the l`idependence and neutrality of arbitrators

j
-. I
Off-prints of rhe
JOURNAL OF INTER NATIONAL ARB ITR AT ION
Geneva
December 1992
Vol. 9 No. 4
"
THE L'IDEPENDENCE AND NEUTRALITY OF ARBITRATORS
i
BY
M. SCOTI DONAHEY
I
I
Publisher and General Edi1or
JACQUES WER:-:ER
Geneva - Switzerland
Ed itorial Assistant
'
Run1 BENJAMIN
Co rrespondence a nd Subscrip1 ions
All correspondence. including s11bscriprions. sho11/d be addressed 10:
The Publisher, Journal of International Arbitration
P.O . Box 51 34. 1211 Geneva 11, Swirze rland
Tel. (41 -22) 3 10 34 22 Telefax (4 1-22) 3 11 45 92
T he Journal of I n1erna1ional Arbitra1ion is published quarterly.
Annual Subscri ption: Sfr_ 250 or U.S.$195 including air mail posiage
Single co pies: Sfr. 75 or U.S .$55
For U.S. Subscribers.
Si!t'nnd Class Po.'tto~r paid ut Ra/11, u.'
1\'. J,
Pos11naster:
Send addr('~., corrections 10 Journul of lnternnrional Arh11r111io1J
c/(J 1\1,•rcury Afr{rt•1glir l111ernauono/ Ltd. / 11c.
131.1 Rantiolplr A1·1•mir, Avenel.
1\'J 07001
NOTE TO AUT HORS
The Ed i1or will be pleased to consider co ntributions p rovided they are not subm itted
for publication elsewhere. Art icles must be presented in 1heir final form. doublespaced. in English. Special a11ention should be given 10 quotations. footnotes and
references. which should be accu rate and comple1e. Due to strict production schedules, i1 is not possible 10 amend tex ts after acceptance or send proo fs to a utho rs fo r
correction. The submission o f a 1ext indicates tha t authors co nse nt , in the event o f its
publication. to the automatic 1ransfer of all copyrights there for 10 the publisher of rhc
Journal of International Arbitration.
© 1992 We rne r Publishing Company Ltd .
The copyright covers the exclusive nghts to reproduce and distribute the article. including reprints. photographic reproducuon. microform or any other reproduction or similar nature. and translations. No pan of
this publication may be reproduced, stored in a retrieval system or transmitted in an)' form or by any
means. elec1ronic. clcclrostaLic. magnetic lapc, n1cchanical , photocopying. recording or otherwise , without permission in writing from 1he Publisher.
For U.S. users authorization to photocopy uems for internal or personal use, or the internal o r personal
USC of specific clients, is granted by Werner Puhhshing Company Ltd. for u'crs resistered with the Copy·
right Clearance Center (CCC) Tmns&ctional Reporting Sef"\icc. provided that the base fee of $10 f>C'
copy. plus 25 cents per page is paid directly to CCC. 27 Congress St .. Salem. MA 01970. For those o rgan1z·
ations that have been granted u photocopy license by CCC. a sep~ratc system of payment has been
arran,ed. The fee code for user> or the Transacuonal Reporting Servu:e b : 0255-8 106i8S SI0.00 + .25.
Published by Werner Publishing Company Lid .
ISSN Oi55·8106
Mode o f cita tio n: 9 J . Im. Arb. 4
-.
The Independence and Neutrality of Arbitrators
M. Scott DoNAHF.v•
This copic has been much discussed in chc field of incemational commercfal
arbitration and has been the subjc:et of much schobrly work. Because: lc:gal scholars
and prae<itioners often use the cums " independence" and "m:utrality" in differing
ways, ic would be: helpful at chc OLmet co define: these terms. T he: definitions used ace
meant to be working definitions only. for purposes of consistency of chis article. and
they do not prerend to be formalisms in an are3 where nuance and implication are
preferred.
l.
TERMINOLOCY
A.
"lndependeirce"
The term independence is one w hich measures rhe cdacionship between the
arbicracor and the parties-personal, social. and financial. The closer che relationship
in any of chese spheres. che less "independent" chc arbitrator is from rhe parry. The rest
is an objective one in char it is generally easy co measure whether the arbitrator and a
parry arc in kinship, whether they have business or finmcial relations, ;ind whether
and to what degree they an: involved socially. It is a test for the appearance of bia.s, not
its actua l presence. Thus. although it is possible for someone who is closdy related to a
p~my, in a party's employ. or a close friend of a party. co be able co judge that party's
case without bias toward that parry. the other parcy in che matter would likely doubt
che impartiality of the arbitrator under the circumstances.
The test ofindependence was perhaps bes t described by Professor Pierre La live at
the Vlth Symposium on lnternaciorul Arb itratio n held in Paris i11 Octo ber 1988:
" Independence implies the courage co displease. the absence of any desire. especiaUy
for che arbitrator appointed by a party, co be: appointed once again as an arbirracor. " 1
B.
"Neutrality"
The word "neutrality" as 1c applies co an arb itrator in the incernarional
• P:irtner. Hoh2111:inn, Wis.: :ind Shcp.1rd. P1to Alto, CJlitOnuJ, USA..•
This arncle w;i1 origin;J.Uy prcpar1:d J~ J p:ipcr tbr ddi ..·t'ry to chc conferrnc:c- on (ntc:rn:ario11JI Contn1c:rci;il
Arbirr:a.cion :u Qu«ns' Co11cgc:. C:1n1bndsc:. Engl.lnd. in July t'JCn. CC>-Sponsord by che School of~nt~m:ition.JI
Arbitrltion. t~ fJculcy ofLt"vs :It Quttn MJry College. UQivcrs1cy of London~ 3nd by Euro Contcn:nccs Ltd
TitC' ~uthor \v1shcs ro Jcknowlcdge the ronsrn1ctive crit1ris:n1 which Ho\nrd Ho1rzm.lnn hls lundly given co .in
c:irher dnft Hov.·C'\·er. 1ll (';rors, n1i.SSCJtcml"l\lS, ~od opuuons 2r(' solely those ofth1; .author.
