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Choosing the “Right” Arbitrator — a Key to Success or a Way to Challenges

A. Amosova Svensson, Arbitration Institute of the Stockholm Chamber of Commerce, Stockholm, Sweden

One of the advantages of arbitration as opposed to court proceedings is the right for a party to choose one’s own judge, i.e. to appoint the arbitrator a party wants to be a member of the arbitral tribunal.

When negotiating and drafting commercial agreements, lawyers and their clients may spend considerable efforts on achieving protection in the contract, including damages, fines, penalties or other remedies. Efforts may also be spent on the arbitration clause, negotiating the arbitration institute, the seat of arbitration and the number of arbitrators, the applicable rules of the arbitration proceedings and even the language of the proceedings. However, in the case of a dispute, it is the arbitral panel that will decide the matter, and choosing arbitrators may become as important as the contract once was.

One of the main reasons for the contracting parties to provide for arbitration is the desire to avoid the jurisdiction of local courts, e.g. because of concerns about local courts’ impartiality. In addition, contracting parties from different countries may prefer international arbitration because they want neutral grounds for dispute resolution. Another reason may be the desire to allow business-oriented professionals that have experience in the type of commercial agreements and commercial practices involved to decide the case. However, these benefits will only materialize if the parties make proper use of their right to choose arbitrators for the arbitral tribunal. As noted by Mr. Nick Peacock from Herbert Smith Freehills:

“…We choose international arbitration because it gives us the opportunity to select a panel in whom all parties have confidence – either because it’s a single panel which had been agreed or chosen by an institution in whom we have confidence, or because the panel includes someone we have chosen, and who we hope will understand our position and perhaps also be receptive to our submissions”[1].

This article will examine appointment of the “right” arbitrators for arbitral proceedings with their seat of arbitration in Sweden, including mandatory requirements of the law, the duty of arbitrators to decide the case impartially and independently, notwithstanding which party has appointed them, and to disclose relevant circumstances which may give rise to doubt as to their impartiality or independence. The article will also analyze aspects of arbitral and court practice on challenges to arbitrators and arbitral awards.

Appointment of arbitrators: formal requirements for arbitrators appointed

Several possible methods are available for appointing an arbitral tribunal. The most commonly used methods are the following:

  • by agreement of the parties;
  • by an arbitration institution;
  • through a list system;
  • the chair is appointed by existing co-arbitrators;
  • by an appointing authority agreed by the parties; and
  • by a national court[2].

If the parties appoint the arbitrators, each party faces the question which arbitrator may be the “right” arbitrator for the case. Generally, the parties are given considerable discretion in choosing and appointing their arbitrators. Apart from the desire of a party to appoint a particular arbitrator, the question whether the desired arbitrator meets the formal requirements for an arbitrator under the applicable laws and arbitration rules must be carefully considered.

The main legislative act governing arbitration proceedings taking place in Sweden both in domestic and international disputes is the Swedish Arbitration Act of 1999 (SAA). According to the SAA, only two general mandatory requirements apply to an appointed arbitrator.

 Under the first requirement, “any person who possesses full legal capacity in regard to his actions and his property may act as an arbitrator”[3]. “Whether or not the person possesses full legal capacity in regard to his actions and property is determined under the personal law of such person. Under Swedish substantive law, persons under 18 years of age, subject of legal guardianship or in bankruptcy, lack legal capacity. Foreign law will apply to persons domiciled elsewhere”[4]. The second requirement is impartiality of the appointed arbitrator: “An arbitrator shall be impartial”[5]. The SAA contains no other requirements on arbitrators, such as gender, education, occupation, or nationality.

 If the parties submit a dispute for resolution to the Arbitration Institute of the Stockholm Chamber of Commerce (SCC), the leading international arbitration institution in Sweden, the arbitral proceedings will also be governed by the SCC Rules, which require impartiality and independence of arbitrators. The Secretariat and the Board of the SCC deal with issues of challenges to arbitrators, their replacement and release from appointment.

 

Arbitrator’s duty to disclose circumstances that may give rise to justifiable doubts as to arbitrator impartiality or independence

It is the duty of each arbitrator to consider their own impartiality and independence before accepting the appointment, i.e. to carry out a self-check on these matters. According to the Judgment by the Swedish Supreme Court of November 19, 2007 in Case No T 2448-06 (Anders Jilkén v Ericsson AB), an arbitrator being a lawyer is “…obliged to observe faithfulness and loyalty vis-à-vis the client. A lawyer is obliged to turn down an assignment offered if he himself, any assistant lawyer employed by him or a lawyer who is his employer or partner or with whom he has a joint office organization in the case or in another case that may be of importance for the execution of the assignment offered, represents or himself has a personal or financial interest that is contradictory to that of the principal”[6].

