Author: Ashima Sharma*
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Introduction
Parties to an arbitration have traditionally been somewhat conservative when bringing challenges to arbitrator appointments, given that many arbitrators hail from an impressive and well-reputed academic or legal practice background. However, post-award challenges to arbitrator appointments have substantially increased over the last decade. Independence and Impartiality of arbitrators as a metric for adjudicating upon allegations of bias, has been widely accepted by international institutions with some degree of universality. This blog post explores the international legal landscape governing arbitrators’ conduct by regulating appointments and challenges, particularly in the context of disclosures, as well as the interplay between disclosures and independence or impartiality of arbitrators, as brought forth by recent case law.
It is important to note that challenges to arbitrator appointments alleging bias or a lack of independence or impartiality are usually governed by the law of the seat of arbitration, which may vary with jurisdictions depending inter alia on the standard of review prevalent at the seat. The UK applies the ‘real danger’ test[1] and the US applies the ‘evident partiality’ test,[2] (divided between actual bias and appearance of bias between the 2nd and 11th circuits, respectively) as the standard for setting aside an award basis arbitrator bias. The ‘real danger’ test necessitates the question that, “whether on the established facts, there is a real danger that the decision maker was biased[3].” According to the UK House of Lords, the ‘real danger’ test analyzes the real possibility of bias and balances the need for public confidence in arbitrator appointments with the practical limits on probing an arbitrator’s actual state of mind. While decribing the standard to be applied in challenges to arbitrator appointments, the House of Lords also clarified that only in situations of direct pecuniary or proprietary interest, would there be an automatic disqualification. ‘Evident partiality’ on the other hand has been understood as relating to arbitrator conduct or an attitude or disposition by which the arbitrator favors one party over the other[4]. 11th and 9th Circuit Courts have interpreted ‘evident partiality’ to mean a ‘reasonable impression’ of bias whereby when a reasonable third party may conclude that a failure in disclosure by an arbitrator can give rise to bias, the evident partiality threshold stands satisfied under the Federal Arbitration Act, and the award can be vacated[5]. By contrast, the 2nd Circuit has adopted a more stringent interpretation of ‘evident partiality’ wherein the party challenging the arbitrator must show that a ‘reasonable person would have to conclude’ that the arbitrator was biased thereby eliminating the mere appearance of bias as a basis for vacatur of awards[6].
Regardless of how varied these tests might be in terms of the level of scrutiny or evidence to be presented to vacate awards on the basis of arbitrator bias, they involve some degree of the reasonable person standard analysis. The same is consistent with the understanding of ‘independence’ not just in fact but also from a third party’s perspective[7]. In essence, when assessing an arbitrator’s independence or impartiality, the central inquiry under most standards would be how a reasonable person would perceive the arbitrator’s conduct.
This piece however, is limited to exploring the soft law and institutional rules on the subject and the relevance of arbitrator disclosures in a challenge on independence and impartiality.
Independence and Impartiality
Often used interchangeably, independence and impartiality have different meanings. Independence is an objective criterion and is understood in the context of the relationship between parties, arbitrators and counsels[8]. Impartiality may refer to the arbitrator’s predisposition towards a party[9] or an issue (issue conflicts). Although separate, the two are often taken together in the analysis of arbitrators’ conduct, whenever a challenge is brought on such grounds[10].
Arbitrator Appointments
“…As to arbitral decisions, he admitted that the matter had been dealt with by numerous mixed arbitral commissions, but he advised caution on the ground that the very fact of setting up a commission may determine in advance the principle of responsibility.”
-Note by Rapporteur for the Spanish Zone of Morocco Case
As cautioned in the aforementioned quote, the act of appointing an arbitral tribunal can be outcome-determinative in a case, and that is precisely the reason why there is an increased focus by the parties as well as institutions on the process of appointment of the arbitral tribunal. For the same reason, any analysis into the framework of adjudging arbitrator bias must start from the process of appointment of arbitrators.
Most of the International legal order addressing the issue of appointment of arbitrators can be found either under institutional rules or as soft law guidelines/ codes of conduct endorsed by different arbitral institutions. Most institutional rules that provide a framework for the appointment of arbitrators restrict themselves to rules on the methodology of appointing arbitrators in the absence of consensus between parties or in the case of a recalcitrant party or similar cases[11], giving deference to party autonomy. They may also provide for necessary disclosures to be made by arbitrators[12].