' P. L.ihvc. C1.•rn ltui1111s in Tltt' .-1,hrrt.Jt Pn•tt'>S 1JuJ tlu· lti1h·pt·1tdl·11r1· 1•{.-ir111trn1ars, p. 111. ICC.: i>ublishin~. S. A..
P:1ns, June l'.14J I.
JOUWNlll 01· INTF.RNATIONAL A~HlTll.~TION
commi:rcial sphere is ofri:n usi:d in rhe political or culcur3) si:nsc. In this sense. an
arbirracor is "neutral" 1fhc is of 3 natronaliry different from rhar of <·idwr of the parries.
There an: numi:rous examples of rhis principle in che inccrnariorul sphere. In
imernarional commercial arbrt rHion, rhe sole or third arbicracor is generally noc of che
same m cionality as that of eithi:r of the parties. ~ Jnrern3tional rules somi:t1mes require
1he cha irperson of a thri:c-pcrson pa nd co be of a nationa lit y diffcrcm fro m those of
rhe parries. Ex am ples of such nrks are chose of the: lmernational Ch rn1ber of
Co m merce and of the London Cou rt of lmernational Arb irracion (LC IA) . ' Ochers,
such as rhc: U NCITRAL Rules and chi: Jmernational Arbitration Ru les of the American
Arbirrarion Association (AAA), merely require char che nario11ality of rhe parries be
taken imo account in selecting the rhird arbitrator! Jn face. Martin Hunrcr prefers that
his own client nominate 3S its parry 3rbitrator an arbirraror of a narionaliry differcnr
from rhac of his client.\
In rhis political and culcural sense... neurraliry" addresses the appc:irance of bias.
r3thcr than ics actual presence. While one might suppose rhat an arbitrltor might be
inclined coward th<· pomion of a parcy who shares with him the same bnguage.
culcure, and general va lue sysrt•m, this is not nt·cessarily tht• ca~c.'' Ncvcrcheless, the
lppe:i rancc thac bias might be pn:scnc has given rise ro the !:'Clleral practice ofselecring
a chi rd arbitracor from a nae ion o rhi: r chan cha c of rhe partic:s cu dw proceeding.
T he term neutra lit y is also fregucn rl y used in t he sa m e sense as "impartia lity" .
This is na e a pol irical or geog raph ical rest, bur one o f sta te of m ind. Ir is a test for che
lack o f i111permissiblt' bias in the mind o f the arbirracor toward a parcy or cowa rd the
subjecr-marrer in dispute. This is a subjecti ve rest. since ir is difficult ro directly
measure. It is a rest, nor for the appearance of bias. but for irs actual presence. The
presence of bias is inferred from the faces and circumstances surrounding the
arbirraror's exercise of the arbicral funcrion.
The lncemacional Chamber of Commerce Arbittacion Rules (rhe ICC Ruk-s)
speak of independence and nor of imparciality. and permit a parry to challenge an
arbitra tor for "lack ofindcpcndcncc or other wise". 7 Shortly before chc adoption of the
current rules, it was suggested char rhe ICC Rules include che concept ofimparciali ry.
Bccauseofrhe lack of time, because rhe concept was "subjective", and because no one
offered a S3tisfacto ry definition of the term. t he proposal was rejected.i Nevertheless,
the ICC Court of Arbitratio n appea rs ro view the phrase "or o therw ise" as including
the concept o f imparrialrcy.''
j
I
I
!
: A. Rcdfcn1 jnd M. Hunter, L.iw m•d P..aa1<r '!f 1'1lt711llriorr11/ CtiuuJU7• 11JI Arl11rrattil11. p. 172. Sweet ~nd
M;i'(\IJt'll. London. IM Edjtion. l•Jti<1.
' ICC Hules Concitiaciuo ~nJ ArbttrlUOn. Jmendcd "J.nd in (orcc:- JS frofn 1J~uuir>· I 9Kli (ht'rt:u1;iftC'r ice
Ruin). Aruclt." ~. p.Jra. b; l ondou Coun of lntcmJuon:.I Arbitrarion Rulo (h1.·rc1n:a(ter LCtA Rul!!S). Article 3.
p.Jn.3.3.
k ,-\rbnr~uon
l(uk-s of the UnuC'd N1r!ons Commission on lnten1auonll Tndc Uv.• {hcrc-in1fi:~r theo
USOTHAL Rults). Arucle: 6. p.JrJ. "'=lntcrnlt1nnl1 ltrb1rnuon Ru Its of Ult' hn11:no n Ar,bnrln<n1 Associltion. as
Jm~cd and in force on or .Jftt:r 1 Ml)' IY'J2 (hrrcin:anC'r the AAA lrucn1Jtion1l ltulcs), Anidt: 6, p.lr:.. .;_
.. M. Hunta. >upTJ. footuoti: I, p. 25.
.. See. gcn~r2lly. 1bLd. ;at p. 120.
';' lCC Ruil~, Artidc.· 2. p•ra. K.
or
II
s. J3ond, SUpra,
" lhid
fOQtll0lt:
t'
r
1) o
INDEPENDF.NCE
AND NEUTk.\LITY OF ARBITRATORS
33
-.
C . Ter111i11ofogy in :'lrbirracio11 Rules
In addition co the ICC, o cher incernarional arbi cracion systems have grappled
,,,;ch che ccrmmology related co che arbitrator's obligJCion co decide fairly and withouc
bias. The UNCITRAL Rules require "im partiality" and ~independence." '" The AAA
lncernacio nal Rules require chac an arbicracor be ''im parrial" and "independenr". 11 The
LC lA Rules use the same termino logy. 12 All are aimed ac che same ideal: an arbi trator
who will decide che issues puc co h im fo r decis ion faicly and wichouc bias .