Even arbitrators who consider themselves impartial and independent should still disclose any circumstances which may give rise to justifiable doubts as to their impartiality or independence from a third party’s point of view. Following appointment, the arbitrator must submit to the SCC Secretariat a signed statement of impartiality and in­dependence disclosing any such circumstances. The Secretariat will send a copy of the statement of impartiality and independence to the parties and the other arbitrators[7].

Besides fulfilling the requirement to report on circumstances that may give rise to doubts as to impartiality or independence before appointment, an arbitrator should immediately inform the parties and the other arbitrators in writing where any such circumstances arise during the course of the arbitration. Thus, an arbitrator is obliged to carry out a self-check over their ability to serve both from subjective and objective points of view before their appointment and during the course of the proceedings. This ongoing obligation is an important duty taking into account that arbitration proceedings may in some cases take several years.

 

Appointment of arbitrators by the SCC

The parties may agree on the number of arbitrators. Where the parties have not agreed on the number of arbitrators, the SCC Rules state that the arbitral tribunal should consist of three arbitrators, unless the SCC Board, taking into account the complexity of the case, the amount in dispute or other circumstances, decides that the dispute is to be decided by a sole arbitrator[8].

The SCC can itself appoint the arbitrators for one or even both parties as well as the chair of the arbitral tribunal in certain circumstances, e.g. upon the request of a party or if this is provided for by the applicable SCC rules. The SCC has no pre-established list of arbitrators, which allows great flexibility in choosing arbitrators suitable for the case, carefully noting any issue of conflict of interests. In these cases, the appointed arbitral panel, including the number of arbitrators, will certainly be “right” for the case based on legal requirements, and the subject and complexity of the dispute. The Board spends much time on identifying suitable arbitrators for each dispute when required. The SCC Board member Jakob Ragnwaldh of Mannheimer Swartling has, for example, noted: “Having served on the board of the Stockholm Chamber of Commerce for three years, I can tell you that there is no more important task for the board than to appoint arbitrators in a particular case”[9].

Whether the party appoints an arbitrator or the arbitration institute does so, the parties are still entitled to exercise further control over the arbitrator and have a right to challenge the appointment under certain circumstances.

 

Challenge to arbitrators: the SAA, the SCC Rules and the IBA guidelines

Assume that a party to a dispute has prepared for the arbitration proceedings, including choosing and appointing an arbitrator in whom the party has confidence or who seems to share the view of the lawyer on the position of the parties in the dispute through academic writing or speeches at legal conferences. Can that party be sure that the chosen arbitrator will not be disapproved by the other party that may also have done a due diligence review on that particular arbitrator and, in a worst case scenario, challenge the arbitrator simply because of the desire to stay or delay the arbitration proceedings? The answer is no. However, the outcome of a challenge depends on the grounds for the challenge so that preparing well for the counterparty’s scrutiny of the choice of arbitrator may be of key importance for a party seeking to quickly and finally settle a dispute.

According to the SAA, an arbitrator must be impartial, and if a party so requests, an arbitrator will be discharged if there is any circumstance which may diminish confidence in the arbitrator’s impartiality. The SAA provides a list of the circumstances that should always be deemed to diminish trust in an arbitrator's impartiality, such as: a) where the arbitrator or a person closely associated to him is a party, or otherwise may expect a notable benefit or detriment as a result of the outcome of the dispute; b) where the arbitrator or a closely associated person is the director of a company or other association which is a party, or otherwise represents a party or some other person who may expect a notable benefit or detriment as a result of the outcome of the dispute; c) where the arbitrator has taken a position in the dispute, as an expert or otherwise, or has assisted a party in the preparation or conduct of their case in the dispute; d) where the arbitrator has received or demanded compensation from one of the parties in violation of the SAA[10]. The list is intended to be exemplary and not exhaustive.

A challenge to an arbitrator must be presented within fifteen days as of the date on which the party became aware both of the appointment of the arbitrator and of the existence of the circumstance. The challenge is decided by the arbitrators unless the parties have decided that it should be determined by another party. If the challenge is successful, the decision cannot be appealed. A party who is dissatisfied with a decision denying a motion or dismissing a motion on the grounds that the motion was not timely filed may apply to the Swedish District Court for the arbitrator to be removed. The arbitrators may continue with the arbitral proceedings, pending the determination of the District Court[11].

