Code of Ethics, Conflict of Interest in Arbitration/ADR BANI-IARBI - - PDF document

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“Code of Ethics, Conflict of Interest in Arbitration/ADR” BANI-IARBI Seminar, Jakarta - 29 November 2018 Presentation Points – Peter Chow, Partner, Squire Patton Boggs A. Introduction 1. Impartiality and Independence

• Party selection and repeat appointments – Are they incompatible with

impartiality and independence? 2. IBA Guidelines on Conflicts of Interest in International Arbitration

• Practical aspects of disclosure

3. IBA Guidelines on Party Representation in International Arbitration B. Impartiality and Independence 4. Concept of Impartiality and Independence

• Wordings derived from UNCITRAL Model Law, Art. 12.
• Impartiality and independence often used together. There is a difference

between the two notions.

• Impartiality concerns the absence of a bias or predisposition toward
• ne of the parties.
• Independence relates to the absence of relations with a party that

might influence an arbitrator’s decision.

• At the time of accepting appointment and shall remain so until final award or

proceedings terminated.

• Relevant facts and circumstances that would give rise to justifiable doubts as

to impartiality and independence. 5. Is party selection inherently incompatible with true impartiality and independence? Views from well know arbitration practitioners.

• No
• One important element of legitimacy of arbitration is party autonomy.
• Party-selected arbitrators are required to act impartially and
• independently. This is spelt out in modern rules and Model Law.
• Old practice in US for eg. AAA old rules – party appointed arbitrator

expected to advance interest of party who appointed them.

• Some parties might select a friend hoping that friend would favour the
• party. In 3-member tribunal, decision made by majority. If arbitrator

has reputation for apparent bias, will undermine his/her credibility. Would lose influence over the other two arbitrators and opinion

• discounted. Detrimental as would lose a friendly voice in the

deliberations.

• Rules of major arbitral institutions provide that arbitrators (sole or party

appointed) must be independent and impartial. Professional arbitrators would be extra careful not to be seen as bias.

• The nominee will ensure that the tribunal will understand the party’s

culture or legal tradition (e.g. common law v civil law).

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• Said that there is an implied duty to ensure that the tribunal consider

the arguments of the party that appointed them.

• Martin Hunter said tendency to “looks for a party-appointed arbitrator

who has a maximum predisposition towards his client with the minimum appearance of bias".

• Studies on investment treaty arbitrations (mostly available to the

public), most of cases, unanimous award. Not a real issue.

• Safeguard – no arbitrator may have the nationality of any party. ICC

and other major rules. Contrast with practice at CIETAC.

• Yes
• Studies of international arbitrations reveal that dissenting opinions

were almost invariably (more than 95% of the case) written by the arbitrator nominated by the losing party. § Study of ICSID cases by Albert Jan van den Berg – 22% of cases with dissenting opinions. § (Compare with Study of ICC statistics by AJvdB – 5 % of cases with dissenting opinions – shows not a big issue in commercial

• arbitrations. But for ICSID, appears that this could be a bigger
• issue. Why? Encourage repeat appointments by a State if

hold certain views?).

• Not necessarily an ethical issue - may mean that appointing party has

made accurate assessment of how its nominee is likely to view certain issues.

• It may be a real issue – arbitrators are frequently suggested by
• counsel. Would there not be an unconscious bias not to antagonise

counsel whose firm is likely to consider the arbitrator for future appointments?

• Need not be overtly bias so as to lose credibility – but in a borderline

situation, might this bias not tilt the balance? (Compare with possibility that the other co-arbitrator may be similarly influenced?).

• Solution – any arbitrator be jointly selected or selected by an

appointing body (but contrast with party autonomy?).

• Appointments be made from a pre-existing list of qualified arbitrators

(potential arbitrators usually have close connections with the appointing body to be included on the list or to be appointed in practice).

• Possibility of opposite bias.

6. Is the practice of repeat appointments inherently incompatible with true impartiality and independence?

• Arguments for repeat appointments
• In some technical fields or smaller jurisdictions, number of skilled and

experienced arbitrators is limited. Difficult to say they are appointed because of bias – but more likely because of their skills.

• Parties have a right to choose someone they are comfortable with

repeatedly, so long as the arbitrator is independent and impartial (not necessarily because they are bias)?

• For busy arbitrators, even several repeat appointments from the same

law firm form only a small part of their business.

• Well known arbitrators do not want to risk their reputation by being

known to be bias towards their repeat appointees.

• In investor state arbitrations, some arbitrators are known to hold views

favourable to the state; others favourable to investors. Some are

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repeatedly appointed by States (not necessarily the same State). Is this also an instance of repeat appointments?

• Widening the pool of arbitrators
• Appointing bodies can consider appointing less experienced

arbitrators to low value, straightforward cases to gain experience (Caution: these cases may be more difficult to handle because the parties may not be represented by counsel or by counsel who are inexperienced in arbitration).

• ICC Arbitrator Nomination Committee – encourage widening pool of

arbitrators

• HKIAC has a panel of arbitrators and a list of arbitrators. Those in the

“list” are for those who are less experienced, and the HKIAC does appoint arbitrators from the “list” from time to time to widen the pool of experienced arbitrators.

