Replacement of arbitrators / Determination as to whether prior proceedings shall again take place and whether prior award on jurisdiction shall be revisited / Art. 2(12) of the ICC Rules / Obligation of the reconstituted arbitral tribunal to take all appropriate steps to ensure that its award be enforceable at law by virtue of Art. 26 of the ICC Rules / Despite Art. 2(13) of the ICC Rules declaring the ICC Court's rulings on challenges as final, award rendered by an arbitral tribunal with one or more unqualified members could be deemed to violate fundamental public policy / Review of the entire record of the case by the newly appointed members of the tribunal / Proceedings need not be repeated/ Prior rulings made by the arbitral tribunal should be reviewed / Rulings by the arbitral tribunal are reaffirmed by the newly appointed tribunal

In this exceptionally hard-fought case, Arbitrators A and B were confirmed by the ICC Court upon nomination by, respectively, Claimant and Defendant, after which the ICC Court appointed Arbitrator C as Chairman. The Parties and the Arbitrators signed the Terms of Reference in which the Arbitral Tribunal was to decide on its jurisdiction. Subsequently, the Arbitral Tribunal issued a partial award which concluded that it had jurisdiction and that the Claimant's claims were admissible.

After the rendition of the Partial Award, the Defendant, who had confirmed in the Terms of Reference that it had no grounds of challenge whatsoever against any of the arbitrators, challenged the then Chairman of the Tribunal. The ICC Court rejected the challenge. However, after the Court's decision on the challenge, Arbitrator C resigned as Chairman, noting that he appeared to have lost the confidence of at least one of the parties. The ICC thereupon appointed as Chairman Arbitrator D. Defendant, apparently moved to a greater measure of investigation, submitted a long list of companies that had some connections with the Claimant. Thereafter, Arbitrator D, acknowledging that he or his law partners had had some dealings with at least one of the companies listed resigned, upon the challenge made by Defendant, and without affirming that the challenge was well-founded. At around the same time, Arbitrator A, originally appointed by the Claimant, informed the Parties and the Tribunal that, unbeknownst to him, one of his law partners had had dealings with one or more companies on the list and, when challenged by the Defendant, also resigned. Thereupon, the Claimant appointed an Arbitrator pursuant to Art. 2(12) of the ICC Rules and the ICC Court appointed the Chairman.

In the meantime, Defendant had already launched an attack upon the partial award in the competent Swiss Court. The Swiss Federal Court rendered a decision rejecting the attack upon the Partial Award and upholding the Tribunal's findings on its jurisdiction and on admissibility.

The following extract concerns Defendant's argument that all prior proceedings and rulings in the arbitration would need be repeated by the 'reconstituted' arbitral tribunal.

'The consequences of the replacement of arbitrators

A. General observations

As soon as the Tribunal had been reconstituted in its present composition, the Defendants applied to the Tribunal for a ruling pursuant to Art. 2(12) of the ICC Rules. This Article provides as follows:

In each instance where an arbitrator is to be replaced, the procedure indicated in the preceding paragraphs 3, 4, 5 and 6 shall be followed. Once reconstituted, and after having invited the parties to comment, the arbitral tribunal shall determine if and to what extent prior proceedings shall again take place.

The Defendant has argued that, since all prior proceedings had been had before, and all prior rulings had been rendered by, a Tribunal composed of arbitrators who lacked the requisite qualifications, the Tribunal should repeat all prior proceedings, including its ruling on jurisdiction. The Claimant has argued that all prior rulings were the law of the case and that proceedings should not be repeated.

At its hearing on January 31, 1994, the Tribunal ruled that it would issue in due course its ruling on the Defendant's application under Art. 2(12). It further ruled that the parties could proceed on the assumption that the Tribunal would revisit and review all prior proceedings and rulings and that the parties could make, together with their submissions on the merits, any additional submissions on the subjects treated in earlier rulings they might wish to make. The Tribunal also ruled that the parties could either agree on additional or new terms of reference or submit whatever additional or new terms of reference they wished to propose.

In issuing these directives, the Tribunal was moved by its concern that the proceedings in this case had already taken almost five years and that they should not be unduly delayed any further.

In determining whether any of the Tribunal's prior proceedings and rulings should be revisited, the Tribunal should be guided in the first instance by Art. 2(12) of the ICC Rules. The text of this Article appears to contemplate the usual case of an arbitrator who succeeds an arbitrator who has fallen ill or has died or who has been called to public office. In that situation, the only relevant question is to what extent the newly appointed arbitrator can properly proceed with the adjudication of the case without having participated in prior proceedings. For that reason, other rules make the newly appointed arbitrator, rather than the entire Tribunal, the judge of whether prior proceedings should be repeated. See, e.g., Art. 12 of the ICSID Rules. In this situation, there is also no reason for revisiting prior rulings of the Tribunal, for they were rendered by a fully qualified tribunal.

