Choosing an Arbitrator
29 March 2021
This essay considers and gives further insight into the importance of the choice of arbitrators, what the parties should look for in an arbitrator, and where to find the relevant information.
Choosing an arbitrator is not an exact science. Those choosing arbitrators should be open to new ideas, which is what this essay aims to encourage. This essay considers and gives further insight into:
The importance of the choice of arbitrator;
What the parties should look for in an arbitrator; and
Where to find the relevant information.
I. Background and the role of arbitrators
In the 1980s it was believed that arbitration proceedings would be handled faster and more cheaply than court proceedings, by arbitrators who were specialised in the appropriate area and who would keep everything confidential. The situation has changed over the past 30 years. There are now many more specialised judges. For court proceedings concerning specific rights, for example, many countries have granted exclusive jurisdiction to specific courts. This specialisation can clearly be seen in their judgments and rulings. Further, the specific knowledge of individual judges is more publicly visible: judges are often members of editorial boards of specialised journals, publish their own works and speak at conferences, and take part in law firms' seminars and share their experience with young trainees. Also, arbitrators sometimes act more like managers than decision-making experts, hampered by a fear of making procedural mistakes that would lead to the annulment of their decision.
Arbitration still offers some substantial benefits over court proceedings, and it can fulfil a unique and distinctive role in today's globalised world. For example, a well-handled arbitration is an extremely efficient way in which to solve disputes with complex cross-border aspects within one set of proceedings.
For many years, court systems have not allowed parties and their counsel to become active players in proceedings and hearings. Counsel often must appear before judges that they do not know or for whom they are unprepared, and the practical running of the proceedings is impersonal and emphasises the inaccessibility and untouchable nature of the judiciary. In the past, judges and counsel generally knew one another. However, because of the explosive growth in the legal profession, this mutual acquaintance has become rarer, and the link between counsel and those passing judgment has been lost.
In arbitration, there is more freedom in the selection of arbitrators than there is in the choice of judges in court proceedings. The free market principle is probably the biggest reason for this difference. Selecting a court judge is not possible. Some predictability is provided in courts that have permanent judges. For example, the constitution of chambers is usually quite predictable. However, there are exceptions (the chambers of a court can be changed quarterly).
Arbitration centres display a different attitude to the service they provide. They consider the parties before them more as customers and they do everything they can to highlight their added value in this regard. They have lists of possible arbitrators, but these are not considered to be exclusive. In practice, it is sometimes considered that certain arbitrators are appointed too often. Depending on the arbitration agreement or the applicable arbitration rules, parties can object to the proposed arbitrators or even nominate arbitrators themselves. Without a doubt, unofficial black lists and preference lists exist. Sometimes the parties' choice of arbitrator can be surprising: in one international trade mark dispute, a centre made a short list of three experienced arbitrators but the parties selected the individual with no apparent knowledge of trade mark law. One wonders whether it was the hope of a minimum level of partiality or a maximum level of attention to procedure that drove the parties to this decision.
II. Starting point
Parties to a dispute (and their counsel) should be curious about the identity of those in charge of examining and resolving that dispute. To this end, lawyers spend years building up experience; they will not hesitate to ask their colleagues whether they have met a particular mediator, arbitrator or judge, and what impression she or he has made. A negative impression may be caused by a particular incident at a hearing, or simply (and perhaps more frequently) when a case is lost. A positive impression, on the other hand, will lead to the mediator, arbitrator or judge being praised and sought after when other disputes arise, with the hope (or perhaps, the illusion) that the same appointment will lead to another win.
The motive for parties to find out who will be part of their deciding bench is obvious: parties want to estimate their chances and predict whether, and to what extent, a dispute can be won. They also look for legal certainty. Clients have always raised these questions with their counsel, and their counsel is generally best placed to answer them (so far as is possible). The impression made by judges and arbitrators affects the reputation of the institutions they serve, and sometimes it calls for improvement. The individual arbitrator determines to a large extent the image of his or her dispute resolution provider, whether they were selected by the parties or not.
