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The Independence and Impartiality of an Arbitrator

Ian Rollit  Bsc., FRICS, FCIOB, MCIArb

Arbitrator, Ajudicator, Mediator & Chartered Project Management Surveyor

Introduction

An arbitration agreement is a contractual clause evidencing agreement or a separate agreement to refer future disputes to arbitration. Arbitration clauses in contracts are phrased in a variety of ways so that the tribunal may have jurisdiction over: “all claims”; “all disputes”; “all differences”. The contractual nature of arbitration requires the consent of both parties to have the dispute settled by arbitration. The arbitration tribunal’s jurisdiction is based solely on the agreement between the parties to submit their existing or future disputes to arbitration. The arbitration agreement is the foundation stone of the arbitration. Its award will have the same finality and binding effect as a judgment. The composition of the tribunal must meet the same standards and characteristics of any fair trial.

The duty of disclosure is the antidote to allegations of impartiality and independence. The Arbitrator must disclose any interest and various laws and arbitration rules provide for this. The timing of disclosure should be before accepting the appointment or as soon as the Arbitrator becomes aware of a possible disqualifying event during the arbitration proceedings.

A definition of both impartiality and independence is critical in understanding the importance of same as it pertains to the Arbitrator.

Impartiality

An Arbitrator is impartial when he neither favours nor is predisposed as to the question in dispute towards one party. Such predisposition exists when the Arbitrator has already expressed a concrete opinion on the legal questions(s) or acted as a counsel for a party in the matter (1).

The impartiality of Arbitrators is essential for the arbitration process. There was no specific statement to this effect prior to the 1996 English Arbitration Act. The 1950 Act did contain various provisions to secure impartiality.

The 1996 English Arbitration Act goes further and confers upon the Arbitrators to “act fairly and impartially as between the parties.”

Section 33 of the English Arbitration Act gives specific instances of what is meant by fair treatment:

Each party should be given a “reasonable” opportunity of putting his case and dealing with that of his opponent, and Suitable procedures should be adopted by the tribunal that avoid unnecessary delay and expense, so as to provide a “fair” means for resolving the particular dispute.

Section 33 effectively requires the tribunal to act in accordance with natural justice and broadly reflects the Model Law Article 18 – Equal treatment of parties which states that “the parties shall be treated with equality and each party shall be given an opportunity of presenting his case”.

Impartiality impacts in three ways:

1. It is necessary to avoid the situation in which an Arbitrator who may not be impartial, by virtue of a personal interest in the outcome or by virtue of relationship with one of the parties is permitted to take up his appointment;

2. The situation may arise after the Arbitrator has taken up his appointment that an Arbitrator puts himself, or is otherwise put, in a position where his personal interest conflicts with his duty to act impartially and

3. The Arbitrator may, in his actual conduct of the proceedings, fail to act in an impartial manner.

The list of issues gives rise to a breach by the Arbitrator of his general duty under section 33(1) (a) of the Arbitration Act 1996 to act fairly and impartially: the Arbitrator in such a case is liable to be removed and if the award has been made it is open to challenge on the ground of serious irregularity. Impartiality requires that an Arbitrator is unbiased and does not favour one party and is not predisposed as to the dispute.

UNCITRAL Model Law

Procedure is contained in Article 12 – Grounds for Challenge and Article 13 – Challenge Procedure. The main issues are as follows:

1. Where an Arbitrator is approached in connection with his possible appointments he must disclose any circumstances likely to rise to justifiable doubts as to his impartiality. Once appointed he is under a continuing duty to this effect under Article 12(1).

2. A party who wishes to exercise his right to challenge an Arbitrator must within 15 days of becoming aware of the appointment or of the circumstances on which a challenge might be founded, send a written statement to the Arbitrators setting out his complaint .The challenged Arbitrator may then withdraw, and he must do so if the other party agrees with the challenge. If the Arbitrator continues, the validity of the challenge is to be considered by the Arbitrators themselves Article 13 (1).

3. If the challenge is not successful, the objecting party may apply to the curial courts within 30 days; pending such an appeal, the Arbitrators are free to continue with the arbitration Article 13 (2).

The procedure is subject to an overriding waiver provision, which prevents a party from exercising his right to challenge an Arbitrator if he participated in the appointment, unless the basis for his challenge did not become apparent until a later date Article 12(2).

The legal standard for impartiality of persons with judicial or quasi-judicial functions has been given detailed consideration by the courts in relation to judges .The leading authority is the ruling in the Court of Appeal Locabail (UK) Ltd v Bayfield Properties Ltd. The Locabail decision made it clear that that identical principle apply both to judicial appointments and to Arbitrators. In AT & T v Saudi Cable Corporation, it was confirmed that there was no basis for lowering the standard of impartiality to Arbitrators than to judges.