D. Rrq11ire111e111s of National Laws
It is 1mporcam co remember chaL an arbirration may be subject to the
requirements o[ the national law of the situs of the arbitration or of the procedural law
which the parries have chosen, in addicion co the arbitration rules the parties might
have crafted or adopted. This article cannot pretend to an exhaustive t reatment of
national laws, but some examples can give a samp ling of the way d ifferen t laws treat
the qualifications of an arbirracor.
Some national legislation treats arbitral requirements in the same general way as
do international arbitration rules. In the United Scares, che Federal Arbicration Act
recognizes ch1c an arbitral award can be vacated "where chere was evide nc parcialicy or
co rruption in che arbirraro rs " . 11 [n the Un iced Kingdom, courcs may remove an
arbicracor "where the arbitrato r has misconducted himself or the proceedings". 14
CommencJcors have said chac such "misconduct" is more chan errors of face or l:iw,
and involves ·'actual or pocencial bias". or unfair, dishonest, or corrupt actions."
Ocher national laws may speci fy particular qualifications or disqualifications for
service as an >rbicrator. For example. under Swedish law, an arbicrator may no c be: (1)
a minor; (2) one who has previous ly cr ied the d ispute submitted co arbi tration; (3) om:
who has g iven evidence on the dispute; (.J.) one who is related to a parcy in such a way
chat ifhe were a judge. he would be disqualified. 14 In Uruguay, an arbicracor would be
disqualified if he had a family rdacionship co any parry wichin che fourch degree of
consanguinity or che second degree of affmity. 17 And Greek law would exclude from
che arbitral ranks anyone who has been excluded from the exercise of civic righcs
following che conviction of a cri me. ••
E. G11iddi11es i11 Codes of Ethics
There exist two codes of ethics for arb1tracors that are generally recognized
Rulc."S, Arric:lc: 10. p.ltl 2.
AAA 1ntt:mlrionJI Ru1c:-s, Aruclc 7
" LClll Rules. Arciclt 3. parJ. 3.1.
" 9 U .S.C. Section IO(a){2) (1W2).
"' UNCTT1l,\l
11
1
~ Arbitr:Jtiou Act of 1950. Cre.lt nril.tin Sc;ituci:s.
H. Sn11c ond V. Pcchota. 2.-. IViulJ rltl1irr111i1•11
Ardsl~y-on...Hudson. Nc\v Yo rk. l'>'Jt.
•l
14
•
Vol. 88. 14)50.
p. 2736, TranS11;1t10nll Juris Public3.c1uns. Inc..
R~p1Jrti:1,
Swedish ArbitrJciott Act of l921J (.ls ~m~nded ~nd tn t"orcc.: on l J:anmry l982). Secuon 5.
" Urugu•y Code ofCivd Proc<dun: (1970). Arudc 31!0.
" CoJe o!Civd Procedun: ofCn'«c. !look Seven (L•w No +I of21 June 1%7. .u amended by Law No.
of 15 Scpt<mbcr 1'171) Article 871. p.r•. I.
~SH
I
Ii
I
l
JOLIHNAL
i
(JI
IN rl:HNATIONAI
.~~lllT~.\
no"
Jround rh<· world. Th<· linr of thcS<' 1s rhe American Arbitra11on Associauon/
American Bar Association Code of Erhics for Arbitrators in Commercial Dispmes
(hereinaicer rhe AAA / A.llA Code of Erhics). Adopted in 19n. it was the first such
code dcvis<"d for commercial .irbmarion . The fi rst six cmons are din:rn:d to all
arb icrarors. The: sevenrh canon is directed coward the parry-appointed arbitrator. The
primary consideration in che pn:p:iracion of Cano n VII was che principle o f parry
:iurono my. Ir recogn iz•d that the parties' righrs co ag ree 011 chdr procedu re wa s
primary. and rbar ch is right encompassed rhe standard of behavior co which the
arbi rrncors would be held. F<Jr exa mp le if Parry A and Parry B ;1grccd d1ac Parry A 's
husband wou ld be an excellent arb icraror o f thei r dispme. it was rh ei r righ t ro
designate him as arbitrator, and no code of arbirral erhics should prohibit them from
exercising char right. T he dr:iftc rs were awa re char che use of a non-neutral arbirracor
might create problems in imemarional arbirrarions. and expressly warned
pracririoners of che risks involved: "Ir should be nor.:d rhat in cases where the
arbirration is conducted ours1de che United Srares rhc applicable law may require chat
all arbicracors be neutral. Accordingly. in such ca.ses chc gov.:rning b\\' should be
considered before appl ying any of rhc foll owing pro\'is1011s rcbring ro non-ncmral
pa rcy-a ppoinced arbir ra co rs. " 1''
The AAA/ A BA Code of Ethics does nor form pare of the AAA Co mmercial
Rules or any orher set of AAA orb ir1·acion rules or o f th ose of any ocher orga nizacion.
Ir is incended co provid.: guidance in aU rypc:s of commercial arbicrari o11 and is not
specifically directed at the inrernational area. Howen:r. ir does provide useful
gu idel ines as ro specific relat ionships and specific conduct which could call inco
question an arbiuaror's "independence" , "neutrality'· , o r .. imparc ialiry". Rather than
arcempc co summarize. permit me co quore some of the more pcrcincm provisions:
.. D
AftcT accepting ;appo1nrmcnc ::tnd \vhilc ~rving as .in ~rburator. a person <hould avoid
I
entcnng inco any fin:inct:al. busin~ss. professional. r-an1ily or social r~lauonship. or
ocquiring •ny fin•ncul or personal incerest. which is lik<ly 10 2fTcct 1mporri2liry or
which might reason•bly create the •ppe•r•ntt of p•rti2liry or bias. For • re2so1l3ble
period of ciJne after 1hc deets1on of a case. persons \vho have served as arburators should
1vo1d cntcnng into any Stich rcl1uonship. or acquinng any such 1ntcrcsc. in
circumstances "vh1ch mig,ht rc:isonably crcacc the :ippc:aroi ncc thar rhcy had been
influi:nccd in the :irbirr:ac1on by the ::inticipac1on o r expectation of relationship or
inccrc.st.
