Pre-appointment Interviews and International Commercial Arbitration - Assignment Example

?PRE-APPOINTMENT INTERVIEWS AND INTERNATIONAL COMMERCIAL ARBITRATION Introduction The current global economic system created a highly integrated international market. This phenomenon known as globalisation is recognized as the most efficient and successful as yet and countries adopt it as part of their strategy for development. As a consequence, international trade has increased and so does the interaction among states. However, it also entailed conflicts between states and multinational entities as they form bilateral and multilateral relationships within the globalisation framework. Because of this, international mechanisms that enforce trading conduct as well as standards and rules that would cover the trade among nations, including conflict resolution were established. Dispute settlement is an important component of these mechanisms. And in this area, international arbitration or mediation emerged as one of the most effective methods. Since the 1980s, there has been a tremendous increase in the number of arbitrations involving billions of dollars in trading disputes.1 International arbitration has steadily gained popularity for several reasons. One of the most important of which is the neutrality in the manner by which disputes are resolved and the efficacy by which the arbitration awards are enforced. According to Poudret and Besson “an international arbitral tribunal is not an organ of the state in which it has its seat in the same way that a court of the seat would be.”2 What this means is that the entire dispute resolution process does away with the complexity and challenges entailed in international litigation. The primary task of the tribunal is to exhaust all efforts in order to render an enforceable award and always guided by the principle that no state can drag the process to its courts to frustrate the process.3 In order to achieve this objective, it is imperative to ensure the legitimacy and fairness of the arbitration outcome to avoid challenges and protracted process marred by conflicts on account of validity by which decisions were made. There are several mechanisms in place to do this and they include the pre-appointment interviews. This paper will explore this aspect of the arbitration process, focusing on why it is important in settling international commercial disputes. Pre-Appointment Interview There are several arbitration systems available and each of these provides some frameworks that define and explain pre-appointment interviews. For example, the United Nations Commission on International Trade Law (UNCITRAL) provides in its disclosure provision that: A prospective arbitrator shall disclose to those who approach him in connection with his possible appointment any circumstances likely to give rise to justifiable doubts as t his impartiality or independence. An arbitrator, once appointed or chosen, shall disclose such circumstances to the parties unless they have already been informed by him of these circumstances.4 The provision highlights the importance of pre-appointment interviews as a tool to determine impartiality and independence. The mechanism is crucial in requiring and fulfilling an obligation on the part of the prospective arbitrators to disclose information, which should determine or influence their selection. In addition, it is also a tool by which parties to arbitration can select arbitrators who are perceived to favour their case. For instance, Martin Hunter, an expert arbitration counsel stated: “what I am really looking for in a party nominated arbitrator is someone with the maximum predisposition towards my client, but with the minimum appearance of bias.5 Even in the cases of stricter arbitration systems such as that by the International Centre for Dispute Resolution, pre-appointment interviews are valid. As a matter of fact, ICDR identify it as the exception to its rule, prohibiting arbitration counsels from communicating with arbitrators.6 Also, the AAA/ABA Code of Ethics for Arbitrators in Commercial Disputes stated: When the appointment of a prospective arbitrator is being considered, the prospective arbitrator: (a) may ask about the identities of the parties, and the general nature of the case; and (b) may respond to inquiries from a party or its counsel designed to determine his or her suitability and availability for the appointment.7 The number of arbitration systems available meant that there is no standard or universal system by which pre-appointment interviews are conducted. However, one of the most widely recognized is the IBA Guidelines on Conflicts of Interest in International Arbitration, which provides specific rules for pre-appointment interviews. This system is reportedly used by 60% of arbitrators.8 It states, for example, that: the arbitrator has had an initial contact with the appointing party or an affiliate of the appointing party (or the respective counsels) prior to the appointment, if this contact is limited to the arbitrator’s availability and qualifications to serve or to the names of possible candidates for a chairperson and did not address the merits or the procedural aspects of the dispute.9 IBA’s Ethics for International Arbitrators’ rule 5.1 further stated: A prospective arbitrator... may... respond to enquiries from