The Scope of Arbitral Immunity - Assignment Example

The Scope of Arbitral Immunity Number The Scope of Arbitral immunity Arbitral immunity is the protection which arbitrators enjoy for decisions they make in their line of duty. Arbitrators are technically judges appointed by the individuals or organizations in dispute and their work is to make balanced decisions on matters presented to them. The autonomy necessary for judicious and effective decision making is taken care of by safeguarding these individuals from the risk of partiality or intimidation arising from fear of litigation which might be instituted against them for rendering their official functions. The special protection of arbitrators is the pillar of arbitration processes and should remain in force for purposes of impartial outcomes. Arbitral immunity is imperative for effective decisions of arbitrators. Scope of Arbitral immunity An arbitrator or any organization acting in similar capacity is protected from civil litigation in the same way judges of courts of law enjoy immunity for acting in a judicial manner. The protection from liability accorded by common law supplements any protections under written laws as well as international bodies of law (Bricker, 2013). In light of this, an arbitrator’s failure to declare his or her role does not make him or her vulnerable to liability under the law. In addition, in judicial, organizational, or similar cases, an arbitrator or agent of an arbitration body is not normally competent to give evidence, and is likely to be exempted from producing records in respect of any statement, behavior, verdict, or relief occurring in the course of the arbitration process in as much the same way as a judicial officer carrying out his or her judicial duties (McClure, & Freehills, 2013). Regardless, immunity could be lifted in the event that a member of the arbitration panel, arbitration body, or an agent of an arbitration body provided the conduct of the arbitrator, the body, or legal representative strongly borders on misconduct (Mettler, 2008). In addition, arbitral immunity may be lost if a court finds that the arbitrator, his or her organization, or an agent of the organization is incompetent. Otherwise, courts are mandated to award reasonable compensation to any arbitrators or an organization that has been unfairly targeted by civil liability cases in balancing the interests of both parties (American Arbitration Association, 2010). The International Law Considerable debate on the parameters of immunity to members of various arbitration panels and their agents took center stage in the run up to the revision of the United Nations Commission on International Trade and Law (UNCITRAL) in 2010. Part of the discussion was the proposal to either reduce or remove the vulnerabilities of the arbitrators to civil suits through specific clauses under paragraph 136 of the Treaty. Some members thought that the immunity under the UNCITRAL ought to be extended to the hiring body under the paragraph 39-40 of the Rules (Nelson, 2015). In respect of the parameters of arbitral immunity, the UNCITRAL envisaged two approaches: first, to have absolute immunity based on the model of the International Chamber of Commerce (ICC) Rules arrived at in Vienna. The ICC Rules of Arbitration under Article 34 grants unequivocal immunity to the arbitrators, the arbitration body and its membership; the ICC and its staffs and the ICC National Committees. The parties are clearly exempted from liability to any individual for their activity in line with the arbitration proceedings (Bricker, 2013). According to Chamlongrasdr (2007) the Vienna Rules under Article 8 also give substantial arbitral immunity in its statement that any member of the arbitration panel, the Secretary General, the Panel itself and its other staffs as well as the Austrian Federal Economic Chamber and its staffs would be immune from civil action for any act or inaction they are accused of regarding arbitration proceedings as long as those actions or inactions are allowable under the law. The second approach to arbitral immunity is in line with the preface to the International Bar Association (IBA) Rules of Ethics (1987), which regulate the conduct of arbitrators, the London Court of International Arbitration Rules (LCIAR) and the American Arbitration Association Rules (AAAR), all of which cushion the arbitration organization as a whole, but for intentional wrongdoing of the parties. The UNCITRAL Rules envisages that since the recent past, there has been a growing trend towards subjecting arbitrators to more scrutiny and accountability (Mettler, 1992). As such, stricter rules of liability for omissions and or commissions of judicial staffs including judges should be taken into account when creating the best immune environment in which arbitrators can work properly. As the result, the Rules excluded material bad faith from immune actions (Nelson, 2015). The UNCITRAL membership also thought that the references of the parties in dispute should remain unaffected by any provisions for arbitral immunity. The Rules further considered that while preserving the interests of the parties in dispute, arbitrators would be immune from negligence suits or individual fault. The UNCITRAL states that any clause that might be inserted in the prevailing Rules to cushion arbitrators from civil litigation should be geared towards strengthening the autonomy of members of the arbitration panels and their capacity to focus on the cases brought before them in a free manner based on the available facts (Mettler, 1992). Nonetheless, ensuring that the protection leaves room for vital accountability, paragraph 39 of the Rules states that such a clause should not culminate in or be seen as creating absolute impunity for arbitrators who may face just consequences of their individual fault or where their decisions frustrate public policy administration (McClure, & Freehills, 2013). At long last, the UNCITRAL opted to adopt a more general approach to arbitral immunity by allowing measured immunity for the entire arbitration channel under paragraphs 39 and 40 for purposes of ensuring efficiency in the proceedings. As such, the 2010 Rules, under Article 16 ensures that parties to any arbitral proceedings must be considered to