Arbitration as a concept is a term that largely identifies with legal systems and it varies across countries. These diversities reflect problems in the local environment and some cases stipulate different approaches to the entirely legal system.1 The legal system is comprised of civil law, common law, Islamic law, etc. Several terminologies are identified with the rules of the legal system of arbitration. The first is the ‘claimant’ who may be one or more individuals who stipulate claims against any other party. The term ‘award’ as utilized by the rules identifies an interim or final compensation deduced during the judgment.2 The term ‘party’ or ‘parties’ refer to individuals such as claimants, respondents, or any other additional person(s) involved with the case.
Arbitrators are a group of adjudicators comprised in the arbitral tribunal.3 This panel is also known as an arbitration tribunal. In case of disputes, the panel of adjudicators is conveyed to resolve the difference using arbitration. While some tribunals may only consist of one arbitrator, some may have more than one.
Arbitrators are used in International commercial arbitration when disputes arising from international relationships or international commercial agreements are present to the international courts. In this case, Parties involved in disputes have the freedom to choose the number of adjudicators to be included in the panel. Moreover, in some legal systems, a clause for arbitration is given describing how many adjudicators are to be included in resolving disputes. In most cases, it provides for two arbitrators i.e. a chairman and an umpire (or any other even number). Although this ‘arbitration clause’ differs from country to country, the appointed panel must choose an additional arbitrator as a chairman of the tribunal. The significance of this is that it reduces the chances of deadlock situations arising.4
Arbitrators are used because the adjudicators are perceived to have the professional expertise concerning subject matters to resolve disputes. Additionally, the arbitration process provides both the claimants and respondents equal opportunities to state their cases. An arbitral tribunal is mainly comprised of two main proceedings namely institutional arbitration proceedings and ad hoc arbitration proceedings. In the first form of proceedings, arbitrators are appointed under the supervision of professional bodies that provide arbitration services.5 These professional bodies include American Arbitration Association which is based in New York, the LCIA that is situated in London, and International.
Although these professional bodies have their respective headquarters, they have the right to supervise the appointment of the arbitral tribunal in almost all countries across the world. They are also capable of excluding the need for parties involved to include local courts and procedures. This is in the event of a disagreement over the replacement or appointment of an adjudicator in the arbitration panel6.
In ad hoc arbitration proceedings, parties involved in disputes have the privilege of choosing and appointing arbitrators. Here, parties rely on courts, procedural law, and not supervising institutions as in the institutional arbitration proceedings. The procedural laws and courts also determine the place of arbitration to resolve any disagreements over replacement and appointment of adjudicators in the arbitration panel.7
Arbitration being a process of resolving disputes; has risen steadily into popularity in international transactions over recent years. Due to the expensive processes and high stakes, parties have generally opted to settle their disputes by utilizing independent or impartial arbitrators. This has led to the creation of bodies such as the International Bar Association (IBN), UNICITRAL (FN1), etc.8
Although attempts have been underway to create independent arbitrators, this has proved to be difficult. This is because there is no specified criterion developed to create homogeneity in the impartial or independent arbitrators. Different jurisdiction bestowed in cases demonstrates a lack of unanimity.9 Consequently, the test applied to a large extent is dependent on crucial law applicable to the disputes.
Role of Arbitrators
Various roles are assumed by arbitrators in the international environment. These roles may be considered from different approaches. The first approach is through analyzing the procedural powers of arbitrators in terms of adversarial versus the inquisitorial, type of proceedings, etc.10 The second approach involves examining the true nature of the arbitration in terms of jurisdiction or contractual basis. In essence, an inquisitorial procedure means arbitrators make their inquiries about proposed arguments, facts, or conclusions of fact. In adversarial procedures, arbitrators only listen to the arguments and evidence presented by parties and decide between them.
The first main role of international arbitrators is to ensure that proceedings of arbitration remain free and fair to all parties involved. Here, the international arbitrators act as neutral observers as the disputing parties present their evidence and arguments. As neutral observers, arbitrators identify a determinant that forms the basis of their decisions. These decisions should however be founded on legal and factual elements. This consequently gives the arbitrators an active role in the process of arbitration. Identification of this role is faced with major challenges because the task of identifying the role involves examining great diversity involved with the transnational environment.
Arbitrators have the role of effectively managing cases while conducting the arbitration process.11 This, therefore, means that after consulting claimants, respondents, and other parties involved, international arbitrators may adopt procedural measures, as it considers appropriate. They should ensure that these measures are within terms and conditions stipulated within the agreement. They also have the role of enhancing the confidentiality of arbitration proceedings.12 Here, the international adjudicators adopt measures that seek to protect trade secrets and private information upon the request of any parties involved.
States also expect that international arbitration will play a key role in contributing to the development of economic relations. This is because they expect that the international arbitrators will expeditiously and peacefully resolve disputes originating in the context of those relations. As greater powers assigned to arbitrators in the international arbitral tribunal are justified by these normative developments.
Instead of categorizing the arbitration process into an inquisitorial procedure versus adversarial, the communication should aptly be characterized by ‘interactive arbitration’.13 This means that arbitrators have a role of continuously searching for effective communication strategies that will help overcome difficulties caused by the conflicting approaches held by parties involved. This process of interactivity is limited to the specificity of individual specificity. The establishment of such measures between arbitrators and parties involved presupposes a sound spirit of cooperation. It also demonstrates the willingness of parties to find solutions on a counsel of professional quality.
Contrastingly, this might not always be the case. Some parties in real-life experience opt for confrontational procedures or utilize tactics aimed at interrupting arbitration procedures. Arbitrators in the international arbitral tribunal have the role of discouraging this attitude at the initial stages of the case.14 In most cases, the levels of cooperation enhanced by parties are determined by the perceived level of fairness by arbitrators. This co-operation is also influenced by the arbitrators’ determination in reaching procedural decisions.
