Fortior Arbitration Guide - Lecture 2 - Tribunals: Selection, Appointment and Challenges
This lecture explains how to select and appoint the arbitral Tribunal and how to challenge biased arbitrators.
What Will Be Covered In This Lecture?
In this lecture I will explain:
How to determine the number of arbitrators on your Tribunal
What to do if your arbitration clause does not mention the number of arbitrators
How to appoint an arbitrator
What to do if an arbitrator is biased
Factors to consider when selecting an arbitrator
The first thing to do to determine the number of arbitrators on your Tribunal – is to look at your arbitration clause. There are 3 most common types of arbitration clauses: those that do not provide a number of arbitrators, those that provide for 3 arbitrators (one to be appointed by each party, and the third by the 2 so chosen), and those that provide for 1 arbitrator.
Since arbitration is a private dispute resolution process, either party agree on the number of arbitrators in their arbitration clause, that is how many arbitrators Tribunal will have. We once had a case, where the arbitration clause provided for a solo arbitrator, but the respondent submitted that the case was too complex and at least 3 arbitrators were required. The LCIA Court dismissed the respondent's request and ruled that there should be one arbitrator, if the arbitration clause so provides.
Determining the Number of Arbitrators
If your arbitration clause does not provide the number of arbitrators, then you need to ask yourself the following two questions. Firstly, does your arbitration clause incorporates any arbitration rules? The rules will normally provide for the default number of arbitrators. For example, Article 5(8) of LCIA Rules provides if the parties do not agree on the number of arbitrators, then the Tribunal will consist only of one arbitrator. Secondly, if your clause does not incorporate any arbitration rules, then you should ask yourself what the Seat of the arbitration is. The Law of the Seat will normally provide on the default number of arbitrators. For example, if your arbitration Seat is in London, then you should at the English Arbitration Act 1996. Section 15(3) of the Act provides if the parties do not agree on the number of arbitrators, then again, the Tribunal will consist only of one arbitrator.
If your arbitration clause provides for 3 arbitrators, or you have concluded based on the Law of the Seat of the Arbitration Rules that there should be 3 arbitrators, then normally each party will appoint one arbitrator and the two so chosen will appoint the third, who will become a Chairman of the Tribunal. This is a position under Section 16 of English Arbitrator Act 1996.
Appointment Under the LCIA Rules
Your arbitration clause holds applicable arbitration rules may provide how to appoint a nominated arbitrator. For example, LCIA Rules provide that an arbitrator is appointed by mentioning his full name and contact details and a request for arbitration. The LCIA Court will then consider the nomination and if satisfied that the candidate is in the position to fulfil these duties, will formally appoint the arbitrator to the Tribunal.
Appointment Under the Arbitration Act 1996
If you have three arbitrators and there are no applicable Arbitration Rules, then you should look at the Law of the Seat of the Arbitration. In England, the Law provides for a similar position to that under the LCIA Rules. That is the Claimant must appoint his arbitrator in the notice of arbitration by providing his full name and contact details. The arbitrator then becomes a member of the Tribunal automatically without the approval of any institution.
Appointing a Sole Arbitrator
When you have one arbitrator and your arbitration is subject to institutional rules, then it will normally be an institution who will appoint an arbitrator. You may, in your request for arbitration, propose the number of candidates but the institution is not obliged to follow your recommendations. If you have one arbitrator and you are not subject to institutional rules, then normally the parties will have to agree on candidates. You should propose the number of candidates in your notice of arbitration to the respondent, to which the respondent may agree or not agree. If the parties cannot agree on the candidate, then the matter will normally have to be referred to the Court of the Seat of Arbitration.
