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Law Essay On International Arbitration Proceedings

Question

Task:
Write a law essay on the topic “The guiding principle is whether a relationship will affect an arbitrator’s impartiality or independence in any material way.” Critically evaluate the importance of an arbitrator’s impartiality and independence in international arbitration and discuss the significance and impact on the arbitral proceedings of an arbitrator’s actual or potential conflict of interest. In doing so, provide references to ICC, LCIA and UNCITRAL arbitration rules, secondary sources and case law to support your answer

Answer

Introduction
The concept of procedural fairness discussed herein law essay includes a cornerstone of independence and impartiality of the person who makes the decision, and this becomes the essential ingredient of arbitration and any other litigation. This is seen in both the domestic arbitration laws, for instance, section 33 of the Arbitration Act, 1996 which is part of the general duty of the arbitrator that is to act in an impartial manner and a fair manner1. The same is also included in the Rules of the London Court of International Arbitration Rules, Article 5.3. The commentators have generally said that independence means the requirement that there is a lack of reliant association amid the arbitrator and the other party that may appear to impact the liberty of judgement of the arbitrator. On the other hand, impartiality neither means the requirement that the arbitrators do not favour one party nor is the other party predisposed2. In the present paper, the importance of the neutrality and sovereignty of international arbitration shall be discussed. Moreover, the paper shall also include the impact of the arbitral proceedings of the potential conflict of interest.

Body:
According to Julian Lew, impartiality is an important ingredient of justice and independence is an important ingredient to make sure that justice is done in a proper manner. Most of the arbitration process that is conducted requires the arbitrators to be impartial and independent for example in the International Chamber of Commerce Rules of Arbitration (Art 11 (1)) and the leadership that has been issued by the ICC to the arbitrators under the court investigation and guidance of conflict to the arbitrators3

Thus, from a general viewpoint, it can be said that most of the scholars have held the view that independence means that the arbitrator is free from any past relationship or any other dependent relationship that exists amid the judge and the parties in the dispute. Impartiality means that the arbitrators should be liberated from any favour belonging to one specific party and they should be liberated from any tendency belonging to any one of the parties to the dispute. Every well recognised and well known worldwide arbitration rules ensure that the arbitrator files for a certificate of neutrality as per which they should inform or rather confirm the impartiality of themselves making sure that they elicit every piece of information that might give rise to a challenging situation to the arbitrator4.

The practice of understanding that the independence of the assessor is taken by both the parties as well as the arbitrator and in some cases such as the case of Halliburton Company v Chubb Bermuda Insurance Ltd [2018]5 the assessment was straightforward and that the arbitrator should understand the potential conflict or any other definite disagreement of interest. However, in some other cases, the evaluation rather leads to a hard situation. However, it should be taken into consideration that though the London Arbitrators consider independence as a separate ground of lack of independence for removal of the arbitrator the AA, 1196 does not take into consideration such an important ingredient as a separate factor of removal. ( AA,1996 Section 24 (1) (a))6

There have been many problems in the past, and the same was recognised by the IBA (International Bar Association) which were mainly caused to disagreement of attention in worldwide arbitration. With an aim to reduce them, important disclosures were asked, and they were put together by a group of experts from all over the world to form the guiding principle on disagreement of interests in the process of international arbitration7.

As per the report of 2016, and the guiding principle that were issued by the IBA it was seen that 3200 arbitrators were known to the respondent over the period of five years in which the issues of the conflict took place. The guiding principle was referenced for more than 50 per cent of them, and the survey also contained about 35 responses from the United Kingdom. The respondents of the survey acted as the counsel in arbitrations in which the conflict of interest was involved, and it was seen in the IBA guiding principle that more than ninety per cent of the cases were consulted, and about in 61 per cent of the cases the issue was whether to take an appointment or not8.

