Independence, impartiality, and immunity of arbitrators—us and english perspectives

International and Comparative Law Quarterly

Volumn 52, Issue 4, 2003, Pages 935-967

  Hong Lin, Yu ^a   Shore, Laurence ^a  

^a UNIVERSITY OF ESSEX   (United Kingdom)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 34248044676     PISSN: 00205893     EISSN: 14716895     Source Type: Journal    
DOI: 10.1093/iclq/52.4.935     Document Type: Article

References (102)

1. See J Konner, ‘Fred Friendly 1915–1998,’ Columbia Journalism Review (May/June 1998), publisher's note.
2. A. Redfern and M Hunter The Law and Practice of International Commercial Arbitration (London: Sweet & Maxwell 1999), at 220–221.
3. See also D Bishop and L Reed, ‘Practical Guidelines for Interviewing, Selecting and Challenging Party-Appointed Arbitrators in International Commercial Arbitration’ 14 (1998) 395 Arbitration International. .
4. Above n 2, at 400. IBA uses the wording ‘bias/conflict of interest’ to cover these issues.
5. Commonwealth Coatings Corp v Continental Casualty Co, 393 US 145 (1968) at 149. See discussion below on the dilution of Justice Black's position by the Court's concurring opinion and lower court interpretations of the case in the 1980s and 1990s.
6. See LCIA Rules, Art 10.3 (an arbitrator may be challenged ‘if circumstances exist that give rise to justifiable doubts as to his impartiality or independence’)
7. AAA-International Rules, Arts 7.1 and 8.1 (an arbitrator shall disclose any circumstance likely to give rise to justifiable doubts as to impartiality or independence; a party may challenge whenever circumstances give rise to justifiable doubts as to impartiality or independence)
8. ‘SCC Rules, Art 17(2) (a ‘person asked to accept an appointment as arbitrator must disclose any circumstances likely to give rise to justifiable doubts as to his impartiality and independence’)
9. UNCITRAL Rules, Arts 9 and 10 (same as the AAA-International Rules noted above).
10. [2000] 2 All ER 625 (Comm). Lord Woolf gave the principal judgment. Lord Justice Potter and Lord Justice May wrote concurring judgments.
11. Arbitration Act 1996, s 24(1)(a). It provides that a party may apply to the court to remove an arbitrator on the grounds ‘that circumstances exist that give rise to justifiable doubts as to his impartiality’.
12. J. Kendall, ‘Barristers, Independence and Disclosure Revisited’ 16 Arbitration International (2000) 343 at 348–9, contends that there ‘cannot be different standards for arbitrators, either lower or higher. It has been suggested that the standard should be higher because of the binding character and finality of awards. This misses the point. The standard should be effective to disqualify where real danger of bias is proved. Either the standard is effective to achieve that or it is not.’ However, as the standard is ‘real danger of bias’, J Kendall's contention means nothing more than the standard should be effective where the standard is proved. This begs the question: assuming finality, assuming a standard lower than ‘real danger’ (such as ‘appearance of bias’), and assuming the lower standard does not mean unreal danger, should disqualification of an arbitrator be the lower standard because even mere appearance of bias is significant where no review exists? If the alternative to ‘real danger’ is, in substance, no danger, then the lower standard can safely be jettisoned. But whether the danger is ‘real’ cannot be known, if at all, until an award is issued. It is extraordinarily difficult to prove the existence of bias in an award, as many US judges have conceded.
13. Arbitration International, at 646. The phrase ‘eyes of the parties’ is from Art 2.7 of the ICC Rules 1988.
14. Laker Airways Incorporated v FLS Aerospace Limited [1999] 2 Lloyd's Rep 45.
15. This case already has prompted extensive commentary, and the present writers do not propose to discuss further the judgment of Mr Justice (now Lord Justice) Rix. See AH Merjian, ‘Caveat Arbitor,’ 17 Journal of International Arbitration (2000) 31
16. J. Kendall, ‘Barristers, Independence and Disclosure Revisited’ 16 Arbitration International (2000) 343
17. the debate in KVSK Nathan, ‘Barristers in Chambers in England-Paragons of Virtue or Just Being Boys?’ Mealey's International Arbitration Report (1999) 14(12) 23
18. A. Malek and D Quest, ‘Reality of Barrister Arbitrators-A Response to Dr KVSK Nathan’, Mealey's International Arbitration Report (2000) 15(1) 22.
19. Unreported case 1 Nov 1989. There are no published materials at all in the UK. However, there was an anti trust case brought in Arizona, the USA, see PPG Industries Inc, v Pilkington plc, Libbey-Owens-Ford Co. 825 F Supp 1465
20. 1993–1992 Trade Cas. (CCH) P70, 368
21. PPG Industries Inc, v Pilkington, plc, et al 1994 U.S. App. (9th Cir) LEXIS 14427.
