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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.
Basics, not EthicsAll 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.
Good Arbitration PracticesCodes 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.
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.
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.
Values in ArbitrationArbitrators 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".
The implementation of EthicsThe 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.
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, 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.
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.
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