i

Ministry of Foreign Affairs

Diplomatic Academy of Vietnam

International Law Faculty

GRADUATION THESIS

Independence, Impartiality and Duty of Disclosure of Arbitrator:

The Varying Approaches

Instructor: Hew R. Dundas

Name: L Quang Hng

Class: LQT36A

Hanoi, May 2013

ACKNOWLEDGEMENT

Foremost I would like to express my deep sense of gratitude towards thy Hew R.

Dundas, whose wisdom and kindness are truly inspiring. His instructions, along with

the enthusiasm and patience in the way he instructed, are truly helpful in all the time of

research and writing this thesis.

My sincere thanks go to my seniors in Vis Moot DAV community, who taught me the

very first lesson in arbitration; and Mr. Tran Anh Dung for all his insightful lectures of

commercial arbitration.

I am also extremely grateful to Ms Pham Lan Dung, Ms Nguyen Thi Lan Anh and all

other professors and lecturers of International Law Faculty of Diplomatic Academy of

Vietnam for their motivation and immense knowledge.

Last but not least, I would like to thank my family for all the love they gave me and all

the sacrifices they made for me.

i

Contents TABLE OF ABBREVIATION ...................................................................................... iii

TABLE OF AUTHORITIES ....................................................................................... viii

NATIONAL COURTS DECISION ........................................................................... viii

ARBITRAL INSTITUTIONS DECISION ................................................................... xi

INSTITUTIONAL RULES .......................................................................................... xiii

CONVENTION AND TREATIES ................................................................................ xv

I. INTRODUCTION .................................................................................................... 1

II. ARBITRATORS IMPARTIALITY, INDEPENDENCE AND DUTY TO

DISCLOSE: AN OVERVIEW ........................................................................................ 2

1. Impartiality, Independence and Neutrality ......................................................... 2

a. The Concept of Independence and Impartiality .............................................. 3

b. Impartiality distinguished from Neutrality, Partiality distinguished

from Sympathy and Neutral Nationality .............................................................. 4

c. Obligations of impartiality and independence in arbitration rules and

national laws ........................................................................................................... 10

2. Arbitrators Duty to Disclose Circumstances that may Give Rise to Justifiable

Doubts ........................................................................................................................ 13

a. Time of the Disclosure .................................................................................. 14

b. Content of the Disclosure .............................................................................. 15

c. Duty to Investigate Potential Conflicts of Interests ...................................... 24

d. Relation between Duty of Disclosure and Bias ............................................ 25

ii

III. PROBLEMATIC RIGIDITY AND DISPARITY IN APPROACHES FOR

DUTY OF DISCLOSURE ............................................................................................. 27

1. Non-Disclosure of Situations under IBA Guidelines Green List ..................... 28

a. Controversies in Courts Decision ................................................................ 29

b. Diversity in Culture and Legal Background ................................................. 37

2. Failure to Disclose in the constitution of Evident Partiality in U.S. Courts: A

Tale of Two Circuits .................................................................................................. 41

a. Standards for Evident Partiality and Disclosure under Commonwealth

case 42

b. Development of Evident Partiality in non-disclosure case over the years:

Disparity between Circuits ..................................................................................... 44

c. Absence of Consensus between Circuits: Time for one final approach? ...... 49

3. Concluding Remarks ........................................................................................ 50

IV. TOWARDS A COHESIVE APPROACHES ...................................................... 53

1. Establishment of Local and Binding Guidelines Based On IBA Guidelines ... 53

2. Publication of Challenge Decisions by Institution ........................................... 54

3. Adjustment to catch up with Internet and Social Network Era ....................... 55

BIBLIOGRAPHY .......................................................................................................... 56

Books .............................................................................................................................. 56

Articles ....................................................................................................................... 57

iii

TABLE OF ABBREVIATION

AAA American Arbitration Association

ABA American Bar Association

ASA Swiss Arbitration Association

CAS Court of Arbitration for Sport

CIArb Chartered Institute of Arbitrators

CIETAC China International Economic and Trade Arbitration Commission

DIS German Institute of Arbitration

HKIAC Hong Kong International Arbitration Centre

IBA International Bar Association

ICAC Moscow International Commercial Arbitration Court

ICC International Chamber of Commerce

ICCA International Council for Commercial Arbitration

ICDR American Arbitration Association International Centre for Dispute

Resolution

ICSID International Centre for the Settlement of Investment Disputes

LCIA London Court of International Arbitration

NASD National Association of Securities Dealers of the United States

iv

PCA Permanent Court of Arbitration at The Hague

SCC Stockholm Chamber of Commerce

SIAC Singapore International Arbitration Centre

UNCITRAL United Nations Commission for International Trade Law

UNIDROIT The International Institute for the Unification of Private Law

VIAC Vietnam International Arbitration Centre

General Abbreviations

Section

Paragraph

AAA/ABA Code AAA/ABA Code of Ethics for Arbitrators in Commercial Disputes

(1977, revised 2011)

ADRLJ Arbitration and Dispute Resolution Law Journal

Am Rev Int Arb American Review of International Arbitration

Arb Int Arbitration International

Art Article

BGG Swiss Federal Supreme Court Act 2007

BGH Bundesgerichtshof (Federal Court of Justice of Germany)

v

Cir. Circuit

Co. Company

Corp. Corporation

ECHR European Convention on Human Rights

ed. editor

edn edition

E.D. Pa. U.S. District Court, Eastern District of Pennsylvania

EWHC England and Wales High Court of Justice

FAA US Federal Arbitration Act (1925)

H.L House of Lords

IBA Guidelines IBA Guidelines on Conflicts of Interest in International

Commercial Arbitration (2004)

IBA Rules of

Ethics

IBA Rules of Ethics for International Arbitrators (1987)

IBA Rules of

Evidence

IBA Rules on Taking of Evidence in International Commercial

Arbitration (1999)

Ibid. Ibidem

ICA International Commercial Arbitration

vi

IDR International Dispute Resolution (Journal)

Inc. Incorporation

Ins. Insurance

Ltd. limited

Model Law UNCITRAL Model Law on International Commercial Arbitration

(1985) as amended in 2006

n Footnote

New York

Convention

The 1958 Convention on the Recognition and Enforcement of

Foreign Arbitral Awards

No. Number

OG Swiss Federal Judicial Organization Act

OLG oberlandesgericht (German Court of Appeal)

p. Page

Rep Report

Reins Reinsurance

Rev Arb Revue de l'arbitrage

RUAA Revised Uniform Arbitration Act (2000)

vii

S.D. Tex United States District Court for Southern District of Texas

Tex. App. Ct. Texas Court of Appeal

UKHL United Kingdom House of Lords (England)

UKSC Supreme Court of the United Kingdom

UNCITRAL United Nations Commission on International Trade Law

UNCITRAL Rules UNCITRAL Arbitration Rules (1976)

Vol. Volume

WLR Wisconsin Law Review

YCA Yearbook of Commercial Arbitration

viii

TABLE OF AUTHORITIES

NATIONAL COURTS DECISION

ENGLAND

ASM Shipping Ltd of India v. TTMI Ltd of England [2006] English Court of Appeal

AT&T Corporation and another v Saudi Cable [2000] England Court of Appeal

Jivraj v Hashwani [2011] UKSC

Laker Airways Inc. v. FLS Aerospace LTD. [2000] 1WLR 113

Lawal v. Northern Spirit Ltd. [2003] UKHL

R (Cummins) v Camden LBC [2001] EWHC

R v. Bow St. Metro. Stipendiary Magistrate, [2000] 1 A.C. 119, 139 H.L

Rental Trading Ltd v Gill & Duffus SA [2000] Lloyd's Rep

The Owners of the Steamship Catalina & The Owners of the Motor Vessel Norma,

[1938] 61 Lloyds Rep. 360

FRANCE

Cour dappel [CA] [regional court of appeal] Paris, Dec. 18, 2003, RG n 2002/09750

T.A.I. v. S.I.A.P.E, CA Paris June 2 1989, 1991 REV. ARB. 87

Gemanco v. S.A.E.P.A., CA Paris June 2 1989, 1991 REV. ARB. 87

Consorts Ury v. Galeries Lafayyet case, [April 13, 1972], Cour de Cassation

Raffineries d'Homs et de Banias case, [1985] Tribunal de grande instance de Paris,

March 28

ix

GERMAN

German Bundesgerichtshof, 4 September 1999, ZIP 859 (1999)

RUSSIA

Erick van Egeraat Associated Architects B.V. v. Capital Croup LLC, Court of Appeal,

27 August 2009 No. KG-40/8155-09

OAO NK Rosneft v. Yukos Capital S.a.r.l, Supreme Arbitrazh Court; decision of 10

December 2007, No. 14955/07

SWITZERLAND

Switzerland, Federal Supreme Court, 1st Civil Chamber, Decision of 20 March 2008,

4A_506/2007

THE UNITED STATES OF AMERICA

Amoco D.T. Co. v. Occidental Petroleum Corp., 343 S.W.3d 837 (Tex. App. Ct. 2011)

Andersons, Inc. v. Horton Farms, Inc., 166 F.3d 308, 328 (6th Cir.1998)

Applied Industrial Materials Corp. v. Ovalar Makine Ticaret Ve Sanayi, A.S., No. 06-

3297-CV, 2007 WL 1964955 (2d Cir. July 9, 2007)

Commonwealth Coatings Corp. v Continental Casualty Co. Et al, 393 U.S. 145 (US

Supreme Court 1968)

Crowe Construction v. Jeffrey M. Brown, 264 F.Supp.2d 217 (E.D. Pa. 2003)

Dealer Computer Services Inc. v. Michael Motor Co. Inc., 761 F. Supp.2d 459 (S.D.

