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( Source of the document: ICC Digital Library )
Of Counsel in the Vilnius office of the pan-Baltic law firm Primus; FCIArb.
On 1 September 2016, the Supreme Court of Lithuania set aside an arbitral award on the grounds that the administering institution and its president had failed to meet the necessary standards of independence and impartiality.
LITHUANIA; INDEPENDENCE; ARBITRATION INSTITUTION
An application (case ref. e3K-3-387-421/2016) was made to set aside an arbitral award rendered under the rules of the Lithuanian Court of Arbitration. The applicant alleged that the institution and its chairman lacked independence and impartiality. The circumstances were as follows:
The role of an arbitral institution is not confined to technical and logistical matters.The institution may be empowered by law or arbitration rules to decide on other matters of importance, including the appointment of arbitrators.Case law relating to Article 6.1of the European Convention on Human Rights, which states that ‘everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law’, has interpreted ‘tribunal’ as meaning both the arbitral institution and the tribunal in charge of a particular case(see Regent Company v Ukraine, no. 773/03; Lavents v Latvia, no. 58442/00). Therefore, the way an institution ismanaged for the purpose of carrying out its duties is relevant to assessing its independence.
Article 8.1 of the Lithuanian Law on Commercial Arbitration requires arbitration institutions, their chairmen and arbitral tribunals to be independent. Read together with Article 6.1 of theEuropean Convention on Human Rights, this means that independent and impartial institutions and tribunalsare a guarantee of due process.Article 4.7 of the Law on Commercial Arbitration requires that the law should be interpreted in such a way as to ensure maximum compliance with the fundamentalprinciples of arbitration, which include the appointment of the arbitral tribunal by an authority (be it a person or an institution)thathas no direct or indirect interest in the outcome of the case.
If there are reasonable doubtsover theindependence or impartialityof theinstitution that acts as appointing authority, thosedoubts should be disclosed and dispelled. Article 9 of the Law on Commercial Arbitration authorises the state courts to take the necessary procedural stepsto deal with such situations.In the case in question, the Supreme Court held that such doubts over the ability ofthe institution and its chairmanto act independently of the institution’s founding bodies andtheir representatives had not beendispelled. The Supreme Court noted the following:
The Supreme Court concluded that in these circumstances the law firm playeda decisive role in the life of the institution and neither the institution nor its chairman could be considered an impartial and independent appointing authority.
In an obiter dictum, the Supreme Court also noted that, when evaluating independence and impartiality, it was free to apply criteria other than those listed in theIBA Guidelines on Conflicts of Interest in International Arbitration, whichare simply recommendations and do not establish anexhaustive list of situations creating conflicts of interest.