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International Commercial Arbitration

International Commercial Arbitration. Lec3: Arbitral Tribunal. Readings. Zhao, Xiu-wen International Commercial Arbitration Law , 2004, Chapter 5 Redfern & Hunter, Law & Practice of International Commercial Arbitration , 2005, Chapter 4. Appointment of Arbitrators.

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International Commercial Arbitration

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  1. International Commercial Arbitration Lec3: Arbitral Tribunal

  2. Readings • Zhao, Xiu-wen • International Commercial Arbitration Law, 2004, • Chapter 5 • Redfern & Hunter, • Law & Practice of International Commercial Arbitration, 2005, • Chapter 4

  3. Appointment of Arbitrators • Number of Arbitrators • 3 arbitrators as default. • UNCITRAL Model Law: • Art. 10 • CIETAC Arbitration Rules: • Art. 24

  4. Appointment of Arbitrators • Qualifications of Arbitrator • “Commercial men” • Palmco Shipping v Continental Ore Corp, The Captain George K [1970] 2 Lloyds Rep 21 • By a charter-party made in New York and dated Apr. 10, 1967, the respondent charterers agreed to hire the applicants' steamship Captain George K. for a voyage from Coatzacoalcos to Kandla and Bombay. The cargo was sulphur in bulk. That charter-party provided (inter alia) that any dispute should be settled by arbitration in London. • At the date of the charter the Suez Canal was open. The charter freight was agreed upon the assumption that the vessel would proceed to her ports of discharge via the Suez Canal.

  5. Appointment of Arbitrators • Qualifications of Arbitrator • “Commercial men” • Palmco Shipping v Continental Ore Corp, The Captain George K [1970] 2 Lloyds Rep 21 • On May 11 the vessel completed loading her cargo and sailed for Kandla via the Suez Canal. On June 13, when the vessel was approaching the Suez Canal, her master was informed by the Suez Canal pilot station that transit of the canal was closed to merchant shipping. The vessel thereupon sailed away from the Suez Canal zone and proceeded via the Cape of Good Hope , reaching Kandla on Aug. 10. The distance from Coatzacoalcos to Kandla via the Suez Canal is 9700 miles, and via the Cape of Good Hope 12.100 miles. The distance actually run by Captain George K. was 1,.400 miles. • In arbitration proceedings a claim by owners for additional freight of $65,000 was rejected by an umpire who stated a special case. The question for the Court was "whether . . . 'the Owners are entitled to claim from the Charterers U.S. $67,969.68 . . . in sending the Captain Goerge K round the Cape of Good Hope instead of through the Suez Canal'."

  6. Appointment of Arbitrators • Qualifications of Arbitrator • “Shipping men” • Owners of The ‘Myron’ v Tradax Export SA [1970] 1 QB 527

  7. Appointment of Arbitrators • Qualifications of Arbitrator • 《中华人民共和国仲裁法》第十三条： • “仲裁委员会应当从公道正派的人员中聘任仲裁员。 • 仲裁员应当符合下列条件之一： • （一）从事仲裁工作满8年的； • （二）从事律师工作满八年的； • （三）曾任审判员满8年的； • （四）从事法律研究、教学工作并具有高级职称的； • （五）具有法律知识、从事经济贸易等专业工作并具有高级职称或者具有同等专业水平的。”

  8. Appointment of Arbitrators • Appointment by Institutions • Arbitrationinstitutions • CIETAC, ICC, SCC, SIAC, HKIAC, AAA, etc. • Secretary-General of the Permanent Court of Arbitration (Hague) • Associations & Industries

  9. Appointment of Arbitrators • Appointment by Institutions • 《中华人民共和国仲裁法》第三十一条： • “ 当事人约定由三名仲裁员组成仲裁庭的，应当各自选定或者各自委托仲裁委员会主任指定一名仲裁员，第三名仲裁员由当事人共同选定或者共同委托仲裁委员会主任指定。第三名仲裁员是首席仲裁员。 • 当事人约定由一名仲裁员组成仲裁庭的，应当由当事人共同选定或者共同委托仲裁委员会主任指定仲裁员。”