E.
Arbiu-:1tors should conduct themsel ves in• way that Is fair 10 all pmic> and ;hould nor
be swayed by oumde pressure, by public cb mor. by fear of criticism or by self-interest.
F.
\Xlhcn an arbitr:i.tor·s authority i~ derived frorn ::in Jg-rccmcnc of' the.· pJ rcics. the
arbicracor should ncith~r cxcc-cd th~t ~uthority nor do less th3-11 is rcquirc:d co c:..xercise ·
I
I
I
I
thar authority complcccly. Where the 2grccmcm of the p•rrics set> forth proccdurcS co
be followed in conductini; the arbitncion o r refers to rules 10 be followed. it is the
obhsacion of the arb1tr>1or to comply with .such procedures or ruks.
G.
An arburaror should n13kc all reason3b1c ctTons to prevent del:ay1ng tJCUO, h3rassmcnt
of parcics or other p2rticap3nu, or ocher abuse or disruption of the 2rb1rr1uon process. n!I•
- - -- -
' A/\A/ AD.:.. Code:. CJuon V ll. lntrodunory Noce.
AAA/ ABA Code. C:11 1011 I. llar;i) I) . E. F :u1d C.
!-•
INDEPENDE :-ICE AND NEUTRALITY OF ARUCTRATORS
35
The lmernltiona[ Bar Association Rules of Echics for lntcrnaciona l Arbitrators
(hereinafter che IBA Code) is , as che na me suggests, spt:cificall y directed ac
internatio nal comme rcial arb itrators. Adopted by che !BA in 1986, che I BA Code is
designed co "reAecr incernacionally accep tab le guidelines devdoped by practising
lawyers from all concinencs. " 1' Like the AAN ABA Code. che IB A Code is noc
directl y bi nding on che arbitrators o r che parties and no c intended co create grounds for
che setting as ide of awa rds by national comes. !1
As with the AAA/ ABA Code. it makes sense tO reproduce che prov1s1ons
verbati m , racher chan co arcempc co summa rize their effect:
"I.
Fundomcncol Ruic
l\rbitr.icors shall p roceed diligently ond cfticicncly 10 provide t h<' parties with a just ond
cffeccive resolurion o f cheir dispmcs, and shall be and sha ll remain free from b ias ...
3.
Elcmencs of Bias
3. 1 The cricc:riJ fo r Jsst.-ssing questions relating co bias ttre imparti:ility and independence.
Partiality 3r-ises \vherc :ln :.lrbicr:iror favours one of rhc pardcs. or \Vhcrc he is prejudiced
1n rc!Jcion to the subject-matter of the dispute. Dt"pc:ndcnc:::~ Jrises from rc:lation.shjps
bct\vecn :in 3rbicra cor and one of chc parties. o r wich sorncone closely connecrcd wic.h
one of the p:ircics.
3.2
F:tccs which mighc le-ad :i n~:1sonablc person. nor kno\ving chc 1rb1trator's true state-of
mind. co consider chat he is dependent on ~l party c reate :'In Jppt..· Jrancc ofbi3s. The s:unc
is cn.1c: if l n Jrbitr:ltOr has :1 rn:ltcrial inte rest in che ouccon1c: of ch.t: dispute, or if he has
a lready taken a posirion in relation co ic. The appear;:ince of bias is b\.-st ovcrcon1c: by full
disclosur(! as descrlb~d in A rcic le 4 bclov1.
3.J
A r'I y current direct.or indirect busitH."$S rcl:icionship bct\vcen :in arbicr:tcor and :t p:1rcy. or
\virh a person \vho ts kno\vn co be a po tcncially impo rranc \vitncss. \viii nor111ally give
rise ro jusrifiablc doubc.s :lS to :1 prospcccivc Jrbicracor·s imparci~1l icy or indepe ndence.
He shouJd decline co acccpc Jn .a.ppoin rnll'nt in .such clrcumsrilnt~ unlL'SS rhL· p:irdL'S
:igrt..•.: in \vricing thJt he n1~1y· prOCL·c~I. E:<ampk·s of indicel.'c rclacion':ihips an: \Vhl.'rc: a
111i:1nbc:r of rhc p rospc:c:ti\'l' .irbicrlcor's fJ 1n ily•. his tirn1. ...,r :u1y businl.!SS p;1rt nL·r has :i
businc-S!i n:lationship \vich o nt: ofchc parties.
3.4
P;:ist business rc laoonships \Viii noc opcr:icc -as ;ln absoluCl' bar to JC:ccpt-ancc of
unlt.'SS chey :.re of s-uch 111ag-ntrudl' or nature os co be likely to affccc ::i
prospcccivc arbirracor's judg ment.
~tppoinrn1c:nc.
3.5
Continuous and subst:inci:il social or pro fc-ssional rcl;:itionshjps bct\vcen a p rospective
::i rbicr:Hor ;ind a parry. o r \Virh :i. person \Vho is kno\vn co be: :i porcnci:.illy in1po rc1nc
\virncss in chc.: arbirr:icion , \vill norn1all y give ris~ co ju~nifi::ibll' doubts :.i.s to the:
irnpJrtiality o r indc:pcndcn<."l! of :1.prospective1rbittlCOr'. ·•!.t
Both Codes give arbitra tors specific examples of rhe cypes of relationships char
may give rise co bias o r the· appearance ofbias. Boch, however, vesr much discretion in
rhe po tential arbitrator co derermine w hether a s peci fic rd acionship is one wh ich
would preclude one: from becoming an arbitrator in che d[spuce ac hand.
J• ( l3A Cvdc. lan roduc.:corv Note.
" 1b;d.
