Frederick Acomb and Nick Jones recently co-authored The Insider Adversary in International Arbitration, for publication by The American Review of International Arbitration (ARIA), at Volume 27, No. 1 (2016). ARIA is a quarterly academic journal that is run by faculty members at Columbia University Law School. The editors are Columbia professors George Bermann and Robert Smit. The publication is the most cited international arbitration law journal in the world. The authors wish to thank Chip Brower for his invaluable comments during the drafting process.
Imagine that you are defending the respondent in an international arbitration administered by an institution headquartered in a distant country. The arbitrator is a lawyer at a prominent law firm there. Midway through the proceedings, claimant gives notice that it has appointed a new lawyer to its counsel team. The new lawyer is from the same country as the arbitrator and the institution. You review her curriculum vitae and are surprised to discover that she is the Vice-Chairperson of the very institution where the case is pending. You turn to the institution’s rules and discover that under certain circumstances she has the power to unilaterally select arbitrators to serve in proceedings administered by the institution.
You know your client, and this is something that he will want to know about. Before you reach for the phone you imagine the range of possible reactions from him:
- The arbitration institution is acting against me? The institution is sitting at counsel table for my opponent? I didn’t agree to that. Who would ever agree to that?
- Your firm drafted the arbitration agreement. Why didn’t they warn me that the institution permitted this? Had I been warned, do you think I would have agreed to this institution?
- Claimant’s lawyer must have advised his client to retain the Vice- Chairperson. Why didn’t you give me the same advice? (Also, is it too late for me to retain the Chairperson?)
You scour the institution’s rules for anything that would have put you on notice that the Vice-Chairperson might be allowed to serve as counsel for claimant. Once you are satisfied that the rules contain no such suggestion, you pick up the phone and call your client.
The lack of notice provided by the rules offers little solace to your client, however. As expected he expresses his conviction that claimant’s appointment of the Vice-Chairperson means that the arbitration institution itself is sitting at counsel table as his adversary. Because it cannot be said that the Vice-Chairperson was the only lawyer qualified to represent the claimant, your client believes that the claimant must have retained her, at least in part, for the purpose of influencing the arbitrator. He believes that the arbitrator’s independence is undermined by the potential for the arbitrator or others at his firm to receive, or not receive, future appointments by the Vice-Chairperson. He believes that this presents a conflict of interest between the Vice-Chairperson and the arbitrator.
It is left to you to explain that challenging the appointment of the arbitrator would likely achieve nothing inasmuch as this is an institutional conflict in which any arbitrator appointed by the institution would have the same conflict. Your client is left with three options: (1) waive the conflict; (2) challenge the Vice-Chairperson’s ability to serve as claimant’s counsel; or (3) seek to even the playing field by retaining some other high-ranking institutional insider to serve as his counsel.
This fact pattern is not purely hypothetical. It is based on facts taken from an international arbitration recently defended by one of the authors. In that case the respondent challenged the propriety of the institutional insider serving as counsel for claimant. The insider declined to voluntarily withdraw and the arbitrator declined to direct him to do so. For the remainder of the arbitration as far as the respondent was concerned the arbitration institution was sitting at counsel table for his adversary. Although the respondent ultimately won the majority of the case on a summary basis, he continues to believe that the entire process was tainted.
This article begins with the unremarkable assertion that ethical lapses undermine the perceived legitimacy of the arbitral process. It then asserts that institutional double-hatting of the sort described in the above fact pattern opens the door to judicial scrutiny in annulment and enforcement proceedings. Finally, the article concludes by asserting that institutions must either regulate double- hatting by preventing officials with significant appointment power from serving as party counsel, or they must structure their appointment mechanisms in a way that diffuses the power of appointment such that no single official possesses unilateral or even substantial influence over appointments.
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See The Insider Adversary in International Arbitration, The American Review of International Arbitration (ARIA), Volume 27, No. 1 (2016).
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