“Code of Ethics, Conflict of Interest in Arbitration/ADR” BANI-IARBI Seminar, Jakarta - 29 November 2018 Presentation Points – Peter Chow, Partner, Squire Patton Boggs A. Introduction 1. Impartiality and Independence • Party selection and repeat appointments – Are they incompatible with impartiality and independence? 2. IBA Guidelines on Conflicts of Interest in International Arbitration • Practical aspects of disclosure 3. IBA Guidelines on Party Representation in International Arbitration B. Impartiality and Independence 4. Concept of Impartiality and Independence • Wordings derived from UNCITRAL Model Law, Art. 12. • Impartiality and independence often used together. There is a difference between the two notions. o Impartiality concerns the absence of a bias or predisposition toward one of the parties. o Independence relates to the absence of relations with a party that might influence an arbitrator’s decision. • At the time of accepting appointment and shall remain so until final award or proceedings terminated. • Relevant facts and circumstances that would give rise to justifiable doubts as to impartiality and independence. 5. Is party selection inherently incompatible with true impartiality and independence? Views from well know arbitration practitioners. • No o One important element of legitimacy of arbitration is party autonomy. o Party-selected arbitrators are required to act impartially and independently. This is spelt out in modern rules and Model Law. o Old practice in US for eg. AAA old rules – party appointed arbitrator expected to advance interest of party who appointed them. o Some parties might select a friend hoping that friend would favour the party. In 3-member tribunal, decision made by majority. If arbitrator has reputation for apparent bias, will undermine his/her credibility. Would lose influence over the other two arbitrators and opinion discounted. Detrimental as would lose a friendly voice in the deliberations. o Rules of major arbitral institutions provide that arbitrators (sole or party appointed) must be independent and impartial. Professional arbitrators would be extra careful not to be seen as bias. o The nominee will ensure that the tribunal will understand the party’s culture or legal tradition (e.g. common law v civil law). - 1 -
o Said that there is an implied duty to ensure that the tribunal consider the arguments of the party that appointed them. o Martin Hunter said tendency to “ looks for a party-appointed arbitrator who has a maximum predisposition towards his client with the minimum appearance of bias" . o Studies on investment treaty arbitrations (mostly available to the public), most of cases, unanimous award. Not a real issue. o Safeguard – no arbitrator may have the nationality of any party. ICC and other major rules. Contrast with practice at CIETAC. • Yes o Studies of international arbitrations reveal that dissenting opinions were almost invariably (more than 95% of the case) written by the arbitrator nominated by the losing party. § Study of ICSID cases by Albert Jan van den Berg – 22% of cases with dissenting opinions. § (Compare with Study of ICC statistics by AJvdB – 5 % of cases with dissenting opinions – shows not a big issue in commercial arbitrations. But for ICSID, appears that this could be a bigger issue. Why? Encourage repeat appointments by a State if hold certain views?). o Not necessarily an ethical issue - may mean that appointing party has made accurate assessment of how its nominee is likely to view certain issues. o It may be a real issue – arbitrators are frequently suggested by counsel. Would there not be an unconscious bias not to antagonise counsel whose firm is likely to consider the arbitrator for future appointments? o Need not be overtly bias so as to lose credibility – but in a borderline situation, might this bias not tilt the balance? (Compare with possibility that the other co-arbitrator may be similarly influenced?). o Solution – any arbitrator be jointly selected or selected by an appointing body (but contrast with party autonomy?). o Appointments be made from a pre-existing list of qualified arbitrators (potential arbitrators usually have close connections with the appointing body to be included on the list or to be appointed in practice). o Possibility of opposite bias. 6. Is the practice of repeat appointments inherently incompatible with true impartiality and independence? • Arguments for repeat appointments o In some technical fields or smaller jurisdictions, number of skilled and experienced arbitrators is limited. Difficult to say they are appointed because of bias – but more likely because of their skills. o Parties have a right to choose someone they are comfortable with repeatedly, so long as the arbitrator is independent and impartial (not necessarily because they are bias)? o For busy arbitrators, even several repeat appointments from the same law firm form only a small part of their business. o Well known arbitrators do not want to risk their reputation by being known to be bias towards their repeat appointees. o In investor state arbitrations, some arbitrators are known to hold views favourable to the state; others favourable to investors. Some are - 2 -
repeatedly appointed by States (not necessarily the same State). Is this also an instance of repeat appointments? • Widening the pool of arbitrators o Appointing bodies can consider appointing less experienced arbitrators to low value, straightforward cases to gain experience (Caution: these cases may be more difficult to handle because the parties may not be represented by counsel or by counsel who are inexperienced in arbitration). o ICC Arbitrator Nomination Committee – encourage widening pool of arbitrators o HKIAC has a panel of arbitrators and a list of arbitrators. Those in the “list” are for those who are less experienced, and the HKIAC does appoint arbitrators from the “list” from time to time to widen the pool of experienced arbitrators. o While knowledge of arbitration law and procedure is important, a lot of required skills are acquired through actual experience. “Arbitrator’s Workshop” – provides role play for participants, with course director providing comments. Good way of giving some “hands on” experience with feedback. o Counsel to consider proposing less experienced arbitrators (but may be experienced counsel) as arbitrators. Problem – for sole arbitrator, likely to be rejected by the other party. For co-arbitrator, party may not want to take chance with inexperienced arbitrators. o Arbitration insitutions to consider introducing rules for low value, fast track, documents only arbitration at fixed fees, and appoint less experienced arbitrators to gain more experience. Such as those for certain consumer arbitrations in the United Kingdom. 7. Summary • Personal view - party selection is not inherently incompatible with true impartiality and independence. Party autonomy and benefits of party selection outweigh risks. Much depend on the personal ethics of arbitrators appointed. In any event, such risks can be mitigated. C. IBA Guidelines on Conflicts of Interest in International Arbitration 8. International Bar Association (IBA) Guidelines on Conflicts of Interest in International Arbitration initially adopted in 2004 by IBA. Revised in 2014. Drafted by a group of experienced and well known IA practitioners around the world. • Guidelines – Reflect understanding of IBA Arbitration Committee as to the best current international practice; do not purport to be comprehensive nor could they be; national courts may have the last word on challenge. • Set out certain general standards. • In addition, proposed concrete examples. o Red List (non-waivable and waivable) – give rise to justifiable doubts o Orange List (disclosure, no objection within 30 days). o Green List – no disclosure required. • Examples – o 3-year limit guideline – for some situations on Orange List, potential conflict might not arise after passage of time. Three year was proposed as a guideline. o Barristers from same chambers. - 3 -
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