The other role of international arbitrators requires one to closely examine their powers in respect to the conduct of proceedings.15 This is because parties during the time of concluding their contract with arbitrators rarely contemplate imposing specified procedural requirements. Their agreement in this stage is limited to several factors including, arbitration clause, majority of cases to the reference, rules of a specified institution, or less frequently to ad hoc arbitration.
Some regulations provided by institutional rules allow international arbitrators to assume an active role in the conduct of proceedings. This enrolls arbitrators to wide flexibility and discretion in the field. This, therefore, causes the procedures of arbitration to commence as soon as possible with the establishment of facts concerning the case as specified in the ICC Rules of Arbitration 1998. Rules governing the production of evidence and witness hearing are determined by all means appropriate.16 Although these provisions do not imply the ICC Rules adopt an inquisitorial process, it is generally accepted that it confers a more active role to arbitrators. This is especially in regards to conducting and management of proceedings that might previously have been the custom of common law jurisdiction.17
The arbitrators must determine whether the tribunal itself should take the initiative ascertaining facts and laws and to what extent.18 This provision has been hailed as imposing international arbitrators to adopt an inquisitorial procedure rather than adversarial. The measure of autonomy attributed to arbitrators is derived from one main objective i.e. to resolve disputes existing among parties in the interest of individuals and also in the communist states. Consequently, this means that countries expect these roles and duties of international arbitrators will be in a manner that demonstrates respect on the basic notion of justice public policies of countries.
Successful mitigation of process and effective communication allows parties involved in the administration of disputes to be conducive.19 It also ensures that members maintain a positive environment of co-operation through eliminating procedural objections for possible attacks against proposed awards. Equally, since parties involved originate from different legal backgrounds, the preparatory conference stage plays a significant role in accustoming them to a specified procedural behavior. Member continuously gains advanced knowledge on the various steps of the arbitration procedure thus allowing them to adjust to the process and requirements of a specified case.20 This increases the possibility of higher efficiency by reducing the cost and time spent on proceedings.
This elevates the role of an arbitrator from a mere neutral observer of parties involved presentations to a driving force of the proceedings. To effectively develop this role arbitrators in the international arbitral tribunal analyze21 files thoroughly to ensure that they have construed the most vital aspects of the case as well as the expectation of parties. This subsequently permits arbitrators to facilitate through arguments and evidence presented by parties based on legal and factual elements. Sometimes, it allows them to identify confusion and undifferentiated presentation involving parties’ disputes.
The other delicate role of international arbitrators is that of achieving a fair balance between efficiency requirement of proceedings i.e. in terms of both cost-effectiveness and expediency, and the respect accorded to every right of parties to plead their case fully. Arbitrators in this case have a mandatory duty of reconciling speed with justice22. This is because of the nature of the finality arbitration process holds as well as a limitation to the means of recourse against awards. In practical experience, it is demonstrated that parties that are aware of this shortcoming in its case may carry all possible techniques to reduce the pace of proceedings. They can do this by producing excessive documentation, proposing new claims, challenging arbitrators’ independence and integrity, putting forward a long list of evidence requirements, etc.
In the advanced stages of the arbitration, international arbitrators have the role of defining the concurrence of parties involved.23 Here, the arbitrators are obligated to sieve issues of facts and /or laws in which there is no actual dispute. They then invite parties to focus their attention on the actual disputed issues.24 Again, the arbitrators may be required to define well-documented aspects of the case that requires them to gather no additional evidence. Moreover, they may be required to determine the significant priority of issues still open. This will enable them to overcome the tendency of parties to present questions in an undifferentiated manner.
Successful mitigation of process and effective communication allows parties involved in the administration of disputes to be conducive.25 It also ensures that members maintain a positive environment of co-operation through eliminating procedural objections for possible attacks against proposed awards. Equally, since parties involved originate from different legal backgrounds, the preparatory conference stage plays a significant role in accustoming them to a specified procedural behavior. Member continuously gains advanced knowledge on the various steps of the arbitration procedure thus allowing them to adjust to the process and requirements of a specified case.26 This increases the possibility of higher efficiency by reducing the cost and time spent on proceedings.
In some cases, international arbitrators may need parties to consider alternative ways to resolve disputes by considering other ways for settlement of their disputes. This may involve techniques such as direct conciliation27. In this case, it is important for the timing of the proceedings to be organized such that parties are prevented from finding ways to agree on alternative compensation before the need. Furthermore, parties should avoid giving insinuations that conclusions regarding the case have been reached. This enables them to overcome the challenge of impartiality and independence.
Future roles of arbitrators
The perceived integrity of arbitrators plays a major role in promoting the integrity and legitimacy of international arbitration.28 The role of arbitrators is evolving due to the rise in the number of disputes and the increase in the number of arbitrators. The growth of the constituency of international arbitration has also contributed to the new expectation of the arbitrators by the arbitrators themselves, since they are diverse in their characteristics, and have different views about the proper conduct to be followed. According to Guidelines on Conflict of Interest, Arbitrators are expected to keep on evaluating their impact. The court uses these Guidelines on Conflict of interest world widely to assess the behavior and misconduct of arbitrators29.
Expansion of the provision of international arbitration requires the arbitrators to follow them and professionalize the services they give.30 They should promote the integrity of international arbitration by proving the neutrality and fairness of the arbitration process by finding out chances to enhance their independence and impartiality.31
The current proposals for ICSID suggest that arbitrators should sign confirmations showing that they have been undertaking their obligation with impartiality and independence. It is important to review and clarify the expected code of conduct to be followed by the arbitrators, especially for first-timers. This will help to avoid the problem of misunderstanding and misperception amongst the arbitration parties32.
The strength of the use of arbitrators
The first strength of using arbitrators is that they make the process of arbitration faster than other litigation courts. This enables disputes to be settled faster and awards to be bestowed to parties as declared by the courts. The significance of arbitrators, in this case, is that they facilitate the proceedings to be confidential and non-public. Again, in international commercial agreements, using arbitrators is a relatively cheaper and more flexible process of resolving disputes.
