ARBITRATION IS VOLUNTARY AND A CREATURE OF CONTRACT
Defining Panel Expectations
Review of Arbitration Rules Regarding Efficiency and Economies of the Process
Arbitration is a form of alternative dispute resolution. The word alternative is important
as parties have a choice as to how they wish to resolve matters of dispute when they arise.
Arbitration, by the very concept, is to be an efficient and economic means of resolving disputes.
The parties anticipate this efficient process because the expert panels that are selected to hear the
dispute typically have the experience and expertise in the dispute to be heard and thus can
simplify the process while at the same time, recognizing the duty to do so in a fair and equitable
manner.
As stated by Allen Overcash and Erin Gerdes in their article entitled “Five Steps to Fast-
Track The Large Complex Construction Case”:1
Arbitrators have a duty to increase the efficiency of the arbitration process. They can do this by requiring counsel and the parties to immediately focus on the real issues in the case, provide the arbitrators with information they need to organize the pre-hearing and hearing procedures around these issues, and prepare a well-conceived award.
So, if arbitration is to be an efficient and economic process and the arbitrator has a duty to
increase the efficiency of the process, what powers does the arbitrator have to control the
arbitration process and does the arbitrator have an ethical obligation to do so? What does an
arbitrator do in light of the advocate’s view that arbitration is their process and that both
advocates agree to a lengthy and arduous process; do the arbitrators abide by whatever the
advocates say? In looking for answers to these questions, one should first examine the
arbitration agreement, institutional rules and the arbitrator code of conduct. In light of this
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review, one must then more fully understand how an arbitrator balances the efficiency and
economies with a fair and equitable process.
There is a misconception that large complex construction cases cannot be conducted in an
efficient and economic manner. In the midst of clients screaming about the rising costs of
arbitration and considering whether to return to litigation to resolve their disputes, many
arbitration institutions are revising their rules and issuing guidelines and training to their panel
members emphasizing the goals of the arbitration process. The College of Commercial
Arbitrators (CCA), in response to mounting complaints that “commercial arbitration has become
as slow and costly as litigation”, convened a National Summit on Business-to-Business
Arbitration in October 2009 to “identify the chief causes of the problem and explore concrete,
practical steps that can be taken now to remedy them.”2 The concept of a National Summit was
held from two key insights: “(1) that lengthy, costly arbitration results from the interaction of
business users, in-house attorneys, the institutions that provide arbitration and other dispute
resolution services, outside counsel and arbitrators; and (2) that all of these “stakeholders”
must play a role in achieving desired efficiencies and economies in arbitration.” 3
In response, the number one critical action as published in the March 2010 CCA Key
Action Items Protocols was:4
Use arbitration in a way that best serves economy, efficiency and other business priorities. Be deliberate about choosing between “one‐size‐fits‐all” arbitration procedures with lots of “wiggle room” and more streamlined or bounded procedures. In May 2010, the International Bar Association (IBA) revised its rules on the taking of
evidence in international arbitrations. The reasons for the revision are clearly denoted in the
preamble to these rules: 5
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These IBA Rules on the Taking of Evidence in International Arbitration are intended to provide an efficient, economical and fair process for the taking of evidence in international arbitrations, particularly those between Parties from different legal traditions Cost efficiency and effectiveness are terms used in the American Arbitration Association
(AAA) Construction Rules for Large Complex Construction Disputes as noted in Rule L-4 (a):6
Arbitrator(s) shall take such steps as they may deem necessary or desirable to avoid delay and to achieve a just, speedy and cost-effective resolution of Large, Complex Construction Cases. Under the International Centre for Dispute Resolution Procedures (ICDR) Rules, per
Article 16, the panel is given broad powers, but in the context of expediting the process:7
Article 16.2. The tribunal, exercising its discretion, shall conduct the proceedings with a view to expediting the resolution of the dispute.
Cannon IV (B) of the Code of Ethics for Arbitrators in Commercial Disputes provides that an arbitrator should conduct the proceedings fairly and diligently.8 The International Chamber of Commerce (ICC) Rules Article 20 (1) provides:9
“The Arbitral Tribunal shall proceed within as short a time as possible to establish the facts of the case by all appropriate means.” Courts have also discussed the efficiency and cost savings goals of arbitration.10 As
noted by Allen Overcash and Erin Gerdes, the following cases shed light on this presumption:
Dunmire v. Schneider, 481 F.3d 465 (7th Cir. 2007) which discusses that the benefits of arbitration include a fast and less expensive decision as well as resolution of the dispute by an expert. In re Poly-American, L.P., 262, S.W.3d 337, 347 Ttex.2008), it is noted that arbitration’s advantages include being “cheaper and faster than litigation”, having “simpler procedural and evidentiary rules”, minimizing hostility between the parties and disruptions to business dealings, and being more flexible. There should be little doubt that the arbitration panel is obliged to act with reasonable
expedition. The UNCITRAL Model Law on International Commercial Arbitration was adopted
by the United Nations Commission on International Trade Law (UNCITRAL) on June 21, 1985
in view of the desirability of uniformity of law of arbitral procedures and the specifics of
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international commercial arbitration practice. It covers all stages of the arbitral process from the
arbitration agreement to the recognition and enforcement of the arbitral award and reflects a
world-wide consensus on the principals and important issues of the international arbitration
process. The Model Law as recommended by the General Assembly significantly contributes to
the establishment of a unified legal framework for the fair and efficient settlement of disputes
arising out of international arbitration. In fact, the Model Law permits the termination of the
appointment of an arbitrator if he or she “fails to act without undue delay.”11
Recognizing the Arbitrator’s Obligations in the Arbitration Process
Given that arbitration is to be an efficient and economical process, what then are the
arbitrator’s obligations in assuring those goals are achieved? Determining whether the
arbitration process will be efficient, timely and/or cost effective is primarily driven by whether
the panel sets forth its expectations at the very beginning of the process.
As is discussed later, laying out a route to a successful arbitration begins with the
expectations defined in the initial letter to the parties regarding the pre-hearing conference and
how that pre-hearing conference is conducted. Once the agenda is prepared, the panel needs to
assure that agenda is followed at the pre-hearing conference. What becomes critically important
is the understanding by both the parties and the arbitrators as to the powers an arbitrator has in
defining and conducting the arbitration process.
Arbitrator’s Board Powers
The duties and obligations of the arbitrators are defined by the arbitration agreement and
by incorporation, the institutional arbitration rules that are to be applied. The arbitrators are also
bound by the ethical standards in conducting the arbitration process.12 While the rules and laws
will define the powers of the arbitrators, the majority of the arbitration institution rules are
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consistent in the powers the arbitrators have in deciding the manner in how the arbitration
hearing is handled. For example, the UNCITRAL Model Law provides that:13
Subject to any contrary agreement by the parties, the arbitral tribunal shall decide whether to hold oral hearings for the presentation of evidence or for oral argument, or whether the proceedings shall be conducted on the basis of documents and other materials. ….
The International Centre for Dispute Resolution (ICDR) Rules are similar to the
UNCITRAL Rules in that the arbitration panel is empowered to “conduct the arbitration in
whatever manner it considers appropriate, provided that the parties are treated with equality and
that each party has the right to be heard and is given a fair opportunity to present its case.”14 The
London Court of International Arbitration (LCIA) Rules encourage the parties to agree on the
“conduct of their arbitral proceedings” while at the same time doing “everything necessary for
the fair, efficient and expeditious conduct of the arbitration.”15 The 2010 IBA Rules, Article 8
also provide for the arbitrator’s powers in conducting the hearing:16
“The Arbitral Tribunal shall at all times have complete control over the Evidentiary Hearing. The Arbitral Tribunal may limit or exclude any question to, answer by or appearance of a witness, if it considers such question, answer or appearance to be irrelevant, immaterial, unreasonably burdensome, duplicative or otherwise covered by a reason for objection ….Questions to a witness during direct and re-direct testimony may not be unreasonably leading.
