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Arbitrator Duties on Equality, Independence and Impartiality

Arbitrator Duties on Equality, Independence and Impartiality

Arbitrator Duties on Equality, Independence and Impartiality

Monday, 06 July 2015 14:33

By Richard Healy & Anson Douglas

 

In an arbitration, it is arguable that the most important actor is the arbitrator, for it is he who handles the dispute through the dispute resolution process till a final settlement or the dispensing of an award. With such a central role, the parties to the dispute have a legitimate expectation that their arbitrator will be independent from any party with an interested outcome in the dispute, and be impartial in determining the issues of the case, without which, there can be no fair trial. As the English court in ASM Shipping Ltd of India v TTMI Ltd of England put it, “[t]here can be no more serious or substantial injustice than having a tribunal which was not, ex hypothesis, impartial, determine parties’ rights.” 

Duty to treat the parties equally, and be independent and impartial

It is because the arbitrator plays such a crucial role in ensuring the proceedings and its outcome are fair, they are, by law, duty bound to be fair, independent and impartial.

Section 46 of the Arbitration Ordinance (Cap. 609) and Article 18 of the UNCITRAL Model Law provides inter alia that (1) the parties must be treated with equality, and (2) the arbitral tribunal is required (a) to be independent, and (b) to act fairly and impartially as between the parties. 

Equality

The duty to treat the parties with equality is usually connected with the arbitrator’s discretion in controlling the opportunities and manner in which the parties may present their case. Arbitrators are not bound to give the parties strictly equal opportunities to present their cases, for example in Brunswick Bowling & Billiards Corp v Shanghai Zhonglu Industrial Co Ltd, the parties had agreed to a chess-clock method of allocating hearing time, but the tribunal granted extra time to the claimant. In a challenge against tribunal for treating the respondent unequally, the court found no inequity, holding that “where arbitrators discern a potential problem with the opportunity to a party presenting his case fairly arising from a procedure agreed by the parties, they are obliged to raise it with the parties instead of following blindly what has been agreed… they should take steps to conduct the arbitration in such a manner that could redress the problem instead of being constrained by an unworkable agreement of the parties.”

However, albeit strict equality in governing the arbitration is not mandated, the parties must be given reasonable opportunity to present their case and to deal with the case of their opponents. In Pacific China Holdings Ltd v Grand Pacific Holdings Ltd, it was held that “the denial of an opportunity to make a submission in reply on a matter of law will invariably constitute a serious violation. It is a matter of basic fairness.”

Independence and Impartiality

Independence

The duty of arbitrator independence has been defined in AT & T Corp v Saudi Cable Co as “connot[ing] an absence of connection with either of the parties in the sense of an absence of any interest in, or of any present or prospective business or other connection with, one of the parties, which might lead the arbitrator to favour the party concerned.” This definition, is however rather too narrow, as aside from commercial and business interests, professional and social links can also affect the independence of an arbitrator. For example, in Chan Man Yiu v Kiu Nam Investment Corp Ltd, an arbitrator was removed because he had been a close friend of the authorized representative and expert witness for the respondents for 25 years.

Impartiality

In Hebei Import & Export Corp v Polytek Engineering Co Ltd, Bokhary J saw the impartiality required of arbitrators and judges to be the lack of bias. Lord Woolf MR of the English Court of Appeal in AT&T Corp v Saudi Cable stated that if there is any justification for different standards to apply between judges and arbitrators, the court would expect a higher threshold to apply to judges, as arbitrators are selected by the parties.

In the Hebei case, a distinction was made between actual bias and apparent bias. It was found that two standards arose in dealing with domestic and international arbitration, where in the domestic context, public policy would dictate that the apparent bias of the arbitrator cannot be accepted, but in international arbitration, under the principle of comity and pro-enforcement policy, it would take something more which will violate the most basic notions of morality and justice, for the Hong Kong courts to refuse to recognize an award; the court also pointed out that if the apparent bias was strong enough, usually actual bias could be inferred, or other bases of challenge could be relied upon.

The Bias Threshold: Real Possibility or Real Danger

The test of whether bias exists has traditionally been the “real danger of bias test”, which is passed when there is a real danger that the arbitrator might unfairly regard of have unfairly regarded with favour, or disfavor the case of a party or the issue under consideration by him.

However, the House of Lords in Porter v Magill modified the real danger test to adhere more closely with the “reasonable suspicion or possibility test” which has been adopted in other common law jurisdictions such as Australia and South Africa. In the case of Deacons v White & Case LLP, the Court of Final Appeal seems to have found the new modified approach in Porter v Magill as authoritative. 

Challenge procedure

If at any time after the arbitral tribunal has been constituted, the parties doubt the impartiality or independence of an arbitrator, a challenge may be commenced under section 26 of the Arbitration Ordinance, unless arbitration rules which contain arbitrator challenge provisions have been adopted for the arbitration, in which case the arbitration rule’s procedures should be followed instead.

Any challenge under s.26 of the Arbitration Ordinance must be instituted within 15 days of the latter of either (1) the constitution of the tribunal, or (2) the discovery of relevant circumstances leading to the doubt of the arbitrator’s impartiality or independence.

The challenge must first be made to the tribunal itself. If the challenge is rejected by the tribunal, the challenging party may then opt to institute a further challenge at the Court of First Instance within 30 days of the rejection by the tribunal.

Disclosure

Due to the time limits of making challenges, parties must pay attention to any information they receive about their arbitrators, especially disclosure documentation, so that they will not be time barred from raising a challenge.

On the other side of the coin, arbitrators will want to make all relevant disclosures to the parties which could lead to a challenge of apparent bias, even if he is subjectively confident in his own independence or impartiality. A good standard of disclosure to adhere to is the Guidelines on Conflicts of Interest in International Arbitration published by the International Bar Association.

Arbitration Institutions

When appointing arbitrators, parties may feel more assured by having an arbitration institution such as the Hong Kong International Arbitration Centre (“HKIAC”) appoint an arbitrator from their panel of professional arbitrators. 

But while it is true that there is some extra degree of comfort in relying on a competent arbitration institution to appoint an independent and impartial arbitrator, it is no substitution for the party’s own judgment. 

This is because according to Section 105 of the Arbitration Ordinance, any person, who appoints an arbitral tribunal or performs any administrative function in connection to the arbitral proceedings, are liable in law, only if it is proved that his act or omission is dishonest. In the recent case of Gong Benhai v Hong Kong International Arbitration Centre, a challenge against the HKIAC in the High Court for allegedly appointing an impartial arbitrator was struck out partly due to such lack of legal liability by the HKIAC, since in the challenge, no dishonesty was pleaded.

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