I wish to address a problem of international commercial arbitration which is better known as a problem of inter-State arbitration: whether a truncated tribunal has the authority to render a valid award. The problem has been notorious in international law since the inception of modern arbitration late in the eighteenth century. It has reared its ugly head in international commercial arbitration as well.

The problem is this. Where there is the characteristic arbitral tribunal of three arbitrators, one appointed by each party, and a chairman agreed upon by the parties or the party-appointed arbitrators, and where the tribunal duly so constituted embarks upon the proceedings, schedules and receives and studies the pleadings, hears oral argument, and begins or completes its deliberations, or even begins or completes its draft award, and when, at any such point, one of the party-appointed arbitrators withdraws – walk out, indefinitely absents himself, or resigns or purports to resign – are the remaining two arbitrators entitled in law to render a valid award?

This problem is so prominent in the practice of arbitration between States that, when the International Law Commission of the United Nations endeavoured in the 1950s to codify and progressively develop that practice through preparation of a Convention on Arbitral Procedure, it was a principal focus of the Commission 's concerns. The special rapporteur of the Commission, the late, great Professor Georges Scelle, described it as "une question très délicate mais capitale."¹

For his part, Professor Scelle had no doubt about the answer to the question. He regarded the withdrawal of an arbitrator under such circumstances as generally designed to sabotage the arbitration. It was "non seulement injustifiable au regard de la bonne foi, mais entièrement contraire au droit."² It followed that, since in international law withdrawal of an arbitrator under such circumstances was a wrong, no legal right could spring from that wrong; the withdrawing arbitrator, and the party appointing him, could not be heard to challenge the validity of an arbitral award rendered by the remaining arbitrators.

A decade ago I was privileged to inaugurate the Hersch Lauterpacht Memorial Lectures at Cambridge University and I devoted one of those lectures to the question of truncated arbitral · tribunals. I surveyed the problem as it had developed over the last two centuries and as it had recently intensified in the proceedings of the Iran-United States Claims Tribunal. Every known international case bearing on the question was taken into account, as were the international codes of arbitral procedure then existing. I reached the following conclusions:

"- Withdrawal of an arbitrator from an international arbitral tribunal which is not authorized or approved by the tribunal is a wrong under customary international law and the general principles of law recognized and applied in the practice of international arbitration. It generally will constitute a violation of the treaty or contract constituting the tribunal, if not in terms then because the intention of the parties normally cannot be deemed to have authorized such withdrawal.

Such a wrongful withdrawal may not, as a matter of international legal principle, debar an international arbitral tribunal from proceeding and rendering a valid award.

While the precedents are not uniform, and the commentators are divided, the weight of international authority, to which the International Court of Justice has given its support, clearly favours the authority of an international arbitral tribunal from which an arbitrator has withdrawn to proceed and to render a valid award."³

Today 's lecture will revisit the problem. I shall not recapitulate my earlier examination, because it is far too long, it is published, and I do not disagree now with what I set out and settled upon then. I shall rather confine myself to what has happened since the publication of that Lauterpacht Lecture.

There are four developments that merit analysis. First, the problem has persisted (though abated) in the Iran-United States Claims Tribunal. Second, it has been passed upon by arbitrators of exceptional experience and distinction in an international commercial arbitration, and then treated by Swiss courts in a half-dozen connected, controversial judgements involving that arbitral award rendered by a truncated tribunal. Third, the authority of truncated arbitral tribunals has been comparatively analyzed at length and in depth at the 1990 Stockholm Arbitration Congress of the International Council for Commercial Arbitration (ICCA). And, fourth, the problem has been dealt with in international arbitration rules newly ad opted by international arbitral institutions. The subject calls for renewed consideration in the light of these four developments and because the authority of a truncated arbitral tribunal to render a valid award is not universally accepted, at any rate in all national jurisdictions, as the Swiss cases and the ICCA survey demonstrate.

I. Iran-United States Claims Tribunal

One of the more important, and, until lately, productive arbitral tribunals in the history of international arbitration has been the Iran-United States Claims Tribunal. A product of the dispute over the taking of hostages in Tehran and their eventual release, the Tribunal has in the last fourteen years rendered a large number of awards dealing with a multiplicity of property claims, published to date in 27 volumes.⁴

The Algiers Declarations which provide for the Tribunal specify that "The Tribunal shall consist of nine members ... each govern shall appoint one-third of the members ... the members so appointed shall by mutual agreement select the remaining third of the members ... Claims may be decided by the full Tribunal or by a panel of three members ... Each such panel ... shall consist of one member appointed by each of the three methods ... The UNCITRAL Rules for appointing members of three-member Tribunals shall apply mutatis mutandis to the appointment of the Tribunal."⁵

The Tribunal adopted Tribunal Rules, incorporating and in some cases modifying the UNCITRAL Rules. The UNCITRAL Rules provide, in Article 13, that, in the event of the resignation of an arbitrator during the course of the arbitral proceedings, a substitute arbitrator shall be appointed pursuant to the procedure for initial appointment; in the event that an arbitrator fails to act, the procedure in respect of challenge and replacement (if needs be by an appointing authority) shall apply.⁶

In the course of its work, the full Tribunal and Chambers of the Tribunal have been at times confronted with the purposeful absence of one or another of the arbitrators appointed by Iran. On some occasions, this has led to the postponement of the proceedings; on other occasions, the Tribunal and its Chambers have decided that they were entitled to proceed in the absence of the Iranian-appointed arbitrator and did so. Iran challenged the resultant awards, sometimes in Dutch courts, but the latter challenges were discontinued, the awards have been treated by the Tribunal as valid, and they have been paid.⁷

Dispute over the validity of these awards was bitter and protracted. The Iranian arbitrators maintained that neither the Full Tribunal nor its Chambers were validly composed in the absence of any of its nationally appointed arbitrators. In the event of the alleged failure of such an arbitrator to act, the sole recourse, they contended, was to invoke the procedure of the UNCITRAL Rules for challenge and replacement of an arbitrator.

