SECOND. INTRODUCTION
Ramon Mullerat OBE is a lawyer in Barcelona and Madrid, Spain; Avocat à la Cour de Paris, France; Honorary Member of the Bar of England and Wales; Honorary Member of the Law Society of England and Wales; Professor at the Faculty of Law of the Barcelona University; Adjunct Professor of the John Marshall Law School, Chicago; Former President of the Council of the Bars and Law Societies of the European Union (CCBE); Member of the American Law Institute (ALI); Member of the American Bar Foundation (ABF); Chairman of Commission 2020 of the International Bar Association (IBA); Co-Chairman of the Human Rights Institute (HRI) of the IBA; Member of the Board of the London Court of Internationa! Arbitration (LCIA); Chairman of the Editorial Board of the European Lawyer. back
"An arbitration is only as good as the arbitrator" 2
It is an honour and a privilege for me to address the Court of Arbitration at the Bulgarian Chamber of Commerce and Industry on the occasion of its 50lh Anniversary of its reestablishment. I wish to thank President Silvy Chernev for his kind invitation to participate in this important event.
It has been rightly said that a good arbitration depends on good arbitrators. The success of arbitration proceedings greatly rests on the moral and professional qualities of the arbitrator. For this reason, arbitrators are subject to strict legal and ethical rules 3 4. This is even more evident in international arbitration. The dignity and reputation of the arbitral process also requires that these rules are strictly enforced.
The function of an arbitrator is even more sensitive than that of a judge given that the latter's decision is always subject to appeal, whereas an appeal cannot be made against arbitration awards except in limited cases.
Arbitrators have a duly to fulfil the obligations provided by national arbitration laws applicable to the arbitrational procedures in which they participate.
The fundamental obligations of an arbitrator generally imply adhering to the following principles: the right of the parties to be heard during the proceedings; the adversarial system and equality amongst the parties; and the insurance a fair award within the appropriate period.
An arbitrator is liable in cases of bad faith, serious negligence or corruption. If the arbitrator breaches the legal obligations, he commits a breach of contract or tort and is liable to the parties to the damages caused. It is true that some legislations grant immunity to an arbitrator but this is never an absolute immunity 5. In arbitration proceedings administered by an institutional body, some legislations grant to the parties prejudiced by an arbitrator in addition direct legal action against the arbitration institution in order to bring a claim for damages.
In arbitration proceedings administered by an institutional body, arbitrators also have a duty to comply with the regulations of the institution which has appointed mem and under which the arbitration proceedings are conducted.
The breach of these regulations gives also rise to an arbitrator's liability for damages as in the case of breach of arbitration laws.
1 Ramon Mullerat OBE is a lawyer in Barcelona and Madrid, Spain; Avocat à la Cour de Paris, France; Honorary Member of the Bar of England and Wales; Honorary Member of the Law Society of England and Wales; Professor at the Faculty of Law of the Barcelona University; Adjunct Professor of
the John Marshall Law School, Chicago; Former President of the Council of the Bars and Law Societies of the European Union (CCBE); Member of the American Law Institute (ALI); Member of the American Bar Foundation (ABF); Chairman of Commission 2020 of the International Bar Association (IBA); Co-Chairman of the Human Rights Institute (HRI) of the IBA;
Member of the Board of the London Court of Internationa! Arbitration (LCIA); Chairman of the Editorial Board of the European Lawyer. back
2 Stephen Bond, Selection of ICC arbitrators and the requirements of independence, 1988. back
3 Juan Figueroa, "Arbitraje y etica", La semana juridica. back
4
The number of legal and ethical regulations for arbitrators is proliferating. The latest rules that I know of are the Ethical
Standards for Arbitrators adopted by the Judicial Council of California, 19 April 2003. Judicial Council News, 34, 16 April 2003. back
5
Art. 19 of the Rules of the London Court of International Arbitration; art. 36 of the Rules of the American Arbitration Association; art. 34 of the Italian Arbitration Association; art. 77 of the Rules of the World International Property. In the US many arbitration rules of the federal states and case law since 1884 rules out any form of civil liability for arbitrators and arbitration institutions for acts carried out in their position. This immunity is aimed at protecting the function of the arbitrator and not the person. In England, this immunity has also been recognised (House of Lords, Sutclife v. Tackrab, 1974 and Asenson v. Asenson, 1977). German, Austrian and Norwegian legislations also recognises this right. Immunity is ruled out by art 16.1 of the Spanish Arbitration Act that establishes the liability of arbitrators for damages caused by fraud or lack of due diligence and by art. 584.2 of the the Civil Procedure Act of Austria which establishes liability in cases of unjustifiable delays to the arbitration. Limits on the liability of arbitrators, except in the cases of deliberate and intentional fraud are also provided for in arbitration regulations. Fouchard, Gaillard et Goldman, Traité de l'arbitrage comercial international, 1996. back
One of the characteristics of the liberal professions is that professionals are subject to strict ethical rules. And although a neutral 6 in ADR as such is not a professional by himself, generally the persons who act as arbitrators are also members of a liberal profession (lawyers, engineers, architects etc.).
This raises some questions. The first question consists on deciding whether the neutrals are subject to special ethical rules or they are only subject to the ethical rules of their own profession. If the answer to the first question is positive, the second is what happens when the neutrals' ethical rules and their professional rules conflict.
Traditionally, arbitrators and mediators from different professions have looked to the professional standards of their own profession. But today arbitrators have special professional standards 7 deriving from different sources not always fully coincidental. If the arbitrator due to his profession is subject in his conduct to specific ethical rules he must likewise fulfil these when acting as an arbitrator. Generally, most of the ethical rules - as an arbitrator or as a professional - will not differ (i.e.: professional confidentiality or secrecy). But should there be a conflict of rules, it seems to me that the rules applying as an arbitrator should prevail.
Ethical rules arc particularly relevant for arbitrators because arbitration is based on trust 8 .
II. Ethical standards for all neutrals
In regard to the US, the Ethical Standards of Professional Conduct for members of the Society of Professionals in Dispute Resolution 1987 provide (General Responsibilities) that neutrals have a duty to the parties, to the profession and to themselves. They should be honest and unbiased, act in good faith, be diligent, and not seek to advance their own interests at the expense of the parties. They impose to neutrals the following responsibilities to the parties: impartiality, informed consent, confidentiality, conflict of interest, promptness and settlement and its consequences.
As John Cooley 9 put it, the ADR profession leaders should define the ADR practitioner's professional and ethical role in relation to the judicial rather that the lawyer's role. The judicial role is a much more appropriate than the lawyer role. First, when performing their judicial role (which includes applying law to facts and assisting with the drafting of settlement agreements), judges are not practicing law. Second, both lawyers and non-lawyers serve in the judicial capacity. Indeed, being a lawyer is not even a requisite qualification to serve on the US Supreme Court. Although the ABA's Ethics 2000 Commission introduced changes to the ABA's Model Rules of Professional Conduct for Lawyers, there is currently no similar study being undertaken with respect to the ABA Model Code of Judicial Conduct. ADR profession leaders should take an active role in urging the study and revision of the ABA Model Code of Judicial Conduct, first to modernize the judicial role to include standards relating to judges1 evolving ADR functions; and second, to consider the inclusion of new canons specially addressing the neutral roles of lawyers and non-lawyers in the various ADR processes.
