulletin, vol. 20, 2009, no.2, p. 7.  It is also stated in the form that “any disclosure should be complete and specific, identifying inter alia relevant dates (both start and end dates), financial arrangements, details of companies and individuals, and all other relevant information”.

[21] See art. 11 of the Rules, which refers to the challenge of an arbitrator “for an alleged lack of independence or otherwise”.

[22] Art. 11 of the UNCITRAL Arbitration Rules as revised in 2010; comp. art. 9 of the old Rules.

[23] M. de Boisséson, Le droit français de l’arbitrage interne et international, GLN Joly editions, 1990, p. 782, n° 770. See also Fouchard, Gaillard and Golman, o.c., p. 587-588, n° 1036 – D. Matray and A.J. van den Berg, o.c., 89-90, n° 6.

[24] On such a definition, see e.g. G. Born, o.c., p. 1474.

[25] D. Matray and A.J. van den Berg, o.c., p. 90, n° 6.

[26] Cf. infra, the question of “issue conflict” discussed in the third chapter of this contribution.

[27] Lord Hewart CJ in the case of R v. Sussex Justice (1924).

[28] Especially when the arbitral institutions have to decide themselves on challenge or confirmation of prospective arbitrators, they may also take into consideration, implicitly, a more general aim, beyond the interest of the parties to the dispute at stake, to promote the confidence in arbitration and hence avoid any appearance or doubts on the impartiality of arbitrators.

[29] Th. Clay, o.c., p. 245 et s., n° 292, and the references cited therein.

[30] Th. Clay, o.c., p. 248 et seq., n° 295 et seq., justifying his refusal to distinguish both notions.

[31] D. Matray and A.J. van den Berg, o.c., p. 94, n° 12 – G. Keutgen, o.c., p. 936.

[32] On the combination of these IBA Guidelines with other disclosure requirements, see C. Salomon, J. Alcala and C. Cardozo, “Arbitrator’s Disclosure Standards: the uncertainly continues”, Dispute Resolution Journal, August/October 2008, p. 77 et seq.

[33] See S. Greenberg and J.R. Feris, “References to the IBA Guidelines on Conflicts of Interest in International Arbitration when Deciding on Arbitrator Independence in ICC Cases”, in ICC International Court of Arbitration Bulletin, Vol. 20, 2009, no. 2, p. 33 et seq.

[34] See the listing and examining of the case-law making reference to the IBA Guidelines in “The IBA Guidelines on Conflicts of interest in international arbitration: the first five years 2004-2009”, The IBA Conflicts of interest Subcommittee (chaired by Matthias Scherer), Dispute Resolution International, Vol. 4, no. 1, May 2010, p. 5.

[35] See PCA Case no.IR-2009/1, Challenge to be decided by the Secretary General of the Permanent Court of Arbitration pursuant to an agreement concluded in ICSID case no. ARB/08/6 between Perenco Ecuador Limited ad the Republic of Ecuador, December 8, 2009

(http://ita.law.ca/documents/PerencovEcuador-challenge.pdf)

[36] A. El-Kosheri and K. Youssef, “The independence of international arbitrators: an arbitrator’s perspective”, in ICC Special Supplement 2007: independence of arbitrators, 2008, p. 43 et seq., esp. p. 47.

[37] G. Keutgen, o.c., p. 930, n° 13, identifying the contact the arbitrator has with a party prior to his or her designation as the only ex parte contact that is authorized.

[38] Th. Clay, o.c., p. 305 et seq., n° 360 et seq.: “En d’autres termes, à peine le futur arbitre discute-t-il avec les parties qu’il doit déjà être indépendant.  Aux premières heures de la future instance, la personne pressentie est déjà, potentiellement, arbitre”.

[39] This is considered by T. Clay, o.c., p. 306, n° 362.

[40] See Lord Steyn: “England – The Independence and/or Impartiality of Arbitrators in International Commercial Arbitration”, ICC Special Supplement 2007- Independence of Arbitrators, p. 98 et seq.

[41] Reported by Lord Steyn, o.c., and by T. Clay, o.c., p. 308, n° 366.

[42] Lord Steyn, o.c., p. 99; Th. Clay, o.c., p. 307, no. 365.

[43] See e.g. the wise words in the ICSID decision rendered on the challenge of arbitrator Dr. Yoram Turbowicz, by the two other members of the panel, arbitrators Hon. Davis R. Robinson and Dr Stanimir A. Alexandrov, in the case of Alpha Projektholding GmbH v. Ukraine (…) : “There is nothing in the record to indicate that this ‘brief phone call’ dealt with any issue other than the question of Dr Turbowicz’s availability. (…) The Two Other Members believe that such inquiries are not out of the ordinary as a matter of practice. (…) Indeed, it is common to nominate an arbitrator after discussing whether he or she is in a position to accept the assignment” (p. 26 and 27 of the decision, available through http://www.globalarbitrationreview.com).

