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Independence and Impartiality of International
Arbitrators
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Doc. JUDr. Katarína Chovancová, PhD., LL.M.
Associate Professor
Institute of International and European Law
THE FACULTY OF LAW
PAN EUREOPAN UNIVERSITY
THE SLOVAK REPUBLIC
Introduction
Together with being a quasi judge, the arbitrator has to be and stay independent and impartial throughout the whole arbtiration proceedings, as well after the end of arbitration. In case of breach of these obligations, he may be removed, or = at the post award stage - the arbitral award may be annulled - set aside . It is a generally accepted principle of international arbitration that arbitrators must stay both impartial and independent of the parties. Both requirements have been enacted in most arbitration laws and rules, as well as in the IBA and AAA codes of ethics. For instance, under Article 10(1) UNCITRAL Rules, „Any arbitrator may be challenged if circumstances exist that give rise to justifiable doubts as to the arbitrator's impartiality or independence.“ In fact, some laws and rules refer to both requirements, other only either to partiality.ent has not been enacted, or whether is is supposed to subsume also the missting requirement etc. The ICC Rules refer only to independence, while the AA 1996 adoptes only impartiality of arbitrators - these principles are not interchangeable and must be clearly distinguished from each other. Unfortunately, courts differ in their opinions and relevant rules and laws provide us with no guidance on the difference among these principles, except for the complicated Swedish Act on Arbitration 1999 /Section 8/. {Examples – reading – LCIA, SCCI, ICDR, ICC Rules}. 1. Impartiality
Impartiality requires that an arbitrator favours no party and is not preoccupied with regard to the issue in dispute.This requirement has a subjective character, and may be not assimilated with the obligation of arbitrator to be neutral – actually, the neutral is usually only the chair, while the PAAS play a slightly different role in the arbitration. However, they cannot be partial either, they cannot be „biased.“ On the other hand, they are appointed not nly because they know the case, but because they share the same, or similar legal bacgkround, social values, religion etc. Consequently, they are better equipped to understand the case and appreciate the submitted facts. When it comes to the nationality of arbitrator, sharing the same nationality with one of the parties is not forbidden, unless the parties agreed so in advance. That means, that when the party and its PAA is of the same nationality, he will be not perceived automatically as actually biased, and the appearance of bias cannot be assumed automatically as well. Basically no person shall be excluded from the arbitrator’s post because of his nationality, but at least the chairman should not share the naitonality, identical with the one of any party, in order to stay absolutely neutral. However, the policy is changed a bit in the investment arbitration, where for instance, in the ICSID arbitration, the majority of the arbitrators must be of a different nationality than the parties. Actual partiality – or the actual bias happens rarely and it is very difficult to prove, as skillful arbitrators only seldom /if ever/ apparently prefer and promote the view of “their” parties. An official partisanship is not permitted globally, so even if they tend to prefer the view of the party, they cannot express it outright. An appearance of bias is obvious, when the arbitrator has already expressed publicly his opinion on the case or acted as counsel for a party in the mater, or in the connected issue. The test which has to be passed here for the party claiming the lack of impartiality of arbitrator is to prove the actual bias, as well as the appearance of bias – this is enough for the disqualification of arbitrator. However, the real danger of bias /see Laker Airways case/ is definitely the most difficult to prove. Potential arbitrators may be interviewed and questioned by the parties without any negative influence on their impartiality. In the course of interview, the potential arbitrator cannot discuss the dispute at length or to advice the party. As the chairman of the tribunal is usually appointed by two PAAS, who were advised about the potentially mostly wished candidate, this act also does not negatively influence the impartiality of the newly appointed chairman. The same applies to disenting opinions.In case the arbitrator attached to the arbitral award his/her dissenting opinion, this may be not percieved as the evidence of partiality in the decided, or also a later case. 2. The Concept of Independence
Independence requires that there should be no such actual or past dependant relationship between the parties and the arbitrators, which could influence the manner, in which the arbitrator decides the case and the freedom in his decision-making process. The standard of independence should be the same both in the pre-award and the post-award stage, but has a more damaging effect in the post-award stage. As a result, stricter limits are adopted when the arbitrator is going to be appointed. Arbitrator lacks his independence if he has a substantial economic, or other interest in the outcome of a case. Consequently, major shareholders, or directors of the parties are not independent enough for the position of arbitrator. Minor financial interest of arbitrator should not be problematic, if it is clear that the result of arbitration cannot be negatively influenced by it. Personal relationships – family relationships and also important actual, or past professional relationships also disqualify. On the other hand, if the law firm participated only in a few past matters for the party, this should not impair an arbitrator's independence. In the shrinking world of international businesses, as big law firms are growing or merging, it is more nad more demanding to find a professional – the arbitrator, with no actual or past links to the party in the complex international arbtirations /e.g. Andersen v Andersen case/. This explains, why many specialists, accustomed to work in the most famous firms specialized on arbtiration /e.g. in Switzerland/ moved out and opened their own small boutique arbitration law offices only with usually two partners. In addition, arbitrators from law firms, which made an alliance with a firm representing one of the parties may also not be found independent and the same can be said about arbitrators