6 Some US rules (f.i. the Society of Professionals in Dispute Resolutions Standards or SPIDR) generically refer to mediators and arbitrators as "neutrals". back
7 Allan Scott Rau, Edward F. Sherman and Scott R. Poppet, Processes of Dispute Resolution, third edition, 2002, p. 532, with regard to mediation. back
8 Juan Eduardo Figueroa, "Ethical in international arbitration", Mealey's International Arbitration Report, My 2003, p. 41. back
9 John Cooley: "Shifting paradigms: the unauthorized practice of law or the authorized practice of ADR". back
Independence and impartiality are the most essential features of the adjudicatory function. Resolution 1999/31 of the UN Commission on Human Rights provides:
" ...an independent and impartial judiciary ... are essential prerequisites for the protection of human rights and for ensuring that there is no discrimination in the administration of justice"
The main duty for arbitrators is also to be independent and impartial. Independence and impartiality is something essential to arbitration proceedings. Only if the arbitrators are independent and impartial and the parties treated with equality can a fair award be made 10.
Questions arise as to whether the same standards of independence and impartiality applied to judges should be applied to arbitrators and how those standards can be applied across the many jurisdictions in which international arbitrations take place. In the international sphere, it is accepted that arbitrators must exercise their functions impartially. In many jurisdictions the notion of independence is considered the best yardstick to measure perceived impartiality. In most international arbitrations, an arbitrator will be required to be independent, either by the law to which the arbitration procedure is subject or the rules of arbitration agreed by the parties. Typically, such arbitration laws and rules require that the person wishing to be appointed as an arbitrator disclose any doubts about his independence both at the time of appointed and throughout the duration of the arbitration (sec III.8).
Independence should not be confused with impartiality. Independence is a situation of fact, impartiality is a state of mind that may only be verified through facts. However, independence is based on a presumption on impartiality.
Independence is the quality of being free from the influence, guidance or control of others. The term independence implies no interest of or pressure on the arbitrator which may influence the free decision of the arbitrator.
At least the following circumstances result in a lack of independence: material interest in the resolution of the case; previous commercial relations; continue family relationship or important social, professional or business relationship with one of the parties' lawyer or witness; enmity with a party; making his position public in regards to the case.
Partiality arises when an arbitrator somehow favours one of the parties, or when he is prejudiced in relation to the subject matter of the dispute.
Impartiality means freedom from favouritism or bias either by word or by action, and a commitment to serve all parties as opposed to a single party 11. Impartiality is a more abstract concept than independence in the sense that it implies a state of mind, which is difficult to measure and quantify.
Impartiality has been especially studied in relation to judges. Fairness and impartiality must be both subjectively present and objectively demonstrated to the informed and reasonable observer. The trial will be rendered unfair if the words or actions of the judge give rise to a reasonable apprehension of bias to the informed and reasonable observer. Judges must be particularly sensitive to the need not only to be fair but also to appear to all reasonable observers to be fair.
The apprehension of bias must be a reasonable one held by reasonable and right-minded persons, applying themselves to the question and obtaining thereon the required information. The test is what would an informed person, viewing the matter realistically and practically-and having thought the matter through conclude. This test contains a two-fold objective element: the person considering the alleged bias must be reasonable and the apprehension of bias itself must also be reasonable in the circumstances of the case. Further the reasonable person must be an informed person, with knowledge of all the relevant circumstances, including the traditions of integrity and impartiality that form a part of the background and apprised also of the fact that impartiality is one of the duties the judges swear to uphold.
A real likelihood or probability of bias must be demonstrated and a mere suspicion is not enough. The existence of a reasonable apprehension of bias depends entirely on the facts. The threshold for such a finding is high and the onus of demonstrating bias lies with the person who is alleging its existence. The test applies equally to all judges, regardless of their background, gender, race, ethnic origin, or any other characteristic.
Impartiality can be described as a state of mind in which the adjudicator is disinterested in the outcome and is open to persuasion by the evidence and submissions. In contrast, bias denotes a slate of mind that is in some way predisposed to a particular result or that is closed with regard to particular issues. Whether a decision-maker is impartial depends on whether the impugned conduct gives rise to a reasonable apprehension of bias. Actual bias need not be established because it is usually impossible to determine whether the decision-maker approach the matter with a truly biased state of mind.
Arbitrators also must not only be independent and impartial, but must be perceived as sueh, following Lord Hewitt's famous statement: "justice should not only be done but should manifestly and undoubtedly be seen to be done" 12 13. Most jurisdictions also confirm that arbitrators should be free from the perception as well as the actuality of bias.
Many regulations refer to the need to disclose not only any interest or relationship likely to affect impartiality but also any interest or relationship which might create an appearance of partiality or bias (Canon II, AAA/ABA Code).
It might be helpful to focus on the relationship between independence and impartiality. Some say that, while both principles in the abstract are frequently invoked, there tends to be an overemphasis on the former (independence) at the expense of the latter (impartiality). They take as their major premise the principle of judicial independence. In other words, they tend to consider judicial independence to be an end in itself and this, in turn, renders all other principles such as impartiality and accountability second order. While the importance of judicial independence cannot be gainsaid, there is a danger in treating it as an end in itself. The primary goal that we should be aiming for is ethical, fair and responsible decisionmaking. In other words, impartiality is considered to be the end to be achieved and independence is a means - a crucial means - to that end, but not and end in itself.
In my view, however, independence, as a matter of fact, comes first and impartiality, as a matter of mind, comes later. A judge as an arbitrator can be independent - inexistence of physical, mental or economic dependence and absence of pressure - but they can be biased. So I think that the order to consider both principles is first independence and second impartiality.
10 Francisco González de Cossio, "Independencia, imparcialidad y apariencia de imparcialidad de los árbitros". back
11 Daniel Bent, Ethical Rules of Mediation and Arbitration. Fair Mediation and Arbitration.com. Ethical Standards of Professional Responsibility. back
12 Lord Hewitt, R. v, Sussex Justices, ex parte Mc Carthy. 1924. Machiaveli said the same about the wife of the Caesar. back
13 Jacqueline F. Drucker, "Ethics in labor and employment arbitration", 2003, American Bar Association. back
In order to protect the principles of independence and impartiality, many laws prohibit some persons to act as arbitrators. In this regard, for instance, the Spanish Arbitration Act 1988 (art 12.4) provides that judges, magistrates, prosecutors, notaries and registrars in active service cannot act as arbitrators. The ABA Code of Judicial Conduct (Canon 5) also prohibits active judges to become arbitrators. The Rules of the German Arbitration Institution (art. 8.1) contain the same prohibition. The main reason of the prohibition for judges to act as arbitrators is the appearing conflict of interests since precisely judges may have to decide on whether to set aside the award, how it is executed, the registration of interim orders, etc.