Tex. 2010)

x

Freeman v. Pittsburgh Glass Works, LLC, 2013 U.S. App. LEXIS 4561 (3d Cir. Mar.

6, 2013)

Gianelli Money Purchase Plan and Trust v ADM Inv. Services, Inc., 146 F3d 1309

(11th Cir. 1998)

Haworth v. Superior Court (Ossakow) (2008)164 California Court of Appeal 4th 930

Jean SCHMITZ; Leonard Schmitz v. Carlos J. ZILVETI, III; Nicholas S. Meris;

Prudential-Bache Securities Inc., aka Prudential Securities, Inc., 20 F.3d 1043 (9th

Cir.

1994)

Kaiser Foundation Hospitals, Inc. v. Superior Court (1993) 19 California Court of

Appeal 4th 513

Kiernan v. Piper Jaffray Cos, 137 F.3d 588, 593-94 (8th Cir. 1998)

Montez v. Prudential Securities, Inc., 260 F.3d 980 (8th Cir. 2001)

Morelite Const. Corp. v New York City Dist. Council Carpenters Ben. Funds, 748 F2d

79, 83 (2d Cir. 1984)

New regency Productions inc v. Nippon Herald Films Inc., 05-55224 (9th

Cir. 2007)

Peoples Sec. Life Ins. v. Monumental Life Ins., 991 F.2d 141, 146 (4th Cir. 1993)

Positive Software Solutions, Inc. v. New Century Mortg. Corp., 476 F.3d 278, 283, 286

(U.S. 5th Cir. 2007)

Rebmann v. Rohde, ___ (California Court of Appeal 2011)

Scandinavian Reinsurance Co. v. Saint Paul Fire and Marine Ins. Co., 668 F.3D 60

(2012)

Sunkist Soft Drinks Inc. v. Sunkist Growers, Inc., 10 F.3d 753 (11th Cir. 1993)

xi

Thomas Kinkade Co. v. White, __ F.3d __, 2013 WL 1296238 (6th Cir. April 2, 2013)

Trustmark Ins. Co. v. John Hancock Life Ins. Co., 631 F.3d 869 (7th Cir. 2011)

ARBITRAL INSTITUTIONS DECISION

INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT

DISPUTES

Tidewater Inc. v. The Bolivarian Republic of Venezuela (2010) ICSID Case No

ARB/10/5

Universal Compression International Holdings, S.L.U. v. The Bolivarian Republic of

Venezuela (2011) ICSID Case No ARB/10/9

LONDON COURT OF INTERNATIONAL ARBITRATION

LCIA Decision on the Challenge to Mr. Judd L. Kessler in Case No.UN 7949

LCIA Reference No.UN3490 October 21 and December 27, 2005

LCIA Reference No.1303 (November 22, 2001)

LCIA Reference No.5660 (August 5, 2005)

LCIA Reference No. 8086

LCIA Reference No.UN9155 (November 10, 1999)

PCA

Republic of Ghana v. Telekom Malaysia Berhad, District Court of the Hague (Civil

Law Section), Decision No. HAiRK 2004.778 5 November 2004

xii

NATIONAL LAWS

ENGLAND

Arbitration Act 1996

FRANCE

New Code of Civil Procedure 1981

GERMANY

German Arbitration Act 1998

Brgerliches Gesetzbuch (Civil Code)

PEOPLE REPUBLIC OF CHINA

Arbitration Law 1995

RUSSIA

Rules on Impartiality and Independence of the Arbitrators 2010

SWEDEN

Swedish Arbitration Act

THE UNITED STATES OF AMERICA

Federal Arbitration Act 1925

Revised Uniform Arbitration Act 2002

VIETNAM

Vietnam Law on Commercial Arbitration 2010

xiii

INSTITUTIONAL RULES

AMERICAN ARBITRATION ASSOCIATION

AAA/ABA Code of Ethics

AAA International Rules 2001

CHINA INTERNATIONAL AND ECONOMIC TRADE ARBITRATION

COMMISSION

CIETAC Rules

CIETAC Code of Ethics

HONG KONG INTERNATIONAL ARBITRATION CENTRE

HKIAC Rules

INTERNATIONAL BAR ASSOCIATION

IBA Guidelines on Conflicts of Interests in International Arbitration

IBA Code of Ethics

INTERNATIONAL CHAMBER OF COMMERCE

ICC Rules1998

ICC Rules 2012

INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT

DISPUTES

ICSID Rules

LONDON COURT OF INTERNATIONAL ARBITRATION

xiv

LCIA Rules 1998

NATIONAL ASSOCIATION OF SECURITIES DEALERS

NASD Code of Procedure for Arbitration

UNITED NATIONS COMMISSION ON INTERNATIONAL TRADE LAW

UNCITRAL Rules 1976

UNCITRAL Model Law 1986

UNCITRAL Model Law 1986 2006 amendment

WORLD INTELLECTUAL PROPERTY ORGANIZATION

WIPO Arbitration Rules 2002

VIETNAM INTERNATIONAL ARBITRATION CENTRE

VIAC Rules 2012

xv

CONVENTION AND TREATIES

European Conventions on Human Rights

The Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958

International Centre for Settlement of Investment Disputes Convetion

1

I. INTRODUCTION

This thesis is related to one of, if not the most, fundamental principle in arbitration that

every arbitrator must be and remain independent and impartial of the parties. No one

should serve as referee in a game after having decided which team should win1, nor

should anyone be the judge of his own case2. And while impartiality and independence

serve the utmost integrity of the arbitral award, the duty imposed on arbitrator to

disclose circumstances that may bring doubts as to his impartiality and independence

guarantees the integrity of the arbitral process. All parties in arbitration deserve the

fundamental rights of a fair hearing3, and the duty to disclose ensure the parties have

confidence and trust in a fair trial.

The duty of disclosure, especially the various approaches towards such duty, shall be

the main concern of this thesis. Whilst the arbitrators duty to disclose is entirely

undisputed, there are diverse approaches for disclosure i.e. what circumstance should

and should not be disclose what is the consequence of a failure to disclose; which has

constantly troubled the arbitration process. Unpredictability and Inconsistency arise as

a result, and the number of challenges of arbitrator due to his failure to disclosure may

justify the one famous outsiders complaint when there is a will, there is a lawsuit4.

The exponential growth of international law firms and multinational corporations, the

radical changes in how we communicate in the internet era, the increase in numbers of

legal organizations and legal events, etc. also address new issues regarding conflicts of

interests, and accordingly complicates the task of properly approaching the duty of

disclosure.

1 William W. Park, Rectitude in International Arbitration (2011) LCIA Arbitration International Vol.27 No.3

Special Edition on Arbitrator Challenges , p. 473. 2The more traditional formulation of this principle is the maxim Nemo judex in parte sua, represents a

fundamental principle of natural justice which provises that no person can judge a case in which he or she

participates as a party (i.e. having legal rights and obligations) - may also be called nemo judex in sua causa or nemo debet esse judex in propria causa. 3 See European Convention on Human Rights Art.6

4 Quote by Addison Mizner, best-known and most-discussed living American architect in 1920s.

2

Part II of this thesis will briefly introduce basic features of impartiality, independence

and the duty of disclosure of arbitrator. The concept, the obligation and grounds that

may give rise to doubts as to independence and impartiality will be discussed

beforehand. The duty to disclose i.e. time of disclosure, content of disclosure and the

duty to investigate information shall be mentioned subsequently.

Part III of this thesis will introduce the underlying problems from the disparity and

rigidity in standards for duty of disclosure. First, various approaches which fail to reach

a consensus between themselves, has consequently increases the inconsistency and

unpredictability (the disparity) of case law regarding duty of disclosure. Second, some

approaches, or at least some of their features, may arguably have failed to meet the

rapid growth of international business and the manner in which it is conducted (the

rigidity).

Finally, Part IV will discuss how we could proceed towards cohesive approaches for

duty to disclose of arbitrators. The writer shall adopt ideas and suggestions of

renowned scholars and practitioners within the field in order to present the best

solutions.

II. ARBITRATORS IMPARTIALITY, INDEPENDENCE AND DUTY

TO DISCLOSE: AN OVERVIEW

1. Impartiality, Independence and Neutrality

This part shall first define the two interrelated, sometimes overlapping, but not

interchangeable concepts of independence and impartiality (a), with the main purpose

to clarify the distinction of the two concepts. Furthermore, in order to provide a more

in-depth overview, these concepts shall be discussed in comparison with the concepst

of neutrality and sympathy (b).

