ARBITRATORS’ CONFLICTS OF INTEREST: BIAS BY ANY NAME

Citation(2007) 19 SAcLJ 245
Published date01 December 2007
Date01 December 2007

This is an expanded version of a paper presented at the Regional Arbitration Conference in Kuala Lumpur in 2007. The theme discussed was whether a detailed code of ethics on arbitrator’ conflicts of interest would promote uniformity. This paper submits that a code of ethics setting out general principles is desirable, but cautions against any attempt to prescribe detailed answers to particular scenarios.

I. The pillars of natural justice

1 Archaic doctrines expressed in Latin are incongruous in the modern, transnational enterprise of arbitration. Nonetheless, there are two precepts of ancient pedigree upon which confidence in the arbitral process is rooted. These are what Lord Denning called the pillars of natural justice: nemo judex in sua causa (no person should be judge in his own cause), and audi alteram partem (everyone has a right to be heard). 1

II. Independence and impartiality

2 Nemo judex in causa sua in its modern manifestation may be described as the doctrine of independence and impartiality. Impartiality and independence are related but different concepts. Clause 3.1 of the SIAC (Singapore International Arbitration Centre) Code of Ethics for an Arbitrator nicely distinguishes the two by the following explanation:

The criteria for assessing questions relating to bias are impartiality and independence. Partiality arises when an arbitrator favours one of the parties or where he is prejudiced in relation to the subject matter of the dispute. Dependence arises from relationships between an arbitrator

and one of the parties, or with someone closely connected with one of the parties.

Strictly speaking, as was the view expressed in ex parte Pinochet2nemo judex in sua causa is more closely associated with the independence of the judge or tribunal. This means that the judge or tribunal must not be a party to the dispute, nor have a financial or proprietary interest in the outcome of the dispute.

3 Most arbitral rules, but not all, require both impartiality and independence.

4 Article 12 of the UNCITRAL Model Law on International Commercial Arbitration contains a rule which has either been directly adopted (for instance in Australia, India, Korea, Singapore and Malaysia) or finds parallel in other arbitral rules:

Article 12 Grounds for challenge

(1) 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.

(2) An arbitrator may be challenged only if circumstances exist that give rise to justifiable doubts as to his impartiality or independence, or if he does not possess qualifications agreed to by the parties. A party may challenge an arbitrator appointed by him, or in whose appointment he has participated, only for reasons of which he becomes aware after the appointment has been made.

5 The IBA Guidelines on Conflicts of Interest in International Arbitration opens with General Standard 1 (“general principle”) which states that:

Every arbitrator shall be impartial and independent of the parties at the time of accepting an appointment to serve and shall remain so during the entire arbitration proceeding until the final award has been rendered or the proceeding has otherwise finally terminated.

6 The Rules of Arbitration of the Singapore Institute of Arbitrators (SIArb) stipulate that:

Article 4 Independence and Impartiality of an Arbitrator

4.1 Any Arbitrator (whether or not appointed by the parties) conducting an arbitration under these Rules shall be and remain at all times independent and impartial, and shall not act as advocate for any party.

4.2 A prospective Arbitrator shall disclose to those who approach him in connection with his possible appointment, any circumstances likely to give rise to justifiable doubts as to his impartiality or independence.

4.3 An Arbitrator, once appointed or chosen, shall disclose any such circumstance (referred to in Article 4.2 above) to all parties, not already informed by him, of these circumstances.”

7 The Singapore Law Society Code of Conduct for Arbitrators also highlights these twin requirements:

4. An arbitrator has an ongoing duty to disclose:

Any interest or relationship, whether business, professional or personal, with any party, representative of the party or potential witness, that might give rise to a reasonable perception of partiality or bias;

The extent of any prior knowledge he may have of the dispute; and

c. Any other circumstances likely to give rise to justifiable doubts as to his impartiality or independence.”

8 The Rules of Arbitration of the Thai Arbitration Institute similarly permit a challenge to an arbitrator on the ground of justifiable doubts as to his impartiality or independence (rr 14-17).