With regard to judges, personal or professional affiliations outside the judiciary inevitably raise the potential for conflicts of interests that can make it difficult for judges to remain impartial. Where those affiliations are with another branch, it may also be difficult for judges to remain truly independent without jeopardising their careers outside the judiciary. In Europe most standards therefore explicitly recommend limitations on judges' outside activities, although the jurisprudence of the European Court of Human Rights and the practice of member slates do not support an absolute prohibition against judges working in the political branches 14.
Also, nationality may be in some eases a cause of incompatibility. Arts. 6 and 9.5 of the Arbitration Rules of the London Court of International Arbitration state that where the parlies are of different nationalities, a sole arbitrator or the chairman of the arbitral tribunal shall not have the same nationality as any party, unless the parties agree.
A. The laws.
Just to give some examples, art. 13.6 of the Brazilian Arbitration Act 1996 states that an arbitrator must cany out his activities with impartiality, independence, competence, diligence and discretion; art. 4.2 of the Scottish Arbitration Code 1999 states that each arbitrator shall be and remain at all times independent and impartial; section 8 the Swedish Arbitration Code 1999 states that the arbitrator must be impartial; art. 180 of the Swiss Federal Law on Private International law refers only to independence; art. 1640 of the Belgium Judiciary Code states that the judge and the arbitrator must bo independent and impartial; art. 24 a of the English Arbitration Act 1996 states that the lack of impartiality leads to a lack of independence; etc.
Other laws only indirectly demand that the arbitrator be independent or impartial, since they require that the arbitrator disclose all the grounds that may give rise to justifiable doubts over his impartiality or independence with the same purpose. This is the case, for example, of section 1036 of the Zivil Prozess Ordung of Germany 1984, following the example of art. 12 of the Uncitral Model Law 1985.
B. The institutions' regulations.
Existing regulations also demand the independence and impartiality of arbitrators. This is the case, for instance, of art. 7 of the American Arbitration Association (AAA) Regulations, International Arbitration Rules 1997; art. 2. 1 of the Arbitration Rules of the London Court of International Arbitration (LCIA); art. 22 of the Arbitration Rules of the World Intellectual Property Organization (WIPO); art. 4 of the Arbitration Rules of UNCITRAL; art. 5 of the Arbitration Rules of CPR, Institute for Dispute Resolutions; art. 29 of the Rules of China International Economic and Trade Arbitration Commission (CIETAC); art. 12.2 of the Uncitral Model Law 1985; art. 3.2 of the Arbitration Rules of the Chartered Institute of Arbitrators; art. 8. 1 of the Arbitration Rules of the German Institute of Arbitration; art. 9 of the Permanent Court of Arbitration of the Hague; art. 6 of the Arbitration Institute of the Stockholm Chamber of Commerce; art. 5.5 of the Rules of the international Arbitral Centre of the Federal Economic Chamber of Vicna; art. 6.4 of the Statute of the Court of Arbitration of the Bulgarian Chamber of Commerce and Industry; etc.
Some arbitration centres only refer to independence being impartiality subsumed in the independence concept, like art. 7.1 of the Arbitration Regulations of the International Court of Arbitration of the International Chamber of Commerce (ICC); art. 30 of the Arbitration Rules of the Geneva Chamber of Commerce; art. 2 of the Rules of Procedure of Arbitration of the International Centre forme Settlement of Investment Disputes; section 12 of the Uniform Arbitration Act of National Conference of Commissioners on Uniform State Laws US 2000; etc.
C. The codes of ethics.
Although practically all regulations demand that the arbitrator be independent and impartial, it is the codes of conduct or ethics where this requisite is generally defined and amplified. For example:
The Guidelines of Good Practice for Arbitration of the Chartered Institute of Arbitrators.
Art. 2 demands that, before the arbitrator becomes an arbitrator, he accepts the position without bias or the appearance of bias; art. 3 defines the criteria to determine whether impartiality and independence exist.
The Guide to the Conduct of Arbitration Proceeding of the German Institute of Arbitration.
Art. 3 states that it is a condition for accepting the position of member of the arbitration tribunal to be impartial and independent of the parties.
The Rules of Ethics for International Arbitrators of the International Bar Association (IBA).
The Introductory Note states that "international arbitrators should be impartial, independent, competent, diligent and discreet"; point 1 provides also that arbitrators shall be and shall remain free from bias.
The.Code of Ethics for Arbitrators of the Chamber of Rational and International Arbitration of Milan.
Art. 4 states that the arbitrator shall guarantee his impartiality by being and remaining independent of any external influence either direct or indirect, during the entire arbitral proceedings.
The Code of Ethics for Arbitrators in Commercial Disputes sponsored by the American Arbitration Association and the American Bar Association (ABA).
(Canon II) reflects the principle that arbitrators should disclose the existence of interests or relationship that are likely to affect their impartiality or that might reasonably create an appearance that they are biased against one party or favourable to another.
The Japan Commercial Arbitration Association Rules.
Rule 20 states that no person having a beneficial interest in the case under arbitration shall be an arbitrator. An arbitrator shall be a person with a beneficial interest in the ease under arbitration.
The Rules of the London Court of International Arbitration (LCIA) /span>.
Art. 3 states that all arbitrators conducting an arbitration under its rules shall be and remain at all times wholly independent and impartial and shall not act as advocates for any party.
The International Arbitral Centre of the Federal Economic Chamber of Vienna Rules.
Art. 5.5 states that the arbitrator must perform their duties in complete independence and impartiality, and are not subject to any directives in that respect.
The National Arbitration Forum Code of Conduct for Arbitrators.
Canon two provides as follows:
"An Arbitrator should avoid entering into any financial, business, professional, family or social relationship, or acquiring any financial or personal interest, which adversely affects impartiality or which might reasonably create the unfavourable appearance of partiality or bias. For a reasonable period of time after a case, Arbitrators should avoid entering into any such relationship, or acquiring any such interest, in circumstances "which might reasonably create the unfavourable appearance that they Juid been influenced by the anticipation or expectation of the relationship or interest".