have ceded the power the institute a civil suit against the arbitrator, the parties which hire them or any individual hired by the arbitral body, as long as their actions are within the relevant law (Mettler, 2008; American Arbitration Association, 2010). In the recent of Injazat Technology Fund BSC v Denton Wilde Sapte (2012), Dubai International Arbitration Centre (DIAC) upheld arbitral immunity in its decision that such processes were important. The court held that staying the arbitration was in line with UAE keeping her international duties under the New York Convention (NYC). In this case, Justice Sir David Steel ruled that Article 13 of the Dubai International Functional Center (DIFC) Arbitration Law (DIFC Law No 1 of 2008), which provides for the obligations of the DIFC Courts to set aside or uphold an action there is only enforceable where the arbitration is held at the DIFC. Douglas (1981) said courts that uphold the limitation of civil liability for arbitrators normally provide credible reasons for their decisions; which is the need to treat arbitrators as judges for the sake justice. In England and Wales as well as in America the reasoning has been used extensively, hence allowing them protection from liability whenever they act in good faith, which is normally the case. The English Arbitration Act 1996 under section 29 mentions and upholds the culture of immunity. The primary issue then is whether this tradition is adequate to validate the immunity (American Arbitration Association, (2010; Nelson, 2015). The doctrine of functional comparability Arbitral immunity can be traced to the advent of common law principle of immunity of judicial officers and processes from interference, where most jurisdictions readily apply landmark decisions on the issue. The primary facet to this culture is the functional similarity of the mandate of arbitrators to judges. The argument was well captured in the case of Butz v Economou [1978] 438 U.S., where the judges read a wide range of operational similarities of the work of arbitrators to judges, adding that the former party and similar organizations are part and parcel of judicial administration processes hence the need to protect the forces behind the administration of justice outside of the court. In a similar case of Corey v New York Stock Exchange [1982] 691 F.2D 1205, the court reaffirmed the doctrine of functional similarity as the primary standard for granting immunity to arbitral bodies for purposes of ensuring justice. In Antoine v. Byers & Anderson, Inc., [1993] 508 U.S. 429 the court reaffirmed the need to protect arbitrators from civil actions on the grounds that the execution of the roles of resolving disagreements between individuals and or organizations is an important aspect of upholding private rights in an authoritative manner. In yet another similar case of Bremer Schiffbau v. South India Shipping Corp. Ltd [1981] AC 909, Justice Donaldson affirmed that courts and arbitration organizations have similar goals, which is ensuring justice and thus the protection from liability should apply in both cases.   Apart from granting arbitrators immunity from litigation, an arbitrator is also commonly accorded protection from legal processes when served with subpoena. Arbitrators should be honest in their roles, however. In Andros Compania Maritima v. Marc Rich & Co [1978] 579 F.2D, the court sent a clear message to arbitrators and potential litigants that existing corporate or arbitration relationships would not compromise the credibility of arbitration proceedings and or their outcome as long as the arbitrators declare their conflicts of interests well in advance (McClure, & Freehills, 2013). Regardless, declaration of interests is just a matter of formality - the test that the conflicts of interests must be able to obscure the arbitrator’s vision of testimonies and or deafen him or her in order to make them unfit is far too high to prove. This is especially true considering that an arbitrator is naturally regarded as an impartial professional. In Andros, the majority decision appeared to affirm the doctrine of arbitral immunity (Nelson, 2015). The owners sought to reclaim the relief and the charterers subsequently filed legal proceedings in court for vacation of the property in question by arguing that the arbitration panel failed to declare conflict of interest which might have influenced the case against them. The grounds for this claim were the close relationship between a member of the panel and the director of the firm who acted on behalf of Andros in the Western region. The accused arbitrator was a popular arbitrator based in New York around the time. Marc Rich failed to provide evidence to support actual partiality of the panel. In fact the evidence provided, clearly excluded such grounds, citing only appearance (American Arbitration Association, 2010). In respect of these claims, the court observed that interactions among key partners in the New York maritime sector were expected to be engulfing and with the population of commercial arbitrators having adequate competence and willingness to resolve such disputes had reduced (McClure, & Freehills, 2013). As such, regular interactions between the arbitrators and the business elite for their mutual benefit in individual capacity and on business association are unavoidable. The court further noted that the smooth relationship of these individuals transcended that which brings them together in judicial proceedings. As such, the court defended the arbitrator’s source of income and choice of estate within which he lived, by arguing that being neighbors cannot disqualify them from acting impartially in legal proceedings. The Charterers filed an appeal to the ruling and in a majority decision the appellate judges unanimously reaffirmed the decision of the lower court (Douglas, 1981). The Court stressed that the new approach taken by courts in respect of disclosure requirements and or bias indicate that the common law have read the values of Commonwealth Coatings in a progressive manner, employing a customized approach instead of dogmatic rigidity that would leave arbitration bodies with virtually no arbitrator if any conflict of interest was to be followed and acted upon. As Mettler (1992) said, the Appellate judges