1
:. T<.· xt of tht· J UA tlulcs oi EthiC":. fro111 Tlic t 9X9 c:11;1/1
• 11.1l11renr,11i,11111I .4rhirr.-1rim1.inil .-lr1iirNl(trf, The P,trkcr
$<;hool of Forcig,n .>nd t:ornp:ir.acivc L.i:,v. Cvh.1n1b1.1 Univc:rsit)'. Tr.n1S!l<Jcio n:il Juris l'ub1ic:iti01)S. Inc.• Oubb'
Ferry, N . Y.•
1'~9 . Jt
pp.
411 ~ 1:2.
I
I
:
....
36
JClUllNAL Ol· INTliRNATIONAI AHHITHATION
T HE DUTY OF DISCLOSU HE .~ND ITS CLF.J\NSING EFFf,CT
!].
Virtually all rules impose a duiy on a prospective arbirraior co disclose all facts
and circumscances which mighc give rise ro doubrs as ro his imparrialicy and
independence, even if 1101 in his own eyes. However helpful rhe ru les and codes of
erhics are, it is still left to 1he arbi trator to d.:rermine what facts and ci rcumstances are
significant enough 10 require disdosurc. 2• le has become an inremational custom and
usage chat an arbicraror must determine: and disclose chose facts and circumsc~nces that
m1gh r conceivably give rise co a challenge of his firness to serve. l.'
Disclc>Sure Requirements af Arbitrario11 Rules
A.
While the various systems ofarbitration rules express the requiremc:nc somewhat
differently. chey arc unanimous in cheir mandate char arbitrators disclose
circumstances which migh t cause a party to believe that rhey are inca pable of
independence or imparcial iry. The UNCITll:\L Rules require th3t a poienria l arbitrator
disclose "any circum stances likel y co give rise to juscifiable doubts as co his
impartiality or independence". y, The new AAA lntt•macioaal Rules borrow this
language directly. n The ICC Rules require the arbitrator co pm herself in che place of
the parries and mandate a disclosure of"any factS or circu mscan ces which might be of
such a nature as to ca ll in to question tht: arbitrator's independence in the eyes of the
pan ics. " 2" The LCI A Rules cake a differenc rack. Rather chan a requ in:ment of
disdo$ure. the LCIA Rules require the prospective arbicraror co evaluare the faces and
circumst2nces which may give rise rojusrifiable doubcs as to his imparrialiry, and then
co either decline appointmenc or ro execute a declara tion that there are no
ci rCtJm scances likely co g ive ri se to any justifiable doubts as co his imparrialiry or
independence. :!'I
B. Disc/os11rc Rtq11ire111e111s of Na1io110/ Laius
Various national laws also im pose independent disclosure obligations on the
arbitrators. Generally. these obligations are as genera l and as discretionary as th ose
imposed by insrirutional rules.
The French Code of Civil Procedure requires an arbitrator to disclose any
personal cause of disqualificarion of whjch he is aware.JI• T he Swiss law on
international arbitration req uires che arbitrator co disclose circum stances thac might
give r ise co doubts.as to his independcncc:11 In the Un ited Stares, the Su pn:m e Court
'.!%
H Hoh2n1.lnn. nipra, footnote I. p. 41.
5
G A Alv:ira. Th< Chotltn.(t' of."\rbitrJton, (19'XI) Vol. 6. No. J, Arbitntion lntcm:adon.JI 203. 217.
"'" UNcrnAL Rules. Article Y.
:- AAA Jntcmarional Ruh.':S, /\rttdc 7.
" ICC Rul«, Aroid e 2, pm . 7
:f LCIA Rules:, Anlclc:: 3. para 3. 1.
... M. L. Smith, l1npartialit)' ojtl1r- Pat1y·Appo111trd Arbltratt>r, {19'-JO) Vol. fl, No. 4. Arbitr:arion (nccrnation;al
320. 327.
" G. R. l)cl:riumt . .'!tw Swiu .<\1b1trntion SrQt111r Emphas1zrs P'111y .-\111onc1nyond Ratrut1)11Jit10JI Rti·i~'. in Tltt
."\/r.1• Sw·us l..Ju'· c>r1 fntmuuion.:I .<\11'i1r~1i-0t1 21. 31 , Swiss Arbitr.20on AssOCtitton. B:.slc, 1Y'JO.
INDEP~NOENCE
AND NEUTRALITY OF ARBITRATORS
J7
has ruled char :m arbitrator muse disclose "any dealings thac might create an
impression of possible bias". i: Thus, nacional laws gen.,rally mirro r arbicral rules on
the duty of disclosure, giv in g general guidelines, but leaving much co the discretion of
. che arbicracor.
C.
Disclosure Require111e111s of Codes of Erhics
Codes of ethics, while scill li:aving broad discretion co che arbitrator, offer more
specific guidelines regarding .disclosu re chan do either arbirral rules or national laws.
The AAA/ ABA Code requ ires t hat a prospective arbitrator disclose:
.. ( I )
Any direct or ind1rea fin01nci1I or personal interest in chc ourcome of the lrbua.t1on;
(2) any exisring or p>sr finonci2l, business. profession2I, family o r soci'11 relationships
which ore likely ro affect impartiality which might reasonably create an lppcarancc of
portiolity or bias. Persons requested tO serve as orbitrators should disclose any such
rdationships which they personally h•vc with •ny p>rty or 1cs '3wycr. or with •ny
individuol whom chcy h•vc been cold will be a w1rness. T hey should also disclose •ny
such rcfacionships involving members of their fomllies or chcir current employers,
pa.trncrs or business :issoci:1tcs. ··»
The I BA Code is similar in its disclosure: requirements:
"4. I
4.2
A prospccrivc >rbirrator should disclose all facts or circumstJnces that moy give rise to
jusuti•ble doubts :is to his tmp•rtiality or independence. Flilurc co make such disclosure
crc31cs an >ppcarancc of bias. an·d may of mdf be a ground fo r disqu>lificarion even
though the non-disclosed facts or circumstances would not of themselves JUStify
disqualitic3Cion.
