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    Ethical Rules F Arbitrators R Mullerat Balmana 2005

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    Tan Chi Sian
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    Justicia CU Ete Pyar hy LEAR Nite 1) wi ol Foal ETHICAL RULES FORARBITRATORS RaMon MULLERAr BACMARA Abogado «No fomentes ef ltigio. Convence a tus vecinas para que pacten siempre que ello sea posible. Hazles notar en que forma el ganador nominal es a me- mudo un verdadero perdedor: en konorarios, gastos y pérdida de tiempov (Abraham Lincoln) Con esta frase inicial, y sin mAs comentario, el autor nos sitia en el cornzin y espiritu de su trabajo y nos obliga a rflexionar, desde la primera linea, sobre ia importancia del papel que juegen en el arbitrae las normas de condueta que eben regir la actuacisn arbitral «Se dice que con razin que un buen arbitraje depend de tn buen drbitr Et éxito del procedimiento arbitral descansa en gran medida en las cualidades morales y profesionales del drbitro, Por esta razén, los drbitros se hallansuje tsa estrctas normas legales y étcas, La dignidad y la reputaciin del proce 0 arbitral iambién requiere que estas normas se impogan estrictamente.» Sobre la base de la normativa que regula ta actividad arbitral y del cddigo ético que deben cumplir tos arbitros, el autor aborda ef estudio de cuestiones tan importantes en arbitraje como la independencia, fa imparcislidad, la con dencialidad, la dedicacién, a diligencia, fa integridad y el deber de actuar pro fesionalments, Finalmente, el autor entra a considerar la diferencia que existe entre el pa pel del abouado-drbitro y del abogado-representante de parte. n ETHICAL RULES FOR ARBITRATORS RAMON MULLERAT BALMARA Abogado Suazo: .Intmoduetion. — 11, Legal and regulatory obligations. |. Obligations a der Iam. 2. Obligations under the regulations, — Il. Ethical obligations of arbitrator, [Specific ethics. 2. Ethical standards for all moutrals.3. Independence and impartiality. 4.1. Independence, 12. Impartiality 3.3, Appearance of partiality or bias. 34 Relation ship between independence and impartiality. 3.5, Incompatibility 3.6, ndeperdence atl impartiality inthe laws, regulations and codes. A) The [aws, B) The institution reguls- tions. C)The codes of ethics. 3.7. Independence and imparility ofthe party-appointed arbitrator. 3.8. The disclosure. A) Duty of disclosure. B) Nature of disclosure. C) Con- tent of disclosure. D) Control of disclosure. E) Obligation to disclosure contained in lws and ethical rules, ) Laws, b) Arbitration rules e) The ethical rules, 3.9. Reinforing ar bitrators’ disclosure standards. 3.10. Developing international standards. 4. Obligation to settle the dispute. 5. Competence and qualification. 6. Confidentiality. 6.1. Impor- lance of confidentiality: 6.2. Matters covered. 63. Persons obliged by confidentiality. 6.4. Exceptions to confidentiality. 6.5. Rules. 6.6. Canfidentialevidenes 7. Dedication. 8. Diligenca. 9. Duty to act professionally: integrity and fairness of the proceedings 10, Communications. 11. Advertising ad solicitation by arbitrators, 12. Involvement i settlement. 13. Fees. — IN. The lawyer as arbitrator and representing partis in erbita- tion, |. In general. 2. Independence and impertality. 3. Lawyers cepresenting partes in arbitration, 4. Confidentiality. 5, Lawyers obligation to advise partic. 6, Libilty, though che history of arbitration as a dispute resolution mechanism can be traced back for thousands of years, its use in new commercial and institutional settings is expanding geometrically" “Report o ABA House of Delegates onthe 2004 Revision of he Code of Ethie for Arbina ‘ion in Comercial Disputes, introduction. ” RAMON MULLERST BALMANA 1. INTRODUCTION Discourage litigation. Persuade your neighbours to compromise whenever they can Point out to them how the nominal winner ts often a in foes, expenses and It bas been rightly said that a good arbitration depends on a good arbitrator The success of arbitration proceedings greatly rests on the moral and proves: sional qualities of the arbitrator. For this reason, arbitrators are subject to strict legal and ethical rules. The dignity and reputation of the arbitral process also requires that these rules be strictly enforced, The function of an arbitrator is even more sensitive than that of a judgr given that the latter's decision is always subject co appeal, whereas appeals cannot be made agains? arbitration awards except in limited jurisdictions cases, Tl, LEGAL AND REGULATORY OBLIGATIONS 1, Obligations under law Arbitrators have a duty to fulfil the obligations provi tration laws applicable to the arbitrational procedures in which they partici pate, Although in some jurisdictions (Argentina, France, Germany, Mexico, Switzerlanc, ete.) arbitration is regulated by general civil or commercial pro- cedural codes, in most jurisdictions® arbitrations are regulated by special by national arbi provisions. 