|
I |
In the business community the term
‘ethics’,
nowadays, risks being abused as much as the notion of philosophy. A company’s
philosophy is but its shareholders policy, its strategy or whatever commercial
guideline, has nothing to do with the quest for wisdom - the
‘philos sofia’, the
tradition of Plato, Descartes or Karl Popper. Similarly any profession or trade
appears to have its own ‘ethics’, which has not much to do with morality, but
boils down often to mere rules of conduct. Arbitration is no exception
thereupon.
As early as 1924 a French writer analyzed the specific ethical rules by which
arbitrators were bound. In 1983 the Paris bar included in its code of ethics
specific rules for advocates acting as arbitrators; and advocates who did not
respect the Bar Code of Ethics were subject to disciplinary sanctions. There
were also some attempts to codify the ethics in arbitration. The American
Arbitration Association (AAA) and the American Bar Association (ABA), for
instance jointly adopted a code of ethics for arbitrators in commercial disputes
in 1977 and slightly amended the code in 2003. The International Bar Association
promulgated Rules of Ethics for International Arbitration in 1987. Some other
bodies related to the work like ‘Resolution Experts of JAMS’, have also enacted
a code for Arbitrators as well.
To what extent do these texts give an insight into arbitrator’s ethics? To
address this question we need to first define what ‘ethics’ are.
The notion of ethics was first time thoroughly analyzed by Aristotle around 350
BC. For the present analysis it is relevant that Aristotle’s ethics had to be
distinguished from the basic rules. Indeed, from the notion of ethics he
excluded all basic rules. Indeed from the notion of ethics that are so obvious
and essential for the society that they have to be respected without
questioning, and whose breach has to be directly sanctioned by the society.
Moreover, for Aristotle ethics are more of a double nature. Either they are the
practices in a group that need to be followed to prevent the group from
disintegrating or they are ideals and values that a virtuous person tries to
implement in his life. In other words ethics consist of objective practices and
subjective values. The code of ethics mentioned above, cover all three types of
categories distinguished by Aristotle: (a) Basic Rules; (b) Arbitration
Practices and (c) Arbitration Values. These three categories will now be
discussed.
I. Basics, not Ethics
All codes stress at great length the principle that arbitrators need to be
impartial and independent. This practice occupies more than half of the IBA
Code.
The independence and impartiality of arbitrator, however, appear such a
fundamental principle that it certainly goes beyond ethics. It is deeply
embedded in the arbitration law and in the arbitration rules of the arbitration
institutions all over the world. In some arbitration institutions, such as
International Chamber of Commerce (ICC), arbitrators even need to formally sign
a declaration of independence before they can accept an appointment as
arbitrator. In all events, courts and arbitration institutions will remove
arbitrators who are found not to be impartial and independent.
Of course, it does hurt to remind the arbitrator in the Code of Ethics of the
basic duty of independence and impartiality. However the incorporation of such
basic duty as an ethical principle risks appearing as a mere guideline and not
mandatory rule. Moreover, such a reminder will be even more effective if
underwritten a specific declaration to be signed as in the case of ICC
arbitration, the if merely included in the Code of Ethics.
Codes of Ethics often specify in some detail what should be considered as lack
of impartiality and independence. These specifications are a two-sided sword. By
clarifying what cannot be tolerated, they may imply that everything else is
acceptable. The 2004 IBA Guidelines on Conflict of Interests, that spells out in
detail when a conflict of interest prevents or may prevent a prospective
arbitrator to accept an appointment, have been subject to the same criticism. By
outlining in what specific circumstances a conflict of interest arise they might
impliedly might indicate that no conflict exists outside those circumstances. As
a first approach, specific standards on conflict of interests, impartiality and
independence, as given in codes of Ethics or other guidelines, are surely
helpful. However, the final assessment goes beyond such listed criteria.
In the United States, it is widely believed that party appointed arbitrators do
not have to be neutral. American Codes of Ethics consequently specifically
address the impartiality and independence of the party appointed arbitration and
state that a party appointed arbitrator should be as impartial as chairman of
the tribunal - unless the party-appointed arbitrator declares otherwise. The
practical impact of such a rule may be questioned. It will rarely happen that a
party appointed arbitrator formally declares that he will not be neutral.