3

a. The Concept of Independence and Impartiality

The notions of independence and impartiality must be subject to interpretation. It

is generally considered that dependence refers exclusively to questions arising out of

the relationship between an arbitrator and one of the parties5, co-arbitrators or

witnesses6. Dependence is also relating to the assessments of facts whether the

arbitrator have any interests in the outcome of the disputes7. Independence, therefore,

is an objective qualification that does not concern the arbitrators state of mind. By

contrast, Impartiality is considered to be a subjective qualification it refers to the

state of mind of the arbitrator as unbiased, disinterested towards one party in an

arbitration8. Impartiality is widely recognized as more abstract than

Independence9.

Despite the fact that several trends pertaining to the interchangeability of the

independence impartiality concept exist, it should be noted that the two

qualifications, often inter-related and overlapping, are different. The minor view which

suggests the non-differentiation of the two terms is illustrated by Lord Steyn as he

stated: the two crucial words are legally synonymous. In truth there is only one

meaning, deriving its principal force from the word impartiality.10 The major view

considers that the two concepts of independence and impartiality are not

interchangeable,11

though they have virtually been used as one package in practice.12

5 Alan Redfern/Martin Hunter/Nigel Blackaby/Constantine Partasides, Redfern and Hunter on On International

Arbitration (5th

edn Oxford 2009), 4.75; Redfern/ Hunter 2004, 4-55; See also LCIA Decision on the Challenge

to Mr. Judd L. Kessler in LCIA Case No.UN 7949, 77 6 Ibid. at Redfern/Hunter, 4.75.

7 Margaret L. Moses, The Principles and Practice of International Commercial Arbitration (Cambridge

University Press 2008), p. 130; Philippe Fouchard/ Samuel Gaillard/ Berthold Goldman, Fouchard Gaillard

Goldman on International Commercial Arbitration (Kluwer Law 1999), 1028 8 Blacklaw Dictionary Definition, See also LCIA Special Issue, p.287 (n 1)

9 Redfern/Hunter (n 5), 4.75.

10 Lord Steyn, England: The Independence and/or Impartiality of Arbitrators in International Commercial

Arbitration [2007] ICC International Court of Arbitration Bulletin Vol. 18, special supplement, 2007 11

Sam Luttrell, Bias Challenge in International Commercial Arbitration: The need for a real danger test (Kluwer Law International 2009), p.19. 12

Redfern/ Hunter 2004 (n 5), 4-54.

4

The two qualifications are parallel tools for assessing the potential for actual or

apparent bias. They are rarely used on their own, individually, but are usually joined

together as a term of art.13 Prof. M. Rubino-Sammartano added the two notions are

different even if on some occasions some overlapping may occur between them.14

The conceptual difference between Independence and Impartiality can be found in

practice. It has been evident for more than once that independent arbitrator may still

possibly favor one party. For example, one independent arbitrator was disqualified for

commenting Italians are all liars in these cases and will say anything to suit their

book. But in my experience the Norwegians generally are a truthful people in a

different case.15

Another instance would be one independent arbitrator calling

respondents counsel a thief, alleging him for breaking in and stealing grapes from

arbitrators break out room.16 The list of instance may go much longer. 17 On the other

hand, one arbitrator may still stay impartial despite being dependent. Lack of

independence is only regarded one pointer to lack of impartiality,18

especially at the

outset of one proceeding when it is difficult to have any idea of whether the

prospective arbitrator is impartial or not.

b. Impartiality distinguished from Neutrality, Partiality distinguished

from Sympathy and Neutral Nationality

The concept of independence and impartiality would not be addressed properly

without mentioning the term neutrality. This part shall briefly introduce the very

13

Ibid. 14

Mauro Rubino-Sammartano, International Arbitration Law and Practice (Kluwer Law International 2001), p.

330. 15

In re The Owners of the Steamship Catalina & The Owners of the Motor Vessel Norma, [1938] 61 Lloyds Rep. 360 (Eng.). 16

LCIA Reference No.UN3490 October 21 and December 27, 2005. 17

See for e.g., LCIA Reference No.1303 (November 22, 2001), where one arbitrator being challenged for lack of

independence, and the Court found he was independent. However, after that he started to have animosity towards

one party, which made him partial. 18

Ronnie King/ Ben Giaretta, Independence, Impartiality and Challenging the Appointment of an Arbitrator (2005) ICLG to International Arbitration Chapter 5; Art 7(1) ICC Rules 1998 it is independence that has to serve as a basic criterion for assessment.

5

basic concept of sympathy and neutrality. The different standards for party-appointed

arbitrator and presiding arbitrator shall be further discussed in I.1(d) of this thesis.

After that, this part shall discuss the difference between one arbitrators sympathy and

partiality towards one party. To conclude this part, the nationality of one arbitrator,

whether de jure or de facto, shall be mentioned since it is one prevalent issue under the

notion of neutrality in practice19.

(i) Impartiality and Neutrality

There are uncertainties over the terminology of neutrality.20

Professor Giorgio Bernini

suggests neutrality refers to the likelihood for arbitrator to be, and remain, wholly

equidistant in thought and action throughout the proceeding.21 Neutrality can also

be interpreted more broadly as one characteristic of whole arbitration process,

connected with not only the arbitrators but also the seat of arbitration.22

Meanwhile,

Professors Alan Redfern and Martin Hunter, joined by other scholars, limit the scope

for neutrality as merely predisposition towards one party who shares the same

cultural or legal background.23

The LCIA Courts seems to concur with this concept in

stating that the concept of neutrality involves an arbitrator taking a certain distance in

relation to his legal, political and religious culture.24 For the purpose of this thesis, the

approach of Professors Redfern and Hunter shall be used.

Despite attracting significant attention from all over the world,25

it should be noted that

the term neutrality under this approach is used mainly in the USA26, and this is a US-

19

Fouchard (n 7), 1037. 20

Amina Rustanova, Neutrality of Arbitrators (Central European University 2009), p.4. 21

GiorgioBernini, Report on the Conduct of Arbitral Proceedings: Standards of Behavior of Arbitrators in The Arbitral Process and Independence of Arbitrators (ICC Publishing 2001), p.31-32. 22

Julian M. Lew , Loukas A. Mistelis , et al., Comparative International Commercial Arbitration, (Kluwer Law

International 2003), 1-23. 23

Redfern/hunter 2004 (n 5) 4-56, See also Scott Dohaney, The Independence and Impartiality of Arbitrators (1992) Journal of International Arbitration, Vol.9 No.4. 24

LCIA Reference No.5660 (August 5, 2005) 4.5; See also Fouchard (n 7), 1036. 25

Redfern Hunter 2004 (n 5), 4-57. 26

Ibid.

6

only circumstance relating to the existence of partisan arbitrators in the US domestic

arbitration. It has no application otherwise. Partiality, in any country, is unacceptable

for obvious reason27

.

The American Bar Association/ College of Commercial Arbitrators introduce in The

Code of Ethics for Arbitrators in Commercial Disputes as follow:

it is preferable for all arbitrators including any party-appointed arbitrators

to be neutral, that is, independent and impartial, and to comply with the same

ethical standards. This expectation generally is essential in arbitrations where

the parties, the nature of the dispute, or the enforcement of any resulting award

may have international aspects. However, parties in certain domestic arbitrations

in the United States may prefer that party-appointed arbitrators be non-neutral

and governed by special ethical considerations.28 (emphasis added)

In the rest of the world, the party-appointed arbitrator must be neutral. Despite being

appointed contractually, the party-appointed arbitrator must not be the representative or

personal services of one party29

since the appointment, even when is made by one party

alone, is not a unilateral act30.

(ii) Partiality and Sympathy

The arbitrator, as introduced above, is not allowed to be non-neutral or to be under

circumstances that give rise to justifiable doubts about his impartiality and

independence. However, parties in arbitration are allowed, and even encouraged, to

choose the arbitrator who will best understand their cases. In such cases, partiality

27

Lew/Mistelis (n 22), 11-11 28

AA/ABA Code of Ethics, Note on Neutrality. 29

See Raffineries d'Homs et de Banias case, Tribunal de grande instance Paris, Mar.28 [1985]; Jivraj v

Hashwani [2011] UKSC 40. 30

Consorts Ury v. Galeries Lafayyet case, Judgement of April 13, 1972, Cour de Cassation

7

should be clearly distinguished with the term sympathy31 or the so-called lack of

neutrality.

First of all, the two terms are different in definition. The sympathy towards one

partys case only means that from the legal, social and cultural background, the

arbitrator may be favorably disposed towards the appointing party. In contrast,

partiality is constituted by bias in favor of, or prejudice against, a party or its case and

encompasses a willingness to decide a case in favor of the appointing party regardless

of the merits or without critical examination of the merits32

. Extensively, the concept of

Predisposition, one part of the concept sympathy, should not be mistaken with the

concept of Prejudgment or Predetermination which constitutes partiality.33

Second and most important, partiality and sympathy do have the same legal effect.

