Lisbon Court of Appeal | Impartiality and Independence of Arbitrators | IBA Guidelines | Challenge of Arbitrator | 13-09-2016 | Case #021

Lisbon Court of Appeal
Date: 13-09-2016
Case Nr. 581/16.7YRLSB.-1
LINK DGSI

Headline:

A challenge to an arbitrator’s independence and impartiality is to be determined through an objective criterion, and not through the eyes of either party.

A nomination for numerous arbitrations does not, by itself, constitute grounds for challenge of the arbitrator, especially in a specialised field.

Provisions under IBA Guidelines on the Conflict of Interest in International Arbitration 2014, Orange List (3.1.3, 3.1.4, and 3.1.5) were referred to. 

Summary:

1. The LAV guarantees the independence and impartiality of arbitral tribunals. It  imposes on arbitrators the obligation to disclose circumstances that may affect their independence and impartiality. It additionally provides the parties the right to challenge the arbitrator on the grounds of lack of those attributes and also ensures access to state courts to consider this issue.
2. The arbitrator has a primary obligation to carry out a diligent self-assessment in order to assess whether he is able to exercise his position independently, impartially and competently.
3. This evaluation must be carried out from a threefold perspective: from the personal point of view, from an objective point of view according to the criterion of ‘good father of family’ and from the point of view of the parties. The arbitrator must make disclose circumstances that may affect his independence and impartiality as per any of these three perspectives.
4. With respect to the parties’ point of view, it is not their arbitrary position that is relevant. Rather, it is the position that one party, acting according to patterns of behavioral normality and according to the common experience of life, using normal diligence, prudence and good faith, and with knowledge of the concrete circumstances of the case, would take.
5. Personal relations of the arbitrator with the parties and their representatives or agents, economic or financial interests of the arbitrator in the subject matter of the litigation or prior knowledge by the arbitrator of the arbitration are circumstances that may affect his independence and impartiality.
6. A disclosure does not in itself constitute any grounds for challenge, but rather enables the parties, if they so wish and by their own means, to carry out the inquiry.
7. However, such inquiry must not entail an extensive investigation of all the past activity of the arbitrator beyond what is reasonable and relevant, as that would become disrespectful to the arbitrator and the arbitral process.
8. The omission of the duty of disclosure generally does not in itself constitute grounds for challenge of his appointment, but in certain circumstances may constitute grounds for challenge.
9. Notwithstanding the grounds that warrant disclosure, only doubts of independence and impartiality based on the objective criterion of the ‘good father of the family’ may constitute grounds for challenge of the arbitrator.
10. The lack of insistence that a nominee arbitrator under challenge is independent and impartial amounts to an acceptance of the challenge to that nominee arbitrator. However, where the presiding arbitrator is challenged by one party, the lack of insistence that he is independent and impartial by the other party will not need to his dismissal.
11. A nomination for numerous arbitrations by itself does not constitute grounds for challenge of the arbitrator unless they imply other factors capable of impairing independence and impartiality. The multiplicity of nominations alone does not create economic dependence.
12. It is necessary to take into account realistic considerations such as the fact that the field in which the dispute arises is highly specific; in such a situation, it is only natural that the parties select arbitrators from a nucleus restricted to persons who are known as qualified in the subject matter. In such scenarios, multiplicity does not transform into exclusivity.

13. APPLICATION OF IBA GUIDELINES ON CONFLICTS OF INTEREST IN INTERNATIONAL ARBITRATIONS:
    This judgment also dealt in detail with the IBA Guidelines:

    1. However reputable or appealing these ‘quasi-laws’ may be, they are not binding instruments, and are merely ancillary to the interpretation and integration of legal concepts.Moreover, they are marked by circumstantial particularities, namely, geographical or cultural origin and the defence of corporate interests.
    2. The IBA Guidelines havebeen established for international arbitration and so they must be adapted when applied to national and domestic arbitrations. There is a need to question whether the rationale behind the guidelines is maintained in the case of and domestic arbitrations.
    3. International arbitration involves disputes between persons belonging to different sovereign spaces. The parties and arbitrators are given to themselves because there is no authority over parties, and the economic interests involved are of a very high amount. International arbitration presupposes, therefore, the highest degree of professionalism of the arbitrators involved, which leads to an increase in rigor with regard to the demands and guarantees of independence and impartiality. These considerations and requirements are not so accurate and relevant to domestic arbitrations.
    4. The ‘Orange List’ of the IBA Guidelines include the circumstance that arbitrator has been appointed as arbitrator on two or more occasions by one of its parties or its associate in the last three years (3.1.3), as well as the circumstance that he has been arbitrator in another arbitration on a similar matter (point 3.1.5). But the Guidelines make an exception for multiple nominations in cases where, in view of the specialty of matter, it is a current practice to extract arbitrators from a limited or specialized set of persons, in which the duty of revelation is dispensed with.

       This case summary was kindly prepared by Rishabh Raheja (rishabharaheja@gmail.com, NALSAR University of Law), Sameer Thakur (sameerthakur@live.in, NALSAR University of Law), and Abhishek Babbar (abhishekbabbar1996@gmail.com).