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Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
'est modus in rebus' (Horace, Satire I.1)
The ICC International Court of Arbitration (hereafter 'the Court') has a long and rich history of dealing with questions of arbitrator independence. Through the administration of over 15,000 cases from around the world, the Court has acquired knowledge of the varying standards that may exist in different legal systems and cultures. Over the years, the Court has been able to follow the developments taking place and adapt its practices as appropriate.
The Court does not apply a single standard to all cases, but rather decides the questions in each case on their own merits. Although the Court does not give reasons for the decisions it makes in individual cases on matters relating to independence, 1 it endeavours to ensure that general trends in the issues arising and the responses given are made known, so as to raise awareness of the Court's practice. This is done through conferences, training courses, research, liaison with other institutions, associations and governments, and through publications. Such communication is intended to be of benefit not only to the practice of ICC arbitration but also to the development of international arbitration law in general.
This article aims to present the Court's practice related to independence as it has developed under the latest version of the ICC Rules of Arbitration ('the Rules'), which entered into force on 1 January 1998. 2 It is therefore based on a study of cases that have been presented to the Court from 1998 to 2006. 3 After an introductory overview of the kinds of situations in which independence issues may arise, the provisions laid down[Page7:] in the Rules for dealing with such situations will be presented. It is these provisions that form the basis of the Court's practice, which is the main subject of this article. That practice will be examined at two stages of the procedure: firstly, at the time of the appointment or confirmation of arbitrators, and then in the event of a challenge, resignation or replacement of a member of an arbitral tribunal. At each stage, a selection of Court decisions will be reviewed. Finally, certain issues that have been raised in public discussions on the Court's approach to independence will be addressed.
I. Overview of independence issues
The subject of arbitrator independence has risen to greater prominence over recent years, due to the changing environment in which international arbitration is taking place. 4 The growing complexity of international business, the increasing number of multiparty and multicontract cases, as well as the multiplication of related proceedings, have led to numerous issues concerning independence. In addition, changes in legal practice and organization, including the international expansion and merger of law firms, the creation of associations and networks of law firms, the linking of law firms and accounting firms, and the varied nature of the positions occupied by lawyers within law firms, have made independence a focus of increasing attention due to the emergence of new issues.
The questions arising in relation to independence may vary depending upon the status of an arbitrator. For example, the issues facing academics and non-practising lawyers are generally different from those facing lawyers practising within law firms. The type of law firm with which an arbitrator is associated, which may vary from a boutique firm to a large multinational firm or a firm in a network or alliance, will often be significant. Furthermore, the role of an arbitrator within a firm may also have an impact on his or her conflict situation. 5
Although the types of situations in which independence issues arise are extremely varied, they can be broadly categorized under the following headings: the arbitrator's relationship with one or more of the parties, the arbitrator's relationship with an entity linked to a party, the arbitrator's relationship with counsel or an entity linked to counsel, the arbitrator's relationship with a State, and the arbitrator's role in a related matter. Below, a number of trends characterizing each of these categories will be discussed by way of background to the more detailed analysis of Court decisions that follows.
1. Arbitrator's relationship with a party or parties
Where there is a direct relation between the arbitrator and a party, the arbitrator will often feel either prevented from accepting the case or obliged to make a disclosure. The situation may not be so clear-cut, however, for arbitrators in law firms with a network of[Page8:] offices who have themselves no direct involvement with a party but have a colleague in another office who may be working or have worked even on an unrelated matter. The repeated nomination of an arbitrator by a party can also raise issues, as arbitrators adopt different approaches to the question of how many nominations require disclosure. The common practice of interviewing prospective arbitrators by parties has also led to queries about how much contact between parties and arbitrators can be regarded as acceptable. 6
2. Arbitrator's relationship with an entity linked to a party
As the structures used in international business relations become increasingly complex, independence issues now seem to arise more frequently in connection with entities linked to a party rather than from direct relations. This may well be due to the fact that in such situations arbitrators are more inclined to see themselves as independent and thus accept the case, whereas they would be more inclined to refuse a nomination when the link is more direct. Also, the increasing use of computerized conflict searches by nominated arbitrators has led to a greater awareness of indirect links that might not necessarily have come to an arbitrator's attention previously. There may nonetheless still be cases in which arbitrators are unaware of the existence of an entity linked to a party at the time they are nominated and where this information becomes known only during the course of the proceeding. Interesting questions also arise concerning an arbitrator's relations with a party's competitor in certain restricted markets.
3. Arbitrator's relationship with counsel or an entity linked to counsel
As previously mentioned, the increasing globalization of law firms and the creation of networks and alliances have made the occurrence of conflicts and disclosures more frequent, especially where arbitrators are part of a firm, but also for individual arbitrators. Questions of independence also arise concerning arbitrators who are acting or have acted with counsel either as members of the same arbitral tribunal or as co-counsel in other matters.
4. Arbitrator's relationship with a State
The increasing involvement of States and State entities in international arbitration has inevitably led to a rise in the number of arbitrators proposed by States and State-related parties. This differs from the past, when such parties often decided not to participate in the proceedings. Independence issues may occur when, for example, the arbitrator nominated by a State or State-related party is or has been employed by the State, especially when outside the ministry or department directly involved in the dispute. In developing economies where the State has a strong presence, the pool of potential[Page9:] arbitrators may be limited, which sometimes raises questions as to how far connections between the State and a proposed arbitrator are acceptable in such situations. This is a particularly sensitive matter, due to the desirability of encouraging State participation in the procedure.
5. Arbitrator's role in a related matter
The huge growth in the number of procedures taking place before arbitral tribunals and State courts has naturally caused an increase in the number of independence issues flowing from the existence of related matters. Often, arbitrators will not disclose the fact that they are acting in a related matter, as they assume that it is common knowledge. This may be acceptable when the same parties, counsel and arbitrators are involved in the different matters, but on many occasions the players will not be identical. When an arbitrator is proposed in a related matter, particularly where some of the issues are the same, it will be necessary to consider the proposed arbitrator's access to information if the parties, the counsel or the other arbitrators involved are different. Consideration will also need to be given to the stage the proceedings have reached, so as to avoid the risk of the arbitrator prejudging an issue. The proliferation of proceedings that have given rise to decisions and published opinions has also led to other questions of possible prejudgment. 7
II. Article 7 of the ICC Rules
The Court's approach to independence is based on Article 7 of the Rules.
Article 7(1) states as follows: 'Every arbitrator must be and remain independent of the parties involved in the arbitration.' There is no definition of independence set forth in the Rules, which allows greater flexibility for the Court to evaluate the circumstances of each case. 8 It should be noted that the requirement laid down in Article 7(1) is an ongoing obligation, as the arbitrator must be independent at the beginning and remain so throughout the procedure.
Article 7(2) sets forth a requirement to disclose facts and circumstances affecting independence before the appointment or confirmation of an arbitrator. Article 7(3) extends this requirement throughout the course of the arbitration.
Finally, Article 7(4) specifies that: 'The decisions of the Court as to the appointment, confirmation, challenge or replacement of an arbitrator shall be final and the reasons for such decisions shall not be communicated.' [Page10:]
The above-mentioned provisions of Article 7 will be considered in further detail below as applied to the different phases of the procedure.
III. ICC Court practice
The practice of the ICC Court in relation to arbitrator independence will be considered firstly at the time the arbitral tribunal is constituted and then at the post-constitution stage.
1. Independence issues at the stage of constituting the arbitral tribunal
The requirement of independence under Article 7(1) applies to all arbitrators in ICC proceedings, whether proposed by the parties or the co-arbitrators and confirmed by the Court, or whether appointed by the Court. 9 It also exists regardless of whether the person is a sole arbitrator, co-arbitrator or tribunal chairman. Pursuant to Article 7(2), a prospective arbitrator must complete a Declaration of Acceptance and Statement of Independence, indicating that he or she accepts to serve as an arbitrator under the Rules. 10 In the event of acceptance, the arbitrator must also 'disclose in writing to the Secretariat any facts or circumstances which might be of such a nature as to call into question the arbitrator's independence in the eyes of the parties'. This is not a totally objective standard, but rather a subjective test, which takes into account independence viewed 'in the eyes of the parties'. The Court's decision on whether or not to appoint or confirm an arbitrator, on the other hand, is based on an objective standard.
The Statement of Independence provides that in deciding what to disclose, the prospective arbitrator should take into account, inter alia, 'whether there exists any past or present relationship, direct or indirect, with any of the parties or their counsel, whether financial, professional or of another kind . . . Any doubt should be resolved in favor of disclosure.' Applying this standard, the nominee must decide whether to file an unqualified or qualified Statement of Independence. In the case of an unqualified Statement of Independence, the nominee is required to declare as follows:
I am independent of each of the parties and intend to remain so; to the best of my knowledge, there are no facts or circumstances, past or present, that need be disclosed because they might be of such nature as to call into question my independence in the eyes of any of the parties.
If the Statement of Independence is qualified, the prospective arbitrator declares as follows:
I am independent of each of the parties and intend to remain so; however, in
consideration of Article 7, paragraphs 2 & 3 of the ICC Rules of Arbitration, I wish to call[Page11:] your attention to the following facts or circumstances which I hereafter disclose because they might be of such a nature as to call into question my independence in the eyes of any of the parties.
When an arbitrator has been proposed by the parties or the co-arbitrators, the arbitrator's Statement of Independence and curriculum vitae are sent by the Secretariat to the parties prior to confirmation. If the Statement of Independence is qualified, the parties are given a time limit in which to provide their comments or objections. If it is unqualified, then no time limit is given. If the prospective arbitrator has submitted an unqualified Statement of Independence or a qualified Statement of Independence that has not given rise to any objection, he or she may be confirmed by the Secretary General of the Court ('Secretary General') pursuant to Article 9(2). 11 Under this provision, if the Secretary General considers that an arbitrator should not be confirmed, the matter is submitted to the Court.
Between 1998 and 2006, 8,085 arbitrators were appointed or confirmed in ICC cases. 12 Over that period, the number of arbitrators confirmed was 5,661, of which 1,670 (29.5%) were confirmed by the Court and 3,991 (70.5%) by the Secretary General. Of these confirmations by the Secretary General, 633 (15.9%) were on the basis of qualified Statements of Independence. It is interesting to note that, despite the disclosures made by these arbitrators, there was no need for a Court decision, since no objections were raised, and the matter could therefore move forward rapidly following confirmation by the Secretary General.
In the event that an arbitrator is appointed by the Court, the appointment is generally made upon the proposal of an ICC National Committee. 13 The Court will not normally accept a qualified Statement of Independence from an arbitrator proposed by a National Committee, since the Court seeks to ensure absolute independence for all appointments that it makes. 14 Also, when the Court makes an appointment, the parties are not sent the arbitrator's Statement of Independence and curriculum vitae before the appointment, so, from a practical viewpoint, no time limit can be granted to the parties for possible objections, as is required with qualified Statements of Independence.