Partiality is one of the fundamental grounds that lead to the disqualification of one

arbitrator. Meanwhile, sympathy is arguably acceptable and may even be necessary

to fulfil the special functions of a party appointed arbitrator in a transnational

arbitration34

. As long as the arbitrator does not let this override their professional

judgment, the qualification of such arbitrator is safeguarded35

.

The fact that sympathy is acceptable and even encouraged is reasonable. In arbitration,

domestic or international, as in other aspects of business life, parties often feel most

comfortable when they are on familiar ground36

. The freedom to choose an arbitrator

31

Doak Bishop & Lucy Reed, Practical Guidelines for Interviewing, Selecting and Challenging Party-Appointed Arbitrators in Interational Commercial Arbitration [1998] 10 Arbitration International Vol. 395, p.399. 32

Ibid. 33

James Maurici, Modern Approach to Bias [2007] Judicial Review Vol. 12 (4) 251260; See also R (Cummins) v Camden LBC [2001] EWHC at 256. 34

Lew/Mistelis (n 22). 35

Redfern/Hunter (n 5), 4-58. 36

Justin DAgostino/Martin Wallace, Impartial-Yes, Neutral-Maybe Not [2010] http://kluwerarbitrationblog.com/blog/2010/09/14/impartial-yes-neutral-maybe-not/

accessed 16 May 2013

8

who shares with that party the same background, tradition and culture, should therefore

be respected. Professor Martin Hunter shared his words of wisdom:

[w]hen I am representing a client in arbitration, 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.37

The willingness to accept certain level of sympathy is evident in practice, notably

in Sunkist case38

. Sunkist simply acknowledges what is already accepted in

practice39: there is a difference between positive bias and general sympathy for the

party who appointed you40

, such distinction between so called lack of neutrality and

neutral arbitrators is eminently sensible and reflects the prevailing thinking that a

balance should be sought between the ideal of independence and the realities of the

world of arbitration.41

(iii) Neutral Nationality and Impartiality

This part shall focus on two questions: Is the arbitrator allowed to share the same

nationality with one party in international arbitration? and Does de facto nationality of

arbitrator count in considering such matter?

Regarding the first questions, the answer depends on the applicable For Model Law,

the answer is yes. The Model Law provides:

37

Martin Hunter, Ethics of international arbitration [1987] Arbitration Vol. 53 291-233, p. 219; See also Prof. Hans Smit lectures at Columbia University cited in Luttrell (n 11), p.139:

Professor Hans Smit teaches his students that the only consideration for a lawyer appointing a party-arbitrator is how sympathetic he or she is to the lawyer's client's case 38

Sunkist Soft Drinks Inc. v. Sunkist Growers, Inc., 10 F.3d 753 (11th Cir. 1993) 39

Luttrell (n 11), p.139 40

Sunskit [n 38] 41

El-Kosheri, M. & Youssef, K. The Independence of International Arbitrators: An Arbitrator's Perspective in ICC Bulletin 2007 (Special Supplement), p.49.

9

No person shall be precluded by reason of his nationality from acting as an

arbitrator, unless otherwise agreed by the parties.42

However, the world is not that perfect for one party to fully trust one arbitrator who

shares the same nationality with opposing party. The UNCITRAL Rules is more

realistic in suggesting considerations of neutral nationality in composition of the

arbitral tribunal:

In making the appointment, the appointing authority shall have regard to such

considerations as are likely to secure the appointment of an independent and

impartial arbitrator and shall take into account as well the advisability of

appointing an arbitrator of a nationality other than the nationalities of the

parties.43

In contrast, The ICC Rules go further than a consideration and impose strict standard of

neutral nationality.

The sole arbitrator or the chairman of an arbitral tribunal shall be of a

nationality other than those of the parties.44

The LCIA Rules take a similar line in providing:

Where the parties are of different nationalities, a sole arbitrator or chairman of

the Arbitral Tribunal shall not have the same nationality as any party unless the

parties who are not of the same nationality as the proposed nominee all agree in

writing otherwise.45

42

UNCITRAL Model Law 2006, Art.11(1). 43

UNCITRAL Rules 2010, Art.6(7). 44

A proviso allows an exception to this rule in suitable circumstances and provided that neither of the parties objects 45

LCIA Arbitration Rules 1998, 6(1).

10

The reason behind the strict requirement for nationality of the sole or presiding

arbitrator regardless of Model Laws provision is to make sure there is no appearance

of potential bias46

. At the outset, it is essential that parties have confidence and trust in

the proceeding.

Regarding the questions of de facto non-neutral nationality, such qualification is indeed

imposed on arbitrator under strict standards.In an arbitration under the LCIA Rules, the

respondent challenged the LCIA-appointed sole arbitrator on the ground that, although

he was not a British national, he was a de facto British national and that this was

contrary to Article 6(1) of the LCIA Rules. The LCIA division in deciding the

challenge first held that a challenge based on nationality should be substantive and not

merely formal.47 It further acknowledged that there may be circumstances where a

personal connection to a country may be so concentrated that the arbitrator's technical

nationality does not ensure neutrality. Such acknowledgement by LCIA Division

firmly supports the theory of de facto neutral nationality. However, on the facts of the

case, the division found that the respondent's contention about the arbitrator's de

facto British nationality was groundless and the challenge was therefore dismissed48

.

c. Obligations of impartiality and independence in arbitration rules and

national laws

Arbitrators have the obligation to remain impartial and independent. There can hardly

be any obligation that more central or fundamental than this.49

This mandatory

obligation is imposed by numerous arbitration municipal laws and institution rules,

though maybe explicitly or implicitly and by different wording. The controversial part

46

LCIA Reference No. 8086, 2.2 47

LCIA Reference No.8086, 3.8 48

See also, LCIA Reference No. UN9155 (November 10, 1999) implies paries nationalities are not affected by nationalities of their counsel 49

See Hew R. Dundas comments on Scotland Arbitration Act r.24: This is a mandatory rule so it is not open to the parties to agree anything else or to disapply it completely. It is

difficult to conceive of a rule which is any more fundamental to and central to the arbitral process. Arbitration

(Scotland) Act 2010 (r.24)

11

is how these rules and laws approach to independence i.e. whether lack of

independence to a certain extent can be acceptable.

(i) Obligation of impartiality and independence in different wording

To begin with, the slightly different provisions in different rules and laws regarding the

obligation of independence and impartiality should be reviewed with due care.50

The England Arbitration Act 1996 does not refers to the term independence as the 1996

Act only requires an arbitrator to act fairly and impartially as between the parties.51

However, it should not be interpreted as an omission of independence requirement

since England has adopted the European Convention on Human Rights. The ECHR

entitles everyone to a fair and public hearing by an independent and impartial tribunal

established by law52 and that is also the position of Englands Court53.

Meanwhile, the Vietnam Law on Commercial Arbitration used only the term

independent,54 whilst its arbitral institution the Vietnam International Arbitration

Centre uses the term objective in parallel with impartial.55

The use of term independence or/and impartiality are used most widely. Both the

UNCITRAL Rules and the AAA International Rules allow a challenge of arbitrator on

basis of justifiable doubts as to the arbitrators impartiality or independence.56 The

LCIA Rules require an arbitrator to remain at all times impartial and independent of

the parties.57 The ICC Rules in 1998 do not specifically require an arbitrator to be

impartial but instead to be and remain independent of the parties involved in the

50

Redfern/Hunter (n 5), 4-54. 51

Arbitration Act 1996 (of England), 33(1)(a). 52

ECHR, Art. 6(1). 53

See for e.g., Lawal v. Northern Spirit Ltd. [2003] UKHL. 54

Vietnam Law on Commercial Arbitration 54/2010/QH12, Art. 21. 55

Vietnam International Arbitration Centre Rules 2012, Art. 14(1). 56

UNCITRAL Rules 1976, Art.10(1) and AAA International Rules 2001, Art. 8(1). 57

LCIA Rules (1998), Article 5(2).

12

arbitration.58 Such provision has been modified in ICC Rules 2012 into must be and

remain independent and impartial of the parties involved in the arbitration.59 One

ground for challenge under the ICC Rules 2012 is whether for alleged lack of

impartiality or independence, or otherwise.60

Though it is important to pay attention the wording of the obligation, in any case it

goes with saying that arbitrator is obliged to stay impartial. The principle is so self-

evident that one can still consider arbitrator having synonymous meaning with

impartiality as in ancient Greek and Rome.61

(ii) Lack of independence to a waivable extent

The different provisions, though expressed in different wording, all lead to same

conclusion that one arbitrator must always remain impartial. The controversial part is

how these rules and laws approach towards requirement of independence - whether it

is an absolute, non-waivable term or whether any de minimis considerations apply62

.

The common assumption is that one arbitrator must be both impartial and

independence. Such assumption has gradually become less correct as now

independence lending itself to waiver up to the point where litigant actually becomes

judge of its own cause.63 This may arguably happen for good reason.64 Admittedly,

lack of independence may give rise to lack of impartiality65

, however it is not always

the case and parties are allowed to let go trivial conflicts of interests if they deem fit.