As is discussed later, selection of the arbitrator is key. Why? Because the arbitrator is guided by
his or her experience, expertise, training and culture. The entire arbitration process is guided by
the arbitrator continually trying to strike a balance between efficiency and economy and fairness
and equality. Albee Bates, in his article “Arbitration in a Global Economy” offers five principles
that should guide the pre-hearing process:17
Fair and Efficient Method of Resolving Disputes: international arbitration is intended to be a fair and efficient method of resolving disputes;
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Excess Information Exchange Wastes Money: while the pre-hearing exchange of information is essential to expediting commercial arbitration proceedings, time and money are wasted when the parties engage in excessive information exchange. Arbitration in intended to be an alternative to litigation and the wastefulness of American style ‘discovery’;
The Arbitration Process Must Be Flexible and Creative: the flexibility that arbitration provides is one of its greatest attributes. This flexibility allows the parties and arbitrators to be creative in defining the arbitration procedures that govern the exchange of information in any particular case;
Early Understanding of the Case and Defenses: each party need to share, early in the process, sufficient information to allow the arbitrators and the other parties to understand their case, including all evidence on which the party may rely to establish its claims and defenses at the hearing; and
Information May be Needed from Others: parties may need to access information that is in the exclusive possession or control of their adversary or a third party to fully and fairly develop their claims and defenses.
However, while the rules are consistent in regards to the arbitrator’s powers over the
hearing, the question then becomes how the arbitrator balances efficiency and economy with
fairness and equality.
Balancing Efficiency and Effectiveness with the Parties’ “process”
The duty to act in a fair and impartial manner is a basic tenant in nearly all institutional
rules. As noted in the 2010 CCA Protocols, arbitrators in striking a balance between
fundamental fairness and efficiency “may be reluctant to push parties to limit such practices or to
keep to schedule, especially when all parties have agreed to a wide ranging discovery.”18
This reluctance is often rooted in the arbitrator’s dilemma in determining what is “fair”.
Fairness may be something different to each party and to the members of the arbitration panel.
“Fairness” entails fairness to both sides.19 However, what if the parties’ principles differ? For
example, assume that one party wishes full discovery and indicates to the arbitrators that they
expect discovery to be in accordance with the U.S. Federal Rules of Evidence. The opposing
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party may indicate to the panel that this is not fair, that their client did not enter into the
arbitration agreement with the expectation of having to follow the Federal Rules of Evidence and
that they expect minimal discovery to be allowed in order to effectuate an efficient and
economical process. This example is more common than not and the arbitrators are faced with
striking a balance between the first party claiming it will not be afforded the opportunity to fully
present its case and the other party noting it has not agreed to any such process and thus would
be treated “unfairly”.
Thus, lays the obligation and duty of the arbitrator to strike a balance to ensure that the
arbitration process is kept under control.20 The institutional arbitration rules allow the arbitrators
the flexibility to make these judgments. The 2010 CCA Protocols even suggest that a “hybrid
system” which combines the basic features of arbitration with some of the court-like discovery
and motion practices, may be a potential choice in a situation where both parties are keen on
proceeding in a traditional litigation style setting. This is where the case management efforts of
skilled arbitrators become so important to assure a satisfactory procedure that is “carefully
tailored to the circumstances at hand” and is presumably what was intended by the drafters of the
contract in allowing that “wiggle room” in the process.21
Managing the Hearing Process
Recognizing that broad powers are afforded to the arbitrator, the lynchpin of whether the
arbitration will be efficient and economical while fair and equitable will be based on how the
hearing process is handled. The hearing process and how it is handled begins on the first day the
arbitration panel is convened. It is then up to the arbitrators, guided by the Chair, as to how to
convey the panel’s expectations to the parties in light of the arbitration agreement and applicable
rules. This message is best conveyed at the pre-hearing conference. The College of Commercial
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Arbitrators Guide to Best Practices in Commercial Arbitration devotes a significant number of
pages as to how this initial pre-hearing conference should be conducted. The 2010 CPR
Protocols offers a summary checklist, based on that discussion, of the matters that should be
determined at the preliminary conference:22
Identity of ALL parties to the arbitration (no et al descriptions) The specific claims, defenses and counterclaims (if any) to be decided. Are all
stated with sufficient specificity? Under what arbitration agreement is the arbitration being conducted? What law governs the arbitration procedures? What law governs the merits of the claims and defenses? What rules will apply in the arbitration? Is there any dispute concerning the arbitrarily of any claim or defense? Do the arbitrators need any additional information (e.g., names of testifying
witnesses and key actors who may not testify) in order to make additional disclosures?
Does any party seek to join additional parties? On what authority and basis? Does any party seek consolidation with arbitration? On what authority and
basis? Who is authorized to make the decision if a party is opposed to consolidation?
What discovery (if any) will be permitted? What procedures will apply? What motions (if any) will be permitted? What procedures and time frames
will apply? Does the arbitration involve specialized scientific or technical matters for
which the arbitrators should have a ‘tutorial’? If so, can the parties agree on a treatise or other publication for the arbitrators to read, or neutral expert to teach the Panel?
Would appointment of one or more neutral experts be appropriate? How will the parties submit documents and information to the arbitrators and
to each other-email, fax, electronic filing, hand delivery? At what location(s) will the hearing be held? Do the parties need subpoenas for non-party witnesses? What authority to
issue? Procedures and standards for seeking a continuance of the hearing. Procedures for the conduct of the hearing. Nature of the award. Due date of the award.
Just as it was critical to carefully define what would be discussed at the pre-hearing
conference, it is equally critical for the panel to memorialize the panels’ and parties’
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understanding and agreements at the pre-hearing conference. This should be accomplished by
the arbitrators promptly issuing a case management order following the pre-hearing conference.
If subsequent developments require some adjustments in that order, an amended case
management order should be promptly prepared and issued.
As so stated by the College of Commercial Arbitrations (CCA) Guide:23
Like most things in life, getting arbitration off on the right foot and keeping it on track are critical to a successful process. While responsibility for so managing arbitrations falls squarely on arbitrators, they should not attempt to perform this task without assistance. Counsel, who know far more about the case than the arbitrators and often have considerable arbitration experience and insight, are essential partners in the undertaking. From their first contact with counsel, arbitrators should set a tone of professionalism, cooperation, and mutual respect. They should make clear that, although the ultimate responsibility (and authority) for managing the arbitration rests with them, they intend to work with counsel in developing a process appropriate to the particular case, and, in turn, expect counsel to cooperatively and professionally with arbitrators and each other.
Handling of Witnesses
The Written Witness Statement
Given that the arbitration process is meant to be an efficient and economic process, more
and more arbitration institutions are providing for the powers of the arbitrator to encourage and
even order the parties to submit written direct testimony of fact witnesses and potentially, with
the parties’ concurrence, expert witnesses. Those arbitrators that have been involved in U.S
public utility rate hearings and those arbitrators who have international experience immediately
respond to this issue noting that the primary method of presenting direct testimony of both fact
and expert witnesses is through filed direct testimony. By getting the parties to agree on filing of
direct testimony, the efficiency and the cost of the process is immediately enhanced by:
Framing of the testimony upon which a particular witness will be put forward, thus obviating the need for direct examination of the witness at the hearing;
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Identifying key facts and expert analysis, if an expert; Providing an opportunity for the arbitrators to better understand the facts of
the dispute and the evidence to support those facts as presented in sworn testimony;
Reducing the time at the hearing to hear direct evidence; and Providing an opportunity for opposing counsel to better prepare for cross
examination, thus reducing the time at the hearing and being able to more efficiently ask questions of the witness.
One method to oppose party arguments relative to wanting to present direct testimony as
needed for submission of key points and facts is for the panel to consider allowing each party to
“present” the witness to the panel for a short period prior to being turned over for cross
examination. This minor direct oral examination allows the summarization of key points of the
written direct testimony as well as to “introduce” the witness to the panel. This introduction and
summary though, should be limited in time and consume a reasonable period of time depending
upon the particular arbitration circumstances.
In the 2010 IBA Rules on the Taking of Evidence in International Arbitration specifically
notes that the panel may order each party to submit written witness statements.24 However,
while efficiency is important, one must be careful in how the witness statement is prepared in
that a witness should only testify (in writing) about the facts upon which he or she is in fact
prepared to confirm at the hearing.25
Typically the process that is followed is an exchange of witness statements at some time
prior to the hearing followed by the opportunity for each side to exchange reply statements if so
desired. The witness statements will typically contain supporting documents in the form of
exhibits.26 Once the witness statements have been exchanged, the parties and the panel can then
decide which witnesses they actually want to testify at the hearing. While parties may chose not
to call a particular witness who has filed written direct testimony, it cannot be overstated the
importance of “live” testimony from a witness. The arbitrators are interested in witnesses as
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human beings and in obtaining an understanding of the parties’ motivations and intentions and,
inevitably, the credibility of the persons who appear before them.27 For example, the revised
2010 IBA Rules on the Taking of Evidence in International Arbitration provide for a
combination of written and oral testimony of fact witnesses: 28
The Arbitral Tribunal may order each Party to submit within a specified time to the Arbitral Tribunal and to the other Parties Witness Statements by each witness on whose testimony it intends to rely. The 2010 IBA Rules, Article 4 (5), go on to state what is to be contained in each witness
statement as follows: 29
a. the full name and address of the witness, a statement regarding his or her present and past relationship (if any) with any of the Parties, and a description of his or her background, qualifications, training and experience, if such a description may be relevant to the dispute or to the contents of the statement;
b. a full and detailed description of the facts, and the source of the witness’s information as to those facts, sufficient to serve as that witnesses’ evidence in the matter in dispute. Documents on which the witness relies that have not already been submitted shall be provided;
c. a statement as to the language in which the Witness Statement was originally prepared and the language in which the witness anticipates giving testimony at the Evidentiary Hearing;
d. an affirmation of the truth of the Witness Statement; and e. the signature of the witness and its date and place.