Due perhaps to confusion between the Court's differing approaches to qualified Statements of Independence when appointing as opposed to confirming arbitrators, it is sometimes mistakenly stated that if a prospective arbitrator files a qualified Statement of Independence, he or she will not be confirmed by the Court. This erroneous belief may cause some prospective arbitrators to hesitate in filing a qualified Statement of Independence. It should be emphasized once again, however, that under current[Page12:] practice, only appointments upon proposals from National Committees require unqualified Statements of Independence. Indeed, statistics show that the vast majority of arbitrators who file qualified Statements of Independence upon being nominated by the parties or the co-arbitrators are subsequently confirmed by the ICC. During the period 1998-2006, 1,055 arbitrators submitted qualified Statements of Independence. Of these arbitrators, 925 were confirmed by the Court or Secretary General, leaving only 130 arbitrators not confirmed by the Court after having submitted qualified Statements of Independence. Therefore, 87.7% of arbitrators were confirmed after submitting qualified Statements of Independence.
For the year 2006 alone, 153 prospective arbitrators submitted qualified Statements of Independence in ICC cases. Of these, 133 (86.9%) were confirmed , 15 leaving 20 non-confirmations. It is interesting to note that in 2006, there were only 22 objections raised by parties following qualified Statements of Independence. From these statistics, one can conclude that the submission of a qualified Statement of Independence does not often lead to an objection, 16 and that on most occasions arbitrators who have submitted qualified Statements of Independence are nevertheless confirmed.
When an objection is made on the basis of a qualified or unqualified Statement of Independence prior to confirmation, the Secretariat will invite the other side to provide its comments. Generally, the nominee is not informed of the objection, so as to preserve the prospective arbitrator's neutrality. 17 The Court uses its discretion in determining whether the objection has been raised in good faith, or whether it is dilatory and frivolous. Traditionally, the Court has preferred not to confirm an arbitrator if there seems to be a reasonable basis for the objection. This is in keeping with the Court's wish to maximize confidence in the arbitral tribunal from the outset. In deciding whether or not to confirm an arbitrator, the Court will also consider possible difficulties that may be encountered during the procedure or at the time of an award if the arbitrator is confirmed. As noted above, pursuant to Article 7(4) of the Rules, the Court's decisions on the appointment or confirmation of an arbitrator are final and the reasons for such decisions are not communicated.
It is pointed out in the Statement of Independence that any doubt as to what should be disclosed by a prospective arbitrator 'should be resolved in favor of disclosure'. Although the Court and its Secretariat do not themselves carry out investigations with respect to disclosures, it sometimes happens that the Secretariat is aware of information that has not been disclosed by an arbitrator but which it considers should be drawn to the parties' attention. The Secretariat may in that case contact the nominee and bring this to his or her attention. It is of course the arbitrator's decision as to what will be disclosed. However, the Secretariat may inform the Court of an arbitrator's failure to disclose information if and when the Court is required to decide whether the arbitrator should be confirmed. In a recent case, the Court decided not to confirm an arbitrator[Page13:] who had been contacted by the Secretariat and who had refused to make a disclosure, despite the fact that none of the parties had objected to the arbitrator's confirmation. 18
There have been occasions when no objection was made to a confirmation but a party requested further information from an arbitrator and the Secretariat forwarded such request to the nominee. Often, the party did not object after receiving the additional information. It may therefore be advisable for a nominee to respond to reasonable requests for information since clarification may sometimes help to reinforce a party's confidence in the arbitrator. However, parties' expectations as to what constitutes reasonable disclosure may vary from culture to culture. In several cases, for example, US parties have submitted multiple-page questionnaires that they expected a proposed arbitrator to complete. The Secretariat did not require the nominee to complete such documents, as according to the Court's practice, only the standard ICC documents need to be filed. Once again, the nominee must determine the type of disclosure that he or she considers reasonable in such a situation.
Finally, the Court has sometimes been confronted with particular requirements concerning independence that arise from the parties' contract. In a very limited number of cases, parties have included in their contract wording that would require the appointment or confirmation of a non-independent arbitrator. In such cases, the Court has given priority to the mandatory requirement of independence laid down in the Rules. 19
The table below20 gives a breakdown of the number of decisions relating to the confirmation, non-confirmation and appointment of arbitrators in ICC proceedings during the years 1998-2006.
[Page14:]
Against the background described above, consideration will now be given to examples of Court decisions on independence issues arising at the stage of confirming arbitrators. A distinction will be made between those decisions where the arbitrator was confirmed and those where the Court decided against confirmation.
1. Confirmation of the arbitrator by the Court
There are four possible scenarios that may arise when arbitrators are confirmed by the Court. Arbitrators can be confirmed (i) with unqualified Statements of Independence and no objections from the parties; (ii) with unqualified Statements of Independence and objections from the parties; (iii) with qualified Statements of Independence and no objections from the parties; or (iv) with qualified Statements of Independence and objections from the parties. Each of these categories will be examined in turn below.
This is the most common situation in which an arbitrator is confirmed. 21 The arbitrator does not consider that 'in the eyes of the parties' there is any information that needs to be disclosed and no one objects to his or her confirmation. 22
A party may in certain cases raise an objection to confirmation even where an arbitrator has filed an unqualified Statement of Independence. The objection may be based on information that a party already possesses or which it acquires as a result of searches conducted after the nomination of the arbitrator. In several cases, for example, parties have objected to an arbitrator on the basis of information found on Internet that was not disclosed by the arbitrator. Below are some examples of cases in which the Court decided to confirm the nominated arbitrator in spite of an objection following an unqualified Statement of Independence.
Case 1. The claimant objected to the arbitrator nominated by the respondent, alleging that the nominee had been contacted directly by the respondent's representative before his confirmation. The respondent's counsel replied that there had been 'no substantive contact with [the arbitrator] and no alteration of his neutral status or other impropriety'. It appeared that the nominee had simply been approached to ascertain his availability to serve as an arbitrator and that there was no discussion of the merits of the case.
Case 2. The respondent objected to the arbitrator nominated by the claimant on several grounds, including (i) that the arbitrator had not disclosed that he was a partner of a law firm and that he or that firm had advised the owner of the claimant; (ii) that the arbitrator had personal contacts with the owner of [Page15:]the claimant; and (iii) that the arbitrator taught the owner's children. In response, the claimant submitted a statement from the proposed arbitrator declaring that he had not acted as a lawyer for four years, but only as an arbitrator, and that his only contact with the law firm was for logistical support, that furthermore he was not aware of any conflict of interest between himself or the law firm and the owner of the claimant, and that he did not know the owner of the claimant or the owner's children. In addition, the claimant submitted a statement signed by its owner indicating that he had never had any contact with the arbitrator and that none of his companies had ever had contractual relationships with the firm.
Case 3. The respondent objected to the arbitrator nominated by the claimant, alleging that he was the official reviewer of a draft law that had been prepared by a partner in the law firm of the claimant's counsel and that he had furthermore co-authored various scientific publications with the same individual. The claimant responded that it was not represented by the partner referred to by the respondent and that, in any event, the arbitrator's independence could not be called into question.
Case 4. The respondent objected to the arbitrator nominated by the claimant, alleging that he had co-authored a law treatise with the claimant's counsel and that the two men had previously worked in the same law firm. The respondent argued that the arbitrator should have disclosed these facts. The claimant responded that the two lawyers had worked together as partner and senior associate in the same law firm more than nine years previously. According to the claimant, the relationship had ended long before and no disclosure was required.
Case 5. The claimant objected to the arbitrator nominated by the respondent, a State party, alleging that he had worked for the government of that State as an employee of the Ministry of Justice and as Solicitor General and that he had acted as defence counsel for the government in several ICC arbitrations. The respondent answered that the nominee had ceased to be employed by the government almost four years previously. Furthermore, the nominee had not worked for the governmental department directly responsible for the project in dispute.
Case 6. The claimant objected to the arbitrator nominated by the respondent, claiming that the arbitrator had not disclosed that he and the respondent's counsel had been members of the same parliament during a certain period of time in the past and members of the same political party.
Case 7. The claimant objected to confirmation of the arbitrator nominated by the respondent on the grounds that the respondent was a State-controlled entity and that the co-arbitrator had contacts with the State. More specifically, the claimant alleged that the nominee had not disclosed that he had business relations with official governmental entities, that he had been named the director of a regional arbitration centre by the State and that he had acted as a private consultant advising numerous State-owned entities. The respondent answered that it was no longer a State-owned company as its privatization process had been completed approximately one year before. It added that even before the privatization process it had never been directly controlled by the State and its day-to-day management had not been in the hands of the State. Upon a request for clarification by the claimant, the proposed arbitrator indicated that he understood that the respondent was a privatized company and that he had never acted for the respondent in the past and had no direct or indirect relationship with the party. Nevertheless, the claimant maintained its objection.
Other examples of objections made to confirmations based on unqualified Statement of Independence include allegations of a personal relationship because the nominated[Page16:] arbitrator had worked with the counsel in various academic settings, Bar activities or professional organizations, and the contention that the nominated arbitrator lacked independence as he was a member of the ICC Court or an ICC National Committee. In all of these cases, the Court confirmed the nominee.
In these matters, where no objection is raised following receipt by the parties of a qualified Statement of Independence, confirmation can be decided either by the Court or the Secretary General. Much importance is of course attached to the absence of an objection when deciding whether or not to confirm the arbitrator. 25 Below are some examples of cases in which arbitrators were confirmed after submitting qualified Statements of Independence that had not given rise to any objections. In several of these examples, the lack of objection may seem surprising given that the disclosure was imprecise as to the timing and duration of the circumstances. This imprecision sometimes led to follow-up questions from the parties.
Case 1. The arbitrator nominated by the claimant indicated that one of his partners had acted as counsel for the claimant in the past in an unrelated matter. In addition, some lawyers from his firm had acted for companies belonging to the same group as the claimant.
Case 2. The respondent nominated an arbitrator who indicated that several offices of his law firm had ongoing attorney-client relations with the respondent, but the work was unrelated to the dispute, did not involve the arbitrator personally and did not involve significant amounts of money.
Case 3. The chairman nominated jointly by the co-arbitrators disclosed that he had acted recently as an arbitrator in a case involving one of the claimants. He also indicated that his law firm was currently providing services to one of the respondents and was involved in a State court action involving a subsidiary of one of the claimants.
Case 4. The arbitrator nominated by the claimant disclosed that in the past he had acted as a consultant for a subsidiary of the claimant, but there were no continuing links.
Case 5. The arbitrator nominated by the claimant disclosed that her law firm was at the time acting as counsel to the lender with respect to loan facilities for entities belonging to the claimant's group, although she had never acted personally for any of the parties.
Case 6. The arbitrator nominated by the claimant disclosed that his law firm had assisted one of the claimant's affiliates in the past.
Case 7. The arbitrator nominated by the respondent disclosed that he and his law firm had advised a company in which the respondent held a majority interest. [Page17:]
Case 8. The arbitrator nominated by the claimant disclosed that he worked part-time as a consultant for a law firm with a regional office that had represented a shareholder of the claimant on one previous occasion.
Case 9. The arbitrator nominated by the claimant disclosed that his law firm was at the time representing a party in State court proceedings in which the counsel to the claimant in the arbitration represented the opposing party.
Case 10. The arbitrator nominated jointly by the claimants indicated that he had previously given legal opinions in four matters for other clients of the claimant's counsel.