  10. Appointment of Arbitrators • Appointment by Institutions • 《中华人民共和国仲裁法》第三十二条： • “当事人没有在仲裁规则规定的期限内约定仲裁庭的组成方式或者选定仲裁员的，由仲裁委员会主任指定。”

  11. Appointment Procedure • Party Autonomy • 3-Arbitrator Tribunal: • Each party select one arbitrator and jointly select the 3rd arbitrator as the umpire of the tribunal. • 1-Arbitrator Tribunal • The parties jointly select an arbitrator so as to set up the tribunal.

  12. Appointment Procedure • List Procedure (mostly used by arbitral institutions) • Step 1: A name list of 5 – 11 (depending on the Arbitration Rules of the arbitral institutions concerned) prospective arbitrators will be given by the institution to the both parties at the submission by the applicant. • Step 2: The parties will be required to respectively name the umpire of the tribunal in an order showing the preference of the parties. • Step 3: The most preferable of the both parties will be named umpire by the institution.

  13. Appointment Procedure • Ad hoc Arbitration • Date • To: Mr. Fm: A Firm (for the Claimant) • “We would like to appoint you as the Owner’s arbitrator and we would be obliged if you could confirm acceptance at your earliest convenience.”

  14. Default Appointment by Statutory Authority • UNCITRAL Model Law: • Art. 11.3 • 3. Failing such agreement, • (a) in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two arbitrators thus appointed shall appoint the third arbitrator; if a party fails to appoint the arbitrator within thirty days of receipt of a request to do so from the other party, or if the two arbitrators fail to agree on the third arbitrator within thirty days of their appointment, the appointment shall be made, upon request of a party, by the court or other authority specified in article 6;    • (b) in an arbitration with a sole arbitrator, if the parties are unable to agree on the arbitrator, he shall be appointed, upon request of a party, by the court or other authority specified in article 6.   

  15. Default Appointment by Statutory Authority • UNCITRAL Model Law: • Art. 11.4 • 4. Where, under an appointment procedure agreed upon by the parties,   • (a) a party fails to act as required under such procedure, or   • (b) the parties, or two arbitrators, are unable to reach an agreement expected of them under such procedure, or    • (c) a third party, including an institution, fails to perform any function entrusted to it under such procedure,    • any party may request the court or other authority specified in article 6 to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.

  16. Jurisdiction of Arbitral Tribunal • Kompetenz-kompetenz • Heyman and Another v Darwins, Ltd [1942] • Per Viscount Simon L C • “… If the dispute is as to whether the contract which contains the clause has ever been entered into at all, that issue cannot go to arbitration under the clause, for the party who denies that he has ever entered into contract is thereby denying that he has ever joined in the submission. Similarly, if one party to the alleged contract is contending that it is void ab initio (because, for example, the making of such a contract is illegal), the arbitration clause cannot operate, for on this view the clause itself also is void”

  17. Jurisdiction of Arbitral Tribunal • Kompetenz-kompetenz • 《中华人民共和国仲裁法》第十九条： • “仲裁协议独立存在，合同的变更、解除、终止或者无效，不影响仲裁协议的效力。 • 仲裁庭有权确认合同的效力。”

  18. Jurisdiction of Arbitral Tribunal • Kompetenz-kompetenz • 《中华人民共和国仲裁法》第十九条： • 第二十条 当事人对仲裁协议的效力有异议的，可以请求仲裁委员会作出决定或者请求人民法院作出裁定。一方请求仲裁委员会作出决定，另一方请求人民法院作出裁定的，由人民法院裁定。当事人对仲裁协议的效力有异议，应当在仲裁庭首次开庭前提出。