According to Art. 15 of the SCC Rules, a party may challenge an arbitrator if circumstances exist that give rise to justifiable doubts as to the arbitra­tor’s impartiality or independence or if the arbitrator does not possess any qualifications pre-agreed between the parties. A challenge to an arbitrator must be made by filing a written statement with the SCC Secretariat setting forth the reasons for the challenge within fifteen days as of the circumstances giving rise to the challenge becoming known to the party. Failure by a party to challenge an arbitrator within the deadline constitutes a waiver of the right to raise a challenge. If the other party agrees to the challenge, the arbitrator must resign. In all other cases, the SCC Board makes the final decision on the challenge[12]. It should be noted that the SCC does not decide ex officio on issues of arbitrator impartiality and independence but is obliged to decide only where an arbitrator is challenged by a party.

The requirements for arbitrator impartiality and independence are also listed in the Rules of Ethics for International Arbitrators (1987) (“IBA Rules”)[13] and the IBA Guidelines on Conflicts of Interest in International Arbitration (2004) (“IBA Guidelines”)[14], both adopted by the International Bar Association. According to the IBA Rules, international arbitrators should be impartial, independent, competent, diligent, and discreet[15].

The rules set some criteria for determining the elements of arbitrator bias: for example, according to the IBA Rules, dependence arises from relationships between an arbitrator and one of the parties, or with someone closely connected with one of the parties. The other ground is any current direct or indirect business relationship between an arbitrator and a party, or with a person known to be a potentially important witness, which normally gives rise to justifiable doubts as to a prospective arbitrator’s impartiality or independence. Examples of indirect relationships are where a member of the prospective arbitrator’s family, their firm, or a business partner has a business relationship with one of the parties[16].

The IBA Guidelines also set general standards applicable to appointment of arbitrators, challenge and disqualification of arbitrators and responsibility of arbitrators to disclose facts and information regarding possible doubts as to their impartiality and independence. Red, Orange and Green lists of specific circumstances that may be grounds for challenging an arbitrator’s appointment form an important part of the IBA Guidelines.

The IBA Rules and IBA Guidelines are only binding on the parties by default if the parties so agree. However, on a practical level, the IBA Rules and IBA Guidelines are taken into account by arbitration institutions, as well as arbitral panels and courts, when deciding on issues of disqualification of arbitrators.

Criticism of the concept of arbitrators being appointed by the parties

Although one of the benefits of arbitration is the right for parties to “choose their own judge(s)” the concept of the party-appointed arbitrator is criticized by some scholars and practitioners.

First, some leading arbitrators question the appropriateness of party-appointed arbitrators on the ground that parties make these appointments, hoping to gain an advantage which at least tacitly endorses unscrupulous behavior, and that ongoing acceptance of this practice undermines the reliability and standing of international arbitration[17].

Second, there appears to have been an increase in attempts by parties to remove the opposing party’s chosen arbitrator. Many of these attempts may appear to be of a tactical nature rather than motivated by legitimate concerns about the neutrality or qualifications of the arbitrator. These challenges are often disruptive and also undermine perceptions about the reliability of the process and its effectiveness – and therefore its attractiveness[18].

The author does not share the view that appointment by a party of an arbitrator undermines the reliability and standing of international arbitration. From a Swedish perspective, effective control mechanisms, including the right to challenge the appointment of an arbitrator, are in place and work quite efficiently.

Every year, challenges to arbitrators are filed with the SCC. However, it cannot be claimed that the SCC is overloaded with malicious or frivolous challenges to arbitrators made in an attempt to delay or disrupt the arbitral proceedings.

Several examples of challenges to arbitrators on different grounds and the decisions of the SCC Board are presented below.

 

Examples of challenges dismissed by the SCC Board

  1. Arbitration 115/2010[19]

Nationality of the Parties:

Claimant: United States

Respondents: Russia

Seat of Arbitration: Stockholm

Nationality of Arbitrators:

Chairperson: Switzerland

Arbitrator appointed by Claimant: Sweden

Arbitrator Appointed by Respondents: Russia

Applicable Rules: UNCITRAL Arbitration Rules

Background: Claimant commenced arbitration under the UNCITRAL Arbitration Rules seeking damages for various alleged breaches of a joint venture agreement.