Case 11. The arbitrator nominated by the claimant stated that he had given legal opinions for a party in a non-ICC case in which a lawyer from the firm representing the claimant had acted as counsel. He also disclosed that he was involved as co-counsel with one of the claimant's counsel in two unrelated cases. He was also co-editor, with the claimant's counsel, of a book on arbitration. Finally, he also stated that he had given legal opinions for clients represented by counsel for one of the respondents in an unrelated case.
Case 12. The arbitrator nominated by the respondent disclosed that he had worked in the same law firm as one of the respondent's counsel six years previously but no longer had any professional relationship with that person.
Case 13. The arbitrator nominated by the claimant stated that on several occasions she had acted as mediator with the claimant's counsel and other members of the law firm to which that counsel belonged.
Case 14. The arbitrator nominated by the respondent (a State party) disclosed that he had been employed by that State more than twenty years previously in various positions, including even that of minister.
Case 15. The arbitrator nominated by the respondent indicated that he had acted as the chairman of the arbitral tribunal in an ICC case in which the respondent was a party.
Case 16. The arbitrator nominated by the claimant disclosed that he had acted twice as the chairman of the arbitral tribunal in former proceedings in which the claimants belonged to the same group as the claimant in the new proceedings.
In these cases, as there is an objection, only the Court can decide whether or not the arbitrator should be confirmed. Below are some examples of cases in which the Court decided to confirm an arbitrator despite an objection to a qualified Statement of Independence.
Case 1. The arbitrator nominated by the respondent indicated that seven years previously she had rendered a legal opinion for the respondent. The claimants objected to her confirmation, alleging that she had not mentioned the subject of the legal opinion, that the law firm for which she worked when she wrote the opinion might conceivably still have close relations with the respondent, and that she might still have close relations with that firm. The respondent replied that the nominee had not been retained by the respondent after her legal opinion, that the opinion concerned an unrelated project, and that there was no personal or business relationship between the proposed arbitrator and the respondent. The claimants nevertheless maintained their objection.
Case 2. The arbitrator nominated by the respondent disclosed that he and the respondent's counsel had participated together in several professional[Page18:] organizations, and that they had also acted together as co-arbitrators in two prior cases during the previous two years. The claimant objected to his confirmation.
Case 3. The arbitrator nominated by the claimant disclosed that two years previously he had considered retaining the claimant's counsel in an unrelated, personal matter, but that he had instead retained another firm. The contact was limited to two telephone calls. The respondent raised an objection.
Case 4. The arbitrator nominated by the claimant indicated that he had been a classmate of the claimant's counsel at law school, but that they had no current relationship or common interest. The respondent objected to his confirmation.
Case 5. The arbitrator nominated by the respondent disclosed that five years previously he had given advice to a law firm in which one of the claimant's counsel then worked. The claimant objected to his confirmation.
Case 6. The arbitrator nominated by the respondent disclosed that she had been an employee of the Ministry of Foreign Affairs of the State that was a party to the arbitration, but that her employment had terminated ten years previously. The claimant objected, arguing that she had held the same position as the person representing the respondent and that she was presently acting as counsel for a public group. The respondent replied that there was no relationship between the nominated arbitrator and its representative, and that the group for which the nominated arbitrator worked was a privately owned company that had been registered for many years. The claimant maintained its objection.
Case 7. The arbitrator nominated jointly by the claimants disclosed that she had acted in two previous ICC arbitrations, one of which had not proceeded to a hearing. Both cases had involved the same parties and different provisions of the same agreement. In both cases she had been nominated by the claimants. The respondent objected to her confirmation, arguing that the repeated nominations were an adequate sign of bias and that she might apply knowledge obtained in the prior proceedings to decide the matter. The claims presented in the different matters were not identical. Additionally, the parties and counsel on both sides were the same as in the previous arbitrations, so there was no problem of unequal access to information. In the new arbitration, however, the respondent had chosen to nominate a different arbitrator.
These examples of confirmation following a qualified Statement of Independence demonstrate that in many cases disclosure does not prevent an arbitrator from being accepted by the Court even when there has been an objection. Indeed, it is preferable that an arbitrator make a disclosure so that any objections can be dealt with by the Court at the outset rather than in a subsequent challenge proceeding.
2. Non-confirmation of the arbitrator by the Court
Statistics show that only in a relatively small number of cases has the Court decided not to confirm arbitrators nominated by parties or the co-arbitrators. Between 1998 and 2006, the total number of arbitrators not confirmed by the Court was only 169, 26 of whom 130 had filed qualified Statements of Independence and 39 unqualified[Page19:] Statements of Independence. 27 More recently, in 2006, only 27 arbitrators were not confirmed by the Court, 20 of whom had filed qualified Statements of Independence. 28 A review of the cases in which arbitrators have not been confirmed tends to suggest that non-confirmation does not result from a single fact or circumstance but from an accumulation of factors that convince the Court that confirmation would not be the proper way to proceed. Below are some examples of non-confirmation grouped into four categories: (i) unqualified Statements of Independence with no objection from the parties; (ii) unqualified Statements of Independence with objections from the parties; (iii) qualified Statements of Independence with no objections from the parties; and (iii) qualified Statements of Independence with objections from the parties.
It is extremely rare for the Court not to confirm an arbitrator if none of the parties has raised an objection. In the cases where this has occurred, it has often been due to the fact that there was a non-participating party. In a few cases, however, the Court has decided not to confirm an arbitrator who filed an unqualified Statement of Independence even though all parties were participating in the proceedings and no objections had been raised. In certain of these cases, parties withheld their objections to the other side's nominee pending a decision on the arbitrator they had themselves nominated. Below are some examples of cases in which the Court did not confirm arbitrators who had submitted unqualified Statements of Independence to which no objections were made.
Case 1. The arbitrator nominated by the claimant filed an unqualified Statement of Independence, without disclosing that he had been nominated by the same party in three related ICC cases involving the same counsel to the claimant. Neither the respondent nor its counsel was involved in the other two related matters. When contacted by the Secretariat enquiring whether he would consider making a disclosure, the arbitrator refused such disclosure.
Case 2. The arbitrator nominated by the claimant filed an unqualified Statement of Independence, without mentioning the fact that he had previously been nominated in an ICC case but had refused the nomination as one of the parties was a client of his firm. That party had been identified as a related entity in the new case. The Secretariat contacted the arbitrator to draw his attention to this, but he refused to make a disclosure. There was no certainty that the respondent knew of the relation between the proposed arbitrator's firm and the related entity.
Case 3. The arbitrator nominated by the claimant filed an unqualified Statement of Independence. He omitted to disclose that his firm was at the time representing the claimant's ultimate parent company and its affiliate. The respondent declared that it did not object to the claimant's proposed arbitrator 'for the moment' and kept its potential objection in abeyance pending the Court's decision on the[Page20:] arbitrator it had itself nominated, who had submitted a qualified Statement of Independence. The Court decided not to confirm either of the co-arbitrators.
Case 4. The arbitrator nominated by the respondent filed an unqualified Statement of Independence, without disclosing that he was involved in other proceedings already ongoing between the same parties. The claimants indicated that they did not object to confirmation of the arbitrator nominated by the respondent, provided the Court confirmed the arbitrator they had themselves proposed. The Court decided not to confirm either of the two co-arbitrators.
As previously mentioned, parties sometimes raise objections despite the fact that an arbitrator has filed an unqualified Statement of Independence. If the information upon which the objection is based should have been disclosed, this may weigh in favour of not confirming the arbitrator. Below are some examples of non-confirmation when there has been an unqualified Statement of Independence followed by an objection.
Case 1. The arbitrator nominated by the respondent filed an unqualified Statement of Independence. The claimant objected, alleging that the arbitrator was the acting director of a company that had an indirect shareholding in the respondent. Indeed, the company of which the arbitrator was a director was the largest shareholder of another company that in turn was the respondent's biggest shareholder.
Case 2. The arbitrator nominated by the claimant submitted an unqualified Statement of Independence. The respondent objected to his confirmation, stating that he had represented the respondent's predecessor in a previous ICC arbitration with a fact pattern similar to the new case. The respondent also alleged that when defending its predecessor, the nominee had obtained confidential information about the respondent and its line of defence in similar matters. According to the respondent, the nominee's firm had been removed as counsel from the previous arbitration because of disagreement over the handling of the case. Finally, the respondent indicated that the nominee's firm acted as counsel for one of the respondent's main competitors in a limited market. The claimant responded that as the nominee's firm had been removed from the case no confidential information could have been received by him; that there was no link with the new case as the parties and the facts were different; that the nominee was to act as co-arbitrator and not as counsel of one of the parties; that the respondent had no link with its competitor, and the fact of being competitors had no effect on the present arbitration. The respondent, however, maintained its position, stressing the importance of the relationship with a competitor in a limited market.
Case 3. The arbitrator nominated by the respondent submitted an unqualified Statement of Independence. The claimant objected to his confirmation, alleging that the law firm to which the arbitrator belonged was the correspondent of the law firm to which the respondent's counsel belonged. Both firms were members of a law firm alliance.
Case 4. The arbitrator nominated by the respondent filed an unqualified Statement of Independence. The claimant objected to his confirmation, stating that he was listed as a professional member ('of counsel') of the law firm to which the respondent's counsel belonged on that firm's website. Also, the address and telephone numbers that he provided were the same as that of the respondent's counsel. The nominee had failed to disclose this information. [Page21:]
Case 5. The arbitrator nominated jointly by the claimants filed an unqualified Statement of Independence. The respondent (a State entity) indicated that the nominee had acted as counsel in an ad hoc case involving investments in that State. He had also participated as counsel in cases involving the same State. The nominated arbitrator responded that earlier cases had been settled before the new arbitration went ahead. However, he then disclosed that he had recently acted as co-counsel with one of the claimants' counsel in proceedings against the respondent. The respondent objected to the nominee's confirmation on the grounds of his failure to disclose these various elements and particularly his relation as co-counsel in the recent proceedings.
Case 6. The arbitrator nominated jointly by the respondents submitted an unqualified Statement of Independence. One of the respondents was a State. The claimant objected to the nominee's confirmation, stating that he was an acting judge and therefore an employee of the State. Additionally, the claimant contended that the judge had been involved in a previous decision connected to the new dispute and therefore might have access to information that was not available to the other members of the arbitral tribunal.
Case 7. The arbitrator nominated by the claimant submitted an unqualified Statement of Independence. The respondents objected, stating that the arbitrator had already acted as a co-arbitrator nominated by the claimant in a related ICC case. There were different respondents in that case. The award rendered in the first case served as one of the grounds for the claimant's claims in the subsequent arbitration. The respondents alleged that the proposed arbitrator might have had access to privileged information in the previous arbitration without their participation. They argued that there was also a risk of prejudgement on certain issues.
Case 8. The arbitrator nominated by the respondent submitted an unqualified Statement of Independence. The claimant objected to his confirmation, stating that he was already acting as a co-arbitrator in a related arbitration in which he had been proposed by the same respondent. According to the claimant, the arbitrator's access to information could call into question his independence and his ability to decide the two arbitrations separately. The counsel were not the same in the two cases and the claimant was not a party in the related arbitration.