  19. Jurisdiction of Arbitral Tribunal • Kompetenz-kompetenz • 最高人民法院关于适用《中华人民共和国仲裁法》若干问题的解释 • 第十二条　 当事人向人民法院申请确认仲裁协议效力的案件，由仲裁协议约定的仲裁机构所在地的中级人民法院管辖；仲裁协议约定的仲裁机构不明确的，由仲裁协议签订地或者被申请人住所地的中级人民法院管辖。 • 第十三条　 依照仲裁法第二十条第二款的规定，当事人在仲裁庭首次开庭前没有对仲裁协议的效力提出异议，而后向人民法院申请确认仲裁协议无效的，人民法院不予受理。仲裁机构对仲裁协议的效力作出决定后，当事人向人民法院申请确认仲裁协议效力或者申请撤销仲裁机构的决定的，人民法院不予受理。

  20. Jurisdiction of Arbitral Tribunal • Challenge over Jurisdiction of Arbitral Tribunal • Alagappa Chettiar v Palanivelpillai & ors [1967] 1 MLJ 208 • “3. (e) If any dispute or difference shall arise between the Lessor and the Lessee touching any clause matter or thing whatsoever herein contained or the operation or construction thereof or any matter or thing in any way connected with the lease of the rights duties or liabilities of either party under or in connection with this lease, then and in every such case the dispute or difference shall be referred to a single arbitrator in case the parties agree upon one and otherwise by two arbitrators one to be appointed by each party and in either case in accordance with and subject to the provisions of the ‘Arbitration Enactment’ or any statutory modification thereof for the time being in force.”

  21. Jurisdiction of Arbitral Tribunal • Challenge over Jurisdiction of Arbitral Tribunal • Coop International Pte Ltd v Ebel S.A. [1998] 3 SLR 670 • Coop International Pte Ltd (the appellants) entered into a distributorship agreement with Ebel SA (the respondents) on 1 April 1995 which provided vide cl 12.2 for arbitration in Switzerland according to Swiss rules as a means to resolve their disputes. In July 1996, both parties terminated the distributorship agreement. Instead of adhering to the termination clause in the distributorship agreement, they entered into a separate termination agreement dated 2 July 1996 with terms different from that provided in the distributorship agreement. The termination agreement did not provide for an arbitration clause and stated that the distributorship agreement would lapse after the respondents had appointed a new distributor. There was no dispute relating to the distributorship agreement, which was superseded by the termination agreement. • On 4 September 1996, the parties reached a third agreement (4 September agreement) which was in the nature of a settlement agreement. By the time this agreement was signed, the distributorship agreement had lapsed. • The Parties later had some dispute in the performance of 4 September Agreement. The appellants brought an action against the respondents, while the latter applied for an stay.

  22. Duties of Arbitral Tribunal • To Act Impartially • To Act Independently • To Hear the Case • To Make Award • To Avoid Prejudice

  23. Duties of Arbitral Tribunal • To Act Independently • Laker Airways Inc v FLS Aerospace Ltd & Anor [1999] 2 LLR 45 • A dispute arose between the first respondent (FLS) and the applicant (Laker) out of the performance by FLS of maintenance services on Laker aircraft. Part of FLS' claim was referred to arbitration because of an IATA arbitration clause incorporated into one schedule of the contract between FLS and Laker. There were counterclaims by Laker. • FLS appointed ME Stanley Burnton, QC as their arbitrator on Sept 23, 1998. At that time Mr Michael Sullivan, who had recently joined the set of chambers where Mr Burnton also practised, had already been instructed in the dispute on behalf of Laker. As a new member of those chambers Mr Sullivan had not then met and did not know Mr Burnton. • On Nov 30, 1998 Laker's US attorneys in a letter asked whether it was true that Mr Sullivan and Mr Burnton practised in the same chambers. When it was confirmed that this was so FLS was requested to make a new appointment.