Challenge by Claimant to Arbitrator Appointed by Respondents: The Claimant challenged the arbitrator appointed by the Respondents, based on the arbitrator’s close personal relationship with Respondents’ counsel, with whom the arbitrator had written several legal books and articles. Moreover, they were professors at the same University. According to Claimant, in one of their joint works, the arbitrator and the Respondents’ counsel adopted a position concerning one of the Respondents, which was prejudicial for the Claimant in this dispute.

 Moreover, Claimant asserted that the arbitrator is a state official in the country in which Respondents are incorporated, and that he actually receives financial support from one of the Respondents. In addition, Claimant made clear that the arbitrator had not disclosed these circumstances.

Respondents’ Reply: The Respondents denied the existence of personal or joint financial relationships between the arbitrator and their counsel, as they explained that academic publications are not subject to disclosure and are listed on the IBA Guidelines Green List. Furthermore, according to Respondents, the quotations from the book made by Claimant were taken out of context and represent the authors’ retelling of a court decision.

 Furthermore, the Respondents explained that the arbitrator’s employer is the state, which was not a party to the dispute, that the circumstances supposedly not disclosed by the arbitrator were not subject to disclosure, and that non-disclosure in itself is not a ground for disqualification.

Arbitrator’s reply to the challenge: The arbitrator did not submit any comment on the challenge.

Decision by the SCC Board: The SCC Board did not find any ground for disqualifying the arbitrator and decided to dismiss the challenge.

  1. SCC Arbitration V (001/2010)[20]

Nationality of the parties:

Claimants: Sweden

Respondent: Sweden

Seat of arbitration: Stockholm, Sweden

Nationality of arbitrators:

Chair: Sweden

Arbitrator appointed by claimants: Sweden

Arbitrator appointed by respondent: Sweden

Applicable rules: SCC Arbitration Rules

Background: The dispute concerned payment of an arrangement fee in connection with purchase of real estate. The arbitral tribunal consisted of three arbitrators. The SCC Board had appointed the chair with the claimant and respondent, each appointing one co-arbitrator.

Challenge to the Chair: The claimants challenged the chair. The challenge was based on circumstances revealed in a letter sent to the claimants’ counsel by the arbitrator appointed by the claimants. In his letter, the arbitrator appointed by the claimants stated that he had acted as counsel in an arbitration in which the chair’s spouse had acted as opposing counsel. During those proceedings, the chair’s spouse had, in the opinion of the arbitrator, acted in a manner which caused strong conflict between counsel.

The arbitrator appointed by the claimants had strongly criticized the chair’s spouse during these previous proceedings, and it was the arbitrator’s understanding that the chair’s spouse was strongly averse to the arbitrator.

Even though the antagonism between the arbitrator appointed by the claimants and the chair’s spouse could not burden the chair, the arbitrator appointed by the claimants stated he had reason to believe that the chair had been influenced by the views of the spouse. Finally, the claimants’ counsel pointed out that he had also criticized the chair’s spouse in another matter, and it was possible that the chair was aware of this criticism.

Statement by the Respondent: The respondent opposed the challenge. According to the respondent, there were no such circumstances as would give rise to justifiable doubts as to the chair’s impartiality or independence.

Statement by the Challenged Arbitrator: The chair was not aware of professional contacts between the spouse and the arbitrator appointed by the claimants or the claimants’ counsel, and the chair ,therefore, could not comment on those circumstances.

Decision by the SCC Board: The SCC Board did not find any ground for disqualifying the arbitrator. The challenge was dismissed.

 

Examples of challenges sustained by the SCC Board

  1. SCC Arbitration V 190/2010[21]

Nationality of the Parties:

Claimant: Belarus

Respondent: Poland

Seat of Arbitration: Stockholm

Nationality of Arbitrators:

Chairperson: Sweden

Arbitrator appointed by Claimant: Russia

Arbitrator Appointed by Respondent: Poland

Applicable Rules: SCC Rules

Background: Respondent and a third party entered into a contract for delivery of certain equipment to Claimant. Claimant was mentioned in the contract as a lease holder. Since the purchase was financed by a third party, that third party and Claimant entered into a leasing agreement concerning the equipment.

 Claimant commenced SCC arbitration arguing that it acquired ownership of the equipment and that it had rights under the delivery contract as if it were a party to that agreement. Claimant further asserted that the equipment delivered was faulty and claimed damages and costs under the delivery contract.