[44] A. El Kosheri and K. Youssef, o.c., p. 50, which refer to the ‘no questioning on the merits’ rule, and add that : “To avoid traps or twilight zones between legitimate and illegitimate questions, an arbitrator should avoid any questions of a substantive nature.

[45] On this duty, see the story so well written by J.D. Bredin, “La Révélation. Remarques sur l’indépendance de l’arbitre en droit interne français”, in Etudes de procédure et d’arbitrage en l’honneur de Jean-François Poudret, Lausanne, 1999, p. 349.

[46] It may therefore come as a surprise that these circumstances should fall within the Waivable Red List (2.1.) of the IBA Guidelines and not on the Red List; however, it is true that if the other party, after having been fully informed of the arbitrator’s past intervention, including its content, still accepts to have that arbitrator decide the case, there might not be a public policy reason to prevent such arbitrator from acting.

[47] The arbitrator may not in this respect restrict himself to facts known to him; he should made due enquiries on facts even not known to him, in particular concerning his law firm activities.

[48] This concerns not only the arbitrator who is a partner with a law firm, but also the arbitrator who is of counsel, and it may even also involve situations where the arbitrator has none of these qualities, but has however a strong connection with one particular law firm, depending on the particulars of that relationship.  The case-law on challenges or annulment does indeed cover all sorts of hypothesis.  Cf the Tecnimont case, discussed in the third chapter of this contribution, where the arbitrator was not a partner but of counsel with the law firm and the case decided by the Supreme Court of Sweden on 19 November 2007 (Petites Affiches, 3 October 2008, n° 1999) where the arbitrator was not even of counsel with the law firm, but the significant relationship of the law firm with an affiliate of a party was considered as disqualifying the arbitrator (taking into account that the arbitrator himself had rendered opinions to that affiliate).  In the case decided by the Court of Appeals of Brussels on 29 October 2007 (discussed in the third chapter of this contribution), however, the Court proceeded to an examination of the relationship of the arbitrator with the law firm with which it was alleged he had a strong connection, but concluded  he was exercising his practice independently from that law firm (law firm which was itself involved not as counsel to a party but as counsel to an unrelated third party but in an arbitration against a party in the arbitration).

[49] Requiring therefore that the conflict check proceeding of the law firm of the arbitrator identifies the ownership structure of the clients of the firm.

[50] A strong relationship between the arbitrator himself and a counsel may indeed prevent the arbitrator to exercise unbiased judgment on the case.  Concerns also exist in circumstances where a counsel proceeds to repeat appointment of the same arbitrator, as this may create a dependence between the arbitrator and that counsel.  This concern of repeat appointment is addressed in the Orange List of the IBA Guidelines, clause 3.3.7.  A similar concern of repeat appointment exists obviously vis-à-vis the parties (see Orange List, clause 3.1.3.) taking into consideration however that in certain very specialized fields of law the pool of experienced arbitrators available for selection will be very small, as acknowledged by footnote 6 in the Guidelines; see the discussion of the issue of repeat appointments in F.Z. Slaoui, “The rising issue of ‘Repeat Arbitrators’: a call for clarification”, Arbitration International, vol. 25, N.1, LCIA 2009, p. 103 et seq.

[51] See for example the recent case of an arbitrator accepting an appointment but indicating in his acceptance that he acted in a recent distinct arbitration as counsel against a party; such arbitrator was unsurprisingly not confirmed.  In such a situation, one might wonder whether the arbitrator should not simply decline to act in the first place.

[52] The involvement of an arbitrator as speaker in seminar sponsored by the law firm advising a party has apparently been examined in two recent decisions in Russia, discussed by R. Zykov in Kluwer Arbitration Bolg. The mere fact that an arbitrator participated to a seminar together with the counsel of one party has also sometimes be invoked in France, but was always rejected; see Paris, 13 March 2008, unreported, discussed by Th. Clay in Recueil Dalloz 2008, p. 3111, Arbitrage et modes alternatifs de règlement des litiges.

[53] Although the English practice sees no objection to the fact that an arbitrator is a member of the same barristers’ chamber as a counsel appearing before him, this practice is less accepted in other countries and therefore disclosure should be made as provided by the IBA Guidelines (Orange List, clause 3.2.2.).

