Can RESPONDENT reserve its right to challenge Professor Presiding Arbitrator?

Relevant Facts

All facts relevant to this issue have been highlighted in the previous section discussing the relation between Dr Mercado and Professor Presiding Arbitrator. While there is rather little law on the issue of the removal of counsel there is both black letter and case law on the issue of removal of arbitrators.

Legal Analysis

It should be noted at the outset that the issue is not before the tribunal and the students should not engage in any discussion of it. Nevertheless, a short discussion here may be of interest to the arbitrators.

The main issue in this factual context is whether the various contacts between Dr Mercado and Professor Presiding Arbitrator may form the basis for a challenge of Professor Presiding Arbitrator for lack of independence and likely lack of impartiality. More pertinently we have in this Arbitration the question of the possibility to reserve the right to challenge an arbitrator, as RESPONDENT attempts to do in the Statement of Defence or make such a challenge conditional on the success (or lack of success) of the effort to have Dr Mercado removed from the case. The questions that could be asked are:

- Is it possible to reserve the right to challenge an arbitrator or is this right to be exercised promptly?

- Is it possible to have a conditional challenge, dependant on the success of the application to remove a counsel from the case?

- Do circumstances exist in this case that would justify a challenge of Professor Presiding Arbitrator?

- Has RESPONDENT waived its right to challenge Professor Presiding Arbitrator by its conduct despite the language used in the Statement of Defence?

Most certainly RESPONDENT did not challenge Professor Presiding Arbitrator within the strict time limit stipulated by the provisions of the applicable procedural rules and arbitration law. Article 30(3) of the CIETAC Rules provides that

“the party may challenge the arbitrator in writing within fifteen (15) days after such reason [for a challenge] has become known”.

The UNCITRAL Model law in Article 13(2) contains the same terms (fifteen days) regarding the time limit of a challenge of an arbitrator.

The RESPONDENT became aware of the reasons in question on the 30^th of August 2011. The Statement of Defence was submitted within 15 days after this but it is unclear as to whether it contains a conditional challenge to Professor Presiding Arbitrator or a mere threat of challenge. It does contain a challenge to Dr Mercado as a member of Elite legal team and it adds that in case the challenge of Dr Mercado is not accepted by the tribunal, the RESPONDENT would “reserve... [its] right to challenge Professor Presiding Arbitrator as arbitrator in this case”.

Arguments can be made either way as to whether a challenge has to be more specific or not. Such arguments may be policy or legal arguments. There is no doubt that the law sets very tight deadlines as it would be problematic to leave the possibility of a challenge open for a long period of time. It follows that speculative or even opportunistic challenge would not normally be upheld and there would be hesitation to accept a conditional challenge.

The stricter position would advocate that once the time limit stated by the CIETAC Rules and the UNCITRAL Model Law runs out, a party cannot challenge an arbitrator on the basis of reasons known by that party. A party that does not act within this time limit is deemed to have waived its right. Otherwise the time limit would not have any effect and a challenging party would be able to reserve the right to challenge the arbitrator even after the award is rendered or at least after the arbitrator’s conduct would evidence his opinion on the merits of the case. Article 4 of the UNCITRAL Model Law provides that a party shall be deemed to have waived its right to object, if it does not state an objection without “undue delay or, if a time-limit is provided therefore, within such period of time”, which is 15 days in the present case. The time limit should be applied strictly in order to prevent “tactical and dilatory” challenges.

In similar cases, arbitral tribunals and arbitration institutions decline challenges on the grounds that the challenge was untimely, even if the grounds for challenge were present. Such case law exists in the United States, England, Germany, Russia and also in investment Treaty context:

- US: Island Territory of Curaçao v Solitron Devices Inc

- England: ASM Shipping Ltd v TTMI Ltd

- Germany: Cologne, 9 SchH 30/00; Mealeys IAR 34

- Russia: International Commercial Court at the RF Chamber of Commerce N 22/2007

- Investment Arbitration: Suez and others v. Argentina, CEMEX v Venezuela.

The issue of reserving the right to challenge or making it conditional to the challenge of a counsel is quite intriguing too. Technically such right may not easily be reserved as the law requires parties to act swiftly. Timely challenge to an arbitrator allows completing this procedure as soon as possible, while the “challenge” which was made by the RESPONDENT simply postpones this procedure. Allowing such challenge to be made at a later stage when RESPONDENT deems it appropriate arguably distorts the equal and fair treatment of parties as it would give RESPONDENT more tactical leverage by this extended right to challenge. It is in the interest of fairness and procedural integrity to have such challenges exercised promptly and decided promptly.

A challenge of an arbitrator is a very serious matter as a lack of independence and impartiality goes to the heart of the legitimacy of the arbitration process and an argument can be made that a Tribunal tainted by some issue of lack independence or impartiality is not properly constituted and an award made by such a tribunal is susceptible to a challenge (France, Tecnimont v Avax). Therefore, this and every other challenge must be carefully examined.

As far as the substance of the challenge is concerned this challenge concerns academic relations between an arbitrator and a counsel; generally, such connections do not create a conflict of interest. Article 5 of the CIETAC Ethical Rules focuses on “debt, property and monetary relationships; business relationships and relationships in commercial co-operation”. It appears that the CIETAC Ethical Rules do not regard academic relationships as a potential source of conflict. Similarly, the IBA Guidelines focus on relationships an arbitrator has as a member of a law firm or his affiliation with a party who is a legal entity (IBA Guidelines, Part I, General Standard 6). The Red and Orange Lists under the IBA Guidelines do not consider an academic relationship between an arbitrator and a counsel as an actual or a potential source of conflict of interest. If one were pressed into classifying an academic relationship under any of the IBA Guidelines lists, one would have to find that this relationship is most akin to Art. 4.4.1 Green List which covers the situations where an arbitrator and a counsel are members in “the same professional association or social organization” (IBA Guidelines, Art. 4.4.1). .

One could compare the current case, the academic relationship between Dr Mercado and Professor Presiding Arbitrator, as one similar to a business relationship, or one similar to the situation where an arbitrator and a counsel sit in the same barrister chambers. Various arguments could be made in this context. There is case law on the issue of counsel and arbitration in the same chambers and such cases would have to be carefully considered.

We might finish this discussion by noting that Article 30(6) of the CIETAC Rules provides

“The Secretary-General of CIETAC shall make a final decision on the challenge, with or without stating the reasons.”

Consequently, under the CIETAC Rules the tribunal would not consider the challenge even if timely.

Date: 2015-12-11; view: 1026