By Patrick Libam Moutngui LLB, NICArb Official.
Having noticed that bringing actions to court were not necessarily the most suitable way to settle disputes – as it resulted to various disadvantages such as high procedural costs, slow proceedings, public hearings and lack of experts in commercial related issues – alternative methods of dispute resolution (ADR) arose. The most popular ADR being conciliation, mediation and arbitration. The practice of the latter is well-known in the commercial sector, and can simply be referred to as the determination of a dispute by one or more third parties – the arbitrators – instead of a judge, as it is in a court of law. Here, arbitrators are appointed directly by the parties in dispute, and are bound to apply the law related to the dispute. However, they have freedom to follow any procedure they feel proper for the resolution of the dispute. The powers of arbitrators are therefore similar to that of judges.
From the aforesaid, it may be clear that the effectiveness of arbitration lies in its arbitrators, as the whole proceedings are conducted and the awards given by them. It is therefore of utmost importance that certain standards are met by them. This is all the more important today, since arbitrators are increasingly becoming professionally linked to each other, and that may call into question their independence and impartiality. The latter are principles of due process of law or natural justice that every adjudicator has to respect when rendering decisions, under pain of nullity.
This article is therefore interesting, as its purpose is to find out whether the binding requirements for adjudicators to observe the above principles of independence and impartiality, should be applied the same way to arbitrators? In order to achieve this goal, the jurisprudence of the concept of independence and impartiality of arbitrators will be examined, from the English law (case law) perspective. Then a critical analysis will be carried on the different views and measures relating to the application of the principles of independence and impartiality between judges and arbitrators. This will lead to a personal opinion about the question.
It should be noticed first of all that there is a fundamental international arbitration principle requiring arbitrators to be and remain independent and impartial during arbitral proceedings. In fact, even though here they are appointed by the parties in dispute, justice must not only be done, but must also be seen to be done. In addition, the fact that arbitrators act as adjudicators of the case binds them to fulfill the above two requirements. What do independence and impartiality mean in arbitration?
Both concepts are sometimes used interchangeably in arbitration rules and statutes, as there is no much difference between them. See for example the United Nations Commission on International Trade Law (UNCITRAL) arbitration rules under which any potential arbitrator is required to reveal any circumstances likely to raise doubts as to their ‘impartiality or independence’, prior to their appointment as arbitrator.
However, even though both principles seem to overlap, there exist some major differences. Independence of arbitrator refers to any professional or personal relationship existing between the arbitrator and one of the parties to the arbitration proceedings. The degree of such a relationship is also a determining factor as to whether the arbitrator is dependent or independent. For example, the level of dependence will be different between an arbitrator having one of the parties as commercial partner, and another arbitrator whose husband is having business relationship with that party. That is the reason why the independence assessment of arbitrators is commonly said to be objective.
On the contrary, impartiality is seen as a subjective concept, as it deals with the state of mind of the adjudicator. Sometimes associated with bias, the determining factor here is to know whether there is a reasonable ground to believe that the arbitrator will give a favorable decision to one of the parties for reasons unrelated to that of the merits of the case.
Knowing the meaning of both independence and impartiality in the arbitration sphere, it seems relevant to explain how these concepts came from their general application in court, to their application in arbitration proceedings under the UK case law. It should be noted that it is a long-established principle of law, that every person in charge of judicial office must be independent towards the parties in dispute before them. This principle was established in order to ensure that judgments were impartial, as well as to comply with the constitutional doctrine of separation of powers. However, one major aim of both independence and impartiality standards was the desire to comply with the concepts of due process of law. In fact, the requirement for every person to be entitled to a fair and impartial hearing to defend themselves are principles of due process of law, and therefore superior to national laws. Early on, Lord Hewart CJ asserted that the purpose of justice was not only to be rendered, but that the perception of it as having been rendered was of equal importance.
Nevertheless, the first test used to determine the existence of partiality or dependence of a judge was done in the case of R v Gough. In this case, the defendant was charged with conspiracy with his brother to commit burglaries. When convicted, he appealed on the ground that the fact that a member of the jury was his brother’s neighbor, implied a risk of bias. Lord Goff and Lord Woolf quashed the appeal, setting up a two-step test for assessing bias – the first being that the court has to establish all the relevant circumstances of the case, and then, a checking as to whether there is a real danger of bias must be conducted.