7 Abratam Lincoln, Notes 5 Juan Eeurd Figuero, “Arbitjey ea” a temana Juri “The numberof ethical regulations fr abivatorsis proliferating Ce atest res that | now fare the Ethical Stndarés for Arbfrators adopted by the Judicial Council of Califor 19 ‘Apel 2005. Auicial Council News, 34, 16 Api 2003 andthe Revision o7the ABA/AAA Cove of Ethics for Arbitrators on Commercial Disputes, February 2004 * ternational Bar Associaton’ Rules of Ethics fr Intemational Arbiators, aed Cvs lines of Good Practice for Arbitrator ofthe Chartred Institute wf Axbitators. Marc lem, | esoir d'ndépendance de "arbre, Librate Général de Droit de Jurisprudence, Pris. 2 eg. Australia» International Arbitators Act 1974; Canada - Commercial Arbitration Act 1985, England -Arbtzation Aet 1996; Finland - Arbitration Aet 1992; Japan - Abia tion Law 2003; Malaysia - Arbitraion Act 1952; The Netherlands = Arbitration Law 19K ‘Spain -Atbitration Law 2003; Sweden - Arbitration Act 1993; USA. Federal Arbitration Act 1925; et, 80 itrator. syofes- ostrict 9 also judge ppeals cases aL arbi- dartici= lexien, al pro- eno sea, 18 Coe | Gui Ashi 1986 ETHICAL RULES FOR AREFZRATURS: The fundamental legal obligations of an arbitrator generally imply adhering to the following principles: the right ofthe parties tobe heard during the pro- ceedings; the adversarial system ane equality amongst the partes; and the in- surance of afar award within the appropriate period ‘An arbitrator is generally liable in cases of bad faith’, serious negligence or corruption Ifthe arbitrator breaches the legal obligations, he commits. breach of contractor tort and is Hable tothe partes to the damages caused, Generally arbitrators are not liable for negligence but dhey are Liable for fraud in respect of anything they have done ot omitted in their capacity as arbitrators (art, 29 English Arbitration Act, Section 28 Australian International Act 1974). It is true that some legislations grant immunity to an arbitrator but this is never an absolute immunity, In arbitration proceedings administered by an institution- al body, some legislations additionally grant tothe parties prejudiced by an ar- bitrator, direct fegal action against the arbitration instinaton in order to bring a claim for damages’, Generally arbitrators are free to negotiate with the parties in advance to re- dtuce their liability (German BGB 276.2 allows exclusion for negligent conduct). 2. Obligations under the regulations In arbitration proceedings administered by an institutional body (ie. LCIA, ICC, AAA, ete), arbitrators also have a duty to comply with the regulations of art 29 English Arbiation Act " Boe cxample art. 19 LCIA Rules ar. 36 American Arbitration Assocation Rules at, 34 alin Actizarion Association: at 77 Rules of te Werld Trteaional Property, et. Im the US some arbitration cules ofthe federal stato and eve fw since 1884 rulo aut ary fra of cv i bility fr arbirtors and arbitration insttatens for acts carried out in thee pesto. This ir ity aime at protesing the furction ofthe arbitrator and not the perzon In Elan his i munity has also been recognised (House of Lords Sucife w Tackab, 1974 and Asenson -Asenson, 1977). Geran, Austrian and Norwegian legislations also recognise ths, The Spcih Arbitmtion Act 2003 at. 21 establishes the ibility of arbitrators for damages caused by Fad fd art. $88.2 ofthe Civil Proedure Act oF Austria establishes ability in oases of unjustifinle ‘delays tothe arbitration, Limits on he iablity of arbitrators, excep the caves of deliberate and itentiona Favd ate als povided for in arirton regulations a a. 34 CC, a. 35 AAA, art 9 (CPR. Foachard Gailad et Golan Tal del'ar bie commercial iterations, 1996, * wr 21.1 Spanish Adbitation Act. °" The immuity provide fo ihe cules o laws i nt unlimited. An arbtatr will bebe for damages resulting fom aud, intentional misconduct or bad fit (Lew; Comparative Inet rational Commercil Arication, Law and Ethic, Khswer Law lnoratinal, 2003. "WA clause excluding lability of the arbitrators i only vali if ism avordance with ne- tional law. Under German lw (BGB, 309) the complete exclusion o Hiab is null and vod ‘Uner Spanish lay, the waiving of labile arising trom mens reais ull and void (uc. 1102 civil Code), 31 RAMON MULLERAT RALMARA, the institution which has appointed them and under which the arbitration pro- ceedings are conducted. ‘The breach of these regulations also