31 May 2007 

Interview with an umpire - Chartered Institute of Arbitrators issues guidelines on interviewing prospective arbitrators

One of the principal advantages of arbitration over litigation is the ability of the parties to agree the identity of the arbitrator and, where there is to be a panel of three arbitrators, the opportunity for each party to appoint an arbitrator of its own choosing.      

A party will typically be making a substantial investment in the proceedings, in terms of the legal fees of its own lawyers and experts, the fees and expenses of the arbitrators and the management time and resources which will be devoted to the proceedings.   It is therefore unsurprising that parties are concerned to ensure that the arbitrators appointed have the experience and expertise required to deal with the relevant issues and sufficient time availability to manage the proceedings expeditiously.   Expertise may be particularly important where, for example, the dispute concerns a relatively obscure area of law or complex industrial processes which require some previous industry experience.     

A party may also be concerned, however, to nominate an arbitrator who is likely to regard their legal position in a favourable light.   For example, a party which considers that it has a weak case on a technical 'black letter law' analysis, but a strong case on the merits, may wish to nominate an arbitrator from a civil law jurisdiction which affords greater importance to concepts such as the duty of good faith.   

The different motivations a party may have when selecting an arbitrator give rise to differing views about the desirability of the increasingly common practice of parties interviewing prospective arbitrators prior to their appointment.   The practice is often justified on the basis that there are some characteristics and skills it is not possible to assess on paper, such as language skills, personality and presence.   The inherent danger of the practice, however, is that it may render the subsequent appointment of the arbitrator, and even any award made the arbitrator, subject to challenge on the basis that the interview compromised or prejudiced the impartiality and independence of the arbitrator.       

The Chartered Institute of Arbitrators in the UK has recently issued a practice direction containing guidelines as to what sort of conduct should and should not be considered good practice in the context of such interviews (CIArb Practice Direction 16: The Interviewing of Prospective Arbitrators).

The guidelines are designed to address the concerns which naturally arise from this practice.   These include the risk that a party may prejudice the actual or perceived independence of the prospective arbitrator by making oral statements about the strengths of its case.   This would subvert the rule (strictly adhered to in arbitrations) that all communications and submissions by a party to the arbitrators should be simultaneously copied to the other parties.   

The guidelines include the following recommendations:

·          a time limit should be agreed for the interview, which should be conducted in a professional manner in a business location and not over drinks or a meal.

·          either a tape recording or detailed arbitrator's file note should be made of the interview and provided to the other parties and the appointing authority at the earliest opportunity.

·          where a sole arbitrator is to be appointed, the arbitrator should be interviewed jointly by the parties (and, if one of the parties does not wish to conduct an interview, it should nevertheless send a representative to the interview to act as an observer).

·          the specific circumstances or facts giving rise to the dispute, the positions or arguments of the parties and the merits of the case should not be discussed (either directly or indirectly).

·          in order to assess the interviewee's suitability in terms of expertise, experience, language proficiency and conflict status, the following topics may legitimately be discussed:

o         the names of the parties in dispute and any third parties likely to be involved.

o         the general nature of the dispute.

o         details of the project, but only insofar as this is necessary to assess the suitability of the interviewee for the project.

o         the expected timetable of the proceedings.

o         the interviewee's experience, expertise and availability.

o         the language, governing law, seat of and rules applicable to the proceedings if agreed, or the fact that some or all of these are not agreed.

·          The interviewee should not be reimbursed for his/her time, save in exceptional circumstances.

The guidelines are to be welcomed as providing sensible terms of reference which can be followed by parties and prospective arbitrators.   By providing a degree of clarity as to what sort of conduct is and is not considered legitimate, more parties may be encouraged to interview prospective arbitrators to try and maximise the benefits of being able to choose their own arbitrator.   It is suggested that strict compliance with the guidelines should provide strong evidence to resist any attempt to challenge the appointment of an arbitrator or any award based on the conduct of a pre-appointment interview.

Exercise of inherent jurisdiction to stay proceedings inherently unlikely - Nigel Peter Albon (t/a NA Carriage Co) v (1) Naza Motor Trading SDN BHD (2) Tamsridato Nasinubbin Amim [2007] EWHC 665 (Ch)

If there is an arbitration agreement a party may apply to the court to stay any court proceedings in favour of a reference to arbitration under section 9(1) of the Arbitration Act 1996 and the court will grant a stay "unless satisfied that the arbitration agreement is null and void, inoperative, or incapable of being performed " (section 9(4)).   But the court also retains a separate inherent jurisdiction to stay proceedings before it wherever it is satisfied the interests of justice so require.

In this case an application was made to stay court proceedings under section 9(1) in a context in which it was alleged that the arbitration agreement was a forgery.   It was contended by the applicant:

·          that the court should stay the court proceedings so that an arbitral tribunal which had already been constituted could decide the issue of whether the arbitration argeement was a forgery.   It was contended that wherever it is at least arguable that there is an arbitration agreement the arbitral tribunal should determine such issues in recognition of the widely accepted principle that a tribunal has jurisdiction to determine its own jurisdiction (the Kompetenz-Kompetenz principle).  

·          that if the court did not have the power to grant such a preliminary stay under section 9(1), it should exercise its inherent jurisdiction to do so.  

Mr Justice Lightman held that where, as in the present case, the court had been asked to grant a stay under section 9(1), the court could and should itself determine the issue of whether an arbitration agreement had been concluded.   Whilst an arbitral tribunal had jurisdiction to determine this issue, the court was not precluded from doing so.   Indeed, the court would only exercise its inherent jurisdiction to stay the proceedings before it so that this issue could be determined by a tribunal in exceptional circumstances.  

Mr Justice Lightman indicated that such exceptional circumstances might exist where there was insufficient evidence before the court to enable it to determine the issue.   Mr Justice Lightman also indicated that in deciding whether or not to exercise its inherent jurisdiction the court might take into account whether the commencement of the court proceedings had preceded the arbitration proceedings and whether the decision of the arbitral tribunal on the jurisdiction issue would be subject to review by a court.   In the present case court proceedings had been commenced first and it was doubtful whether the decision of the arbitral tribunal (seated in Malaysia) was subject to review by the Malaysian courts.   Accordingly, no exceptional circumstances were made out and the English court would determine the issue of whether an arbitration agreement had been concluded.

This case is an important sister case to the recent Court of Appeal decision in the Fiona Trust case, the appeal of which is due to be heard in the House of Lords shortly (see the discussion in the April 2007 edition of the Dynamic Solutions Arbitration Update).   A distinction must be drawn between cases such as the Fiona Trust case where the dispute concerned the validity or discharge of a contract containing an arbitration agreement which had been concluded (where, the Court of Appeal held, such issues should ordinarily be determined by the arbitral tribunal, unless the arbitration agreement itself is directly impeached) and situations such as that in Albon where the issue is whether an arbitration agreement was ever concluded at all.