said arbitrators could have any social relationships but still make judicial decisions. The approach to arbitral immunity was also echoed in the judgment of the head of Commonwealth Coatings who indicated that having corporate relationships do not directly render arbitrators incapable of undertaking arbitration if prior information about potential conflict of interest was delivered to the other party well in advance or if the parties were oblivious of the connection, which in most cases is unimportant (McClure, & Freehills, 2013). Except in these situations, the Commonwealth Coatings said it sees no grounds to prevent competent arbitrators from doing their job. Regardless, declaring potential conflict of interest has become the norm for many arbitrators, and thus, the potential for claims of bias has been remarkably limited (Nelson, 2015). Over the recent past, however, disclosure documents have become unnecessarily comprehensive and in many cases they have turned out to be somehow self-serving. The declarations contain more details about the arbitrator than is necessary for verification of potential conflict of interest between any of the parties and the arbitrator. Some arbitrators today present real disclosures, with a life history and testimonials, details which do not contribute towards arbitral immunity. Differences between Courts and Arbitration bodies There are several, major variations between courts and arbitration bodies, which should influence the level of immunity of either body from litigation (Douglas, 1981). The first fundamental difference between the two organizations lies in their creation and source of authority. Whereas the authority of judges originates from the State or the Crown in England and Wales and various bodies of law in every state, the power of an arbitrator’s originates entirely from the consensus of the parties in dispute. Secondly, courts and judges are maintained by the state, while arbitrators are maintained by the parties in dispute. As such, the dissenting decision in the case of Arenson v. Arenson &Casson Beckman and Ruttey & Co. [1975] 3 All E.R. 901, noted the natural variation in the level of immunity which the two institutions should be entitled to, by stating that the litigants do not have the authority to appoint the judges, nor do they pay them. Therefore, the courts are completely beyond the influence of the parties and thus they serve state interests. In considering all these differences, Mettler (2008) argued that the ground on which such comparison should be made then comes up: by implementing the theory that an arbitration bodies ought to be impartial and autonomous as courts as scholars have suggested near similarity of relief for both bodies. In the landmark case of Sutcliffe v. Thakrah [1974] AC 727 H, Lord Salmon underscored this assumption in his decision that judges and lawyers enjoy total immunity from virtually any form of liability based on their statement or action during court proceedings and this protection applies in protecting officials of arbitration bodies for purposes of protecting and or administering public policy (American Arbitration Association, 2010). Common Public Policy As Nelson (2015) has argued, an arbitrator should have the space to execute his or her duties without constantly being bothered by sideshows such as threats of claims, since the fear would jeopardize justice and fail the common public policy enforced by both bodies. Nonetheless, it is somehow apparent that the basis for the creation of immunity of judicial processes from liability is significantly dissimilar to those in favour of arbitral immunity. Effective judicial processes require that a judge of a court shall not be individually liable for the verdict he or she gave in a certain case, because, the judge in question serves the interests of the state (Mettler, 2008). However, like arbitrators, decisions of a judge could be set aside or modified by a judicial organization with higher authority upon appeal and hence the enforcement of near-similar immunity from personal liability in both cases. McClure and Freehills (2013) said the autonomy of a judge or an arbitrator should be upheld against the possibility of individual implication on the grounds that a losing party wants to have their way, and arbitral immunity is the only way to ensure that all judicial processes are effective in enforcing the relevant bodies of law. Conclusion Generally, there are many functional similarities between arbitrators and judges, but a closer look into the two institutions of justice shows stark differences. This is especially true in their composition, maintenance and most importantly, where their loyalty lies. Whereas judges are appointed by the state, arbitrators are hired and paid by the parties in dispute. Regardless, arbitrators function more like courts, and any qualified arbitrator is cushioned by law from liability in the course of his or her work for purposes of remaining impartial and being beyond the unnecessary suits by the losing parties. In most cases, arbitral immunity is only valid during the course of proceedings, but not for deliberate acts and or omissions done in bad faith. As such, the immunity is sufficient for proper arbitration proceedings. References American Arbitration Association, (2010). American Arbitration Association Handbook on Labor Arbitration. New York: Juris Publishing, Inc. Bricker, M., (2013). The Arbitral Judgment Rule: Using the Business Judgment Rule to Redefine Arbitral Immunity. Texas Law Review, 92(1), 197-229. Chamlongrasdr, D., (2007). Foreign State Immunity and Arbitration. New York: Cameron May. Douglas, J.M., (1981). The scope of arbitrator immunity. Arbitration Journal, 36(2), 35-38. McClure, M., & Freehills , H.S., (2013). Dubai – a hub for international arbitration? Retrieved from http://kluwerarbitrationblog.com/blog/2013/01/23/dubai-a-hub-for-international- arbitration/ Mettler, A., (1992). Immunity vs. Liability in Arbitral Adjudication. Arbitration Journal, 47(1), 24-35. Mettler, A., (2008). Immunity of Arbitral Witnesses. Dispute Resolution Journal, 63(2, p93-94. Nelson, L.E., (2015). Arbitrator Immunity From Suit and Testimoy Annotated Research Guide and Bibliographies. Retrieved from http://naarb.org/immunity/reference.asp Read More