gives rise to an arbitrator’ lisbility for damages #s in the case of breach of arbitration laws, Ml, ETHICAL. OBLIGATIONS OF ARBITRATORS "An arbitration is only as good as the arbitrator" 1. Specific ethics (One ofthe characteristics ofthe liberal professions is that professionals are subject to strict ethical rules". Aithough the position of an arbitrator isnot per se professional, generally the persons who act as arbitrators are also members of a liberal profession (lawyers, economists, engineers, architects etc), Ethical rules are particularly relevant for arbitrators because arbitration is based on trast" ‘This raises some questions. The first question consists on deciding whether arbitrators are subject to special ethical rules or are only subject tothe ethical rales of their own profession. [f the answer to the first question is the former. the second is what happens when the arbitrator's ethical rules and his profes- sional rules conic. Traditionally, arbitrators and mediators from different professions have Jooked to the professional standards of their own profession. But today arbi trators have special professional standards'* deriving from different sources ‘not always fully coincidental. Ifthe arbitrator due to his profession is subject in his conduct to specific ethical rules he must likewise fulfil these when aci- ing as an arbitratot. Generally, ethical rules — either as an arbitrator or as & professional — will not differ (ie: professional confidentiality o secreey). But should there be a conflict of rules, it seems to me thatthe rules applying to an arbitrator should prevail ® Stephen Bond, Selection af ICC arbivators athe requirements of independence. 198, "Ramon Mullerat, “Professionalism in Europ: how the valcs ofthe profession are rans tod in Europe” ABA Annus! Meating, Toronto, 30 July —-3 August, 1998 juan Eduardo Figueroa, "Ethical in international arbivation”, Mealy» dnermatioa! Arbivaion Ror, Sly 2003.p.At. > ‘Allan Seot Ra, Edward F Sherman and Scot R. Peppet, Proceses af Dispute Resolution. hind ein, 2002, 332, with regar to mediation 2 thi ‘The L ciety of provide t selves. T not seek cal Stanc impartia and sett With on indey paper. Ask practitio the law role. Fi facts an’ te —teye! 6h see of lity For valsare rot per ‘nether ethical ‘ormer, soles s have y arbi- subject recy ying to trans rationed lation, 2. Ethical standards for all neutrals The US Fthical Standatds of Professicial Conduct for members of the So- ciety of Professionals in Dispute Resolution [987 (General Responsibitties) provide that neutrals have a duty tothe partis, tothe profession and to them- selves. They should be honest and unbiased, act in good faith, be diligent and ot seek to advance their own interests atthe expense of the parties. The Ethi- cal Standards impose on neutrals the following responsibilities to the partes: impartiality, informed consent, confidentiality, conflict of interest, promptaess and settlement and its consequences. With referring to ethics for arbitrators, some commentators" only focus on independence and impertiality — which are the main duties — but the reality is that the ethical obligations are several, as I plan to deseribe inthis paper. As John Cooley" puta it, “ADR profession leaders should define the ADR practitioner's professional and ethieat role in relation tothe judicial rather than the lawyer's role. The judicial role is much more appropriate than the lawyer role. First, when performing their judicial role (which includes applying lav to facts and assisting withthe drafting of setlement agreements), judges are not practicing lav. Second, both lawyers and non-lawyers serve inthe judicial ca- pacity.” Indeed, being a lawyer is not even a requisite qualification to serve on the US Supreme Court. Although the ABA's Ethics 2000 Commission intro- rivate Span. rimust mpar- se any FRAL, LCA Rules Com- “Arbi 143 ators DIBA. ss thar ‘epen treet, pom mntre~ their cre of val or business aftirs. Non-disclosure of an indirect relationship unkown toa prospective arbitrator will norhe a ground for disqualification un- less it could have been ascertained by making reasonable enquiries ) the nature and duration of any substantial social relationships with _any party or any person known tobe likely an important witness inthe arbitration, ©) the nature of any previous relationship with any fellow arbitrator (in cluding prior joint service as an arbitrator): 4) the extent of any prior knowledge ke may have of the dispute, €) the extent of any commitments whick may affect his availability 10 perform his duties as arbitrator as may be reasonably anticipated. The duty of disclosure continues throughout