Ethical Rules for International Arbitrators - 12

Ramon Mullerat OBE

FIFTH. THE LAWYER AS AN ARBITRATOR

I. In general

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.

SIXTH. CONSEQUENCES OF BREACHING ETHICAL RULES

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:

• The possibility of the award being cancelled
• The removal or the arbitrator from the proceedings
• The arbitrator being disqualified from being an arbitrator in the future.
• Application of the sanctions as provided for by the applicable code of ethics, for example, removal or suspension of their membership to their professional association, etc.

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