Peter Ashford, in his Handbook on International Commercial Arbitration offers some
additional guidelines for drafting witness statements:30
The statement should be drafted in the first person singular Documents should be referred to where they support evidence being given.
Usually the documents should be attached or in a supporting volume, but included with the statement. These documents should also be page numbered so the witness can easily refer to them in the hearing.
The statement should prove those facts that have been pleaded in the written pleadings.
The evidence should distinguish between evidence from the witness’ own knowledge and which derived from information and belief, and if the later, the source of the information of the basis for the belief should be given.
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The statement should generally be in chronological order but if there are various issues, it can be effective to deal with each issue and in turn, within each section, to deal with matters chronologically.
Witness Sequestration
Another procedural matter which should be resolved at the pre-hearing conference is
whether witnesses will be allowed to be present in the hearing room during the testimony of
other witnesses. Typically, parties generally agree that fact witnesses are not allowed to be in the
room prior to their own testimony unless they are the designated party representative. Others
have simply agreed that fact witnesses are not allowed at any time except during the presenting
of their own oral testimony. Parties may make an exception for expert witnesses, allowing them
to sit through any portion of the hearing their party may request. However, one caution should
be noted if the parties decide that a witness, fact or expert, is determined to be sequestered from
the hearing, whether that includes the ability to review any written transcripts prior to the
presentation of evidence. Experience demonstrates that parties often miss this subtle detail and
find themselves in a sticky situation with the panel when the review of prior hearing testimony
has already been undertaken and the witness is now appearing live.
No assumptions should be made relative to any manner in the way evidence is handled.
Clear and precise interpretation of witness sequestration should be officially recorded and agreed
to by the parties at the pre-hearing conference.
Handling of Evidence
The ongoing debate, especially in domestic arbitrations, is how much discovery should be
allowed. In civil code law, discovery is essentially non-existent. In common law countries,
discovery can be a mixed bag. Nowhere but in the United States has discovery become an issue
that if not watched carefully, can mirror that which is done in litigation. Some will even argue
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that under the relatively new Federal Rule of Evidence, that discovery cannot be “curtailed”.
However, one must consider why it is that they chose the arbitration process over that of
litigation. One of the largest costs and one of the largest complaints from clients is the cost of
discovery and the time the process can consume.
So, the question really is how much information is necessary to actually assure a fair and
equitable process? Is it really fair to require one party unlimited access to documents and to
compel a party to provide everything that is requested? Or is it more reasonable to determine
what documents are really relevant to the dispute and what information would be required in
order to assure that fair and equitable process. This applies not only to actual documents,
whether that is in electronic or hard copy form, but to depositions. In arbitration, what is the real
purpose of a deposition? Given the experience and background of the arbitrators, one is not
persuaded as in litigation relative to whether someone said something different in their
deposition. A deposition should be to gain relevant information that in fact may not be gained in
another form and which is necessary to ensure that the party is allowed a fair and equitable
process. Thus, depending on the actual circumstance, this may range from zero depositions
allowed to a specific number, again set by the arbitrators after hearing from the parties as to not
only why depositions are necessary in the first place, but why the particular individual requested
is necessary.
One may also argue that expert deposition is different from fact deposition and that the
only way to ascertain what the expert knew and when they knew it and upon what information
the expert relied, can only be obtained through a deposition. There may actually be some truth to
this statement. However, it really depends on the circumstances of the dispute and the time
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allowed for the actual hearing itself. This is where the experience of the arbitration panel is
invaluable.
Parties who choose arbitration presumably do so with the expectation that discovery will
be limited, or reduced from that allowed in civil court discovery procedures. As noted in the
Commentary to the Conflict Prevention & Resolution (CPR) Rules:31
[a]rbitration is not for the litigator who will ‘leave no stone unturned’” Unlimited discovery is incompatible with the goals of efficiency and economy. The Federal Rules of Civil Procedure are not applicable. Discovery should be limited to those items for which a party has a substantial, demonstrable need. Documentary discovery is part of the process of presenting evidence. Evidence is also
essential for any arbitration panel to make findings of fact. The principle purpose of the
documentary evidence is to assist the parties in ascertaining what documents may be available
that will contain essential facts that will be relevant to the claims and defenses relative to the
matter in dispute.32 The concept, as provided in the revised 2010 IBA Rules on Taking Evidence
in International Commercial Arbitrations, is that:33
The taking of evidence shall be conducted on the principles that each Party shall act in good faith and be entitled to know, reasonably in advance of any Evidentiary Hearing or any fact or merits determination, the evidence on which the other Parties rely.” However, as previously stated, discovery is typically the largest single cause of delay in
large complex construction cases.34 Thus, the second critical action noted in the 2010 CCA
Protocols Key Action Items is in regard to discovery:35
Limit discovery to what is essential; don’t simply replicate court discovery.
The arbitration institution rules vary somewhat in how much power an arbitrator has with
respect to discovery, but the majorities are consistent in that the norm is to limit discovery to
achieve the goals of efficiency and economy and provide the flexibility to the arbitrator in best
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achieving those goals. As noted in Rule L-4-Management of the Proceedings in the AAA
Construction Large Complex Case Rules:36
(b) Parties shall cooperate in the exchange of documents, exhibits and information within such party’s control if the arbitrator(s) consider such production to be consistent with the goal of achieving a just, speedy and cost- effective resolution of a Large, Complex Construction Case.
(c) The parties may conduct such discovery as may be agreed to by all the parties provided, however, that the arbitrator(s) may place such limitations on the conduct of such discovery as the arbitrator(s) shall deem appropriate. If the parties cannot agree on production of documents and other information, the arbitrator(s), consistent with the expedited nature of arbitration, may establish the extent of discovery.
Under the AAA Commercial Rules R-30: 37
(b)The arbitrator, exercising his or her discretion, shall conduct the proceedings with a view to expediting the resolution of the dispute and may direct the order of proof, bifurcate proceedings and direct the parties to focus their presentations on issues the decision of which could dispose of all or part of the case.
The 2010 IBA Rules, Article 2, clearly lay out the arbitrator’s obligation to the parties as to how
the process of taking evidence will proceed:38
1. The Arbitral Tribunal shall consult the Parties at the earliest appropriate time in the proceedings and invite them to consult each other with a view to agreeing on an efficient, economical and fair process for the taking of evidence.
2. The consultation on evidentiary issues may address the scope, timing and manner of the taking of evidence, including:
a. The preparation and submission of Witness Statements and Expert Reports;
b. The taking of oral testimony at any Evidentiary Hearing; c. The requirements, procedure and format applicable to the production
of Documents; d. The level of confidentiality protection to be afforded to evidence in the
arbitration; and e. The promotion of efficiency, economy and conservation of resources in
connection with the taking of evidence.