14 In Europe, most candidate states to join the EU place restrictions on judges holding offices in the executive, parliament, or the civil service. Not all crossover is prohibited, however; several countries allow judges to work within the Ministry of Justice (Czech Republic, Poland, Slovakia). In the Czech Republic and Slovakia, judges routinely work in the Ministry of Justice while retaining their status as judges; Estonia and Latvia arc planning to introduce the practice. In Poland, judges may work for the ministry and continue to adjudicate cases; such a practice seriously undermines judges' independence. Rules on incompatibility also limit the ability of judges to hold elective office - the practice in most, but not all member states, in general, judges who wish to hold elective office must resign from bench. However, in some candidate stales a judge may merely suspend service (Slovakia, Slovenia) and then return to the judiciary later. This encourages an unduly close relationship with the other branches. The rules on incompatibility notwithstanding, in several states judges may be appointed to different commissions or committees for elections (Bulgaria, Latvia, Poland, Romania) or human rights (Latvia, where a member of the Supreme Court is a consultant). Obviously, the opportunity to select particular judges to serve on committees affords other branches an opportunity to reward or punish judges for inappropriate reasons. In Bulgaria, commission work can provide significant remuneration, which increases the potential for inappropriate incentives and influence. It is common among candidate states -as among member states - that judges are not allowed to be members of political parlies or to be engaged in political activities. Although the ban on party membership was introduced as a reaction to the communist past, the prohibition is still perceived as a genuine guarantee of independence. In the member States, too, limitations on judges' political affiliations are common. There arc no such prohibitions in the Czech Republic and Slovenia. All candidate states place restrictions on judges' outside commercial or professional activities; all allow judges to engage in academic, scientific or artistic work. These provisions are consistent with international standards, and generally contribute to ensuring that judges arc impartial, and arc seen to be. back
Depending on the arbitral rules selected, a significant difference may exist between the role of party-appointed arbitrators in the US and elsewhere. While leading arbitral organisations outside the US require that party-appointed arbitrators be independent and impartial (art. 7 ICC Rules of Arbitration, art. 5.2 Rules LCIA, Model Rules UNCITRAL, etc.), certain US arbitral rules and laws permit party-appointed arbitrators to serve as non-neutral partisans (A A A Commercial Arbitration Rules, also the case law interpreting the Federal Arbitration Act, etc.).
In the US, a party-nominated arbitrator was historically not obliged to satisfy the same standards of independence and impartiality that were imposed on non party-appointed arbitrators. Code Canon VII of the ABA/AAA permits arbitrators to: a) be "predisposed" towards the appointing party; and b) have communications with the appointing party subject only to a general obligation to "act in good faith and with integrity and fairness.
"Canon, VII. Ethical considerations relating to arbitrators appointed by one party
In some type of arbitration in which there are three arbitrators, it is customary for each party, acting alone, to appoint one arbitrator. The third arbitrator is then appointed by agreement either of the parties or of the two arbitrators, or, failing such agreement, by an independent institution or individual, in some of these types of arbitration, all three arbitrators are customary considered to be neutral and are expected to observe the same standards of ethical conduct. [In other instances] ... it has been the practice that the two arbitrators appointed by the parties are not considered to be neutral and are expected to observe many, but not all, of the same ethical standards as the neutral arbitrator. For the purpose of thin code, an arbitrator appointed by one party who is not expected to observe all of the same standards as the third arbitrator is called a 'nonneutral arbitrator' ".
Canon VII describes the ethical obligations that nonneutral party-appointed arbitrators should observe and those that are nol applicable to them.
But the trend in contemporary international arbitration is strongly towards a uniform set of standards of independence and impartiality for all members of the tribunal 15. Today, the general opinion is that all arbitrators, including ex parte arbitrators, should be fully independent and impartial 16. An arbitrator that has powers similar to those of a judge, and sometimes even broader, should be absolutely independent and impartial in respect to both of the parties 17 18. All arbitrators, including party-appointed arbitrators must respect the same ethical duties, which must apply to all of them without distinction.
In order to protect the independence and impartiality of party-appointed arbitrators, some solutions have been envisaged. For example, the CPR Institute for Dispute Resolution, in their revised rules (Rule 5.4 d) provides for an optional "screened" selection of party appointed arbitrators designed "in such a manner so that the arbitrators wouldn't know who picked them"19.
15 Gary B. Born, International Commercial Arbitration in the United States. Klubcr, 1994, p. 64. back
16 J. Coc, International Commercial arbitration. Transnational Publishers, 1997. back
17 René David, L'arbitrage dans le commerce international, Editorial Economica, 1982.back
18 Mauro Rubino-Sammartano, L'arbitrato Internazionale, Cedam, Padua, 1989back
19 Under these rules, parties wishing to follow this procedure arc given a copy of the CPR "Panel of Distinguished Neutrals", and each party is to designate three candidates, in order of preference "as candidates for its party-designated arbitrator", A party may object to any appointment "on independent and impartial grounds by written and reasoned notice to CPR", which is to make a final decision with respect to any objection. "Neither the CPR nor the parties shall advice or otherwise provide any information or indication to any arbitrator candidate or arbitrator as
to which party selected cither of the party-designated arbitrator". Sec Scott Ran, Sherman and Peppet, op. cit., p. 852. back
A. Duty of disclosure.
An arbitrator, from the time of his appointment and throughout the
arbitration proceedings, must disclose any such facts or circumstances likely to give rise to justifiably doubts related to his independence or impartiality. The duty of disclosure does not expire in the lapse of time prior to the acceptance to become an arbitrator hut carries on throughout the arbitration proceedings. Failure to make such disclosure creates an appearance of bias, and may of itself be a ground of disqualification.
B. Nature of disclosure.
The disclosure declaration rests upon the arbitrator. The arbitrator may not disclose, intentionally or negligently, relevant facts or could in good faith omit information, either because he docs not know of it or because in good faith he does not consider it to be relevant, but it may be for one of the parties in the arbitration. In international arbitration, the disclosure is particularly important given that the parties belong to different countries and are not in a position to have access to information in regards to the arbitration.
C. Content of disclosure.
Circumstances to be disclosed include bias, interest in the results of the arbitration and past or present relations with a party. In order to avoid negligence or bad faith of the agitators, together with a declaration of independence and disclosure, some arbitral institutions have detailed questionnaires for the arbitrators to complete, which include all possible questions on independence and impartiality.
D. Control of disclosure.
The declarations of the arbitrator must be directed to (he parties of the arbitration in ad hoc arbitration or to the arbitration institution which will then inform the parties who will have a time period in which to raise any concerns. The parties on receiving the disclosure and the responses take the questionnaire can request that the arbitrator provide further information.
E. The obligation to disclose in the laws and ethical rules.
"A prospective arbitrator should disclose all facts or circumstance that may give rise to justifiable doubts as to his impartiality or independence, including:
- any past or present business relationship, whether direct or Indirect, including prior appointment as arbitrator, with any party to the dispute, or any representative of a party, or any person known to be a potentially important witness in the arbitration. With regard to present relationships, the duty of disclosure applies irrespective of their magnitude, but with regard to past relationships only if they were of more than a trivial nature in relation to the arbitrator's professional or business affairs. Non-disclosure of an indirect relationship unknown to a prospective arbitrator will not be a ground for disqualification unless it could have been ascertained by making reasonable enquiries;
- the nature and duration of any substantial social relationships with any party or any person known to be likely an important witness in the arbitration,
- the of any previous relationship with any fellow arbitrator (including prior joint service as an arbitrator); /em>
- the extent of any prior knowledge he may have of the dispute,
- the extent of any commitments which may affect his availability to perform his duties as arbitrator as may be reasonably anticipated The duty of disclosure continues throughout the arbitral proceedings as regards new facts or circumstances.
Disclosure should be made in writing and communicated to all parties and arbitrators. When an arbitrator has been appointed, any previous disclosure made to the parties should be communicated to the other arbitrators ".
Cannon II, AAA/ABA Code provides that: "An arbitrator should disclose any interest or relationship likely to affect impartiality or which may create an appearance of partiality or bias".
