Ethical rules for arbitrators
| Autor | Ramón N. Mullerat Balmaña |
| Cargo | Abogado |
ETHICAL RULES FOR ARBITRATORS
RAMN MULLERAT BALMAA
Abogado
I. INTRODUCTION
“Discourage litigation. Persuade your neighbours to compromise whenever they can. Point out to them how the nominal winner is often a real loser —in fees, expenses and waste of time” 2
It has been rightly said that a good arbitration depends on a good arbitrator. The success of arbitration proceedings greatly rests on the moral and professional qualities of the arbitrator. For this reason, arbitrators are subject to strict legal and ethical rules3,4. The dignity and reputation of the arbitral process also requires that these rules be strictly enforced5.
The function of an arbitrator is even more sensitive than that of a judge given that the latter’s decision is always subject to appeal, whereas appeals cannot be made against arbitration awards except in limited jurisdictions cases.
II. LEGAL AND REGULATORY OBLIGATIONS
1. Obligations under law
Arbitrators have a duty to fulfil the obligations provided by national arbitration laws applicable to the arbitrational procedures in which they participate.
Although in some jurisdictions (Argentina, France, Germany, Mexico, Switzerland, etc.) arbitration is regulated by general civil or commercial procedural codes, in most jurisdictions6 arbitrations are regulated by special provisions.
The fundamental legal obligations of an arbitrator generally imply adhering to the following principles: the right of the parties to be heard during the proceedings; the adversarial system and equality amongst the parties; and the insurance of a fair award within the appropriate period.
An arbitrator is generally liable in cases of bad faith7, serious negligence or corruption. If the arbitrator breaches the legal obligations, he commits a breach of contract or tort and is liable to the parties to the damages caused. Generally arbitrators are not liable for negligence but they are liable for fraud in respect of anything they have done or omitted in their capacity as arbitrators (art. 29 English Arbitration Act, Section 28 Australian International Act 1974). It is true that some legislations grant immunity to an arbitrator but this is never an absolute immunity8. In arbitration proceedings administered by an institutional body, some legislations additionally grant to the parties prejudiced by an arbitrator, direct legal action against the arbitration institution in order to bring a claim for damages9,10,11,12.
Generally arbitrators are free to negotiate with the parties in advance to reduce their liability (German BGB 276.2 allows exclusion for negligent conduct).
2. Obligations under the regulations
In arbitration proceedings administered by an institutional body (i.e. LCIA, ICC, AAA, etc.), arbitrators also have a duty to comply with the regulations of the institution which has appointed them and under which the arbitration proceedings are conducted.
The breach of these regulations also gives rise to an arbitrator’s liability for damages as in the case of breach of arbitration laws.
III. ETHICAL OBLIGATIONS OF ARBITRATORS
“An arbitration is only as good as the arbitrator” 13
1. Specific ethics
One of the characteristics of the liberal professions is that professionals are subject to strict ethical rules14. Although the position of an arbitrator is not per se professional, generally the persons who act as arbitrators are also members of a liberal profession (lawyers, economists, engineers, architects etc.). Ethical rules are particularly relevant for arbitrators because arbitration is based on trust15.
This raises some questions. The first question consists on deciding whether arbitrators are subject to special ethical rules or are only subject to the ethical rules of their own profession. If the answer to the first question is the former, the second is what happens when the arbitrator’s ethical rules and his professional rules conflict.
Traditionally, arbitrators and mediators from different professions have looked to the professional standards of their own profession. But today arbitrators have special professional standards16 deriving from different sources not always fully coincidental. If the arbitrator due to his profession is subject in his conduct to specific ethical rules he must likewise fulfil these when acting as an arbitrator. Generally, ethical rules — either as an arbitrator or as a professional — will not differ (i.e.: professional confidentiality or secrecy). But should there be a conflict of rules, it seems to me that the rules applying to an arbitrator should prevail.
