One of the main advantages of commercial arbitration is the ability to choose an arbitrator. In this short post, I would like to tell you how this happens in practice, and how to use this opportunity in the best way for yourself.
This is not an idle question. In-house lawyers whose tasks include managing the legal department often asks me about this.
Let's imagine that we have already gone through the difficult path of negotiating an arbitration clause with a counterparty, and now there are disagreements that require proceeding in accordance with the agreed clause. Are we ready enough for this process?
The composition of the arbitral tribunal determines how effectively, quickly and deeply our dispute will be analyzed. Before a dispute is referred to an arbitration tribunal, lawyers, as a rule, negotiate among themselves and discuss the grounds and prospects of their position. If there is no consensus between the team of specialists, then the dispute is referred to the arbitration tribunal and a budget is allocated for this proceeding. We would really like the arbitrators not to be random people.
But how are we coming to this choice?
The choice is often made as follows:
The party to the dispute requests the institution administering the arbitration to make a recommendation or to appoint an arbitrator among those recommended by that institution. In this case, the party to the dispute trusts the arbitral institution and its ability to select a specialist with relevant experience and skills in conducting arbitration proceedings. In this case, the appointment of an arbitrator will be made without our direct participation, taking into account not only specialization and certain skills, but also taking into account the collegial relations of this institution.
In Russia, traditionally, lists of recommended arbitrators are available at institutions administering arbitration proceedings, such as the ICAC at the RF CCI, the MAC at the RF CCI or at the Russian Arbitration Center, and are published on their websites. A party to a dispute is not obliged to choose an arbitrator from the recommended list. The stay of a candidate for arbitration on the recommended list cannot be the only criterion for his appointment if we would like to conduct a quality trial.
The tradition of publishing lists is not supported by all institutions administering arbitration. Some deliberately refuse to publish the recommended lists of arbitrators for a number of reasons. These include, for example, the Northern Maritime Arbitrators Association (NOMA), the Japan Commercial Arbitration Association (JCAA), although such lists may be held by the institution in case a party requests assistance in appointing an arbitrator.
The party studies the recommended lists of arbitrators, meets well-known names, and on the basis of these resumes, statuses, ratings, a certain image in the media, scientific and teaching activities, publications, makes a decision on the election of this arbitrator. Is this information about the candidate enough for us? The image that is formed about the specialist is of great importance. This image must be carefully studied and strictly judged.
From the publications and the popularity of individual lawyers, it is not always possible to understand how this specialist will conduct the arbitration proceedings, whether he/she has time to independently conduct the arbitration proceedings without entrusting it to assistants, study the case materials in detail, respond to the parties' requests within a reasonable time, how often he/she responds to inquiries, whether he/she will be attentive to the parties and their difficulties, whether he/she is honest about the case, whether his/her opinion will be independent and thoughtful. In addition, each case is individual in nature, and there is hardly a publication that will fully reflect the opinion of the arbitrator on the issues in our case.
If the professional is actively involved in teaching, public or government activities, is this compatible with the conduct of arbitration proceedings? Does this specialist treat arbitration as his/her main occupation, does this area fascinate him/her, and is he/she constantly developing and researching it?
To summarize, the recommendations of the institutions and the credibility in the media or among the professional public are not enough to make the choice of an arbitrator. You can be an authority in teaching, in the management of companies, understand the devices of sea vessels and other areas, but at the same time not be able to resolve a dispute between specific two parties or in a hurry, due to the overload at the main place of work, miss some statements or petitions, and etc.
Arbitration is a special area of practice, and in order to develop in it, you need to do it a lot and with passion. This activity is difficult to combine with any other work, therefore it is necessary to choose arbitrators from those specialists who devote at least 40% of their time to this.
How else is the choice of an arbitrator carried out?
It is necessary to define the criteria and qualities of the chosen arbitrator, such as:
- the dispute shall be resolved lawfully and fairly, therefore, the arbitrator shall know the law relevant to our dispute and be neutral in relation to everything except the law and the evidence presented,
- the arbitrator should have experience and education related to the subject of the dispute,
- the arbitrator shall have an interest in the effective conduct of the arbitration proceedings so that he/she is professionally interested in completing the arbitration efficiently and quickly,
- at the same time, the arbitrator shall be independent from everything that may affect the dispute, from the other party and other third parties who may have influence on this dispute,
- and most importantly, we would like to trust the arbitrator, that is, this person must be known, and his/her psychology, reactions to certain events are understandable, and moral qualities correspond to expectations.
