NPAC’s Arbitration Review: Choosing an Arbitrator – rules of engagement

Shashank Garg

Introduction

With great power comes great responsibility.  -Voltaire and Uncle Ben.

Hague Convention 1907 on the system of arbitration says that “International arbitration has for its object the settlement of differences ……by judges of their own choice, and on the basis of respect for law.”

Party autonomy is the lynchpin of arbitration and the very reason why parties adopt for arbitration over litigation, therefore, it is imperative that this autonomy is used to good advantage by the parties. Appointment of the appropriate arbitrator is the first step towards a successful arbitration. As noted by jurist Jean Flavien Lalive “The choice of persons who propose the arbitral tribunal is vital and often the most decisive step in an arbitration. It has rightly been said that arbitration is only as good as the arbitrators.”

There are several methods of appointing an arbitrator. Some of the most common in India are:

1. By the parties
2. By an arbitral institution
3. By means of a co-arbitrator appointing a presiding arbitrator
4. By professional institution or a trade association; or
5. By High Court/ Supreme Court.[1]

However, for the purposes of this article the most common method i.e., the appointment of the arbitrator by the parties has been taken into account.

Factors to be considered while appointing an arbitrator

An arbitrator should be independent, neutral and impartial. But these qualities alone do not make for an ideal arbitrator. The starting point, therefore, should be to match the arbitrator to the arbitration. In doing so the questions that need to be asked are: Whether the arbitrator is available for the expeditious conduct of proceedings or does he have a proclivity to abandon? Whether he or she is decisive and has good management skills or not? Does he have sound judgment and whether his previous awards were well reasoned and well written? What are his professional expertise and technical knowledge of the issues pertaining to the proposed arbitration? What is his knowledge of procedural law as well as his outlook towards procedural issues? Also, while ideally, an arbitrator should be neutral a strong case can be made for arbitrators who have some knowledge of the parties and the issues so as to be in a better position to adjudicate upon them. It goes without saying that an arbitrator should possess the requisite linguistic skills and the knowledge of the governing law required for the conduct of the proposed arbitration.

What we know but still don’t know

While it is simple to list down the qualities of an ideal arbitrator, the parties reach an impasse when it comes down to successfully identifying this “Paragon Arbitrator”. The biggest challenge faced by the parties is the scarcity of information. Since arbitrators do not work in open forums like the judges one can never be entirely sure of his choice until after the start of the proceedings.

The problem is not simply of knowledge and identification but also the availability of such arbitrators. It is common knowledge that where there is a closed established group there is a tendency of blocking new and perhaps more efficient and capable individuals from entering the field. This problem is very evident in the Indian arbitration system. The common perception amongst Indian arbitration practitioners is that the retired judges have more or less monopolised the arbitration scene and they seek to conduct arbitration proceedings like a trial with countless adjournments and ultimately a delayed award. This perception may not be entirely true since the problem of numerous adjournments and delays in arbitral proceedings is attributable to both the counsel as well as the arbitrators where ever it occurs. Instead of simply putting the blame on the arbitrators who are former judges it is necessary to look at more objective ways to ensure that the choice of the arbitrator made by the party is an informed one. The question still begs – what, therefore, can be done?

Some hits & some misses

While selecting an arbitrator knowledge is power. There are certain fundamentals in the appointment of an Arbitrator. The crucial test should be the quality of arbitrator over the more tempting criteria of an arbitrator’s previous experience in a particular type of dispute.

We can draw inferences from international best practices and the same can be incorporated in our domestic system. A proposed path while appointing a “party-appointed arbitrator” can be – first, make a list of potential arbitrators and then investigate to discover further. Once there is a prospective list, depending upon the availability of the arbitrators, parties can schedule “pre-appointment” interviews. By meeting the prospective arbitrator the parties get an opportunity to assess the suitability of the arbitrator. While interviewing what one should really look for is someone with a maximum predisposition towards the appointing party, but with the minimum appearance of bias.[2] Whether predisposition automatically leads to bias is debatable but as observed by Doak Bishop and Lucy Reed, nonetheless it is a natural and unexceptional aspect of the party appointment system.[3] It should be noted that this practice should be entered into openly and the scope of discussion should be limited to topics like availability, prior experience, potential conflict of interest and one should at no time divulge into the merits or other such nuances of the dispute.

“Some arbitrators refuse to communicate ex parte with the parties beyond supplying certain relevant information such as their curriculum vitae, fees, and availability. They do, however, seek from the parties information about the case so that they can determine conflict of interests, their own suitability and available,… Others agree to be interviewed and be informed about the case in great detail as long as a transcript of the interview is made available to the other side and the co-arbitrators.”[4]

Therefore, the interviewers approach towards the interview should be tailored accordingly. It gets slightly tricky when one seeks to interview a sole arbitrator, however, there should be no objection in principle if the discussion is controlled carefully and both the party representatives are present. However, the request for such interviews should be made with utmost caution as such interviews may be viewed as demeaning and improper by some arbitrators.

While interviews are most ideal to determine the suitable arbitrator they are not always feasible therefore the least parties can do is seek feedback from parties who have been previously involved in arbitrations with the prospective arbitrator and their counsel. The parties can look at the curriculum vitae and prior publications and writing samples of the prospective arbitrator. Individuals actively involved in arbitrations often write regularly for journals which are openly available in the public domain. The parties may even ask the arbitrators to share blue-penciled copies of their previous awards to understand the style and approach of the arbitrator or may even speak to arbitral institutions that have previously appointed the arbitrator.

Take away

The biggest attraction of arbitration is the autonomy to choose your own judge and there is no value in having this theoretical advantage if the parties do not truly exercise their right. The arbitral community too can do more to assist. The arbitrators should be more open to being interviewed and give references, be willing to refer the matter to another more suited arbitrator if they deem fit and make way for new generation and hopefully more innovative and discerning arbitrators; because it is only when the arbitration proceedings are made efficient and expeditious that the arbitral regime will grow and thrive.

About the Author: He is a Partner at Advani & Company and a member of NPAC Advisory Council. He was assisted by Tejasvita Dhawan a trainee at Advani & Company.

[1] Martin Hunter on International Arbitration, 6^th edition at 240

[2] See, Martin Hunter, “Ethics of International Arbitrator,” 52 Arb 219 at 223 (1987)

[3] See, Doak Bishop & Lucy Reed, “Practical Guidelines for Interviwing, Selecting and Challenging Party-Appointed Arbitrators in International Commercial Arbitration,” 14 (4) Arb Int 395 (1998) at 396

[4] Lew, Mistelis & Kroll, at para 10-34