Using arbitrators in international commercial arbitration has the advantage of increased expertise in resolving disputes. This is because when cases presented by claimants are highly technical, arbitrators with the appropriate expertise are appointed. Moreover, the legal systems of many countries limit avenues for the appeal of arbitral awards. This, therefore, makes enforcement of awards easier. It also limits the duration of time taken to resolve disputes and any associated liability.
Another advantage of using arbitrators in international commercial arbitration is that it results in faster resolutions. Arbitration on disputes issues can give speedier resolution to the parties involved. However, this depends on the number of parties involved in terms of arbitrators and lawyers.
The use of arbitrators does not involve a public hearing, and therefore there would know a record of the proceedings available to the public. This is because there is a need for confidentiality among the involved party. The parties involved in solving a particular dispute can also reach an agreement to impose confidentialitonto in the arbitration process.
The arbitration process is more likely to maintain a businesrelationshipsip between the involved parties because the process is less adversarial compared to litigation. The arbitration process is also more informed compared to the litigation process,
In arbitration, the process, a party involved have had a chance of recording a lis pendens by filing a lawsuit and keeping the case abeyant until the resolution is obtained even in a situation where there is no arbitration pending.
In the arbitration process, the law requires the judge to be impartial and should remain unaffected by the outcome of the case.
Weakness in the system of the use of arbitrators
Several weaknesses are associated with the system of use of arbitrators. First, arbitrators do not have the right to enforce interlocutory measures against a party. This makes it easier for parties to avoid enforcement of members in a tribunal without explaining to members the adverse consequences of an unfavorable ruling. Again, although arbitrators have the role of following the rule of applicable law, this rule is not binding to them.
The other disadvantage of the system is that the process is highly complex. There are a lot of bureaucratic procedures to follow and expensive legal fees to be paid. This limits the process of arbitration to powerful law firms that represent wealthier and stronger parties. In some cases, the arbitrators depend on the corporations for repeat business. This is a weakness to the system since this presents an incentive for arbitrators to rule against employers or consumers.
In the arbitration process, there is no right to appeal even in a situation whereby the arbitrator has made a mistake of law or fact. The limitation of this rule exists but they are difficult to understand.
In the arbitration process, parties are denied the right of discovery in situations where the arbitration agreement does not provide or in situations where it is not permitted by the arbitrator
If the qualifications of an arbitrator are not defined by either the arbitration agreement or the organization that administers the process of arbitration, there would be bias or the competency of the arbitrators will be compromised.
A claimant may face a setback in the arbitration process because there is no jury in the process. This may make the entire process slow and resolutions to the disputes may not be reached.
An arbitrator may adopt broad principles of justice and equity in making an award in the process of arbitration rather than on basis of rules of law or substantive evidence. Moreover, the award cannot be a platform for a claim for malicious prosecution.
Immunity of Arbitrators
The immunity of arbitrators is partly based on the doctrine of judicial immunity.33 The immunity of arbitrators is mostly dependent on whether their functionality and responsibility are comparable to those of a judge. In this case, although some countries evaluate the immunity of arbitrators based on contractual arbitration, others analyze it by evaluating their similarities with arbitrators. Commentators argue that immunity should be extended to arbitrators because of the quasi-nature of their functions in international arbitration34. They state that this will help protect the independence of those acts. In essence, it is argued that, instead of focusing on the terms of the arbitrator’s appointment to establish the scope of liability, this liability should be justified by the status of arbitrators that is similar to those of a judge35.
There are various reasons why arbitrators are immune to the legal liability of both the United States and Europe as well as by regulations of arbitral institutions such as rules of ICC.36 In yesteryears, arbitration was not a common practice amongst individuals. The appointment of a professional to act as an adjudicator by one’s peer was perceived as an act of honor for the arbitrator. Since the adjudicators were not arbitrators by profession, they were paid a nominal amount to compensate for the time which they sacrifice, and in case of service which they provided, they received the fee.
In this circumstance, consideration should determine the accountability of the arbitrator hence the issue of immunity was axiomatic. This is because both the signs for standing in the community and professional success level are considered in appointing an arbitrator.
Contrastingly, the position of arbitration has changed over time. In complex s contemporary society, this position has acquired a role of vast significance. Arbitrators have also assumed unprecedented power. While it is still perceived as an honor to be appointed in the panel of arbitrators, individuals in most cases are full-time professionals. This means that arbitrators depend on this practice as their source of livelihood. Due to this, several institutions were established to regulate commercial arbitration. This has improved the effectiveness of procedures while regulating fees paid to barely nominal levels.
The procedure is deemed to be costly because the members of the arbitral tribunal are expected to show competence in their profession.37 The losses suffered by parties in circumstances of an arbitral tribunal cannot be compared with the loss suffered by the adjudicator assuming he/she doesn’t get any fee. Therefore, the parties concerned are expected to show hard work and competence in delivering their duty according to their profession.
In the United States, once an arbitrator is appointed in the international arbitral tribunal, they assume responsibilities that are functionally comparable to those of a judge.38 These functions are identified by the existence of disputes, the ultimate determination of liability, and whether the person(s) making the decision conducts a hearing and takes evidence from parties. Contrastingly, no entitlement of immunity exists when there is no underlying dispute or if the ‘misconduct’ is unrelated to the decision-making capabilities of a defendant.
Courts in the international community justify the extension of judicial immunity to arbitrators because of public policies stipulated in various countries. One objective for extending these immunities is the subject of independence and integrity in the process of decision-making practiced by arbitrators.39 In regards to this, immunity protects likable arbitrators from prospects of being harassed or intimidated by losing parties. Additionally, if arbitrators are not guided by the context, they might not make principled decisions. In other words, if the context of immunity is disregarded in the process of international arbitration, the integrity of the judicial process will be sacrificed.