the arbitral proceedings as regards new facts or circumstances. Disclosure should be made in writing and communicated to ell parties and arbitrators. When an arbitrator has been appointed, any previous disclosure made to the parties should be communicated to the other ar- bierators” Canon Il ABAJAAA Code 2004 provides that: “An arbitrator sbould dis- close any interest or relationship likely to affect impartiality or which tay cre- ate an appearance of partiality or bias”. In the same sense, art, 4 Guidelines of Good Practice for Arbitrators of the Chartered Institute of Arbitrators and art. 5 Code of Ethies for Arbitrators of the Chamber of National and International Arbitration of Milan", 3.9. Reinforcing arbitrators’ disclosure standards In the interest of the reputation of arbitration, the general tendency is to strengthen the disclosure obligation for arbitrators. In the US, California has enacted Ethical Standards that substantially expand an arbitrator's disclosure requirements and which increases a party’ ability to disqualify an arbitrator based on such disclosures. Unlike existing voluntary standards, the California rales will have the force of law. The rules ~ Disclosure case- Iw: Vacating award becouse AAA appointed replacement arbittor Wit> ‘ow discosing arbiter’ previous business dealing with ane pariy ex permitting party Yo ex press views.en sppoiatment (Rogers: Scheving Corp 3d Ciust 1989); Where the arbiter ha substan interest ina firm which has done wore than rival business with pay that et ‘ust disclosed (Commonwealth Coating Corp. Continenta! Casualty Co, US 1968 Supreme Court}; The leaostbasis for bia is tnarbrtors aera, undisclosed financial interes ne outcome of the arbitration (iddlser Aural fas. Co. Levine, # 10h Crust 1982). ” RAMON MULLERAT BALMARA, establish alist of required enforceable disclosures and ethical conduct, not an aspirational isting of best practices. Among the most detailed provisions under the Ethical Standards are the categories of information that must be disclosed by arbitrators prior to appointment. In the commercial arbitration arena, here are 14 separate categories, inchuding the existence of family relationships with a party or a lawyer in the arbitration, a “significant personal relationship” with any party or lawyer for a party, nd prior service as an arbitrator for a party or one of the lawyer inthe last 5 years. Ifa proposed arbitrator has servi! on mul tiple oceasions for a party or one ofthe lawyers, the arbitrator must disclose the results ofeach case submitted to arbitration, including the amount of damages, A potential arbitrator must also disclose whether he has served as a ADR neu tral other than an arbitrator ina prior case inthe last two years or has ay ce ‘ent arrangement for prospective neutral service. In addition, a proposed arbi- trator must disclose a range of professional relationships and any financial interest be or she may have in the underlying dispute, the parties or theit lawyers. Finally, the standards require disclosure of membership in any orean- isation that practices discrimination on the basis of race, sex, religion, national origin, or sexual or sexual orientation 3.10. Developing international standards In an effort to introduce some international uniformity and provide guide- lines both for arbitrators and insttations, Committee D of the IBA established a Working Group on Conflict of Interest in International Commercial Acbiten- tion, 19 experts in international arbitration from 14 countries to study, with the intent of helping this decision-making process, national laws, jucicial dee’ s, arbitration rules end practical considerations and applications regarding impartiality and independence and disclosure in international arbitration, tt ‘August 2003, the Working Group issued a draft Guidelines on Conflicts of Interest in International Arbitration (the “Guidelines”. AAs the Introduction of the Guidelines states, the growth of international bbusiness and the manner in which it is conducted, including interlocking corporate relationships and larger international faw firms, have caused more disclosures and have created more difficult conflicts of interest issues to deter mine. ‘The Working Group determined that existing standards lacked sufficient clarity and uniformity in their application, The Working Group believes that greater consistency and fewer unnecessary challenges and arbitrator with « Grawals and removals could be achieved By providing lists of specific situa James M, Schurz, "California's pioneering spin", JOC United Kingdom, vol VI. 98 tions that The Guid circumst. dence an “aon-wa cline the where the contict diselosun