Although it is rare for the Court not to confirm an arbitrator when no objection has been raised, this may occur with both unqualified and qualified Statements of Independence. Below are examples of cases in which the Court decided not to confirm an arbitrator where the nominated arbitrator had submitted a qualified Statement of Independence and none of the parties had objected. As can be expected, many of these cases involved a non-participating party.
Case 1. The arbitrator nominated jointly by the claimants filed a qualified Statement of Independence, disclosing that he had worked in the legal department of a subsidiary of one of the claimants for six years. He had also had been employed in the legal department of an indirect subsidiary of the same claimant during the following four years and had ceased the latter activity one year prior to making his Statement of Independence. The respondent did not participate in the proceedings and therefore raised no objection.
Case 2. The arbitrator nominated by the claimant disclosed that some of his partners were acting as counsel for the claimant in several matters. There was no objection from the non-participating respondent. [Page22:]
Case 3. The arbitrator nominated by the claimant submitted a qualified Statement of Independence in which he disclosed that he was acting as counsel for the party in matters unrelated to the dispute. The respondent did not participate in the proceedings and therefore raised no objection.
Case 4. The claimant nominated an arbitrator who disclosed that he had been asked to act as a mediator for the same dispute prior to the arbitration. There was no objection from the non-participating respondent.
Case 5. The arbitrator nominated by the claimant revealed that he was acting in another arbitration not directly linked to the arbitration for which he was being proposed, but which had similar facts. The claimant in the other arbitration was wholly-owned by the claimant in the new proceedings. Also, the two arbitrations involved parties from the same country, the subject of the dispute was of the same type, and the claimants in the two arbitrations were represented by the same counsel. There was a risk that the arbitrator might have access to information not available to the other members of the arbitral tribunal. The non-participating respondent did not raise an objection.
Case 6. The arbitrator nominated jointly by the claimants filed a qualified Statement of Independence indicating that he had represented the claimants over a two-year period in State administrative proceedings, which, although terminated at the time, had led to a judgment that was still under review in the State courts. The respondent nominated an arbitrator, to whom the claimants objected. Although the respondent considered that the arbitrator nominated by the claimants should be disqualified, it did not object, indicating that it would prefer both arbitrators to be confirmed so as to allow the proceedings to move forward without delay. The Court decided not to confirm either arbitrator.
The great majority of non-confirmations by the Court occur in cases where a nominee has submitted a qualified Statement of Independence and one of the parties objects. During the period 1998 to 2006, of the 169 non-confirmations, 124 involved a qualified Statement of Independence with an objection. Below are some examples of such cases. When deciding not to confirm in these cases, the Court took into account the timing and duration of the facts and circumstances disclosed. Sometimes, the nominee's lack of precision with respect to timing and duration weighed against his or her being confirmed in view of the objection that had been raised.
Case 1. The arbitrator nominated by the claimant disclosed that on three occasions his law firm had acted in matters against the respondent. The respondent objected to his confirmation.
Case 2. The arbitrator nominated by the claimant indicated that two years previously the claimant had consulted a law firm with respect to the agreement from which the new dispute arose. One of the lawyers at that firm who had participated in the consultation later joined the firm to which the nominated arbitrator belonged. The respondent objected, stating that the nominated arbitrator would not be able to decide independently upon an agreement drafted under the responsibility of one of his colleagues.
Case 3. The arbitrator nominated jointly by the claimants disclosed that several partners of her firm, located in other offices mostly in other countries, represented the claimants or affiliates of the claimants. She also stated that she knew and had worked with some lawyers working for the claimants' counsel, but none of those lawyers was involved in the present dispute. The respondent[Page23:] objected, considering that there was an established client relationship between the claimants and the nominee's firm.
Case 4. The arbitrator nominated jointly by the respondents indicated that in the past he had given legal advice to the claimant. He also stated that one of his partners was currently acting as a consultant for a subsidiary of one of the respondents. The claimant objected to his confirmation.
Case 5. The arbitrator nominated by the respondent disclosed that he had met with the respondent to discuss the possibility of representing the respondent in the matter. The respondent subsequently retained other counsel. The claimant objected to the arbitrator's confirmation, alleging that disclosures may have been made during the meeting that could have an impact on the arbitrator's independence.
Case 6. The respondents jointly nominated an arbitrator, who disclosed that one of the respondents had been a client of his law firm until a few months previously, when it had moved away following the departure of one of the co-arbitrator's partners. The nominated arbitrator indicated that he had personally never been involved in any work related to the respondents, that he did not have access to any files relating to the former client, and that he did not have any knowledge of the contents of the cases handled by his former partner for that client. The claimants objected to confirmation of the arbitrator.
Case 7. The arbitrator nominated by the claimant disclosed that his law firm was currently rendering professional services to two subsidiaries belonging to the same group of companies as the claimant. The respondent objected to his confirmation, stating that although the two subsidiaries were not directly related to the claimant, nor directly involved in the matter in dispute, the same parent company had financial and administrative control over the claimant and those two subsidiaries and had apparently played an important role in negotiating the agreements that were the subject of the arbitration.
Case 8. The arbitrator nominated by the respondent indicated that the firm where he was 'of counsel' currently represented the respondent's parent company. After the claimant objected to the arbitrator's confirmation, the respondent replied that he should be confirmed as he was a former partner and therefore no longer shared in the firm's profits and as his firm had also represented the claimant's parent company.
Case 9. The arbitrator nominated by the respondent disclosed that a partner of his law firm had represented a subsidiary of the respondent in an unrelated arbitration. The same partner was currently advising the same company in its efforts to enforce the award. Also, the partner was currently representing the subsidiary in an additional matter unrelated to the new arbitration. Finally, the nominee stated that, except for himself, he could not ensure that any lawyer from his firm would not take up matters for one of the parties or any companies in their respective groups. The claimant objected to confirmation of the arbitrator.
Case 10. The chairman nominated jointly by the co-arbitrators indicated that one or more of the firms belonging to the same group as his own firm had ongoing matters concerning totally unrelated issues (employment benefits, trademark, corporate) in which they were acting for an entity that could be affiliated to one of the parties to the arbitration. The nominee added that he had never personally acted for any of the parties or related entities and had no personal knowledge of the work done by member firms in his group. The respondent objected to confirmation of the chairman. [Page24:]
Case 11. The respondent nominated an arbitrator who stated that he was currently serving as co-counsel with the respondent's counsel in cases pending in the State courts. The claimant objected to the nominee's confirmation on the grounds that the arbitrator was acting as co-counsel in four cases with lawyers from the law firm to which the respondent's counsel belonged. More particularly, the claimant asserted that in two of those four pending cases, the nominee was serving as co-counsel with the lawyer representing the respondent in the new arbitration. The claimant objected also on the ground that the nominee was acting opposite the law firm to which the claimant's counsel belonged in two cases pending in the State courts.
Case 12. The arbitrator nominated by the respondent initially filed an unqualified Statement of Independence. After discussions with the Secretariat, he filed a qualified Statement of Independence, indicating that he was currently serving as chairman of an arbitral tribunal in which the respondent's counsel was a co-arbitrator, and as co-arbitrator in a case where the respondent's counsel was acting as counsel. However, he failed to disclose that he had been nominated by the same counsel as co-arbitrator in three additional ICC cases during a six-month period. The claimant objected to his confirmation.
Case 13. The respondent was a public entity. It nominated an arbitrator, who disclosed that he had rendered four legal opinions for the respondent during the previous two years in his capacity as an independent expert. The claimant objected to his confirmation, claiming that his opinions had had an impact on the respondent's investment policy and that they could have a significant impact on the present dispute. The respondent replied by stressing the insignificance of the nominee's opinions compared to the total number of legal opinions received by the respondent and insisting on how difficult it was to find an arbitrator competent in the field relevant to the dispute who had never given a legal opinion to the respondent. The claimant again highlighted the possible impact of the legal opinions on the new dispute.
Case 14. The respondent, a government, nominated an arbitrator who disclosed that he was currently advocate general in the Ministry of Justice. The claimant objected to his confirmation, alleging that he was under the direct control of the attorney general, who was representing the respondent in the arbitration.
Case 15. The arbitrator nominated by the claimant disclosed that when he worked for the government in the past the claimant was a corporation owned by that government. Additionally, he was currently the director of a consulting company that had worked for the claimant at the time the contract from which the dispute arose was signed and performed. The nominee stated that 'the aforesaid assignments have given me an awareness about [the claimant] which will help me in the arbitration work . . .'. The respondent objected to the nominee's confirmation.
Case 16. The arbitrator nominated by the claimant indicated that he had been appointed sole arbitrator by the Court in a previous ICC arbitration between the same parties. He had rendered a final award in the previous matter, by which he had ordered the respondent to pay damages for non-performance of the contract. The respondent had not paid the amount awarded, leading the claimant to initiate the subsequent arbitration in which it claimed that non-performance should allow the contract to be terminated. The respondent objected to the nominee's confirmation owing to the risk of prejudgement.
Case 17. The arbitrator nominated by the claimant initially filed an unqualified Statement of Independence. Following a query by the respondent, he[Page25:] subsequently disclosed that he had been nominated as a co-arbitrator in a related ICC case involving the same claimant, plus the sub-contractors of the respondent. The respondent thereafter objected to his confirmation, arguing that he had participated in the rendering of the final award in the related case. According to the respondent, issues raised in the first case on which the respondent had never had the opportunity to be heard would be raised again in the new arbitration. The respondent's objection was also based on the nominated arbitrator's failure to make the appropriate disclosure in his Statement of Independence. Although not identical, the contracts in the two cases (a sub-contract in the first arbitration and a main contract in the second arbitration) were closely connected. Moreover, the two contracts contained mirror provisions, some of which had been analyzed by the arbitral tribunal in the first case. Also, documents relating to the contract underlying the new dispute had been submitted in the first arbitration.
2. Independence issues after the arbitral tribunal has been constituted
The second stage at which the Court may be required to consider issues of independence is when an arbitrator is challenged, resigns or may have to be replaced due to problems of independence.
Although it is often claimed that the number of challenges in international arbitration has dramatically increased, this does not seem true in the ICC system. 29 For the sake of clarification, it should be pointed out that challenges in ICC arbitration refer to actions against arbitrators once they have been appointed or confirmed. They do not refer to objections made at the time of constituting the arbitral tribunal. The following table provides an overview of challenges introduced in ICC proceedings between 1998 and 2006. It also allows a comparison to be made between the number of challenges and other relevant statistics so as to put them in their proper context.