The majority of the Tribunal maintained that the specification in the Algiers Declarations about the three elements in the composition of the Tribunal and its Chambers was descriptive of their constitutive process; it was not a quorum requirement. The challenge and replacement procedure of the UNCITRAL Rules could not be interpreted to frustrate continued proceedings. Where a case has been pleaded and heard and deliberation has begun, unauthorized absence of an arbitrator will not require resort to the challenge and replacement procedure, which by its nature will take extended time and might require fresh hearings, at great trouble and expense. Such repeated processes - repeated walkouts or resignations and replacement - could stultify the Tribunal.

In so deciding, the Tribunal's majority could rely and did rely on a line of international precedent, on leading cases in which procedures for replacement – if any – of absent arbitrators were not followed and the tribunals in question held themselves entitled to proceed and render valid awards.⁸ The holdings of those tribunals for the most part withstood subsequent national and international challenge.

Since the expedient of absence from the Iran­United States Claims Tribunal and its Chambers of a party-appointed arbitrator has not been effective in accomplishing its apparent purpose, it might have been supposed that that approach would have been abandoned in the Tribunal. In a measure, it has been, but not fully.

Thus in James M. Saghi, Michael R. Saghi and Allan J. Saghi, Claimants and the Government of the Islamic Republic of Iran, Respondent, the arbitrator appointed by Iran "did not participate in the deliberation of this Case, stating that in his view such cases are not admissible, and he refused to sign the present Award," an interlocutory award which established that the nationality or dominant nationality of the applicants was that of the United States.

"As this Tribunal has previously held, a continuing international tribunal with many cases on its docket cannot permit its work to be frustrated by the refusal of one of its members to deliberate a claim or to sign an award." ⁹

When the case subsequently was argued on the merits, Iran maintained that the interlocutory award was invalid because it was signed by only two arbitrators. The Tribunal held that it could not accept that argument. It observed that the Tribunal' s Rules make a provision for that occurrence:

"here there are three arbitrators and one of them fails to sign, the award shall state the reason for the absence of signature. " ¹⁰

It may be noted that the Iranian-appointed arbitrator did sign this award on the merits while dissenting.

In the case of Uiterwyk Corporation (et al.), Claimants, and the Govern of the Islamic Republic of Iran (et al.), Respondents, the majority of Chamber One of the Tribunal held as follows:

"Mr. Mostafavi took part in the Hearing and in three sessions of oral deliberations on various procedural issues in the Case. However, at the third session, he announced that, in view of his dissent from decisions reached by a majority of the Chamber on procedural issues, he did not wish to take part in further deliberations. The Chairman then informed Mr. Mostafavi that, in accordance with the Tribunal Rules and Tribunal practice, the Chamber could and would nevertheless continue the deliberations and prepared an Award notwithstanding his absence. Mr. Mostafavi then withdrew from further participation in the preparation of this Case. The other two Members of the Chamber continued the deliberations and prepared the Award. This is in accordance with the established practice of the Tribunal to continue its work and make awards despite the failure of one arbitrator to participate. The practice of the Tribunal in this respect is necessary to prevent disruption and frustration by one Member of the Tribunal's performance of its functions and is fully in accordance with recognized principles of international law. As Judge Stephen Schwebel has observed, 'the weight of intern authority, to which the International Court of Justice has given its support, clearly favors the authority of an international tribunal from which an arbitrator has withdrawn to render a valid award ..."'¹¹

Subsequently, in the same case, the Tribunal decided in favor of the Claimants in an award which the Iranian-appointed arbitrator failed to sign. It equally denied a request for correction of the final award by the same majority.¹²

While I have not set out in this lecture the earlier published exchanges over the eff of the absence of an Iranian-appointed arbitrator, which are fully described in my Lauterpacht Lecture, it may be observed that they were much fuller and sharper. These more recent incidents are relatively mild in comparison. Perhaps it may be concluded that, in the Iran-United States Claims Tribunal, it has in effect been recognized on all sides that a truncated tribunal may render an award which will be treated as valid. At any rate, the majority practice of the Tribunal uniformly, repeatedly and emphatically sustains that conclusion. It does so, moreover, in a context which is not one of purely public international arbitration. It is generally recognized that the Tribunal's awards may be regarded as "Dutch" awards which may be enforced pursuant to the New York Convention on the Recognition and Enforcement of Arbitral Awards.¹³

II. The Milutinovic case

In Jvan Milutinovic PJMv. Deutsche BabcockAG, an arbitration held under the Rules of the International Chamber of Commerce, the three­man Tribunal was composed of Professor Eugene Bucher, chairman, and Professors Vladimir Jovanovic and Karl-Heinz Bockstiegel, arbitrators.¹⁴ It concerned a monetary dispute between members of a construction consortium which had contracted to build a power station in Homs, Libya. The Consortium Agreement provided that the place of the arbitration would be Zurich. The Terms of Reference agreed upon by the parties recorded that the Rules of the ICC Court of Arbitration and the Code of Civil Procedure of the Canton of Zurich governed the procedure of the arbitration. It was further provided that the Tribunal might deviate from the non-mandatory provisions of the Zurich Code.