fiable do finding t sore and allowing Follow Group re within th part, am toms, cul pendence many dif pectedio ington on The ¢ override However, communi tility, in 4, Obi Thea ced the ap and then Feil ofthe case Teil “leit We pares teal ine abit not an under losed there swith “with ety or mul: sethe cages. arbi- ‘ncial their rean- >itra- the feci- ding ati sof onal king nore eter viet that vith ETIWCAL RULES FORARBITRATORS tions that, do or do not warrant disclosure or disqualification of an arbitratr. ‘The Guidelines identify lists'(Rev, Orage afd Green List} inteaded to set out circumstances giving rise to justifiable doubts as to an arbitrator’ indepen: dence and impartiality, {n situations falling within the Red List, (divided in “non-waivable ced list™" — and “waivable red list") the arbitrator must de cline the appointment, The Green List is intends to itemise specific situations ‘here there is no appearance of a lack of independence and impartiality and no conti of interest exists. In uch cases, arbitrators would not required fo make disclosures", The Orange List enumerates situations likely to give rise to justi- fiable doubts as to the arbitrator's impartiality or independence®, Arbitrators finding themselves in a Orange List situation are required to make full disclo- sure and the parties are ftee to waive any potential conflict of interest, thereby aliowing the arbitrator to be appointed. Following the publication of several drafts of the Guidelines, the Working Group received many conflicting comments about which situations should fall within the different lists. Whilst judicial independence can remain, ia large part, a matter for national juriscitions to address taking into account local cus toms, culture and legal history, the formulation of universal standards for inde. pendence and impartiality in international arbitration requires the balancing of many different interests. The draft was debated at different levels and it was ex- pected tobe finally approved by the IBA Couneil Committee Meeting in Wash. ington on 22 May 2004, The Guidelines recognise that they are not legal provisions and do not override any applicable national Yaw or arbitral rules chosen by the parties, However, they will have general acceptance within the international arbitration community and help all arbitration actors on the important questions of impac- liality, Independence, disclosure, objections and challenges, 4. Obligation to settle the dispute ‘The main legal and ethical obligation of the arbitrator, after having accept- cd the appointment is to resolve the dispute, which has been entrusted to himn ‘and then fo secure, as far as possible, thatthe award is valid and not susceptible “Le. f the abitratar has significant nana interest in one ofthe parties or the ouome ofthe ease. “ Le: ithe arbitrate has previous involvement in the ease, “Le ifthe arbitrator’ lw firm has acted aginst one ofthe parties ora affiliate of one of ‘he partes in an unrelated matter withou the imvoiventent othe arbitrator. “Le the atbitrator has publicly advocated a specifi position regarding he case thats be ingarbitrated, whether na published papce or otherwise, 9 RAMON MULLERATBALMARA to ctallenges and within the fined legal or contractual time-period. The scbitrator, by the fact of accepting his appointment undertakes to earry out his duties until the end of his mandate, pursuant to the regulations in foree (art. 7.5 ICC Rules). See for instance, att. 35 ICC Rules; art, 32.2 LCIA Rules, art. 813 Italian Procedure Code art. 1462 French Procedure Code, art. 21.1 Spanish Atbitra- tion Act 2003 ete. One of the consequences of this obligation, is that the azbitrator may not withdraw from the proceedings unless there exists just cause given thatthe mandate of the arbitrator is not fulfilled until the award has been issued ‘Many rules requir the consent ofthe parties or of the arbitration institution in order for the arbitrator to withdraw from the arbitration (For instance, art. 56 Q) ICSID; art, 10 AAA, ICDR Rules) or of the courts, art. 1689 Belgium Judicial Code; art, 1029 (2) Netherlands Cp. The ICC Court, for instance, reserves the right not to acoept the resignation of an arbitrator and require thew to remain in office as an arbitrator. This is intended to safeguard against « party-appointed arbitrator resigning for the sole purpose of disrupting the proceedings S. Competence and qualification In order to make a good appointment, itis important to determine whether the arbitrator to be nominated has the level of knowledge andl experience on the relevant legal field. Ethical rules generally provide that an arbitrator has the duty no to aecept an