However, in the case at hand, the Tribunal confronts a different situation. In this case, the Defendant argues strongly and insistently that the Tribunal's prior rulings are defective, because unqualified arbitrators participated in their rendition.

It may be acknowledged that this argument is less persuasive insofar as it pertains to Arbitrators C and D. For the challenge of Arbitrator C was rejected by the ICC Court, the body declared competent by Art. 2(9) and (13) of the ICC Rules to make that determination. And Arbitrator D resigned right after he had been appointed and therefore did not participate in anything affecting the disposition of this case.

Nevertheless, if a subsequent attack were made on the award in this case on the ground that, notwithstanding the ICC Court's ruling, Arbitrator C was not qualified to act as an arbitrator in this case, the Defendant might argue that an erroneous ruling by the ICC Court cannot preserve an award when the defect is so essential as the participation by a disqualified arbitrator. The Tribunal, obligated by Art. 26 of the ICC Rules to take all appropriate steps to ensure that its award be enforceable at law, wishes to avoid a possible attack on its award on this ground. It is duly mindful in this context of the possibility that a court, in which enforcement of its award is sought, may rule that, in spite of Art. 2(13), declaring the Court's rulings on a challenge to be final, an award rendered by an Arbitral Tribunal with one or more unqualified members violates fundamental public policy and cannot be enforced.

Even if this were rejected as a realistic possibility, the Tribunal must take into due account that Arbitrator A, who participated in all activities of the Tribunal since its inception until he resigned, was challenged on the ground that one of his law partners had too close a relationship with one or more of the companies on the Defendant's list and that the ICC Court never ruled on that challenge. And, if the Defendant managed to establish that Arbitrator A was indeed unqualified, a question would arise as to whether decisions in which he participated could stand.

It may be noted that Arbitrator A declared that he was unaware of the potentially disqualifying circumstances before the Defendant presented its list and that, consequently, he can hardly be regarded as having been moved by partisan consideration before he discovered his partner's relationship to companies on the Defendant's list. But any assertion to that effect could no doubt be countered with the argument that no investigation was made into the circumstances of Arbitrator A's discovery and that the failure to check with his partners may itself be a disqualifying circumstance.

Whatever the proper dispositions on these questions, the fact remains that the Tribunal, in is present composition, is faced with the circumstances that Arbitrator A resigned before a decision could be made on the challenge of his qualifications and that the Tribunal must decide whether this circumstance renders appropriate revisitation of all prior proceedings and rulings.

A solution to this problem would be afforded if the Tribunal could itself decide whether the challenge of Arbitrator A was proper. Even if it is recognised that the ICC Rules assign the authority to render that decision to the ICC Court, it might be argued that the Tribunal might be able to decide this question when it arises collaterally (as it does here) rather than directly.

The Tribunal judges that the best and safest course is to review all prior proceedings and rulings of the Tribunal and to make such dispositions as it deems appropriate in the light of this review. This will exclude any possibility of the Defendant's attacking this award on the ground that it is based on prior proceedings and rulings by an improperly constituted tribunal.

B. The Tribunal's revisitation of prior proceedings and rulings

When it sought an immediate ruling pursuant to Art. 2(12), the Defendant argued that it needed such a ruling in order to prepare for the revisitation of the proceedings and rulings the Tribunal might select. The Tribunal addressed this argument by ruling that the Defendant could properly assume that the Tribunal would revisit everything done thus far. The Defendant also argued that the parties were agreed that the Tribunal should issue such a ruling forthwith, but that argument proved unavailing since the Claimant denied having made any such agreement and, in any event, the Tribunal did rule on Defendant's Art. 2 (12) motion, but did so only partially, preserving rulings on the entire application until the rendition of this award. Of course, the Tribunal proceeded as it did, in part because it wished to avoid another delaying attack in court, which it deemed antithetical to the purposes of arbitration.

Upon reviewing the entire record of the case, the newly appointed members of the Tribunal have reached the conclusion that no proceedings need to be repeated for their benefit and that their study of the record, together with the additional submissions by the parties, has adequately informed them of what has transpired before. The Tribunal therefore concluded that no repetition of prior proceedings is necessary.

The next question to be addressed is whether the prior rulings of the Tribunal should be reviewed. For the reasons explained above, the Tribunal has concluded that they should be reviewed. The Tribunal's review, in the light of all submissions by both parties, leads it to conclude that all rulings by the Tribunal should be reaffirmed, except that the reasoning needs to be adjusted as indicated in this award.

This ruling extends to the Terms of Reference. The Defendant has argued that they should be adopted anew or be amended, while the Claimant considers them adequate. However, although invited by the Tribunal to submit proposed Terms of Reference in renewed or amended form, the Defendant has failed to submit specific proposals in its submissions. The tribunal judges that, in these circumstances, the originally adopted version is adequate and needs no amendment or addition. The parties' submissions on the merits have also confirmed that additional Terms of Reference are unnecessary. Although the parties' submissions were simultaneous, they very adequately addressed the issues that kept the parties divided.'