[54] See J. Fry and S. Greenberg, “The Arbitral Tribunal: applications of Articles 7-12 of the ICC Rules in Recent Cases”, ICC International Court of Arbitration Bulletin, Vol. 20, No. 2, 2009, p. 16: “Potential arbitrators should not be nervous about full disclosure.  They should have confidence in the Court’s decision on whether the disclosed fact is significant.  Disclosure is likely to avoid the potential embarrassment and delays that could result if facts that have not been disclosed are subsequently uncovered.  Moreover, proper disclosure protects an arbitrator by flushing out any challenges at the outset of a case“.

[55] See however, in Switzerland, the decision of the Tribunal federal of 20 March 2008 (commented by Th. Clay in Recueil Dalloz, 2008, p. 3111, Arbitrage et modes alternatifs de règlement des litiges, also discussed in “The IBA Guidelines on Conflicts of Interest in International Arbitration : The First Five Years 2004-2009”, o.c., p. 18 et seq.), rejecting a challenge in a case where two arbitrators were, together with counsel to the adverse party, members of the same professional association – whose principal purpose was to favour the professional interests of its members – for a variety of reasons, including the fact that such memberships were notorious.

[56] See e.g. Article 33 (1)(a) of the English Arbitration Act.

[57] The mere dissatisfaction of a party towards an award or preliminary measures ordered by a tribunal does not indeed, obviously, constitute legitimate doubts about the tribunal’s independence and impartiality (see e.g. the recent report of a challenge to the three members of a tribunal having ordered preliminary measures against a party and its dismissal, in GAR, 14 July 2010: “Bolivia ramps up anti-ICSID rhetoric”).

[58] Th. Clay, o.c., p. 351 et seq., n° 417 et seq.- G. Keutgen, o.c., p. 930, n° 13.- A. El-Kosheri and K. Youssef, o.c., p. 51, who note that: “It is one of the golden rules of the international consensus on arbitrator independence and it is generally observed.

[59] Article 3 of the Rules of good conduct, Appendix II to CEPANI Rules.  A similar rule is also expressed by some ethical codes of conduct, see T. Clay, o.c., p. 352, and ref. cited in note 5.

[60] T. Clay, o.c., p. 354, n° 420 et seq.: “Le secrétaire arbitral a (…) les pouvoirs étendus pour converser avec les parties: il est, en quelque sorte, la voix des parties auprès du tribunal, et inversément”.  This author at the same time is very strict in limiting the actions of the secretary to administrative and organisational tasks, and considers the secretary should never assist to the deliberations of the tribunal or prepare a draft of the award.

[61] The discussion of past arbitration may be treated differently, as the arbitrator has finished his mission, and may therefore be considered to be released of his or her obligations of impartiality and independence; the question to be examined might in that connection be more that of a breach of confidentiality of the proceeding or of the deliberation.

[62] PCA Case no.IR-2009/1, Challenge decided on 8 December 2009 by the Secretary General of the Permanent Court of Arbitration pursuant to an agreement concluded in ICSID case no. ARB/08/6 between Perenco Ecuador Limited and the Republic of Ecuador (http://ita.law.ca/documents/PerencovEcuador-challenge.pdf). An argument for breach of confidentiality had also been raised by the challenging party (Ecuador), but was not retained.  As mentioned earlier, the parties to the dispute had reached an agreement pursuant to which any challenge to an arbitrator was to be decided by the Secretary General of the Permanent Court of Arbitration, applying the IBA Guidelines.

[63] See the discussion of the Tecnimont case in the third chapter of this contribution.

[64] Taking into account, also, that an arbitrator is generally not authorized to resign without the agreement of the parties or of another authority.  Under Belgian law, see art. 1689 of the Judicial Code.

[65] J. Fry and S. Greenberg, o.c., p. 13, n° 6.

[66] As we believe serious animosity between the arbitrator and a party, expressed in a litigation, should be regarded as impairing the impartiality of the arbitrator.  We note however that the IBA Guidelines, dealing with conflict of interest and therefore more with independence than impartiality, do not cover the circumstance of animosity or litigation among the arbitrator and a party.

[67] Unless we are mistaken, this is the attitude that was adopted by Prof. Gaillard in the challenge initiated against him by the Republic of Ghana before the The Hague District Court (infra, third chapter of this contribution, for a discussion of this case).

[68] Subject to the debate we have identified above, see footnote 12.

[69] G. Born, o.c., p. 2617, which notes that a party must however timely record its objections to the arbitrator’s independence and impartiality.

[70] Even if their decision is not considered as a judicial decision, the system does not appear to be very healthy.  Similar doubts have been reported to be expressed by arbitrator Brigitte Stern at the BIICL Investment Treaty Forum held in Paris on 2 July 2010 (reported in GAR, 19 July 2010).