58

ICC Rules 1998, Art.7(1). 59

ICC Rules 2012, Art.11(1). 60

ICC Rules 2012, Art.15(1). 61

Gary Born, International Commercial Arbitration (Kluwer Law International 2009), p. 1466 62

See Dundas, Commentary on Scotland Arbitration Act 2010 [n 49]. 63

Park (n 1), p. 480 . 64

Park (n 1), p. 481. 65

King/Giaretta (n 30), p.27.

13

Independence works for the sake of the parties as a rights, and thus should be

waivable.66

2. Arbitrators Duty to Disclose Circumstances that may Give Rise to

Justifiable Doubts

If an arbitrator has a serious conflict of interest with one party, he or she should not

accept an appointment. If the arbitrator deems the possible conflict not serious, he must

disclose it to the parties and appointing authority. An arbitrator has to disclose any

circumstances that may lead the parties to question his independence and impartiality.

Such duty is imposed by every arbitration rules as well as national laws and is regarded

as the cornerstone of arbitrators duty of independence.67

Besides being of significant importance in assessing the question of an arbitrators

independence, disclose duty also help to increase the efficiency of arbitration process

by flushing out any potential problems with an arbitrator at the outset of proceedings68

.

On the one hand, disclosure rule provides an opportunity for the parties to consider and

waive at the outset conflicts of interest that might otherwise provide the basis for a

losing party to challenge the award. If the arbitrator discloses a potential conflict and

no objection was filed, none of the party can challenge the award based on disclosed

circumstances69

. On the other hand, one nondisclosure being discovered after the

render of the award, the losing party always finds such circumstances more doubtful70

and it is highly unlikely that they would accept their defeat and would not claim for a

vacatur. Even if some of these attempts may be frivolous and the motions are denied,

66

Judge Dominique Haschner, Independence and Impartiality of Arbitrators: 3 Issues [2011] The American University Law Review Vol.27 No.4, p.793. 67

El-Koshari/Youssef (n 41), p. 51; Haschner (n 66), p.793; Fouchard (n 7), 1058. 68

King/ Giaretta (n 30), p.26-27. 69

See, e.g., Kiernan v. Piper Jaffray Cos, 137 F.3d 588, 593-94 (U.S. 8th Cir. 1998). 70

Philip J. Loree Jr., Arbitration Nuts & Bolts: Vacating Arbitration Awards Part III.A: Evident Partiality (Expectations of the Parties) [8th December 2009], online academic paper http://loreelawfirm.com/blog/arbitration-nuts-bolts-vacating-arbitration-awards-its-all-in-the-agreement/

accessed 16th

May 2013

14

time and money will surely be wasted71

on a process which can be described as a

losing game for both sides.

In this part, this writer shall discuss (a) the time of disclosure, (b) the content of

disclosure, (c) the duty to investigate circumstances to disclose and (d) the relation of

disclosure and bias. The duty to disclose of arbitrator presented in this thesis should not

be mistaken with, and diluted by, the same duty to disclose imposed on the party.

a. Time of the Disclosure

Since the duty of impartiality remains throughout the whole process, the requirement of

disclosure is a continuing one. If new circumstances arise, the arbitrator is obliged to

divulge at any time of the arbitration.

It should be noted that, however, the timing of disclosure may affect the standards for

disclosing.72

In a recent American case Thomas Kinkade v. White decided by Six

Circuit Court of Appeal this April,73

disclosure at later stage of arbitration is well

described as a lose-lose situation by the appellants counsel. The primary issue was

that five years into the arbitration proceedings, after closing of hearing but before the

award, the presiding arbitrator Mr. Kowalskys law firm took on two significant new

matters from the Whites, the respondent, and their appointed arbitrator. Kowalsky

informed the parties of these new financial ties between his firm and the Whites.

Kinkade, the opposing party, request to disqualify Kowalsky but was denied by the

AAA. Courts, as well as many commentators74

, never understand the peculiar logic

71

David Foster/David Edwards, Challenges to Arbitrators [2008] The European & Middle Eastern Arbitration Review 2008 Section 3, p.2. 72

IBA Guidelines General Standard 3[d]; Redfern/Hunter (n 5), 4.81 73

Thomas Kinkade Co. v. White, __ F.3d __, 2013 WL 1296238 (U.S. 6th Cir. April 2, 2013). 74

See for e.g.,Liz Kramer, Six Circuit paints a vivid picture of Evident Partiality [2013] Leonard Street and Deinard Arbitration Nation Blog on Appealing Arbitration Decisions

http://arbitrationnation.com/sixth-circuit-paints-vivid-picture-of-evident-partiality-sufficient-to-vacate-

arbitration-award/

accessed 16th

May 2013

15

behind AAAs denial as they decided otherwise. Return to the issue of disclosure in

closing stage in this case, the brilliant75

brief of Kinkade's counsel, Dana Levitt, in his

May 9, 2007 objection to the AAA, astutely sum up the situation:

...Once the disclosure was made the harm was done regardless of the outcome.

The disclosure put our clients in the awkward position of either objecting to or

appearing to approve the representation by the neutral arbitrator's firm of a party

adverse to our client in another arbitration. If we object, we run the risk of

offending the neutral; if we don't object, we appear to condone a clear conflict.

We should never have been put in this position.

Conclusively, it is of best interests to both the arbitrators and the parties that it should

be fulfilled at the earliest convenience.76

b. Content of the Disclosure

The real problem is not the existence of a duty of disclosure but determining which

facts prospective arbitrators should disclose.77

Many experts or drafters of code of

ethics have consistently expressed their concerns of errors in disclosing i.e. disclose too

little or too much. As a famous quote by former U.S. president Abraham Lincoln, half

the truth is often a whole lie, arbitrators non-disclosure or failure to disclose fully,

whether intentional or not, always raises doubts in the eyes of the parties over the

impartiality of the arbitrator and subsequently the integrity of the process. Meanwhile,

overly excessive disclosure may fuel opportunistic challenge as part of delaying

tactic.78

Parties occasionally use delaying tactic when facing possible adverse award

and challenging the divulged circumstances, regardless of its proximity, would likely

75

Kinkade (n 73), Circuit Judge Kethledges Opinion, 27. 76

King/ Giaretta (n 30), p.28. 77

Fouchard (n 7), 1060 78

Nathalie Allen/Daisy Mallett, Arbitrator Disclosure: No Room for Colour Blind [2011] Asian International

Arbitration Journal, Vol. 7 No. 2, Pages 118-147; Moses (n 7), p.131

16

be part of that tactic.79

Another frustrating result of excessive disclosure would be the

excluding of a knowledgeable arbitrator, at times just because he does not want to put

up with such challenge.80

Such conundrum has sparked off many debates over years

regarding what should one arbitrator disclose with the only general accepted point in

such situation maybe that when there is a possibility to make error in disclosing,

arbitrator should always err in favor of excessive disclose.81

In order to thoroughly address all the underlying issues, this part shall firstly introduce

the objective test and subjective test of duty to disclose whether the arbitrator should

put himself in the position of a reasonable third party or in the eyes of the parties in

dispute to divulge the circumstances. Secondly, what circumstances that may give rise

to justifiable doubts as to arbitrators impartiality and independence shall be clarified.

(i) Objective Test and Subjective Test

The majority of institutional rules provide that an arbitrator must disclose any

circumstances likely to (or may) give rise to justifiable doubts as to his

independence82

. Such provisions are considered as the objective test as it is required

that the arbitrator only have to put himself in the position of a reasonable third party to

disclose. In contrast, the ICC and ICSID Rules required the prospective arbitrator to

walk in the shoes of the parties to decide what should be disclosed. This requirement

under ICC and ICSID Rules and like-minded institution are called the subjective test.

Article 7(2) ICC Rules provides that, prior to appointment, a prospective arbitrator

must sign a statement of independence and disclose in writing any circumstances

which might be of such a nature as to call into question the arbitrators independence

79

Alain Frecon, Delaying Tactics in Arbitration [2005] Dispute Resolution Journal November 2004 January 2005 , p. 6. 80

J.J. Marshall/ M.E. Comeau/A.R. Sparkes, Six Degrees of Separation: Arbitrator Independence in International Arbitration [2008] Transnational Dispute Settlement Vol. 5, issue 4, p.2 81

Positive Software Solutions, Inc. v. New Century Mortg. Corp., 476 F.3d 278, 283, 286 (U.S. 5th Cir. 2007) 82

See AAA International Rules 2001, Article 7(1); LCIA Rules 1998, Article 5(3); UNCITRAL Rules 1976,

Article 9; WIPO Arbitration Rules 2002, Article 22(b).

17

in the eyes of the parties. Meanwhile, the ICSID rules use the term mightbe

questioned by the parties.83

The leading applier of objective test is UNCITRAL Model Law.84 The standard for

disclosure under Model Law is circumstances likely to give rise to justifiable doubts

as to his impartiality and independence85. Under the Model Law, the only difference

between the standard of disclosure and the standard for a successful challenge is that

with regard to disclosure, the facts and circumstances are only likely to give rise to

justifiable doubts, whereas for a successful challenge, the circumstances do actually

give rise to such doubts.86

Such test is applied in countries which adopted Model Law

by statute, namely Australia, Canada, Mexico, the Netherlands, New Zealand and

Singapore. Tunisia and Germany has adopted a virtually identical rule with exclusion

of the word justifiable87.