The JAMS Streamlined Arbitration Rules & Procedures call for “voluntary and informal”
exchange of all relevant, non-privileged documents and other information, and states that any
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additional requested documents will be determined by the Arbitrator based on the reasonable
need and the burdensome of the request on the opposing Party and the witness.”39 As noted in the
ICC Final Report on Construction Industry Arbitrations:40
The tribunal should make it clear at the onset that the documents should be directly relevant to the issues as defined by the tribunal and should be confined to those which a party considers necessary to prove its case (or to dispose of the case of the other party) or which help to make the principle documents comprehensible…
As is also noted in the ICC Publication “Techniques for Controlling Time and Costs in
Arbitration”:41
It is wasteful to provide the arbitrators with documents that are not material to their determination of the case. In particular, it will not usually be appropriate to send to the arbitral tribunal all documents produced pursuant to production requests. This not only generates unnecessary costs, but also makes it harder for the arbitral tribunal to prepare efficiently. It is clear that the IBA Rules require the request for documents to be both relevant and
material. The IBA Rules further address the degree of relevance and materiality in Article
9(2)(a) which excludes from production documents lacking “sufficient relevance or materially”,
meaning that it must be more than illusory.42 However, this is contrasted to the US Federal
Rules of Civil Procedure that permit parties to obtain discovery regarding any matter that is
relevant to the claim or defense of the party.43
The background of the parties and the arbitration panel will certainly play into how the
discovery monster is played out. In the US, there is still a tendency for advocates to want as
much discovery as can be obtained and a tendency for many US arbitrators to simply sit back
and let the parties decide their own fate as to discovery. However, the general practice in
international arbitration is to limit discovery to those documents that are both: (1) relevant to
those issues in dispute, and (2) necessary for the proper resolution of those issues.44 Those
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parties and arbitrators with international experience will no doubt view the discovery monster in
a much more different light than those with only US experience. Given that the arbitrator has the
duty to assure a fair and equitable process for both parties and has an obligation to assure an
efficient and cost effective process, the arbitrator needs to then assist the parties in ferreting out
those key documents that will assist the parties and the arbitration panel to discern the facts in
the case.
Unless otherwise stated in the arbitration clause within the parties’ contract, the rules
under which the arbitration will be conducted generally provide the basis for the arbitrator’s
powers in regard to discovery.45 Having all this been said, the question arises in context of this
paper as to whether the arbitrator has the power to have the final decisions with respect to
discovery and when does the arbitrator potentially cross the line of his or her ethical obligations
to both the parties and to the arbitration process of efficiency and economics? The 2010 CCA
Protocol offers some guidance on this question:
In this respect, expert opinion and current standards vary, although under most standards arbitrators must respect and adhere to party agreements regarding discovery. The AAA Rules for Large Complex Cases authorize the arbitrator(s) to override party agreements and ‘place such limitations on the conduct of such [agreed] discovery as the arbitrator(s) shall deem appropriate.’46Although both the JAMS and CPR Rules give arbitrators considerable authority regarding exchange of information, neither set of procedures is explicit regarding the authority of arbitrators to ‘trump’ or modify agreements regarding discovery;47however, the JAMS Arbitration Discovery Protocol recognized that, while party agreements regarding the scope of discovery should be respected by the arbitrators, ‘[w]here one side wants broad arbitration discovery and the other wants narrow discovery, the arbitrator will set meaningful limitation.’”48 Institutions are becoming more and more aware of the need to control and limit discovery
and accordingly are granting the “final authority” of arbitrators in regards to discovery. For
example, the ICDR Guidelines indicates:49
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a. The tribunal shall manage the exchange of information among the parties in advance of the hearing with a view to maintaining efficiency and economy. The tribunal and the parties should endeavor to avoid unnecessary delay and expense while at the same time balancing the goals of avoiding surprise, promoting equality of treatment, and safeguarding each party’s opportunity to present its claims and defenses fairly.
b. The parties may provide the tribunal with their views on the appropriate level of information exchanges for each case, but the tribunal retains the final authority to apply the above standard.
There is nowhere in the rules that requires the arbitrator to merely “accept” what both
parties believe to be the “right amount” of evidence. Thus, it is incumbent for the Chair to
always have the parties “agree” on the record after each topic is discussed, that should counsel
want discovery beyond what was agreed in the pre-hearing conference, he or she must make a
case for why that discovery is necessary. It is then incumbent on the arbitrators to make the
decisions relative to those requests.
IBA Rules, Preamble (4): The taking of evidence shall be conducted on the principle that
each Party shall be entitled to know, reasonably in advance of any Evidentiary Hearing, the
evidence on which the other Parties rely. The IBA Rules also permit any party to ask the
arbitration panel to take whatever steps are legally available to obtain requested documents from
third parties (Art. 3 (9)). The arbitration panel has further power to request a party to produce to
the arbitration panel and to the other party any documents it believes to be relevant and material
to the outcome of the case (Art. 4).50
If the arbitrators today did not have enough challenges with respect to the production of
traditional “paper” documents, additional challenges have been put upon the arbitrators with the
fact that significant portions of today’s construction projects are documented by electronic
means, whether it be e-mail communication or project record keeping through electronic
databases. The US practice of e-disclosure has been codified in the Federal Rules of Civil
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Procedure 2007. Specifically, the parties must disclose the electronic documents they have and
where they are stored51 and must confer and discuss how to deal with electronic documents and
their preservation.52 The Advisory Committee Notes to the Federal Rules of Civil Procedure
2007 encourage the parties to address the form of any production of electronic documents. They
can be produced in either hard copy format or in electronic format, the later in either the
document’s native format, meaning the manner in which it was originally stored, or in a “PDF”
or “TIFF” image.53
Parties and arbitrators should be keenly aware of the advantages and disadvantages of
both and what it may mean should the documents be produced in one of these formats, or
multiple forms. As production of electronic documents can be quite costly and time consuming,
it is critical for everyone to fully understand what is being requested prior to an order being
issued by the panel. Requesting production of documents in native format will generally mean
that the documents carry with them metadata, which can provide a great deal about the
document. As noted in the 2007 pocket guide for judges: 54
Metadata, which most computer users will never see, provide information about an electronic file, such as the date it was created, its author, when and by whom it was edited, what edits were made, and in the case of an email, the history of its transmission. As such, parties are often reluctant to produce documents in native format and rather
produce in either PDF or TIFF as the data cannot be manipulated. This is also the underlying
reason institutional rules have allowed arbitrators flexibility in determining how to rule when
such questions arise. For example, the ICDR, in its Guidance to Arbitrators Concerning
Exchanges of Information permits the producing party to produce electronic documents in the
form “most convenient and economical for it…unless there is a compelling need for access to the
documents in a different form.”55 The 2010 IBA Rules require that the documents that a party
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maintains in electronic form “shall be submitted or produced in the form most convenient or
economical to it that is reasonably usable by the recipients, unless the Parties agree otherwise or,
in the absence of such agreement, the Arbitral Tribunal decides otherwise.”56 The IBA Rules in
Article 9.2 provide the arbitrator with wide discretion on considering how to deal with electronic
issues. For instance, there is no reason that an arbitration panel could not direct keyword
searches and otherwise restrict the scope of electronic data thereby reducing the cost and time of
production of such data.57
Managing Time at the Hearing
Due to a variety of reasons; including handling multiple schedules of the panel, the
parties and counsel, the need to be able to understand the facts and circumstances surrounding a
particular issue in dispute, and the need to achieve an efficient yet fair and equitable process, the
hearings should be held in large blocks of time. Should the hearing not be able to be concluded
within a two week period, then additional blocks of time should be identified and scheduled as
early as possible during the process so as to assure the goals and objectives are met. These
blocks of time should coincide, to the maximum extent possible, to specific issues in order to
hear all the evidence surrounding a particular issue.
To preserve the expeditious nature of arbitration, how the arbitration will be handled
becomes one of the most important decisions made. While many US domestic arbitrators still
believe that the process must “play out” as it may since the parties must be afforded every
opportunity to present their respective evidence and cross examine, arbitrators must also
recognize that the primary reason for arbitration as the preferred ADR process, is to resolve the
dispute in a more efficient and economical alternative to litigation. Accordingly, it is essential
that the arbitrators use their authority to control the process as afforded to them under the rules,
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including the time to present and hear evidence. One effective method that works extremely well
is to allocate approximately one half of the hearing time agreed to each party. The primary
purpose of the hearing is to allow cross examination of fact and expert witnesses and
presentation of rebuttal testimony.
Constant debate, especially in domestic US arbitrations is given to whether a time limit
can and should be imposed upon the parties in which to present their evidence to the panel.
Again, those arbitrators with international experience will tell you that more often than not, it is
the common practice for each party to be given an equal amount of time to present its evidence.
By doing so, the parties tend to refine their case, presenting and crossing only on those key
points to the dispute and narrowing the issues for the arbitration panel. The time apportionment
is usually done with what is deemed to be a “time clock” which starts immediately when either
of the parties and/or its witnesses speaks. The only exception to the time clock rule is the time
the arbitrators take to ask their own questions of either counsel of witnesses at which point the
time clock is not assessed against either party. A time clock may be enacted by either use of an
old fashioned chess clock, or by having the court reporter track the time used by each party.
Court reporters can either mark time, or with some software programs today, time can be
automatically tracked within the system.