• While knowledge of arbitration law and procedure is important, a lot of

required skills are acquired through actual experience. “Arbitrator’s Workshop” – provides role play for participants, with course director providing comments. Good way of giving some “hands on” experience with feedback.

• Counsel to consider proposing less experienced arbitrators (but may

be experienced counsel) as arbitrators. Problem – for sole arbitrator, likely to be rejected by the other party. For co-arbitrator, party may not want to take chance with inexperienced arbitrators.

• Arbitration insitutions to consider introducing rules for low value, fast

track, documents only arbitration at fixed fees, and appoint less experienced arbitrators to gain more experience. Such as those for certain consumer arbitrations in the United Kingdom. 7. Summary

• Personal view - party selection is not inherently incompatible with true

impartiality and independence. Party autonomy and benefits of party selection outweigh risks. Much depend on the personal ethics of arbitrators

• appointed. In any event, such risks can be mitigated.

C. IBA Guidelines on Conflicts of Interest in International Arbitration 8. International Bar Association (IBA) Guidelines on Conflicts of Interest in International Arbitration initially adopted in 2004 by IBA. Revised in 2014. Drafted by a group of experienced and well known IA practitioners around the world.

• Guidelines – Reflect understanding of IBA Arbitration Committee as to the

best current international practice; do not purport to be comprehensive nor could they be; national courts may have the last word on challenge.

• Set out certain general standards.
• In addition, proposed concrete examples.
• Red List (non-waivable and waivable) – give rise to justifiable doubts
• Orange List (disclosure, no objection within 30 days).
• Green List – no disclosure required.
• Examples –
• 3-year limit guideline – for some situations on Orange List, potential

conflict might not arise after passage of time. Three year was proposed as a guideline.

• Barristers from same chambers.

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9. Concept of issue conflict – arbitrator is concurrently acting or has previously acted as counsel in another case raising analogous issues, or is to act in a subsequent case. Or expressed an opinion or rendered a prior award on a dispute issue. Not listed in Orange list – but list not exhaustive. 10. IBA Rules used for more than 10 years. IBA Rules promoted by major arbitral institutions such as HKIAC, SIAC, LCIA. ICSID awards – arbitrators and parties have generally referred to the Guidelines. 11. Examples - (Practice of guerilla tactics)

• Hrvatska Elektroprivreda v Republic of Slovenia

10 days before hearing, counsel for one party put forward the name of a barrister as counsel. Both the new barrister and chairman of tribunal were door tenants from the same chambers. IBA Guidelines – would be a potential conflict (Orange list). Other party seeks order for the party to refrain from using the counsel (too late for arbitrator to recuse). Tribunal held has power to exclude counsel, barrister not permitted to further participate.

• Contrast with: The Rompetrol Group NV v Romania

Tribunal accepted that, in principle, there was an inherent power to exclude counsel, but noted that it would be exercised only rarely and in compelling circumstances to safeguard the integrity of the arbitral process.

• Hong Kong – ZTE v Jung Science

12. Summary

• IBA Guidelines useful in practice.
• IBA Guidelines take into account views from various jurisdictions.
• Note – it is not exhaustive.

D. IBA Guidelines on Party Representation in International Arbitration 13. Ethical rules and guidelines for party representatives (including counsels) in arbitration proceedings – no international legislation. 14. Most jurisdictions have own professional codes of conduct governing lawyers practicing in the respective jurisdictions. 15. Problems:

• Applicability to foreign lawyers who act as counsel in international arbitrations

in those jurisdictions.

• Applicability to lawyers within jurisdiction but acting as counsel in international

arbitrations outside of home jurisdiction. What about lawyers admitted in multiple jurisdictions? In what capacity is the lawyer acting in?

• Applicability to non-lawyers who act as representatives in international

arbitrations.

• Different standards applicable to lawyers from different jurisdictions but

appearing in same international arbitration proceeding – uneven playing field.

• Enforcement of code of conduct over lawyers not within jurisdiction of local

bar associations or enforcement authorities.

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16. IBA Guidelines on Party Representation in International Arbitration adopted in 2013 by IBA. Drafted by a group of experienced and well known IA practitioners around the world.

• Applicable by agreement.
• Deal with issues such as communications with arbitrators, submissions to

tribunals, disclosure of documents, dealing with witnesses and experts. 17. Problems with IBA guidelines:

• Guidelines are not mandatory.
• Who should regulate and enforce? Arbitral institutions, bar associations?
• Incorporation into arbitration agreement or arbitration rules?

18. London Court of International Arbitration (LCIA) General Guidelines for Parties’ Legal Representatives - annex to the LCIA rules. The guidelines are not very detailed. The guidelines provide that they do not derogate from any applicable mandatory laws, rules of law, professional rules or codes of conduct. E. Conclusion 19. Move towards convergent of views on what is acceptable international practice. Many of these views are articulated in papers produced by working committees in international organizations such as the IBA. Therefore, important that the relevant committees consist of representatives from diverse jurisdictions.