A prospective orbirraror should disclose:
any post or present business relationship. whether dirccc or indirect as illusmtcd in
Article 3.J, including prior .appoincmc:nt :as :irblrrator. 1,,vuh :iny party co the
dtspuce. or any rcprcscnmivc of• party, or 1ny person known to be a potcnu11ly
1n1port.Jn1 \vitncss tn the JrbitrJnon. With rcg:lrd to present relationships, the duty
of disclosure :l pplics irrespective of chcar 111Jgnitudc, buc \Vith rcg1rd to p1sc
rclacionships o nly if chey \vcre of more rhan 3 criv1.il nJturc: in rel~cion co the
.irbitr.itor's profession.JI or business lfT21rs. Non-disclosure: of a.n indirect
rcl:icioriship unkno\vn to a prospC"Ctivc ~rbicrJ.cor ~viii not be J g round for
di>qualiticacion unless it could hlvc been osccrcoincd by rnoking re•sonoblc
enquiries:
(J)
(b) chc narurc and durmon of any subsrannal soci•I rdouonships with any party or
any person known co be likely to be Jn i1nporranr witness in thC" Jrbir-racion;
(c)
the nJturc of any pr<vious rcbcionship with ony fellow irbitrator (including prior
J01nc service 2S an arbitrlror):
(d) the extent of >ny pnor knowledge he may have of the dis puce;
(<)
the extent of any commitmcncs which nldy Jil<:c1 his avoibbility co perform his
<Juries as ubitracor :is moy be rcasonobly ~nucipatcd.•,.
.~! Cl•1t11nt11u,•l-.1l1/1 C1•Jtit1,llj ''· Co11ti'th·11t11l C11s1111/ty
C",. J1>3 U.S. 145, l4Y. 89 S. Ct. 337, JJ\J. 1 1 l. F.d .2J JO I
(1%:;)
1\llllliHJA C<><k C>non II
" IUA Rul"·~ of Eth1~. "'P tat• .
rOc:unot~ 23. p. 411.
j
I
38
JOUllNAL OI· IN 1 ERN.,. TION.'>L ,,.RHITRATION
le is clear from chc '3ngu3ge of both Codes rhar rhe porenrial arbmacor is requin:d
ro exercise his discrer1on in evaluaring what re'3rionships deserve disclosure and
which are insign ilicam. One should be careful not to rake roo literally the language
con tained in the IBA Code which suggests chat an arbirraror could be disqualified for
rhe mere failure ro disclose. Howard Holtzmann has pointed out char the language
"failure to make such d isclosme c.re3 ces an appearance of bias, and may of itself be a
ground for d isqua lification even though che non-disclos<:d facts or circumstances
would not of themselves justify disqualification" should only be applied where the
arbitrator conscious! y attempted to cover up a fact or circumstance. and nae where ch e
arbitrator merely exercised his judgment in the mannn which is con rem plated by the
Code..u
D. C o111111c111a1ors 011 r/rr 0111y of Disclos11re
I
I
In deciding what ro disclose. it is always preferable to disclose a·nything
conceivably compromising. Wlule a prospective arbirraror need not disclosc
insignifica nt fans and circumsta nces, whrncver he is in doubt, he should err on rhe
si de ofdisclosure. In addition co the guid;mce given by national laws, arbitration rules
and codes of ethics, com mc11tarors have suggested certain focts and ci rcumstances
which a pocenrial arbi1 rater shou ld disclose to the parties. An arbitra tor should always
disclose any financial interest in the dispute or wirh one of the parties, especially an
ongoing employment relationship:v' Present relationships of whatever nature should
be disclosed. 31 Any rdanonship which the prospective arbitrator decermines is
"direct", rather chan ''remote". "substanrial", "ongoing". and "significant". rather
than "uncertain" and "specubtivc", should be disclosed. 311 Disclosure should be made
of any relationship chat is "close. substantial, recent and proven".'' In summary, an
arbitracor should always disclose an "interest ... so connected wirh his duties as an
arbitracor as co render ir inequitable that the parties shou ld be held bound by the
agreemenr to accept h is decision.""'
The Cleansing Ejfw of Disclosure
.E.
Once an arbitrator has made his d isclosures, it is up to the parties to evaluate
them, and, where appropriate. make timely objections ro the arbitracor acting in the
matter. Failure co timely object waives the righr to object at a lacer stage of the
proceedings. National courcs generally will not coltratc the objecrions of a parry made
H. Holu.maon. 1upr-o, (ootnott t. p. ~1
,. Craig. Patk and P>uls.son. lnrmt~lfO•l#I 0Mm1NrofCommcrtt .l\l'b1"1"'""· p. 229. Oc<.21n:1 Public3oons, lnc..
5
Pms (2nd Ediuon 1991)
n Ibid_
"' M . Hollering. nipr.:, (oocnoce I, p. 5.
" S. Bond. supr..i. foou1oti; I, P- 13.
..,, R11sscll(1111llf Law u{.JJ.rbtlrali(lu, 20th edinun. Anthony W2lron. Q.C. tind M=ity Virtona. Stevens and Sons.
ltJndou, 198'.2.
·
INDEPENDENCE ANO NEUTRALITY QI· ARBITRA1'0RS
39
long ati:er rhe alleged g rounds for rhe challenge an: made: known to him. A recent
decision in rhe Federal cou rts ofche United Scates ty pi fies this acricude. In reject ing the
challenge co an arbitral award based on, among other grounds, an alleged failure of the
ar~icrator co disclose allegedly significant relationships. the court noced chat the
challenger cited as its source of knowkdgc of the relationship Jn arricle which
appeared in The Wa ll Strcerjournal durin g the course of rhc: arbi tration, and yet, at the
rime of publication, made no objection to the continued service of the:: arbitrator in
question!' The chalknge was rejected and the award confirmed.'2
Arbicral rules also look with disfavor on the: dilatory, and require that challenges
be made promptly afcer rece iving a disclosure or upon lea rning in another fashion of
facts and circumstances 1which the party believes go against independence and
impartial icy. ' 3 A failure to objecr when first confronted with rhe facts and
circumstances can be viewed from ac least two perspectives. First, it can be viewed as a
waiver ofrhe party's right to object. Second, it can be: viewed as an imp lied admission
that , in the first ins tance, the party d id no t regard the faces and circumstances as
sufficiencly couching upon che arbitrator's imparriality and indeptmdence.