appointment beyond his competence forthe specific case, In many arbitration ‘agreements the partes stipulate the characteristics and qualities thatthe arbi- trator must have. Principally, they revolve around! their ability and competence in relation to the case they are going to arbitrate on, In the event of this provi- sion not being included, many arbitration regulations impose on their arbitea- tors requisites in relation to their competence and qualification inthe matter to be adjudged, which are normally satisfied by the “curriculum vitae” of the fu- ture arbitrator. Generally there are uo legal provisions regulating the qualifications ofarbi- trators and no formal citizenship, residency or professional requirements for arbitrators. The parties may prescribe any qualifications that they may require The limited right to withdraw ofthe abiteator makes a gretciference with the lawyes's righ w withdraw whic is unimited provided tht is done “in time to prevent price being suffered by the elie” (rt. 3.1.4 CCBE Code of Conduit}. 100 and the qualities land, Fre persons therwis number tration & ‘courts, ¢ Ant. ledge an CIARB inform i Ethics fe trator sb petent to the lang ABAAY The V referring compete: relied up law shall Arbitrate Theo rales 3.5) ‘The De Chinese bea lawy Then tomeet t trator? Thiso isa pact Bont tation ets Diraion Ae Titernation Namber 9: ads. The y outhis (art. 7.5 3 Mealian ‘Abita » art. 56 Belgium rastance, require against itr he whether eon the coept in oitration cho acti speterse is prov- arbitn- natter‘o fhe fe of arki- rrequie ehavyes fice beg [ETHICAL RULES FOR ARBITRATORS and the courts have the power to remove an arbitrator who does not possess the qualifications required by the arbitration agreement. Some jurisdictions (Fin- land, France, The Netherlands, Spain) only require that arbitrators are ptysical ‘persons and in full possession of their civil rights. Others require tha, unless otherwise agreed, arbitrators must be members of the Bar, with a determined number of years of legal experience (Ethical Prineiples for the National Arbi- tration Fonin), attend a number of hours in certain programmnes agreed bythe courts, ete Art. 5 Vienna Rules states that arbitraiors should have specific know ledge and experience in legal, commercial or other pertinent matters. art, 5 CIARB Guides of Good Practice states that the prospective arbitrator must inform if he is competent to determine the issues in dispute, art, 2.2 Rules of Ethics for International Arbitration of the IBA states that a prospective arbi- tcator shail acceph the appointment only if he is fully satisfied that he is com petent to determine the issues in dispute, and has an adequate knowledge of the language of the arbitration, This is also provided in Canon I, B ABA/AAA Code 2004, ‘The Washington Convention of 18 March 1965 on investment disputes on referring to arbitration panels states (art. 14) that “persons designated to serve on the Panels shail be persons of high moral character and recognized competeace in the fields of law, commerce, industry or finance, who may be relied upon to exercise independent judgment. Competence in the field of law shall be of particular importance in the case of persons on the Panel of Arbitrators.” The Grain and Feed Trade Association (GAPTA) Atbitration Rules (1.125, rules 3.5) states that the arbitrator should be engaged in specific area of trade ‘The Deutsche International Schiedgerichitsbarkeit (DIS) Section 2 and the Chinese Arbitration Act, states thatthe sole arbitrator or the chairman should bea lawyer. ‘The new Spanish Arbitration Act 2003, at. L5.6 obliges both the arbitrator, to meet the requirements established by the parties to be appointed as an arbi. trator ® Itisourintepretaton in arbitration inlaw the arbitratar must prove evidence that heshe isa practicing lawyer (art 15.1, 2" On the Spanish Arbitration Act 2008, se for instance, Rarnon Muller, “Th rew Ar tration Actin Spain”, Phe atrnattonal Arburarion News, Winter 2003/2004, pp. 7s; “New Ae ‘bration Actin Spain” CCL, 2004, issue 6, pp. 169 ss; “Arbitration Actin Spat” Arbon Invernaicnal lume 20'sse 2, "Principles omovaciones de la nueva ley dearbirae" Le Le, [Nummer 5899, Monday 19 Apri! 2004, 101 RAMON MULLERAT BALMARA 6. Confidentiality “Arbitration isa private process, and while there are exceptions to the general rule, confidentiality is widely perceived to be one of the hey advantages of arbitration” 6.1. Importance of confidentiality (One of the reasons why parties decide to resort to arbitration is that they expect that their case will remain private far away from the eyes of the press fang theit competitors, clients and