Secondly, it is argued that the immunity aspect of international arbitration helps to ensure the finality of arbitral awards.40 Without this aspect, losing parties would opt to re-litigate cases by attacking arbitrators in the international tribunal. This would subsequently undermine the process of arbitration. Similarly, the other argument for extending immunity to international arbitrators is that immunity reduces the number of people willing to act as arbitrators in an international tribunal41. This is because the idea stipulated by the context of immunity only deters individuals who are capable and responsible enough to accept posts. Thus, it is difficult to find skilled persons willing and prepared to serve as arbitrators in the international arbitral tribunal.
Although important ideas have been developed to explain the advantage of imposing immunity to arbitrators, the context presents some pitfalls. For instance, it can be argued that imposing liability to international arbitrators for negligence and willful misconduct will not threaten people out of their profession. Instead, liabilities merely increase the quality of services provided. This is because arbitration has become a significant profession over the years. Moreover, individuals in the profession perceive the posts of arbitration as a mark of success for a fully developed profession.
Both litigation courts and the international courts of arbitration cannot be perfect in how they resolve disputes between parties. However, there exists a process in which international commercial courts can improve their performance. First, the system should formulate different levels of judicial supervision depending on the nature of cases presented to the international courts. This will increase the accountability of arbitrators involved in the international commercial arbitration proceedings.
Again, the system can formulate an appellate arbitral tribunal where initial awards to parties are legally reviewed. This can be a positive step taken for the introduction of arbitration as an equal and independent to other courts dispute mechanism with the ability to issue legally founded awards. This will help decrease the burden of civil courts to handle various forms of cases that have crowded the courts.
While privatizing and contractualizing the process of arbitration, the system should not eliminate the public regulation of the process. This argument is founded in the debate of empowering parties and unburdening public institutions. The significance of public regulation is that it establishes an ‘interest of justice in the proceedings and rulings stipulated by arbitrators42.
England and U.S case laws and statutes have emphasized the part of the jurisdiction in the arbitration to show the basis of arbitrator’s immunity. England for example gives arbitrators immunity through statute. England Arbitration Act section 29 provides that arbitrators are not liable for any act or omission of their duties as arbitrators unless it was in bad faith. This provision was made by the Department Advisory Committee (DAC) purposely to give immunity in claims in torts and contracts which are not in bad faith.
English law provides immunity of arbitrators from personal liability on issues and actions done in their judicial capacity, regardless of whether the action was unethical or done in bad faith. There were views that arbitrators should also be offered immunity since they act with judicial capacity in the arbitration process. The House of Lords gave their comments on this issue and suggested that it was necessary to give such immunity to the arbitrators because the arbitrators have the same capacity as arbitrators in the arbitration process. In Arenson v Casson Beckman Rutley & Co, the House of Lords upheld that arbitrators can only be conferred judicial immunity, in cases where they undertake judicial functions which shall be determined by whether he is needed for adjudication of an old formulated dispute or obtain term of appointment or evidence from the parties.
In the United States, judicial immunity is also conferred to arbitrators43. This is illustrated in the case of Hoosac Tunnel Dock & Elevator Co v O’Brien in 1884 which explained the quasi-judicial nature of arbitrators. This was also supported by Gahn v ‘International Union Ladies’ Garment Workers Union44 where the appointed arbitrator was sued for compelling the plaintiff to adhere and maintain contract provisions that were against the Sherman Anti-Trust Act and other statutes. The court concurred with the District Court that the arbitrator was undertaking judicial duties and thus was conferred immunity because he was undertaking quasi-judicial duties and was thereby protected by immunity.
The court argued that if arbitrators were denied immunity they would face difficulties n judicially conducting the arbitration. Moreover, the court was supporting the opinion that it was important to extend immunity to all the arbitration proceedings to promote an effective way to solve disputes.
Int. A.L.R. 114 recognize that “Arbitrators may act with impunity, For theirs is a favored community, Though losers may whine, And even malign, Judges will guard your immunity.”45. while in other professions insurance covers are used to cover risks of potential negligence claims associated with the job, in the absence of bad faith, in arbitration the arbitrators have been conferred immunity by judicial from such actions brought by the parties involved46.
Int A.L.R 115 also recognizes that arbitrators are in the same position as the judges in terms of the functions they carry out and that the public policy expect them to be conferred immunity47
Some people have different views concerning the granting of immunity to arbitrators. Others perceive it to be wrong in terms of principle because they think it gives immunity, though qualified immunity in instances where this is unwarranted. This view can be justified by the remarks of Lord Salmon in Arenson v Arenson, where he gave the following statement, “such immunity can only exist when there are strong grounds for holding that public policy demands it’48.according to arbitration 204, public policy requires to ensure that those responsible for damages through breaching their legal obligation, are answerable in courts to compensate the victims of their negligence. Some argument suggests that arbitrators are not in the same position as judges since they obtain their authority from the parties that selected them, unlike the judges who obtain it from the state. Arbitral awards are determined by the limited rights of appeal and arbitrators cannot be removed by their peers.
In some circumstances, the parties may suffer irrecoverable losses caused by the arbitrator. It is provided that if arbitrators’ arbitral proceeding status and respect are viewed as preserved and enhanced, it is important that arbitrators while undertaking their duties, be seen to have the same similar status and independence as the judiciary. This implies that the arbitrators are expected to have the highest professional standards of integrity and competence49.
Independence and Impartiality of Arbitrators
Independence and impartiality are important in international commercial arbitration because this process is mainly based on trust. Article 11 of the ICC provides that arbitrator must sign a statement of ‘acceptance, availability, impartiality, and independence and report to the secretariat of any arising issue that may raise eyebrows of the parties involved on independence and impartiality, which may cause an arbitrator to be challenged Though impartiality and independence appear to be the same, they have a different meaning.50 According to the IBA Rules of Ethics for International Arbitrators, the criteria used to assess issues to do with impartiality and independence is biased. Partiality occurs when an arbitrator is siding one of the parties, or where he is discriminating in settling the dispute.