Time should be set with the understanding that the arbitrators would also have their own
respective questioning of witnesses and thus time needs to be built into the schedule to allow the
arbitration to be conducted within a continuous period, or periods, if at all possible. Weekends
can serve as “float” that can be used should the arbitration time be running behind at the end
during any continuous period. The time is typically recorded by the court reporter and time is
reviewed at the beginning and end of each break during the day and the start and end of the
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hearing day so as to keep both parties and the panel well informed of the time used and time
remaining. By keeping track on a continuous basis, the panel is also able to adjust start and end
times of each day resulting in being close to the scheduled half time mark at the end of the first
continuous period and thus not having to use the weekend as catch up. Experience has shown
that in well guided and controlled time clock arbitrations that parties are usually able to present
all their evidence in less than the allotted time.
Another tool which saves immense time in the process is the receipt of daily transcripts
of the hearing at the end of each day. Review of the transcripts allows both the arbitrators and
the parties to review the evidence presented and to pursue additional questions, either of the
same witness or potentially future witnesses, especially if written witness statements have been
submitted which alert both the panel and opposing counsel as to similar areas another witness
may provide evidence. Modern technology has allowed both the arbitrators and counsel to have
computers in front of them during the process and review testimony in real time through the use
of “Livenote” or similar real-time transcript software where annotations can be made as the
transcript appears on the computer screen before them.
The 2010 CPR Protocols offers a list of the major steps toward an efficient arbitration
hearing which include:58
Make clear to counsel that, unless formal rules of evidence apply (which is rare in arbitration), virtually all non-privileged evidence offered by any party will be received and traditional objections (hearsay, foundation, etc.) will not be entertained. Urge Counsel to focus on the probativeness of evidence, not its admissibility.
Determine what order of proof is most appropriate for the particular case, including sequencing the hearing in progressive phases, taking both side’s witnesses issue by issue, or ruling on threshold issues before receiving evidence on other issues.
Encourage the parties to submit a joint collection of core exhibits on chronological order with key portions highlighted.
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Establish an expedited procedure for receipt of other exhibits. For example, require all parties to submit their tabbed, index exhibits in advance of the hearing and advise counsel that all such exhibits will be received en masse at the start of the hearing save any that are privileged or genuinely challenged as to authenticity.
Require that parties show demonstrative exhibits including power point slides, to each other a reasonable time before they are used in the hearing so that time is not wasted in assessing and possibly challenging their accuracy.
Discuss with counsel the possible use of written direct testimony for some or all witnesses
Establish procedures to narrow and highlight the matters on which opposing experts disagree. For example, require experts to confer before hearing and provide the arbitrators with a list of the points on which they agree, the points on which they disagree, and a summary statement of their respective opinions on the latter.
Limit the presentation of duplicative or cumulative testimony. Make appropriate arrangements for receiving by conference call or
otherwise testimony from witnesses in remote locations. Consider receiving affidavits or pre-recorded testimony regarding less
critical matters. Sequester witnesses until they testify unless all parties request otherwise. Establish and maintain a realistic daily schedule for the hearing. Start
hearings on time and don’t allow excessive recesses and lunch breaks. Encourage the parties to employ a ‘chess clock’ that limits the total
number of hours available to counsel for examination and argumentation. At the close of each hearing day (not the beginning), discuss with counsel
any administrative matters that need attention and monitor their progress against the projected hearing schedule. If needed to meet the scheduled completion date, consider starting hearing earlier, ending them later, or having one or more weekend sessions.
Don’t hesitate to tell counsel when a point has been understood and they may move on, or when a point was not understood and requires clarification.
Make sure, well prior to the hearing, that counsel have worked out all logistical arrangements concerning transcripts, shared used of power point or other equipment, etc.
Freely take witnesses out of turn when necessary to accommodate scheduling conflicts.
Prohibit parties from running out of witnesses on any given day. “Call your next witness” is a powerful tool for keeping a hearing moving.
Party-Appointed Arbitrators
Panel Selection Process
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Choosing the “correct” arbitrator is one of the most, if not the most, important part of the
arbitration process. Because arbitrators have broad discretion to shape and determine the
procedures, including the manner and method of taking evidence, to determine the credibility of
the witnesses, and not to mention the power to determine the ultimate award, as so stated by John
Hinchey and Troy Harris in their handbook on international construction arbitration, “an
arbitration is no better than the arbitrators.”59 The role of the arbitrator is critical in maintaining
the integrity and efficiency of the arbitration process. As the parties attempt to gain their
position in the process, engage in adversarial arguments, and find reasons for “strategic” delays,
it becomes ever so important to assure a strong and knowledgeable panel has been selected that
will guide the process in the manner in which arbitration was intended-efficiently and cost
effectively-while at the same time assuring a fair and equitable right to be heard. In fact, one of
the critical action items in the 2010 CCA Protocols is to select arbitrators with strong case
management skills.60
Because choosing the right arbitrator is so important, most of the arbitration institutions
have strict requirements on the qualifications of potential arbitrator candidates as well as
requiring continuing education of their panel members to assure its arbitrators are current with
the respective rules and lessons learned in improving the arbitration process. For example,
applicants for membership on the ICDR Panel of Arbitrators must meet or exceed the following
requirements:61
1. QUALIFICATIONS a. Minimum of 15 years of senior-level business or professional
experience. b. Educational degree(s) and/or professional license(s) appropriate to
your field of expertise. c. Honors, awards, and citations indicating leadership in your field. d. Training and substantial experience in arbitration mediation and/or
other forms of out-of-court dispute resolution.
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e. Membership in a professional association(s). f. Other relevant experience or accomplishments (e.g., published articles)
2. NEUTRALITY a. Freedom from bias and prejudice. b. Ability to evaluate and apply legal, business or trade principles.’
3. JUDICIAL CAPACITY a. Ability to manage the hearing process. b. Thorough and impartial evaluation of testimony and other evidence.
4. REPUTATION a. Held in the highest regard by peers for integrity, fairness and good
judgment. b. Dedicated to upholding the AAA Code of Ethics for Arbitrators.
… 5. COMMITMENT TO THE ADR PROCESS
a. Willingness to devote time and effort when selected to serve. b. Willingness to participate in continuing education programs pursuant
to ICDR Guidelines.
The ICC Final Report on Construction Industry Arbitrations also suggests qualifications
for those potential candidates being considered as construction arbitrators:62
Familiarity with construction contracts and how construction disputes evolve and are best resolved.
Intellectual curiosity and the ability to come to grips with technical issues (if a lawyer) or legal issues (if not a lawyer).
Familiarity with computers and word processing skills. The ability and willingness to be “proactive” and to “manage an
arbitration and to devise an effective management framework”. The ability to write awards which will be acceptable to the international
construction industry. Proven experience in seeing how an international arbitration about a
construction dispute is carried from start to finish.
The 2010 CCA Protocols suggest that the following queries may be helpful:63
Does the prospective arbitrator (or chair of the arbitration tribunal) have experience in process management, and does that experience reflect well on his or her ability to supervise an efficient, economical process?
Is the prospective arbitrator committed to the concept of promoting economies and efficiencies throughout the process?
Is the prospect available for expedited hearings, or for hearing over the period during which the arbitration is likely to occur? What other standing or prospective commitments does the arbitrator have?
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Numerous articles and books written on the arbitration process have continually pointed
to the following key factors in selecting an arbitrator: 1) impartibility and independence, 2)
personal characteristics, and 3) the interview.64
Impartiality and Independence
One of the major benefits of the arbitration process is the fact that the arbitrator is
impartial and independent of the parties, regardless if the arbitrator is serving as party-appointed,
or as Chair of the panel. This means that the arbitrator has no relationship with either of the
parties that would bias him or her and is thus not influenced by factors other than the merits of
the case. The importance of the arbitrator’s impartiality and independence is borne out in the
language of the majority of the institutions around the world.
Given the importance of the need for arbitrators to be impartial and independent lends
itself to the need for full disclosure of any potential relationships which could prevent a selected
arbitrator from performing his or her duties, or could be perceived as a factor which would
prevent one from performing his or her duties.