Challenge by Claimant to Arbitrator Appointed by Respondent: Claimant challenged the arbitrator appointed by Respondent alleging that the arbitrator owns a company that negotiated the delivery of similar equipment as with Claimant. The arbitrator’s company’s offer was turned down by Claimant in favor of Respondent’s offer. After Respondent’s failure to repair the faulty equipment, Claimant turned to the arbitrator’s company and to the arbitrator personally for a proposal to eliminate the defects, although the arbitrator’s offer was again rejected. Claimant considered that the arbitrator’s involvement in the subject of the dispute and awareness of commercial and technical details of the relationship between the parties undermined his independence and impartiality.

Respondent’s Reply: Respondent objected to the challenge, arguing that the market for this kind of equipment is narrow, and the companies and their directors recognized each other on a commercial basis.

Arbitrator’s reply to the challenge: Although the arbitrator did not deny that his company was involved in the bidding process, he explained that his company had not made any offer concerning repairs. Accordingly, his impartiality and independence were confirmed.

Decision by Decision by the SCC Board: The SCC Board sustained the challenge. The arbitrator was consequently released from appointment.

  1. SCC Arbitration V (018/2009)[22]

Nationality of the parties:

Claimant: Sweden

Respondents: Sweden

Seat of arbitration: Stockholm, Sweden

Nationality of arbitrators:

Chair: Sweden

Arbitrator appointed by claimant: Sweden

Arbitrator appointed by respondents: Sweden

Applicable rules: SCC Arbitration Rules

Background: The claimant filed a request for arbitration, seeking damages based on an allegation that the respondents had not placed all daily income in a bank account in accordance with an agreement between the parties.

Challenge to Arbitrator Appointed by the Claimant: The respondents challenged the arbitrator appointed by the claimant. The challenge was based on two separate grounds. First, according to the respondents, the claimant had appointed the same person as arbitrator on several occasions. Hence, the arbitrator could not be considered impartial. Second, the arbitrator had previously been the chairman of a branch organization and was currently a member of the branch organization’s ethical board. Two companies controlled by the claimant were members of the organization.

Statement by the Challenged Arbitrator: In his statement, the challenged arbitrator first stated that he could not, with reference to the confidentiality rule in Art. 46 of the SCC Rules, disclose whether the claimant had previously appointed him as arbitrator, as alleged by the respondents. Second, the arbitrator stated that the branch organization is an organization for the branch in general, not only for parties representing certain positions. The board of directors, as well as the ethical board, consists of representatives of different positions in the branch. The arbitrator’s engagement in the branch organization should merely be regarded as positive and as promoting the making of an objective and independent award.

Decision by the SCC Board: The SCC Board decided to sustain the challenge. The arbitrator was released from his appointment.

 

Summary of the SCC practice on challenges to arbitrators

 The annual number of challenges during the last ten years has ranged between 2 and 11, so that it is difficult to establish a strong practice of the SCC Board decisions on every possible ground for challenge. It may, however, be noted that potentially influenced by the IBA Guidelines, the SCC Board tends to sustain challenges based on an arbitrator’s or their law firm’s previous or current professional involvement with one of the parties. On the other side, the SCC Board is not easily persuaded to sustain a challenge based on the existence of a previous relationship between the arbitrator and the attorney(s) for one of the parties. Instead, such a challenge would only succeed when it is sufficiently demonstrated that the relationship between the arbitrator and counsel does in fact jeopardize the former’s ability to be and remain independent and impartial[23]. To summarize the above it should be noted that each challenge will be assessed by the SCC Board on its specific merits and decided on a case by case basis.

 

Challenge of arbitration award in Swedish courts on the grounds of arbitrator dependence and lack of impartiality

 Under Section 34 of the SAA, a party has right to challenge an award in a Swedish court on the ground that the arbitrator was unauthorized to sit on the arbitral tribunal due to certain circumstances, including the existence of circumstances that diminish confidence in the arbitrator’s impartiality.

The author shares the views of Thomas J. Stipanowich : “For many corporate counsel, concerns about the inability to overturn arbitration awards that do not comport with the applicable law or proven fact, coupled with suspicion about the abilities or motivations of arbitrators, are paramount”[24].

 Therefore, where there is lack of trust in the impartiality of an arbitrator, the issue of challenge to an award may arise, as illustrated by the court cases summarized below. As a general established principle, assessment of a challenge to an award for arbitrations seated in Sweden will be done by the courts on the basis of the SAA. However, courts may also look at the IBA Guidelines and international practice when deciding on issues of impartiality and independence.