Ill.
THE PARTICULAR PROBL EM OF THE PAltTY AR BITRATOR
The duty of disclosure and the rules surrounding it are designed co bring to lighr
evidi:nc~ of a rebcionship between an arbitrator and a party that could raise quesuons
concermng the arbitrator's ability to remain independent and imparcial. Yet, in
international commercial arbitration. there.: is a praccice chat at first sec.:ms ar odds wirh
indc.:pc.:ndence and impartiality: the party-appointed arbi'trator. Europeans regard the
right co select their arbitramr in a three- person panel as just short of fundamental. In
inrc:marional arbicrarions, tho: parry-appointed arbitrator. who has often been selected
because of his percei v~d predisposi tion co the pa rty and its legal posi tion, is expected
to mJincain his independence and impartia lity. That chis paradox works well in
practice is one of the strengths of international commercial arbicracion.
A.
Wiry" Parcy-Apf>Oinced Arbicmtor?
In an international commercial dispute, the parties an: from different countries,
often with dccid.:dly different culrures. The: sole arbitrator or rhird arbitrator will
most likely be: chosen from yet a third country. with possibly differen t cultu ral mores
from those of either party. It is a dea rl y perceivable risk rhac rhe arbitrator wi ll not be
able to grasp one o r the ocher of the panics' positions. Ouc of chis dilemma. the plrty
arbitrator trldition developed .
The parry arbitrator is most often one: who is a nario1ul of the same country as the
.. Hum" .11..hil o.i CNp .. 654 F. Supp 14B7. 15tXI (S. D. N. Y. l\Jl!7).
l! lhu.I .. .1c l520.
" f<..:C Rules. Artack ~. p:;tra. g ('l.1t1th1n JOd3ys): t\AA lnt~ntlriotul Rul"~ (\v1th1n I; dl)"): U:-.aTttAL RulL"S.
Artt('."11: 11 ('l.vHhut 15 J.1v>)
!
•
I
40
J
.'
t
I
I
!
I
JOUnNAL 01' INTERNATIONAL .~RlllTUATION
party appointing him. and therefore familiar w ith the party's culture. The party
arbitracor, even though he may be skillful in mo re than o ne language, unde rstands
thorough ly che language of the pa rty that selected hi m. He is fami liar with the party's
legal system. And he is well versed in the trade practices of his appointing party. If,
during ddiberations. the presiding arbi trator is confused, whether as che resul t of
language. culru ral differences. differences in legal systems, or unfamiliarity with trade
pr;ictices, the party arbicracor can set h im scraight. The part y thus has a check against
being misunderstood. This avoidance of cultural misunderstanding is the raisoJJ d'e1re
of the party- appointed arbitra tor.
B.
SlaJJdards for the Parry A rblrrator
Virtually all rules designed specifically for inrernational arbitration require the
same standards for borh the party-appointed arbitrator and the sole or presiding
arbi trator."' The !BA Code is co che same effecc. ';The AAA/ ABA Code, originally
promulgated for use in all commercial arbitrations, domestic and imernaciona l, makes
a d istinction . The pa rt y arbicrno r "may be predisposed to the party who appointed
him , bm in all ocher respeccs is obligated co ace in good faith and with integrity and
fa irness".""· The party arbitrator is abk to consult with the appoincing party regarding
the selection of the presiding arbitrator (where the presidin g arb irracor is to be selecced
by the cwo pa rty-appoimed arbicracors), and he may communicate with the
appointing party on any o ther aspect of the case. provided chat he firsr informs the
ocher arbitrators and the parties of his intent co do so.'7 Again. the AAA/ ~BA ru les
were subject co che guiding principle of party au to nomy. It is the recommendation of
the AAA that parries in all cases agree chat all arbitrators ace as neutra ls.••
C.
The Party Arbicraror i11 Praaic.e
ls the practice in international commercial arbirracion thac much differenr from
che AAA / ABA Code when it comes to the use of party arbitrato rs? Ir appears not to
be. The party arbitrator is predisposed to his party's position, yet is expected to act
w ich imegricy and fa irness and impartiality.
Under both the AAA/ ABA Code and the !BA Code, as well as imernacional
practice, all arbitrators are required co prevent delaying tacrics, harassment of parries
or pa rcicipams, or ocher abuse or d isruption of the arbitral process.'°' In TCC
arbitracions the parties may select an ·arbitrator who is clearly sympathetic to their
case, although this is not advised."' While the parcy arbitrator muse be "independer1c",
"' Sc."C
UNCJT~Al
Rulc-s. Articles 9 and 10; JCC Rulc:s. Article 2: LCIA Rules. Arricle 3: AAA lntc:m:adona1
Rule$, Art icle 7~ AAA Supplenu:nt.ary Procedures ror hHcrnadoo=il Con1n1cre-i:ll Arbitntion. Anidi: 2.
' i IUA Code, Artidt' 1.
'
~ AAA/ABA Code, Canon VII. p>r>. A( !).
" Ibid. , pms. C( l) and (2).
-"' H. Holt2n1~nn . .'in1erico11 Arbitroti<>n A ssotialiou Rulrs. }11(r0Ju<rfr111. in XIV Yearlmok C auunrrdal Arbirra1i<•JJ
2<>3. 267. 1989.
1
' ' Ai\A/ ADA Code. Canon I, p:ira. G; IBA Code . Article 7.