Dependence on the other hand occurs when the arbitrator has a relationship with one of the parties or somebody relating to one of the parties.51 Although the 1998 Rules do not talk about the need for arbitrators to be show impartiality, the term “independent” has been widely interpreted to include the concept of impartiality.52 Potential partiality may be caused by a lack of independence. Their arbitrator may not be fully independent of all the parties involved but may decide to ignore the relationship with one of the parties and rely fully on impartiality, as determined by the facts and laws.
The need for independence ensures that the arbitrators who may be doubtful of being impartial are dismissed at the early stages of the arbitration process rather than giving chance to the risk of potential partiality arising in the later stage. Impartiality involves the arbitrator undertaking his duty without being biased to any of the parties. An arbitrator is said to be impartial if he does not favor any party and he is committed to treating all the parties equally in providing his services. An arbitrator can be qualified if shows impartiality and partly independence. And he can be disqualified if he shows independence but he is not impartial53
According to Redfern54, the UNCITRAL Rules have not much restriction compared to ICC, and they advise on the importance of an arbitrator to another nationality:
- In making the appointment, the appointing authority shall have regard to such
- Considerations as are likely to secure the appointment of an independent and
- Impartial arbitrator and shall take into account as well the advisability of appointing an arbitrator of a nationality other than the nationalities of the parties.”55
The above phrase shows that impartiality and independence of arbitrators are needed in arbitral processes to secure the arbitral institution.
When arbitrators are appointed by the parties, the arbitrators are more likely to side with one of the parties involved. This may affect the outcome of the arbitration process. Redfern and Hunter suggest that such arbitrators “do not allow this to override their conscience and professional judgment if they believe that the other party has made a better case”56.
Redfern and Hunter portray a doubtful picture concerning the party-appointed arbitrator. There is a big difference between arbitrators appointed by parties with the arbitrators appointed by the non-neutral party in particular trade arbitration and procedures (USA)57 In several arbitral institutions, the party-appointed arbitration consists of three arbitrators, where the third one is appointed by the arbitral institution, to ensure there is fairness and balance in the arbitration process.
Thus, arbitrators’ respect for professional ethics gains relevant significance for the respectfulness of the tribunal itself as an alternative mechanism to resolve disputes in the international communities. Moreover, arbitrators’ independence is identified as an important element for maintaining the legitimacy and credibility of international courts and arbitral institutions themselves.
Thus, it can be argued that international arbitrators besides professional credentials and intellectuals, must adhere to the moral integrity of a judge. Over the years, the credibility of international commercial arbitration has been founded on the perception that the process is fair and that bestows awards worthy of respect and consideration.
The requirement of independence and impartiality have been provided in rules and codes of most agencies such as ICC, LCIA, UNCITRAL, ISCID, AAA, and IBA.58 Some of these are explained below.
International Chamber of Commerce (ICC) Arbitration Rules
ICC arbitration rules provide that arbitrators should be independent in the arbitration process of any involved parties and should remain independent throughout the process. ICC also incorporates a declaration by the arbitrators that arbitrators should be independent and should disclose to the secretariat of any arising circumstances that may compromise their independence.
ICC also incorporates the duty of the arbitrators to submit a written declaration concerning the disclosure of facts that may have effects on the arbitration proceedings. This declaration should be submitted because the arbitrator himself agreed to offer his services; hence he has an obligation of disclosing facts that may affect the arbitration process.
The LCIA Rules
The rules of independence and impartiality are provided by article 5 of the LCIA. The rules require the arbitrators to be impartial and independent, and that the arbitrators should not favor or give advice to any part on the outcomes of the dispute.LCIA rule also incorporates the aspect of the arbitrator signing a written declaration that the arbitrator should under no circumstance give a chance to justify doubts concerning his independence and impartiality.
Commercial Arbitration Rules of the American Arbitration Association (AAA)
AAA commercial rules also require the arbitrators to disclose to the American Arbitration association any issue that is likely to have effects on impartiality or independence. This includes personal interest, bias, or the relationship that may have existed or still exists between the parties or their representatives in the arbitration process.
AAA rules also provide that arbitrators should disclose if there is any past or present relationship with any of the parties, and if there is, the arbitration should be declared unbiased. After the arbitrator has disclosed such facts, the AAA shall thereafter communicate such disclosure to the parties who have the right to raise any issue and the arbitrators could be disqualified by the parties.
American Arbitration Association also provides articles that require the arbitrator to disclose facts that may give rise to doubts about his independence and impartiality. The parties may be held liable if they fail to communicate with the arbitrators. The AAA rules have also given the parties the right to challenge the arbitrator.
UNICITRAL Arbitration Rule
Article 9 of this rule requires the arbitrator to disclose to the parties any circumstance that may cause doubts to his impartiality or independence. Article 10 of this rule gives the parties the right to challenge any arbitrator on such circumstances that may bring justifiable doubts to his independence and impartiality.
Relationship between ‘Independence’ and ‘Impartiality’
From its definition, both terms are used synonymously to indicate the lack of property in the arbitration body. However, conceptually, these terms hold different meanings59. Impartiality is used to define the state of mind about subjective appraisal while the term ‘independence’ is verifiable objective. The definitions thus inextricably link the two terms to be used interchangeably as ‘the two sides of the same coin. Therefore, most rules and regulations that address the issue of assessment of biasness (except ICC Rules and English Arbitration Act) use the two notions as a package.
Both the ICC Rules and the English Arbitration Act are based on the understanding that the terms ‘impartiality’ and ‘independence’ overlap and that both terms can be subsumed interchangeably60. ICC Rules uses ‘independence’ as a criterion for the absence of bias and this has influenced practical considerations.61 This is because it was thought that independence can be established objectively as opposed to impartiality.
Impartiality is perceived as an abstract idea from its definition and this made its establishment almost impossible. The rationale of this approach, however, may lead to problematic consequences. This is because the ICC Rules62 arbitrators to remain independent when resolving disputes among parties. This element does not take into account the issue of conflict thus; demonstrating the possibility of a panel of adjudicators to be partial.