22. The challenge in Laker Airways was brought under s 24(1) of the Arbitration Act 1996 (‘justifiable doubts as to his [the arbitrator's] impartiality’), AT&T whereas in the challenge proceeded both under the common law (bias) and the Arbitration Act 1950 (misconduct). In his concurring judgment in AT&T (at 645), Lord Justice Potter stated that the question of whether the legislature introduced through Art 24(1) a statutory definition of bias different from the real danger test ‘remains for future argument’. However, in light of Lord Woolf's express approval of Mr Justice Rix's application of the real danger test, it would seem that there is little room for future argument that the ‘real danger’ test does not apply under the 1996 Act. See also Save and Prosper Pensions Ltd v Homebase Ltd [2001] L & TR 11, in which Judge Rich QC applied the ‘real danger of bias’ test in a challenge under s 24(1) of the Arbitration Act 1996.
23. See Merjian, above n 18, at 31.
24. Different chambers have different arrangements for their cost sharing. For example, they may involve two lawyers sharing the cost of common overheads, eg, rent, secretarial and administrative arrangements or they may extend to a much larger office shared by a number of lawyers who may share not only the rent and the secretarial expenses, but may also employ junior lawyers who work for a number of them. See M Lee, ‘The ICC Perspective’ the ICIA AMINZ Arbitration Seminar, at 49. In his article above n 22, Dr KVSK Nathan questioned whether the confusing relationship between members of chambers would be viewed as a cosy arrangement among ambitious lawyers (at 24). He pointed out that barristers consider themselves as belonging to a specific Chambers, rather than a set of Chambers, and ‘They are much closer knit group than a New York law firm or a firm of London solicitors who employ far more lawyers than the average Chambers. To say that the barristers in the same Chambers are independent of each other is far from the truth’ (at 25).
25. However, in the later issue of Mealey's, Ali Malek QC and David Quest argued for Rix J decision, above n 22.
26. Stephanie E Keer and Richard W Naimark, ‘International Private Commercial Arbitration: Expectations and Perceptions of Attorneys and Business People at the Beginning of the Case’ 30(5) International Business Lawyer, 203.
27. Commonwealth Coatings Corp v Continental Casualty Co, 393 US 145 (1968).
28. US.
29. ANR Coal Co v Cogentrix of North Carolina, Inc, 173 F 3d 493, 499, at n 3 (4th Cir 1999).
30. F 3d.
31. F 3d.
32. Cook Industries, Inc v C Itoh & Co (America) Inc, 449 F 2d 106, 107–8 (2d Cir 1971)
33. cert denied, 405 US 921
34. Cook Industries, Inc v C Itoh & Co (America) Inc, 449 F 2d 106, 107–8 (2d Cir 1971)
35. cert denied, 405 US 921
36. L Ed, at 109.
37. L Ed.
38. cert denied, 464 US 1009 (1983).
39. Under Fed R Civ P 60(b).
40. US, at 679.
41. US, at 680.
42. US.
43. See AS Rau, ‘On Integrity in Private Judging’ 14 Arbitration International (1998) 157, which expressly takes as its subject Judge Posner's ‘tradeoff between impartiality and expertise’, and appears to offer a defence of it on the grounds that arbitration should be understood primarily ‘through the lenses of contract rather than of adjudication’. In the present writers' view, Professor Rau's article is flawed in the same manner as Judge Posner's Merit Ins opinion: it asserts that the contracting parties to arbitration prefer a hearing that is more a form of ‘private self-government’ than a form of private adjudication, so that in arbitration, we are ‘merely searching’ for the ‘rules of the game’, and therefore ‘economic regulation’ instead of morality should be the primary concern. This theory has no empirical foundation.
44. F 2d, at 83–84.
45. F 2d, at 84.
46. F 2d, at 85 n 6.
47. The essential identity of the standards is apparent from the 1974 addition to 28 USC s 455. Subsection (a) provides that ‘[a]ny justice, judge, or magistrate of the United States shall disqualify himself in any proceeding in which his impartiality might reasonably be questioned’ (emphasis added). See also Liteky v United States, 510 US 540, 553 (1994) (‘subsection (a) deals with the objective appearance of partiality) (emphasis in the original). Justice Kennedy's concurring opinion in Liteky explained that, ‘[f]or present purposes, it should suffice to say that s 455(a) is triggered by an attitude or state of mind so resistant to fair and dispassionate inquiry as to cause a party, the public, or a reviewing court to have reasonable grounds to question the neutral and objective character of a judge's rulings or findings. I think all would agree that a high threshold is required to satisfy this standard’ (emphasis added, at 557). The US judicial standard, then, is ’reasonable suspicion’; as this is clearly something higher than mere appearance and lower than actual bias, it is also similar to ‘real danger’-as Lord Woolf observed in AT&T, above.
48. USC, at 496.