[71] Or the breach by the arbitrator of an obligation to disclose certain circumstances, where such a duty to disclose is explicit.

[72] Subject to the application of any immunity or contractual exclusion of the arbitrator’s civil liability, question which will not be discussed herein.

[73] In which case, the claimant will seek compensation of the damage resulting in the delay in the arbitration. R.O. Dalcq and A. Van Oevelen, “La responsabilité de l’arbitre”, in L’arbitre: pouvoirs et statut, colloque CEPANI, Bruylant, 2003, p. 196.- S. Raes, “Aansprelijkheid van deskundigen en scheidslieden”, R.W., 1987-88, p. 1236-1237.

[74] In which case the damage will result form the new arbitration proceedings to be conducted.  See for such a case the decision of the Finnish Supreme Court of 31 January 2005, commented by G. Möller, “The Finnish supreme court and the liability of arbitrators”, Kluwer Law Journal, 2006, Vol. 23, Issue 1, pp. 95-99.

[75] Especially under French law, giving the importance the Code of Civil Procedure places on disclosure.

[76] Challenges to arbitrators can indeed sometimes be used as dilatory tactics in the arbitration.  Especially in the context of the increasing practice of partial awards, a party that is not satisfied with a first partial award might be tempted to suddenly conduct extensive searches on the arbitrators’ connections, in the hope of finding circumstances it may invoke in the context of a challenge, thereby at the very least slowing down the furtherance of the arbitration.  Such a tactic has however its own dangers, as an unsuccessful challenge may be detrimental to the party that initiated it, in terms of its own credibility vis-à-vis the entire Tribunal.  In extreme circumstances, it is also possible that a party voluntarily creates a link with the arbitrator, in order to mount a later challenge and get rid of an undesired arbitrator (see Th. Clay, o.c., p. 342, n° 404).  Although it was not alleged to be the case of Slovenia who requested an English barrister of the same Chamber as the President of the Tribunal to join his team of counsel, it is interesting to note that, in that case, the opposing party did not challenge the President of the Tribunal but the new counsel to Slovenia, and won on that challenge, the Tribunal noting the general rule that parties may seek their representation as they see fit, but also the overriding and prevailing principle of the immutability of properly constituted tribunals (see reference to the Hrvatska Elektroprivreda d.d. v. The Republic of Slovenia case, in two footnotes from this one).

[77] See also G. Born, o.c., p. 1513-1515.

[78] See recently the case of a party seeking the removal of a new member of the team of opposite counsel, on the basis of a relationship between that counsel and one arbitrator: decision rendered by the ICSID tribunal in Hrvatska Elektroprivreda d.d. v. The Republic of Slovenia (ICSID Case No. ARB/05/24), where the tribunal decided that the new counsel announced by Respondent could not participate as counsel in the case, on the basis of the fact that he was a member of the Barrister Chambers where the President of the Tribunal was door tenant (Decision dated 6 May 2008, available from ICSID web-site).  Challenges have also recently been motioned against the judges of the judiciary court deciding on the annulment of an award; see Cass. France, 11 March 2009 (reported in Actualités Dalloz), rejecting a challenge that had been made against a judge of the Paris Court of Appeals, on the basis of his past quality of secretary general of the Court of Arbitration of the ICC.

[79] See the fact that such circumstances are listed in the Waivable Red List of the IBA Guidelines, clauses 2.1., 2.3.5.

[80] The IBA Guidelines only contemplates in the Orange List the circumstance that “The arbitrator has publicly advocated a specific position regarding the case that is being arbitrated, whether in a published paper or speech or otherwise” (3.5.2.), which does not cover the circumstance where the position taken by the arbitrator is not on the case but on a legal question, and the advocacy is not public, but in a distinct arbitration or litigation.  The expression of a general opinion “concerning an issue which also arises in the arbitration” is listed in the Green list – i.e. matters not needing to be disclosed – under 4.1.1., but only where it is “a published general opinion (such as in a law review article or public lecture)“.

[81] See Professor Buergenthal, “The problem of disputes, dispute settlement procedures and respect of the rule of law”, Transnational Dispute Management, May 2006 and H. Mann, “The emperor’s clothes come off: a comment on Republic of Ghana v. Telekom Malaysia Berhard, and the problem of arbitrator conflict of interest”, Transational Dispute Management, January 2005, vol. 2, issue I. The issue has arisen especially in investment arbitrations, taking into account the similarity of legal issues that are generally to be decided in those arbitrations.

[82] These decisions have been published in an English translation in ASA Bulletin 23, 1/2005, p. 186 et seq. The first decision is examined in “The IBA Guidelines on Conflict of Interest in International Arbitration : The First Five Years 2004-2009”, o.c., p. 14).