2. Ethical standards for all neutrals
The US Ethical Standards of Professional Conduct for members of the Society of Professionals in Dispute Resolution 1987 (General Responsibilities) provide that neutrals have a duty to the parties, to the profession and to themselves. They should be honest and unbiased, act in good faith, be diligent and not seek to advance their own interests at the expense of the parties. The Ethical Standards impose on neutrals the following responsibilities to the parties: impartiality, informed consent, confidentiality, conflict of interest, promptness and settlement and its consequences.
With referring to ethics for arbitrators, some commentators17 only focus on independence and impartiality — which are the main duties — but the reality is that the ethical obligations are several, as I plan to describe in this paper.
As John Cooley18 puts it, “ADR profession leaders should define the ADR practitioner’s professional and ethical role in relation to the judicial rather than the lawyer’s role. The judicial role is much more appropriate than the lawyer role. First, when performing their judicial role (which includes applying law to facts and assisting with the drafting of settlement agreements), judges are not practicing law. Second, both lawyers and non-lawyers serve in the judicial capacity.” Indeed, being a lawyer is not even a requisite qualification to serve on the US Supreme Court. Although the ABA’s Ethics 2000 Commission introduced changes to the ABA’s Model Rules of Professional Conduct for Lawyers, there is currently no similar study being undertaken with respect to the ABA Model Code of Judicial Conduct. ADR profession leaders should take an active role in urging the study and revision of the ABA Model Code of Judicial Conduct, first to modernize the judicial role to include standards relating to judges exercising ADR functions; and second, to consider the inclusion of new canons specifically addressing the neutral roles of lawyers and non—lawyers in the various ADR processes.
3. Independence and impartiality
Independence and impartiality are the most essential features of the adjudicator’s function. Resolution 1999/31 of the UN Commission on Human Rights provides:
“…an independent and impartial judiciary… are essential prerequisites for the protection of human rights and for ensuring that there is no discrimination in the administration of justice”
The main duty for arbitrators is also to be independent and impartial from the parties19,20. Independence and impartiality is something essential to arbitration proceedings. Only if the arbitrators are independent and impartial and the parties treated with equality can a fair award be made21. Arbitrators must be independent and impartial not only at the moment of their nomination but through the course of the arbitration proceedings. As an example, art. 7.1 of the ICC Rules requires every arbitrator to “be and remain independent of the parties in the arbitration”. The New York Convention allows refusing the enforcement of an award for lack of the independence or impartiality of the arbitrators.
Questions arise as to whether the same standards of independence and impartiality applied to judges should be applied to arbitrators and how those standards can be applied across the many jurisdictions in which international arbitrations take place. In the international sphere, it is accepted that arbitrators must exercise their functions impartially. In many jurisdictions the notion of independence is considered the best yardstick to measure perceived impartiality. In most international arbitrations, an arbitrator will be required to be independent and impartial, either by the law to which the arbitration procedure is subject or the rules of arbitration agreed by the parties. Typically, such arbitration laws and rules require that the person wishing to be appointed as an arbitrator disclose any doubts about his independence and impartiality both at the time of being appointed and throughout the duration of the arbitration (see III.8).
3.1. Independence
Independence should not be confused with impartiality. Independence is a situation of fact; impartiality is a state of mind although may only be verified through facts. However, independence is based on a presumption on impartiality.
Independence is the quality of being free from the influence, guidance or control of others. The term independence implies no interest of or pressure on the arbitrator, which may influence the free decision of the arbitrator.
At least the following circumstances result in a lack of independence: material interest in the resolution of the case; previous commercial relations; a family relationship or important social, professional or business relationship with one of the parties’ lawyer or witness; enmity with a party; and making his position public in regards to the case22,23,24.
3.2. Impartiality
Partiality arises when an arbitrator somehow favours one of the parties or when he is prejudiced in relation to the subject matter of the dispute. Impartiality means freedom from favouritism or bias either by word or by action, and a commitment to serve all parties as opposed to a single party25. Impartiality is a more abstract concept than independence in the sense that it implies a state of mind, which is difficult to measure and quantify.
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