Conversely, to ICC Rules, the English Arbitration Act relies on the impartiality of the adjudicators.63 This approach is more logical since it takes into account an objective behind arbitrating disputes i.e. the desire to have professional arbitrators adjudicate upon the issue. This desire is created since the parties involved feel more comfortable having professional arbitrators resolve their disputes since they are more experienced in the field.
Furthermore, the approach gives room for the previous associations between arbitrators and parties to be studied concerning their trivialities. In case these relations give, rise to ‘justifiable doubts’ this becomes a disqualifying factor. This approach is more acceptable as it is submitted to the line of reasoning, unlike independence that can easily be subsumed. The approach also avoids any challenges identified by the remotest association between arbitrators and parties involved in disputes.
Besides ‘independence’ and ‘impartiality, there exists another concept in international arbitration known as ‘neutrality’.64 This term is normally linked with the nationality of arbitrators which in most cases resides from different nationalities from any member of the parties involved. This requirement is mostly provided in arbitration laws such as ICC Rules and Stockholm Chambers of Commerce arbitration rules. To some extent, this requirement is a psychological measure designed to give parties a conviction the international tribunal is neutral and independent.65 According to the International Chambers of Commerce, it is this conviction enhances the decision of losing parties to honor arbitral awards provided by ICC.
Independence and Impartiality in International Arbitration
International organizations all over the world promote the idea of perfect fairness arbitrators. The concept of independence and impartiality is widely emphasized in the codes and rules governing the international arbitration processes. It is also emphasized arbitration institutions and formulating agencies such as LCIA, UNICITRAL, AAA, ICC, IBA, and ICSID.66 In this regard, the ICC in its article 7.1 states that “Every arbitrator must remain independent of parties involved in the arbitration process”67. The ICC further makes it mandatory for judges to sign a declaration agreement for her independence and give it to the Secretariat of the court.
In this light, international rules may also require the disclosure from the adjudicators of any circumstances or factual evidence that may influence person(s) against one of the parties.68 This disclosure requirement is a continuous requirement for arbitrators throughout the arbitration process, such that if a new circumstance arises that may influence his or her independence or impartiality, they should disclosure them.
The disclosure requirement is however not standardized in the rules, regulations, and codes of international arbitration firms.69 For instance, in the International Trade Law of the United Nations Commission, its arbitration rule establishes that a potential arbitrator should undertake the disclosure requirement once they have been appointed. In arbitration rules of the American Arbitrators Association (AAA) however, requires that arbitrators disclose issues before accepting the appointment.
Many challenges face the system of arbitration about independence and impartiality associated with arbitrators. One such challenge is the growing adoption of the test of ‘justifiable doubts’. The statue of independence that deals with international commercial arbitration have grown over the years. The articulation of this test is a relatively new concept to common law countries which continue to use a standard based on ‘apprehension of biases. Again, the bias test is articulated differently by courts in other common law countries.
For instance, in Canada, the test of ‘justifiable doubts’ is a ‘reasonable apprehension of bias. In Australia however, the test is one of ‘real possibility of biases. In the United States the test of ‘justifiable doubts’ is ‘evident partiality. In England, the test is associated with ‘real danger’. These disparities between standards applied by courts in identifying independence and partiality or bias present a challenge in international arbitration. It imposes a challenge to the homogeneity of rules and consistency of practices associated with the appointment of arbitrators.
This challenge is further complicated by the presence of different practices of arbitral institutions in issues concerning the appointment of arbitrators. Unfortunately, little guidance is provided to deal with the challenges. This is because no decisions of arbitral institutions on challenges have been published. Consequently, there is no single rule governing impartiality, and independence of arbitrators in the international tribunal may be applied. There are different criteria utilized depending on whether the subject matter is addressed by the arbitration institution or arbitral tribunal.
While it is a general rule that arbitrators should be independent and partial, there exist significant differences in how these objectives should be articulated and applied. This has also given rise to uncertainty to arbitrators in determining whether they can accept or reject appointments in arbitral tribunals. It has also given rise to uncertainty in confirming the impartiality and independence of international arbitrators nominated by parties or appointed by presiding arbitrators.
Additionally, there have been challenges associated with the appointment of arbitrators by parties. This is because even though parties have been given the privilege to choose their arbitrators, these choices might not necessarily be wise decisions.70 This is because while parties use this opportunity to nominate arbitrators on the basic abilities, backgrounds, and expertise, they also should ensure that the aspect neutrality and objectivity are enhanced to bring a balanced mix. It is relatively difficult for parties to accomplish the latter and thus have to incorporate institutional arbitration rules in appointing authority in the arbitration tribunal
The other issue that faces international arbitrators about the independence and impartiality of arbitrators is the issue of conflict of interest between other parties. Rules and regulations that act as guidelines for arbitrators to follow during an arbitration procedure have unavoidably opened doors for opportunism and opportunity. Some parties have capitalized on such guidelines to challenge arbitrators as they undertake their roles in international arbitration. This has subsequently delayed and derailed proceedings.
In international commercial arbitration, the real challenge is to ensure that rules guiding the proceedings provide stabilized arbitration. Therefore the arbitrators and international tribunal should first of all try to develop an understanding of the factors that affect the presented case before agreeing to take the appointments71. They should also know what and when to disclose in cases where they are faced with a conflict of interests. Moreover, the arbitrators should find ways of solving the conflict once they find one or when it is presented by the parties involved. Arbitrators should try to understand the conflict as they associate with another involved party in the arbitration process.
In most cases, the concept of independence and impartiality tend to overlap each other. In the United States, for instance, a great of debates is raised as to whether the appointment of arbitrators by parties lacks independence. This is one of the accounts of relationships existing between the arbitrators and the parties making the appointment and being partially based on that relationship.72 It is argued that even if an arbitrator does not have any relation with the appointee, the judge may still display biasness/ reasonable apprehension of biases favoring the appointee. At this point, the main issue is recognized and the arbitrators aim at finding a scope in which they can be advocates for the party they represent.