Another case is the Pinochet case, where the House of Lords disqualified a judge – Lord Hoffman – from this case where the issue was to determine whether to extradite to Spain the former president of Chile. The reason was that Lord Hoffman was a director of the charitable arm of the Amnesty International organization, intervening in the proceedings and acting against Mr. Pinochet. The House of Lords found it to be an apparent bias.
The test set out in R v Gough to determine apparent bias was later on extended to arbitrators, through the case of Laker Airways Inc v FLS Aerospace Limited. Here, both the arbitrator nominated by the respondent and its barrister were working in the same chambers. The English commercial court held that this was insufficient to satisfy the test of bias. The court went further stating that even though barristers in UK may work from the same chambers, they are mere partners working independently from one another. This is a well-known practice in UK that any ‘reasonable Englishman’ would know. The court also referred to the decision of the Paris Court of Appeal in KFTCIC v Icori Estero Spa, where a challenge to an award made in France and based on the ground that both the president of the tribunal and the counsel of one of the parties were from the same chambers, was set aside.
That position of the court in the above two cases is peculiar. In fact, the court seems to be less interested in the principles of due process, than the protection of common practice of English law. In addition, the ‘reasonable man’ concept appears to add more subjectivity to an already subjective test to determine apparent bias. In Locabail (UK) Ltd v Bayfield Properties Ltd, a solicitor sitting as arbitrator was held not obliged to disqualify himself even though their firm might lose the ability to represent one of the parties to the dispute. The court held however the disqualification possible if a reasonable third party might think that the solicitor would be biased. It was added that the reasonable man does not need any special knowledge.
The case of Porter v Magill upheld the decision in Locabail’s case and established the proper test for determining apparent biased that is applied today. Here, Dame Porter – a conservative leader of Westminster City Council – sold houses in marginal wards, with the aim of raising the proportion of conservative voters in those wards. After enquiry, an auditor concluded that Porter had sold at a discount that cost the City more than £30 million, and for that reason she had to reimburse that sum to the City. She appealed on the ground of apparent bias, as the auditor had given a press conference showing apparent bias. Lord Hope held that the test to determine apparent bias has to be whether all the circumstances of the case would induce ‘the fair minded and informed observer’ to conclude that ‘there was a real possibility that the tribunal was biased’.
From the aforesaid, one can say that the new test to determine independence and impartiality of arbitrator – fair-minded and informed observer – seems to be better than the reasonable man test, as it is more objective. As such, it could be said that arbitrators are complying and are seen to be complying with the principles of independence and impartiality. Knowing the evolution of both principles under the English case law, an analysis of the different views and measures relating to the application of these concepts by arbitrators will be the next step.
- Being a human right to be entitled to an independent and impartial judgment, every arbitration rules and statutes must provide for impartiality and/or independence clause. For instance, The European Convention on Human Rights (ECHR), and more generally the Universal Declaration of Human Rights (UHDR) clearly stipulate that everyone must enjoy the right of fair civil or criminal trial, by an ‘independent and impartial tribunal’.
Nevertheless, there is a debate as to whether the standards of assessing the enforcement of those principles by judges should be similar to standards applied to arbitrators? In fact, while it is agreed by some authors that the requirements of independence and impartiality of arbitrators must be less mandatory than that of judges, others are more critical and argue that those standards must be even more strictly applied on arbitrators.
Certain factors make it difficult for both independence and impartiality standards to be applied to arbitrators as it is for judges. Judge Posner stated in its judgment in the case of Merit Insurance Co v Leatherby Insurance Co that before answering the above question, the main reason of choosing arbitration by the parties must be found. He added that the ‘voluntary nature of commercial arbitration is an important safeguard for the parties that are missing in the case of the courts. Unlike the court, the parties here freely decide who they want for the arbitration proceedings, and generally choose people having special knowledge of the subject matter. For this reason, Judge Posner think that, expertise must be prized over independence and impartiality of arbitrators, and not the reverse as it is the case for judges. The latter view is relevant, especially when it is known that arbitrators are sometimes also acting in the marketplace – that is even the reason why they are experts – whereas judges are not.
