This is a response to yesterday’s post by Duarte Gorjão Henriques, “Incorporating IBA Guidelines Into A ‘Code of Ethics’: A Step Too Far?”
My unambiguous answer to his title question is “right direction, not far enough!”. My response is from the perspective of an in-house counsel involved in negotiating dispute clauses in cross-border contracts.
Henriques, a practicing arbitration lawyer, does not share my enthusiasm.
The institution that is the subject of discussion is the ACL Arbitration Centre (of the Portuguese Chamber of Commerce and Industry) in Lisbon, where Henriques practices. He believes the organization may have acted rashly when it recently incorporated the IBA Guidelines on Conflicts of Interest into its Code of Ethics and arbitration rules, rendering it binding on all arbitrators in ACL proceedings.
While he does not question the value of the IBA Guidelines themselves, Henriques asserts that they are “shaped for large arbitration communities but not so much for small communities such as the Portuguese, where personal relationships are simply impossible to avoid.”
In other words, this argument goes, a provincial institution should be….well, provincial, and presumably leave cross-border disputes to others. As surprising as this may sound to those accustomed to law firms, institutions, and even cities jockeying for primacy in the competition for international arbitration, it is not inconsistent with the virtual absence of Portugal in disputes with parties from outside of the Portuguese-speaking world.
Fertile Ground for a Portuguese Arbitration Institution
As many international practitioners know, especially those active in the oil and gas industries, important commercial and legal ties crisscross the Portuguese-speaking world. One good example is Angola, a high-growth economy where a fair share of business, and perhaps an even greater percentage of legal work, is carried out in Portugal. This stems from a shared legal and political history and is reinforced today by other factors, including notoriously onerous visa procedures for entering the sub-Saharan country. And Brazil, as everyone knows, is a relative newcomer to the New York Convention on the Recognition and Enforcement of Arbitral Awards.
Despite the potential opportunity, however, I have rarely seen a Portuguese arbitration institution proposed for dispute resolution in contracts where at least one party is from a non-Portuguese speaking country. And it would be an even rarer case for one to be accepted.
This leaves an obvious gap in an important and economically expanding region. To put things in perspective, think of Asia without the role played by SIAC or the HKIAC, or Russia and CIS countries without the Stockholm Chamber.
Assessing the Quality of a Foreign Arbitration Institution
No party wants to risk being “home-towned” by a provincial institution set up to benefit the locals. As an in-house counsel responsible for dispute resolution in my company, I would never advise my internal clients to accept the rules of a foreign/national arbitration institution without reasonable assurance of its (1) ethics and (2) competency in cross-border disputes.
But how can we know these things about an institution if we have no first-hand experience with it?
The most logical place to start is an institution’s public website, if they have this, or simply to call them and ask for information. (Some institutions do not have websites and others do not take or return calls, and in my mind this, by itself, is sufficient reason to reject them.)
The questions are fairly basic. Does the institution publish its rules in multiple languages, including in English? Does it appear to have a level of governance, ethical standards, and management that will provide comfort to a foreign party? Do they have transparent procedures for appointing arbitrators? Is their roster of arbitrators populated with an ample number of competent foreign arbitrators as opposed to just local lawyers? Do they offer only arbitration or also mediation?
The ACL Arbitration Centre’s website has a lot of material. Unfortunately for me, the site is in Portuguese, which I do not speak, although I was able to navigate my way to an English version of the institution’s arbitration rules. Further, the names on the institution’s roster of arbitrators did appear – at least to me – to be locally grounded.
As a foreign party unfamiliar with the Lisbon arbitration community, I cannot assess the accuracy of Henriques’ assertion of the additional problem that they all also have unavoidable personal relationships. It may not matter, though, since this is a common and safe assumption for a party considering a foreign institution’s roster of mainly local practitioners.
From an Unlikely Place, A Bold Step in the Right Direction
There is nothing wrong with being a close-knit community of local practitioners content to handle domestic arbitrations. But with article 12 of its arbitration rules, which incorporates the IBA Guidelines on Conflicts of Interest, the institution is laying the groundwork for broader ambitions.
To a foreign party who knows nothing else about the ACL, the message is clear: integrity is not some unknown local code of ethics, but well-known international standards that are taken so seriously that any arbitrator who fails to adhere to them will be removed.
It is difficult to imagine a stronger statement of its integrity that an institution could put into its rules.