The independence of the international arbitrators is influenced by the nature of the arbitration. For instance, in cases where arbitrators are advising the parties that have appointed them a high level of tolerance is entailed. This can be a conflict in some circumstances. This presents the other shortcoming of impartiality and independence associated with international arbitrators. It is difficult to determine the extent to which the parties that have appointed their arbitrators ought to advise their appointees.
In an attempt to address these challenges the IBA Guidelines73 of Conflict of Interests in international commercial arbitration have been developed. The guidelines analyze the best practices that are currently utilized in the international courts. The main objective of the IBA Guidelines is to improve the homogeneity of rules and regulations associated with partiality and independence of arbitrators. It also aims at bestowing clarity in the question of disclosure and conflict of interest among parties. The strength of the guidelines is that it recognizes that legal provisions do not override any national laws applicable to countries or arbitral rules are chosen by claimants and respondents. The IBA Guidelines are aimed at establishing general acceptance of rules in the international arbitration community. This will subsequently assist to develop consistency in the practice of arbitration procedures.
To reinforce efforts stipulated by the IBA Guidelines, greater consistency and homogeneity in the decision-making process associated with the partiality and independence of arbitrators should be applied74. Additionally, arbitration institutions and courts are required to carry out continued studies it improves knowledge of decisions on challenges. To enhance these efforts courts and international arbitration institutions, the Arbitration Committee of the Dispute Resolution Section of IBA has formulated a task force that monitors and reviews the use and application of guidelines. The other role of the task force formulated is to monitor and review decisions on challenges to international arbitrators.
The arbitrators are the custodians of a system that is important for the success of international trade and investment. Therefore it is crucial to set expectations concerning the arbitrators’ role to enhance the legitimacy of a system with significant effects on the global economy. Parties, arbitrators, and institutions should embrace the importance of involving in independent decision-making. They should try to think of the ethical conduct expected of international arbitrators and provide encouragement to them to prevent malicious or unethical conduct. This may help to expand the arbitration’s ultimate objectives and to enhance the integrity of the arbitration process with significant global implications.
Arbitrator’s immunity can be taken as a state that controls the various aspects of international arbitration such as structure and functions. Arbitrator’s immunity limits the rights of parties on agreement of an effective arbitration process by the state. It can therefore be said that arbitrators have been conferred a unique status and their powers are extended to the state through the rules of state law.
This kind of unique status of the arbitrators is seen in delegation theory which insists on the jurisdictional component of arbitration. Once the delegation has been confirmed, the arbitration process undertaken by an arbitrator lacking this new authority will be declared null and void. The case of immunity is always provided by statutes and case laws, and not the parties’ agreement in arbitration. Immunity causes the arbitrator’s function to conflict with the concept of agent theory since their decisions are not determined by the best interests of the parties that appointed them.
Particularly focus is demonstrated in the field of acquisition of evidence and enforcement of penalties to parties. The increasing scope of the arbitrator’s role demonstrates the increasing attraction of arbitration as a technique of settling disputes in the international environment. However, countries far from demonstrating a lack of interest in arbitration proceedings, maintain a specified measure of control in regards to some fundamental principles e.g. in respect to adjudicators’ impartiality and independence. The process of awarding parties should conform to the public policies of the respective countries. Again, countries maintain a scope of control as regards sanctioning their violation through annulment of rewards or refusing to recognize its law enforcement.75
The international business community has continued to adopt more international commercial arbitration as a suitable process for settling disputes. They view it to be more convenient compared to other systems such as litigation in settling disputes in a more neutral, confidential, faster, and cheaper way. The parties expect the arbitrators in this process to be completely independent and impartial.
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Ferrari, F & S Kroll, eds. Conflict of Laws in International Arbitration (Munich: European Law Publishers,2011), p. 4-36.
Fouchard, P, E Gaillard , B Goldman & J Savage , Fouchard Gaillard Goldman On International Commercial Arbitration (Netherlands: Kulwer Law International, 1999), p. 600.
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Lutrell, S, Bias Challenges in International Commercial Arbitration (Netherlands: Kulwer Law International, 2009), p. 129- 145.
Mauro, S, International Arbitration Law and Practice (2nd edn; Netherlands: Kulwer Law International, 2001), p. 1-53.
Michael, M & S. John, International Arbitration and Mediation (Netherlands: Kulwer Law International, 2010), p. 14-99.
Redfern, Alan, Hunter, Martin, Law, and Practice of International Commercial Arbitration (5th edn; London: Sweet & Maxwell, 2009).
Rovine, A, Contemporary Issues in International Arbitration and Mediation (Netherlands: Martinus Nijhoff Publishers, 2008), p. 226-228.
Sayed, A, Corruption In International Trade and Commercial Arbitration (Netherlands: Kulwer Law International,2004), p. 9- 100.
Soons, A, International Arbitration Past and Prospects ( Netherlands: Martinus Nijhoff Publishers, 1990), p. 2-150.
Stephen, B, M Paralika & M Secomb, Concise International Arbitration (Netherlands: Kluwer Law International, 2010), p.305.
Stephen, S, International Arbitration (New York, NY: University of Cambridge, 2000), p. 198.
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Schwartz, D, A Guide to the New ICC Rules of Arbitration, 1998, p. 252-253.
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- S Mauro, International Arbitration Law and Practice, 2nd edn.( Netherlands: Kulwer Law International, 2001), p.1.
- M Blessing, Introduction to Arbitration-Swiss and International Perspective, vol. 10 Swiss Commercial Law Series, 1999, p. 68-70.
- A J Van der Berg, ed. International Commercial Arbitration: Important Commercial Question, (Netherlands: Kulwer Law International, 2003), p. 368-372.
- M Blessing, Introduction to Arbitration-Swiss and International Perspective, vol. 10 Swiss Commercial Law Series, 1999, p. 73.