49. USC, at 500. The Fourth Circuit set out a four-factor test for the determination of whether a claimant has demonstrated ‘evident partiality’: (i) the extent or character of the arbitrator's personal interest, pecuniary or otherwise; (ii) the ‘directness’ of the relationship between the arbitrator and the allegedly favoured party; (iii) the connection of that relationship to the arbitration; and (iv) the proximity in time between the relationship and the arbitral proceedings.
50. See also Kiernan v Piper Jaffray Co, 137 F 3d 588 (8th Cir 1998), where appellants decided not to challenge an arbitrator pre-award (but post-hearing), upon learning that one of the arbitrators had failed to disclose details regarding her relationships with the other party. Relying on Cook Industries and Merit Ins, the court held that appellants had waived their ‘evident partiality’ claim, and rejected their contentions that they did not have enough information to have knowingly waived their objection and that the arbitral institution (National Association of Securities Dealers) gave them no meaningful option at the time. The court found that ‘while they [appellants] did not have full knowledge of all the relationships to which they now object, they did have concerns about Powers’ impartiality and yet chose to have her remain on the panel rather than spend time and money investigating further until losing the arbitration’ (at 592–3). Appellants, it should be noted, had proposed that the other two arbitrators decide the case, but the opposing party refused.
51. Lord Tenterden CJ in Garnett v Ferrand (1827) 6 B & C 611, at 625–626
52. [1824–1834] All ER Rep 244, at 246.
53. [1975] QB 118
54. [1974] 3 All ER 776
55. [1974] 3 WLR 459
56. JP.
57. Lopes LJ in Royal Aquarium and Summer and Winter Garden Society v Parkinson [1892] 1 QB 431, at 451
58. [1891–1894] All ER Rep 429, at 436.
59. [1974] AC 727.
60. [1977] AC 405.
61. AC.
62. AC, at 758.
63. AC, see Lord Simon and Lord Wheatley, at 423 and 428.
64. [1985] 2 All ER 161
65. [1985] 1 EGLR 86.
66. DAC Report, at 296.
67. Corey v New York Stock Exchange 691 F 2d 1205. The court said: ‘Extension of arbitral immunity to encompass boards which sponsor arbitration is a natural and necessary product of the policies underlying arbitral immunity; otherwise the immunity extended to arbitrators is illusion-ary. It would be of little value to the whole arbitral procedure to merely shift the liability to the sponsoring association’ (at 1211).
68. L Ed, at 649–650.
69. Gahn v International Union Ladies' Garment Workers Union 311 F 2d 113 (3rd Cir 1962), at 114–115.
70. Hoosack Tunnel, Dock and Elevator Co v O'Brien 137 Mass 424 (1984), at 426.
71. See also Bradley v Fisher above n 81, at 349.
72. Mass.
73. Mass.
74. Mass.
75. Mass, at 115.
76. Also see Cooper v O'Connor, 69 App DC 100
77. Hohensee v Goon Squad, 171 F Supp 562, 568, 569 nM.D.Pa 1959)
78. Hoosac Tunnel Dock & Elevator Co v O'Brien, 137 Mass. 424, 426 (1884)
79. Craviolini v Scholer & Fuller Associated Architects, 89 Ariz 24
80. US, at 397.
81. US.
82. US, at 1211.
83. The prevailing party in the arbitration may have the opportunity to recover all or part of the arbitral tribunal's fees.
84. This phrase is from a ‘non-legal’ source: C Lane, ‘The Tainted Sources of “The Bell Curve” ’ The New York Review of Books (1 Dec 1994), at 18.
85. Merlin, 9 ‘Recueil Alphabétique de Questions de Droit’ (4th edn 1829), at 144
86. translation see A Samuel, Jurisdictional Problems in International Commercial Arbitration: A Study of Belgian, Dutch, English, French, Swedish, Swiss, US and West German Law (Zürich and Schulthess: Polygraphischer Verlag Zurich, 1989), at 34.
87. Jurisdictional Problems in International Commercial Arbitration: A Study of Belgian, Dutch, English, French, Swedish, Swiss, US and West German Law, at 144.
88. See J Lew, The Applicable Law in International Commercial Arbitration (Dobbs Ferry, NY: Oceana Publications, 1978), at 54.
89. J. Foelix, Traite du Droit International Prive (2nd edn 1847), at 461
90. translation see Samuel, above n 92 at 35.
91. [1986] 2 Lloyd's Rep 301.
92. Lloyd's Rep, at 306.
93. Lloyd's Rep.
94. M Mustill and S Boyd, The Law and Practice of Commercial Arbitration in England (2nd edn 1989), at 223.
95. Hong Kong Ordinance 1996, ch 341, s 2GM.
96. Moutulsky, Ecrits, Dalloz, Paris (1974) at 14
97. translation see Samuel, above n 92, at 55.
98. Ecrits.
99. Mann, ‘Lex Facit Arbitrum’, in P Sanders (ed), International Arbitration: Liber Amicorum for Martin Domke (1967), at 106.
100. Niboyet, Traité de Droit International Privé Français (Paris, 1950), para 1985, at 137
101. cited from Lew, above n 93 at 53. Although upholding the status theory of arbitrator, Lord Mustill does not agree with the analogy between arbitrator and judges, above n 115 at 223.
102. H. Yu and E Sauzier, ‘From Arbitrator's Immunity to the Fifth Theory of International Commercial Arbitration’ 3 International Arbitration Law Review (2000) 114.