The parties exchanged three sets of written briefs and additional written submissions. Two sessions of oral hearings were held at which witnesses were examined. At the latter set of hearings, at the end of the examination of witnesses, claimant's counsel called for the re-examination of some witnesses and the hearing of additional witnesses, which defendant's counsel opposed. The Arbitral Tribunal, after "great internal deliberation ... by majority and against the explicit opposition of the arbitrator proposed by claimant, took the decision to reject claimant's request and not to allow additional evidence to be presented... "¹⁵ The next day, upon the chairman's communication of this decision to the parties, Professor Jovanovic announced his resignation because "he disagreed with the decision of the Arbitral Tribunal."¹⁶ Claimant's counsel thereupon refused to present its final pleadings.

Claimant's counsel then moved in the ICC Court of Arbitration to replace Chairman Bucher and Professor Bockstiegel. The ICC Court of Arbitration, by a decision of January 29, 1987, rejected the challenge of Professors Bucher and Bockstiegel and "refused to accept the resignation of Mr. Jovanovic not failing to underscore that in the absence of any justification of his withdrawal, Mr. Jovanovic was obliged to continue to act as arbitrator."¹⁷ The chairman then invited the co­arbitrators to an intern meeting of the Tribunal, which Professor Jovanovic did not attend; rather, he confirmed his resignation. A Partial Award in the arbitration was agreed upon in his absence by Professors Bucher and Bockstiegel, which Professor Jovanovic was invited to sign, and which was submitted to the ICC Court of Arbitration pursuant to its Rules and accepted by it.

The Partial Award records that the Tribunal earlier had decided that the parties were to have a last and final possibility to present requests for the taking of evidence and that, upon the hearing of agreed additional witnesses, the final pleadings would be made. All witnesses accordingly proposed at that time by the claimant were admitted.

"The request for additional evidence presented by claimant is belated and the tardiness is not excused ... Claimant did not indicate which facts ... should be evidenced by the newly proposed witnesses ..." ¹⁸

The claimant had earlier opposed additional examination of defendant's witnesses while proposing the examination of no further witnesses called by it.

"Given the clear decision of the Arbitral Tribunal and its approval by the parties ... the Arbitral Tribunal could not accept claimant's request presented at the end of the taking of evidence ..." ¹⁹

The Award then continues:

"The present award can be rendered notwithstanding the declaration of Professor Jovanovic to 'resign' as arbitrator and notwithstanding his not participating at the arbitrators ' meeting of February 7, 1987. Both under the Zurich procedural law and the ICC rules for arbitration the withdrawal of Professor Jovanovic, not justified by any legitimate and lawful cause, is ineffective and therefore the present Arbitral Tribunal continues to be correctly constituted. It is settled under Zurich pro al law that the arbitrator cannot withdraw at his free will ...

In accordance with the given situation under Zurich law, the ICC Court of Arbitration on January 29, 1987, decided 'not to accept the resignation tendered by the co-arbitrator, Professor V. Jovanovic on November 12th, 1986' and, after admonition of Professor Jovanovic, expressed the confidence 'that the arbitral tribunal as it is presently constituted will conclude its task in the instant case and that the arbitral tribunal will fully accept the decision rendered by the ICC Court of Arbitration.'

"The determination of the chairman and of one co-arbitrator to take a decision in the absence of the other co -arbitrator seems to be justified by the given circumstances and is in accordance with the provisions of ZPOIZ [Zurich Code of Civil Procedure], even if the latter do not include an explicit rule with respect to the present situation. Not only a decision by majority is valid, but § 254 ZPO makes clear that a refusal of a dissenting arbitrator to sign the award cannot question the validity of the award signed by the majority only; the signing 'durch deren Mehrheit unter Anmerkung der Weigerung der Minderheit is explicitly admitted. If a refusal of an arbitrator to sign does not exclude the validity of the award, the result cannot be different if the minority-arbitrator does refuse to participate in the internal deliberations until their end. The rule that the finding of the final award must be performed with the participation of all arbitrators ... intends to deal with different problems. An arbitrator deceased before the decision of the Arbitral Tribunal must be replaced by a successor and likewise an arbitrator who by an admissible and therefore valid withdrawal has ceased to hold office; the majority of an arbitral tribunal is not allowed to exclude a minority from the further deliberations; an arbitral tribunal is not allowed to depart from oral deliberations inter praesentes without the consent of every member ... These (and other) problems justify the provision of § 254 cited above which stipulates positive obligations with respect to the question how to proceed in finding the award but does not exclude its validity if one arbitrator refuses to observe these obligations by not participating in the final stage of deliberations. The latter situation is in all relevant respects identical to that of an arbitrator refusing to sign. A position concurring with this conclusion has been taken by the Zurich authorities ... (‘The renunciation to an oral [internal] deliberation [of the arbitral tribunal] is furthermore justified if an arbitrator tries to delay or to prevent the taking of the final decision by abusive shirking from the oral deliberation, a risk not existing with ordinary courts'.) This obiter dictum precisely foresees the circumstances realized in the present arbitration. The decision of the Swiss Federal Tribunal (SFT) of October 23, 1985 ... setting aside an arbitral award does not provide an argument against the position exposed above, as all relevant facts are different: In the case decided by the SFT the decision of the arbitrators was not taken during oral deliberations of the arbitrators but by exchange of writings, and the not-signing arbitrator never gave his consent to this way of procedure (even a majority decision to that end does not seem to exist). By way of contrast in the present case the decision of the arbitral tribunal was taken during oral deliberations to which all arbitrators (including Professor Jovanovic) were invited. Professor Jovanovic had no objective cause preventing him from participating in the last part of these oral deliberations which took place at the meeting on February 7. The SFT decision, as it does not refer to an arbitrator refusing without justification to participate in internal oral deliberations, is therefore no precedent to the present case. Nevertheless, it may be added that it is based on the 'Concordat,' the Swiss intercantonal arbitration convention, while the present arbitral proceedings are governed by the Zurich law of Civil Procedure. Furthermore and consequently, the present decision applying, it is not submitted to the control of the SFT if not under the general aspect of the Swiss Federal Constitution (arbitrariness; art. 4).