Many institution rules also adopted the objective test under the UNCITRAL Model

Law.The LCIA provides in Article 5(3) that before appointment by the LCIA Court,

each arbitrator shall furnish to the LCIA Registrar a written resume of his past and

present professional positions, and that he shall sign a declaration to the effect that

there are no circumstances known to him likely to give rise to any justified doubts as to

his impartiality and independence, other than any circumstances disclosed by him in

the declaration. The SCC adopts the objective test with slight but notable difference88.

Article 14(2) of the SCC Rules provides that an arbitrator shall disclose any

circumstance which may give rise to justifiable doubts as to his/her impartiality or

83

ICSID Rules 2006, Rules 6(2). 84

Redfern/Hunter (n 5), 4.83 85

UNCITRAL Model Law 2006, Art.12(1). 86

Otto L O de Witt Wijnen/Nathalie Voser/Neomi Rao (IBA Working Group), Background Information on the IBA Guidelines on Conflicts of Interest in International Arbitration [2004] Business Law International Vol. 5 No. 3, 3.1 87

German Arbitration Law 1998, 1036(1); See also Fouchard (n 7), 1057. 88

Karel Daele (ed), Challenge and Disqualification of Arbitrators in International Arbitration, International Arbitration Law Library, Volume 24 (Kluwer Law International 2012) pp. xix - xxi, 1076

18

independence. Under the SCC Rules, circumstances that may give rise to such

doubts are to be disclosed, whereas the UNCITRAL Rules and the LCIA Rules only

require the disclosure of circumstances that are likely to give rise to such doubts. The

word may refers to a mere possibility, whereas the word likely refers to a higher

threshold of probability89

. Less clearly, the SIAC Code of Ethics only requires

disclosure of close relationship90 without shedding any light on how to decide the

closeness.

Meanwhile, The Working Group for IBA Guidelines on Conflicts of interests sides

with ICC and ICSID Rules regarding the application of subjective test. The Working

Group states its reasons:

because of varying considerations with respect to disclosure the proper

standard for disclosure may be differentthe Working Group recognizes that

the parties have an interest in being fully informed about any circumstances that

may be relevant in their view.

In America, courts even take it further than the subjective test: arbitrators must disclose

all conceivable relationship, regardless of its nature and magnitude. U.S. Courts

granted parties, not arbitrators, the rights to decide what should be disclosed. The U.S.

Court of Appeal the Fifth Circuit explained:

It cannot therefore be left to the fox, who is the potential arbitrator, to guard

the arbitration henhouse, secretly identifying to himself alone all prior or

present relationships, then just as secretly deciding which are worthy of

disclosure and which are not. On the contrary, avoidance of partiality in the

selection of the arbitrator can be achieved only if, in discharging his duty of

disclosure, the potential arbitrator objectively disgorges absolutely every

89

Deale (n 88), 1076. 90

SIAC Code of Ethics for an Arbitrator 2009, 2.2.

19

conceivable fact of prior or present relationships with parties or counsel,

regardless of how tenuous or remote they might seem to him. He must leave to

the parties the value judgment as to which (if any) among those fully disclosed

facts constitutes a basis for rejecting the potential arbitrator for bias or the

appearance of bias.91

Finally, there are also tests which are hard to be listed merely as objective or

subjective including the tests applied in France, England and, to some extent,

Sweden.92

The IBA Working Group sum up situations in France and England as

followed:

France requires the disclosure of any facts encompassed by the statutory

grounds for challenge, provided that the facts involved are not common

knowledge and that they raise reasonable doubts as to the arbitrators

independence. The duty to disclose is restricted by the statutory list of grounds

for challenge.

Under English case law, an arbitrator should disclose any facts that could

arguably give rise to a real danger of bias. This exceeds a purely objective

disclosure requirement and comes close to a subjective test with regard to the

arbitrator.93

(ii) Categorizations and Enumerations of Circumstances that give rise to

justifiable doubts

The arbitrators, before concluding any Statement of Independence, should meticulously

log in his facebook and linkedin, check out his CV, his education process, his love

91

Positive Software (n 81) 92

See Swedish Arbitration Act, Art.9, stating

A person who is asked to accept an appointment as arbitrator shall immediately disclose all circumstances which,

pursuant to sections 7 (legal capacity) or 8(circumstance which may diminish confidence in the arbitrator's

impartiality), might be considered to prevent him from serving as arbitrator. 93

IBA Background (n 86), 3.1

20

affair history, his published opinion and also his firms list of customers to find out

these kinds of circumstances that may give rise to justifiable doubts as to his

impartiality and independence. Such term, despite being used widely by both

subjective and objective test, is hard to define precisely. This part shall introduce some

circumstances classified and enumerated into types by recognized author, guidelines

and code of ethics. It should be noted, though, that it is not always as straightforward in

practice as in such categorization or enumeration - one relationship is complicated and

should be approach cumulatively.94

To begin with, Prof. William Park divides the circumstances into two categories of

concern namely problematic relationship and pre-judgment. The problematic

relationship often includes ties form financial dealings (such as business transaction

and investments), ties of a sentimental quality (such as friendship and family) and links

of group identification (shared nationality and professional or social affiliations).95

Prof. Parks categorization shares certain similarities with The IBA Guidelines Code of

Ethics 1987.96

According to this source, the following may be considered as giving rise

to justifiable doubts as to an arbitrator's impartiality or independence:

(1) a material interest in the outcome of the dispute;

(2) a position already taken in relation to the dispute;

(3) current direct or indirect (i.e., via a member of family, firm or partner) business

relationships with a party or a potentially important witness;

(4) past business relationships of such a magnitude or nature as to be likely to affect an

arbitrator's judgment; and

94

LCIA Special Volume, p. 288 95

Park, p. 478 [n 1] 96

IBA Code of Ethics for International Arbitrators 1987, 3.1.

21

(5) continuous and substantial social or professional relationships with a party or a

potentially important witness.

More thoroughly, Dr. Sam Luttrell, in his inspiring book Bias challenge in

International Arbitration: The need for a real danger test, sum up the circumstances

give rise to lack of impartiality as when arbitrator has a preference in the outcome or a

preference towards one party. According to his study, outcome preference is equivalent

to pre-judgment, and party preference is arbitrators inclination to decide in favour of

one party than the other.97

Dr. Luttrell further classified the relationship that incents

party preference into two types:

(1) the characteristics of the party (relative to the characteristics of the decision maker

(identity characteristics), which include the following: Nationality or domicile, Race

and Political persuasion/association

(2) the familiarity of the relevant party with the decision maker (party familiarity),

which includes Professional familiarity, Commercial familiarity, Social familiarity and

Representative familiarity

However, it should be noted that Dr. Luttrell approaches these circumstances as

grounds for bias challenge and based on courts decision in practice. In contrast, this

thesis approaches the circumstances as ones that should be disclosed at the

commencement of the proceeding the stage where more sensitivity are needed to

safeguard future integrity of the process. Therefore, Codes of Ethics for Arbitrator and

the IBA Guidelines on Conflict of Interests thus seem more suitable.

The ABA Code of Ethics categorized the circumstances on the basis of interests,

relationship and knowledge. Under the ABA Code, there are two kinds of interests:

direct and indirect, and there are four kinds of relationships: financial, business,

97

Luttrell (n 11), p.18.

22

professional or personal relationships.98

Prior and extended knowledge of the dispute

must also be divulged. Since the three provisions is connected with the word and,

this writer believe the relationship must be considered collectively with the interests

attached to it. ABA further proves that point in its example:

prospective arbitrators should disclose any such relationships which they

personally have with any party or its lawyer, with any co-arbitrator, or with any

individual whom they have been told will be a witness. They should also

disclose any such relationships involving their families or household members

or their current employers, partners, or professional or business associates

Rather than categorizing the circumstances based solely on their nature, The IBA

Guidelines on Conflicts of Interests also takes into account the proximity and intensity

of the circumstances. It provides a non-exhaustive enumeration of situations which,

depending on the facts of each case, may give rise to justifiable doubts as to the

impartiality and independence of the arbitrators. The Working Group divides these

situations into three lists: Red, Orange and Green List. The Red List is composed of

Non-waivable Red List, which includes situations deriving from the overriding

principle that no person can be his or her own judge, and the waivable Red List, which

encompasses situations that are serious but not as severe. Arbitrator under situations

listed in Non-Waivable Red List must not arbitrate in any case, whilst parties mutual

and expressed consent may help arbitrators who fall in Waivable Red Lists

circumstances. The Orange List is a non-exhaustive enumeration of specific situations

which in the eyes of the parties may give rise to justifiable doubts as to the arbitrators

impartiality and independence. Arbitrators in Orange situations shall be disqualified

only when a timely and expressed objection is made. Both the Orange and Red lists

address situation justifiable doubts may exist, which is if there is an identity between a

98

ABA/AAA Code of Ethics, Canon II.A.

