Friday, May 7, 2010

Does having been classmates with a party’s counsel undermine impartiality and independence of an arbitrator? ICSID says no.

During the course of an arbitral proceeding if counsel for one of the parties chances upon a twenty-something year old graduation photograph of a particular batch of a reputed law school depicting one of the arbitrators standing next to the counsel for his adversary, can he challenge the arbitrator on account of lack of independence? Does the fact of not having disclosed the “shared educational experience” warrant removal of the arbitrator?

An ICSID tribunal was recently faced with similar fact situations in Alpha Projektholding GmbH v Ukraine [ICSID Case No. ARB/07/16]. In this case Dr. Yoram Turbowicz, an arbitrator of Israeli nationality, appointed by claimant had submitted a declaration in accordance with Rule 6(2) of the ICSID Rules inter alia stating “[a]ttached is a statement of (a) my past and present professional and other relationships (if any) with the parties and (b) any other circumstances that might cause my reliability for independent judgment to be questioned by a party”. After the commencement of the arbitral proceedings, the counsel for the Respondent, in a letter addressed to the Secretariat of the ICSID alleged: “Dr. Yoram Turbowicz and Counsel for the Claimant Dr. Leopold Specht maintain personal relations, which have arisen in the course of their studies in the Harvard University, where Dr. Turbowicz and Dr. Specht were together enrolled in LLM (1987-1988) and SJD programs (Dr. Turbowicz in 1988-1990 and Dr. Specht in 1988-1992)”. Further it was argued for the respondent that the non-disclosure of this relationship between the arbitrator and the counsel for claimant constituted a violation of Rule 6.2 of the ICSID Arbitration Rules which required the arbitrator to disclose “past and present professional, business and other relationships (if any) with the parties” and “any other circumstance that might cause [his] reliability for independent judgment to be questioned by a party”. Additionally it was argued that publicly available material did not establish that the arbitrator had sufficient experience in transnational investment or commercial arbitration and hence the only feasible explanation for the claimant’s choice of arbitrator was the personal relationship. The arbitrator admitted that he had studied at Harvard together with the claimant’s counsel. However, he emphatically asserted that they shared no personal or professional relationship that required to be disclosed under Rule 6(2).

The other two members of the Tribunal deciding on the challenge stated that the “reliability to exercise independent judgment”, as required by the ICSID rules entailed two concepts – impartiality and independence. They observed that the two concepts had to be considered independent of each other and stated the difference between the two observing: 
“It is generally considered that “[in]dependence” is concerned exclusively with questions arising out of the relationship between an arbitrator and one of the parties, whether financial or otherwise [...] By contrast the concept of “impartiality” is considered to be connected with actual or apparent bias of an arbitrator – either in favour of one of the parties or in relation to the issues in dispute.”
On the standard to be met for a successful challenge to an arbitrator, the other two members of the Tribunal quoted the award in SGS Société Générale de Surveillance S.A. v. Islamic Republic of Pakistan [ICSID Case No. ARB/01/13] which held:
“An arbitrator cannot, under Article 57 of the [ICSID] Convention, be successfully challenged as a result of inferences which themselves rest merely on other inferences […]. The facts established or undisputed must, in the circumstances of the particular case, be plainly capable of giving rise to the inference claimed to be derived from such facts. The inference resulting from the facts must be that, manifestly, that is, clearly, the person challenged is not to be relied upon for independent judgment, or that a readily apparent and reasonable doubt as to that person’s reliability for independent judgment has arisen from the facts established or not disputed.”
On the facts of the dispute, it was held that the respondent had not divulged the source of or given evidence in support of its allegation that that the arbitrator continued to maintain personal relationship with the claimant’s counsel and hence this aspect of the allegation had to be disregarded. Coming to the question of whether having attended Harvard as batch-mates affected independence of the arbitrator, the other two members observed: 
“The Two Other Members are aware of no case and of no scholarly learning that holds, or even argues, that long-ago encounters at an educational institution, standing alone, provide objective grounds, either real or perceived, for justifying an obvious misgiving as to impartiality or for demonstrating an evident lack of reliability as to independence”. 
Further, it was held that the non-disclosure of the shared education experience did not warrant removal of the arbitrator as the facts presented by the respondent did not cross the de minimis threshold.

It is interesting to note that what was held was that shared educational experience alone did not warrant disqualification. What would be the outcome if the respondent was able to establish that during the Harvard days, the arbitrator and the counsel shared something more than mere acquaintance, say a friendship? Would the fact that twenty years of no contact have passed exempt these facts too from disclosure?  Or what if the claimant's counsel had filed an objection to the arbitrator stating they had unpleasant encounters while in college? Can these ghosts of their law school past haunt the arbitrators decades later in their professional lives? The position is unclear.

1 comment:

  1. In a case of Laker Airways Inc v FLS Aerospace Ltd [2000] 1 W.L.R. 113 (QBD (Comm)) similar question arose Whether a party appointing their counsel and their arbitrator from the same barristers' chambers contravenes the requirement of impartiality?

    The court held :

    ....that a judge/arbitrator would be disqualified if there were an appearance of bias (i.e. a real danger that he was biased). The judge concluded that no such danger existed in the present case. He emphasised the self-employed status of each barrister. In a similar case, the Paris court of appeal reached the same conclusion (Kuwait Foreign Trading Contract and Investment Co. v.Icori Estero SpA, unreported, June 29, 1991), as had a special committee of the LCIA. The judge further concluded that there was no lack of independence (which is a requirement of many institutional rules and national laws but is not a separate requirement under the English Act). Nor was there a risk of confidential information passing across “Chinese walls”.


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