"Again it must be said that under the rules of the Zurich ZPO as well as under the rules of the ICC, Professor Jovanovic is considered to be an arbitrator, even if refusing to effectively cooperate ... It is correct that both under the Zurich ZPO (§ 254) and the ICC rules (art. 2.8) Professor Jovanovic could be removed and replaced. However, no procedure for his removal had even been started before the final decision of the arbitral tribunal on this partial award, much less has a refusal taken effect. Both parties refrained from presenting such a request, either before the competent authorities in Zurich or the ICC Court of Arbitration. The other members of the Arbitral Tribunal cannot recognize a duty to present such request ex officio if the parties choose to renounce to request Professor Jovanovic's removal and replacement. Claimant, who presented a request for removal of the other two arbitrators, by not including Professor Jovanovic in the request for removal, evidences his willingness to accept the given situation, i.e., the arbitrator pro sed by claimant not participating in the further proceedings; claimant has no title to reproach the arbitrators for not presenting a request for Professor Jovanovic's removal, as he did not himself present such a request. The rendering of the present award is the consequence of the Arbitral Tribunal not doing so.

"Obviously, the possibility to continue the proceedings without all arbitrators cooperating is strictly limited. Taking of evidence or accepting oral pleadings in the absence of an arbitrator would seem to be, except perhaps in exceptional circumstances, generally inadmissible. But this issue is not at stake here, since in the present case Professor Jovanovic declared his intention to resign after the conclusion of the taking of evidence only. The final pleadings were not presented orally but in writing ... Professor Jovanovic therefore was not absent in any of the tribunal 's activities requiring his presence. He also participated in all internal deliberations up to the moment of his declaration on October 28, 1986. Obviously, the intern deliberations in which he was involved also concern the merits of the case. This is especially true for the deliberations on the evening of October 27, 1986, concern the taking of additional evidence.

"A decision of the Arbitral Tribunal to the contrary, i.e., to present a request for the removal of Professor Jovanovic (either in Zurich or in Paris) and to re-start the proceedings with the eventual successor of Professor Jovanovic, would be contrary to the requirements of orderly and correct arbitration, providing to an arbitrator (or a party influencing him) the means to sabotage the correct coming to an end of an arbitral procedure and to extort from the tribunal and the opposed party the reopening of the proceedings. Such a possibility would neglect the demands of the solution of international commercial disputes and question the credibility of the arbitration both as off by ICC and as performed in Zurich or Switzerland. The present Arbitral Tribunal is even less allowed to depart from a speedy settling of the main issue of the present arbitration by rendering an award (not only requested by defendant, but, up to and including the telex of October 13, 1986, also by claimant), as it is a view more and more accepted that in international commercial arbitration the possibility of delaying tactics is a serious concern and the elimination of these effects a primary task of all involved ...

"By a possible request of a party, the present award can be subject to the annulment procedure provided by the Zurich Code of Civil Procedure; the Obergericht of the Canton of Zurich ... is competent. In the present context it may be pointed out that an eventual annulment of the present award by the Zurich Obergericht would neither stop the competence of the arbitral tribunal as installed by the ICC nor terminate the effectiveness of the arbitration clause. § 256 ZPO/ZH implicitly presupposes that the arbitral tribunal, whose award was set aside, has again to decide on the issue. Should the same arbitral tribunal not be in the position to act, under said rule a new arbitral tribunal would have to be constituted in conformity with the arbitration clause and would be competent to render an award." ²⁰

I have quoted from the Partial Award in the Milutinovic case at such length because it is the fullest analysis of the authority of a truncated tribunal known to have been made in an international commercial arbitral award; because of the cogency of that analysis; because of the distinction of the arbitrators – Professor Bucher and Bockstiegel - who are the authors of the Award; and because the Award hitherto has not been published. I agree with the Tribunal that a contrary decision would have been incompatible with "the requirements of orderly and correct arbitration, providing an arbitrator (or a party influencing him) with the means to sabotage the correct coming to an end of an arbitral procedure and to extort from the tribunal and the opposing party the reopening of the proceedings. Such a possibility would neglect the demands of the solution of international commercial disputes and question the credibility of the arbitration both as off by the ICC and as performed in Zurich or Switzerland." ²¹