Given that 8,085 arbitrators were confirmed or appointed by the Court between 1998 and 2006, the 270 challenges introduced during that period represent a limited number. If the number of cases in which a challenge has been made is set against the number of new cases filed, the resulting percentage is only 3.5%, while a similar comparison between the number of arbitrators challenged and the number of arbitrators confirmed or appointed gives an even lower percentage (3.3%). During the period studied, no significant increase in challenges in ICC proceedings can be inferred from ICC[Page26:] statistics. 30 It is very likely that the ICC's disclosure requirements and the Court's review of independence during the confirmation and appointment process help considerably to limit the number of challenges after the constitution of the arbitral tribunal. The effectiveness of the ICC system is further seen in the even smaller number of challenges accepted, which averaged a mere 0.2% of the number of arbitrators confirmed or appointed over the last nine years. 31
Pursuant to Article 11(1) of the Rules, a challenge 'shall be made by the submission to the Secretariat of a written statement specifying the facts and circumstances on which the challenge is based'. The Secretariat gives the arbitrator concerned, the other party or parties and any other members of the arbitral tribunal a suitable period of time to comment in writing. The challenge is then decided by the Court at a Plenary Session. According to Article 11(2) of the Rules, for a challenge to be admissible, it must be submitted within 30 days of a party's being notified of an arbitrator's appointment or confirmation, or within 30 days of a party's becoming aware of the facts and circumstances underlying its challenge. As with confirmations and appointments, the Court does not communicate the reasons for its decisions on challenges. When making such decisions, it will take into account, amongst other factors, at what stage in the proceedings the challenge is made. The apparent good faith of the party raising the challenge will also be considered. Challenges that serve purely dilatory purposes will be readily rejected by the Court. Once again, there is no general standard applied by the Court to all cases. Rather, each challenge is decided on its own merits. Like confirmations, challenges are decided by the Court using an objective test, rather than a subjective 'in the eyes of the parties' standard. [Page27:]
The role played by the Court in deciding challenges is one of the most significant advantages of ICC arbitration. Most challenges are able to be resolved by the Court within one to two months following receipt of all information. This helps to ensure efficiency in the proceedings, particularly where frivolous challenges are concerned. Outside the ICC system, such challenges may necessitate the intervention of State courts, which may cause a case to be delayed for months or even years. 32
Article 11(1) of the Rules provides that challenges can be made 'for an alleged lack of independence or otherwise'. Hence, the grounds underlying a challenge are not limited, and the Court can decide challenges asserted on any basis. 33 Past ICC studies have shown that the largest proportion of challenges in ICC cases are not based on grounds of independence but rather on the manner in which the proceedings are conducted, although very few of the latter category are accepted. Challenges are also sometimes made because an arbitrator lacks certain qualities or capabilities. However, as this will usually have been known at the time the arbitrator was appointed or confirmed, challenges based on such grounds are almost always refused. By far, the largest number of challenges that have been accepted were brought on grounds of independence. The discussion below will be limited to such challenges. A distinction will be made between those challenges that have been accepted and those that have been rejected.
Case 1. The claimant introduced a challenge against the co-arbitrator who had been nominated by the respondents. According to the claimant, it had discovered that the co-arbitrator had represented one of the respondents in a judicial expertise procedure that was linked to the arbitration. The arbitrator had not revealed this relationship in his Statement of Independence. The respondents did not contest the fact that the co-arbitrator had been present during the expertise proceeding, but alleged that he had been asked to participate in order that his technical opinion could be given to all of the parties. The challenged arbitrator, who was not a lawyer, commented that he had indeed participated in the procedure as the director of an independent expertise company. He indicated that he had been paid by his company and not by any of the respondents. He claimed that his role had been limited to providing an expert opinion. He added that he had had professional contacts with engineers working for several of the parties. However, as highlighted by the claimant, it was clear that the co-arbitrator had rendered an expert opinion concerning the subject matter of the dispute, without indicating this on his Statement of Independence.
Case 2. The co-arbitrator nominated by the respondent had filed an unqualified Statement of Independence. After his confirmation and while the proceedings were at an early stage, he informed the parties that he had just learned that his firm had undertaken an engagement on behalf of the respondent. The transaction was being chiefly handled by one of the foreign offices of his firm of over 700 lawyers and was an isolated event completely unrelated to the arbitration. Additionally, the co-arbitrator's firm stated that the strictest possible internal confidentiality restrictions ('Chinese walls') were in place to isolate the co-arbitrator from any contact with the engagement. The claimant commented that the respondent was nevertheless a client of the co-arbitrator's firm, and 'the[Page28:] impact of the attorney/client relationship on the appearance and the reality of independence [was] not affected by a proposed Chinese wall'.
Case 3. The claimant challenged the co-arbitrator nominated by the respondent, who, after being confirmed, disclosed that, as a former legal advisor for the respondent, he had been involved in the development of the project that led to the contract underlying the arbitration.
Case 4. Shortly following signature of the Terms of Reference, the co-arbitrator nominated by the claimant disclosed that some attorneys of his firm were involved in a transaction as co-counsel for a third party that was negotiating the takeover of the claimant. He subsequently disclosed that his firm had resigned as co-counsel of the third party on the date that the public tender offer had been made to the claimant's shareholders. The co-arbitrator confirmed that during the due diligence process no advice had been given by his colleagues on the merits of the arbitration. The respondent challenged the co-arbitrator on the basis of his disclosures. The respondent added that one of the third party's subsidiaries was a key competitor of the respondent. The respondent highlighted the fact that the relationship between the co-arbitrator's firm and the third party had existed during the co-arbitrator's mandate. The respondent also noted that the co-arbitrator's firm had been involved in the takeover transaction to which the claimant itself was a party.
Case 5. The respondent filed a challenge against the sole arbitrator, asserting that he had failed to disclose the relationship existing between his law firm and the claimant's auditing firm. The arbitrator thereafter indicated that his law firm was a member of an alliance of law firms associated with a group to which the claimant's auditor also belonged.
Case 6. The respondent filed a challenge against the chairman of the arbitral tribunal, claiming that a foreign office of his law firm was representing a client in a law suit against the parent company of the respondent. The law suit was not related to the arbitration.
Case 7. The claimant challenged the co-arbitrator nominated by the respondents on the grounds of his close professional relationship with the law firm to which the respondent's counsel belonged. The claimant alleged that the co-arbitrator handled lawsuits jointly with that counsel and that the relationship had been continuing recently. Although the co-arbitrator was nominated and confirmed before the respondent's counsel appeared in the case, he failed to disclose the relationship when this occurred.
Case 8. The respondent submitted a challenge against the co-arbitrator nominated by the claimant. The respondent alleged that the website of the claimant's law firm showed that the co-arbitrator worked as a counsel and consultant for the firm. The claimant responded that the co-arbitrator was a full-time professor at a State university and in that capacity could not pursue any other professional activity. The challenged arbitrator confirmed that he could not work full or part-time for a law firm. He could, however, temporarily and in an indirect manner, render legal opinions or consult with law firms. In such a case, his fees were paid to the university, which would thereafter pay him for his services. He added that it was clearly indicated on the website that he was providing counselling services within the regulatory framework of the State Education Act. He was therefore obliged to remain independent of any law firm that required consulting services. The respondent replied that there was a close and regular professional relationship between the co-arbitrator and the claimant's[Page29:] law firm that should have been disclosed by the co-arbitrator. Moreover, according to the respondent, it was clear that the co-arbitrator had provided legal advice to the claimant's law firm in exchange for remuneration.
Case 9. The co-arbitrator nominated by the claimant had filed an unqualified Statement of Independence before his confirmation. He subsequently disclosed that a partner from a different office of his law firm was currently advising a party related to the claimant in a non-ICC arbitration unrelated to the ICC case. The party in question was a State ministry that wholly owned the claimant in the ICC case. The co-arbitrator also indicated that the law firm that represented the claimant in the ICC case was acting as counsel for the State ministry in the non-ICC case. The respondent challenged the co-arbitrator on the basis of these disclosures and on two other grounds. The respondent alleged that the co-arbitrator's law firm was currently acting as counsel against the respondent's parent company and corporate affiliates in State courts. Additionally, the respondent claimed that the co-arbitrator was involved in five cases where he had been appointed by parties whose opponents had the same nationality as the respondent. The respondent alleged that the co-arbitrator had generally taken an unfavourable position towards the respondent's State. In response, the claimant argued that it was a legal entity distinct from the party in the non-ICC case and that, even if owned by the State, it was functionally different from the State.
Case 10. The respondents, a State and a State entity, filed a challenge against the co-arbitrator appointed on their behalf on the grounds that he had acted in matters for parties against the respondents and several of those matters were still pending. The companies for which the co-arbitrator was acting conducted the same business as the claimant in the respondent's country.
Case 11. The respondent was a State party. The claimant filed a challenge against the co-arbitrator nominated by the respondent on the ground that the latter belonged to the State's legal advisory branch. This information had not been disclosed by the arbitrator, who had filed an unqualified Statement of Independence. It was, however, included in his curriculum vitae. The claimant had not objected to the arbitrator's confirmation. The claimant raised its challenge pursuant to Article 11(2), which allows a party to challenge an arbitrator within thirty days of that party's receipt of the notification of the arbitrator's confirmation.
Case 12. The co-arbitrator appointed by the Court on behalf of the respondent was challenged by the respondent because he had failed to disclose that he had served as chairman of the arbitral tribunal in a non-ICC case that concerned the same construction project as the ICC case. In addition, the respondent alleged that the co-arbitrator had links with a dispute resolution centre that had sent a letter indicating that the ICC did not have jurisdiction over the case, thereby raising issues of prejudgment. The co-arbitrator responded to the challenge by stating that the other case had settled without a hearing on the issues, with no witness testimony and with the arbitral tribunal only having addressed procedural and not substantive matters. He considered therefore that his participation in the previous case did not call into question his independence.
Case 1. The claimant challenged the co-arbitrator nominated by the respondent on the ground that he allegedly had ex parte communications with the respondent's representatives at a seminar a few weeks before the arbitration hearing. The claimant alleged that the arbitrator was at the seminar to promote[Page30:] himself professionally, so his purported conversations with the respondent showed that he hoped to benefit from a future relationship with the respondent. The claimant stated that the arbitrator should have disclosed this interaction with the respondent and, by not doing so, had acted in a manner that called into question his independence. The challenged co-arbitrator responded that he had no involvement at all in the organization or promotion of the conference in question and in particular in the choice of the invitees; that his contact with one of the respondent's employees was extremely limited and was not of a substantive nature; and that the claimant's allegations lacked foundation and were mere speculation.
Case 2. The respondent challenged the chairman of the arbitral tribunal, alleging inter alia, that he was not independent of the parties since he had resided for a long time in a given country where the claimant was incorporated. According to the respondent, the chairman had received his education and had lived and worked in that country for more than twelve years. For the respondent, 'such a strong relationship' with the country in question, where the claimant was located and incorporated, affected the arbitrator's independence. The chairman's curriculum vitae indicated that he had only spent two years of his education in the country, and then nine to ten years as a lawyer in different international law firms in the same location. He did not have the same nationality as the claimant.
Case 3. The respondent challenged the co-arbitrator nominated by the claimant on the basis of his alleged 'improper unilateral communications' with the claimant's counsel. The respondent argued that under the law of the place of arbitration, it was improper for the co-arbitrator to have alleged unilateral contacts with the claimant's counsel concerning the appropriateness of certain candidates identified by the co-arbitrators for the position of chairman of the arbitral tribunal. The challenged co-arbitrator replied that he had discussed the names of potential chairmen of the arbitral tribunal with counsel before exercising his own judgment in discussions with his co-arbitrator about nominating a chairman. He added that such communication did not involve substantive matters and in no way caused him to become less impartial and independent with respect to the merits of the dispute.