The guiding principle so issued by the IBA make it very clear that it is applicable in cooperation the speculation adjudication and to the mercantile arbitration and also to lawful and to non-legal specialized who serve as authority. In part 1 of the IBA guiding principle on disagreement, the universal standards have been laid in which impartiality of the arbitrator to the area under discussion of the case, to the parties and to the legal representatives are displayed, and independence to the subject matter, parties and to the lawyer of the dispute and disclosure is stated. The revisions of 2014 of the guiding principle provided that there were important clarifications on the basic standards such as:

In standard one, the general principle of impartiality has been laid which independence shows and explains that the time during which the arbitrator should be impartial is throughout the entire proceedings of the negotiation counting the time taken for alteration, final award and also the interpretation of the final award. The time period means the time that can be easily ascertained9

General Standard 2 is about the conflict of attention and the rationalization linked with this state that when the judge has hesitation with his capabilities to deal with any given dispute or has doubts as to whether he can act in an independent or impartial manner, then he or she should immediately decline the appointment as an arbitrator. This means that they should err on the side of watchfulness10

General Standard 3 states that the revelation by the judge means to precede a waiver about any probable conflicts of attention that may take place or arise from the circumstances and facts of the case.

General Standard 4 states that when dealing with the waiver by the parties, they should specifically state that any non-waiver Red list should be considered as invalid.

The General Standard guideline 5 deals with the scope of guiding principle in which the exemption of non-neutral arbitrators has been removed and the guiding principle be relevant to all the arbitrators as well as with administrative secretaries and other helpers.

The Standard 6 states and deals with the relationships in which clarification is made that if either of the party is a legal body, or any other lawful or bodily individual who has control or power on the lawful body in a straight financial attention or as a responsibility to indemnify the party or to honour to be considered in the adjudication, should be considered to tolerate the individuality of such a party. The account linked to this makes it clear that the third party insurers and funders in related to the conflict should have a straight monetary attention in the honour. It is also stated that the terms “third party funder” and “insurer” would mean any individual or a body that is making contributions.

Funds or any other type of material holding up the defence or prosecution of the case, or anything that has a straight link so as to monetary attention or the duty to assure or cover the party or honour to be rendered in the process of adjudication. As the authors are not aware of the case laws or any other awards in the decision or in the scope of principles so they are not clear as to how expansive the view in the court or the tribunal would take in the funders and the indemnity companies.

General Standard 7 lays down the duty of the parties to the dispute and the adjudicator. The parties have a legal obligation to inform the arbitrator and the tribunal and other parties of any type of existing relationship between the person, entity and the arbitrator with an economic interest in, or duty to indemnity, an award that has been issued as part of arbitration proceedings. The parties should also inform the arbitrator about the identity of the counsel who shall be appearing in the proceedings of arbitration and moreover any relationship that takes place between the members or some barristers should also be informed. While conducting their duty of disclosure, the revisions so imposed in the 2014 guiding principle require that the parties should investigate proper information that is so available to them. The explanation that is linked with GS7 means that the disclosure with the persons or any other organisations having a straight financial attention in the reward is to be considered in the negotiation process such as an organisation that is as long as funding for the arbitration.11

Part 2 of the guiding principle is about the submission of the universal standards and also states the direction to the arbitrators and other courts as in which circumstances lead to or do not lead to a conflict of interests and should be most importantly disclosed. Essentially, part 2 contains three colour-coded lists in which there are none exhaustive examples as to what would constitute a disagreement of interest in the international arbitration that is commercial in nature. The list is however subject to some general standards as laid in part1:

  • Red list items that are further categorized into a waiver and non-waivable items and contain instance of reasonable reservation relating to the neutrality and sovereignty of the arbitrator
    • A non-waivable item will lead to habitual ineligibility of the arbitrator, and this means that the arbitrator who has a huge amount of monetary interests in one of the parties of the final result of the case. The criticism for the same is explained in the case of W Limited v M SDN BHD12
    • Waivable items should be properly disclosed to the parties, and consent of the parties would be needed so that they expressly consent if the appointment of the arbitrator would continue or not. The waivable items also include the lawyer in the firm who is also the lawyer to any one of the parties13.
  • The orange list has the items that may be considered as doubtful as to the neutrality and sovereignty of the authority. The authority has the legal obligation to reveal such type of circumstances. However, the disclosure does not necessarily mean to disqualify the arbitrator, on the other hand, the purpose of such a section is to allow the parties to the dispute to make a joint decision whether the arbitrator is to be disqualified on the basis of such a ground. One of the items that are already part of the orange list includes whether the arbitrator has take delivery of more than three arrangements by the same lawyer and part of the similar firm or not. This was also explained in the case of Cofely Limited v Anthony Bingham and Knowles Limited [2016]14
  • The orange list items are also referenced in the English Courts in the Cofely Limited v Anthony Bingham and Knowles Limited [2016] and Halliburton Company v Chubb Bermuda Insurance Ltd15 in which repetitive engagements and revelation were addressed and strong-minded depending on the foundation of their facts the previous confront was succeeded and the latter was not succeeded16.

In the case of Cofely, he wanted to eliminate the authority after knowing that the authority had acted as an arbitrator in more than 25 cases involving Knowles. It was held by the High Court that as in more than three cases out of 25 involving Knowles, the arbitrator should have made the disclosure about the same and that is why the court-ordered elimination of the arbitrator in the case of Cofely.

However, in the case of Halliburton, the Court of Appeal rejected the appeal of removing the authority was because the non-disclosure on the side of the arbitrator of being appointed by more than once in any given case was an innocent mistake. The Guiding principle of IBA have further stated that if even any such circumstances is however not part of the orange list or falls exterior the constraints that have been listed in an sometimes as mentioned in the orange list, then the arbitrator still has the duty to make the disclosure.

  • The green list items include those situations in which the arbitrator has not made any appearance or where no conflicts exist, and resultantly such a situation includes those items in which the arbitrator is a teacher in the same school or University as another arbitrator or even counsel to one of the parties17.

The revisions that have been included in the year 2014 endorse certain items in the green lost and in the orange list such as the judge or some other judge or guidance to one party in the process of adjudication act or have acted in cooperation in the preceding years as co advice. Thus, it can be said that the guiding principle of IBA have relied too much on the parties and the arbitrators for understanding and addressing those situations involving conflict of interests18.

In an Austrian Supreme court decision, the issue was whether and the extent to which the grounds for confronting the authority can be raised in proceedings that are put sideways under the adjudication law of Australia. In understanding the challenge, it was seen that when the confront becomes recognized after the subject of the process of arbitration, then the grounds can be applied which are same in set aside proceedings. In the case of Sierra Fishing Company v Farran19The court held that proper assistance from the guiding principle on conflict of interest was examined as a challenged to the impartiality of the arbitrator as per o AA 1996, s 24. In the case of W Limited v M SDN BHD20, the Court understood the significance of the guiding principle and also recognized the weakness of the same especially the one that is listed in the non-waivable list and the capability to be relevant to the scenario of the case to the non-waivable catalogue21.

As far as the third party funding or funding of the insurance is concerned, the International Council for Commercial Arbitration (ICCA), in collaboration with the Queen Mary University stated a final report on the details regarding third-party funding. The report is a kind of reference manual for those who are part of the arbitration proceedings and also lays down the standard for the practitioners to go after the guiding principle for forming superior constancy and a more proper set of rules relating to third-party funding process22. The account addresses the meaning of the guiding principle of third party funding and also counters two important issues concerned, the first problem was the wording with the meaning of the event before the event as the insurance companies that they do not have indirect interest but a direct interest while paying the premium amount. Secondly, the wording that says after the event as the insurance companies have taken the view that the policies could be said to have been giving some type of material support. However, it is not clear whether the side of the claimant insurance company can be covered by the guiding principle issued by the IBA or not23.

In the year 2013, 25th of May the IBA issued guiding principle issued on the Party Representation in International Arbitration were approved to understand and control the performance of the representatives of the party. This includes the guiding principle as to whether the conflict of interest that arises out of the reason of the new counsellor by some relationship with the other counsel is being brought before the case in an independent counsel. This was addressed in the case of Hrvatska (Hrvatska Elektroprivreda dd v Republic of Slovenia, ICSID Tribunal Ruling 6 May 2008) and Rompetrol (The Rompetrol Group NV v Romania, ICSID Ruling 14 January 2010).