Prior to the rendering of the Partial Award which has been so substantially quoted, the plaintiff in the proceedings, Milutinovic, brought an action before the Administrative Commission of the Supreme Court of the Canton of Zurich requesting that the Tribunal accept Professor Jovanovic's withdrawal as legally operative and maintaining that continuation of proceedings by two arbitrators gave rise to presumption of prejudice on their part. The Administrative Commission rejected the challenge, holding that continuation of the arbitral proceedings by the two arbitrators in the unusual situation that had arisen was justifiable and did not warrant a presumption of bias.²²

On appeal to the Court of Cassation of the Canton of Zurich, the foregoing judgement was reversed. It was held that, while the ICC Rules govern the proceedings of the Arbitral Tribunal, they did not contemplate unilateral resignation of an arbitrator. Under the Zurich Code of Civil Procedure, no party in an arbitration could be accorded a preferential position. Equality of the parties was the essential, imperative principle. In accordance with that principle, it was absolutely prohibited that a three-member arbitral tribunal could, in the person of its chairman and one member, deliberate and take a decision which ought to have been taken collegially. While the refusal of an arbitrator to sign the award is of no legal consequence, this in no way implies that a party-appointed arbitrator and the chairman may deliberate in the absence of another legally designated arbitrator and reach a decision that must be taken collectively. Professors Bucher and Bockstiegel could have requested dismissal of Professor Jovanovic on the ground of his refusal to fulfil his functions; that would have been the lawful procedure to have been followed in this case. Whether Professor Jovanovic's resignation was right or wrong is irrelevant. Violation of the principle of non-discrimination between the parties and according one party preferential treatment was not only unlawful, it seriously compromised confidence in the tribunal, creating as it did a presumption of partiality. Accordingly, the decision of the Administrative Commission was annulled and the case was remanded to the Administrative Commission.²³ The Commission finding that Professors Bucher and Bockstiegel did in fact discuss and draw up the Partial Award without the participation of Professor Jovanovic, and being bound by the foregoing judgement of the Cantonal Supreme Court, required Professors Bucher and Bockstiegel to retire from the arbitration.²⁴ Subsequently, the Court of Cassation declined to consider annulment of that decision on the ground that the application to annul was not filed within ten days of the decision's service.²⁵

On appeal to the Swiss Federal Tribunal it was held, by a judgement of December 20, 1989, that the criticized actions of Professors Bucher and Bockstiegel were insufficient in themselves to create an appearance of bias. Accordingly, the judgement of the Administrative Commission divesting Professors Bucher and Bockstiegel of their positions as arbitrators in the case was vacated.²⁶ Thus the Administrative Commission of the Zurich Court of Appeals definitely dismissed the challenge to the arbitral status of Professors Bucher and Bockstiegel.²⁷

However, Milutinovic also submitted a request to the Court of Appeals of the Canton of Zurich for nullification of the Partial Award, arguing that it violated the Code of Civil Procedure of Zurich as well as Article 6 of the European Convention on Human Rights. The Court of Appeals dismissed the nullification request by decision of July 4, 1990. Milutinovic's argument that, irrespective of whether Professor Jovanovic had serious reasons justifying his withdrawal, after his withdrawal a properly constituted tribunal no longer existed, was unsubstantiated. An arbitrator is obliged to serve until the conclusion of the arbitral proceedings, and withdrawal is excluded in the absence of cause. Professor Jovanovic had justified his resignation solely by reason of the fact that the two other arbitrators had declined to admit further testimony at that stage of the proceedings. But the fact that the arbitrators differed in that regard manifestly did not furnish a serious reason justifying withdrawal of the outvoted arbitrator. Accordingly, his resignation did not vacate the functions of Professor Jovanovic. Thus the tribunal could be treated as properly composed. In the circumstances, there was no transgression of Articles 4 and 58 of the Swiss Federal Constitution or Article 6 of the European Convention on Human Rights. It was uncontested that Professor Jovanovic had, without providing justification, failed to take up an invitation to a session of the Tribunal. It was equally uncontested that he had received a draft of the Partial Award but did not sign it. His refusal to take part in the Tribunal's deliberations may be equated with a refusal to sign. It is true that by the terms of Article 254 of the Code of Civil Procedure, an award must be given with the participation of all the arbitrators. That does not mean that all arbitrators must actually meet; a written exchange may suffice, provided that no arbitrator is deprived of the opportunity to participate in the hearing. The fact that Professor Jovanovic justified his refusal to take part solely as he did is uncontested. That refusal was abusive; that it lacked cause, moreover, was made clear to him by the ICC. Milutinovic had chosen to identify itself with that abuse by not requesting the removal of its delinquent arbitrator. If it has therefore been "penalized", it can only blame itself. In any event, the remaining arbitrators and the other party may not be held to have acted irregularly. There is no ground in the circumstances for maintaining that the principle of the equality of the parties has been impinged upon by the remaining arbitrators rendering an award, when Milutinovic alone is responsible fo any lack of opportunity to participate.²⁸