In the interest of the arbitration reputation, the general tendency is to strengthen the disclosure obligation for arbitrators.
In the US, California has enacted Ethical Standards substantially expand an arbitrator's disclosure requirements that increases a party's ability to disqualify an arbitrator based on such disclosures. Unlike existing voluntary standards, the California rules will have the force of law. The rules establish a floor of required enforceable disclosures and ethical conduct, not an aspirational listing of best practices. Among the most detailed provisions under the Ethical Standards are the categories of information that must be disclosed by arbitrators prior to appointment. In the commercial arbitration arena, there are 14 separate categories, including the existence of family relationships with a party or a lawyer in the arbitration, a "significant persona! relationship" with any party or lawyer for a party, and prior service as an arbitrator for a party or one of the lawyer in the last 5 years. If a proposed arbitrator has served on multiple occasions for a party or one of the lawyers, the arbitrator must disclosure the results of each case submitted to arbitration, including the amount of damages. A potential arbitration must also disclose whether he has served as a "ADR neutral" other than an arbitrator in a prior case in the last 2 years or has any current arrangement for prospective neutral service. In addition, a proposed arbitrator must disclose a range of professional relationships and any financial interest he or she may have in the underlying dispute, the parties or their lawyers. Finally, the standards require disclose of membership in any organisation that practices discrimination on the basis of race, sex, religion, national origin, or sexual or sexual orientation 20.
In an effort to introduce some international uniformity and provide guidelines both for arbitrators and institutions, Committee D of the IBA has established a Working Group on Conflict of Interest in International Commercial Arbitration. In August 2003, the Working Group has issued a draft IBA Guidelines on Impartiality, Independence and Disclosure in International Commercial Arbitration. The Guidelines identify lists (Red, Orange and Green List) intended to set out circumstances giving rise to justifiable doubts as to an arbitrator's independence and impartiality. In situations falling within the Red List, the arbitrator must decline tire appointment. The Green List is intends to itemise specific situations where there is no appearance of a lack of independence and impartiality and no conflict of interest exists. In such cases, arbitrators would not required to make disclosures. The Orange List enumerates situations likely to give rise to justifiable doubts as to the arbitrator's impartiality or independence. Arbitrators finding themselves in a Orange List situation are required to make full disclosure and the parties are free to waive any potential conflict of interest, thereby allowing the arbitrator to be appointed.
Following the publication of several drafts of the Guidelines, the Working Group has received many conflicting comments about which situations should fall within the different lists Whilst judicial independence can remain, in large part, a matter for national jurisdictions to address taking into account local customs, culture and legal history, the formulation of universal standards for independence and impartiality in international arbitration requires the balancing of many different interests. The draft will be debated at the IBA Conference in San Francisco in September this year.
In order to make a good designation, it is important to determine whether the arbitrator to be appointed has the level of knowledge and experience on the relevant legal field.
Ethical rules generally provide that an arbitrator has the duty no to accept an appointment beyond his competence for the specific case. In many arbitration agreements the parties stipulate the characteristics and qualities that the arbitrator must have. Principally, they revolve around their ability and competence in relation to the case they are going to arbitrate on. In the event of this provision not being included, many arbitration regulations impose on their arbitrators requisites in relation to their competence and qualification in the matter to be adjudged, which are normally satisfied by the CV's of the future arbitrators.
Art. 5 of the Vienna Rules of Arbitration states that arbitrators should have specific knowledge and experience in legal, commercial or other pertinent matters. Art. 5 of CIARB Guides of Good Practice states that the prospective arbitrator must inform if he is competent to determine the issues in dispute. Art. 2.2 of the Rules of Ethics for International Arbitration of the IBA states that a prospective arbitrator shall accept the appointment only if he is fully satisfied that he is competent to determine the issues in dispute, and have an adequate knowledge of the language of the arbitration.
Some jurisdictions require that, unless otherwise agreed, arbitrators must be members of the Bar, with a determined number of years of legal experience (Ethical Principles for the National Arbitration Forum), attend a number of hours in certain programmes agreed by the courts, and similar conditions.
20 James M. Schurz, "California's pioneering spirit", ICC United Kingdom, vol. VI. back
1. Importance of confidentiality
One of the reasons why parties decide to resort to arbitration is that their case will remain private far away from the eyes of the press and their competitors, clients and suppliers. Litigation in national courts is generally open to the public and to the media. By contrast, arbitral proceedings are conducted in private, so that the identities of the parties and of the tribunal, and the nature of the dispute, should remain confidential. This may assist to preserve trade secrets and, in some eases, even to the rebuilding commercial relations. It will also provide an environment thai may be more conducive to reaching a settlement. It is also part of the private and confidential nature of arbitration that proceedings are conducted in a less formal atmosphere than is generally the case in the courts (LC1A, Introductory Brochure).
Confidentiality encourages candor, a full exploration of the issues and an arbitrator's acceptability. Also, confidentiality allows the parties to reach agreements during the arbitralional proceedings and also the possibility of continuing commercial relations between them.
In principle, unless otherwise agreed by the parties or required by applicable rules or law, an arbitrator should keep confidential all matters relating to the arbitration proceedings and decisions (Canon Four, National Arbitration Forum Code). An arbitrator should not discuss a case with persons not in the arbitration unless the identity of the parties and details of the case are sufficiently obscured to eliminate any realistic probability of identification.
The English courts 21 have held that an implied term as to the confidentiality of the proceeding is an essential corollary of the privacy of arbitration proceedings and a term which the nature of the contract itself implicitly requires.
Confidentiality covers all documents, materials and awards in arbitration. Likewise, the deliberations of the arbitration tribunal are confidential.
Confidentiality is permanent and, therefore, an arbitrator should not participate in, or give any information for the purpose of giving assistance in any proceeding to consider the award (art. 9 Milan Code of Ethics; art. 7 of CLARB Guidelines of Good Practice, art. 5.5 of Vienna Rules; 20 ICC; 35 AAA; 25 Uncitral; 17 CPR and 9 IBA).
Confidentiality is excluded when the parties reach a mutual agreement to make public the facts or when they are legally obliged to do so (art 30 LC1A Rules; art. 35 ABA International Arbitration Rules, etc).
3. Persons obliged by confidentiality
It is important to decide whether both arbitrators and parties are bound by a principle providing for absolute confidentiality in respect of the arbitration proceedings. The Swedish Supreme Court addressed the issue in a judgement given on 27 October 2000, and concluded that this principle of law does not exist. At present, the Rules of the Arbitration Institute of the Stockholm Chamber of Commerce provide that both the SCC Institute and the arbitration panel should maintain the confidentiality of the arbitration, but there is no express obligation on the parties to do so 22 23.
The LCIA European Council Symposium on 14 November considered the decision of the Swedish Court to render an (interim) award void on the grounds that a breach of confidentiality constituted a violation of an essential element of the agreement to arbitrate in and therefore rendered the agreement to arbitrate null and void, was in error. Confidentiality is an element of arbitration agreements but unless it can be shown that the parties agreed to elevate confidentiality to an essential element of the agreement to arbitrate a violation should not result in avoidance of the arbitration agreement.