  24. Duties of Arbitral Tribunal • To Act Independently • Laker Airways Inc v FLS Aerospace Ltd & Anor [1999] 2 LLR 45 • FLS' solicitors explained that barristers were self-employed but shared office space and clerks and pointed out that Mr Burnton's independence could not be questioned. They suggested that the request was part of a campaign to delay the arbitration. • On Dec 22, 1998 Laker's then London solicitors wrote to Mr Burnton asking him to resign. Their letter stated that Laker had a justifiable concern that the presence of Mr Sullivan and Mr Burnton in the same set of chambers might colour Mr Burnton's view of the arguments and further that "Chinese walls" within chambers might be insufficient to prevent the passing of informal discussions within chambers of which Laker would be ignorant. • Mr Burnton replied on Jan 4, stating that he would resign if requested to do so by both parties but declined to do so on the request of one party only. • On Jan 29, 1999 Laker applied to remove Mr Burnton as arbitrator.

  25. Duties of Arbitral Tribunal • To Act Independently • Laker Airways Inc v FLS Aerospace Ltd & Anor [1999] 2 LLR 45 • In the affidavit of Mr Bolkenhol, Laker‘s president, it was stated inter alia that Laker strongly doubted Mr Burnton’s impartiality. He argued that Laker was a US company and in the US it would be impermissible and unthinkable for two lawyers from the same firm to assume roles in the same matter where an actual or potential conflict of interest arose. Mr Burnton‘s position as a member of the arbitration tribunal could not be regarded as just and the decision of such tribunal would not be respected in the US as rendered by a just and impartial tribunal. There was a conflict of interest between Mr Burnton and Mr Sullivan in their respective duties in the arbitration. There was no organizational structure in chambers designed to prevent the intentional or accidental transmission of information between them including confidential information. Finally Mr Bolkenhol contended that Mr Sullivan and Mr Burnton were well known to each other and that Mr Burnton’s approach to the dispute may be coloured by his familiarity with Mr Sullivan.

  26. What Happens in Practice • Some parties appoint “arbitrator advocates” more, or less, openly; • Some parties try to bribe the arbitrator; • Some parties/arbitrators cheat a little, some cheat a lot, and many do not cheat at all; • There is no proven distinction between nationalities. • -- Robert Knutson (ICC Court Member)

  27. What Happens in Practice • In the US, potential arbitrators are frequently interviewed/sometimes elsewhere as well; • In several countries the arbitrator and the party know each other already; • People normally name people they think they can trust; • There are many different reasons for that belief, but it often involves an analysis of the potential arbitrators background and culture. • -- Robert Knutson (ICC Court Member)

  28. The Problems with Your Man • NO communication between the parties and the arbitral tribunal or arbitrator(s) shall be secretive since the establishment of the tribunal. • ANY communication between one party and the tribunal shall be forwarded to another party by the tribunal. • Do NOT play secret game. They may become public. • Do NOT try to unlawfully influence “your man”. The tribunal may notice it. This could cause that the tribunal’s decisions are made by the other two arbitrators who are not clearly biased. • -- Robert Knutson (ICC Court Member)

  29. Objection and Removal • All arbitrators are supposed to act independently and impartially. • Parties can object to individual arbitrators for any reason they think of, say, “his name (a Chinese sounding name) indicated he will favour the Chinese party”. Such objections, however, seldom work. • Objections are increasingly used as delaying tactics. It works sometimes but always gives the tribunal a more negative view which may convince the tribunal as whole that the party is wrong.

  30. The IBA Rules • General Principles and the Three Sets of Lists • Red (Waivable and Unwaivable conflicts) • Orange (Justifiable Doubts List) • Green (Objectively No Conflicts)

  31. The IBA Rules • General Principles • General Standard 1 states that: • Every arbitrator shall be impartial and independent of the parties at the time of accepting an appointment to serve and shall remain so during the entire arbitration proceeding until the final award has been rendered or the proceeding has otherwise finally terminated.

  32. The IBA Rules • General Principles • General Standard 1 • The Working Party considered that it was a fundamental principle in international arbitrations that each arbitrator must be impartial and independent. It would be interesting to discuss whether this is a statement that everyone agrees with.