those approaching him, provided that such enquiries are designed to determine his suitability and availability for the appointment and provided that the merits of the case are not discussed.10 There are other tools available such as the case of The Practice Guidelines on the Pre-Appointment Interview of Prospective Arbitrators, which is consisted of mere suggestions about the norms, ethics and practices of conducting pre-appointment interviews. The available systems, resources and tools in this aspect of the arbitration proceedings underscore why there is a need for time and effort to be invested because it will serve all the parties involved. It is one of the cornerstone in which the outcome of the arbitration is based on, it avoids challenges or delays on account of charges of bias and questions regarding arbitrator independence. This is made more critical by the fact that in many states, arbitration laws are applicable in state courts. Arbitration provisions in contracts, such as in the United States, are considered severable from the rest of the contract and its invalidity does not mean the arbitration provision is invalid as well. In Buckeye v Cardegna, for example, the United States Supreme Court ruled that arbitration provisions are “valid, irrevocable, and enforceable” and that only in instances when the arbitration provision or the agreement to arbitrate is challenged and proven invalid would such provision would be unenforceable.11 This is also the same in other countries. In China the arbitration clause is deemed autonomous from a principal contract since it treated as a consequence of the parties’ autonomous will. The Notices of Supreme People’s Court declares that “laws have no other restrictions to terms and conditions of the effect of such clause, nor does the terms and conditions of the effect of the principal contract” that is why “the effect of the arbitration agreement shall not be affected by that of the principal contract”.12 It is important to note that the principle of arbitration as accepted around the world rests on the impartiality of the arbitrators. Lanzone stressed that despite the fact that most arbitrations are of an “ad hoc” nature without specific guidelines in place, it is maintained that the appointed arbitrator “would be an individual who was independent, neutral and impartial.”13 There is a high degree of inviolability involved in arbitration clauses found in commercial contracts that is why proceedings like the pre-appointment interviews are important. The qualifications, interests, biases and predispositions of potential arbitrators must be identified. Pre-Appointment Interview Process Although arbitration systems are explicit in their sanction and the recognition of the importance of pre-appointment interviews, there are no specific provisions available that dictate some semblance of rules or procedures that would govern the process. Based from frameworks such as the UNCITRAL, ICDR and IBA, independent guidelines developed are confined to advices and suggestions, which may, in the future, become norms as they are accepted and practiced but nevertheless still nonbinding and not standardized. They are not rules that form part of arbitration systems. Also, rules on pre-appointment interviews found on binding arbitration systems are typified by provisions that are dominated by “mays” and “shoulds”, implying a high degree of unenforceability or ambiguities that provide plenty of room for different interpretations. For instance, IBA Rules says: No arbitrator should accept any gift or substantial hospitality, directly or indirectly, from any party to the arbitration. Sole arbitrators and presiding arbitrators should be particularly meticulous in avoiding significant social or professional contacts with any party to the arbitration other than in the presence of the other parties.14 In order to gain deeper insight, one can turn to the Chartered Institute of Arbitrators’ Guideline 16, which deals with interviewing prospective arbitrators. The guideline fundamentally sets a framework of ideal pre-appointment interview on the basis of ethics or what is the proper conduct, proper subjects to discuss, and so forth. It is also based on existing arbitration conventions and international legal norms. What this means is that it can be effective especially if the parties involved in the interview agree to make the guidelines the basis of the interview and using it as a binding framework. The guidelines can be divided into three parts: provisions on conduct; the manner in conducting the actual interview; and, the content of interview questions. Guidelines concerning the actual interview, for instance, provide safeguards such as the need for tape recorders, secretaries to note minutes and witnesses. It also proposes conventions such as the need for the presence of opposing parties in certain conditions during the interview. The Guidelines also outlined the questions that should be included in the interview and those that should not be discussed, which include: 1) the specific facts or circumstances giving rise to the dispute; 2) the positions or arguments of the parties; and, 3) the merits of the case.15 The same structure and content can be found in the same guidelines such as the practice guidelines issued by the United Kingdom Chartered Institute of Arbitrators16 