A debated question concerning confidentiality is the relationship between an"arbitrating party and its holding or associated companies. In what circumstances, for example, can an arbitrating company communicate to its holding company what is happening to the arbitration without breaching confidentiality?
These are some arguments in favour that there should be no breach of confidentiality when parties to whom disclosure is contemplated are in the same beneficial ownerships and managements as the party in arbitration, as the need to qualify accounts in consequence of advice given in relation to the arbitration. The past advantage of confidentiality does not therefore come without some drawbacks that must be considered. In considering these issues, careful consideration must be given to the specifics before a strategy for addressing them can be determined, for example, who are the parties to the communications? What is their relationship? What are their mutual or divergent interests? What will the communication be? 24
21Ali Shipping Corp. v Shipyard Tragir [1999] 1 WLR 314. back
22 A Bulgarian bank (Bulgarian Foreign Trade Bank Ltd) had a line ofcredit with an Austrian hank to facilitate financing of various contracts between Austrian export companies and Bulgarian import companies. After a few years the Austrian bank transferred its right to payment under some of the loans to a finance company, A,I. Trade Finance Inc. The Bulgarian bank was notified of the transfer. The Bulgarian bank did not pay the finance company which therefore initiated arbitration proceedings against the Bulgarian bank. The arbitration proceedings took place in Stockholm according to the arbitration clause in the agreement between the Bulgarian bank and the Austrian bank. The Bulgarian bank alleged that it was not bound by the arbitration clause because there was not a valid contract of arbitration between the parties to the proceedings, i.e. the loan agreement with the arbitration clause had originally been executed between the Bulgarian bank and the Austrian bank. The arbitrators made a ruling on this issue and found that the Bulgarian bank was bound by the arbitration clause. The ruling was reported in Mealey's International Arbitration Report (apparently the US counsel of the finance company had distributed the ruling to Mealey's). Furthermore the finance company's Swedish counsel gave the article to the chairman of the arbitration panel, Mr. Lars Welamson, a former Judge in the Swedish Supreme Court. Mr. Welamson distributed the article to a judge in the Swedish Supreme Court who quoted the article in a judgement regarding a similar case. When it found out what had happened, the Bulgarian bank purported to rescind the arbitration contract on the grounds of breach of a duty of confidentiality. Furthermore it challenged the award and alleged that the UN ECE arbitration rules, which were the applicable procedural rules according to the arbitration clause, provide for a contractual obligation of secrecy between the parties themselves and between the parties and the arbitrators. Furthermore the Bulgarian bank alleged that it was a fundamental principle of Swedish law that arbitration proceedings arc absolutely secret. The Bulgarian bank was successful in challenging the award in the District Court but lost in the Court of Appeal. The Supreme Court agreed with the Court of Appeal and made the following remarks. The ECE arbitration rules do not contain an obligation of secrecy which makes it a breach of the arbitration clause to reveal the outcome of the proceedings. back
23 Jonas Bcnedictsson and Anders Isgren, Confidentiality in Arbitration in Sweden. back
24 Nicholas Baratz, "Some issues concerning confidentiality of arbitrators in English Law", ICC United Kingdom, members handbook, vol VI, p. 45 and the English court decisions he cites: Ali Shipping Corp. v. Shipyard Trogir [1999] 1 WLR 314, Associated Electrical and Gas v. European Reassurance, City of Gotha v Sothebys [1998] 1 WLR 114. back
The duty of confidentiality is not absolute. There may be some cases in which confidentiality may be broken. The authors 25 mention: accountability, threats, reports of crime and abuse, whistleblowing.
However, as it happens with the confidentiality duty in the legal profession, justifiable as may be the case, we must be careful to expand the confidentiality exceptions since people might be discouraged to use the process 26.
Amongst the rules, which contain the most complete regulations on confidentiality, the following may be highlighted:
The London Court of International Arbitration (LCIA) Rules in addition to providing for hearings to be in private (unless the parties agree otherwise), upon revising its rules in 1.998, the LCIA included as art. 30 the following provision:
"30.1 Unless the parties expressly agree in writing to the contrary, the parties undertake as a general principle to keep confidential all awards in their arbitration, together with all materials in the proceedings created for the purpose of the arbitration and all other documents produced by another party in the proceedings not otherwise in the public domain, ~ save and to the extent, that disclosure may he required of a party by legal duty, to protect or pursue a legal right or to enforce or challenge an award in hona fide legal proceedings before a State Court or other judicial authority.
30.2 The deliberations of the Arbitral Tribunal are likewise confidential to its members, save and to the extent that disclosure of an arbitrator's refusal to participate in the arbitration is required of the other members of the Arbitral Tribunal.
30.3 The LCIA Court does not publish any award or any part of an award without the prior written consent of all parties and the Arbitral Tribunal".The AAA International Arbitration Rules, as amended on 1 November, 2001, provide that hearings are private, awards may not be made public and that confidential information disclosed during the proceedings may not be divulged by the tribunal. Interestingly, this latter requirement is not imposed on the parties themselves. Art. 34 provides: "Confidentiality information disclosed during the proceedings by the parties or by witiiesses shall not be divulged by an arbitrator or by the administrator. Unless, otherwise agreed by the parties, or required by application law, the members of the tribunal and the administrator shall keep confidential all matters relating to the arbitration or the award". Arts. 5.5 and 14.2 of the Rules of Arbitration of the International Arbitral Centre of the Austrian Federal Economic Chamber provide similar protection to that set out in the AAA Rules, Arbitrators are bound to "observe secrecy in respect of all matters that come to their notice in the course of their duties", but no such duty is expressly imposed upon the parties. Hearings may not be held in public. The Stockholm Chamber of Commerce Arbitration Rules provide that the SCC Institute and the Tribunal but not expressly the parties -should keep the arbitration confidential (arts. 9 and 20(3)). Art. 43(1) German Institution of Arbitration Rules provides: The parties, the arbitrators and the persons at the DIS Secretariat involved in the administration of the arbitral proceedings shall maintain confidentiality to all persons regarding the conduct of arbitral proceedings and, in particular, regarding the parties involved, the witnesses, the experts and other evidentiary materials. Persons acting on behalf of any person involved in the arbitral proceeding shall be obligated to maintain confidentiality.
The China International Economic and Trade Arbitration Commission ("CIETAC") Arbitration Rules expressly stipulate that the parties, witnesses, tribunal and secretariat "shall not disclose to outsiders the substantive of all procedural matters of the case."
The Rules of Commercial Conciliation and Arbitration of the Dubai Chamber of Commerce and Industry provide (art. 7): "All information provided by the parties requesting ... arbitration shall be considered confidential, and a person who becomes aware of such information due to his position shall not divulge its contents except with the consent of the parties or pursuant to an order of a competent judicial authority".