Finally, after this multiplicity of conflicting judgements, the Swiss Federal Tribunal set aside the foregoing judgement of the Zurich Court of Appeals and upheld the nullification appeal submitted by Milutinovic. The guarantees of the Federal Constitution and of the European Convention on Human Rights, it held, embrace not only state courts but private arbitral tribunals. They must assure the independent administration of justice. This applies, in particular, to the right to a proper composition of the tribunal. Under the governing Code of Civil Procedure of the Canton of Zurich, the final award must be made with the participation of all arbitrators. That is a fundamental principle of procedure. The case was to be distinguished from the practice cited by the Court of Appeals, because here a member of the tribunal had resigned from his function and refused to participate further in the proceedings; therefore he did not simply withdraw from an oral deliberation with an intent to delay the proceedings. It was not a question of an arbitrator simply refusing to sign the decision; such a case would have to be considered differently. Whether an arbitrator may withdraw at any time is an open question. If it is accepted that an arbitrator may withdraw only for cause, then the question immediately arises as to who must decide whether a withdrawal is legitimate. That the remaining arbitrators may decide is out of the question. The only proper solution appears to be referral of this decision to the competence of a regular judge. The judge must either establish that the mandate to arbitrate is terminated or, if there are no substantial reasons justifying withdrawal, require the withdrawing arbitrator to continue to participate. An unjustified withdrawal does not simply lead to continuation of the proceedings in the absence of the withdrawing arbitrator and without appointing a new one. This could be argued only if the arbitration agreement so provides. Absent such a provision, the arbitral tribunal will again be properly composed either when the withdrawing arbitrator – if need be, pursuant to court order – reconsiders his withdrawal or when he has been replaced. The result of illegitimate withdrawal is limited to the arbitrator's possible liability for damages and disciplinary measures. If the remaining members of the arbitral tribunal continue with the proceedings despite the withdrawal of an arbitrator, without having been authorized to so do by the parties, then the arbitral tribunal is not properly composed. The contrary view expressed by the Court of Appeals is inconsistent with the fundamental right of the parties to a proper composition of the tribunal and thus violates both Article 58 of the Federal Constitution and Article 6 of the European Convention on Human Rights. The parties referred the dispute to an arbitral tribunal consisting of three arbitrators; the Partial Award was rendered by two arbitrators only. The Code of Civil Procedure of the Canton of Zurich was violated and the Court of Appeals acted arbitrarily when it failed to nullify the Partial Award on this ground as well.²⁹

The ultimate consequence has been that the Partial Award rendered by the truncated tribunal composed of Professors Bucher and Bockstiegel was effectively quashed. In the circumstances, a new arbitral tribunal has been established under ICC auspices which, it is understood, is as of this writing in the course of adjudicating the dispute - which initially was brought to arbitration as long ago as 1984.

The result is deplorable, and not only because it has given rise to an arbitral process extending more than ten years. The judgement of the Swiss Federal Tribunal is inconsonant with the general principle of law that a party may not invoke its own wrong (or a wrong that it adopts) to deprive another party of its rights. It runs counter to the predominant practice of international arbitration. It places the Swiss Federal Tribunal in conflict with the Court of Arbitration of the International Chamber of Commerce: whereas the ICC, by refusing to accept the purported resignation of Professor Jovanovic or the challenge to the status of the remaining arbitrators, and by approving their Partial Award, in authoritative interpretation of its own Rules authorized the truncated arbitral tribunal to proceed and ratified its holding when it did proceed, the Swiss Federal Tribunal held that, despite those ICC positions - to which it hardly refers, still less defers - the Award was null. If, indeed, the judgement of the Swiss Federal Tribunal were today still the law of Switzerland, there might be reason to question - as did the arbitral tribunal - the suitability of the Canton of Zurich, and Switzerland itself, as optimal sites for the pursuit of international commercial arbitration. The practical eff of the judgement conduces to obstruction if not subversion of the international arbitral process.

One hesitates to gainsay holdings of the Swiss Federal Tribunal about the Constitution of Switzerland and Swiss law. Being uninformed about the exegesis of the Swiss Constitution, little more will be said than that, on its face, the provision of the Constitution invoked by the Swiss Federal Tribunal does not appear to be dispositive.³⁰ Article 58 provides:

"No one may be deprived of his constitutional judge; therefore no exceptional courts of law may be set up." ("Nul ne peut être distrait de son juge naturel. En conséquence, il ne pourra être établi de tribunaux extraordinaires.")³¹

Presumably the Swiss Federal Tribunal invoked Article 58 because it concluded that Professor Jovanovic's "resignation" deprived Milutinovic of its constitutional judge; if so, the question arises whether the deprivation was not self-induced or adopted (as the Zurich Court of Appeals held that it was). Or perhaps the Swiss Federal Tribunal, in passing upon lower court judgements, reasoned that the failure of Professors Bucher and Bockstiegel, or the ICC, to move to replace Professor Jovanovic (a motion which it might be thought rather rested with Milutinovic) deprived Milutinovic of its constitutional judge; if so, that is a singular interpretation of the facts. It may be observed that the Constitutional holdings of the Swiss Federal Tribunal were not shared by some other Swiss courts.

In any event, if the reliance of the Swiss Federal Tribunal on Article 6 of the European Convention of Human Rights is an indicator of the strength of its reasoning, its position is strikingly unpersuasive. Only paragraph 1 of Article 6 concerns civil suits and it provides:

"In the determination of his civil rights and obligations ... everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law." ³²

Assuming, arguendo, that this provision embraces in camera arbitral proceedings, the implicit reasoning of the Swiss Federal Tribunal appears to be that the proceedings of the truncated arbitral tribunal in the Milutinovic case could not have been "fair", that the tribunal could not have been "independent and impartial" by reason of the fact that one party-appointed arbitrator absented himself during some of the tribunal's deliberations and in the preparation of the Award. It is not easy to reconcile the sense of such a judgement of the Swiss Federal Tribunal with its own judgement of December 20, 1989, rejecting the challenge to Professors Bucher and Bockstiegel.