suppliers. Litigation in national courts is generally open to the public and to the medin. By contrast, arbitral proceed- igs are generally conducted in private so thatthe identities ofthe parties and of the tribunal, and the nature of the dispute, should remain confidential. This may assist to preserve trade secrets and, in some cases, even to the rebuilding ‘of commercial relations. It will also provide an environment tbat may be more conducive to reaching a settlement. Its also part ofthe private and confiden- tial nature of arbitration that proceedings are conducted in a less formal at mosphere than is generally the case in the courts (LCIA, Introductory Brochure). Confidentiality encourages candour, a full exploration of the issues and an arbitrator's acceptability. Also, confidentiality sllows the parties to reach agreements during the azbitrationel proceedings and also the possibility of continuing commercial elations between them. ‘However, internationally, there is considerable uncertainty on whether atbi- ‘rations are confidential, and, if they are, on the scope of the obligation of cou- fidentiality®. In general, inthe absence of express agreement of the partes, \hother an implied duty on confidentiality aries is controversial, and there are discrepancies across different countries and institutions. There are also differ- ‘ences as to what exactly it s to be kept confidential, and whether such obiiga- tions asdhereare apply to witnesses, experts and other thitd parties as well to the partes, arbitrators and institutions. In principle, unless otherwise agreed by the parties or required by applica bie rules or law, an arbitrator should keep confidential all matters relating to the arbitration proceedings and decisions (Canon Four, National Arbitration * Geoff Nicholas and Johan Lucker, “An iatrtion to intentional Commercial Arby tion —key concepts, trends and features", 4ripenion World. European Lawyer, 2004p. 5 Monpm Lewis, “Inernational Comerci Arbitration, Confidentiality” «practical cheak list OC United Kingdom membors handbook, vo. VM % Geof Nichola ae Johan Lucker op. ct. p17 102 Forum Cx arbitratio: ciently ot Magy mercial p Malaysia There biteation obligatior UNCITR dentiality The E ty of the ceedings The Aust are privat party to. 62. Ma When awards in confident Conf ipatein,o ceeding ¢ Guideline AAA Ru Spanish’ al arbitre through t informati " Dat 243, degis, Shipyard * Awat lawyers, aksence of Marine Tug “bs: ‘ages of rat they 1e press ours is roceed- tiesand al. This wilding ye more af + “ma, at- fuctory sand an © reach >ilty of verarb- of cor- parties, hereare > diffe oblige well to applic ating 1 ditt on Acta. PS. fal chek ETHICAL RULES FOR ARBITRATORS Forum Code)”. An arbitrator should not discuss case with persons not in the atbitzation unless the identity of the parties and details of the ease are suffi cienily obscured to eliminate any realistic probability of identification. Many laws of jurisdictions, like the Argentinean Codes of civil and com: ‘mercial proceedings; the Canadian Commercial Arbitration Act 1985; othe Malaysian Arbitration Act £952, etc. do not address the confidentiality issue ‘There is not a uniform position about the confidentiality principle inthe ar- bitration institutions, Some of the rules (ICC Rules) do not contemplate this cobjigation; other only refer to the confidentiality of the award (AAA, [CSID, UNCTTRAL), witereas others (LCIA) provide a broader obligation on confi- dentiality including the parties and the arbitrators ‘The English courts" have held that an implied term as to the contidentiali- ty of the proceeding isan essential corollary ofthe privacy of arbitration pro condings and a term which the nature ofthe contract itself implicitly requires®. The Australian courts! have declared that arbitral proceedings and hearings are private (not open to general public), however documents produced by aay party to arbitration proceedings are not automatieslly confidential 6.2. Masters covered ‘When it applies, confidentiality usually covers all documents, materials and. awards in arbitration. Likewise, the deliberations of the arbitration tribunal are confidential, Confidentiality is permanent and, therefore, a arbitrator should not patic- spate in, or give any information forthe purpose of giving assistance inany pto- ceeding to consider the award (art. 9 Milan Code of Ethics; art. 7 CIARB Guidelines of Good Practice. art. 5.5 Vienna Rules; art, 20 [CC Rules; art, 35 AAA Rules; art, 25 Uncitral Rules; 17 CPR and art. 9 BA Rules). art, 24.2 ‘Spanish Arbitration Act 2003 states that the arbitrators, parties and institution- al acbitrations are obliged to keep confidential