23

party and the arbitrator, if the arbitrator is a legal representative of legal entity that is a

party in the arbitration, or if the arbitrator has a significant financial or personal interest

in the matter at stake.99 By contrast, in the Green List, no conflict of interests exists.100

The IBA Working Groups brilliance is undeniable as they continuously receive

international recognition and even won prestigious award101

for their outstanding

contribution in a minefield full of rigidity and disparity.102

One special list of circumstances that worth mentioned is from The China Arbitration

Law as well as many Codes of Conducts from Chinese arbitration institutes. Besides

familiar circumstances, they add one specific situation of when arbitrator has received

gift from one party or its agent, or accepted invitation to entertainment by one party or

its agent.103

In China, after the disclosure of circumstances named in the list, the

arbitrator is required by law to submit his/her withdrawal instantly.

As demonstrated above, there are many categorizations as well as enumerations for the

term circumstancesdoubts as to impartiality and independence. In conclusion, it

should be mentioned that in any event, the circumstances that give rise to justifiable

doubts must be approached cumulatively104 and with proper flexibility105 - as cautious

as the wording of IBA Guidelines suggests: any consideration is depending on the

facts of a given case106.

99

IBA Guidelines, General Standard 2. 100

IBA Guidelines Part II, 1- 9 101

At the 22nd Annual Awards Program of the CPR Institute for Dispute Resolution, the International Bar

Association (IBA) was presented with the distinguished arbitration bodys 2004 Outstanding Practical Achievement Award. 102

Leon Trakman, The Impartiality and Independence of Arbitrators Reconsidered [2007] University of New South Wales Faculty of Law Research Series 25, p.1 103

China Arbitration Law Art.34(4); See Jingzhou Tao , Arbitration Law and Practice in China (2nd

Edn Kluwer

Law International 2008), 364. 104

LCIA Special Volume (n 1), p. 288. 105

IBA Guidelines, General Standard 2. 106

IBA Guidelines, Part II 2-6.

24

c. Duty to Investigate Potential Conflicts of Interests

One of the duties arise as consequence of duty to disclose by arbitrator is the duty of

investigation.107

To be more specific, the arbitrator may be obliged to investigate and

disclose any potential conflict of interests, or at least reasonably attempt to do so.

The General Standard 7(c) of the IBA Guidelines states:

An arbitrator is under a duty to make reasonable enquiries to investigate any

potential conflict of interest, as well as any facts or circumstances that may

cause his or her impartiality or independence to be questioned.

The IBA Guidelines put the same obligation of investigate on the party. The practice in

French, though, suggests that such obligation rest primarily on the arbitrator108

.

In America, the ABA Code of Ethics, the RUAA109

and NASD Code110

expressly

impose such requirement in demanding the arbitrator to ascertain facts by reasonable

efforts111

. Not just in the black-letter law, the duty of investigation is also widely

recognized in the U.S. Courts, especially in the Ninth Circuit.

Notably, The Ninth Circuit applies the theory of constructive knowledge situation

if the arbitrator should have known the circumstances by reasonable investigation112

.

Black's Law Dictionary defines constructive knowledge as if by prudent action one

should have known a fact they are deemed to have knowledge of that fact. By virtue of

such theory, the Ninth Circuit held that an arbitrator who lacks actual knowledge of the

conflict can still have constructive knowledge of the conflicts. He shall subsequently be

107

Haschner (n 66), p. 794 108

Cour dappel [CA] [regional court of appeal] Paris, Dec. 18, 2003, RG n 2002/09750 109

The Revised Uniform Arbitration Act 2002 110

National Association of Securities Dealers Code of Procedure for Arbitration 111

ABA/AAA Code of Ethics, Canon II.A(2). 112

Jean SCHMITZ; Leonard Schmitz v. Carlos J. ZILVETI, III; Nicholas S. Meris; Prudential-Bache Securities

Inc., aka Prudential Securities, Inc., United States Court of Appeals, Ninth Circuit 20 F.3d 1043 (1994); New

regency Productions inc v. Nippon Herald Films Inc., United States Court of Appeals, Ninth Cirtcuit No. 05-

55224 (2007)

25

responsible for his failure to investigate, and thus failure to disclose113

. The IBA

Guidelines concurs on this point, providing: Failure to disclose a potential conflict is

not excused by lack of knowledge if the arbitrator makes no reasonable attempt to

investigate.114

d. Relation between Duty of Disclosure and Bias

To understand the relation between Duty of Disclosure and Bias, this part shall

analyzed such situation in two circumstances: in case of a disclosure and in case of a

failure to disclose

(i) In case where the duty of disclosure is fulfilled

Disclosure does not automatically mean a ground for rejection exists115

, and disclosed

facts are not indication of potential bias or an admission of a conflict of interest. An

arbitrator who has made a disclosure to the parties considers himself or herself to be

impartial and independent of the parties, despite the disclosed facts, or else he or she

would have declined the nomination or resigned.116

Disclosure does not guarantee that an arbitrator is entirely impartial, either. After the

arbitrator disclosed circumstances that may give rise to justifiable doubts as to his

impartiality and independence, the parties shall consider such facts to decide whether

to file a challenge. The challenge shall be decided by the institution117

or other

appointing authority, or the arbitrator may opt to recuse himself from the process

seeing the party does not have enough confidence in his impartiality and

independence.118

113

Schmitz v. Zilveti (n 112), 1048-49 114

General Standard 7(c) 115

Karl-Heinz Bckstiegel/Stefan Michael Krll , et al. (eds), Arbitration in Germany: The Model Law in

Practice [2007], Kluwer Law International, p.35 116

IBA Guidelines, Explanation to General Standard 3(b). 117

See for e.g., ICC Rule Art.7(2); ZPO 1037 (1); DIS Rules 18.2. 118

See for e.g., R v. Bow St. Metro. Stipendiary Magistrate, [2000] 1 A.C. 119, 139 (H.L.) (appeal taken from

England), Lord Nolan's opinion: judge may have to disqualify himself by reason of his association with a body

26

(ii) In case where the duty of disclosure is not fulfilled

The implications of a failure to disclose are measured by the same standards as other

allegations of bias119

. The outcome of one failure to disclose, whether it is non-

disclosure or partial disclosure, shall consequently depends on which bias test shall be

applied by the deciding authority, along with the facts of the given case120

.

In countries where the law allows a successful challenge of an arbitrator if there is

reasonable suspicion or a threat of an appearance of lack of independence, failure

to disclose creates the impression of bias and thus disqualify the arbitrator.121

For

example in America, where judges tend to dig into every aspect of arbitrators personal

and professional life,122

partiality was rightfully found based on an omission of the fact

that an arbitrator, when he was a sitting judge, received a public censure by the

California Supreme Court for disparaging his female employees and colleagues based

on their physical attributes, sexuality, and ethnicity.123

Under other tests which come closer to actual bias, the non-disclosure shall be

considered cumulatively with the undisclosed fact in deciding whether or not an

arbitrator was bias.124

For instance, the Court of Appeal held in AT&T Corporation v

Saudi Cable that an inadvertent non-disclosure of a fact which might have affected the

that institutes or defends the suit, and Lord Hope of Craighead's opinion: absent waiver by both sides, judge must recuse himself if "anything which can even by remote imagination infer a bias or interest in the judge"

exists. 119

LCIA Special Volume (n 1), p. 289. 120

Lew/Mistelis (n 22), 11-44 121

Ibid. 11-45 122

Katarna Chovancov, Independence and Impartiality of International Arbitrators http://www.paneurouni.com/files/sk/fp/ulohy-studentov/2rocnikmgr/extract-ind-imp-3.pdf

accessed 16th

May 2013 123

Haworth v. Superior Court (Ossakow) (2008)164 California Court of Appeal 4th 930 (U.S.); See also Kaiser

Foundation Hospitals, Inc. v. Superior Court (1993) 19 California Court of Appeal 4th 513 (U.S.), 516-517 124

LCIA Special Volume (n 1), p. 289

27

appointment process is not sufficient to lead to a real danger of bias. Consequently

the non-disclosure did not lead to a sanction.125

III. PROBLEMATIC RIGIDITY AND DISPARITY IN APPROACHES

FOR DUTY OF DISCLOSURE

Professor William W. Park once argued that there are two courses to disrepute

arbitration: allowing service by bias arbitrator and setting unrealistic standards of

impartiality126. Many established standards have been walking the tight rope127 in

balancing the two courses. The standards for duty of disclosure, while remains

different and less complex from standards for bias, is undoubtedly affected by them

and consequently piled up with its own setbacks.128

This writer humbly contend that

approaches towards duty of disclosure have to confront with two main obstructions: its

disparity arising out of the lack of one cohesive and clear standard, and its rigidity

arising out of the inability to adjust to drastic changes in international business and the

manner in which it is conducted.

