Arbitrator’s Corner – Pierre Bienvenu talks disclosure, challenges and neutrality

In the Arbitrator’s Corner, practitioners of our firm who serve as arbitrators are invited to contribute articles commenting on questions of interest to our readership from the perspective of the arbitral tribunal. In this inaugural column, Pierre Bienvenu, global co-head of our international arbitration practice, discusses the arbitrator’s duty to disclose facts and circumstances relevant to the parties’ assessment of his or her independence and impartiality, as well as the importance for the arbitrator who faces a challenge to display restraint in commenting on any challenge.

The duty of independence

The independence and impartiality of arbitrators are crucial to the legitimacy of international arbitration. This article offers examples of arbitrators failing to comply with their disclosure obligations or, when challenged, commenting inappropriately on the merits of the challenge or the bona fides of the challenging party.

Scope of disclosure

Every arbitrator must be and remain impartial and independent of the parties. As parties have a strong interest in being informed of facts and circumstances that may be relevant to assessing the independence and impartiality of the arbitral tribunal, prospective arbitrators are required to disclose any facts or circumstances that may, in the eyes of the parties, call into question their independence or give rise to doubts as to their impartiality.

Arbitrators are under a duty to make reasonable inquiries to identify such facts and circumstances, and their disclosure obligation remains in force for the entire duration of the proceedings.

Arbitration rules adopt a subjective standard for this obligation by requiring the disclosure of facts or circumstances that may call into question the arbitrator’s independence in the eyes of the parties. However, the standard applicable to decide on an arbitrator’s independence and impartiality is objective and focuses on whether “a reasonable third person, having knowledge of the relevant facts and circumstances, would reach the conclusion that there is a likelihood that the arbitrator may be influenced by factors other than the merits of the case as presented by the parties in reaching his or her decision”. The arbitrator’s failure to disclose facts or circumstances based on the subjective standard may still be relevant to assessing his or her independence and impartiality in the event of a challenge. As the ICC Note to the Parties and Arbitral Tribunals on the Conduct of Arbitration explains, “[a]lthough failure to disclose is not in itself a ground for disqualification, it will however be considered by the [ICC] Court in assessing whether an objection to confirmation or a challenge is well founded”.

National case law and challenge decisions by arbitral institutions offer too many examples of arbitrators, often unintentionally, failing to abide by these standards, thereby imposing significant costs on the parties and undermining public confidence in arbitration. A recent example is the case of Saad Buzwair Automotive Co v Audi Volkswagen Middle East FZE LLC, in which the Paris Court of Appeal annulled an arbitral award on the ground that one of the arbitrators had failed to disclose that his law firm had carried out work for an affiliate of one of the parties during the pendency of the case, thereby raising a reasonable doubt as to his independence and impartiality (C.A. Paris, Pôle 1, Chambre 1, 27 March 2018, No. 16/09386). The case is currently pending before the French Supreme Court. Should the award’s annulment be confirmed, the parties will be left facing the prospect of having to start the proceedings afresh.

Arbitrators must therefore take a liberal approach to disclosure and pay heed to the guideline that any doubt as to whether certain facts or circumstances should be disclosed must be resolved in favor of disclosure.

Scope of participation in challenge proceedings

The requirements of independence and impartiality have implications for the arbitrator in the event he or she is challenged. Arbitration rules typically afford challenged arbitrators the opportunity to comment on a challenge but they are silent as to the scope of participation permitted.

It is appropriate in the context of a challenge for the arbitrator to ensure that all relevant facts are placed before the arbitral institution or court called upon to determine the challenge. However, when commenting on a challenge, the arbitrator should exercise caution before deciding whether to respond to criticisms directed at the arbitrator’s conduct advanced by the challenging party, or to argue the merits of the challenge (otherwise than by simply declining to resign). The challenged arbitrator must be careful not to descend into the fray, and resist any temptation to attack the party raising the challenge lest that provides the decision maker with independent grounds to uphold the challenge.

A striking example of a course to avoid is given in the disqualification decision of the Chairman of the ICSID Administrative Council in Burlington Resources inc. v Republic of Ecuador (ICSID Case No. ARB/08/5). The Chairman held in that case that the primary substantive grounds for the challenge had not been raised in a timely manner, and he dismissed the proposal to disqualify the arbitrator to the extent it relied on these grounds. Nonetheless, the Chairman disqualified the arbitrator based on his response to the challenge. The Chairman noted that arbitrators may legitimately “ask questions and satisfy themselves of the legal merits of the arguments put forward by the parties”, as well as “address the circumstances related to the proposal for disqualification”. However, the arbitrator in that case had made “allegations about the ethics of counsel” for the party bringing the challenge, which in the opinion of the Chairman “did not serve any purpose in addressing [the challenge]” and evidenced an apparent lack of impartiality that justified upholding the challenge.

Similarly, a Division of the LCIA Court concluded in a 2001 case that while the substantive grounds for the challenge did not give rise to justifiable doubts as to the arbitrator’s impartiality or independence, the challenge ought to be upheld considering “the self-evident tension and ill-feeling” resulting from the challenge (LCIA Reference No. 1303, November 22, 2001). In that case, the challenged arbitrator had described the challenging party’s submissions as “fictitious, false and malevolent”. More recently, in Cofely v Bingham and Knowles [2016] EWHC 240 (Comm), the English Commercial Court upheld an application to remove an arbitrator based in part on the arbitrator’s response to a party’s enquiries regarding potential conflicts of interests. The Court held that the enquiries were reasonable, courteous and appropriate, and that the arbitrator had descended into the arena by responding aggressively, adopting attack as the best form of defence.

Concluding thoughts

The lesson from these decisions is that a challenged arbitrator should cooperate with the decision maker by providing observations as to the factual bases for the challenge. However, the challenged arbitrator should be prudent in addressing the merits of the challenge. In no circumstances should the challenged arbitrator appear to descend into the fray or display animosity toward the challenging party.