 

Sustained challenge to arbitral award by the court in a Judgment of the Swedish Supreme Court of November 19, 2007[25]

On November 19, 2007, the Supreme Court, reversing a judgment of the Svea Court of Appeal, in the main part set aside an arbitral award given between Anders Jilkén as claimant and Ericsson AB as respondent on June 7, 2004.

The issue in the case was whether the challenged arbitral award should be set aside because circumstances prevailed that could have diminished trust in an arbitrator’s impartiality. According to Anders Jilkén, these circumstances were that J. L. (chairman of the arbitral tribunal) at the time of the arbitration proceedings was firmly linked to Mannheimer Swartling Advokatbyrå as a consultant with the task of providing legal advice to the lawyers of the firm, and that Mannheimer Swartling Advokatbyrå had significant legal assignments from the Ericsson Group, of which Ericsson AB was part. J. L. had assisted the Ericsson Group by means of two legal opinions.

Ericsson AB denied that circumstances existed that could diminish trust in J. L.'s impartiality or that J. L. had neglected his duty to disclose.

From investigation of J. L.'s relationship with Mannheimer Swartling Advokatbyrå, the Court concluded that J. L. worked part-time as a consultant for the firm. According to Ericsson AB, the contractual relationship was probably an employment relationship, even if the agreement was designated as a consultancy agreement. The work consisted mainly of providing legal advice to the other lawyers at the firm and writing legal opinions. Among these were legal opinions given to companies in the Ericsson Group.

In a decision relating to J. L.’s principal, the disciplinary committee of the Swedish Bar Association stated that J. L. was employed by the law firm and that for reasons of legal ethics he should have turned down the assignment as arbitrator. The SCC, in its legal opinion to the Supreme Court, also stated that if the SCC had had to make a decision in a matter such as the current one, it is highly probable that the SCC would have found that bias existed. In its opinion, the SCC referred to Swedish and international practice in courts and arbitration institutes, as well as the IBA Guidelines and some of its own decisions on issues of bias.

In the reasoning in support of the judgment, the Supreme Court also stated that a relationship damaging to trust must be deemed to exist even if the arbitrator has not personally had direct client contact with the party, the arbitration activities have been carried out separately from the lawyer activities, or if the arbitration dispute related to issues other than those that a client assignment normally included. The Supreme Court concluded that with an objective view, circumstances prevailed that could diminish trust in the impartiality of J. L. The challenged arbitral award was set aside in its entirety.

 

Pro-arbitral approach of Swedish courts

It should be noted that the majority of challenges of arbitral awards on the grounds of alleged lack of impartiality and independence of an arbitrator are not successful in the state courts. Below is summary of one of the typical cases of challenges of arbitral awards and the judgment of the Swedish court.

 

Dismissed challenge to arbitral award in Judgment of the Svea Court of Appeal of 7 December 2006[26]

An interesting example of a challenge to an arbitral award is the Judgment of the Svea Court of Appeal of 7 December 2006 in Case No. 5044-04 “The Rapla Invest v TNK Trade Case”. In this case, Rapla Invest sought an order from the Court of Appeal setting aside the entire arbitral award on several grounds, including disqualification of an arbitrator due to previous connection with TNK.

The party-appointed arbitrator of TNK, S. L., had been an arbitrator in an arbitral award made by the SCC on May 30, 2002, in which TNK Ukraine was indirectly a party. S. L. also once appeared for TNK Ukraine in insolvency proceedings at the Court of Financial Cases, Luhansk region. Rapla claimed that these circumstances came to Rapla’s knowledge after the arbitral award was rendered. In his confirmation of appointment, S. L. declared that he was independent of the parties in the arbitration and made no disclosure as regards the above mentioned matters.

TNK contested the assertion made by Rapla and stated i.a. that S. L. is one of the most respected and experienced arbitrators in Russia and had been impartial during the arbitration procedure.

After considering the questions of impartiality and independence, the Court declared that the “sole fact that a person has several appointments as an arbitrator does not meant that the person is disqualified as an arbitrator”. Another important statement of the Court was: “…the Court of Appeal considers that it would have been appropriate for S. L. to disclose the circumstances now pointed by Rapla to the parties. However, this failure is not such that a situation that harms trust can be deemed to have arisen as a result of the failure. On account of this and since the other matters put forward by Rapla do not lead to the conclusion that S. L. was disqualified as an arbitrator in the present arbitration, Rapla’s request for relief through the setting aside of the arbitral award on the grounds of disqualification shall not be approved”.

 

Final considerations

Nowadays, it is general practice in international arbitration that parties and their counsel pay great attention to the choice and appointment of an arbitrator which, according to the opinion of a particular party, may be “right” for the case.