There is little guidance in these institutional rules on the internal processes that a party may adopt or considerations to keep in mind while making arbitrator appointments. Such guidance is essential as it may come in handy in the event allegations of bias or conflict are levelled against an arbitrator in the future. Two primary pre-appointment procedures to adjudge the independence and impartiality of arbitrators are Interviews and Disclosures. The former is a party-driven process, the latter, while a mandatory process under institutional rules, is still dependent on arbitrator discretion as to the content and extent of such disclosures.
Interviews
Interviewing arbitrators is a pre-appointment process that has become increasingly popular[13]. The practicum on ‘Interviews for Prospective Arbitrators’ issued by the Chartered Institute of Arbitrators[14] is an illustrative guidance on how to conduct pre-appointment interviews, subject to lex arbitri governing the dispute[15]. The practicum seeks to convey that while general questions on the arbitrator’s familiarity with an industry or subject matter are acceptable, specific hypotheticals testing arbitrators’ positions on issues likely to arise in the dispute are impermissible[16].
Disclosures
Another way to decipher arbitrator conflict is to look at disclosures. When not governed by institutional arbitral rules, for ad hoc arbitrations, disclosures are largely voluntary procedures adopted by arbitrators. IBA Guidelines on Conflicts of Interest in International Arbitration[17] are widely accepted soft law standards on what may amount to a conflict of interest in relation to a party-appointed arbitrator, thereby providing guidance on what kind of disclosures must be made by arbitrators. IBA guidelines categorize conflict into three lists, which in decreasing order of severity are: Red (waivable and un-waivable), Orange, and Green[18]. The un-waivable red list consists of conflicts which even if both parties agree cannot be waived and therefore, appropriate disclosures or the consent of parties cannot serve as defences to the appointment of such person as an arbitrator. Eg:- Arbitrator is an employee of one of the parties to the arbitration. Waivable red list consists of conflicts under which a person should ideally not act as an arbitrator however, may choose to do so, basis full disclosure of such conflict to the other party and timely consent of all parties. Eg:- Arbitrator is a non-majority shareholder of one of the parties. Orange list consists of situations which ‘may’ give rise to reasonable doubts on arbitrator’s impartiality depending on the facts of the case and therefore disclosure is fact dependent. Eg:- Arbitrator has served as an expert for one party in an unrelated matter. Green list consists of situations where no actual or appearance of bias may be concluded by a reasonable person and therefore no disclosure is as such required from the arbitrator. Eg:- the Arbitrator has previously, in an unrelated matter, heard expert testimony from an expert appearing in the current proceedings.
UNCITRAL/ ICSID Code of Conduct for Arbitrators has taken a rather stringent approach in terms of disclosures, mandating the arbitrators to disclose engagements in all IID or related proceedings in the last five years and any prospective engagements in IID or related proceedings[19], thereby casting the net much wider than the largely voluntary IBA Rules[20]. Prima facie, this expands the set of disclosures to be made on two levels: one, which proceedings would amount to “related proceedings” has not been defined and two, engagement in IID or related proceedings is not limited to the capacity of a counselor an arbitrator and is extended to an expert witness as well. However, given the relatively limited pool of arbitrators with expertise in Investor-State Arbitration as opposed to Commercial Arbitration, such an approach may prove to be rather counterproductive, which might be one of the reasons why the enforcement procedures in the ICSID Code of Conduct remain ambiguous[21].
The foregoing rules also do not provide much clarity on the controversial issue of third-party funding and how, if at all, the disclosure of a third-party with a monetary interest in the outcome of the case who also happens to be funding the said arbitration on behalf of a party, would interact with disclosures by arbitrators. For instance, if an arbitrator is also the non-majority shareholder of such third party funder then would a disclosure be required under any of the foregoing soft laws?
Post Award challenges to Arbitrator Appointments basis Disclosures
A challenge to the independence and impartiality of arbitrators may prima facie seem like a relatively well-settled principle in several institutional rules[22]. However, courts in different jurisdictions have applied varying standards to adjudge issues of “bias” at the stage of enforcement of arbitral awards. What act (or series thereof) or omission(s) may demonstrate a lack of independence or impartiality at the stage of enforcement is hard to define.