Moreover, by allowing an exception for the party appointed arbitrator, the
overall principle of the arbitrator’s impartiality and independence is
undetermined.
II. Good Arbitration Practices
Codes of Ethics indicate practices that should be followed in order to preserve
the arbitration process. They relate to different aspects of arbitration
proceedings.
(a) Appointment of arbitrators
Codes of Ethics indicate sometimes that the party may interview a prospective
arbitrator but in such an interview, the merits of dispute should not be
discussed. These codes do not indicate any obligation on arbitrator to disclose
about the interview to fellow arbitrator.
A Prospective arbitrator should not accept his appointment when he cannot devote
time and attention the parties reasonably expect to spend on the case. Before
accepting he should indicate his availability. Moreover, he should not accept an
appointment when he does not have the required language and technical skills –
or discuss this openly with the parties or with arbitral institution.
(b) The initiation of the arbitral proceedings
The arbitrators have to make sure that the parties understand the arbitration
process. They have to impress upon the parties not to contact their arbitrator
but to address all questions and arguments about the proceedings to the
tribunal, and duly served copies to other parties. The arbitrators should not
indicate to the parties what is expected from them, e.g. what type of evidence
tribunal is looking for.
The AAA and ABA Code of Ethics expressly allows the chairman to contact each
party separately, e.g. to make procedural arrangement, as long as other side is
informed about results of such contacts.
(c) The conduct of the arbitral proceedings
The arbitrator has not only a duty towards parties, but also towards the
arbitration process and business community at large, for which arbitration is a
adequate method of dispute settlement. He should not endanger the credibility of
the arbitration process, through his laxity. He should not tolerate that one
party should block the arbitral process with delaying tactics. Moreover, he
should not lend himself to indulge in activities universally considered illegal,
such as money laundering. Furthermore, the arbitrator should be well prepared
when he hears the case. He should have reviewed parties’ submissions and
supporting documents. He should raise questions, call witnesses and request for
submission of documents whenever necessary for the judgment. Moreover, he should
always keep an open mind. His questioning should not be biased. Moreover, he
should always remain courteous to the parties and request the parties too behave
courteously.
(d) Deliberations
The Tribunal has to deliberate carefully. Deliberations are teamwork. The
chairman needs to involve his arbitrators to involve his co-arbitrators in the
decision process. The co-arbitrator, from their side should promptly submit
their views when asked for by the Chairman. Even for the matters where the
Chairman may act on his own, e.g. procedural matters, he should consult his
colleagues to the extent possible. Undoubtedly the arbitrators might not be
influenced in their decision making by fear of the impact of their decision or
the desire for interest in future referral.
(e) Compensation
In many arbitration institutions, the arbitrator’s compensation is fixed by the
institution under a fee schedule. However, in some arbitration institutions,
such as London Court of International Arbitration or Netherlands Arbitration
Institute, however the arbitrators have to state their hourly rate. In all the
events with so-called ‘ad hoc’ arbitrations, i.e. arbitration conducted outside
arbitration institution, arbitrators have to determine their own remuneration.
When they discuss compensation with the parties, arbitrators should not create
an impression of coercion. Moreover, they should charge a reasonable fee that
adheres to the standards of ‘integrity and fairness’. Some Code of Ethics allows
the party appointed arbitrator to arrange his compensation ex-parte with party
that appointed him. However in my view, such private deals undermine
transparency of the arbitration process and should be excluded.
III. Values in Arbitration
Arbitrators should use their best endeavor to conduct fair and expedient
proceedings. Although they should not act as mediators themselves, they should
conduct the proceedings in a way that encourages the parties to settle the
dispute if they wish to do so.
The decision that arbitrators render, does not only have to be correct in fact
and in law, but has also, to meet the needs of parties as far as possible.
Indeed very often the law allows a spectrum of remedies from which the
arbitrator has to choose the one that best corresponds to parties’ needs and
possibilities.