The author adheres to the words of Luis Enrique Graham that “the relevance of the arbitrator’s role does not only derive from the fact that he or she is the one who will decide the case, but also from the nature of arbitral proceedings: the arbitrator enjoys a great deal of discretion in conducting the arbitration. Thus, the manner in which arbitration is conducted will depend significantly upon the style, knowledge and creativity of the arbitrator selected for that case. An experienced practitioner knows that every arbitration in which he or she has participated could have been different (in terms of conduct of the proceedings) if different arbitrator(s) had been appointed”[27].

It may be stated that a particular arbitrator chosen by one of the parties may indeed have an impact on the case, either from the procedural aspects of proceedings or even from the decision making point of view in the course of deliberations and at the stage of rendering an award.

In cases where the arbitral award will anyway be rendered by the majority of the arbitral tribunal, thus enabling them not to count the voice of a party-appointed dissenting arbitrator, that arbitrator may tend to provide a dissenting opinion to the arbitral award. According to research by Albert Jan van den Berg following analysis of Investment Treaty Arbitration (ITA) and ICSID websites up to 2009, in 150 publicly reported decisions in investment cases the presiding arbitrator rarely dissents. A party-appointed arbitrator issued a dissenting opinion in 34 cases and nearly all of those 34 dissenting opinions were issued by the arbitrator appointed by the party that lost the case in whole or in part.

However, this may be not so beneficial as it may sound for the party who appointed the dissenting arbitrator. According to Albert Jan van den Berg, “One of the major problems with dissents by party-appointed arbitrators is that they may inhibit the deliberative process. A party-appointed arbitrator who believes that he or she should support (or even improve) the case advanced by the party that appointed him or her is not likely to engage in meaningful dialogue about the case with his or her colleagues”[28]. Therefore, on the other side a party-appointed arbitrator may by fervent action to support the party and render a decision in favor of the party that appointed him or her, may bring nothing to the arbitral proceedings but conflict within the arbitral tribunal and the issuance of an arbitral award by the other arbitrators “ignoring” the voice of the dissenting arbitrator.

Another red flag for a party choosing an arbitrator, maybe despite its desire to choose a familiar arbitrator with whom the party has trustful relations: check any possible issues of conflicts of interest before the appointment of that arbitrator in order to prevent the other party from challenging the arbitrator or an arbitral award on the grounds of arbitrator bias.

Finally, as a concluding remark, it should be noted that every arbitrator should decide the case based on the law and that the duty of an appointed arbitrator is “to conduct the arbitration in an impartial, practical and expeditious manner, giving each party an equal and reasonable opportunity to present its case”[29] as well as “to do their best to conduct the arbitration in such a manner that costs do not rise to an unreasonable proportion of the interests at stake”[30].

Therefore, a careful choice of a trustworthy and experienced arbitrator free from conflict of interests will give a party a certain level of comfort in the arbitral proceedings, but will not and should not guarantee that the party-appointed arbitrator will be fighting for the interests of that party in violation of the applicable laws and rules.



[1] CDR Conference Report, Volume 4, Issue 1, January – February 2013, p. 40.

[2] K. Hober. International Commercial Arbitration in Sweden. Oxford University Press. United States, 2011, p.146.

[3] Section 7 of the Swedish Arbitration Act (SFS 1999:116), unofficial translation of the SAA. available at: http://sccinstitute.com/?id=23746 (last access May 10, 2013).

[4] F. Andersson, T. Isaksson, M. Johansson, O. Nilsson. Arbitration in Sweden. Swedish Arbitration Association. Sweden, 2011, p. 84.

[5] Section 8 of the Swedish Arbitration Act.

[6] Unofficial translation. available at:

 http://www.arbitration.sccinstitute.com/files/108/1083436/T2448-06_en%20English.pdf (last access May 01, 2013).

[7] Arbitration Rules of Arbitration Institute of the Stockholm Chamber of Commerce. 2010, Art. 14.

[8] Arbitration Rules of Arbitration Institute of the Stockholm Chamber of Commerce. 2010, Art. 12.

[9] CDR Conference Report, Volume 4, Issue 1, January – February 2013, p. 41.

[10] Section 8 of the Swedish Arbitration Act.

[11] Section 8 of the Swedish Arbitration Act.

[12] Arbitration Rules of Arbitration Institute of the Stockholm Chamber of Commerce. 2010, Art. 15.

