The impartiality and independence of arbitrators is a prevailing principle of arbitration; however it has proven to be equally complex as it is fundamental. (See, for example: paragraphs 2–4 of the introductory text to the IBA Guidelines on Conflicts of Interest (IBA Guidelines) (section 33(1)(a) of the English Arbitration Act 1996, which states that the tribunal shall "act fairly and impartially as between the parties," this mirrors the provisions of article 18 of the Model Law. Further, Gary Born calls impartiality a "defining characteristic" of arbitration (paragraph 8 of chapter 1 of his 2015 book International Arbitration: Law and Practice 2nd Ed.), and the enforcement of impartiality and independence of arbitrators "vital" (chapter 7, Ibid); and Mustill and Boyd's seminal text refers to the requirement of the impartiality of the tribunal as being "so obvious as to require no elaboration" (page 44, sub-paragraph (v), Commercial Arbitration, 2nd Ed., 1989).) In submitting to arbitration, parties defer to the judgement of select individuals with the qualities, skills, and experience that the parties themselves have determined to be valuable in the tribunal hearing their dispute. In doing so, arbitrators are conferred with the dual quality of party creation and final adjudicator—a far departure from the conventional court process with its select judiciary and clearly defined appeals processes. Such unconformity serves to highlight the trust that is placed in each arbitrator and underpins the need for independence and impartiality. Indeed, it could be said that the success of arbitration as a mechanism for effective dispute resolution depends on this lynchpin. Without confidence in the integrity of the institution, there will be no buy-in from its users.
It is an unfortunate but not uncommon situation where, unbeknownst to one party an arbitrator (or several) has displayed (whether consciously or otherwise) some pre-disposition toward one party or their arguments, which is not based on the underlying facts of the dispute but instead prior relationships or knowledge. Given the serious nature of an allegation of actual bias and the potentially damaging repercussions it may have for the arbitrator(s) in question, the threshold to demonstrate actual bias is very high. The test for apparent bias is assessed objectively having regard to all the circumstances and therefore is not grounded in the opinion of the party advancing the challenge.
Disclosure is paramount: we must avoid the unknown unknowns. That is the focus of the IBA Guidelines and that was the focus of the recent UK Supreme Court decision in Halliburton Company v Chubb Bermuda Insurance Ltd  UKSC 48. Lord Hodge and Lady Arden acknowledged the public interest in upholding the integrity of arbitration as a dispute resolution mechanism by ensuring proper disclosure. Ibid, paras. 63, 80, 81, 103. (See also Lady Arden at para. 160 on interrelationship between the duty of impartiality and the duty of disclosure.)
This article stands a practical guide for parties who wish to challenge one or more members of an arbitral tribunal (or defend a challenge). It considers three sets of arbitral bodies: the London Court of International Arbitration (LCIA), the International Chamber of Commerce (ICC), and the International Centre for Settlement of Investment Disputes (ICSID). Although different in nature and scope, these have been chosen due to their popularity, the availability of data around challenges and because, together, they cover a wide range of disputes and both international commercial and investment arbitration.
The process for bringing a challenge before arbitral bodies is fairly straightforward and, now, relatively standardised. (See, for example, paragraph 50 of chapter 7 of Born's 2015 book International Arbitration: Law and Practice (Op Cit), where he confirms, after discussing the United Nations Commission on International Trade Law procedure, that the same basic structure of a challenge is followed by other institutional rules.) In international commercial arbitration, the applicable law is likely to be the lex arbitri as supplemented, to the extent permitted, by the parties' chosen arbitration rules and often the IBA Guidelines. In an ICSID arbitration, the applicable standard is set out in the ICSID convention. The table below sets out the key rules for the ICC, LCIA, and ICSID (prior to ICC and LCIA recent revisions). The IBA Guidelines are addressed separately below.
Table 1: The rules governing challenges to arbitrator(s) under the ICC Rules, the LCIA Rules and ICSID as at the date of writing.
Each of the three arbitral bodies allows for a challenge where there is doubt over an arbitrator's impartiality or independence. Each seeks to achieve confidence in the arbitration process. Each institution also requires specific reasons to be articulated, which often emerge from the background of the appointment of the arbitrator, or the arbitrators' conduct during proceedings. These are frequently based on the IBA Guidelines discussed below.
Table 2: Comparative table between the grounds for challenge under the ICC Rules, the LCIA Rules and ICSID as at the date of writing.
Importance of Disclosure
The IBA Guidelines do not form part of the lex arbitri and are seldom expressly chosen by the parties in their arbitration agreement. And yet, they are often (if not always) cited and relied on when a challenge is brought.
Table 3: Summary of the current IBA Guidelines.