This part shall only introduce two issues: (1) debates over the inclusion of situation that

unnecessary to disclose in IBA Guidelines, and (2) the different approaches towards

non-disclosure in US Court 45 years after the Commonwealth case. Hopefully, these

two issues will well illustrate the rigidity and disparity concerning approaches for duty

of disclosure. After all, the world is of stubbornly hetero-generous legal cultures and

each country has its own view of proper conduct,129

including duty of disclosure; but in

125

AT&T Corporation and another v Saudi Cable [2000] England Court of Appeal; see also the decision of the

same effect by the German Bundesgerichtshof, 4 September 1999, ZIP 859 (1999); Rental Trading Ltd v Gill &

Duffus SA [2000] Lloyd's Rep 14 11-44. 126

Park (n 1), p. 476. 127

Ibid. 128

Karel Daele (n 88), 1-028 129

Pak (n 1), p. 475.

28

reaching a decision over this issue, transnational standards, soft law and professional

guidelines have always been more or less taken into account.130

1. Non-Disclosure of Situations under IBA Guidelines Green List

The Cautious Seldom Err

- Confucius -

The IBA General Standard 3(c) requires any doubts as to whether an arbitrator should

disclose certain facts should be resolved in favor of a disclosure. However, in its

Explanation, the IBA remind the arbitrator the negative effect of unnecessary

disclosure:

Unnecessary disclosure sometimes raises an incorrect implication in the minds

of the parties that the disclosed circumstances would affect his or her

impartiality or independence. Excessive disclosures thus unnecessarily

undermine the parties confidence in the process131

The Green List comes along in the Practical Standard as an enumeration of situations

where disclosure is unnecessary. Nevertheless, even the IBA Guidelines Working

Group worried about the inconsistent to have the Green List on the IBA Guidelines.132

Some argued that the subjective test rendered the Green List redundant. Arbitrator must

see the potential conflicts in the eyes of the parties, and it made no sense to have a list

of situations beyond the disclosure requirement.133

Sarah Francois-Poncet, an arbitrator

and counsel in Paris, also observed that If, as an arbitrator, you have any possible

130

Ibid. p. 476. 131

IBA Guidelines, General Standard 3(c) Explanation. 132

IBA Background (n 86), 3.1; See also Ramon Mullerat, The IBA guidelines on conflicts of interest revisited: Another contribution to the revision of an excellent instrument, which needs a slight Daltonism

treatment [2009] Internacional Workshop on ADR/ODRs. Building bridges: legal framework and principles. Universitat Oberta de Catalunya (UOC), Internet Interdisciplinary Institute (IN3), September 15, 2009

http://www.uoc.edu/symposia/adr/

Accessed 16th

May 2013 133

IBA Background (n 86), 3.1

29

concern about a conflict, you sleep better at night if you disclose and though over-

disclosure may open the door to abusive challengesyou cant guideline away from

bad-faith134. Ms. Nathalie Allen and Ms. Daisy Mallet even suggested the removal of

Explanation to General Standard 3(c)135

concerning excessive disclose.

Should the IBA Guidelines need such amendment? The answer should be No.136

However, the arbitrators are required to apply it with robust common sense, and among

which great sense of caution is critically needed. It is due to two main reasons:

First, national courts may not reach the same conclusion regarding the necessity of

disclosure as the Working Group.137

The practice of arbitration has seen numerous

situations where relationship, which is less serious than Green List, lead to the

disqualification of one arbitrator and/or vacatur of the award.

Second, the diverse culture and legal background should always be dealt with

cautiously in considering what should be disclosed. Despite being a set of principles

with which most international arbitrators seek to comply138, the IBA Guideline cannot

be expected to deal with such diversity flawlessly.

a. Controversies in Courts Decision

(i) Telekom Malaysia v. Ghana139 (2005) and Urbaser v. Argentina140 (2010)

ICSID Cases: Non-disclosure of Item 4.1.1 Green List

In 2002, Telekom Malaysia commenced arbitration against the Republic of Ghana

under the investor protection provisions of the Malaysia-Ghana BIT. The parties

134

Moses (n 7), p.141 135

Allen/Mallett (n 78), p.135 136

Lew/Mistelis (n 22), 11-38 137

Moses (n 7), p.140 138

Redfern/Hunter (n 5), 4.87 139

The Republic of Ghana v. Telekom Malaysia Berhad, District Court of the Hague (Civil Law Section),

Decision No. HAiRK 2004.778 5 November 2004 (PCA) 140

Urbaser and another v. Argentina, ICSID Case No ARB/07/27 (Decision on Claimants Proposal to Disqualify)

30

submitted to UNCITRAL Rules arbitration at PCA in The Hague, with the Secretary

General of the PCA as designated appointing authority.

In November 2005, Ghana challenged Arbitrator Emmanuel Gaillard on the basis that

he was serving as counsel in a similar but unrelated investor-state dispute in which he

was representing RFCC, a foreign consortium, against Morocco. Ghanas challenge

was arising out of their concern of merits-prejudgment by Prof. Gaillard. Judge Von

Maltzahn of District Court of Hague sum up Ghanas case as followed:

Ghana's challenge was therefore based on a risk of merits pre-judgment by

involvement in concurrent (but unrelated) investor-state proceedings. The

question was whether a decision against Ghana would strengthen Professor

Gaillard's position as counsel for RFCC against Morocco, or as E.R. Meerdink

put it, whether by deciding for Ghana (and against Telekom Malaysia) Professor

Gaillard would be generating case law against his client's position141.

Telekom Malaysia argued that the facts of the RFCC v. Morocco arbitration were

different from the claim against Ghana, and that the situation at hand was analogous to

that dealt with in Item 4.1.1 of the Green List of the IBA Guidelines.142

Item 4.1.1

cover the situation where the arbitrator has previously published a general opinion

concerning an issue which also arises in the arbitration and such situation is deemed

to be unnecessary to disclose as it does not give rise to conflict of interest.

Judge Von Maltzahn disagreed with Telekom Malaysias argument. In upholding the

challenge, he held that:

Account should be taken of the fact that the arbitrator in the capacity of

attorney will regard it as his duty to put forward all possibly conceivable

objections against the RFCC/Morocco award. This attitude is incompatible with

141

Telekom Malaysia (n 139), 2. 142

Ibid. 4.

31

the stance Prof. Gaillard has to take as an arbitrator in the present case, i.e. to be

unbiased and open to all the merits of the RFCC/Morocco award and to be

unbiased when examining these in the present case and consulting thereon in

chambers with his fellow arbitrators. Even if this arbitrator were able to

sufficiently distance himself in chambers from his role as attorney in the

annulment proceedings against the RFCC/Morocco award, account should in

any event be taken of the appearance of his not being able to observe said

distance. Since he has to play these two parts, it is in any case impossible for

him to avoid giving the appearance of not being able to keep these two parts

strictly separated143

.

Nevertheless, the case Telekom Malaysia v. Ghana cannot be said as a successful

challenge based merely on the ground of Item.4.1.1 Green List. However, it is highly

recommendable that arbitrator should be cautious with Item 4.1.1 Green List as such

Item under certain circumstances can give rise to justifiable doubt.

In another ICSID case involving Item 4.1.1, Urbaser v. Argentina, the two-member

tribunal emphasized that there is no distinction between general and specific in

describing academic work in contending scholars opinion may be a factor of influence

when it comes to considering the same or similar issues in a particular dispute. Their

reasoning was as follow:

the Two Members are not convinced that distinctions like the one based on

the notion of "general opinion" as it is used to define the attitudes to be put on

the "green list" according to the IBA Guidelines make much sense. Such a

distinction between "general" and "specific" views is of little value when it

comes to characterizing academic work. The hypothesis of research done by a

scholar on a merely "general" level is a description more caricatured than that of

143

Ibid.

32

actual academic work. As well, it is not much more convincing to draw a strict

dividing line between opinions expressed as a scholar and those to be formed as

an arbitrator. While it is correct to say that a scholars opinion might change

and is unrelated to the pattern of facts and arguments related to a particular

case, Claimants are right to the extent that they argue that such opinion may

nevertheless be a factor of influence when it comes to considering the same or

similar issues in a particular dispute144

(emphasis added)

Prof. Ramon Mullerat also voiced his concern over Item 4.1.1 Green List. He observed

that the content of the publicly published view may affect the impartiality and

independence of the arbitrator. He argued that the more extreme these views, the

greater the grounds for challenge on the basis of lack of impartiality. Furthermore, he

observed that the issue is more sensitive where there is a political or philosophical

element to the question in dispute145

.

The outcome of the Telekom Malaysia v. Ghana and Urbaser v. Argentina, in addition

to Prof. Mullerats opinion, suggests that Item 4.1.1 Green List is not that unnecessary

to disclose. One arbitrator should not therefore automatically opt for a non-disclosure

in such situation. Rather, he should apply Item 4.1.1 with robust common sense and,

in this case, with caution to be exact.

(ii) ASM Shipping v. TTMI146 (2005): non-disclosure of circumstances far

beyond the Green List

This is the case that marks an inauspicious debut in the English courts of the IBA

Guidelines on Conflicts of Interest in International Arbitration147. ASM shipping was

represented by Zaiwalla & Co (Solicitors), TTMI by Waterson Hicks & Co