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Has this Arbitral Tribunal the Power to Remove Dr Mercado from the Arbitral Process?

 

Relevant Facts

Professor Presiding Arbitrator is the Schlechtriem Professor of International Trade Law (ITL) at Danubia National University. At Danubia National University, the ITL faculty covers Sales Law, CISG and International Commercial Arbitration. Professor Presiding Arbitrator is a world-renowned specialist in trade law but arbitration as such is not his main focus. He sits on the Management Committee of the ITL Faculty and thereby is responsible with the other members of the Committee for all ITL activities, including arbitration. He sits as arbitrator in investor-state arbitrations including ICSID as well as in WTO arbitrations and occasionally in commercial disputes. It is because of this broad experience that he was designated as the presiding arbitrator in this arbitration by the joint agreement of the two parties.

 

Dr Mercado is a Visiting Lecturer at Danubia National University, teaching the International Commercial Arbitration courses. She secured her Visiting Lectureship following a public application process of which she had been unaware until she received a telephone call from someone who introduced herself as the Professor Presiding Arbitrator’s assistant and said she was calling on his behalf. Dr Mercado was shortlisted along with one other and was selected after interview by a panel of three, chaired by Professor Presiding Arbitrator.

 

She delivers approximately 50% of the arbitration lectures and is paid per lecture; she is not salaried but is treated as a third party service supplier for payment and tax purposes. The Tax Authorities have accepted this and no issue arises as to her employment status.

 

In the past, Dr Mercado had been General Counsel of a large international trading company. As a consequence, in addition to her arbitration lectures she delivers lectures to the ITL Faculty as part of Professor Presiding Arbitrator’s course on international trade, focusing on the “real world“of international commerce as opposed to the black-letter law. As a consequence, Dr Mercado has occasional contact with Professor Presiding Arbitrator, but the majority of her contact is with the ITL Faculty’s full-time staff, particularly the several Course Directors. Face- to-face, she calls him “Peter” but in company normally adopts the more formal “Professor”.

 

Dr Mercado is very good with children and is on first name terms with the Professor’s four, aged between 10 and 20. She is godmother to the youngest of the Professor's children. She is also on first name terms with his wife. The two women occasionally meet in the city for lunch or a coffee.

 

Dr Mercado has appeared as Counsel before Professor Presiding Arbitrator in three previous arbitrations. In the first two, Dr. Mercado’s client was successful with a unanimous tribunal. In the third case, Dr Mercado’s client was unsuccessful on a majority decision with Professor Presiding Arbitrator issuing a Dissenting Opinion in her client's favor. In none of the three cases were Dr Mercado’s client's opponents aware of the connections between Dr Mercado and Professor Presiding Arbitrator. Therefore, no question of a challenge ever arose.



 

Legal Analysis

The issue of concern is the relation of Dr Mercado to the Presiding Arbitrator. RESPONDENT wishes to have Dr Mercado removed from the legal team of the CLAIMANT arguing that the integrity of the Tribunal may be compromised; it is worth noting that the Presiding Arbitrator did not consider appropriate to make any disclosure of a relation to Dr Mercado.

 

In this issue we have a rather novel and intriguing question or rather a tension: the challenge is between the right of a party to freely choose its own counsel and the right of the tribunal to take action in order to ensure the integrity of the arbitration process. There is no black-letter answer to this question so any good advocate would have a field day arguing the question either way. A number of smaller legal questions/arguments are to be explored here:

 

- Has the Arbitral Tribunal the power to deal with this question? The answer must be in the affirmative as Tribunals have a residual jurisdiction to deal with any procedural matter. However, it should also be noted that neither the arbitration agreement, nor the CIETAC Rules, nor the Model Law provides the Tribunal with the express power to remove Dr Mercado. It follows that Tribunal’s power would be derived from its general residual procedural powers.

- Would allowing CLAIMANT to retain Dr Mercado compromise the integrity of the arbitral proceeding? There is nothing at law that compels the Tribunal to remove Dr Mercado. Conversely, the Tribunal would risk jeopardising the integrity of the proceedings if it removes Dr Mercado. The circumstances of the relation of Presiding Arbitrator may provide a basis to remove Presiding Arbitrator.

- The right for a party to freely choose its own counsel is a fundamental one; limiting this right in the proceedings could risk the safety of the arbitral award pursuant to Arts. 34(2)(a)(iv) and 36(1)(a)(iv) Model Law and Art. V(1)(d) and V(2) of the New York Convention.

 

An argument can be made to the effect that Dr Mercado’s participation is not, strictly speaking, a procedural aspect directly concerning the integrity of the proceedings, as it does not objectively demonstrate “extraordinary circumstances” a tribunal must find to warrant the exercise of its discretion. As the circumstances of Dr. Mercado’s participation have been known to RESPONDENT well before the hearing, there is no “real possibility that the Tribunal” would be biased. Moreover the dismissal of Dr. Mercado based on the procedural discretion of the tribunal would deprive the CLAIMANT from freely choosing their counsel and damage the interest of such counsel although the latter is not bound by the arbitration agreement.

 

It might be noted that Respondent learned of Dr. Mercado’s addition to the CLAIMANT’s legal team on 30 August 2011 (Clarification 29), three days before the submission of the statement of defence on 2 September 2011, though the date she joined the team is not given.

 

Most related case law comes from international investment treaty arbitration rather than international commercial arbitration and as such it is to be considered with certain caution: the argument can easily be made that investment arbitration and commercial arbitration have significant differences so that arguments from one “system” cannot readily be “transposed” to the other one. In any event key investment cases to be considered in this context are:

- HEP v Slovenia (Hrvatska Elektroprivreda v. The Republic of Slovenia): this is the most relevant case; a rather bold decision by the Tribunal in order to ensure that the Presiding arbitrator stays on board and distinguishing between good and bad faith occurences.

- Rompetrol v Romania

- Fraport v Philippines

- Pope & Talbot v Canada

- There is also a small number of arbitral awards in commercial cases, none of which is particularly conclusive.

 

Given that there is no direct applicable authority most arguments could or should be made along the lines of the reasoning of the Tribunal in HEP v Slovenia. In particular, policy and procedural integrity arguments should be particularly welcome. Is this application tactical, a mere dilatory tactic or a genuine concern of the RESPONDENT. A reasoned and balanced assessment of such criteria would distinguish a good team. In such a discussion, teams should be using facts, law, soft law, arbitral case law as well as judicial practice and related commentaries to present and support their arguments.

 

 


Date: 2015-12-11; view: 922


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