The aforementioned opinion is not welcomed by everyone. In fact, the close relationship between arbitrators and the business market in which they operate, does not necessarily waive their duty to respect the fundamental due process of law principles. It is sometimes argued that, arbitrators being more vulnerable to external personal or financial pressure than judges, must be subject to equal or even more strict standards. In AT&T Corp v Saudi Cable Co, Judge Potter asserted that both arbitrators and judges are under the same duty to act without bias. In this case, AT&T and Nortel were on a bid for a telephone contract in Saudi Arabia. A dispute about the pre-bid process led the parties to arbitration proceedings and AT&T appealed in court, stating that the arbitrator was a non-executive director of Nortel. However, despite the position of the judge, the appeal was dismissed, since there was no substance to the allegations of misconduct or bias of the arbitrator in this case.
In another dispute in France between the late businessman Bernard Tapie and the Credit Lyonnais bank, the Court of Cassation went upheld the duty of arbitrators to be independent and impartial. In this case, the three appointed arbitrators were suspected of having awarded a lump sum of money to Mr. Tapie on the resale of Adidas with apparent bias. The court ordered the indictment of one of them, and placed the two others under the status of assisted witness in the investigation on which the arbitration had favored Mr. Tapie. This case shows that the failure of an arbitrator to observe the principles of due process of law, may lead them to face judicial proceedings. The above cases reveal therefore the two extreme views when the question to know if those principles should be applied similarly between judges and arbitrators.
The position of the law in England is favorable to an equal standard and same level of assessing the bias in litigation and arbitration. In fact, any judge or arbitrator hearing a case in which they have professional or personal interest would be excluded from hearing that case.
Thus, arbitrators are under the general duty in both domestic and international arbitration to act without bias. In addition, the test to determine the partiality here is that of knowing whether all the relevant circumstances of the case would lead a ‘fair minded and informed observer’ to conclude that there was a danger of bias. This means that in accordance with English law, the court allows to challenge an arbitrator on the ground of justifiable doubts as to their independence or impartiality.
Nevertheless, the right of fair trial is not protected only by the court. Several arbitral institutions and statutes have, over the years, passed rules and regulations on this issue. In UK for example, the English Arbitration Act requires the arbitral tribunal to act in a fair and impartial way between the parties. However, the Act does not expressly mention the requirement of independence of arbitrators. It is also silent as to the arbitrator’s duty to disclose their interests. The UNICITRAL Model Law is another legislation imposing duty of independence and impartiality on arbitrators, as that of judges. In fact, like judges, they may be challenged in case of non-disclosure of all information that could lead to justifiable doubts as to their fairness. Other international institutions contain arbitral provisions similar to the UNICTRAL Model Law.
However, the International Bar Association (IBA) appears to be of great importance, as it drew up general international standards to apply for the appointment and challenge of arbitrators. In fact, IBA guidelines on conflict of interest classified the circumstantial situations into three categories. Those situations might fall under the red, orange or green category, depending on whether or not they give rise to justifiable doubts as to the arbitrator’s independence and impartiality.
In conclusion, it is universally agreed by national and international courts and arbitration institutes, that arbitrators must comply with the principles of due process of law, and especially those of independence and impartiality. However, diverging opinions are proffered as to whether those standards must be the same for both arbitrators and judges. This article gave the meaning of independence and impartiality in the context of arbitration, and raised the relationship between both standards. Then, the English jurisprudence on this field of law was examined, showing therefore how both principles were extended from their application on judges to their application on arbitrators as well. The following paragraphs showed the contrasting views between those requiring a less or more strict application of both concepts on arbitrators, and those calling for an equal standard with judges.
The latter opinion seems to be more suitable, especially when it is known that arbitrators have a similar role with that of judges – hearing the parties, giving a final and binding decision, and enjoying immunity from prosecution related to their decision.