,., Cr"3ig. l'~rk. :ind P:iulsSOfl , Jupra, fiio n lOft' 36, r· 212.
i
I
INDEPENDENCE
AND
NEUTRALITY OF ARBITRATORS
41
he may not be "neurral"; that is to say that an arbitrator of the same narionaliry. from a
similar economic and social milieu, is expected to be sympac:hecic co the positions
taken by and embracing the legal doctrines favorable co his appointing parry. 51 The
parties may also ag ree ro waive the independence requirementofrhe parry arbitrator,
though t his is rare in practice. 51
The above practice is nor unique co the ICC. le is noc uncommon in in ternational
arbitrations cond ucted under the UNCITRAL, LCIA and lcsm Rul.es for che party
arbitrator to be "predisposed cowards rhc party who appointed hjm". >l It is common
for the parry arbitrators to consult thei r parties where the presiding arbirrator is to be
sdected by the party arbitrators. ;,
Marrin Hunter has candidly ad mined that in selecting a parcy arbirraror he looks
for "maximum predisposirion cowards my client. consistent with the minimum
appearance of bias". someone who is likely to be sympathetic ro c:he client's position
and likely to be genuinely persuaded by counsel's argument.» Nevertheless. that
arbitrator is expected to be neutral and impartial. and if it is otherwise, chis fact must
be disclosed beforehand. 50 In intern acional arbirranon. a party arbitrator may be
predisposed co his appointing party's position. but must conduct himself and render
his decision in good faith and an independent manner.
JV. T l! CCON DUCT OF ARBITRATOR FHOM APPHOAC IJ
In addition
t0
TO AWARD
die duty to disclose: and the: obligation to trea1 all parries fairly and
impartially and to avoid delay. there an~ general gu idel ines w hich rhe parry arbitrator
should obse rve from tbt' time he is firsc approached by a party until, and even after, an
award is issued. When a parry interviews a prospc:ctive arbirr:uor. ir is proper to
discuss che issuc.-s wic:h che parry, so long as the pocenrial arbitrator dot~ not discuss or
offer his opinion on the merits. 57 A recent decision by the Federal Coun of the United
States criticized an arbirr:tror who had discussed. at the party's H..-adquarcers office,
the merits of rhe defenses of the party who had appoimc:d him. examined
documentary evidence at that meeting. accep ted hospitali ty from che appointing
party, and attem pted co discuss the m erits of the case with the o cher parry arbttrator
prior to rhe selectio n of the presiding arbitrator.!!< Thus. it is wise: to lim it this in itial
discuss ion to those facts and issues an arbicrator must know in order co determine
wherher it would be appropriate for him to accept the lppointment. ,.,
\I
Ibid .
" Ibid .. p 211
" A Rl.'dl't:ru .Jod 1~- Hunter, supra. 10otnocc 2. p. 170,
" Ibid .. p . 172.
u M Huntc.·r. j11prw. 10out0te 1. p. 25.
"" G Ucmuu, c"P'"· fuotnot~ I. P- 36-37
" (; lkrnuu. J.llJ''J· tOomOtt:' I. P- 3-l: Crl1g, P;arl Jud P.n11sson, 111proJ, footnote.• 36, p. ?24.
~... ,\/ttn.1/ktl1ta11 Pri'j>c:;ry .t11d CJsu.ilty ln1. Co. 1•. J C
CJJu1'1ty lus.. Co.. 780 F Supr 885, ~ .1nd M'JJ
""'"'>'
(D. Ccmn. l'l'll).
"' Tl1c "11u:r1ts" of~ case iuvolvC' the: lik1,:lihot.,J of uh:Ct'S~ \Ji"J \"lai111 or d.:ti'll.k: tbC' '"i.ssu~ - .Jn: tht' dJuus :111d
dcicns:cs :u ~cited by the p:arti~. An l"IUiucnr An1t·nc111 co111n1(.'.11tJ tOr $(.'Cills to tr1..'lt the C\\'O "JS synau y o1011s,
which J,·:s<l) h.> cnnt·us1011 St-'t" R. Coulson, :\11 ,;11u·r1r.111 (:t1t1qrtt' iJj' tJu· I HA. 's Ethics J;1r l11rt·n1.u11•1Ml .--\rli1tr1.11111s, -'
J.lnt.Arh.2.
Ill). ll15. June l'IH7.
•
42
JOUR NAL OF INTERNATIONAL ARHITRATION
There seems co b., a divergence of views among co mmentato rs on whether ex
pnrce co mmun ications between a party and the arbirraco r appoi nted by that party are
c;ven appropria te after the presiding arbitrator has been selected. Some commentators
seem co feel char such communicarions are never permitted."' Others feel such
communications are permissible. but only by agreement of the parties or if announced
beforehand co all partil'S and arbitr:tcors. 6 1 However. ic is clear chat absent agreement
or pre-announced intemio n, ex partr communication between a parcy and its
appointed arbitrator is cle:trly· improper, and such secret communication would
consrirute a clear violation of an arbitrator's duty of "independence" and
" im parrialit y".
V.
CONCLUSION
International commercial arbitration seeks to bridge the national. cultural, legal
and language differences in order to provide rhe parties ro a commercia l dispme a fair
and just resuh . T he parcy-arbirraror sys rem has evolved to prevent those differences
from leading co a confused, and therefore unfair, resolution. The :tpparem paradox of
rhe concept of the parry-appointed arbitracor and th~ duries of "impartiality" and
" independen ce .. is, in pracricc:, mo re apparent chan real. The con ccpr of party
autonomy gives the parties che fkxibility necessary co structure the procedure in a
way besc suited co their needs. It is this flexibilicy rh~r has led to the success of
commercial arbirrarion and made ic che preferred means of resolving intemarional
commercial disputes.
h• G. A. :\l\'lrc.-z. Jupru. l°cx">nuuc ~5. pp.1lb--17. M. L Smith, suptJ. tOOl1\QI\" :?'>. p >it ; G
l\C'trnnl. n1pN,
1Uo1notc I. p. jJ
.., .A. H.t•dr"rrn .tnd rvt Hunter. .u1prJ, footnurc.· 2~ C:r;;ug . 11.atl .ind l>3t1k-.~HI, 01pr.J. l°'ltUOh.' ·"'· p 240