9 In substance, the Indonesian Law No 30 of 1999 also provides for independence and freedom from bias. Article 22 of the Law stipulates that:

Terhadap arbiter dapat diajukan tuntutan ingkar apabila terdapat cukup alasan and cukup bukti otentik yang menimbulkan keraguan bahwa arbiter akan melakukan tugasnya tidak secara bebas dan akan berpihak dalam mengambil putusan.

Tuntutan ingkar terhadap seorang arbiter dapat pula dilaksanakan apabila terbukti adanya hubungan kekeluargaan, kenangan atau pekerjaan dengan salah satu pihak atau kuasanya.

10 Loosely and unofficially translated, para 1 says that an arbitrator may be challenged if there is reason and evidence to raise doubt that he will not perform his duty independently and will be bias in his decision. Paragraph 2 says that the challenge will be successful on proof of family, financial or work connections with one of the parties or its authorized representatives.

11 One will not find the Anglo-Saxon terminology of “independence and impartiality” in Chinese law or rules of arbitration, but the principle should be recognized there. The Arbitration Law of the People’s Republic of China of 1995 stipulates the circumstances for challenge of an arbitrator. These focus on the arbitrator’s relationship with a party or material interest in the case. The Rules of the China International Economic and Trade Arbitration Commission (“CIETAC”) also disqualify an arbitrator who has a personal interest in the case.

12 England has chosen to uphold impartiality, but not independence, as the key ingredient against bias. The Arbitration Act 1996 speaks only of “justifiable doubts as to his impartiality”. The omission of “independence” was deliberate. England decided not to have lack of independence as an additional ground for removal on top of lack of impartiality because it could give rise to endless arguments about how independent an arbitrator must be and “there may well be situations in which the parties desire their arbitrators to have familiarity with a specific field, rather than being entirely independent.”3 The decision may be influenced by the fact that in England, leading arbitrators are often members of a set of barristers’ chambers, where the barristers are sole practitioners and do commonly act against each other. Sometimes, a dispute is entirely contained in one set of chambers, with both counsel and the tribunal coming from the same chambers.

13 In contrast, Art 7 of the ICC Rules of Arbitration refers only to the independence of the arbitrator:

1. Every arbitrator must be and remain independent of the parties involved in the arbitration.

2. Before appointment or confirmation, a prospective arbitrator shall sign a statement of independence and disclose in writing to the Secretariat 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 Secretariat shall provide such information to the parties in writing and fix a time limit for any comments from them.

3. An arbitrator shall immediately disclose in writing to the Secretariat and to the parties any facts or circumstances of a similar nature which may arise during the arbitration…

14 Although disclosure is on matters that potentially affect the arbitrator’s independence in the eyes of the parties (this is not an objective test, unlike that in many other rules or statutes), a challenge can be mounted on not just lack of independence but any other credible basis (Art 11(1) allows challenges “whether for an alleged lack of independence or otherwise”).

15 For the most part, the distinction between independence and impartiality is not crucial in practice because case law predominantly considers impartiality and independence in the same pot, under the test of apparent bias.

16 Actual bias will of course disqualify any judge or tribunal. Actual bias is hard to prove, so a party with grievance against the tribunal will usually assert apparent bias.

III. Judges and arbitrators

17 Freedom from apparent bias is as important to a judge as it is to an arbitrator. A judge, however, is not embedded in the business community the way that an arbitrator is. He does not work for potential disputants nor is he part of the community of counsel who might one day argue a case before him. An arbitrator is very much part of the business and legal fraternity. For this reason, it is often of concern whether the arbitrator has reason to be partial towards one of the parties.

18 The social or business context aside, there should be no real difference between the impartiality required of a judge and that required of an arbitrator.

19 In Japan, for instance, s 792(1) of the Law Regarding the Procedure for Public Notice and the Procedure for Arbitration provides that an arbitrator may be challenged on the same grounds as a challenge of a judge.

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