[13] Rules of Ethics for International Arbitrators (1987). available at: http://sccinstitute.com/filearchive/4/43005/publications_Ethics_arbitrators.pdf (last access May 10, 2013)

[14] IBA Guidelines on Conflicts of Interest in International Arbitration (2004). available at. http://sccinstitute.com/filearchive/4/43004/IBA_publications_Arbitration_guidelines_2007.pdf  
(last access  May 10, 2013)

[15] Rules of Ethics for International Arbitrators, Introductory notes.

[16] Rules of Ethics for International Arbitrators. Art. 3.

[17] By Steven Finizio (WilmerHale) & Claudio Salas (WilmerHale), It`s my party, January 28, 2013. available at: http://www.cdr-news.co.uk/categories/wilmerhale/its-my-party (last access 01 May, 2013).

[18] Ibid.

[19] Arbitrators’ independence and impartiality: a review of SCC board decisions on challenges to arbitrators (2010-2012) by Felipe Mutis Tellez. available at: http://www.sccinstitute.com/filearchive/4/44889/Felipe%20Mutis%20Tellez_Article%20on%20SCC%20Challenges%20on%20Arbitrators.pdf (last access  May 10, 2013).

[20] Challenges to Arbitrators – Decisions by the SCC Board during 2008 – 2010. Review by Niklas Lindström. available at:

 http://www.sccinstitute.com/filearchive/4/40158/Challenges%20to%20Arbitrators%20–%20Decisions%20by%20the%20SCC%20Board%20during%202008.pdf (last access May 10,2013).

[21] Arbitrators’ independence and impartiality: a review of SCC board decisions on challenges to arbitrators (2010-2012) by Felipe Mutis Tellez. available at: http://www.sccinstitute.com/filearchive/4/44889/Felipe%20Mutis%20Tellez_Article%20on%20SCC%20Challenges%20on%20Arbitrators.pdf (last access May 10, 2013)

[22] Challenges to Arbitrators – Decisions by the SCC Board during 2008 – 2010. Review by Niklas Lindström. available at:

 http://www.sccinstitute.com/filearchive/4/40158/Challenges%20to%20Arbitrators%20–%20Decisions%20by%20the%20SCC%20Board%20during%202008.pdf (last access May 10, 2013)

[23] Arbitrators’ independence and impartiality: a review of SCC board decisions on challenges to arbitrators (2010-2012) review by Felipe Mutis Tellez, p. 15. available at: http://www.sccinstitute.com/filearchive/4/44889/Felipe%20Mutis%20Tellez_Article%20on%20SCC%20Challenges%20on%20Arbitrators.pdf (last access May 10, 2013).

[24] Thomas J. Stipanowich, What Does the Fortune 1,000 Survey on Mediation, Arbitration and Conflict Management Portend for International Arbitration?. available at: http://kluwerarbitrationblog.com/blog/2013/03/14/what-does-the-fortune-1000-survey-on-mediation-arbitration-and-conflict-management-portend-for-international-arbitration (last access May 10, 2013).

[25] Unofficial translation. available at: http://www.arbitration.sccinstitute.com/files/108/1083436/T2448-06_en%20English.pdf (last access May 01, 2013).

[26] Stokgol'mskii Mezhdunarodnyi Arbitrazhnyi Obzor [Stockholm International Arbitration Review]. SCC, 2007:1.

[27] Luis Enrique Graham. Vybor pravil'nogo arbitra: prakticheskie soobrazheniya [The selection of the right arbitrator: practical considerations]. World Arbitration & Mediation Review, Volume 6, No. 2, 2012, p. 255.

[28] Albert Jan van den Berg. Dissenting Opinions by Party-Appointed Arbitrators in Investment Arbitration. Chapter 42, pp. 829 – 830.

[29] Arbitration Rules of Arbitration Institute of the Stockholm Chamber of Commerce. 2010, Art. 19.

[30] Rules of Ethics for International Arbitrators. Art. 7.

Bibliography:

  1. F. Andersson, T. Isaksson, M. Johansson, O. Nilsson. Arbitration in Sweden. Swedish Arbitration Association. Sweden, 2011. p. 84.
  2. K. Hober. International Commercial Arbitration in Sweden. Oxford University Press. United States, 2011. p. 146.
  3. Luis Enrique Graham. Vybor pravil'nogo arbitra: prakticheskie soobrazheniya [The selection of the right arbitrator: practical considerations]. World Arbitration & Mediation Review. 2012. Volume 6. № 2. p. 255.