08 Dec 2016

International arbitration and independence – off the beaten track

By Frank Bannon and Jason Corbett

Counsel, experts and arbitral institutions should all owe a duty of independence, but enforcing that duty could be challenging.

The duty of independence owed by arbitrators in international arbitration has been extensively explored over the years. It is surprising, therefore, that there has been little discussion of the existence and scope of such a duty owed by other significant participants in the arbitration process, namely counsel, experts and arbitral institutions. Elliot Geisinger, Head Arbitration Partner of leading Swiss law firm Schellenberg Wittmer Ltd, International Arbitrator, and President of the Swiss Arbitration Association, brought this question to the fore at the 15th Annual Clayton Utz/University of Sydney International Arbitration Lecture in 2016.

Mr Geisinger opened with a strong personal conviction that independence is indispensable to all participants involved in an arbitration, declaring that in the context of "unprecedented challenges" to arbitration, independence "is one of the most potent tools that we have to overcome those challenges". Central to his thesis, the distinguished speaker explored the similarities between concepts of independence among jurisdictions, although precise expressions of the concepts varied.

Mr Geisinger then turned to consider the duty of independence from several perspectives.

Beginning with counsel, Mr Geisinger assessed that counsel's duties of independence in domestic settings are generally classified in two categories ‒ independence vis-à-vis the client, and independence vis-à-vis the courts and authorities. The question of whether these duties carried over to international arbitration, however, is met with an absence of explicit confirmation in international and statutory rules. Mr Geisinger contended that the question to ask should not be limited to the legal positivist approach of "what is the legal basis of these duties of independence in international arbitration?". Rather, the question should be whether "there is any reason why the rules that apply nationally should not apply also in international arbitration?", to which he answered emphatically in the negative.

According to Mr Geisinger, a functional approach should apply; "if international arbitration is to remain a preferred method of international dispute resolution, then it must also be a way of upholding the rule of law". The duties of independence are, in his view, indispensable to achieve that goal, and any departure from these principles on the part of counsel would present a convenient argument to critics who already accuse international arbitration as being "the justice of kangaroo courts".

Thus, when breaches of independence occur, sanctions should apply, but who should impose them?

The arbitral tribunal may be seen as the obvious disciplinary forum. Mr Geisinger, however, argued the contrary: judges have statutory authority to assess misconduct, whereas the arbitrator's authority stems only from the parties' contractual agreement and the lex arbitri (with notable exceptions where parties agree to institutional rules which give arbitrators disciplinary powers). Furthermore, arbitrators are tasked with resolving the dispute between the parties, and the decision of whether parties have misconducted themselves does not naturally fit within this role.

Mr Geisinger also identified a supranational body as the Global Arbitration Ethics Council proposed by the Swiss Arbitration Association in 2014 as another possible forum for discipline. However, the working group that examined this project recent decided that it is an idea whose time has not yet come.

Thus, with no clear sanctioning authority, Mr Geisinger admitted that his conclusion of this section of his lecture was "somewhat anti-climactic". He reiterated, however, his position that the rules which govern a lawyer's duties of independence in their home jurisdiction should extend to apply in international arbitration. In his view, those national bodies who were already tasked with enforcing those rules domestically would also be the most appropriate disciplinary forum for sanctioning breaches of independence in international arbitration.

On experts, Mr Geisinger noted some differences arising out of civil law and common law jurisdictions. In civil law litigation, the court typically appoints an expert who carries out the role as "a direct auxiliary of the court" and thereby has "the same duties of independence and impartiality as any other member of the court". Parties remain free to appoint their own experts, though the weight of their evidence will be treated the same as any ordinary submission of the party. The same applies in international arbitration, being authorised under multiple institutional rules.

However, even in civil law countries, the usual arbitration practice is to employ party-appointed experts ‒a somewhat ironic reality given that the civil law does not recognise the concept of expert witnesses in law and thus does not properly regulate their behaviour. By contrast, there is a myriad of rules, procedures, and professional codes under the common law which suggest that expert witnesses have a "fundamental and overriding duty of independence from instructing counsel and the client, and owe an overarching duty of independence, and… assistance to the court". In the international arbitration context, however, there is again a concerning lack of statutory, treaty and institutional rules on the matter, with few exceptions.

Mr Geisinger, however, submitted that "The grounds are the same as for the duties of independence that are incumbent upon counsel: we cannot afford to have a system of dispute resolution in which there is not – at the very least – a minimum duty of independence, and thereby of objectivity, for party-retained expert witnesses". Thus a number of sanctions are argued to be applicable, for example, the removal of weight given to the evidence by the Tribunal, costs sanctions against the party who retained the expert, the disqualification of the expert, reporting the expert to their professional trade board for professional misconduct, and of course, professional reputational harm for the expert.

In considering the independence of arbitral institutions, Mr Geisinger illustrated institutions' duties of neutrality and impartiality towards parties with a hypothetical scenario of a would-be claimant contacting the arbitral institution to ask for advice on whether their claim may be time-barred. With the likely response from the institution in the hypothetical being obvious, the speaker posited that this clearly implied a duty of independence for arbitral institutions similar to the duty of independence of arbitral tribunals. Unsurprisingly, however, there is again an absence of explicit duties of independence for institutions set out in rules, statutes, and treaties.

Mr Geisinger then followed with the point that any consequences flowing from a breach of independence by an institution are remote but possible. Case law from French and Swiss courts suggest that although the independence of arbitral institutions is rarely a standalone, it may have the capacity to compromise the integrity of an arbitral award. Similarly, several authors write that a lack of independence on the part of an institution would "suffice to vitiate the entire arbitral process and thus render moot an examination of the independence and impartiality of the tribunal". Such a theory finds support in obiter dicta in the decisions of the Swiss Supreme Court and Supreme Commercial Court of Russia. Mr Geisinger also shares this view, citing the increasing powers of tribunals to shape proceedings and increasing emphasis on transparency and accountability of tribunals as indicative of the duty of independence held by institutions.

Sanctions against arbitral institutions, as one might expect, are a challenge in themselves and most commonly examined in proceedings relating to a final award rendered in one case by an allegedly partial tribunal. Mr Geisinger explained that the reason for this is relatively simple: "there is generally no way to challenge directly the decisions of arbitral institutions in the courts". One very "unfortunate" method of sanctioning institutions may be in an action against the institution for damages, however, whether one is able to overcome the hurdles of statutory immunities and liability exclusion clauses in institutional rules is another story.

As a final and practical takeaway from his lecture, Mr Geisinger implored the audience to introspectively consider "independence from one's self" throughout proceedings. Two questions need to be asked, no matter who the participant: "why am I doing, or not doing, this?" and "should I be doing this differently?". At the crux of these questions is a keen self-awareness engaged with the purpose of assessing the motivation behind each action taken ‒ "does the situation necessitate my actions, or does this only benefit myself?"

To conclude, Mr Geisinger engaged in a light-hearted exercise of "critical self-honesty" as he professed his guilt of slight self-promotion and vainglory in presenting. "Is there anything fundamentally wrong with that?" he asked an amused audience. He answered that it would depend on whether he had succeeded in piquing our interest and in presenting provocative ideas worthy of ongoing debate. Naturally, Mr Geisinger disqualified himself from that judgment, leaving us with the spirit of his lecture in a most useful metaphor: "These duties [of independence] are indispensable for the wheels of arbitral justice, which would no longer turn – or more likely would continue to turn, but would squeak very loudly – without them."


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