  33. The IBA Rules • General Principles • General Standard 2 states that an arbitrator must not serve when either: • he considers that he has doubts over his ability to be impartial or independent; or • if facts or circumstances exist that from a reasonable third person’s point of view having knowledge of the relevant facts, give rise to justifiable doubts as to the arbitrator's impartiality or independence, unless the parties have accepted the appointment.

  34. The IBA Rules • General Principles • General Standard 3 sets out the general test for disclosure by the arbitrator. The test is that the arbitrator must disclose facts and circumstances which may: • in the eyes of the parties, give rise to doubts as to the arbitrator’s impartiality and independence.

  35. The IBA Rules • General Principles • General Standard 4 sets out the parties’ rights and obligations to accept or reject any arbitrator on the basis of a conflict of interest. • The general rule is that the parties have 30 days to object to the appointment of an arbitrator and if they do not object in that time, they are deemed to have waived any potential conflict. • However this waiver does not apply to any conflicts on the non waivable Red List. • In respect of any matters on the waivable Red List, the parties need to give express consent before any arbitrator can accept an appointment.

  36. The IBA Rules • Red List (non-waivable) • There is an identity between the arbitrator and the party, or where the arbitration is the legal representative of an entity that is a party in the arbitration. • The arbitrator is a manager, director or member of the supervisory board, or has a similar controlling influence in one of the parties. • The arbitrator has a significant financial interest in one of the parties or the outcome of the case. • The arbitrator regularly advises the appointing party or an affiliate of the appointing party and the arbitrator or his or her firm derives a significant financial income therefrom.

  37. The IBA Rules • Red List (waivable on mutual consent) • where the arbitrator has given legal advice or provided an expert opinion on the dispute to a party or an affiliate of one of the parties; • where the arbitrator holds shares in a party or an affiliate; • where the arbitrator is a lawyer in the same firm as a firm advising one of the parties; • where the arbitrator’s law firm currently has a significant commercial relationship with one of the parties or an affiliate.

  38. The IBA Rules • Orange List (justifiable) • where the arbitrator's law firm current acts for one of the parties in an unrelated matter without creating a significant commercial relationship; • where the arbitrator and Counsel are members of the same chambers; • the arbitrator has publicly advocated a specific position regarding the case that is being arbitrated; • the arbitrator holds one position in an arbitration institution with appointing authority over the dispute.

  39. The IBA Rules • Orange List (justifiable) • The general rule is that where the relationship falls outside the time period, i.e. that a relationship previously existed but has ended before the period of time stated in the Orange List, the situation is relegated from the Orange List to the Green List. So for instance, one situation on the Orange List is: • The arbitrator has within the past three years received more than three appointments by the same counsel or the same law firm.

  40. The IBA Rules • Green List (no conflicts) • where the arbitrator has previously expressed a general opinion in an unrelated forum concerning an issue arising in the arbitration; • where the arbitrator has previously worked with one of the Counsel as Co-Counsel; • where the arbitrator has a relationship with another arbitrator or with the counsel of one of the parties through membership in the same professional association or social organization; • where the arbitrator and a manager, director or member of a supervisory board, or any person having a similar controlling influence, in one of the parties or an affiliate of one of the parties, have worked together as joint experts or in another professional capacity, including as arbitrators in the same case.

  41. The IBA Rules • A review of the situations on the Green List might support the views of the Working Party that these are indeed a list of issues which need not be disclosed. However, there are obvious difficulties with the drafting. This difficulty applies to situations and relationships which are listed on both the Green and Orange lists, where the only distinction is the degree of the relationship. • For instance, the arbitrator is under a duty to disclose the fact that he has a material shareholding in one of the parties if it is publicly listed but not when that share holding is insubstantial. • Similarly there is an obligation to disclose close personal friendships with the parties but not relationships through membership of the same professional organization or social club.

  42. Immunity of Arbitrator & Institution • The Legal Relationship between Parties and Arbitrator • The Legal Relationship between Parties and Arbitral Institution • Absolute Immunity • Qualified Immunity

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