Case 4. The claimant challenged the co-arbitrator nominated by the respondent as he had not disclosed an academic relationship with a lawyer from the firm to which the respondent's counsel belonged. The claimant stated that the co-arbitrator had supervised the lawyer's doctoral thesis and had contributed to financing its publication. The challenged arbitrator responded that he had merely an academic relationship with the lawyer, as with his many other students. A letter from the publisher was submitted indicating that the co-arbitrator had not contributed financially to the thesis.
Case 5. The respondents challenged the chairman of the arbitral tribunal, who after taking up his position disclosed, amongst other things, that a partner of his law firm was representing a party in an unrelated non-ICC arbitration in which the counsel for the claimant was the chairman of the arbitral tribunal. Neither the parties, the issues or the subject matter were the same in the two arbitrations. Also, in neither case had the chairman been appointed by the counsel appearing before them.
Case 6. The claimant filed a challenge against the co-arbitrator nominated jointly by the respondents. The co-arbitrator had submitted an unqualified Statement of Independence. The claimant alleged that the co-arbitrator's law firm had represented a party in a non-ICC case against a subsidiary of the claimant. The[Page31:] representation had taken place over a two-year period and had finished approximately five years before the co-arbitrator had been confirmed in the ICC matter. The Respondent replied that the facts on the basis of which the challenge had been filed did not show any 'actual existence or even the appearance of a lack of independence'. The co-arbitrator commented that he had not been personally involved in the non-ICC arbitration and that he knew nothing about the case. He indicated that the facts alleged by the claimant, which had taken place 'so many years ago', would not affect his independence or impartiality in the ICC case.
Case 7. The claimant challenged the co-arbitrator nominated by the respondent as he was a town councillor and head of a political party that formed part of the majority in the local government of the city where the respondent had its offices. According to the claimant, the respondent was also a major employer in that city. The respondent replied that it was a private party. Although the co-arbitrator had not disclosed his political engagement when he accepted to act as an arbitrator, the information was publicly available. Also, it did not appear that there was any relationship between respondent and the co-arbitrator's political party.
Case 8. The respondent challenged the sole arbitrator, alleging that the arbitrator was the member of a law firm which, through a local office, had been working for the claimant, a State entity, since the beginning of the arbitration. The sole arbitrator replied that the respondent's affirmations were incorrect. Although his law firm did have a cooperation agreement with the local law firm mentioned by the respondent, that firm had never worked for the claimant or related State entities. The sole arbitrator submitted a letter from the local law firm stating that it had never acted for the parties referred to by the respondent. The respondent did not produce any evidence in support of its allegations.
Case 9. The claimant challenged the chairman of the arbitral tribunal on the ground that he lacked independence of mind. The claimant alleged that the chairman had written various articles in which he expressed political opinions against a certain country and that the claimant's shareholder was allegedly a national of that country. The claimant also maintained that the chairman had expressed political opinions in favour of one of the respondents, which was a State. The articles referred to did not relate to the case in question.
Case 10. The claimant filed a challenge against the co-arbitrator nominated by the respondent on the ground that he had been nominated by the same party in an ongoing related case. The claimants and their counsel were not the same in the two matters. Also, the other co-arbitrator that had been proposed by the claimant in the related matter was different. There were common issues of fact between the two arbitrations, as both disputes arose from the same project although from different relationships. As the challenged co-arbitrator had only been nominated and not yet confirmed in the other matter, the Court decided to reject the challenge and not confirm the co-arbitrator in the related case.
Case 11. The respondent filed a challenge against, inter alia, the chairman of the arbitral tribunal, alleging that he had failed to disclose that he was currently involved as chairman of another arbitral tribunal in a case where one of the co-arbitrators in the present arbitration was co-counsel. Although it would have been preferable for the arbitrator to have made such disclosure, the claimant argued that the circumstances did not call into question the arbitrator's independence.
Case 12. In a case in which there were fourteen challenges, the respondent challenged the chairman of the arbitral tribunal on the ground that he had failed to disclose that he was working as a partner in the same law firm as a member of the ICC Court. The chairman replied that he had complied with all provisions of[Page32:] the Rules and that he did not consider the fact that a member of the Court was a partner in his firm caused a conflict of interest or required disclosure. He noted that he had not discussed the case with the Court member and would not do so. It should be noted that in accordance with the Internal Rules of the Court (Article 2, Appendix II of the Rules), the ICC had excluded the Court member from all discussions concerning the case and from the distribution of any related documents.
When potential conflicts of interest arise, arbitrators may in some cases decide to tender their resignation immediately. Sometimes the arbitrator informs the parties of the situation and offers to resign if any party so requests. At other times, the arbitrator is challenged and then decides to step down before the challenge is examined by the Court.
The table below provides an overview of ICC statistics on resignations between 1998 and 2006:
According to Article 12(1) of the Rules, an arbitrator's resignation must be accepted by the Court. During the period 1998 to 2006, 184 resignations were tendered by arbitrators in ICC proceedings. The Court rejected only five of those resignations. In 2006, all of the ten resignations tendered were accepted. Most of them were based not on issues relating to independence, but on personal grounds, such as a change in status (e.g. becoming a judge) or health problems. Two of the ten resignations were made subsequent to a challenge, which in one case was based on an alleged problem of impartiality or independence linked to the arbitrator's nationality, and in the other case on a claim by one of the parties that the arbitrator was incapable of handling the procedure due to illness. The few resignations accepted in 2006 on grounds of possible conflicts of interest and without a challenge being made are summarized below.
Case 1. The co-arbitrator who had been nominated by the respondent informed the parties that one of his partners had been retained by the respondent to act in an unrelated matter. Following the claimant's objection, the arbitrator tendered his resignation, which was accepted by the Court.
Case 2. The chairman of the arbitral tribunal tendered his resignation as he had accepted to act as an arbitrator for any disputes that might in the future arise in connection with a mergers and acquisition transaction involving one of the parties to the ICC arbitration. Although no dispute had at the time arisen from the transaction, the arbitrator preferred to resign from the ICC case, by way of precaution.
Case 3. The co-arbitrator who had been nominated by the claimant had previously disclosed that he had formerly been a partner and business associate with one of the counsel for the claimant. The respondent claimed that it was unaware of the disclosure and asked that the arbitrator be replaced. The arbitrator tendered his resignation despite the untimeliness of the objection, stating that he wished to 'allow the case to proceed in an impartial manner, free of all unnecessary controversy'[Page33:].
It should be noted that when the Court accepts a resignation and has to decide on the fees to be paid to the outgoing arbitrator, it may take into consideration whether the situation leading to the resignation was known to the arbitrator at the time his or her Statement of Independence was submitted. In a recent case, the Court decided not to grant any fees to an arbitrator who tendered his resignation shortly after his confirmation, since arguably he should have identified the conflict before accepting to act in the matter.
The replacement of arbitrators is governed by Article 12 of the Rules. Pursuant to Article 12(1), an arbitrator shall be replaced upon his death, upon acceptance by the Court of the arbitrator's resignation or a challenge of the arbitrator, or at the request of all the parties. Independence, although not specifically referred to in Article 12(1), may underlie the event giving rise to a replacement, whether that event be a resignation, a challenge or a request from all the parties.
Article 12(2) further provides that the Court may replace an arbitrator on its own initiative when the Court decides inter alia that he or she is not fulfilling his or her functions in accordance with the Rules. It is therefore possible that an arbitrator who is not independent or acts partially and who is not challenged by the parties could be replaced by the Court on its own initiative. This has never occurred in practice, however.
When a replacement is being envisaged, the Court will first decide, usually in a Committee session, on the basis of the information that has come to its attention, whether to initiate replacement proceedings. If it decides to do so, the arbitrator concerned, the parties and the other members of the arbitral tribunal will then be given an opportunity to comment. The Court's decision on whether or not to replace the arbitrator will be taken thereafter at a Plenary Session.
The following table provides an overview of ICC statistics on replacements between 1998 and 2006: 34
In 2006, the five decisions made pursuant to Article 12(1) all related to the death of an arbitrator and therefore did not touch on independence. Likewise, the decisions made pursuant to Article 12(2) were unrelated to independence, for the arbitrator was in each case replaced because he was not performing his functions under the Rules. Although there were therefore no replacements of arbitrators on grounds of independence in 2006, below are two examples where Article 12 was nevertheless invoked in relation to independence. [Page34:]
Case 1. An arbitrator already acting in an ongoing ICC case was proposed by the respondent in another case to act as a co-arbitrator in that case. In the second case, the nominated arbitrator disclosed that he had occasionally given legal advice to the firm representing the respondent. He also indicated that he was acting as co-arbitrator in the first case, which was a related matter. The claimant objected to the confirmation of the arbitrator and claimed that on the Internet he was presented as being a member of the firm representing the respondent. The Court decided not to confirm the arbitrator in the second case. After the Court's decision, the Secretariat invited the arbitrator, pursuant to Article 7 of the Rules, to inform the parties in the first case of his relationship with the respondent's counsel, who was also acting in that case (the counsel for the claimant was different in each case). Upon the arbitrator's refusal to make the disclosure, the Court decided to initiate replacement proceedings pursuant to Article 12(2). The parties and the arbitral tribunal were given an opportunity to comment on the replacement. The members of the arbitral tribunal and the respondent indicated that they had no objection to the arbitrator continuing, while the claimant made no comments and raised no objection. The Court therefore decided not to replace the arbitrator. It is worth noting, however, that by initiating the replacement procedure, the Court succeeded in drawing attention to the undisclosed information and thus prevented a possible attack on the subsequent award on grounds of non-disclosure by the arbitrator.
Case 2. A co-arbitrator requested the replacement of the chairman of the arbitral tribunal on the grounds that he was not acting impartially. As Article 11 provides for challenges made only by parties, this situation was not specifically covered by the Rules. However, it was considered that the co-arbitrator had drawn the Court's attention to the alleged situation and therefore, under Article 12(2), it was for the Court to decide whether to initiate replacement proceedings. On the basis of the information available to it, the Court decided not to initiate replacement proceedings in this case.
Parties occasionally file both a challenge and a request for the arbitrator's replacement, considering perhaps that they need to complete their use of Article 11 with a reference to Article 12(1)-'An arbitrator shall be replaced . . . upon acceptance by the Court of a challenge . . .'. Since 1998, the Court has decided in only one case to refuse a challenge and replace an arbitrator. 35 In that case, the respondent challenged an arbitrator for lack of impartiality following the rendering of an interim award. It was then discovered that the arbitrator was extremely ill. The Court decided to replace the arbitrator under Article 12(2), considering that he was prevented from fulfilling his functions. Despite the Court's decision, the respondent refused to withdraw its challenge. The Court therefore decided to refuse the challenge.