Independence

Independence requires that there should be no actual or past dependent relationship between the parties and the Arbitrators. Model law permits intervention where the Arbitrators are not impartial or independent. The Model Law provides for full disclosure.

The absence of an independent Arbitrator might well be contrary to the guarantee of independence in Article 6 of the European Convention of Human Rights since the Act goes to great lengths to secure impartiality.

The distinction between independence and impartiality was emphasized by the Court of Appeal in AT &T Corporation v Saudi Cable Co.

Nationality

Article 11 of the UNCITRAL Model Law states “No person shall be precluded by reasons of his nationality from acting as an Arbitrator.” It is commonplace and stated in most arbitration rules that a sole Arbitrator or a chairman should be of a different nationality than either party. ICSID Convention dictates that the majority of the Arbitrators must be of a different nationality than the parties.

Duty of Disclosure

Arbitrators are generally under a duty to disclose to all parties all facts which may be relevant. This ensures compliance with requirements of independence and impartiality. Each Arbitrator is under an obligation to ensure a valid and fair resolution of a given dispute.

IBA Rules of Ethics for International Arbitrators provides that a prospective Arbitrator discloses past and present business relationship, social relationships, previous relationship with any fellow Arbitrator prior knowledge of the dispute and commitments which may affect his availability to perform his duties as Arbitrator. The ICC Statement of Independence requires Arbitrators to declare their willingness to act as an Arbitrator.

Conclusion

In R v. Gough it was held by Lord Goff of the House of Lords that ‘the test should be the same in all cases of apparent bias, whether concerned with justices or members of other inferior tribunals or with jurors or with Arbitrators and that test was ‘… whether here was a real danger of bias on the part of the relevant member of the tribunal in the sense that he might be unfairly regard (or have unfairly regarded) with favour or disfavour, the case of a party to the issue under consideration by him.’

An Arbitrator may be removed by the Court where circumstances give rise to justifiable doubts as to impartiality. (Article 12 of the Model law).

Earlier Law of the Courts had always stated that “justice should not only be done, but should manifestly and undoubtedly be seen to be done.” Courts have taken the view to intervene when;

1. The Arbitrator has some connection with one or other of the parties to the arbitration proceedings.

2. The Arbitrator has some interest in the outcome of the proceedings;

3. The Arbitrator’s conduct prior to or during the proceedings demonstrates that his mind is made up.

In Taylor v. Lawrence the Court of Appeal concluded (at paragraph 60) that the appropriate test for potential bias was the test in Re Medicaments (No.2) as modified by Lord Hope of Craighead in Porter v. Magill:

“The court must first ascertain all the circumstances which have a bearing on the suggestion that the judge was biased. It must then ask whether those circumstances would lead a fair-minded and informed observer to conclude that there was a real possibility that the tribunal was biased.”

There is a close relationship between the concept of independence and that of impartiality. In Findlay v United Kingdom 244, paragraph 73, the European Court said:

The Court recalls that in order to establish whether a tribunal can be considered as ‘independent’, regard must be had inter alia to the manner of appointment of its members and their term of office, the existence of guarantees against outside pressures and the question whether the body presents an appearance of independence.

As to the question of ‘impartiality’, there are two aspects to this requirement. First, the tribunal must be subjectively free from personal prejudice or bias. Secondly, it must also be impartial from an objective viewpoint, that is, it must offer sufficient guarantees to exclude any legitimate doubt in this respect. The concepts of independence and objective impartiality are closely linked…”

In both cases the concept requires not only that the tribunal must be truly independent and free from actual bias, proof of which is likely to be very difficult, but also that it must not appear in the objective sense to lack these essential qualities.

The nationality of the sole Arbitrator or Chairman of a tribunal is not good grounds for setting aside the award if the Arbitrator has disclosed at all times all facts which are relevant. Additionally if the party fully participated in the arbitration he will be estopped from claiming that nationality of the Arbitrator was a factor in his decision making.

Ian has 30 years’ experience as a Surveyor and Project Manager on a wide range of projects in Building and Civil Engineering. His experience in the commercial and contractual aspects of construction management has been acquired by working directly for a developer, as a consultant for large international companies and contracting organizations on major tourism projects. Ian has worked extensively throughout England, the Caribbean and South America. He has been involved in all aspects of projects, including costs estimates, contractor and sub-contractor selection, design management, preparation of contract documents, contract administration and the formulation and settlement of claims, drafting of pleadings and litigation support in litigation, advocacy in arbitration proceedings and is experienced in negotiation, conciliation, mediation, adjudication, arbitration and litigation. He is also a member of CCD’s Editorial Board. He can be contacted via email: [email protected]