(5) Challenging an appointment for partiality // IBA Guidelines…
(5) Challenging an appointment for partiality // IBA Guidelines
on Conflicts of Interest in International Arbitration (2014)
non waivable red list: Some examples of arbi having close financial interest
Catalina v Norma (1938) 61 Lloyds Rep 360
England and Wales, High Court
The Catalina (a Portuguese steamship) and Norma (a Norwegian motorboat) collided and referred the ensuing dispute to arbitration before Sir William Raeburn KC. After discussing a case about an Italian steamer, Sir William said:
“They (referring to the Norma's witnesses) are not Italians. The Italians are all liars in these cases and will say anything to suit their book. The same thing applies to the Portuguese. But the other side here are Norwegians, and in my experience the Norwegians generally are a truthful people. In this case I entirely accept the evidence of the master of the Norma.”
High ct removed the arbitrator. Not necessarily a binding authority, but it’s a cute vivid example of how bad some arbis are…
Sierra Fishing Co v Farran  EWHC 140 (Comm)
England and Wales, High Court
Facts: Sole arbitrator had a financial interest in his father’s law firm. The firm (and his father) acted for one of the parties and derived significant income from that continuing commercial relationship. Arbitrator failed to disclose this at the outset of the arbitration. [stupid, non waivable red list offence]
Held: The arbitrator would be removed. The circumstances fell within the non-waivable red list of the IBA’s Guidelines.
ITL BAR ASSOCIATION GUIDELINES - go to guidance no matter where the arbi is seated … of universal application. Not binding but very helpful. First produced 2004, updated in 2014.
"application list at the bottom of document - list of different things that might/not amount to things that are conflict of interest: they are categorized. Red list, orange list, green list = never amount to conflict of interest i.e. don’t need to be disclosed by arbitrator.
Red list must be disclosed. Even if they don’t articulate a challenge / even if parties say its ok , it can't amount to waiver / remove the ability to impugn.
how to: challenge appointment for partiality
note: parties not allowed to delete the right for parties to challenge procedure
Art 13.3 ML
“If a challenge under any procedure agreed upon by the parties or under the procedure of paragraph (2) of this article is not successful, the challenging party may request, within thirty days after having received notice of the decision rejecting the challenge, the court ...to decide on the challenge which decision shall be subject to no appeal; while such a request is pending, the arbitral tribunal, including the challenged arbitrator, may continue the arbitral proceedings and make an award.”
13.3 makes clear that if such a request is pending, the arbitral tribunal can still carry on w arbitration. There is no stay, even when the appt is chaleneged. They can continue to deal w substantial merit of arbitration. They can pause it, but they don’t have to. [this is impt for slow jurisdictions]. Ml has made a judgement call: we are not going to let this stop the process of arbi, let arbi continue in the bg.
Art 13.2 ML
“[Failing agreement by the parties on the procedure for removal], a party who intends to challenge an arbitrator shall, within fifteen days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstance referred to in article 12(2), send a written statement of the reasons for the challenge to the arbitral tribunal. Unless the challenged arbitrator withdraws from his office or the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge.”
Have 15 days for making a challenge… in ZTE case, they appointed a set of lawyers to dig up yung and matters 20 years ago
Standard for challenge: A12(2) ML
Article 12(2) ML
“An arbitrator may be challenged only if circumstances exist that give rise to justifiable doubts as to his impartiality or independence, or if he does not possess qualifications agreed to by the parties. A party may challenge an arbitrator appointed by him, or in whose appointment he has participated, only for reasons of which he becomes aware after the appointment has been made.”
challenging appointment for partiality
Sierra Fishing Co v Farran 2015, HC, Eng
Were there circumstances that gave rise to justifiable doubts as to Mr Zbeeb’s impartiality?
highlights independence of the Tribunal
(1) if arbitrator knows of any circumstances which may cast doubt on his/her impartiality, details should be disclosed to the parties immediately. arbitrator must not assume the parties will carry out their own enquiries. (2) arbitrators who do find themselves the subject of challenges to their independence should avoid getting dragged into the arguments. Arbitrators must be capable, and be seen to be capable, of remaining impartial once such a challenge has been made.
The Judge applied the common law test of bias as established by the Court of Appeal in Porter v Magill  AC 357, namely whether “the fair minded and informed observer having considered the facts, would conclude there was a real possibility that the tribunal was biased”.
The Judge found that there were three grounds upon which a fair-minded observer would conclude that there was a real possibility of bias. (1) legal and business connection between Mr Farran, the Bank and Mr Zbeeb. On this point the Judge referred to the IBA Guidelines... Non-Waivable Red List: affiliate/financial income... and another on the Orange List (2) Mr Z involvement in negotiation and drafting covered by another circumstance on Waivable Red List "had given legal advice" (3) Judge considered Z's conduct demonstrated a lack of impartiality where: (i) he had refused the parties’ requests to postpone publishing his award; and (ii) he had taken the challenge to his independence personally by writing letters to the court which were “argumentative in style and had … [advanced] … points against the Claimant which had not been put forward by either of the Defendants”. As a result he had lost the necessary objectivity to determine the merits of the dispute.
standard duty of disclosure
Arbitrators have to be v transparent, parties need to know if they would want to impugn / invalidate him.
:star: Jung Science Information Technology v ZTE Corp  HKCFI 606
facts: Yang appointed as arbitrator. Everything they did seemed to be decided against ZTE. This is even to the extent where rude responses vs graceful responses. ZTE was like WTF. ZTE challenged yung and sought to have him removed for partiality. Looked into his bg to remove him as arbitrator. Found a connectiong between yang and an associate in jung. Yang and Mr matters (jung) are social aquaintences. = jung cannot be sufficiently impartial
ZTE continued to challenge.. Yung said to ZTE ' take it to court then / bring an application'. Hk court heard it, gave a detailed judgement WRT standard of duty of disclosure ..
The standard for disclosure is lower than the standard for a successful challenge.
(Wong J): “ There is… a distinction between circumstances which give rise to a duty to disqualify and those which give rise to a duty to disclose. A failure to disclose, of itself, can be one of the circumstances which together with others may give rise to a reasonable apprehension of bias...
 The facts to be disclosed are not confined to those warranting or perceiving to be warranting disqualification but those that might found or warrant a bona fide application for disqualification.”
Duty to disclose is v broad. In every circumstance, arbitrator must raise immediately.
There is a difference between duty to disclose and grounds for impugning arbitrator
Disclosure does not mean there are grounds for challenge, or that the arbitrator thinks he is conflicted. If he did, he would decline the appointment or resign. -> they are not the same thing.
Challenging an appointment for partiality : Article 12(1) ML
“When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose any circumstances likely to give rise to justifiable doubt as to his impartiality or independence. An arbitrator, from the time of his appointment and throughout the arbitral proceedings, shall without delay disclose any such circumstances to the parties unless they have already been informed of them by him.”
Usually issues w arbitrator identity willl be resolved ealier on; impugn by article 12 ML