Recent controversies such as that in the case of Port Autonome de Douala v. Douala Int’l Terminal S.A (Port Autonome) particularly bring such issue to the forefront, where despite explicitly holding that ties within academic circles can in no way imply, by their very nature, close professional or personal relationships between arbitrators and counsels, the Court of Appeal in Paris set aside an arbitral award basis a eulogy published by the arbitrator in the memory of the late counsel[23].
The foregoing case was peculiar in the context of disclosures made by the arbitrator in the statement of independence and impartiality, revealing beforehand that the arbitrator had been previously appointed twice (2008 and 2015) by the late counsel’s firm[24], despite which the Court of Appeals held that the eulogy revealed a close relationship between the arbitrator and the late counsel, which, failing disclosure, raised reasonable doubts in the minds of the parties’. The court also did not take into account the fact that the arbitrator had not been in contact with the late counsel since 2019, which is when the case was instituted.
In the Jordan Chiles case, allegations of bias have been levelled before Swiss courts against the President of the Ad-Hoc Tribunal, Dr. Hamid G. Gharavi, that stripped Jordan Chiles of her Olympic Bronze, in favour of a Romanian athlete. Dr. Hamid G. Gharavi had made necessary disclosures that he acted as counsel for the government of Romania in arbitrations before ICSID[25]. While it remains to be seen what the Swiss courts decide, it is pertinent to note that neither of the parties objected to the arbitrator’s appointment at the stage the disclosure was made.
In sharp contrast to Port Autonome, a Canadian Superior Court in the case of Vento Motorcycles, Inc. v. United Mexican States (Vento I), where similar allegations of bias were levelled, upheld the award on the basis that the award was unanimous and there were no allegations of the other arbitrators being a) biased or b) influenced by the opinion of the allegedly biased arbitrator.[26] In this case, one of the arbitrators was informed by Mexico that he was being considered to be included in a roster of panel arbitrators, and the Canadian court held that even though that was not an actual appointment as an arbitrator, it was still a significant professional opportunity which ought to have been disclosed by the arbitrator. Failing to disclose this opportunity gave rise to reasonable apprehension of bias under Canadian law, however, the judge of Superior Court categorised such bias as a procedural error and relied upon Wewaykum Indian Band v. Canada[27] (Wewaykum) to state that the bias of one arbitrator did not taint the others. The approach adopted by the Canadian Superior Court echoed the concern presented by challenging arbitrator appointments at the stage of enforcement.
However, the Court of Appeal of Ontario reversed the judgment on appeal and set aside the arbitral award basis bias[28] (Vento II). The Court of Appeal for Ontario disregarded the argument on the unanimity of the award and categorically held that if the independence of the tribunal is compromised, then its award must be set aside and the courts must not refuse such a remedy by citing competing considerations of cost and convenience[29].
Vento II is also particularly significant because it solidifies the threshold for determining such questions at the “apprehension of bias” and clarifies that any surrounding considerations such as the appointment procedure (in this case, a public appointed panel system) or absence of compensation in the award or the conduct of other arbitrators etc., is not relevant to or determinative of the question on apprehension of bias. Thus, once a court holds that there was an apprehension of bias due to a breach by an arbitrator or lack of material disclosure, etc., the court’s enquiry must stop there and the award be set aside.
While Port Autonome seems to suggest that lack of disclosure was sufficient to set aside the award, Vento II disregards the emphasis on the unanimity of the award to decide the question of bias. An important distinction in the foregoing two cases is that while the Court of Appeals in Port Autonome did not particularly hold that the arbitrator’s conduct was representative of lack of independence or impartiality, the Ontario Superior Court Of Justice in Vento I had clearly held that there was an apprehension of bias, which was then relied upon in Vento II to set aside the award.
Given the foregoing, it is evident that there is no clear standard for determining the degree of importance to be given to arbitrator disclosures (or lack thereof), if at all, while deciding a challenge on arbitrator appointment basis bias. In this context, it is important to note that disclosures by arbitrators by itself does not amount to a conflict under the IBA guidelines[30]. If disclosure is not a singular determinative factor of conflict of interest, then by extension, a finding of bias on the part of the arbitrator, especially at the stage of enforcement, must not solely be based on lack of disclosure or partial disclosure.