How can we define these qualities?
Exclusively through personal communication. Unfortunately, more often than not, such an impression about a person can only develop over the years of communication. At the same time, we cannot appoint our colleague as an arbitrator, with whom we have a long-standing trusting relationship, without disclosing these circumstances to the other side of the arbitration. Most likely, such a colleague will not be able to be independent in relation to us, and, therefore, will not be able to be an arbitrator. The circumstances about the existence of any social connection between the party and the arbitrator must be disclosed, and if these circumstances may affect the bias of the arbitrator, then the other party may object to his/her appointment.
So, what may we do?
The choice of an arbitrator is of great importance for the fate of the dispute, but this choice itself cannot be absolutely accurate and in line with our expectations, since there is always a set of unknown data: we are dealing with remotely familiar people, especially if the dispute is of a cross-border nature and their professional behavior not predictable for us. In commercial arbitration, you can face a lack of flexibility, with a tough attitude towards unintentional mistakes of the parties, with a reluctance to waste time on the proceedings or with indecision of the arbitrator, leniency and dependence on the opinion of colleagues or some third-party factors that are not related to the case.
There is no single right answer to the question of what to do. But there are a number of steps you can take to prepare yourself for a dialogue called arbitration.
First of all, arbitration is a process of communication, negotiations - and their result will depend on the behavior of all participants, on their mentality, age, psychology. To keep the communication smooth, what can we do in advance? Of course, it is good to get acquainted, and not only to study publications, recommendations of other colleagues specifically in relation to the arbitration experience, social pages, but also to hold a preliminary meeting with the arbitrator.
Such a meeting (interview) should preferably be open to the other party and be conducted with its consent; at this meeting, one should not discuss the arbitrator's attitude to a particular dispute or consult with the arbitrator. It is advisable to make a record, minutes of this meeting in order to show, if necessary, to the other party that the rules of arbitration were not violated during the interview. Other tactics may lead to the challenge of the arbitral award in the future.
However, some questions can be safely asked. So, you can ask the candidate for arbitrator to tell:
- about his or her biography, how this candidate came to be involved in arbitration proceedings, and why he or she is interested in it,
- about disputes from a specific field of activity, where experience and special knowledge are important to us,
- on education and knowledge of a foreign language necessary for the free conduct of arbitration in this language,
- whether the arbitrator is familiar with other arbitrators from the arbitral tribunal, and what kind of relationship has developed between them, assess the likelihood of whether they will be able to agree on disputable issues, and what influence they can have on each other,
- a possible conflict of interest with the parties, their shareholders, their representatives and other arbitrators,
- what is the applicant's business in addition to arbitration, and whether he or she has enough time to deal effectively and efficiently with the case.
Detailed information on how to interview candidate arbitrators can be found in various sources, such as the Chartered Institute of Arbitrators (CIArb) Practice Guideline 16: The Interviewing of Prospective Arbitrators (https://www.ciarb.org/media/4185/guideline-1-interviews-for-prospective-arbitrators-2015.pdf).
For the interview, you can invite a lawyer who has experience working with arbitrators and experience in conducting interviews.
In the course of personal communication with a candidate for arbitrator, we can glean much more information we need than will be communicated in an interview. This information is received and processed irrationally in the first minutes of communication, but it is no less valuable, and sometimes even more valuable, than the information provided by the candidate. What can be valuable in such communication? Look, manner of speaking, timbre of voice, emotional and physical state, as well as straightforwardness in answering questions, flexibility in judgment, ability to empathize, humility, etc., and the mass of non-verbal signs that we use in everyday life to build relationships with people and find those we trust.
Thus, in order to take advantage of the choice of arbitrator, a lot of work should be done to study candidates and communicate with potential arbitrators. If the company's contracts already contain arbitration clauses, then it is important to maintain communication with those people who could be arbitrators or could recommend them, attend events and seminars where such communication can be found and information about potential candidates can be obtained. Otherwise, this advantage is lost and does not bring any noticeable benefit.
This article is the result of an analysis of practical experience over the past three years in the field of commercial arbitration and a desire to share its results. I was also helped by materials kindly provided by my colleague at Redstone Chambers, Norair Babadjanian, to whom I am very grateful.