This interest in the identity of the decision maker is essentially no different whether a dispute is to be settled by arbitration or in a traditional court of law. Lawyers use their information to actively search for the system most suited to their client. They are "forum shopping" (either internationally, or even domestically in cases where there is more than one possible court to choose from). They are trying to find, either on their own, or with the help of the arbitration centre, the most appropriate arbitrator(s) for their case. In the case of court proceedings, the choice is quickly limited by the structure and functioning of the judicial system, over which the lawyer has no influence. However, even in arbitration proceedings, parties and their lawyers only have one chance to choose: when the arbitration tribunal is composed. Therefore, it is important to pay sufficient attention to the arbitration tribunal's configuration.
III. What the parties look for
1) Practical knowledge
First, the parties should check which person would be most suitable given the economic sector or industry setting in which the dispute takes place. It is also important to bear in mind the requested relief, that is, whether:
The party in question is in search of a finding of infringement, a determination of the degree of liability, an estimation of damages, or all of these things;
Only a part of the dispute will be handled in arbitration, and the parties are resorting to the courts for the rest of the proceedings.
It is not only vital to identify an arbitrator who is familiar with the relevant sector or industry, but it is also essential to understand the potential arbitrator's vision (for example, concerning the development of a particular sector or technology, a particular legal standard, or any number of other factors), to be able to evaluate the impact on any given dispute. Although relevant experience from other cases and thorough knowledge of the sector can be invaluable, ultimately a party's interests will not be served if the nominated arbitrator has a vision diametrically opposed to that party's point of view. Of course, persuasive argument may prompt an arbitrator to change his or her vision. This may be an appealing challenge to some, but the uncertainty of success would tend to make it an unwise course when choosing an arbitrator, especially if history has shown that the arbitrator in question is unlikely to change his or her position.
The main reasons why parties choose arbitration are related to the personalities involved in examining the case and passing judgment. Depending on the binding nature of the measures prescribed by the judgment, these reasons can become important or even critical. An arbitrator, especially if he or she is sitting as a one-member panel or is the panel's chair, must have the necessary social skills to conduct a constructive process, involving counsel, the parties concerned, experts and co-arbitrators, in such a way as to facilitate the intended objective. Experience suggests that a good arbitrator must strike an appropriate balance between observing and actively steering the proceedings. Just like judges, their ability to listen is even more important than their ability to lead the proceedings. To be able to show their empathy and demonstrate an ability to hear the parties is essential. An arbitrator must be able to reassure the parties that he or she is listening to the different points of view and that there is room for dialogue. The compromise is a well-known and successful model for dispute settlement. The arbitrator who can balance the parties' interests rather than becoming fixated on the legal arguments will be able to engender flexibility among co-arbitrators and will achieve useful solutions. However, this approach can lead to a decision in which the facts are perfectly reproduced but the analysis of the points of view and arguments of the parties is seriously flawed. A flexible approach must not jeopardize the legal foundation of a decision. Finally, a charismatic chair who can assure the steady course of the proceedings is to be preferred to heavy-handed leadership.
The parties desire pragmatism. An arbitrator is expected to translate a decision concerning claims into an outcome that is clearly understandable to the parties and does not require endless interpretations or requests for clarification. The formula of alternative dispute resolution (that is, arbitration, expedited arbitration, expert determination, and so on) seems to make this clear. Alongside a finding (for example, of a contractual non-performance or of liability and the causal relationship with damage) and an order (for example, the obligation to pay damages), an arbitrator is also expected to list the necessary practical consequences (for example, the calculation of the actual damages a party must pay to another party, and the details of all allocated costs). Much depends on the parties. Counsel are expected to provide all the necessary information to allow the arbitrator to make a decision quickly and efficiently. Except in cases where parties prefer "bifurcation" (that is, a breakdown between the treatment of the litigation on competence and the grounds of the case, or between the merits of the claim and the quantification of damages, or between the claim and counterclaim), counsel must appreciate that a satisfactory resolution for a dispute cannot be obtained purely through a decision of principle. Their clients require their specific problems to be addressed and resolved in a practical, pragmatic way that allows them to continue with the successful running of their business.