In short, and in agreement with Kant, the
arbitrator should strive to "act in
such a manner as he wishes other would have act when they would arbitrate his
dispute".
IV. The implementation of Ethics
The Codes of Ethics discussed above are not binding, unless the parties and
arbitrators have adopted them. The present writer does not know of any instance
where this has been the case. Indeed, arbitrators do not formally underwrite a
specific Code of Ethics when they undertake arbitration. Parties also do not ask
them to do so. Moreover, the codes indicate that breach of their principles does
not offer additional grounds to annul the awards. At the most, as the IBA Rules
do, they consider such breach to be a ground of removing an arbitrator or not
paying his remuneration.
However one may wonder whether non-binding Codes of Ethics are effective way of
ensuring that arbitrators respect specific rules. It seem more efficient when
the arbitration institution requests the arbitrators, upon appointment, to
underwrite a brief documents (e.g. some 2 pages) stating few rules of conduct
that the arbitrators will have to follow. These rules of conduct could, for
instance, spell out a few specifications of the basic requirement of
impartiality and independence. Moreover, they could request the arbitrator to
confirm whether he has time to bring the arbitration proceedings to a good end.
They may also regulate a few aspects of the conduct of the arbitration and of
the rendering of the award. Through his signature the arbitrator confirms that
he is aware of these requirements and commits himself to fulfill them. If he
fails to stick to his commitment, he could be removed. However, the mere fact of
underwriting the guidelines will generally be sufficient for their breach.
In brief, ethics in arbitration, however
necessary, are difficult to codify, but depend on a personal assessment.
Arbitration institutions, which want their arbitrators to behave in a correct
way, should incorporate the most essential rule in a brief guideline that their
arbitrators have to underwrite before undertaking proceedings. Such guidelines
are more efficient than general and non-binding Code.
*********************************
References:
See, Salmans J., Droit et Morale, deontologie Juridique – Brussels, 1924,
191-192.
See, Houtte Hans Van, Ethics in Arbitration, (2005) 1 D.I.A.C Law Journal,
38-42.
See, http://www.adr.org
See, M. Hunter & A. Redfern, Law and Practice of International Commercial
Arbitration, 3rd ed., Sweet & Maxwell, Appendix L.
Refer, JAMS Arbitrators Ethics Guidelines; http://www.jamsadr.com/
See, Houtte Hans Van, Ethics in Arbitration, (2005) 1 D.I.A.C Law Journal, 39.
Refer, IBA Guidelines on Ethics in Arbitration, www.ibanet.org/pdf/internalarbitrationGuidelines.pdf
See, Russell on Arbitration, 21st ed., Sweet & Maxwell, 172-173.
Id.
Supra note 7
See, O.L.de Witt Winjen, N. Woser and N. Rao, The Background information on the
IBA Guidelines on Conflicts of Interests in International Arbitration, Business
Law International, 2004, 433.
See, JAMS Arbitration Ethics Guidelines: American Arbitrators Association Code
of Ethics, Canon VII (Revised Code Cannon X), 552
Refer, IBA Guidelines on Conflicts of Interests, Rule 4.5.1
See, American Arbitrators Association’s Code of Ethics, Cannon III, (Revised
Code Cannon VI), B5.
See, JAMS Arbitrators Ethics Guidelines I: American Arbitrators Association Code
of Ethics, Canon IV (Revised Code Cannon VII), B4.
American Arbitrators Association Code of Ethics, Canon IV E.
See, JAMS Arbitrators Ethics Guidelines VII.
See, JAMS Arbitrators Ethics Guidelines IX.
See, American Arbitrators Association Code of Ethics, Canon VII B.
See, American Arbitrators Association Code of Ethics, Canon VII B1.
See, JAMS Arbitrators Ethics Guidelines VII A.
See, Preamble to American Arbitrators Association Code of Ethics.
---------------------------------------------------------***********************************----------------------------------------------------------
The author can be reached at :
anandshankarjha@legalserviceindia.com
Ph: 094252-30185
|
Ethica
Arbitrationis