Personal Characteristics
The job of the arbitrator is not to work out a settlement or act as an advocate to either of
the parties; rather, the role of the arbitrator is to decide the issues between the parties judicially.65
As such, the qualifications and experience of the arbitrator should be centered on the arbitrator’s
ability to decide in an efficient and cost effective manner while assuring the process is fair to
both parties. It requires the individual to decide complex legal and factual issues correctly and to
focus on the real issues of the case in accordance with the applicable law. This ability and what
qualifications and credentials a potential arbitrator might possess to assist him or her in getting to
that ability is what should be explored when looking for an arbitrator. For example, in a
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construction dispute, the parties should look for arbitrators that come from the construction
industry, typically have some experience with the type of matter and/or issues of the dispute and
come from a variety of backgrounds, such as having at least one engineer on the panel.66
In addition to the “technical” requirements sought in seeking the best arbitrator to hear
the matter, is to explore how that potential arbitrator will handle the process. Handling of the
process goes beyond the ability to manage the process, but to how the arbitrator will relate to the
parties and the witnesses. Social and good communication skills are essential.67 Another critical
aspect in ascertaining the personal characteristics of the arbitrator is how he or she will handle
the discovery process. The parties should determine what they may wish to seek in this regard
and then inquire of the arbitrator and/or his or her references and/or publications/articles, as to
the position of the potential candidate when it comes to discovery in the arbitration process.68
As quoted by John Hinchey and Troy Harris in their handbook on International
Construction Arbitration, Professor Neal Bunni summed up what he believes are certain
“personal attributes” that are conducive to an effective and efficient arbitration:69
The ability and the patience to listen carefully and to have an open mind on all matters;
To be authoritative and possess leadership qualities; To be friendly, but not casual; To be firm, but not overbearing; To be articulate, but not verbose; To be flexible to consider different options that may be put to him by the
parties; The capability of spontaneously handling procedural problems that
usually rise during a hearing, which are in practice of a difficult nature.
The 2009 edition of the Baker & McKenzie book entitled International Arbitration
Checklists also provides a good set of personal characteristics to look for when choosing an
arbitrator including:70
1. a good understanding of the arbitral process;
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2. an understanding of the commercial matter in dispute; 3. an ability to listen, assess the credibility of witnesses and the weight of
the evidence, and decide in accordance with the applicable law; 4. the capability to act as a leader and manage the arbitral process; 5. the ability to clearly and decisively deal with issues during the arbitral
proceedings; 6. the ability to act with fairness, civility, and courtesy; 7. an appreciation for the cost of the process and the commitment to
render a decision in a timely manner; 8. the ability to interact with the parties, counsel and co-arbitrators; and 9. an understanding that the job of an arbitrator is to turn out an
enforceable award following a process in which the parties, regardless of the result, were all treated fairly.
The Interview
There has been an increasing trend to interview potential arbitrator candidates, especially
when a potential candidate may not be known to the counsel or party appointing them. However,
care must be taken not to overstep the bounds of what can and cannot be asked in such an
interview, otherwise the other side may seek a challenge to the potential arbitrator on grounds of
reasonable apprehension of bias.71 The interview, especially if it is ex parte, should not delve
into the merits of the dispute, should not touch on the arguments of the interviewing party and
should comply with the applicable laws, rules and ethical requirements.72 Several of the
arbitration Rules offer guidance on what can and cannot be asked in an interview. The ICDR
Rule Article 7 (2) states:73
No party or anyone acting on its behalf shall have any ex parte communication relating to the case with any arbitrator, or with any candidate for appointment as party-appointed arbitrator except to advise the candidate of the general nature of the controversy and of the anticipated proceedings and to discuss the candidate’s qualifications, availability or independence in relation to the parties, or to discuss the suitability of candidates for selection as a third party arbitrator where the parties or party designated arbitrators are to participate in that selection. No party or anyone acting on its behalf shall have any ex parte communication relating to the case with any candidate for presiding arbitrator.
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The Chartered Institute of Arbitrators has issued practice guidelines for pre-appointment
interviews that may offer some insights as to what inquiries might be made when interviewing a
potential arbitrator candidate.74 The guidance promotes transparency and openness. Generally,
as noted in Baker & McKenzie’s International Arbitration Checklists, the questions go to
exploring the potential candidate’s experience, expertise, language proficiency, availability and
possible conflicts.75
1. The potential arbitrator should be advised of: a. The nature of the dispute; b. The subject matter of the dispute; c. The names of the parties involved; d. The amount in dispute; e. The names of the other arbitrators if they have been chosen; f. The length of the case and some insight into its complexity.
2. You will want to know from the arbitrator that he is independent and impartial. You should then canvass the following points:
a. Any relationship to the parties b. Any relationship to the major witnesses appearing on behalf of
your client including experts who may be retained; c. Any relationship to the counsel or law firms involved; d. Any associations or relationship with other companies or trade
associations in the same business that might be affected by the decision;
e. Any association with property in the vicinity if real estate is involved in the case;
f. Any previous decisions rendered by the arbitrator on significant points in issue.
3. Inquire into the qualifications of the arbitrator: a. What degrees does he have? b. What experience does the arbitrator have in his field? c. How many arbitrations has the arbitrator conducted? d. Is the arbitrator generally comfortable with the nature of the
dispute and the subject matter? 4. You should also inquire into the availability of the arbitrator:
a. Discuss the length of the case and the proposed timing; b. The arbitrator should commit the time necessary to the case
and agree not to take on other retainers that might conflict with the scheduled hearing of your matter;
c. You should consider the age and health of the arbitrator. This can be a factor not only as to the availability but also the
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commitment to work long hours and stay awake late in the afternoon.
5. Particularly in the case of an ad hoc arbitration, where fees will not be set or negotiated by institution, you should inquire into the fees to be charged by the arbitrator and the method of billing. Are there cancellation fees? Will fees be charged if there is an adjournment? Does the arbitrator change any flat disbursement fee for administrative assistance? Will the arbitrator require a deposit? You may also wish to specify that the arbitrator has no power to hire experts, order transcripts, or incur other similar disbursements without the approval of the parties.
6. If you and the potential arbitrator are satisfied with the answers to the foregoing, then you should confirm the arrangement in writing with the arbitrator and notify the other side of the acceptance of the appointment.
7. The confirming letter to or from the arbitrator should set out: a. The acceptance of the appointment as arbitrator; b. Confirmation of independence and impartiality; c. That the arbitrator agrees all matters dealing with the
arbitration are confidential; d. Confirmation of availability during the times specified; and e. Confirmation of the fee structure.
In addition to the guidelines above, John Hinchey and Troy Harris offer the following
practice tips in their handbook on International Construction Arbitration:76
The candidate’s background, experience, qualifications in, and familiarity with the construction industry in general, and with the particular dynamics of the construction processes or technical issues involved in the case at hand;
Any published writings, including books, articles, professional papers, seminar presentation, or teaching experience that are relevant to the construction processes or subject matter in the arbitration;
Previous representation of parties in construction cases (if the prospective arbitration or a lawyer or has practices as an advocate or represented parties in construction matters); and
Whether the candidate feels competent to determine the parties’ dispute and the extent to which the prospective arbitrator is comfortable with e-mail and communication and dealing with electronic data, which is the modern and normal way of communicating and storing much of the information on construction projects.
The ethics of interview questions and how an arbitrator candidate might respond is also
addressed in many of the arbitration institutions Rules of Ethics. For example, the IBA Rules of
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Ethics for International Arbitrators require the potential candidate to make inquires of the party
to ascertain whether there may be any circumstance that would give rise to that individuals’
impartiality and independence. The potential candidate may also inquire as to his or her
availability and suitability to serve, but is barred from asking any questions on the merits of the
case.77 Similarly, the American Bar Association/American Arbitration Association Code of
Ethics for Arbitrators in Commercial Disputes provide that when the appointment of a
prospective arbitrator is being considered, the interviewee may inquire as to the identity of the
parties and the general nature of the case but not the merits and may respond as to his or her
availability and suitability to serve.78
Expectations for Disclosure of Communications between the Neutral and Appointing Parties
Virtually all arbitration laws and institution rules require disclosure by a candidate. For
example, the UNCITRAL Model Law states:79
When a person is approached in conjunction with his possible appointment as an arbitrator, he shall disclose any circumstances likely to give rise to justifiable doubts 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 on them by him. Disclosure goes beyond merely whether an arbitrator has any financial involvement or
whether the arbitrator has ever had an indirect or an indirect relationship with any of the parties,
their counsel, major witnesses and/or ultimate beneficiaries of the Award.80 Disclosure is of vital
importance to assure a fair and equitable process and to assure there is no reason to question or
subject the award to motions to vacate. As was said in the U.S. case of Commonwealth Coatings
Corp. v. Continental Casualty Co.81
[A]rbitrators are not automatically disqualified by a business relationship with the parties before them if both parties are informed of the relationship in advance, or if they are unaware of the facts but the relationship is trivial.” However,
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“arbitrators must take steps to ensure that the parties are not misled into believing that no nontrivial conflict exists. If therefore follows that where an arbitrator has reason to believe that a nontrivial conflict might exist, he must (1) investigate the conflict (that may reveal information that must be disclosed under Commonwealth Holdings) or (2) disclose his reasons for believing that there might be a conflict and his intention not to investigate. Given that many industries, such as the construction industry, are small, there is a high
probability and likelihood that the parties will know the arbitrators and the arbitrators each other
and that the arbitrators will know potential witnesses, especially in the expert arena. And given
that lawyers and consultants have worked or are working for large firms that may have had
contact and/or knowledge of a particular client, advocate and/or other witnesses/experts, an
arbitrator is faced with asking himself or herself as to what level of affirmative inquiry needs to
be conducted before making disclosures. These questions often go beyond just the individual
being approached to be an arbitrator, but to the relatives that may have relationships with the
parties and/or advocates and/or any of the witnesses. Other questions arise relative to how far
back in time must one go and again, what levels of relationships must be disclosed.82
Arbitration institutions vary somewhat as to what level of disclosure is required. For
instance, under the UNCITRAL Rules, the disclosure requirements are simply that “a
prospective arbitrator shall disclose to those who approach him in connection with his possible
appointment any circumstance likely to give rise to justifiable doubts as to his impartiality or
independent.”83 Similarly, under the ICC Rules, a prospective arbitrator is asked to “declare
their independence”84 and if there are any facts or circumstances that might call into question the
prospective candidate’s impartiality or independence, these would then be passed on to the
parties for review.