The implication of any such holding is worrisome, for it strikes against a fundamental assumption of international commercial arbitration, namely, that all members of the tribunal are independent, whether or not they are party-appointed. If Professor Jovanovic acted independently, why should it be assumed that his absence from the tribunal cut against the interests of Milutinovic? Why should it be assumed that the tribunal was any less fair, independent and impartial in the absence of Professor Jovanovic than in his presence? The ICC and Zurich Court of Appeal made no such assumption. They rather appear to have acted on the presumption that, if party­ appointed arbitrators are to act not as advocates but arbitrators, they are independent ; their independence and impartiality is not prejudiced by the walkout of one of them; and, in circumstances in which the tribunal had had the benefit of extensive written pleadings and oral argument, heard the witnesses agreed upon, and embarked upon its deliberations, it had every capacity to render a fair and impartial award. There is nothing in the Partial Award actually rendered which suggests otherwise.

It should be noted that the tribunal was initially constituted in precise conformity with the will of the parties and the ICC Rules. It was the walkout of one party-appointed arbitrator at an advanced stage of the proceedings which prejudiced not the constitution but the continued effective composition of the tribunal. The distinction, as the International Court of Justice has observed, is fundamental.³³ It follows that an unjustified withdrawal should not be treated as vitiating the authority of a tribunal which initially was duly constituted.

The various judgements of Swiss courts in the Milutinovic case were based on provisions of law, some of which have been superseded by the arbitral provisions of the Swiss Private International Act of December 18, 1987. Article 179 of that Act provides:

"(1) The arbitrators shall be appointed, removed or replaced in accordance with the agreement of the parties.

"(2) In the absence of such an agreement, it shall be possible for applications to be brought before the seat of the arbitral tribunal; the court shall apply the provisions of cantonal law regarding the appointment, removal or replacement of arbitrators."

Article 189 provides:

"(1) The arbitral award shall be rendered in accordance with the procedure and in the form agreed upon by the parties." ³⁴

A leading Swiss arbitrator and counsel, Dr. Marc Blessing, has been reported to have maintained that, in view of the latter provision, a Swiss court applying current law would not annul an award rendered in the circumstances of the Milutinovic case.³⁵ The parties are free to agree upon the procedure governing the arbitration. It consequently may be concluded that, if they have provided for the governance of ICC procedures, ICC Rules and the ICC's interpretation of those Rules should be dispositive.³⁶

It is unclear why such reasoning was not applied by the Swiss Federal Tribunal in the Milutinovic case even taking the governing Swiss law as it then was. The Swiss Federal Tribunal found that it was obliged to apply the Zurich Code of Civil Procedure, which required that all the arbitrators must participate in all the deliberations and decisions of the arbitral tribunal (as equally did Article 31 of the Intercantonal Arbitration Convention of 1969, the "Concordat", which was not applicable in this case.) But that provision could have been read as satisfied by offering the absent arbitrator the opportunity to participate in the deliberations and in the adoption of the decision, off in fact made in the Milutinovic case; or by treating the parties as having adopted the governing ICC Rule as authoritatively interpreted by the ICC;³⁷ or on other grounds on which the Zurich Court of Appeals relied, including abusive conduct by Professor Jovanovic and the adoption of that conduct by Milutinovic. In any event, as will be shown shortly, the rules of arbitral institutions in addition to the ICC may be interpreted or applied to sustain the authority of a truncated arbitral tribunal to act when a member arbitrarily withdraws.

III. The ICCA Survey

It would unduly extend what is already an extensive paper if I were fully to summarise the worldwide survey of the authority of truncated arbitral tribunals which was carried out at the 1990 ICCA Congress. The chairman of those proceedings, Judge Howard M. Holtzmann, observed that, where an arbitrator refuses to participate or submits a resignation without cause at a relatively early stage in the arbitration, the most prudent course is to remove the recalcitrant arbitrator and to appoint a replacement. That situation entails some delay, but it can be limited by laws and rules which assure that a new arbitrator can be appointed with minimum delay.

However, appointing a new arbitrator is not practical late in the proceedings; then there is not only the time required for replacement, but to allow the new arbitrator to become familiar with the case. Hearings may have to be repeated. At a later stage, "the only effective solution is for the two remaining arbitrators to continue the proceedings and render an award."³⁸ Judge Holtzmann summarized the various national reports and comments as showing that both civil and common law courts would respect awards by truncated arbitral tribunals if the parties had so agreed or had chosen rules which so provide. He concluded that, even in the absence of such agreement or choice, it was hard to imagine that "a modern court in a state that otherwise has a public policy of supporting international commercial arbitration would invalidate an a ward because a party-appointed arbitrator, in an effort to frustrate the arbitration, ... refused to participate in deliberations ... National laws that refer to participation by three arbitrators should be interpreted to be satisfied" when all three have had the opportunity to participate.³⁹

In his survey of laws and court decisions in civil law countries, Professor Emmanuel Gaillard concordantly took the position that:

"An arbitrator should be considered to have deliberated once he has been afforded the same opportunity to participate as that afforded his fellow arbitrators. In the same way that the adversarial principle is satisfied when each party has been given the opportunity to present its case, the deliberation requirement should be considered to have been met when each arbitrator has been given the opportunity to put forth his point of view. This is the position of French case law ..."⁴⁰

In Professor Gaillard's view, legal systems like the Belgian and Swedish, which specify that all arbitrators must take part in the deliberations, "are in no way opposed to the principles endorsed by French and Swiss case law. There is nothing in either system to prevent the expression 'take part in the deliberations' from being interpreted as a simple requirement that each of the arbitrators should have been given the opportunity to take part."⁴¹ (It may be noted that Professor Gaillard's reference to Swiss law antedated the judgement of the Swiss Federal Tribunal of April 30, 1991 reported above.)

