Ethics of an Arbitrator

TIntroduction he growing popularity of the use of Alternative Dispute Resolution methods in Nigeria is undeniable, in recent times there has been a proliferation of centres for ADR and arbitration institutions. This is due to several factors, one of which is the debilitating effect of delays on the dispensation of justice by the courts which engenders serious consequences for all parties involved and essentially results in the miscarriage of justice.

A popular form of ADR is Arbitration. According to Black’s Law Dictionary, Arbitration is a process of the reference of a dispute or difference between not less than two parties for determination, after hearing both sides in a judicial manner by a person or persons other than a court of competent jurisdiction. There have been several arguments for and against the notion that Arbitration is an ADR process. Some argue that arbitration is an ADR process because it shares some of the characteristics common to ADR which are not present in litigation such as arbitral tribunal informality, confidentiality and party autonomy. On the other hand some argue that arbitration closely resembles litigation because the dispute is settled by a third party called an arbitrator who is responsible for controlling the process and making a binding award as opposed to other forms of ADR such as mediation where one party seeks to convince the other to settle and accept the terms of settlement. Who is an Arbitrator? An arbitrator has been defined as a neutral person who resolves disputes between parties. Usually an arbitrator is appointed by agreement, by a third party, by two arbitrators or by the court. Section 7 (2) of the Arbitration and Conciliation Act 2004 allows parties to appoint arbitrators of their choice. However if the parties fail to agree on an arbitrator, the appointment shall be made by the court on the application of any party to the arbitration within 30 days of such disagreement. Due to the crucial role played by the arbitrator in the arbitration process certain guidelines are prescribed by various laws such as the Arbitration and Conciliation Act and the International Bar Association’s Guide on Conflicts of Interests in International Arbitration, to ensure that the arbitrator is free from connections to litigants and is able to listen carefully to both parties in a dispute.

The integrity of the arbitrator during and after proceedings is necessary so that the arbitral award is not set aside on grounds of the lack independence or partiality of the arbitrator. Section 30 of the Arbitration Act provides that an award may be set aside where the arbitrator misconducts himself or where the proceedings or award has been improperly obtained. The section further states that an arbitrator who misconducts himself may on the application of any party may be removed by the court. The duties of an arbitrator will be discussed in more detail below. Independence Impartiality and Neutrality Section 8 (3) (j) of the Arbitration Law 2009 states that arbitrators should be independent and impartial. The double requirement of “independence” and “impartiality” of an arbitrator tries to minimise conflict of interests in arbitration. Both terms might sound similar however they are very different. Independence The duty of “independence” stipulates that the arbitrator must not have a relationship with any of the parties to the dispute, while the duty of “impartiality” ensures that the arbitrator is not biased towards any party or in relation to the issues in the dispute or the subject matter of the dispute.

Lack of independence arises from relationships between the arbitrator, one party and its lawyers. These result from financial dealings often from business transactions or investment relations. Emotional ties such as friendship or family, group identification such as shared nationality, professional or social affiliations. Ideally, the arbitrator should decline participation in an arbitration when such situations exist.

In international arbitrations, the nationality of the arbitrator might be an important factor in determining the independence or impartiality of the arbitrator. Section 44 (10) of the UNCITRAL Model law provides that except as otherwise agreed by the parties, no person shall be disqualified from being appointed as an arbitrator by reason only of his nationality. However, Article 6.4 of the Arbitration Rules restating the provisions of Article 11 (5) of the UNCITRAL Model law provides that the court in making an appointment of a sole arbitrator where parties are unable to do so”…takes into account as well as the advisability of appointing an arbitrator of a nationality other than the nationality of the parties.” Similarly, Article 9.5 of the ICC Rules provides that “the sole arbitrator or the chairman of the Arbitral Tribunal shall be of a nationality other than those of the parties.” Impartiality An arbitrator might be independent but might have prejudged the subject matter of the dispute or have a low opinion of certain nationalities, religion or race this is what the concept of “impartiality” seeks to avoid. This was illustrated by the English decision arising from a maritime accident off the coast of France, between a Portuguese and a Norwegian vessel, submitted to arbitration in London by the two respective ship owners. During hearings, counsel for one side mentioned a case involving Italians. To which, the arbitrator responded that:

As part of the application to remove the offending arbitrator, it was argued that a formal award not having yet been rendered, there was no evidence that an ultimate decision against the Portuguese would be premised on the biased perspective. Rejecting the argument, the court established that justice must not only be done, but must be seen to be done. The arbitrator was removed. Neutrality Some argue that “neutrality” encompasses both “independence” and “impartiality” as it is used to describe the obligation not to favour one of the parties or prejudge a subject matter. The requirement of neutrality does not apply to party appointed arbitrators, however they have to be independent of the parties to the dispute. Interestingly, “neutrality” is used in International Commercial Arbitration to address issues of nationality and discuss the likelihood of bias. Duty of Disclosure Arbitrators are obliged to disclose any conflict of interest and any matter that may affect their independence and neutrality. Section 8 of the Arbitration and Conciliation Act provides that “Any person who knows of any circumstances likely to give rise to any justifiable doubts as to his impartiality or independence shall, when approached in connection with an appointment as arbitrator, forthwith disclose such circumstances to the parties.”

Section 8 (2) provides that “The duty to disclose imposed under subsection (1) of this section shall, continue after a person has been appointed as an arbitrator and subsist throughout the arbitral proceedings, unless the arbitrator had previously disclosed the circumstances to the parties.”

Furthermore, arbitration rules of arbitration institutions state specifically that parties should be independent and impartial and disclose conflicting interest. For example Article 7 rule 1 of the ICC Rules provides that “every arbitrator must be and remain independent of the parties involved in the arbitration.” Rule 2 further requires a prospective arbitrator to “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…”

To deal with the issue of conflict of interest a potential arbitrator is advised to carry out a conflict check, to determine whether he or she has acted advised or played any material role that might arise from the dispute.

The International Bar Association’s Guidelines on Conflicts of Interest in International Arbitration clearly delineates the ethical standards and duties of arbitrators. It makes a distinction between interests that do not require full disclosure and will not lead to disqualification of the arbitrator and interests are that require full disclosure. Interests are grouped under a particular colour and categorised into waivable and non-waivable relationships. The Red list contains interests that are non-waivable and includes an arbitrator who acts for a litigant in the case, or is a member of the same firm as counsel to one side and it also mentions an arbitrator that has a significant financial interest in one of the parties or the outcome of the case. Conclusion The importance of “independence” and “impartiality” of an arbitrator is crucial to the credibility of the whole arbitration process. The burden of ensuring that the arbitrator is independent and impartial does not rest on the arbitrator alone, parties should carry-out due diligent checks before nominating an arbitrator as this will minimise the cost of challenging an award in future on the grounds of the misconduct of the arbitrator.