In contrast, the ICDR’s guidelines state that the following information should be
disclosed regarding a relationship:85
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1. Whether the relationship is in the past, present, or anticipated in the future; 2. The nature of the relationship; 3. The duration of the relationship (from when to when); 4. Whether the business is being conducted directly or indirectly; 5. Whether the disclosed relationship is professional, social or familial; 6. The extent of contact-daily, weekly, monthly, yearly; 7. The contact event (e.g., business meetings, occupying space in the same
building, consultation; legal professional representation; professional or trade association meeting or committee work; intimate social gathering; large group social gathering; etc.); and
8. Whether the relationship affects the arbitrator’s ability to act impartially.
The LCIA Rules are similar to the ICDR in that before appointment by the LCIA Court,
each arbitrator is to furnish to the Registrar a written report of his or her past and present
professional positions and shall sign a declaration to the effect that there are “no circumstances
know to him likely to give rise to any justified doubts as to his impartiality or independence,
other than circumstances disclosed by him in the declaration.”86
In 2004, the International Bar Association (IBA) published IBA Guidelines on Conflicts
of Interest in International Arbitration. While the guidelines were written with international
arbitration in mind, the principles set out in the IBA publication offer guidance to potential
arbitrators regarding what facts might give rise to a concern regarding impartiality and
independence, including what the IBA refers to as the “Practical Application of the General
Standards”, which has been likened to the actions one takes when approaching a stop light- the
“Red List”, the “Orange List”, and the “Green List.” 87
As one might surmise, the Red List means “stop”, providing a list of specific situations,
which, depending on the facts of a particular matter, give rise to justifiable doubts as to
arbitrator’s impartiality and independence. The Red List includes lists of “non-waiver-able”
situations, such as significant financial interests, and a “waiver-able” list which includes
situations which are serious but that could be waived by the parties should they both so agree.
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The Orange list, as one might also surmise is to proceed with caution. While the
situations listed might give rise to justifiable doubts as to the arbitrator’s impartiality and
independence, the situations may not automatically disqualify the potential arbitrator, but if not
disclosed and agreed by the parties, could and probably would lead to a challenge in the
appointment of the arbitrator.88 The Green List includes examples of those situations where no
appearance of, and no actual, conflict of interest exists from the relevant objective point of view.
While none of the major arbitral institutions have adopted or officially follow the IBA
guidelines, they provide a valuable tool to both counsel and the potential arbitrator in focusing on
various situations that may give rise to the question of impartiality and independence.
As laid out in the 2009 book by Baker & McKenzie entitled International Arbitration
Checklists, a valuable checklist regarding impartiality and independence, when considering a
potential arbitrator candidate, includes the questions:89
1. Does the nominee have any financial interest in the dispute, a party, its counsel or a major witness or beneficiary?
2. Is there a family or close social relationship with a party, counsel, major witness or beneficiary?
3. Is there a professional relationship between the nominee’s law firm and one of the parties, witnesses or beneficiaries?
4. Are there any past business relationships with a party of its counsel?
5. Has the nominee previously acted as arbitrator for the same party or counsel?
6. Has the nominee taken any clear public position with respect to any of the parties or any of the matters at issue?
There is nothing that attacks the integrity of the arbitrator more than the failure to
disclose. It is incumbent upon all arbitrators to do their “due diligence” checks when responding
to inquiries to serve. However, in trying to fully disclose while at the same time ferreting
through what is and is not relevant, it is equally incumbent upon the parties to understand that the
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more experienced the arbitrator candidate, the more likely that the individual will be involved in
professional organizations, seminars and have professional contacts with people in the industry
and may not give rise to disclosure. A recent article that appeared in the August 30, 2010 issue
of the Chicago Daily Law Bulletin addressed a disclosure issue which concerns all arbitrators
that jointly write articles, appear on panels with other arbitrators and are members of the same
professional organizations. While an allegation was posed regarding an arbitrator’s failure to
disclose, the Court held that:90
All that it has shown are a series of public, almost exclusively parallel, professional contacts involving lecturing and writing on construction-related matters. These endeavors were “no secret”, and their existence, as Continuum’s motion concedes, was readily discoverable to anyone who chose to look. These purely professional involvements are emblems of professional achievement about which lawyers, their publishers, and event organizers publicly (and rightfully) boast on their websites and through advertisements to interested members of the bar.
1 “Five Steps to Fast Track The Large Complex Construction Case”, Overcash and Gerdes, Dispute Resolution Journal, Vol. 64, No. 2, May-July 2009, American Arbitration Association, NYC). 2 CCA Protocols for Expeditious, Cost-Effective Commercial Arbitration, August 2010, Foreward. 3 CCA Protocols for Expeditious, Cost-Effective Commercial Arbitration, March 2010 Key Action Steps for Business Users, Counsel, Arbitrators & Arbitration Provider Institutions. 4 Id. 5 IBA Rules on the Taking of Evidence in International Arbitrations, May 29, 2010, Preamble (1). 6 AAA Commercial Arbitration Rules and Mediation Procedures, American Arbitration Association, June 1, 2009, Rule L-4(a) 7 ICDR International Dispute Resolution Procedures, June 1, 2009, Art. 16(2). 8 AAA/ABA Code of Ethics for Arbitrators in Commercial Disputes, March 1, 2004, Canon IV 9 ICC Rules of Arbitration, January 1998, Art. 20(1)
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10 “Five Steps to Fast Track The Large Complex Construction Case”, Overcash and Gerdes, Dispute Resolution Journal, Vol. 64, No. 2, May-July 2009, American Arbitration Association, NYC). 11 Handbook on International Commercial Arbitration, Peter Ashford, JurisNet, LLC, New York, New York, 2009, p.45; Model Law, Art. 14. 12 Handbook on International Commercial Arbitration, Peter Ashford, JurisNet, LLC, New York, New York, 2009, p.43. 13 UNCITRAL Model Law, Art. 24. 14 ICDR Rules, Art. 16(1). 15 LCIA Rules, Art. 14.1, 14.2, International Construction Arbitration Handbook, John W. Hinchey and Troy L. Harris, Thompson West, 2008, p.467. 16 IBA Rules on the Taking of Evidence in International Arbitration, May 29, 2010, Art. 8(2). 17 Arbitration in a Global Economy, “Managing Information Exchange to Expedite International Commercial Arbitration Hearings”, Albert Bates Jr., Yorkhill Law Publishing, Release CD2, 2005. 18 CCA Protocols for Expeditious, Cost-Effective Commercial Arbitration, August 2010, p.7. 19 Handbook on International Commercial Arbitration, Peter Ashford, JurisNet, LLC, New York, New York, 2009, p.43. 20Id. 21 CCA Protocols for Expeditious, Cost-Effective Commercial Arbitration, August 2010, p.10. 22Id, p.71. 23 CCA Guide, pp.73-74, International Construction Arbitration Handbook, John W. Hinchey and Troy L. Harris, Thompson West, 2008, p.456. 24 IBA Rules on the Taking of Evidence in International Arbitration, May 29, 2010, Art. 4(4). 25 Chapter 9, “Procedural Matters Checklist”, Robert B. Davidson, Werner Muller, Stefan Riegler, International Arbitration Checklists, Second Edition, Baker & McKenzie, JurisNet, LLC, Huntington, NY, 2009. 26Id. 27 Chapter 10, “Discovery and Production of Evidence”, Richard M. Franklin, International Arbitration Checklists, Second Edition, Baker & McKenzie, JurisNet, LLC, Huntington, NY, 2009. 28 IBA Rules on the Taking of Evidence in International Arbitration, May 29, 2010, Art. 4(4). 29 IBA Rules on the Taking of Evidence in International Arbitration, May 29, 2010, Art. 5. 30 Handbook on International Commercial Arbitration, Peter Ashford, JurisNet, LLC, New York, New York, 2009, pp.164-166.