Up to here we have analysed confidentiality as a right and duty for arbitrators generally not to disclose the information that they have received in the course or related to the arbitration proceedings. A separate issue is the legal privilege to withhold certain testimonial or documentary evidence from an arbitration proceeding. There is no universal approach to the question and evidence rules vary substantially from jurisdiction to jurisdiction. Therefore, the arbitration tribunal has the ultimate power to determine procedural rules. Another is the communication between lawyers with the purpose to attempt to compromise a dispute between the parties (what in common law tradition is known as "without prejudice"). Again the attitude of the different jurisdictions is different, particularly between civil law and common law traditions. Therefore, the arbitration tribunal will have to decide whether to admit or refuse such evidence balancing in each case the need for the information against the privilege claimed and other circumstances of the case 27.
The time consuming process, which resorting to ordinary justice involves is one of the main reasons why parlies decide to go to arbitration. By using arbitration, the parties wish to obtain a fair but quick and economical solution.
Asides from being competent, the arbitrator must also have sufficient time and use the necessary diligence in order to sufficiently impulse the arbitration procedure.
A prospective arbitrator should accept an appointment only if he is able to give the arbitration the time and attention which the parties are reasonable entitled to expect (art. 2.3 1BA, Rules of Ethics) and shall do his best to conduct the arbitration in such a manner that costs do not rise to an unreasonable proportion of interest at stake art. 2.5 y 6, ClARB, Guidelines of Good Practice, art. 9 of the Rules of Arbitration of the International Court of Arbitration; art. 10.2 Geneva Arbitration Rules; art. 13 Milan Code of Ethics, etc. With regard to lawyers, art. 3.1.2 of the CCBE Code provides that "A lawyer shall not accept instructions unless he can discharge those instructions promptly having regard to the pressure of other work".
25 Kevin Gibson, "Confidentiality in mediation. A moral reassessment", J. Dispute Resolution. 1992 back
26 Ramon Mullerat, "Lawyers: between maintaining trust, keeping gates and blowing whistles", speech at the International Symposium on Gatekeeper Regulation of Practising Attorneys, Tokyo, 2003. back
27 Norah Gallagher, "Legal privilege in international arbitration", International Arbitration Law Review. 2003, Issue 2, p. 45. back
The speed of the dispute settlement is another benefit that the parties look for an arbitration. This benefit is particularly significant in business activities because timely resolution of a dispute also secures prompt continuation of business operations without freezing assets unnecessarily.
All efforts must be taken by the arbitrators to prevent delaying tactics, harassment of the parties, or any other disruption of the arbitration process. When the parties set forth the arbitrator's authority in their agreement, the arbitrator should neither exceed nor fall short of the mandated authority. The arbitrator is required to exercise authority completely and to comply with all provisions of the agreement.
The IBA Rules of Ethics (art. 1) state as a fundamental rule that the arbitrators shall proceed diligently and efficiently to provide the parties with a just and effective resolution of their disputes art. 1 professional standard of the CIARB, Guidelines of Good Practice for Arbitrators; Canon I, G, AAA/ABA Canon: art. 23 a WIPO Arbitration Rules; 17 a London Maritime Arbitrators' Association; art. 7, German institution of Arbitration, Guide to the Conduct of Arbitration Proceedings.
The arbitration must ensure the just, expeditious, economical and final determination of the dispute (art. 5.1 CIARB. Arbitration Rules). An arbitrator should perform duties diligently, conduct a proceeding as effectively and economically as possible, and conduct a case as efficiently and promptly as the circumstances reasonably permit (Canon 1, B National Arbitration Forum Code of Conduct).
In order for commercial arbitration to be effective, there must be broad public confidence in the integrity and fairness of the process. Therefore, an arbitrator has a responsibility not only to the parties but also to the process of arbitration itself, and must observe high standards of conduct so that the integrity and fairness of the process will be preserved. Accordingly, an arbitrator should recognise a responsibility to the public, to the parties whose rights will be decided, and to all other participants in the proceeding.
After accepting appointment and while serving as an arbitrator, a person should avoid entering into financial, business, professional, family or social relationships, or acquiring any financial or personal interest, which is likely to affect impartiality or which might reasonably create the appearance of partiality or bias (Canon I, D, AAA/ABA Code).
No arbitrator should accept any gift or substantial hospitality, directly or indirectly, from any party to the arbitration. Sole arbitrator and presiding arbitrators should be particularly meticulous in avoiding significant social or professional contacts with any party to the arbitration other than in the presence of the other parties.
The arbitrator should carefully and deliberately decide all issues involved in the dispute by relying on his independent judgement and without consideration of any outside pressures. The arbitrator should not delegate his responsibility to decide the case to another person (Canon V, AAA/ABA Code).
During the proceedings, an arbitrator should exhibit and require all participants to exhibit equality, fairness, diligence, promptness, patience and courtesy toward all parties lawyers, witnesses, and other arbitrators. (ICC Arbitration Rules; art. 24.1 ABA, Canon IV, AAA/ ABA Code, etc.).
An arbitrator should not discuss the merits of the case or receive evidence or legal argument from a party in the absence of other party and his fellow arbitrators. Throughout the arbitral proceedings, an arbitrator should avoid any unilateral communications regarding the case with any party, or its representatives. If such communication should occur, the arbitrator should inform the other party or parties and arbitrators of its substance.
An arbitrator communicating with a party in writing should address a copy of the communication to the other party, the other arbitrators, and the secretariat of the court. An arbitrator may communicate with a party regarding the fixing of procedural dates or other practical and material aspects of the arbitration, but the contents of such communication should immediately be made known to the other party and arbitrators. An arbitral tribunal should generally allow the parties to modify or adopt procedural rules, including ones that may reached in the course of proceedings. For instance, if both parties agree, each party may communicate ex parte with the arbitrator it has named, particularly where the parties agree that such communication may favour a settlement.
Canon Three of the National Forum Code of Conduct for Arbitrators lists the circumstances where an arbitrator can discuss the case with one party in the absence of another party: a) matters as setting the time and place of proceedings or making other arrangements for the conduct of proceedings; b) if a party fails to be presented at a proceeding after having given due notice; c) if all parties consent; d) when other provided in applicable rules.
Advertising and client solicitation are illustrative of provisions of professional codes that are concerned with business ethics and limiting competition 28.
In the US until recently, the Code of Professional Responsibility for Arbitrators of Labor Management Disputes prohibited advertising by labor arbitrators. In fact, Opinion Letters by the NAA elaborated on this prohibition, examining and opining on various actions that might be considered advertising and therefore were violations of the Code. After much debate, however, the National Academy of Arbitrators in 2001 voted to delete this prohibition, replacing it with a prohibition against "false or misleading advertising". Code Section 1(C) (3). This was preceded in June 2000 by a partial lifting of the ban through an amendment that permitted arbitrators to maintain websites.
With regard to solicitatioa, the NAA left intact Code Section 1(C)(4), which provides as follows: (4) "An arbitrator must not solicit arbitration assignments: a) solicitation, as prohibited by this section, includes the making of requests for arbitration work through personal contacts with individuals parties, orally or in writing..." 29.