Independence and Impartiality of Arbitrators
This is a commonly accepted principle that arbitrator should be both independent and impartial. Independent means, that an arbitrator should not, for example, be an employee or a partner of one of the parties. Impartial means, that an arbitrator should not have a predetermined view on the matter or one of the parties and should generally act with the “cold heart”. Examples of the situations, where arbitrators are considered to be unfit to act due to their lack of independence or impartiality are listed in IBA Guidelines on Conflict of Interest in the International Arbitration. The guidelines can be downloaded for free here. These guidelines are not binding unless parties agree otherwise. However, arbitral institutions and competent courts can consider them as persuasive authority, when faced with arbitrator challenges. Examples of situations listed in guidelines, where arbitrators are considered to be unfit to act include situations where the arbitrator regularly advices one of the parties and derives significant financial benefit therefrom. The arbitrator provides the legal opinion or expert opinion on the dispute to one of the parties or where the arbitrator has a substantial interest in one of the parties or the outcome of the case.
As a note of caution, successful arbitrator challenges are extremely rare. I have only seen two successful challenges in my practice. One where the arbitrator basically insulted one of the parties. The other is where the Council for the respondent appointed the arbitrator on 15th time, which gave rights to suspicions as to the nature of the relationship between the arbitrator and the Counselor.
The procedure for challenging arbitrators will be found in the Law of the Seat of the Arbitration or the applicable arbitration rules. Where the LCIA Rules apply, they provide at Art 10 that LCIA Court will remove the arbitrator, where circumstances exist which give rise to justifiable doubts as to arbitrator’s independence or impartiality. A challenge should be made within 14 days of the arbitrator being appointed or the relevant party becoming aware of the circumstance which gives rise to doubts about independence or impartiality. A challenge should be made in the written statement, submitted to LCIA Court or Tribunal, and all other parties and setting out all relevant facts and grounds for the challenge. Where the other party agrees to the challenge, the LCIA Court will remove the arbitrator. Where the other party does not agree to the challenge, the LCIA court will allow it to make written submissions and explain why it considers that arbitrator should not be removed. The LCIA Court will then make its decision on the basis of both parties’ submissions.
In our Arbitration Guide, we have a sample arbitrator challenge, which you can download at www.fortiorlaw.com.
Consider These Factors When Selecting an Arbitrator
I recommend that you consider the following 4 factors when selecting an arbitrator.
Firstly, the arbitrator should know what he is doing. Some parties prefer to select industry experts as arbitrators, I would not necessarily go this far. However, if you want a decision which is reasonable by industry standards then the arbitrator should understand at least the basics of how the relevant industry operates.
Secondly, the arbitrator should be available. Prior to nominating an arbitrator, you should write to him, providing a neutral summary of your case and the names of all relevant parties, and ask if he is available and free of conflict. It may be embarrassing if you appoint an arbitrator and he later writes to you opponent and says that he is unwilling to act. It may not be useful to you as a Claimant to nominate an arbitrator who will later refuse appointment and delay proceedings.
Thirdly, you should not appoint an obviously biased arbitrator. As I have mentioned, if one out of three arbitrators is obviously biased, then he is likely to be excluded from the decision-making process or the rest of the Tribunal. It is not useful for you to appoint an arbitrator who is not going to participate in the Tribunal’s decision-making process.
Finally, I would recommend that you appoint an arbitrator, who is either a lawyer or at least commenced some authority in the world of international arbitration. If you do not want your decision appealed or want it to survive the appeal, the arbitrator should be very careful to follow the applicable law. Some parties prefer to choose former judges as arbitrators, the watch it being if the arbitrator’s decision is appealed it is unlikely to be overturned by the arbitrator’s peers. As the practical matter, if you are looking for arbitrators, you may wish to review the list of arbitrators provided by the LCIA, the Charted Institute of Arbitrators or other institutions. Alternatively, you may wish to contact a clerk in one of the arbitration Chambers, who may recommend a suitable arbitrator for you.
I hope this lecture was useful. If you require more information, please download our Arbitration Guide at www.fortiorlaw.com. Our Arbitration Guide provides more information as to how to commence the arbitration proceedings and it contains template notice of arbitration and the template response to the notice. Alternatively, get in touch with one of our lawyers at email@example.com.