Allegations of bias are severe, and when made at the stage of enforcement of an award, may have the effect of nullifying the award in its entirety. Given the severity of the consequences of such allegations, both for the parties and for the arbitrators, any such finding of bias must be firmly rooted in the award. Disclosures or lack thereof cannot, in and of themselves, be sufficient to render a finding on lack of independence or impartiality one way or the other. The Supreme Court in Wewaykum had a similar logic when it stated that the entire decision-making process must be evaluated to adjudge whether the judge tainted by bias played an active role in arriving at the final decision. However, Vento II dismissed the foregoing findings in Wewaykum as mere obiter and distinguished Wewaykum as a special case involving a Supreme Court Justice where no allegations of bias were found.
The foregoing case laws in totality restrict the findings of bias on arbitrator disclosures to the stage of such disclosure and divorce it from any subsequent processes or the actual decision of the tribunal. Therefore, there is a lot riding on arbitrator disclosures for an area that largely remains subject to soft law and arbitrator discretion.
Are arbitrators required to disclose their political views?
Given the increasing set of disclosure requirements being imposed on arbitrators, such as the 2024 IBA guidelines prescribing a disclosure if the arbitrator has publicly advocated a position on a case[31], arbitrators must rethink their public activity and be increasingly cautious of even their social media posts. The recent jurisprudence on the area has been divided on the issue, with the PCA removing two arbitrators for their support of a March 2022 declaration criticizing Russia’s military activities, which rendered them incapable of impartiality in cases involving the Russian state,[32] and the ICSID deciding against an arbitrator challenge on similar facts[33]. While it seems reasonable to imagine why political views would be a pertinent consideration in Investor State arbitrations, especially in the Russia-Ukraine context, where the state’s action detrimental to the investment is in fact a political action, and so the question of liability also becomes political to an extent. However, it would be a dangerous precedent to extend the same concerns to non-political state actions in ISDS and other commercial arbitrations.
This would become a particularly burdensome requirement with a widespread chilling effect on arbitrators’ voicing personal opinions, especially in light of the fact that that disclosure is a continuous requirement throughout the period of arbitration and is terminated only after the arbitrator has made necessary corrections, if any, to the award or such period has elapsed[34].
Such requirements would work more as a delaying tactic for the recalcitrant party in the arbitrations, and less for ensuring the impartiality of the tribunal. Dismissal of arbitrators basis political views risks operation on a slippery slope where their public legal criticisms of a state’s judicial or administrative system may render them ‘partial’ or capable of a reasonable apprehension of bias against that state in arbitrations. It will be hard to draw a line in such scenarios and it would undermine the very purpose of having such rules in the first place.
Conclusion
While the trend for arbitrator obligations tilts in favour of disclosures, even when there is a doubt, there is no uniform set of guidelines that govern this area. The IBA guidelines of conflict are instructive, and their Red List (waivable and non-waivable) is a helpful criterion for determining the impact of a lack of disclosure upon the fairness of the arbitral process. It has been made clear by courts in France and Canada through recent case law that a lack of appropriate and accurate timely disclosures can be sufficient for setting aside an arbitral award and competing considerations of convenience and economic efficiencies do not play a role in such determinations. With that background in mind, arbitrators must continue to resolve any ambiguity in disclosures in favour of disclosing such information and must be cautious of their online presence and criticisms of state policies, which may now operate as a factor in their subsequent disqualification.
[1]R. v. Gough, (1993) 2 All ER 724 (Court name to be mentioned).
[2] Commonwealth Coatings Corp. v. Continental Casualty Co., 393 U.S. 145 (1968); Federal Arbitration Act §10, 9 U.S.C. §§ 1-16.
[3] Supra n.1
[4] Supra n. 2
[5] Gianelli Money Purchase Plan and Trust v. ADM Inv. Services, Inc., 146 F.3d 1309, 1312–13 (11th Cir. 1998).