By contrast, the Court has, on a limited number of occasions, refused a challenge and simultaneously accepted the resignation of the arbitrator in question. This has sometimes been done at the request of an arbitrator who wished to withdraw from the case but first sought to have his name 'cleared' of any allegations made in support of a challenge. [Page35:]
IV. Other issues related to independence in ICC arbitration
1. IBA Guidelines on Conflicts of Interest in International Arbitration
Since the IBA Guidelines on Conflicts of Interest in International Arbitration (the 'IBA Guidelines') were published in July 2004, 36 certain information, both correct and incorrect, has circulated about their applicability in ICC arbitration. It is therefore important to clarify the exact role given to the IBA Guidelines by the Court. The ICC has always viewed the IBA Guidelines as a commendable effort to try to identify uniform standards for disclosure related to conflicts of interest. The ICC was consulted by the Working Group that drafted the IBA Guidelines and provided comments on the various drafts. Although the ICC is not in complete agreement with the adopted text, it recognizes that the IBA Guidelines are intended to be a work in progress, to be modified in the light of experience. The ICC has agreed to assist in efforts to improve and adapt future versions of the IBA Guidelines. 37 However, the Court has repeatedly made it clear that it is not bound by the IBA Guidelines. Moreover, when parties agree to ICC arbitration, they implicitly accept that the Court will apply the Rules of Arbitration and that decisions on independence will thus be made in accordance with the Court's practice under those Rules.
From the ICC's perspective, there is a fundamental incompatibility between the Rules and the IBA Guidelines. Article 7(2) of the Rules requires a subjective approach to disclosure, i.e. an ICC arbitrator is required to disclose in writing any facts or circumstances which might be of such a nature as to call into question his or her independence 'in the eyes of the parties'. Hence, it is not possible in ICC arbitration to have a list of situations which are said to be objective and never to require disclosure as provided in the IBA Guidelines' Green List.
Additionally, under the IBA Guidelines, there is an Orange List of circumstances, for which disclosure is required. However, the IBA Guidelines themselves state that disclosure depends on the facts of a given case. Although the Orange List may be helpful for prospective arbitrators and parties in considering what to disclose, it does not provide any guidance for institutions as to the impact of such disclosure for confirmations or challenges. As many of the disclosure situations which institutions such as the ICC must confront seem to fall on the Orange List, the utility of the IBA Guidelines is therefore limited for an institution. 38[Page36:]
An internal review conducted by the Secretariat of the Court has revealed that many of the facts and circumstances underlying objections to confirmations and challenges of arbitrators in ICC cases are not covered by the IBA Guidelines. 39 This can also be seen from many of the cases already discussed elsewhere in this article.
What use, it may be asked, do arbitrators and parties make of the IBA Guidelines in ICC cases?
As far as arbitrators are concerned, as they must comply with the disclosure standards of the ICC Rules, they do not cite the IBA Guidelines in the documents submitted to the Court at the time of their confirmation, 40 although it is of course possible that they may give consideration to the IBA Guidelines when deciding what to disclose.
As far as the parties are concerned, there have not as yet been any arbitration clauses or requests for arbitration in which reference is made to the IBA Guidelines. In a small number of cases, parties have referred to the IBA Guidelines in their arguments concerning an objection to a confirmation or a challenge, although it is worth noting that they are sometimes inaccurate when referring to a specific provision. In 2004, reference was made to the IBA Guidelines in relation to one confirmation and one challenge. 41 In 2005, there was a reference to the IBA Guidelines in relation to one non-confirmation and two challenges. In 2006, there were references to the IBA Guidelines in relation to four non-confirmations and three challenges. 42 Below are some examples of such references.
Case 1. Both parties referred to the IBA Guidelines in relation to the confirmation of an arbitrator. The respondent had proposed an arbitrator who filed a qualified statement of Independence, in which he disclosed that he had served as the chairman of an arbitral tribunal in a related case involving an entity with a similar name to the respondent but not involving the claimant. The claimant objected on the grounds that the person in question had acted as arbitrator in a substantially similar case in which a final award had been rendered, erroneously referring to Article 2.1.2 of the Waivable Red List, which states: 'The arbitrator has previous involvement in the case.'43 The respondent argued that the IBA Guidelines should not apply. The Court decided not to confirm the arbitrator in this matter. [Page43:]
Case 2. Reference was made to the IBA Guidelines in relation to a challenge. The claimant had previously objected to the confirmation of an arbitrator who it alleged had acted in an ad hoc arbitration as the arbitrator nominated by one of the respondents in the ICC case. The claimant added that the award rendered in the former case was ultimately vacated by a State court. The claimant considered that in filing an unqualified Statement of Independence, the arbitrator, who was confirmed by the Court, had failed to disclose his links with the respondent. The claimant subsequently challenged the arbitrator on exactly the same grounds, claiming that he should have disclosed the fact that he had acted in the ad hoc proceedings under both the ICC Rules and the standard of independence found in the General Standards of the IBA Guidelines, which require disclosure of facts or circumstances that may give rise to doubts as to the arbitrator's impartiality or independence. 44 The arbitrator commented that the applicable standards contained in the IBA Guidelines did not require him to disclose the facts mentioned by the claimant. The respondent argued that the ad hoc arbitration was unrelated to the ICC case and involved different parties (apart from one of the respondents), and as such, disclosure had not been mandatory. The Court refused the challenge.
Case 3. The respondent challenged an arbitrator on the grounds that the arbitrator's law firm was acting as local counsel to a party involved in the acquisition of the claimant. The claimant referred to the IBA Guidelines in its objection to the challenge, stating that the situation would come under the Orange List, but without referring to a specific provision. The claimant argued that the situation was not necessarily a source of conflict of interest or a reason for disclosure, and thereby demonstrated an incorrect understanding of the duty of disclosure imposed by the Orange List of the IBA Guidelines. 45 The Court decided to accept the challenge.
2. Non-communication of reasons for decisions
Article 7(4) of the Rules provides that the Court does not communicate the reasons for decisions it makes concerning the appointment, confirmation, challenge and replacement of arbitrators. This provision has been the subject of public discussion, especially in relation to challenges. The discussion has doubtless been fuelled recently by requests for greater information on investor-State proceedings where public interests are at stake, and by the move on the part of certain arbitration institutions to give reasons for their decisions on challenges. 46 Unfortunately, the question has not always been considered in its proper context. As a characteristic of the ICC system, the non-communication of the reasons for decisions on appointments, confirmations, challenges and replacements serves a specific purpose, which will be explained below.
As far as challenges are concerned, it should be recalled that they are considered by the Court at a Plenary Session, generally attended by around 35 to 45 of the Court's 126[Page38:] members from 88 countries. The Secretariat prepares a document containing the information presented by the parties and the arbitral tribunal once they have all been made fully aware of the arguments put forward and given an opportunity to state their position. A Court member drafts a report on the challenge with a recommendation. During the Plenary Session, an open discussion takes place amongst Court members. Many different points of view may be expressed, but a consensus is almost invariably reached. It is extremely rare for a vote to be needed. The ICC system allows a decision to be taken by a highly diverse representation of legal systems and cultures without requiring agreement to be reached on the reasons for that decision. This mechanism therefore gives scope for the expression of several strands of thinking in reaching a decision without necessarily requiring a single line of reasoning. Such approach is specific to the ICC system and sets it apart from other institutions, which may, for example, have a small sub-committee of three persons deciding challenges. Due to the extremely international nature of ICC cases, resorting to a sub-committee would be unfortunate, since limiting the number of persons involved in the decision-making process would not allow the same wealth and breadth of input from all parts of the world, which is fundamental to the international neutrality of the ICC system and a hallmark of the ICC Court.
It should also be borne in mind that the role of the Court is to ensure the application of the Rules. 47 The Court does not exercise jurisdictional powers, which would understandably require the provision of reasons. In administering its caseload, the Court's aim is not to replicate State court litigation or create a system of precedents. Rather, whilst aware of the need for consistency in its decision-making, the Court's priority is to enable a solution to be found, fairly and efficiently, on a case-by-case basis.
There are also clear practical advantages in the Court's issuing final decisions without reasons. When parties choose to resolve their disputes through ICC arbitration, they opt for a method of dispute resolution specially designed to meet the needs of international business. Conditions need to be created that are conducive to an efficient and appropriate outcome. Where challenges are presented in bad faith or for dilatory purposes, the provision of reasons is likely to encourage an attack on the Court's decisions, either by a renewed challenge at the ICC or in a State court. In one ICC case, as many as fourteen challenges were made by the respondent, which seemed constantly to be looking for an opportunity to delay the proceedings. This is by no means a unique case. If the Court were to give reasons for its decisions, this could well encourage dilatory manoeuvres of this kind through attempts to find flaws or omissions in the Court's reasoning.
The non-communication of the reasons for Court decisions on questions concerning independence is thus a characteristic of ICC arbitration. It is stated clearly in the Rules, to which the parties subscribe when they agree to ICC arbitration. It would also appear to be in the best interest of the international business community for the pragmatic reasons cited above. Rather than providing reasons in individual cases, the ICC should be encouraged to continue making available information of a general nature concerning its practices in this and other areas. [Page39:]
V. Conclusion
Independence is clearly crucial to the credibility and practical effectiveness of international arbitration. It is a fact that the changing environment in which international arbitration is taking place is leading to many new questions. The diversity of the issues arising in relation to independence can be seen in the cases presented in this article.
ICC arbitration is sometimes criticized for being too strict when it comes to independence. Yet, practical experience suggests that the importance given by the Court to these questions early in the proceedings when the arbitral tribunal is being constituted, reduces the number of procedural incidents such as challenges or resignations later on. The valuable role played by the Court in dealing with independence issues has moreover been recognized by certain State courts. 48
In recent years, there has been a tendency in certain circles to exaggerate the impact of independence issues on the practice of international arbitration. Although there is no doubt that changes in the patterns of legal practice have made independence an issue more often than before for certain categories of practitioners, it should be stressed that in the vast majority of ICC cases independence never gives rise to problems. Any significant reform of ICC Court practice in this field should therefore be made with caution and on the basis of an international consensus rather than as a response to competition or lobbying.
There is a risk that the excessive focus placed on independence may encourage abuses that distort and undermine arbitration. Parties that intentionally nominate non-independent arbitrators to slow down the constitution of the arbitral tribunal, arbitrators that fail to make disclosures that clearly should be made, parties that raise groundless objections and challenges as a means of slowing down a procedure and, most dangerously, parties that wait to learn the outcome of a procedure before seeking or unleashing spurious independence grounds to attack a fair award after a well-run procedure: abuses such as these must be controlled, and it is here that institutions like the ICC have an important role to play. As ICC practice amply illustrates, an institution can offer procedural safeguards such as overriding frivolous objections, appointing arbitrators when acceptable nominations are not forthcoming, and disposing efficiently of groundless challenges, all of which help to keep the case on track. State courts too have an essential role to play in preventing derailment on independence grounds. [Page40:]
As so very often, the key lies in a proper balance: est modus in rebus. To ensure that international arbitration continues to be an effective method of resolving commercial disputes, all players must share responsibility in maintaining that balance. Independence must continue to be protected and preserved, without being misused. Finding the appropriate means to achieve this worthy goal is one of the most significant challenges facing international arbitration in the future.
Click for ANNEX
1 Article 7(4) of the Rules. See below for further discussion of the Court's non-communication of the reasons underlying decisions on independence issues.
2 The Court may also consider independence issues when appointing arbitrators or deciding challenges in other proceedings, such as those introduced under the Rules of ICC as Appointing Authority in UNCITRAL or Other Ad Hoc Arbitration Proceedings. However, only cases brought under the ICC Rules of Arbitration have been analysed for the purpose of this article.