However, it should not be forgotten that arbitration is an alternative dispute resolution method; as such, there are instances where those requirements may not be applied scrupulously. In the case of the independence principle for example, even though an arbitrator may be set aside if found to have a professional or personal relationship with one of the parties in dispute, the freewill of the parties must prevail. In choosing arbitration instead of litigation in court, the parties wish to be able to decide who will settle their dispute. Thus, independence of arbitrator should not be relevant where both parties are aware of the situation and expressly give their consent. This is not the case with judges who must act with complete independence, as noticed in the previous paragraphs.
In relation to the impartiality concept, the equal standard for both judges and arbitrators appears to be a great suggestion, as the lack of impartiality of any of them may influence the judgment and favor one of the parties in dispute. However and as mentioned earlier, impartiality of arbitrators – and even of judges – is hard to prove, and the test applied here to determine apparent bias is a subjective one based on the ‘fair minded and informed observer’ opinion. Thanks to the IBA guidelines, which categorized instances for the determination of bias and challenge of arbitrators in three colored lists. This seems to render the test to determine partiality of arbitrators less subjective.
As a final remark, arbitration is a major alternative method of dispute resolution. It has become increasingly helpful in the resolution of conflicts, especially in the commercial field. As such, its sustainability is of particular interest. That sustainability highly depends on the reliance parties have on their arbitrators, as the latter will act as judges and their awards will have a final and binding effect on those parties. Principles of due process of law must therefore be observed by arbitrators, and failure to comply with them must open the door to challenge or invalidity of the awards.
BIBLIOGRAPHY
Cases
- AT&T Corp v Saudi Cable Co [2000] 2 Lloyd’s Rep 127
- KFTCIC (Kuwait Foreign Trading Contract & Investment Company) v Icori Estero Spa [1991]
- Laker Airways Inc v FLS Aerospace Limited and Another [1999] All ER 410
- Locabail (UK) Ltd v Bayfield Properties Ltd [2000] QB 451
- Merit Insurance Co v Leatherby Insurance Co [1983] 714 F 2d
- Porter v Magill [2001] UKHL 67, [2002] 2 AC 357
- R v Bow Street Metropolitan Stipendiary Magistrate & Others, ex parte Pinochet Ugarte (No 2) [1999]
- R v Gough (Robert) [1993] 2 All ER 724 HL
- R v Sussex Justices, Ex parte McCarthy [1924] 1 KB 256, [1923] All ER Rep 233
Legislations, Statutes and Conventions
- English Arbitration Act 1996
- European Convention on Human Rights (ECHR) 1950
- International Bar Association’s (IBA) Guidelines on Conflicts of Interest in International Arbitration 2004
- United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules (as revised in 2010)
- Universal Declaration of Human Rights (UDHR) 1948
Books
- Blackaby N, Partsides C, Redfern A and Hunter M, Redfern and Hunter on International Arbitration (5th edn, OUP 2009)
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Articles and Journal Articles
- Chung R K L, ‘The rules of natural justice in arbitration’ [2011] Arbitration 167
- Nairn K, ‘Independence in arbitration involves many shades of grey’ [2003] Euro Law 28
- Shore L, ‘Disclosure and Impartiality: An Arbitrator’s Responsibility vis-à-vis Legal Standards’ [2002] Dispute Resolution Journal ,Vol 57 Issue 1
- Singhal S, ‘Independence and impartiality of arbitrators’ [2008] Int. A.L.R 124
- Trakman L, ‘The impartiality and independence of arbitrators reconsidered’[2007] Int.A.L.R 124
Website
- Le Monde.fr, ‘Affaire Tapie: deux juges arbitres placés sous statut de témoin assisté ‘ ( LeMonde.fr, 10 April 2014) < http://www.lemonde.fr/societe/article/2014/04/10/affaire-tapie-credit-lyonnais-deux-juges-arbitres-places-sous-statut-de-temoin-assiste_4399520_3224.html > accessed 02 Mai 2014
Dictionary
- Law J and Martin E A, Oxford Dictionary of Law (7th edn, OUP 2013)