[83] The Chairman, arbitrator Prof. van den Berg, disclosed on his side that his law firm partner, Prof. Bernard Hanotiau, has been appointed as Chairman of the ICSID annulment panel in the same case.  This disclosure did not result in any challenge, to the best of our knowledge.

[84] H. Mann, o.c.

[85] The difficulty would be, however, to assess actual knowledge by the author of the challenge.

[86] Difficulties may also arise on the basis of confidentiality requirements.

[87] Brussels, 14 January 2003, P&B/R.D.J.P., 2003, p. 380.

[88] This decision has not been published so far in Belgium, but hopefully should be published soon.  It has been published in France, Les Petites Affiches n° 60 of 25 March 2008, but with a note by T. Kaïssi that is erroneous on the facts and consequently leads to an erroneous analysis.  This erroneous analysis seems to have been followed by a number of French commentators.  It has been on the other hand adequately described in “The IBA Guidelines on Conflict of Interest in International Arbitration: The First Five Years 2004-2009”, o.c., p. 9. We wish to disclose up-front our involvement in that case, as counsel to Judge Schwebel, initially with André Faurès, and after with Pierre Van Ommeslaghe.  For this reason, we will merely expose the facts of the case and the decision of the Court, to correct misapprehensions, but will not comment it.

[89] Paris, 12 February 2009, Revue de l’arbitrage, 2009, p. 188, with note by Th. Clay, also published in Les Petites Affiches, 21 July 2009, n° 144, p.4, with note by M. Henry: “L’obligation d’indépendance de l’arbitre ou le mythe d’Icare”, and commented further by L. Degos, “La révélation remise en question(s)”, Gazette du Palais, Rec. November-December 2009, p. 3581 et seq.

[90] At that time, the participation of a representative of Tecnimont as a speaker in a conference sponsored by the law firm of the arbitrator together with two partners of that law firm.

[91] T. Clay, Note under Paris 12 February 2009, Revue de l’arbitrage, 2009, p. 190 et seq.

[92] M. Henry, “L’obligation d’indépendance ou le mythe d’Icare”, o.c., n° 11, and the references quoted therein, in particular in note 21. Expressing more mixed views on the questions, Th. Clay, o.c., Rev. arb., 2009, p. 194, n° 14, and references quoted therein, in particular in notes 13 and 14.

[93] Although the decision does not contain a clear statement in that respect, and it may also be pointed out that the ground for annulment was not limited to circumstances that had been invoked in the ICC challenge, but involved also other circumstances, revealed afterwards by the arbitrator.

[94] TGI Paris, 1 April 1993, Rev. arb., 1993, p. 455.

[95] This solution has therefore been criticised and considered dangerous by M. Henry (o.c., n° 11), who sees it as a bad substitute for a valid recourse against the decision of the arbitral institution.

[96] As regretted by T. Clay, o.c., Rev. arb., 2009, p. 196, n° 19.

[97] See the criteria used in the UNCITRAL Model Law, art. 12.2., and reproduced e.g. in article 1690 § 1 of the Judicial Code.  This criteria is however not incorporated in the French Code of Civil Procedure.

[98] Subject to the title of the IBA Guidelines “On Conflicts of Interest in International Arbitration”.

[99] In which case the circumstance is in itself impairing the arbitrator’s independence, save in the case of a specific waiver.   See, for a recent case of annulment of an award on the basis of a significant relationship between the arbitrator’s firm and an affiliate of one of the parties, the decision of the Supreme Court of Sweden of 19 November 2007 (case n° T 2448-06), published in English with comments by M. Henry in Les Petites Affiches, 3 October 2008, n° 1999, also discussed in “The IBA Guidelines on Conflict of Interest in International Arbitration : The First Five Years 2004-2009”, o.c., p. 15).

[100] We assume this related to all the interventions of the law-firm in the whole period of the arbitration, i.e. a period of five years.

[101] L. Degos, o.c., esp. P. 3584 et seq.

[102] The Court noted that the arbitrator had sent numerous letters “en distillant progressivement des révélations sur la nature précise des activités de W. auprès de Tecnimont et de ses sociétés mère et filiale”, the very words used having quite a negative connotation.  On the same time, seeing the questions of Avax and the answers of the arbitrator as reported in the decision of the Court and in the observations that were made by commentators, it appears that each time the arbitrator gave answers, Avax reacted with new questions, in a never-ending process, which was apparently described by Tecnimont as harassment, and which may have contributed to the decision of the arbitrator to resign.

Published by

blogadmin

Blog Administrator