- Fouchard P, Gaillard E, Goldman B & Savage J., Fouchard Gaillard Goldman On International Commercial Arbitration (Netherlands: Kulwer Law International, 1999), p. 600.
- M Blessing, Introduction to Arbitration-Swiss and International Perspective, vol. 10 Swiss Commercial Law Series, 1999, p. 78.
- P Bernardini, Arbitration International, vol. 20. LCIA, 2004, p. 113.
- Arbitration and ADR Rules, International Centre of ADR (Paris: International Chambers of Commerce, 2011 )p. 26.
- Ibid 27.
- A Fina, Arbitration International, vol. 5, Hein online, 1999, p.385.
- Ibid 387.
- D Schwartz, A Guide to the New ICC Rules of Arbitration, 1998, p. 252.
- D Schwartz, supra n. 12 at p. 253.
- A J Van der berg, ed. New Horizons In International Commercial Arbitration and Beyond (Netherlands: Kulwer Law International, 2005), p. 529.
- S Mauro, International Arbitration Law and Practice, 2nd edn.( Netherlands:Kulwer Law International, 2001), p. 39.
- Ibid, 43.
- S Lutrell, Bias Challenges in International Commercial Arbitration( Netherlands: Kulwer Law International, 2009), p. 138.
- A Sayed, Corruption In International trade and Commercial Arbitration( Netherlands: Kulwer Law International, 2004), p. 9- 100.
- Van der berg. Op. cit. 563
- S Mauro, International Arbitration Law and Practice, 2nd edn.( Netherlands: Kulwer Law International, 2001), p. 39.
- Ibid 43.
- P Bernardini, Arbitration International, vol. 20. LCIA, 2004, p. 119.
- B Stephen, M Paralika & M Secomb in Loukas A. Mistelis, (ed), Concise International Arbitration (Netherlands: Kluwer Law International, 2010), p.305.
- S D Franck, The Liability of International Arbitrators: A Comparative Analysis and Proposal For Qualified immunity, New York; Law School Journal of International and Comparative Law, 2000.
- G L Horvarth, The Selection of Arbitrators, Center for International Legal Studies, International Construction Law and Dispute Resolution, 1998.
- Franck. Op. cit.
- Franck. op.cit. p. 8.
- Ibid 10.
- Ibid 12.
- A Soons, ed. International Arbitration Past and Prospects( Netherlands: Martinus Nijhoff Publishers, 1990), p. 2-146.
- S D Franck, The Liability of International Arbitrators: A Comparative Analysis and Proposal For Qualified immunity, New York; Law School Journal of International and Comparative Law, 2000 p. 10.
- Franck. Op.cit. 8.
- Ibid 11.
- Franck. Op. cit.
- F.H Dana, Practical Considerations in Drafting Dispute Resolution Provisions in International Commercial Contracts: A US Perspective, Journal of International Arbitration, (1998) Vol.15(4), p.29.
- Gahn v International Union Ladies’ Garment Workers Union 311 F 2d 113 (3rd Cir. 1962), 114-115.
- Lew, The Immunity of Arbitrator (London: Lloyd’s of London Press, 1990), at p. 85.
- T. Berger and M. Robertson, The new ICC rules of arbitration: a brief overview of the main change,‘ (Netherlands: Kluwer Law International, 2011).
- Li, “Arbitral immunity: A profession comes of age” (1998) 66(1) Arbitration 51 at 758.
- Ibid 436E-F.
- Arbitration 1996, 62(3), 202-204.
- Y. Derains and E. Schwarz, A Guide to the ICC Rules, p.79.
- IBA Rules on Ethics for Arbitrators, (1987). Web.
- S. Bond, M. Paralika & M. Secomb in Concise International Arbitration, p.326 §2: “Even though art. 7(1) does not mention impartiality, it is understood that the term ‘independent’ in art. 7(1) is broad enough to take into account impartiality.”
- D Bishop ,L Reed , Practical Guidelines for Interviewing, Selecting and Challenging Party Appointed Arbitrators in International Commercial Arbitration, Arbitration International 14, 345, 1998.
- Redfern, Alan, Hunter, Martin, Law and Practice of International Commercial Arbitration (5th edn; London: Sweet & Maxwell, 2009).
- UNCITRAL Arbitration Rules, Act 6.4.
- Redfern, op.cit. 213.
- S R Bond, Current Issues in International Commercial Arbitration: The International Arbitrator: From the Perspective of the ICC International Court of Arbitration, 12 Nw. J. Int’l L. & Bus.
- Redfern, op cit, 213.
- S D Franck, The Liability of International Arbitrators: A Comparative Analysis and Proposal For Qualified immunity New York Law School Journal of International and Comparative Law,2000, p. 5.
- T. Berger and M. Robertson, The new ICC rules of arbitration: a brief overview of the main change,‘ (Netherlands: Kluwer Law International, 2011).
- Arbitration and ADR Rules. op. Cit. 78.
- Franck. Op.cit.7.
- S Donahey, The UDRP and the Appearance of Partiality, Panelist Impaled on the Horn of a Dilemma Paper, Tomlinson Zisko Morosoli & Maser LLP, 2001.
- A Redfern & M Hunter, Law and Practice Of International Commercial Arbitration, (5th edn; London: Sweet & Max Ltd, 2009), p. 213.
- Article 7.1 ICC Arbitration Rules.
- S Donahey, The UDRP and the Appearance of Partiality, Panelist Impaled on the Horn of a Dilemma Paper, Tomlinson Zisko Morosoli & Maser LLP, 2001.
- Redfern, op.cit. 215.
- B Gary, International Commercial Arbitration, vol. 1( Netherlands: Kulwer Law International, 2009), p. 1246.
- A Rovine, ed. Contemporary Issues in International Arbitration and Mediation(Netherlands: Martinus Nijhoff Publishers, 2008), p. 228.
- Gary. Op.cit. 1253.
- P Bernardini, Arbitration International, vol. 20. LCIA, 2004, p. 116.