Mr. V. V. Veeder, Q.C., reported that, both under the UNCITRAL Model Law and in common law countries, where the arbitrators have reached a majority decision in deliberations involving all three arbitrators, the withdrawal of a dissident arbitrator will not prevent the tribunal from completing its deliberations and making its award in his absence. However, where no decision has been reached in the arbitrators' deliberations, only the UNCITRAL Model Law and United States practice permit the truncated tribunal to proceed to an award. In other common law countries unless the parties agree otherwise (by their arbitration agreement or through applicable arbitration rules), the absent arbitrator is not equated with a mere dissenter; the parties are entitled to an opportunity whereby the absent arbitrator could persuade the other members of the tribunal to arrive at another decision. In the absence of agreement by the parties, the remedy in these jurisdictions requires the missing arbitrator to be replaced.⁴²

However, as Professor Ivan Szasz pointed out, the Rules of the London Court of International Arbitration provide that if an arbitrator refuses to participate in "the making of the award, having been given reasonable opportunity to do so, the remaining arbitrators shall proceed in his absence."⁴³ A truncated arbitral tribunal similarly may render an award under the American Arbitration Association Rules and by interpretation of less explicit provisions of the UNCITRAL Rules.⁴⁴ This appears to be the dominant opinion in interpretation of the ICC Rules; at any rate, it was the one adopted by the ICC in the Milutinovic case.⁴⁵ It has been authoritatively held to be the case in respect of ICSID as well.⁴⁶ The authority of a truncated arbitral tribunal has also been upheld by a 1989 Resolution of the Institute of International Law.⁴⁷

If the parties to an arbitration agreement agree that the arbitration shall be governed by any of the · foregoing sets of arbitration rules, it would appear to follow that they have agreed to authorize a truncated arbitral tribunal to render a valid award.

IV. Recently adopted rules

That such rules represent the trend of modem international arbitration is suggested by the terms of three sets of arbitral rules adopted since the Milutinovic case and the ICCA Congress. The International Arbitration Rules of the American Arbitration Association effective March 1, 1991, provide, in Article 11:

"1. If an arbitrator on a three-person tribunal fails to participate in the arbitration, the two other arbitrators shall have the power in their sole discretion to continue the arbitration and to make any decision, ruling or award, notwithstanding the failure of the third arbitrator to participate. In determining whether to continue the arbitration or to render any decision, ruling or award without the participation of an arbitrator, the two other arbitrators shall take into account the stage of the arbitration, the reason, if any, expressed by the third arbitrator for such nonparticipation, and such other matters as they consider appropriate in the circumstances of the case. In the event that the two other arbitrators determine not to continue the arbitration without the participation of the third arbitrator, the administrator on proof satisfactory to it shall declare the office vacant, and a substitute arbitrator shall be appointed pursuant to the provisions of Article 6, unless the parties otherwise agree.

2. If a substitute arbitrator is appointed, the tribunal shall determine at its sole discretion whether all or part of any prior hearings shall be repeated."⁴⁸

The Permanent Court of Arbitration Optional Rules for Arbitrating Disputes between two Parties of which only one is a State, effective July 6, 1 993, provide, in Article 13, paragraph 3:

"If an arbitrator on a three-person tribunal fails to participate in the arbitration, the other arbitrators shall, unless the parties agree otherwise, have the power in their sole discretion to continue the arbitration and to make any decision, ruling or award, notwithstanding the failure of one arbitrator to participate. In determining whether to continue the arbitration or to render any decision, ruling, or award without the participation of an arbitrator, the other arbitrators shall take into account the stage of the arbitration, the reason, if any, expressed by the arbitrator for such nonparticipation, and such other matters as they consider appropriate in the circumstances of the case. In the event that the other arbitrators determine not to continue the arbitration without the nonparticipating arbitrator, the arbitral tribunal shall declare the office vacant, and a substitute arbitrator shall be appointed ... "⁴⁹

Finally, the World Intellectual Property Organization (WIPO) in 1994 adopted Arbitration Rules which contain the following provision:

"Truncated Tribunal Article 35

If an arbitrator on a three-person Tribunal, though duly notified and without good cause, fails to participate in the work of the Tribunal, the two other arbitrators shall, unless a party has made an application under Article 32, have the power in their sole discretion to continue the arbitration and to make any award, order or other decision notwithstanding the failure of the third arbitrator to participate. In determining whether to continue the arbitration or to render any award, order or other decision without the participation of an arbitrator, the two other arbitrators shall take into account the stage of the arbitration, the reason, if any, expressed by the third arbitrator for such non­participation, and such other matters as they consider appropriate in the circumstances of the case.

(b) In the event that the two other arbitrators determine not to continue the arbitration without the participation of a third arbitrator, the Center shall, on pro satisfactory to it of the failure of the arbitrator to participate in the work of the Tribunal, declare the office vacant, and a substitute arbitrator shall be appointed by the Center in the exercise of the discretion defined in Article 33, unless the parties otherwise agree."⁵⁰

It is believed that these provisions of the AAA's, the PCA's, and WIPO's Rules represent not only the latest but the soundest consideration of the problem of the authority of a truncated arbitral tribunal to render a valid award.

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