The Challenge of Practicing Lawyers as Arbitrators in International Commercial Arbitration
(Dr. Ulrich Lohmann, LL.M. Berkeley, and Katharina Hilbig)
Selecting an arbitrator in international commercial arbitration is no easy task, particularly if a professional relationship exists between counsel to one of the parties in arbitration and an arbitrator. The existence of such a relationship may lead to a challenge to the selection of such arbitrator. If the facts become known after the award has been made, the other party may attempt to have the award set aside.
The task of selecting an arbitrator becomes more difficult if counsel to one or more parties in arbitration or the potential arbitrators are partners in a law firm. Does a conflict of interest arise if one of the partners decides to leave the law firm representing the claimant and to move to the law firm where the arbitrator selected by the respondent is a partner? Does it make a difference if the moving partner has no knowledge regarding the subject matter of the arbitration? What if the law firms enter into a cooperation agreement?
This article discusses how professional relationships of practicing lawyers in law firms affect their availability as arbitrators in commercial arbitration proceedings. Arbitration law, i.e. the body of law relating specifically to arbitration proceedings, suggests that (even slight) financial interests and access to confidential information, both integral elements of a professional relationship, affect the independence and impartiality of an arbitrator. This is true even for informal cooperation arrangements between lawyers, because any such arrangement may be the basis for a financial interest and significantly increases the risk that confidential information is shared. Any such relationship should be disclosed.
The ethical rules governing the legal profession suggest that if both parties consent, based on full and frank disclosure, the arbitration should, as a rule, be allowed to go forward.
However, no party should be forced to accept an arbitrator, even if the professional rules permit the arbitrator to prove the absence of impropriety, i.e. that there is neither a financial interest nor a relationship conducive to the sharing of confidential information. In particular, an arbitrator should not have the right to force a screen (or Chinese Wall) upon a party, assuming the relevant professional rules permit screening.
Failure to disclose a potential conflict of interest should always lead to removal of the arbitrator or, if the award has been made, to the award being set aside. This should be so even where the failure to disclose was an error. Justice would not "manifestly and undoubtedly be seen to be done" if the parties feel that the arbitrators have business behind the their backs. Arbitration as such would suffer if this were permitted.
Dr. Ulrich Lohmann, LL.M. (Berkeley)