As established by the information cited in this section, pre-appointment interview can become an effective tool especially if they are done within a systematic framework and assume legal character in the event of an agreement between the parties involved. It underpins a crucial component of successful arbitration – that which emphasizes the impartiality of the arbitrators and how appropriate and knowledgeable ones are eventually appointed. Pre-appointment Disclosure Pre-appointment provisions in arbitration rules such as those by UNCITRAL, ICDR, IBA and ABA all cite an obligation on the part of arbitrators to disclose information that may affect their neutrality or impartiality. Although most of these rules rely on ethical instead of legal standards to govern such requirement, it is explicitly mandated and could become grounds to challenge arbitrators. An interesting aspect in this area is that there are no specific provisions found in each of their arbitration rules that identify who or which institution or agency the arbitrator must make his disclosure to. For instance, Article 9 of UNCITRAL Rules states that a “prospective arbitrator shall disclose to those who approach him in connection with his possible appointment any circumstances likely to give rise to justifiable doubts as to his impartiality or independence.”17 The closest framework that addresses this issue is Article 1034 of the Netherlands Arbitration Act, which states: 1. A prospective arbitrator or secretary who presumes that he could be challenged shall disclose in writing to the person who has approached him the existence of such grounds. 2. A person who has been appointed as arbitrator or secretary shall, if the parties have not previously been notified, immediately notify the parties as prescribed in the preceding paragraph.”18 The consensus from among different arbitration rules provided that disclosure can be made to anyone who approaches the potential arbitrator. Most rules do not specify a person or create a group or an agency that the arbitrator could disclose to. Therefore, there is no guarantee that information that could lead to justifiable doubts in regard to the impartiality and independence on the arbitrator can be determined prior to his appointment. The arbitrator could just easily cite the fact that no one approached him so the duty to disclose is undermined. This is also true even in the case of the ICC Rules, which is considered more specific, providing how “the prospective arbitrator shall 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, as well as any circumstances that could give rise to reasonable doubts as to the arbitrator’s impartiality.”19 This provision identifies the body in which arbitrators can make their disclosures. However, the key word in the provisions is “might” and the key concept is “disclose in writing”, which can work together to provide inadequate or selective information. It leaves the arbitrators the discretion to determine what is relevant and provided in a one-way communication. Parties to arbitration cannot Even when challenges to the impartiality of arbitrators can be made throughout the proceedings such as in the case of UNCITRAL Model Law, being able to disclose relevant information early on would avoid delays because the problem about doubts to partiality, qualifications and independence would have been significantly addressed before the arbitration proceeding begins. In addition, a party will usually (in most arbitration rules) be deemed to have waived the right to object to an arbitrator if it fails to raise its objection immediately after the disclosure and eventual appointment.20 Finally, the available provisions outlining and explaining the duty to disclose are written in general terms and silent on specifics, particularly in regard to how arbitrators disclose information and who receives such disclosure. Pre-appointment interview addresses these issues. It allows arbitration parties to engage potential arbitrators in a legitimate dialogue so that their qualifications, independence and biases, among other valid concerns could be efficiently determined. It serves all parties in their objectives and strategies in the entire arbitration process. 2012 International Arbitration Survey and Pre-Appointment Interviews The 2012 International Arbitration Survey undertaken by Queen Mary University School of International Arbitration provided deep insights in regard to the importance of pre-appointment interviews. It is a survey designed to determine the popular and preferred practices in international commercial arbitration. Two of the survey’s findings were important empirical evidences to the relevance of pre-appointment interviews. First, it was found that most respondents – those who have engaged in the proceedings such as arbitration counsels and organisations – prefer to select an arbitrator in tribunal of three unilaterally21. Hence, two arbitrators are selected through unilateral appointments. As parties angle for the best possible arbitrator aligned with their strategy and objectives, pre-appointment interviews assume a prominent role. The fact is that besides the control of the tribunal constitution, this preference is also attributed to the fact that parties are supposed to be in the better position to determine the arbitrator who have the skills and