3 For discussion of the Court's practice under the previous version of the ICC Rules of Arbitration, see D. Hascher, 'ICC Practice in relation to the Appointment, Confirmation, Challenge and Replacement of Arbitrators' (1995) 6:2 ICC ICArb. Bull. 4; S. Bond, 'The Experience of the ICC in the Confirmation/Appointment Stage of an Arbitration' in The Arbitral Process and the Independence of Arbitrators, ICC Publication 472 (ICC, 1991) 9.
4 Increased attention has also been drawn to independence due to the unfortunate tendency to transpose to international commercial arbitration questions that may be justifiably arising in a purely domestic context.
5 For example, sometimes lawyers who are 'of counsel' or 'special counsel' consider that they do not have to carry out firm conflict searches.
6 In this respect, see the 'Guideline on the Interviewing of Prospective Arbitrators', published by the Chartered Institute of Arbitrators on its website for members. The Chartered Institute of Arbitrators also plans to make all of its guidelines available in book form. It should be noted that the interviewing of prospective arbitrators may also raise questions concerning the arbitrator's relationship with counsel.
7 The relationship that may exist between individuals who repeatedly act together as arbitrators in different cases has sometimes also been cited as raising possible independence issues.
8 Unlike certain other institutional rules, there is no mention in Article 7(1) of impartiality. However, two other provisions of the Rules allow for impartiality to be considered: Article 15(2), which states 'In all cases, the Arbitral Tribunal shall act fairly and impartially . . .' and Article 11(1), which allows a challenge to be brought 'for an alleged lack of independence or otherwise' and which therefore might include a lack of impartiality.
9 Article 9 of the Rules makes a distinction between the 'confirmation' and 'appointment' of arbitrators. An arbitrator who has been nominated by the parties or pursuant to their particular agreements (e.g. by the co-arbitrators) is 'confirmed' by the Secretary General of the Court or the Court. Otherwise, the arbitrator is 'appointed' by the Court.
10 See p. 41, below.
11 In certain cases, arbitrators who under Article 9(2) could have been confirmed by the Secretary General are nonetheless confirmed by the Court when decisions on matters such as jurisdiction need to be made prior to the constitution of the arbitral tribunal.
12 During this same period 1998-2006, there were 4,950 new cases registered at the Court.
13 Between 1998 and 2006, parties or co-arbitrators nominated 5,661 arbitrators, i.e., 70% of all arbitrators confirmed or appointed. This percentage has been even higher in recent years, e.g. 73% in 2006. During the same period, the number of arbitrators appointed by the Court was 2,424: 2,208 upon the proposal of a National Committee and 216 directly by the Court. Therefore, only 27.3% of the arbitrators confirmed or appointed between 1998 and 2006 were appointed upon the proposal of a National Committee and only 2.7% directly by the Court.
14 In exceptional circumstances where rare and specific expertise was required, the Court has accepted a qualified Statement of Independence from an arbitrator proposed by a National Committee. For example, this occurred in a maritime matter, where the arbitrator had to possess precise technical qualifications.
15 Of these confirmations, 62 were decided by the Court and 71 by the Secretary General.
16 In some cases in which a qualified Statement of Independence is submitted, there is a non-participating party, which of course does not object. The Court must be particularly attentive to qualified Statements of Independence in the presence of a non-participating party.
17 Occasionally, the parties will send their comments or objection directly to the nominee. This has led to a prospective arbitrator who was offended by the objection responding in what appeared to be a non-neutral manner. The arbitrator was not confirmed by the Court.
18 An arbitrator's failure to make a disclosure may of course be raised in subsequent challenge proceedings. This will be considered below in our discussion of challenges.
19 An example of this situation would be where the parties include the name of a prospective arbitrator in their contract who, at the time of the dispute, is linked to one of the parties.
20 The author is grateful to Christian Serres for advising on the presentation of this and other data appearing in this article.
21 As the confirmations in these cases were made without any disclosures or objections, no case examples are cited.
22 Indeed, between 1998 and 2006, the number of confirmations made by the Secretary General was 3,991, of which 3,358 (84.1%) were based on unqualified Statements of Independence with no objection. In 2006 alone, there were 408 confirmations by the Secretary General, of which 337 (82.6%) were based on unqualified Statements of Independence with no objection.
23 In many of these cases, the objection is not based on grounds relating to independence, but rather to capability or availability. Objections raised against unqualified Statements of Independence often allege that the nominee does not have the necessary language skills, knowledge of the applicable law or is not resident at the place of arbitration.
24 Indeed, between 1998 and 2006, the Secretary General confirmed 633 arbitrators who had submitted qualified Statements of Independence which had not given rise to an objection.
25 There may be various reasons for a party to withhold an objection despite the disclosures made in a qualified Statement of Independence. The Court will therefore generally confirm an arbitrator when all parties are participating and no objection has been raised given that the parties have had the possibility to do so. Where there is a non-participating party, however, the Court will be particularly cautious in confirming an arbitrator when there is no objection following a qualified Statement of Independence.
26 This should be compared with the 5,661 arbitrators confirmed by the Court and the Secretary General during the same period.
27 Although questions of independence are the most frequent grounds for non-confirmation of arbitrators, other reasons for not confirming an arbitrator may exist. Pursuant to Article 9(1), in deciding whether to confirm an arbitrator, the Court shall consider, inter alia, the prospective arbitrator's availability and ability to conduct the arbitration in accordance with the Rules. Accordingly, the Court has not confirmed arbitrators who lacked required capabilities such as language skills, specified experience or qualifications, ability to travel to the place of arbitration, who were not proposed within applicable time limits, or who were unavailable. As these situations are not directly related to independence, they are not examined in the present article.
28 In all of these instances, an objection had been made by one of the parties. However, as discussed below, there have been other occasions when the Court decided not to confirm an arbitrator even though no objection had been made.
29 See e.g. G. Nicholas & C. Partasides, 'LCIA Court Decisions on Challenges to Arbitrators: A Proposal to Publish' (2007) 23:1 Arbitration International 1, where the authors state: 'the number of challenges of arbitrators in international arbitration is growing. Whilst once the challenge of an arbitrator might have been a relatively rare occurrence, that is no longer the case.' The authors continue by citing ICC statistics: 'According to ICC statistics, approximately 90 challenges were made in ICC cases in the five years between 1995 to 1999, compared to approximately 140 challenges made over the five-year period between 2000 and 2004.' This reference to the number of challenges seems, however, to be taken out of context, as it does not refer to the increase during the same periods in the number of arbitrators appointed or confirmed by the Court or the number of cases filed or pending during these same periods. For example, during the period 1995 to 1999, there were 3,774 arbitrators appointed or confirmed by the Court. From 2000 to 2004, this number had increased to 4,664. There were 2,307 new requests filed from 1995 to 1999, rising to 2,841 for the period from 2000 to 2004. Therefore, the number of challenges remains extremely limited for both periods, when seen in relation to the number of arbitrators appointed or confirmed and the number of cases filed.
30 Statistics for 2007 once again confirm that there has been no significant increase in challenges in ICC proceedings. The number of arbitrators confirmed or appointed was 1,039 and 26 challenges were introduced. Thus, there was a decrease in the percentage of arbitrators challenged to 2.5% of all arbitrator confirmed or appointed during the year. The 26 challenges were in 22 cases. Only one challenge was accepted in 2007.
31 The number of challenges accepted may be affected by the resignation of arbitrators who have been challenged. See below the discussion on resignations.
32 Recognition of the value of the Court's role with respect to challenges is seen in the requests submitted to the Court for decisions on challenges in non-ICC cases, including even cases where the ICC was not the appointing authority.
33 This differs from the UNCITRAL Arbitration Rules, for example, which limit the grounds for a challenge to a lack of impartiality or independence.
34 These figures do not include replacements following challenges and resignations pursuant to Article 12(1).
35 In another case, the Court rejected a challenge against the chairman of the arbitral tribunal and subsequently took note of the parties' agreement to replace him pursuant to Article 12(1).
36 IBA Guidelines on Conflicts of Interest in International Arbitration, approved on 22 May 2004 by the Council of the International Bar Association.
37 With a view to assisting the IBA, on an internal level and for purely informational purposes, the ICC has been tracking the relevance of the IBA Guidelines in cases presented to the Court. However, the IBA Guidelines are not relied upon by and do not bind the Court. Unfortunately, the existence of this internal project has led to some erroneous external comments to the effect that the Court is applying the IBA Guidelines.
38 Once again, this does not take into account the use that parties and prospective arbitrators may make of the IBA Guidelines before a matter reaches the Court.
39 The following are recent examples of facts and circumstances not directly covered by the IBA Guidelines:- an arbitrator had provided two legal opinions to clients represented by counsel to one of the parties;- an arbitrator proposed by the respondent was concurrently acting as counsel against the claimant's counsel;- an arbitrator and the counsel for one of the parties were simultaneously serving together as co-counsel in an unrelated matter;- a partner in the arbitrator's law firm was the husband of one of the party's counsel- an arbitrator was referring clients to the counsel that nominated him;- one of the counsel in an arbitration had previously represented an arbitrator's current or former law firm;- an arbitrator had supervised the doctoral thesis of one of the counsel.It may also be noted that no specific reference is made in the IBA Guidelines to relations involving State parties.
40 Indeed, in one case, where the proposed arbitrator made a disclosure referring to the IBA Guidelines, the Secretariat contacted the person, whom it asked to refer to the Rules and not the IBA Guidelines.
41 It should be recalled that the IBA Guidelines were published as recently as July 2004.
42 Between 2004 and 2006, the IBA Guidelines have also been referred to in a total of three UNCITRAL cases in which the Court was requested to decide upon a challenge. In 2007, there would appear to have been an increase in references to the IBA Guidelines in ICC cases.
43 The Secretariat, in analysing the case, found that the situation was closer to Article 3.1.5 on the Orange List, which provides as follows: 'The arbitrator currently serves, or has served within the past three years, as arbitrator in another arbitration on a related issue involving one of the parties or an affiliate of one of the parties.'
44 The claimant wrongly cited the General Standards in its challenge. Upon reviewing the situation, the Secretariat considered that the situation was covered by a different provision of the IBA Guidelines, Article 3.1.3 on the Orange list, which provides that there is a duty to disclose when '[t]he arbitrator has within the past three years been appointed as arbitrator on two or more occasions by one of the parties or an affiliate of one of the parties'.
45 According to the IBA Guidelines, the arbitrator has a duty to disclose in situations covered by the Orange List.
46 See G. Nicolas & C. Partasides, supra note 29 concerning the provision of reasons for challenge decisions by the LCIA.
47 Article 1(1) of Appendix I to the Rules.
48 See e.g. Enviro Petroleum Inc. v. Kondur Petroleum S.A., 91 F.Supp.2d 1031 (S.D. Texas 2000), where the federal court refers to the 'multiplicity of procedural safeguards built into the ICC rules designed to avoid the possibility of . . . rank bias and unfair procedures' and then mentions the ICC mechanisms for appointments and challenges under Articles 7, 9 and 11 of the Rules.