with warm relationship with the lawyers on the other side beyond the fence line. A borderline case in this respect may be the English practice to allow barristers who are appointed as arbitrators being in the same chamber as one of the parties counsel.This issue has been discussed in light of the Laker Airways case,in which the English court held that the fact that an arbitrator was from the same chambers as counsel for one of the parties did not give rise to justifiable doubts as to his impartiality or independence. This decision was highly debated. Where an arbitrator is picked up repeatedly by the same party, the other party may claim the lack of his independence, but basically, earlier appointments by one party /if not too many/ should not be taken as an evidence of the lack of an arbitrator. If there are odubts, the arbitrator should disclose his past appointments and all connections and activities he used to have with the parties. On the other hand, the fact that two arbirators, actively involved in the international commercial arbitration met at the itnernational arbriation conference in Salzburg and exchanged their disagreeing opinons on this or that matter or the internaitonal conglomerate and the disputes in which it is involved, does not negatively afflict their independence. Another problem may arise when the arbitrator has been or is expected to be appointed in related disputes. No general rule has been written down here and the judgment of the mater will depend on the view of deciding arbitration institution, or the court with the evidence being the most important factor. In comparison with the traditional international commercial arbriation, the investment arbitration differs, as persons, who work for one of the parties – here a state or a state entity, will not be excluded from arbitator‘s post as being not independent. Especially judges and law professors, as well as directors in state owned companies are considered in these cases as suitable PAAS. 3. Disclose, Disclose, Disclose
To met the standards of independence and impartiality, arbitrators usually have to disclose to the parties all facts which may negatively influence their indepdndence and impartiality. This duty either is adopted in the relevant arbitration rules and laws, or may be deduced from the agreement between the parties and the arbitrator. This obligation exists since the moment the potential arbirator has been approached by the parties and lasts until the end of arbitration. For instance, under the Article 4.2 of the IBA Rules of Ethics for International Arbitrators, a prospective arbitrator should disclose: (a) any past or present business relationship, whether direct or indirect including prior appointment as arbitrator, with any party to the dispute, or any representative of a party, or any person known to be a potentially important witness in the arbitration. With regard to present relationships, the duty of disclosure applies irrespective of their magnitude, but with regard to the past relationship only if they were of more than a trivial nature in relation to the arbitrator's professional or business affairs. Non-disclosure of an indirect relationship unknown to a prospective arbitrator will not be a ground for disqualification unless it could have been ascertained by making reasonable enquiries; (b) the nature and duration of any substantial social relationships with any party or any person known to be likely to be an important witness in the arbitration; (c) the nature of any previous relationship with any fellow arbitrator (including prior joint (d) the extent of any prior knowledge he may have of the dispute; (e) the extent of any commitments which may affect his availability to perform his duties as arbitrator as may be reasonably anticipated. When mulling over the question, what to disclose and what to omit, arbitrators should use simply rely on their common sense and a sound judgment and to disclose only those facts which objectively could be relevant, rather than r distant factors. There is no uniform global test applicable on this mater. For instance, the US approach is digging into every aspect of both private and professional life of arbitrator. However, this approach is not welcome in Europe. In practice, a PAA will „spill his guts “and disclose all relevant information to the party approaching him. If the appointing party considers his relationships as negatively influencing the arbitrator’s independence or impartiality, the arbitrator will disclose the information in writing to the appointing authority, to the other party and the other arbitrators. Many institutions have their own standard form which must be signed before appointment by the parties /e.g. the ICC/, and the ICC Statement of Independence requires arbitrators to declare their willingness to act as an arbitrator. The duty of disclosure seldom breaches on the duty of confidentiality owed to parties in a different arbitration. In this situation, the arbitrators should turn down the case and refuse the arbirator’s position. Actually, the non-disclosure of relevant facts may also result in claiming damages against the arbitrator. For instance, the Austrian Supreme Court, held that the immunity granted to an arbitrator for his judicial task does not extend to a violation of the disclosure obligation, for which an arbitrator may be liable for breach of a contractual duty. 4. PAA and his Nemesis
In arbitration with commodities, as well as in domestic arbitration in some countries, the PAAS play the role of the representatives – the delegates of their appointing party. Many times they have the same nationality as their appointing party. In the course of proceedings, they make it sure, that their party's case is understood and fairly reviewed by the co-arbitrators. However, the may not appear to be direct counsels for the parties, as this oculd lead to their removal – they have to avoid all ex parte communications with his appointing party while acting in the arbitral tribunal. When co-arbirators doubt the impartiality and independence of their colleague – the PAA, they may raise this mater with the incriminated PAA either informally, or even formally, according to some arbitration rules /e.g. the LCIA Rules/. An informal challenge could result either in the attacked arbitrator’s stepping out of his position of arbitrator, or even in challenging the other two arbitrators by an already removed member of the tribunal.

Source: http://www.paneurouni.cz/files/sk/fp/ulohy-studentov/2rocnikmgr/extract-ind-imp-3.pdf

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