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31 INTERNATIONAL INSTITUTE FOR CONFLICT PREVENTION & RESOLUTION, RULES FOR NON-ADMINISTERED ARBITRATION Commentary to CPR Rule 11 (2007) [hereinafter CPR RULES], available at http://www.cpradr.org/ClausesRules/2007CPRRulesfor NonAdministeredArbitration/tabid/125/Default.aspx#Commentary., Commentary to CPR Rule 11. 32 Handbook on International Commercial Arbitration, Peter Ashford, JurisNet, LLC, New York, New York, 2009, p.85. 33 IBA Rules on the Taking of Evidence in International Arbitrations, May 29, 2010, Preamble, (3). 34 “Five Steps to Fast Track The Large Complex Construction Case”, Overcash and Gerdes, Dispute Resolution Journal, Vol 64, No. 2, May-July 2009, American Arbitration Association, NYC). 35 CCA Protocols for Expeditious, Cost-Effective Commercial Arbitration, March 2010 Key Action Items. 36 AAA Commercial Arbitration Rules and Mediation Procedures, June 1, 2009, Rule L-4 (b) and (c). 37 AAA Commercial Arbitration Rules and Mediation Procedures, June 1, 2009, Rule R-30 (b) 38 IBA Rules on the Taking of Evidence in International Arbitration, May 29, 2010, Art. 2 (1), 2(2). 39 JAMS STREAMLINED ARBITRATION RULES & PROCEDURES, RULE 13 (2009). 40 ICC Final Report, ¶52. 41 ICC Publication 843, ¶ 57. 42 Handbook on International Commercial Arbitration, Peter Ashford, JurisNet, LLC, New York, New York, 2009, p.94. 43 US Federal Rules of Civil Procedure, Rule 26 (b) (1) 44 Handbook on International Commercial Arbitration, Peter Ashford, JurisNet, LLC, New York, New York, 2009, p.88. 45 Chapter 10, “Discovery and Production of Evidence”, Richard M. Franklin, International Arbitration Checklists, Second Edition, Baker & McKenzie, JurisNet, LLC, Huntington, NY, 2009. 46 AAA Commercial Arbitration Rules and Mediation Procedures (2009), l-4(c). 47 JAMS COMPREHENSIVE ARBITRATION RULES & PROCEDURES R. 18 (2007) [hereinafter JAMS COMPREHENSIVE RULES], Rule 17(b). 48 See JAMS, Recommended Arbitration Discovery Protocols for Domestic, Commercial Cases (Jan.6 2010), available at http://www.jamsadr.com/files/Uploads/Documents/JAMS-Rules/JAMS_Arbitrartion_Discovery_Protcols.pdf.
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49 INT'L CENTER FOR DISPUTE RESOLUTION, ICDR GUIDELINES FOR ARBITRATORS CONCERNING
EXCHANGES OF INFORMATION (May 2008) [hereinafter ICDR GUIDELINES], available at http://www.adr.org/si.asp?id=5288, 1.a-b. 50 Chapter10, “Discovery and Production of Evidence”, Richard M. Franklin, International Arbitration Checklists, Second Edition, Baker & McKenzie, JurisNet, LLC, Huntington, NY, 2009. 51 Fed. R. Civ. P. Rule 26(a)(1)(B). 52 Fed. R. Civ. P. Rule 26(f)(3). See also Handbook on International Commercial Arbitration, Peter Ashford, JurisNet, LLC, New York, New York, 2009, p.128. 53 Handbook on International Commercial Arbitration, Peter Ashford, JurisNet, LLC, New York, New York, 2009, p.128. 54 Managing Discovery of Electronic Information: A Pocket Guide for Judges (2007), available at http://www.uscourts.gov/riles/eldscpkt.pdf. 55 ICDR Guidance to Arbitrators Concerning Exchanges of Information, effective May 31, 2008, Guideline 4 56 IBA Rules on the Taking of Evidence in International Arbitration, May 29, 2010, Art. 2 (12)(b). 57 Handbook on International Commercial Arbitration, Peter Ashford, JurisNet, LLC, New York, New York, 2009, p.134. 58 CCA Protocols for Expeditious, Cost-Effective Commercial Arbitration, August 2010, p. 75 59 International Construction Arbitration Handbook, John W. Hinchey and Troy L. Harris, Thompson West, 2008, p.294. 60 CCA Protocols for Expeditious, Cost-Effective Commercial Arbitration, March 2010 Key Action Items. 61 AAA Neutrals eCenter Web site (Http://www.adr.org). 62 ICC Final Report on Construction Industry Arbitrations, 2001, extract from Report of the ICC Commission on Arbitration. Full Report published in the ICC International Court of Arbitration Bulletin, Vol. 12, No. 2 (2001). 63 CCA Protocols for Expeditious, Cost-Effective Commercial Arbitration, August 2010, p.33. 64 Chapter 5, “Selection of the Tribunal”, J. Brian Casey, International Arbitration Checklists, Second Edition, Baker & McKenzie, JurisNet, LLC, Huntington, NY, 2009. 65Id. 66 International Construction Arbitration Handbook, John W. Hinchey and Troy L. Harris, Thompson West, 2008, p.107. 67 Chapter 5, “Selection of the Tribunal”, J. Brian Casey, International Arbitration Checklists, Second Edition, Baker & McKenzie, JurisNet, LLC, Huntington, NY, 2009.
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68 Handbook on International Commercial Arbitration, Peter Ashford, JurisNet, LLC, New York, New York, 2009, p. 86. 69 International Construction Arbitration Handbook, John W. Hinchey and Troy L. Harris, Thompson West, 2008, p.299. 70 Chapter 5, “Selection of the Tribunal”, J. Brian Casey, International Arbitration Checklists, Second Edition, Baker & McKenzie, JurisNet, LLC, Huntington, NY, 2009. 71Id. 72 International Construction Arbitration Handbook, John W. Hinchey and Troy L. Harris, Thompson West, 2008, p.313. 73 ICDR Rules, Art. 7. 74 Chapter 5, “Selection of the Tribunal”, J. Brian Casey, International Arbitration Checklists, Second Edition, Baker & McKenzie, JurisNet, LLC, Huntington, NY, 2009. 75Id, p. 49 76 International Construction Arbitration Handbook, John W. Hinchey and Troy L. Harris, Thompson West, 2008, p.315. 77Id, p.314. 78Id, p.314-315. 79 UNCITRAL Model Law, Art. 12 (1). 80 Chapter 5, “Selection of the Tribunal”, J. Brian Casey, International Arbitration Checklists, Second Edition, Baker & McKenzie, JurisNet, LLC, Huntington, NY, 2009. 81 Handbook on International Commercial Arbitration, Peter Ashford, JurisNet, LLC, New York, New York, 2009, p.42. 82 International Construction Arbitration Handbook, John W. Hinchey and Troy L. Harris, Thompson West, 2008, p.306. 83 UNCITRAL Rules, Art. 9. 84 ICC Web site, “The ICC Arbitral Process” (ttp://www.iccwbo.org) and ICC Rules, Art. 9(2), 11(1). 85 AAA Neutrals eCenter, “Disclosure and Challenge of an Arbitrator in International Cases (http://www.icdr.org). 86 LCIA Rule, Art. 5.3. 87 IBA, IBA Guidelines of Conflicts of Interest in International Arbitration, May 2004, Part II. 88 Chapter 5, “Selection of the Tribunal”, J. Brian Casey, International Arbitration Checklists, Second Edition, Baker & McKenzie, JurisNet, LLC, Huntington, NY, 2009. See also Handbook on International Commercial Arbitration, Peter Ashford, JurisNet, LLC, New York, New York, 2009, p.41.
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89 Chapter 5, “Selection of the Tribunal”, J. Brian Casey, International Arbitration Checklists, Second Edition, Baker & McKenzie, JurisNet, LLC, Huntington, NY, 2009. 90 Chicago Daily Law Bulletin, August 30, 2010, Volume: 156 Issue 169.
