Selecting the right referee
In the previous three columns on arbitration, we have looked at the value of following this route to dispute resolution as opposed to taking a dispute to court, and at how arbitration works.
Monday 9 April 2012, 12:34PM
In this, the fourth and final article in the series, we look at one crucial aspect: how the arbitrator or arbitration panel is chosen.
One of the advantages of arbitration proceedings over domestic court proceedings is the opportunity for the parties involved in a dispute to select the person or people who will decide on the issue in question – the arbitrators.
In arbitration proceedings, the contending parties can nominate arbitrators with the specialised and up-to-date knowledge required to understand the technical background of the issues in question.
Section 17 of the 2002 Arbitration Act of Thailand (“the Act”) states that the number of arbitrators forming the tribunal must be an uneven number.
If the parties nominate an even number, the arbitrators will need to choose another arbitrator to create an uneven number.
If the parties fail to agree on the number of arbitrators, Section 17 further provides that a sole arbitrator will be appointed.
Section 19 of the Act requires that the arbitrator be “independent and impartial” and possess the particular qualifications, if any, agreed by the parties.
Interpretation of the terms “independent” and “impartial” is highly controversial and subject to dispute but, in general, the lack of close relations between an arbitrator and either party in the dispute means the arbitrator is “independent”
“Impartiality” refers to the arbitrator’s lack of prejudice with respect to a party or the matter in dispute. Such definitions are, however, still very vague.
Some guidance has been provided by the International Bar Association (IBA) in its Guidelines on Conflicts of Interest in International Arbitration (Guidelines).
While the Guidelines are not legally binding, the standards they articulate are generally accepted, and parties and arbitrators often use and cite them when the assessment of an arbitrator’s independence or impartiality is at issue.
A potential arbitrator may, for example, turn to the Guidelines to determine what facts he is required to disclose before accepting appointment as an arbitrator. Alternatively, for example, a party may turn to the Guidelines to determine under what circumstances they may nominate or challenge an arbitrator.
Some of the most common issues that need to be assessed when determining whether or not an arbitrator is adequately independent and impartial are:
the relationship between either party and the arbitrator;
the relationship between either party and an arbitrator’s law firm;
the relationship between an arbitrator and either party’s counsel;
previous appointments as an arbitrator (repeated appointments by one of the parties);
ex-parte contacts immediately before the appointment – in other words the arbitrator has had discussions that exclude one of the parties to the dispute;
non-disclosure of any of the above.
It must be noted that none of the above, in itself, determines that a potential arbitrator is not independent or not impartial. The determination will always depend on the circumstances of an individual case.
And even if no issue raises sufficient doubt of independence or impartiality at a particular stage of the arbitration proceedings, the arbitrator is duty bound to disclose any issue that arises later in the proceedings, for the relevant parties’ consideration.
If a party in the dispute believes that an appointed arbitrator is not independent or impartial, they have the right to challenge that arbitrator. The procedure for challenging an appointed arbitrator is dictated by the relevant arbitration institute’s rules and by the Act.
Where it is decided that an arbitrator was not independent or impartial at the time of appointment or was no longer independent or impartial later in the proceedings, that arbitrator will then be removed from the arbitral tribunal and replaced.
With regard to the arbitrator’s independence and impartiality, it is noteworthy that Section 23 of the Act (somewhat controversially in relation to most other jurisdictions’ arbitration legislation) imposes criminal sanctions on any arbitrator for “wrongfully demanding, accepting, or agreeing to accept an asset or any other benefit for himself or anyone else for doing or omitting to do any act in his duties”.
Choosing the right arbitrator with the right skills, who will make the right decisions, is among the most important and sometimes also the most difficult decisions in the arbitration proceedings.
Whether the right choice is someone with the appropriate legal training, skills and experience, or whether it is someone with specialised or “hands-on” expertise will depend on the dispute that gave rise to the claim.
Competent legal counsel with solid arbitration experience will be able to help the parties in making the right choice of arbitrators, and will also be able to identify issues that make it advisable to challenge an arbitrator.
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