4) Procedural knowledge
An arbitrator must have full understanding of procedure. Only someone who is aware of the importance of the grounds for the arbitral decision, its validity and its enforceability, should be appointed as arbitrator. Anyone falling short in this respect can, at the most, act as an advising expert in a particular matter; they cannot be charged with the management of a procedure that is a matter of public order (arbitration decisions are subject to judicial control before being enforced and executed).
In a multi-member panel, in simple matters, it might be sufficient if the chair is more thoroughly familiar with the procedure than the co-arbitrators. However, in complex international disputes, it soon becomes impossible to run a proper arbitration unless all those involved have a good all-round knowledge and sufficient experience.
IV. Importance of the parties' perception of an arbitrator's qualification
Anyone with the ambition to act as an arbitrator or mediator is likely to demonstrate their own suitability for the role (whether consciously or unconsciously) in one or more of the four areas described above. However, the parties' perception of a potential arbitrator's ability will determine whether the parties are prepared to nominate and eventually appoint that candidate as a member of the arbitration panel. Party perception is particularly crucial where there is selection of one single arbitrator and during the selection of a chairman. The perception will undoubtedly be influenced by the public perception that the potential arbitrators have developed through publications, speaking opportunities and simply by doing an excellent job, showing their superior knowledge and experience.
Arbitrators appointed by arbitration centres benefit from favourable party perception. Centres build up a special knowledge of the four important areas for a continuously growing number of individuals. Centres tend to make repeat appointments of the same individuals, although it is our experience that new talent tends to be given a fair chance. Parties with experience in arbitration proceedings will expect the arbitration centre to make suggestions or choices that are not devoid of a certain amount of bias, and this should be borne in mind when appointing an arbitrator in consultation with an arbitration centre or when choosing an arbitration centre at the outset.
V. Where to find the necessary information?
A search for information on arbitrators can be difficult, due to the confidentiality of arbitration proceedings. Therefore, searches often begin with a consultation of publicly available and verifiable information on possible candidates.
1. Judgments and arbitral awards
Judgments on requests for annulment of arbitral awards used to be an interesting source of information on arbitrators. However, the amount of case law is limited, and in many jurisdictions the grounds for annulment have been reduced. Also, : requests are only handled in first and last instance by one single court and judgments are published anonymously. Therefore, in the absence of unofficial information, these judgments are not useful.
This also applies to arbitral awards. Only a limited number of arbitral awards are published, often also anonymously. Recently, there has been a move towards more transparency at arbitration centres regarding the appointment of arbitrators and the applied method for appointment (by parties or by the centre), without compromising the confidentiality of the arbitral procedure. Appointment lists contain useful information for parties about the experience and availability of arbitrators, and allow arbitration centres to demonstrate their desire to foster more diversity.
It is worth mentioning that the International Chamber of Commerce (ICC) introduced a new approach: publication of awards made from 1 Juanary 2019 is the default position. The new approach does provide parties with an opt-out mechanism. Where any party objects to publication, the award will simply not be published (or will be anonymised or pseudonymised if that is what a party requires).
2. Peer reviews
The list of organizations screening and cataloguing professionals constantly grows. However, one may question whethere these lists are reliable and whether they are based on any qualitative research. The fact that some people who are no longer active as arbitrators are listed calls the list into question. It is well-known that some individuals appear on a list despite never having received an invitation, sent a submission or been interviewed. A small number of organizations have built up a respectable and long-standing reputation, are internationally active and offer none or hardly paying products like advertisements. Clearly, it is important to handle these sources with care when searching for an arbitrator.
Dinners that accompany awards ceremonies recognising legal professionals are good occasions for networking. However, whether the award ceremonies should be taken seriously is questionable.
3. Personal descriptions
Anyone interested in acting as an arbitrator generally communicates this fact openly. The information made available by the candidate:
May include studies, publications and presentations;
Will usually clearly demonstrate the experience, specialisation, nationality, cultural background and language knowledge of the person in question; and
May show their focus on procedure or a specific legal practice, or both.