The guideline no 6 provides for the different measures to protect and safeguard the proceedings and also excluding the new agent. There can be tension in the words of rule no 5 in which the extension of an actual conflict is stated. Unless it is the parties that have agreed to include the IBA guiding principle during conflicts and representations the same cannot be applied and become lawfully binding. They will not be generally received, and they will also not swathe any type of understood conflict24.

Conclusion:
The arbitral awards are generally not published. However, there has been some important movement and openness towards the process of international arbitration. The same is done by LCIA, who also acts as a publisher of the challenged decisions. The court has ruled many types of decisions that were based on the relationship between the parties and the arbitrator, and it also gives rise to any such type of justifiable relationship. The procedural fairness includes a cornerstone of independence and impartiality of the person who makes the decision, and this becomes the essential ingredient of arbitration and of any other litigation25. This is clearly seen in both the domestic arbitration laws for example section 33 of the Arbitration Act, 1996 which is part of the general duty of the arbitrator that is to act in an impartial manner and in a fair manner. The same is also included in the Rules of the London Court of International Arbitration Rules, Article 5.3. The commentators have generally said that independence means the requirement that there is a lack of dependent relationship between the arbitrator and the other party that may at least appear to impact the freedom of judgement of the arbitrator. Thus, in the present paper, the fairness, independence and impartiality of the arbitrator have been discussed, keeping in mind the conflict of interests as well.

References:
Bastida, Bruno Manzanares. "The independence and impartiality of arbitrators in international commercial arbitration." Rev. E-Mercatoria 6 (2007): 1.

Bernasconi-Osterwalder, Nathalie, Lise Johnson, and Fiona Marshall. "Arbitrator Independence and Impartiality: Examining the dual role of arbitrator and counsel." IV Annual Forum for Developing Country Investment Negotiators. 2010.

Bishop, Doak, and Lucy Reed. "Practical guiding principle for interviewing, selecting and challenging party-appointed arbitrators in international commercial arbitration." Arbitration international 14.4 (1998): 395-430.

Bottini, Gabriel. "Should Arbitrator Live on Mars-Challenge of Arbitrators in Investment Arbitration." Suffolk Transnat'l L. Rev. 32 (2008): 341.

Brower, Charles N., and Stephen W. Schill. "Is arbitration a threat or a boom to the legitimacy of international investment law." Chi. J. Int'l L. 9 (2008): 471.

Byrne, Olga K. "A New Code of Ethics for Commercial Arbitrators: The Neutrality of Party-Apointed Arbitrators on a Tripartite Panal." Fordham Urb. LJ 30 (2002): 1815.

Donahey, M. Scott. "Independence and Neutrality of Arbitrators, The." J. Int'l Arb. 9 (1992): 31.

Franck, Susan. "The role of international arbitrators." ILSA J. Int'l & Comp. L. 12 (2005): 499.

Fry, James D., and Juan Ignacio Stampalija. "Forged independence and impartiality: conflicts of interest of international arbitrators in investment disputes." Arbitration International 30.2 (2014): 189-264.

Hascher, Dominique. "Independence and impartiality of arbitrators: 3 issues." Am. U. Int'l L. Rev. 27 (2011): 789.

Lawson, David A. "Impartiality and independence of international arbitrators." ASA Bull. 23 (2005): 22.

Sheppard, Audley. "Arbitrator independence in ICSID arbitration." International Investment Law for the 21st Century: Essays in Honour of Christoph Schreuer 131 (2009): 147-48.

Smith, Murray L. "Impartiality of the party-appointed arbitrator." Arbitration International 6.4 (1990): 320-342.

Trakman, Leon. "The impartiality and independence of arbitrators reconsidered." (2007): 999.

Yu, Hong-Lin, and Laurence Shore. "Independence, impartiality, and immunity of arbitrators: US and English perspectives." The International and Comparative Law Quarterly 52.4 (2003): 935-967.

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