The LCIA’s publication of its arbitrator challenge decisions
Sana Mahmud, Associate, Fenwick Elliott
On 12 February 2018, in line with its stated commitment to increased transparency, the LCIA published on its website1, 32 anonymised excerpts of decisions made following challenges to the proposed appointment of arbitrators. The release of the decisions follows the LCIA’s earlier publication in 2011 of 28 challenge decision summaries from between 1996 and 2010. The 32 recent excerpts range from 28 October 2010 to July 2017. The LCIA’s intention is to update its online database periodically when new decisions are issued.
According to LCIA figures, during the period covered by the decisions, 1,600 cases were registered and challenges were heard in under 2% of those cases. Of the 32 challenges listed on the LCIA’s website, six were upheld and a further one was partially upheld. The success rate is low – about 22%, or one in four or five.
Following a challenge to the appointment of an arbitrator by a party, the other parties and the arbitrator concerned are given an opportunity to respond by way of submissions. The LCIA then appoints one or three members of the Court, depending on the complexity of the challenge, to provide a “robust and closely-reasoned decision”.
Under Article 10 of the LCIA Arbitration Rules (2014), a party may challenge the appointment of an arbitrator on the following grounds:
- The arbitrator becomes unfit to act because he or she (i) acts in deliberate violation of the Arbitration Agreement; (ii) does not act fairly or impartially as between the parties; or (iii) does not conduct or participate in the arbitration with reasonable efficiency, diligence and industry; or
- Circumstances exist that give rise to justifiable doubts as to that arbitrator’s impartiality or independence.
Most of the 32 challenges on the database are concerned with the second ground where one party claimed that circumstances exist giving rise to justifiable doubts as to an arbitrator’s impartiality or independence, either because of a perception of bias or a perceived conflict of interest. It is evident from the published excerpts that the test applied by the LCIA Court is an objective one and dependent on the particular facts and circumstances specific to each case. In many cases, the challenging party, who was more often a respondent in the proceedings, presented a procedural decision contrary to its interests as evidence of bias. The subject of the challenge was often a sole arbitrator.
Challenges based on deliberate violations of the arbitration agreement or allegations that the arbitrator or tribunal failed to conduct the proceedings fairly or with reasonable efficiency, diligence and industry were much less common.
The fact that challenges to arbitrators under the LCIA are rarely brought, and rarely successful is perhaps unsurprising. Raising a challenge to the appointment of an arbitrator is an inherently risky course of action for any party, particularly in circumstances where the allegation relates to the arbitrator’s independence or impartiality. If a party does choose to raise a challenge it needs to ensure that its allegations are well founded to avoid any suggestion that it is using the process to gain tactical advantage. Opportunistic or ill-founded challenges are therefore not recommended and it is clear from the excerpts of the LCIA’s decisions that they are unlikely to be successful. A careful and measured approach should also be adopted by any party raising a challenge because in the event that it is dismissed – and at least statistically, that is a real possibility – the arbitrator concerned will remain in place. In those circumstances there is a real risk of lasting damage to a party’s credibility in the eyes of the tribunal that could affect other aspects of a party’s case.
Recent years have seen the rise of large law firms with global reach, making it more difficult for lawyers associated with those firms to sit as arbitrators. The current IBA Guidelines on Conflicts of Interest in International Arbitration prohibit the appointment of an arbitrator in circumstances where his or her firm regularly advises a party to the proceedings and derives significant financial income as a result. A more recent report by the IBA Arbitration Guidelines and Rules Subcommittee2 noted that further guidance on the meaning and scope of the term “law firm” may be of assistance to arbitration practitioners, for example, in relation to potential conflicts arising out of relationships between members of the same barristers’ chambers in England and Wales. In this wider context, the publication of the LCIA’s challenge decisions provides valuable insight into how the rules surrounding alleged bias and conflict are applied.
The LCIA’s publication of its challenge decisions is a welcome step towards increased transparency in international arbitration and is a useful resource for clients and arbitration practitioners who may be considering the merits of a potential challenge to an arbitrator. The decisions provide useful guidance as to how institutions like the LCIA apply their rules without affecting the fundamental privacy and confidentiality of international arbitration proceedings. The initial decision of the LCIA some years ago to make excerpts of its challenge decisions public prompted the ICC to issue reasons for it decisions to parties where it previously had not done so. It will be interesting to watch whether other arbitral institutions such as the ICC now follow suit.
- 1. http://www.lcia.org/challenge-decision-database.aspx
- 2. Report on the reception of the IBA arbitration soft law products by the IBA Arbitration Guidelines and Rules Subcommittee, September 2016