For example, some candidates are very interested in construction disputes, while others focus on the financial world, technology, intellectual property, international investment treaties, and so on. Candidates, or the centres where they are most known, will provide personal descriptions in the form of a curriculum vitae. Similar information can be found on websites, marketing materials or brochures. The individuals involved must respect their secrecy obligations and become adept at providing a personal description that offers useful information without revealing any tie to a case or a party. In today's competitive society, it is a difficult exercise for an arbitrator to find this balance between providing useful information and honoring secrecy obligations.
4. Interviews with candidates
A personal conversation with possible candidates can provide clarification. However, a conversation usually goes no further than providing reassurance as to the candidate's availability and knowledge. The chair of the International Bar Association (IBA) Arbitration Committee has recently stressed the need for arbitrators to be genuinely available, and an interview may reveal factors affecting a candidate's availability.
Declarations of independence
The importance attached to the declaration of acceptance and independence by an arbitrator cannot be emphasised enough. IBA Guidelines on conflict of interest and any stricter rules such as those of the ICC must remain the ultimate reference. Some over-enthusiastic arbitrators, wanting to get nominated at any cost, have not taken the necessary care (either through haste or negligence) and their final decisions have had to be annulled. By not taking the necessary care with respect to potential conflicts of interest, they not only risk personal liability (even if such liability is strictly limited), but they may also make life difficult not only for themselves but also for the parties involved, who may suffer serious damage. Fortunately, most candidates are diligent in this regard, and bad handling of possible conflicts is the exception (but it must, of course, be avoided at all costs).
VI. Appointing relevant individuals and escalation procedures
In practice, the role of well-judged choice and selection parameters for arbitrators in a detailed escalation procedure seems particularly important for large and complex, technical cases. Essentially, this is a way to ensure that problems are addressed according to their type. Only the relevant individuals need be approached to deal with a possible dispute (for example, accountants decide on financial discussions, engineers on technology, lawyers on contracts, and so on). It follows that the person chosen to resolve a dispute need not always be a lawyer or private practitioner. In selecting the appropriate players, it can also be agreed that the dispute will be taken to a higher level if a ‘first filter’ does not lead to a solution. The dispute can continue up the ladder until it eventually falls to those with ultimate responsibility, preferably a final commercial authority (such as a company's CEO). The higher the level, the bigger the involvement and authority of the players, and the more important sector- and practice knowledge, personality, pragmatism and procedure become.
This approach prevents small problems from getting out of proportion and unnecessarily complicating a relationship. Parties can either postpone the selection of the appropriate dispute resolvers or appoint every relevant individual at the outset of the procedure. Appointing at the outset can be effective in clearly defined projects for which the timescale is predictable, such as large construction projects. Parties know very well beforehand who should be available in the first or second dispute resolution phase, and until what stage of the project there is a real chance that these persons can be called upon. However, it is advisable not to contractually select arbitrators in advance of a dispute, if the timeframe and the individuals' availability are not yet clear.
Concept of a standing panel
It has been suggested that, in relation to certain types of dispute, arbitration centres should establish a standing panel. Such a panel would, before any dispute arose, assign a limited list of individuals who are informed in advance about the project and any foreseeable problems. They would agree with their nomination in advance, subject to there being no conflict of interest. The aim of such a panel is to obtain a back-up of expertise as well as a fixed direction in decisions (case law) (in other words, legal certainty for all those involved in a certain sector). This could be a practicable approach as long as the number of members of the standing panel is sufficient, there are strict rules on independence and conflicts of interest, and each party involved can determine who is qualified to be part of the standing panel and decide who is nominated.
The search for the right arbitrator in a dispute between parties is difficult and will never be a simple exercise. However, a good appointment can be achieved by minimising pre-determined risks, and will enhance the chances of success. It appears that the best way for experienced arbitrators to ensure they do not let the parties down, is for them to recall the reason for their appointment and use that skillset and experience to offer a reasonable approach and an outcome that is acceptable, effective, respectable, satisfactory, legally conclusive and, if possible, fair and just