Right Direction, More Steps Needed
The ACL or any other Portugal-based arbitration organization will not become attractive to parties outside of the Portuguese-speaking world with this step alone. Much more is needed to convince us that the institution has the ability to handle our disputes efficiently and competently, and that it can appoint arbitrators from outside of Portugal.
But the incorporation of the IBA Guidelines is a bold and unquestionably sensible move in the right direction. It will be interesting to see whether, and how long, it takes other national institutions to follow.
In the meantime, score one for the Portuguese.
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You are absolutely right , Michael, many doubts stay unanswered if one wants to choose Portugal as a place for arbitration! But Portugal has such a strong connection with Angola and Brasil ( not to mention Macau) that is almost a sin not to take advantage of speaking the same language , promoting university cooperation in teaching and being in a country that can guarantee impartiality as is not directly involved in the dispute! Do you believe an university center of arbitration with several good investigators and a wider rank of arbitrators would more more easily earn the trust of the investors?
A step nearer to a regulated process. Not very consonant with party autonomy, is it?
Firstly, A_Layman, I do not think that this is primarily an issue of party autonomy; much less that it is
another “nail in the coffin” (see comment on my post in Chartered Institute of Arbitrators Linkedin Group). Quite the opposite: I think that party autonomy in arbitration is risking being killed if we “stand still and just watch unspeakable atrocities being committed”. I will dispense with any illustration.
Secondly and as Michael’s rebuttal post, which I have to thank.
Despite the fact that Portugal undoubtedly has a handful of excellent legal practitioners, with a solid education, high level training and indisputable reputation, integrity and ability to conduct from the most simple to the most complex arbitrations, the truth is that a statement of this kind – the “integration” of the IBA Guidelines – will be regarded as some sort of warranty that the IBA guidelines
shall be applied and construed in all arbitrations in a quasi-mathematical binding fashion. At least, I belive that foreign practitioners will regard this statement as truly binding. If I understand the words correctly, Michael has the same thought.
In the meantime, the Chairman of the Board of ACL Arbitration Centre, José-Miguel Judice, has denied this way of thinking, stating that ‘nothing in the Code or in the interpretation of it by de Centre, allows anybody to think that the IBA Guidelines are considered as law and even less as a Bible to be accepted without tne need of
interpretation.’ (Chartered Institute of Arbitrators Linkedin
Group – post of 1st Feb 2014)
Thirdly, Michael showed us how the international community is viewing the Portuguese community.
Therefore, I may assume that (1) the bar has been raised for us, and (2) that our bar will stand higher than for all of the other jurisdictions.
So – giving all that – the question remains as to whether or not we are in a position to prove (which is something different from asserting or stating) that we have all of those above cited predicates.
I entertain no doubt whatsoever that the Portuguese arbitral community will show and prove its integrity, competence, diligence, knowledge and ability to stand side by side with any other advanced jurisdiction in the world. No more and no less. However, what I suggest is that the actions should precede the statements. That is the key issue of my post.
Michael, Thank you so much for your comment. The current chairman of the Center, José Miguel Júdice, with whom I have the honor of sitting on the Board, has asked me to, on his behalf, address the following message to you as he was unable to do so. “Since October I have been coordinating a very good team and I am able to inform that we are trying to work along the lines you mentioned. The brand new website will have an English version in the near future. We decided to invite 25 leading international arbitrators for our Roster, also thinking that the new rules state that in case of international arbitration sand unless the parties decide otherwise the Chairman of the Center needs to apply the neutrality principle, that it to nominate a President without the nationality of the parties, against the local tradition of nominating always Portuguese names. We will try to apply the best international practices, not only for ethical reasons, but also out of interest as it will help to bring Lisbon – a wonderful and friendly location, connected with all the Portuguese speaking countries, with an UNCITRAL inspired new arbitration law – international arbitration cases.”
In the passing of a three-year period since this post, a short follow-up. Very recently, a Portuguese court of appeals considered–very harshly–that the “IBA Guidelines” are not the law of Portugal, and that the “State of Portugal and the Portuguese legal regime applicable to arbitration is neither submitted to mere guidelines nor international arbitration private usages, and much less to those usages deriving from companies, entities or markets of the Anglo-Saxon and common-law jurisdictions” (decision of the Administrative Central Court – South of 16 Feb 2017).
Although this decision was made by an administrative court of appeals, resolving a dispute involving “public expenditures”, the criticism spilt by those words may well contaminate other shores.
Luckily enough, on previous occasions the Portuguese superior courts have applied the “IBA Guidelines” consistently with the international practice.
This case deserves close attention, in any event …