The premise of the Red Non-Waivable category illustrates a weakness of the IBA Guidelines. The list purports to remove control from the parties, by seeking to mandate that any scenario falling within the Red Non-Waivable list cannot be approved of by the parties such that the arbitrator remains on the tribunal. The recent English case of W Limited v M SDN BHD  EWHC 422 (Comm) illustrates the inherent problem with this approach. Whilst the conflict situation fell squarely within the Red Non-Waivable list, the English court concluded that there was no apparent bias due to the particular facts of the case. The arbitrator had been unaware of the affiliate company being linked to his firm after it was purchased, and his firm's conflict checker did not pick up the relationship either. Some degree of flexibility may be needed, and on a straight reading of the IBA Guidelines this is not provided for.
The Halliburton Case
The IBA Guidelines have recently come under strict scrutiny. Halliburton v Chubb centres on disclosure and apparent bias. Arbitrators have a duty of disclosure, and the UK Supreme Court confirmed that this is a legal duty arising out of the statutory duties of impartiality under section 33 of the Arbitration Act 1996. In cases where disclosure is called for, a failure to disclose may give rise to the appearance of bias—but it is only a factor to take into account, it is not, in and of itself, determinative. Further, the relevant time to ask the question of whether the fair-minded and informed observer would conclude there is a real possibility of bias is at the time of the hearing to remove the arbitrator. The court held that in the circumstances of this case, Mr. Rokison's failure to disclose was a breach of his legal duty, but by the time of the removal hearing, circumstances meant that the objective observer would not infer a real possibility of unconscious bias. Mr. Rokison had provided an explanation of his failure to disclose, English case law had been unclear as to whether disclosure was a legal duty and Mr. Rokison's conduct provided no basis for interring subconscious ill-will in respect of the ferocity of the challenge made against him.
In the context of the case load statistics we have reviewed, formal challenges against arbitrators are limited and only succeed in rare cases.
In the years 2014–2019, ICC and LCIA caseloads have increased steadily and the proportion of cases where a challenge against one or more arbitrators was made has remained consistently low. Far fewer challenges are brought under the LCIA rules, with an average 1.81 percent of cases, compared to the ICC rules’ average of 5.72 percent—more than triple. A possible reason for this is the short period in which the challenge must be brought under the LCIA Rules (14 days). In spite of this, the success rate of these challenges are not drastically different: challenges under the LCIA Rules have an average success rate of 8.57 percent and challenges under the ICC Rules have an average success rate of 11.31 percent.
With a predictably lower caseload, the data is very different for challenges brought under ICSID. Parties are more comfortable bringing challenges in ICSID proceedings, but these hardly ever succeed. However, this greater number of challenges could be indicative of a greater level of tactical challenges for the purpose of delay. (See, for example, an article by Y. Kryvoi of BIICL ICSID Arbitration Reform: Mapping Concerns of Users and How to Address Them.) On average, for the period of 2014 to 2019, 14.28 percent of ICSID cases involved a challenge to one or more arbitrators. Of these, an average of only 5.13 percent were successful (three in the six years under consideration). There are also likely to be overlapping cases and one or two particularly discontent parties (involving Venezuela—Fábrica de Vidrios Los Andes v Venezuela and ConocoPhillips v Venezuela) having brought at least 8 of the total 39 challenges.
Table 4: A comparative table detailing the number and proportion of challenges in comparison to the total caseload for arbitrations administered under the ICC Rules, the LCIA Rules and ICSID for the period from 2014 to 2019.
Table 5: Total number of challenges.
Table 6: Total number of successful challenges.
A Case for Change
The integrity of the arbitral process is of fundamental importance to its continued success and to the trust placed in it by parties who choose to resolve their dispute by way of arbitration. This was squarely recognised and confirmed by the UK Supreme Court in its Halliburton decision, and their confirmation of an express legal duty of disclosure under English law can be seen as a pro-arbitration stance, favouring the promotion of transparency, within the confines of the varying bounds of privacy and confidentiality that apply to different arbitrations.
The recognition by the UK Supreme Court of the differing customs and practice of divergent fields of arbitration, in particular where the pool of experienced arbitrators is much narrower than in general commercial arbitration, is—in our view—both pragmatic and helpful. This is an area where one size does not fit all. The data described above demonstrates that challenges are fairly rare, and even fewer are successful. The IBA Guidelines are at pains to emphasise that disclosure does not go hand in hand with apparent bias, and this has been reaffirmed by the UK Supreme Court's decision. It does not follow that because a disclosure is made, an arbitrator cannot or should not act.
If greater disclosure does emerge following the confirmation of an express legal duty, it will be interesting to see if an increase in challenges results. That is not the expectation of the court, and certainly its decision does not pave the way for borderline challenges to be pursued.
The authors would like to thank Bradley Mycock for his invaluable assistance in reviewing and analysing the cases, compiling the key statistics, and more generally for his help in writing this article during his time in the Dispute Resolution Department at Baker McKenzie in London.
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