knowledge required to resolve the dispute effectively.22 In order to do this, parties have to exhaust all possible ways to screen and evaluate arbitrators and interviews are, unarguably, indispensable in this situation. The second finding directly cited the importance of pre-appointment interview, which was consistent with the previous preference with unilateral appointment. It was revealed that “most private practitioners and in-house counsel explained that they find pre-appointment interviews to be useful as they assist in providing a clearer picture of the candidate’s availability, personality and knowledge or experience in the specific field relevant to the dispute.”23 Criticism Pre-appointment interview in arbitration is not without its share of critics. The most important of the criticisms is the issue that the method can fall prey to influence and machinations. Greenberg, Kee and Weeramantry, for example, pointed out that parties use the interview process in order to weed out arbitrators that would likely decide against their case.24 This became a practice more popularly known as “beauty parade”. The situation becomes delicate or on the verge of becoming unethical when interviews are no longer exclusively conducted for the purpose of determining the knowledge, qualification, background and experience of candidates but to assess whether they will lean in favour of a case.25 This problem, however, can be dealt with easily. Adopting a clear pre-appointment interview guideline can prevent parties from asking for unethical questions or those that would compromise impartiality and independence on the part of arbitrators. Those guidelines cited in this paper are cases in point. Arbitral rules26 also address this dilemma by preventing ex parte communication as well as by outlining specific subjects that are valid discussion points. Conclusion All in all, the significance of pre-appointment interviews can be illustrated in the determination of two concepts in arbitration: independence and impartiality. The concept of independence, wrote, Bishop, Miles and Luzi, concerns the personal and professional relations between a potential arbitrator and the parties, counsel, witnesses and other arbitrators whereas impartiality focuses on the subject matter of the controversy rather than the relationship of the arbitrators to the parties or other stakeholders.27 Based on the definitions and the dynamics by which pre-appointment interviews were employed by parties to arbitration, it is critical that they are achieved and differentiated so that the process is effective and the outcome is legitimate. Pre-appointment interviews help to realize this objective through the disclosures given by the arbitrators and the manner by which parties can probe and observe the candidates deeper in regards to their values, character and predisposition – variables that are difficult to determine on paper, in a written disclosure or in a outline of qualification and background information. References '2012 International Arbitration Survey: Current and Preferred Practices in the Arbitral Process' Queen Mary University of London School of International Arbitration. D Bishop, C Miles, and R Luzi, ‘Interviewing and Selecting Arbitrators’ [2007] 6 Latin Lawyer 1, 46-47. ‘Buckeye v Cardegna’ [2007] 22 Ohio State Journal on Dispute Resolution 3, 899-908. C Drahozal, and R Naimark, Towards A Science Of International Arbitration: Collected Empirical Research (Kluwer Law International, The Netherlands, 2005) International Bar Association (IBA), IBA Guidelines on Conflicts of Interest in International Arbitration. Council of the International Bar Association, 2004. ‘International Bar Association (IBA) Ethics for International Arbitrators’ [1987] 2 International Arbitration Rep. S Greenberg, C Kee, and R Weeramantry, International Commercial Arbitration: An Asia-Pacific Perspective (Cambridge University Press, Cambridge, 2010) M Gusy, J Hosking and F Schwarz, A Guide to the ICDR International Arbitration Rules (Oxford University Press, Oxon, 2011) International Chamber of Commerce Rules of Arbitration (in force from 1 January 2012) art 11(2). A Lanzone, ‘Impartial, Independent, Neutral Arbitrators v. Non-Neutral Party Appointed Advocates’ [2004] 54 FDCC Quarterly 4, 381-391. M Moses, The Principles and Practice of International Commercial Arbitration (Cambridge University Press, Cambridge, 2012) Netherlands Arbitration Act (adopted 1 December 1986 Code of Civil Procedure Book Four: Arbitration) art 1034. J Poudret and S Besson, Comparative Law Of International Arbitration (Sweet & Maxwell, London, 2007) Practice Guideline 16: The Interviewing of Prospective Arbitrators. Chartered Institute of Arbitrators, Pre-appointment Interview of Prospective Arbitrator(s): Practice Guidelines Issued by UK Chartered Institute of Arbitrators (Fulbright Alert Jaworski L.L.P., New York, 2007). M Roth, M Geistlinger and M Stegner, Yearbook on International Arbitration Volume II (Intersentia, Antwerp, 2012). J Tao, Resolving Business Disputes in China (Kluwer Law International, the Netherlands, 2005) UNCITRAL Arbitration Rules (General Assembly Resolution 31/98). World Intellectual Property Organization Rules (WIPO Publication No. 446) art 21-23 < http://www.wipo.int/amc/en/events/conferences/1995/denberg.html> accessed 27 December 2012. Read More