[6] Applied Indus. Materials Corp. v. Ovalar, 492 F.3d 132, 137 (2d Cir. 2007)
[7] https://jusmundi.com/en/document/publication/en-arbitrators-impartiality-and-independence
[8] https://jusmundi.com/en/document/publication/en-arbitrators-impartiality-and-independence
[9] Malintoppi, L., Independence, Impartiality, and Duty of Disclosure of Arbitrators, in The Oxford Handbook of International Investment Law 807, (Muchlinski, P.T., Ortino, F. & Schreuer, Ch. eds., 2008).
[10]https://jusmundi.com/en/document/publication/en-arbitrators-impartiality-and-independence
[11] Cf Article 13, ICC Rules 2021, [https://iccwbo.org/dispute-resolution/dispute-resolution-services/arbitration/rules-procedure/2021-arbitration-rules/ – block-accordion-13]; Article 11 UNCITRAL Model Law on International Commercial Arbitration, [https://uncitral.un.org/sites/uncitral.un.org/files/media-documents/uncitral/en/19-09955_e_ebook.pdf]; Rule 14 American Arbitration Association Commercial Arbitration Rules and Mediation Procedures 2022, [https://www.adr.org/sites/default/files/CommercialRules_Web_1.pdf]
[12] Cf Rule 18 American Arbitration Association Commercial Arbitration Rules and Mediation Procedures 2022, [https://www.adr.org/sites/default/files/CommercialRules_Web_1.pdf]
[13] https://arbitrationblog.kluwerarbitration.com/2015/09/29/interviewing-prospective-arbitrators/ – :~:text=When exercising this right, it,the arbitral process in general.
[14] https://www.ciarb.org/media/0v4pnwao/1-interviews-for-prospective-arbitrators-2015.pdf
[15] Article 1(2), Interviews for Prospective Arbitrators, Chartered Institute of Arbitrators (2015), available at https://www.ciarb.org/media/0v4pnwao/1-interviews-for-prospective-arbitrators-2015.pdf
[16] Article 3, Interviews for Prospective Arbitrators, Chartered Institute of Arbitrators (2015), available at https://www.ciarb.org/media/0v4pnwao/1-interviews-for-prospective-arbitrators-2015.pdf
[17] https://www.ibanet.org/document?id=Guidelines-on-Conflicts-of-Interest-in-International-Arbitration-2024
[18] Ibid.
[19] Article 11(2) https://uncitral.un.org/sites/uncitral.un.org/files/media-documents/uncitral/en/2318944_coc_arbitrators_e-book_eng.pdf (Incomplete citation)
[20] Rule 4.4.1 of IBA Rules, https://www.ibanet.org/document?id=Guidelines-on-Conflicts-of-Interest-in-International-Arbitration-2024.
[21] https://www.iisd.org/itn/2021/11/10/the-uncitral-code-of-conduct-breakthrough-or-diversion/ – :~:text=The Code of Conduct appears,can actually make a difference.
[22] Cf Article 14 ICC; Article 10 LCIA Rules; Article 13 UNCITRAL Model Law.
[23] (Pole 5 – Chamber 16) 20/18330 (Incomplete Citation)
[24] https://files.lbr.cloud/public/2023-02/Gaillard decision English translation.PDF?VersionId=NL6XMRA7bP.Z2g2T7Rr8AYmg6mQTB9rI
[25] https://www.kcci.com/article/panel-member-jordan-chiles-romania-legal-cases/61870291
[26] 2023 ONSC 5964 (Court details to be provided)
[27] 2003 SCC 45, [2003] 2 S.C.R. 259
[28] https://www.italaw.com/sites/default/files/case-documents/italaw1826559.pdf
[29] Id.
[30] Supra n. 7. (Same comments as above for “Supra” citations)
[31] https://www.acerislaw.com/wp-content/uploads/2024/03/2024-IBA-Guidelines-on-Conflicts-of-Interest-in-International-Arbitration.pdf
[32] https://pcacases.com/web/sendAttach/52784
[33] ICSID Case No. ARB/24/1
[34] https://www.acerislaw.com/wp-content/uploads/2024/03/2024-IBA-Guidelines-on-Conflicts-of-Interest-in-International-Arbitration.pdf
* Ashima Sharma is an India-qualified disputes lawyer with an LL.M. from Columbia Law School. She has broad experience in commercial litigation and international arbitration, with a particular focus on disputes in the construction and energy sectors.