It is interesting to see what can happen sometimes during an oral hearing for an arbitral proceeding. I have noted from my esteemed colleagues that they have witnessed a very interesting phenomenon – watch the arbitrators – can you tell who appointed whom? Should you be able to?

Having worked for most of my career in The Netherlands before returning to my home country, the USA, I was a little surprised by what I noted and what I heard. Yes, I know about party appointed arbitrators. No, I did not realize that they could be so “non-neutral” as to be able to actively ensure the side of the party appointing is adequately considered and understood. Is that truly impartial and fair? Yes, this debate can be heard elsewhere and I have located a couple quality articles on the topic. Yet, my shock remains. I understand that in theory, if both parties have someone at least sympathetic to their culture, side, etc. then that may provide a balanced and fair panel. The party-appointed party may ensure that culture mistakes in communication are understood or approaches appreciated.

The question I ask myself should this be allowed? What concerns me is when you can actually tell who appointed the arbitrator by the questions they ask. Is that not taking it too far? Is the actual practice failing to reflect the fairness of the theory?

I have not witnessed this one-sided practice – at least not to such an obvious extent. Everyone knows that with a three arbitrator panel, the third arbitrator typically comes from a neutral country. This is completely understandable as to ensure no bias towards a certain culture, style or system exist. However, why would anyone want any member of the panel almost advocating for the other party – even if allegedly they have someone doing that for their own side? How can the parties ensure that the arbitrator they appointed will advocate to the same degree as the other side?

The concept of party appointed arbitrator – i.e. a non-neutral arbitrator so-to-speak is not universal and certainly not everyone would accept such a notion. Moreover, not every arbitrator agrees with or supports this notion. Therefore, they may either avoid any quasi-advocating activity or simply do it to a lesser degree because their personal views on it differ from the other party-appointed arbitrator. Then is the process truly fair? Some promote the practice of selecting an arbitrator who perceives your side favorably (or at least you believe it does) as one of the perks of international arbitration – the ability to shop around for the arbitrator. True, but shopping around for the most qualified arbitrator would remain a perk even if such an arbitrator is not free to ensure that your side is fully heard (versus the other party’s side). All arbitrators should equally ensure they fairly hear the evidence and understand both sides. Advocating a parties’ side – isn’t that the attorneys’ job? What I would recommend to clients is: shop for the RIGHT attorney to advocate your case and the RIGHT arbitrator who will fairly ensure all parties are being heard. If you have the right attorney, your side will be adequately advocated.

If this practice of overtly asking questions, etc to the favor of the party who appointed you continues, however, there is no way to ensure an entirely fair process for the reasons already set out above. It requires all panelists to openly consider every angle of both parties’ side to ensure a fair hearing. Perhaps simply looking to a neutral sole arbitrator is something to consider.


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2 comments

  1. Lisa, at core is an issue that has come up from time to time in OGEMID discussions (we allowed to mention other arbitration discussion fora here?), which is whether an arbitrator-cum-advocate actually disserves the party who appointed her/him by sacrificing their independence and credibility with the rest of the tribunal? If one side appoints someone who is obviously conflicted and/or appears as their second advocate, isn’t the other party actually advantaged by appointing someone whose independence and standing will not appear to be compromised?
    Mike

  2. Lisa, I think it’s important that you distinguish between two things that you blend in the post, namely party-appointed arbitrators and non-neutral arbitrators. You can certainly have party-appointed arbitrators in a system that expects them to be neutral, and you can even have non-neutral arbitrators in a system in which arbitrators are not appointed by the parties (but they are seen as having a responsibility to one side or the other). You might want to argue that having party-appointed arbitrators leads to non-neutral arbitrators, that the latter are bad, and that therefore so is the former. But you can’t simply lump the two together.

    That said, I think it’s also important to distinguish between different jobs an arbitrator can be seen as doing. You criticise the notion that an arbitrator might be seen as having a responsibility to ensure that the case of the party that has appointed it is properly understood, but don’t clearly distinguish between an arbitrator who does this, and one who actually adopts the party’s position as his/her own. That is, it is quite possible for an arbitrator to ensure that his/her appointing party’s view is properly understood, while nonetheless thinking that the other side should win.

    It is really only the latter that is clearly problematic, though. Part of an arbitrator’s job, after all, is to understand the parties’ arguments and positions. It is unclear how it is bad that an arbitrator would ask questions designed to ensure this is done.

    There are, as you mention, certainly potential inequalities if one arbitrator pursues such a practice while the other doesn’t, but this is a matter of being clear about the arbitrator’s role, not a problem with partial arbitrators.

    Similarly, you argue that clarifying the party’s position is the lawyer’s job, not the arbitrator’s. Indeed, but the lawyer is not as intimate with how the tribunal is seeing the presentation as are the lawyers, so the lawyer may not realise that a particular point needs clarification, is being misunderstood, is not being addressed, or whatever

    You conclude with a reference to arbitrator’s asking questions to “favor” the party that appointed them, and I don’t think anyone would really disagree that this is unacceptable. However, there is a difference between “favoring” a party and ensuring that the party’s views are properly understood. Non-neutral arbitrators may be more likely to slip into “favoring” than neutral arbitrators, but neutral arbitrators are far more likely to misunderstand a party’s position or arguments than non-neutral ones. Each approach has its downfalls, and it’s certainly not as obvious as you suggest that it is the use of non-neutral arbitrators that is problematic, rather than, for example, an approach that attempts to reconstruct arbitration along the lines of a court hearing with an independent and neutral judge, and thereby wastes the ability arbitration provides to give the parties a genuinely insightful award, rather than just a neutral and abstracted one.

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