An arbitrator should avoid marketing that is misleading or that comprises impartiality. An arbitrator should ensure that any advertising or other marketing to the public conducted on the arbitrator's behalf is truthful. An arbitrator may discuss issues relating to compensation with the parties but should not engage in such discussions if they create an appearance of coercion or other impropriety and should not engage in ex parts communications regarding compensation.
Some US state bars require lawyers to file advertisements and writings which are not exempt with the state bar advertising review committees 30.
A substantial number of arbitrations end with a settlement. This tend to happen at a fairly advanced stage of the procedure and mainly as the result of the parties becoming more realistic and more aware of the costs as the procedure unfolds 31. We must not forget that the objective of the arbitration is to resolve a dispute 32 and that the will of the parties is paramount.
The possibility for an arbitration assisting the parties to reach a settlement is well established in some jurisdictions but not in others. It is not improper for an arbitrator to suggest to the parties that they discuss the possibility of settlement of the case. However, an arbitrator should not be present or otherwise participate in the settlement unless requested to do so by all parties. However, the arbitrator should not exert pressure on any party to settle (Canon IV, AAA/ABA Code). Nothing prevents a person from acting as a mediator or conciliator of a dispute in which he has been appointed as arbitrator, if requested to do so by all parties or where authorized or requested to do so by applicable laws or rules.
In the event that all parties agree upon a settlement of issues in the dispute and request an arbitrator to embody that agreement in an award, an arbitrator may do so, but is not required to do so unless satisfied with the propriety of the terms of the settlement (Canon VI, AAA/ABA Code).
However, the arbitrator shall resign if, as a consequence of his involvement in the settlement process, the arbitrator develops doubts as to his ability to remain independent or impartial in the justice cause of the arbitration proceedings (Part J, (4) (D) draft of IBA Guidelines on disclosure in international commercial arbitration).
28 Stephen K. Huher, "Competition at the bar and the proposed code of professional standards", 57 N.C. Law Review. 1979. p. 559. back
29 Jacqueline Druker, op. cit. back
30 Richard Hile, "Rules regulating advertisement and griten (sic) solicitation communications: An overview", 58 l?.xas_BarJoura_al 1995. back
31 Goklberg, Sander, Rogers, Dispute.Rcsolution, 1991, p. 549. back
32 This is what US Justice Burger called "healing human conflict". back
Lawyers are often designated as arbitrators, due to their expertise in law and in disputes and their strict ethical duties.
II. Independence and impartiality
All codes of legal ethics impose lawyers the paramount obligations of independence. For instance, the CCBE Code of Conduct 33 provides independence, confidence and integrity, the avoidance of conflict of interests, prohibition of contingency fees, etc. as general principles for lawyers. A lawyer appointed as arbitrator needs to be also truly independent and impartial. This duty offers special characteristics for lawyers.
In the US Advisory Ethics Opinion 2001-06, it was concluded that: "An attorney may not serve as an arbiter on an arbitration panel when one of the parties in arbitration is an ongoing client of the attorney, even though the attorney is not representing the client with respect to the matter in arbitration", This conclusion was based, inter alia, on the view that arbitrators are "required to be impartial in the sense that they do not have any private personal stake in the matter or potential pecuniary advantage that would influence their decision". Based upon Vermont Rule of Professional Conduct 8.4 (d), which prohibits a lawyer from engaging in conduct prejudicial to the administration of justice, Opinion 200 1 -06 found that: "Any outside financial benefit to the arbiter which goes beyond the payment agreed to for all arbiters in the proceeding would fundamentally undermine the integrity of the arbitration process and would violate Rule 8.4 (d). For example, it would clearly not be proper for a party to offer an arbiter a contingency fee for the right outcome in arbitration". Because "the arbiter has a duty of loyalty to the client and a pecuniary interest tied to maintaining a successful relationship with the client", it was decided that a lawyer cannot serve as arbitrator on an arbitration panel in a proceeding in which one of the lawyer's client is a party.
The Committee on Legal Ethics and Professional Responsibility of the Pennsylvania Bar Association concluded in Opinion No. 96-180 that, if a lawyer has an attorney-;licnt relationship with an insurer involved in an uninsured/underinsured motorist irbitration, the lawyer may not serve as an arbitrator without disclosure and consent. Fhe ABA Code of Ethics for Arbitrators in Commercial Dispute similarly preserves 'the freedom of parties to agree on whomever they choose as an arbitrator," and states hat "when parties, with knowledge of a person's interests and relationships, nevertheless desire that individual to serve as an arbitrator, that person may properly serve" 34.
Another peculiar problem for lawyers in law firms is when a partner of the lawyer-arbitrator represents or formerly represented a company in the same corporate group as one of the parties to the dispute. The arbitrator concerned is confident that he will be mpartial and that his partners will exercise no influence over the outcome of the case. But there is potentially a direct or indirect financial benefit to the arbitrator if the other party, which is connected to a client of the firm in which the arbitrator works, wins the case, thereby compromising the arbitrator's ability to be truly impartial 35.
III. Lawyers representing parties in arbitration
Regarding the ethical obligations for lawyers representing parties in arbitration proceedings, art. 4.5 of the CCBE Code provides that: "The rules governing a lawyer's relations with the courts apply also to his relation with arbitrators..."
IV. Lawyers' obligation to advise parties
In some jurisdictions (f.e. Florida, which has a comprehensive system of state-wide and state controlled court mediators) lawyers are responsible to advise their clients of the availability of mediation and its potential benefits. Failure to do so could result in charges of a violation of professional responsibility or malpractice or both.
The ABA Model Rules (1.2.(a) state that:
"[a] lawyer shall abide by a client's decisions concerning the objectives of representation ... and shall consult with the client as to the means by which they are to be pursued ".
The Virginia adopted version of the Model Rules, provides:
"... a client has also the right to consult with the lawyer about the means to be used in pursuing these objectives. In that context, a lawyer shall advise the client about the advantages, disadvantages, and availability of dispute resolution processes that might be appropriate in pursuing those objectives".
In similar terms, Rule 2.1 of the Colorado Rules of Professional Conduct, a Michigan Bar Opinion (RI-262) 36.
The breach of ethical rules may give rise to liability if it is proved that the breach has caused damages to the parties or the arbitrational institution. Art. 78.2 of the Spanish General Lawyers' Statute (Estatuto General de la Abogacia Espanola) de 22 June 2001 provides that lawyers when exercising the profession are liable under civil law when trough iraud or negligence they cause damage to the interests, which have been confided to them by the parties.
At the same time, I think that a breach may result in:
33 Council of the Bars and Law Societies of the European Union (CCBE), Code of conduct for lawyers in the EU adopted in 1988 and amended in 1998 and 2002. back
34 Advisory Ethics Opinion 2003-01 back
35 Karyl Nairn, "Independence in arbitration involves many shades of gray", The European Lawyer June 2003. back
36Robert R Cochran, Jr. "Professional rules and ADR: Control of ADR under
the ABA Ethics 2000 Commission proposal and other professional responsibility standards", Fordham University Law Journal, April 2001, No. 4. back