the information obtained through te arbitration proceedings and that confidentiality covers all kinds of information received, Sur. 302) LIA Roles: an, 34 AAA, ICDR Rules Genera ules, art. 5; IBA Rules, 9 % Dollng-Baker » Moore [1990] 1 WLR (203: Harsnek v Mev (1993) 2 Lleyts Rep 243, Aegis x European Re Privy Counetl Ape! No %3, 2001 28 Jan. 2003, 44 Skoog Corp Shipyard Tragir (1999) | WLR 314, want vacated due 4 arbitrator engaged inex parte communications with one partys lawyers, without notifying adverse party (MacNeal ». Rageld, 1990, US, Dis.) Even in te absence of th instutona rules, ex parce contacts ae generally regarded as improper Mariae Tug v North American Towing inc th Citeit 1979), Ssso Ausraia Resoures Lid. Plowson, {1995} 183 CLRID, 103 RAMON MULLERAT BALMASA Confidentiality is.excluded when the parties reach a mutual agroement t0 make public the facts or wien they are legally obliged to do so (art. 30 LCIA Rules;art. 35 ABA Intemational Arbitration Rules, etc). 6.3. Persons obliged by confidentiality Itis important to decitle whether both azbitrators and parties are bound by a principle providing for absolute confidentiality in respect of the arbitration proceedings. Recent Swedish court decisions have severely limited confiden- tialty. The Swedish Supreme Court, for instance, addressed the issue on 27 Oc- tober 2000, and concluded that this principic of law does not exist, At present, the Rules of the Arbitration Institute ofthe Stockholm Chamber of Commerce provide that both the SCC Institute and the arbitration panel should maintain the confidentiality of the arbitration, but there is no express obligation on the parties to do so, © A Bulgarian bank (Bulgarian Foreign Trade Bank Ltd hada line of credit with an Aus trian bank to Facilitate financing of various contracts between Austria export compenies and Bulgarian import companies. After a few years the Austrian bank transfered is right pay- ‘ment under some of the loans to a finance company, AI. Trade Finance Ins. The Bulgarian ‘bank was nolified ofthe wansfe. The Bulgarian bank: did ot pay the Finance company which ‘therefore initiated srbiration proceedings against the Bulgarian bank. The arbitration pro- ‘ceedings took place in Stackholm according to the arbitration cause inthe agreementbetween the Bulgarian bank nd the Austrian bank. The Bulgarian bank alleged tht i was not bound by the arbitration clause because there was not Valid contract of arbitration between the par- ties tthe proceedings, the loan agreement with the arbitration clause had originally been ‘exocuted between the Bulgarian bank andthe Austrian bank. The arbitrators made aculing o> this isue and found thatthe Bulgarian bank was Pound bythe arbitration clase. The ruling nt reported in Mealey's International Arbitration Repor (apperenty the US counsel ofthe finance company had disibuted the rating to Meslay’). Furthermore te finance company’s ‘Swedish counsel gave the article to the chairman ofthe arbitration panel, Mr Lars Welamson, ‘former Judge inthe Swedish Supreme Court. Mr Welamson distributed he aticle to ajudge inthe Swedish Supreme Cour: who quoted the article in a judgement regarding similar ease. ‘When it found out what had happened, the Bulgarian bank purported to rescind the arbitration contract an the grounds of breach of a duty of confidentiality, Furthermore i challenged the ‘ward and alleged thatthe UN ECE arbitration rules, which were the applicable procedural rules acording to the arbitration clause, provide for a contractual obligation of secrecy be ‘ween the parties therselves and betven the parties ari the arbitrators. Furthermore the Bul- ‘arian bank alleged that i was a fundamental principle of Swedish law that arbitration ‘ceedings are absolutely sore. The Bulgarian bank was sucessful in challenging the sward io ‘he Distret Court bu lost in the Court of Appeal. Tae Supreme Court agreed with the Court of Appeal and made the fellowing cemarks. TheLCE arbitration rules donot contain an obi tation of secrecy which makes ita breech ofthe abiasion clause reveal the outcome ofthe proceedings "onus Benedicston and Anders Isgten, Confira in Arberation i Sweden 104 Thel ered the grounds element « arbitrate agreemet dential this prine Adet an arbite stances, company tality? There confiden same ber need @ tration. T drawback sideratior can be de What ist will thee 64. En Evens es in whi countabil Howe justifiabi ty except ® Nite ICC Unites Ai Shippin open Ree Revs 1992, Ram Hes" spece Tokyo, 200 ment to OLCIA ind bya vtration infiden- 1270c- presert, merce sainaain onthe ba niet and ‘to pa Bulgarian ny whi ition pe- between vot bousd athe per ally been uling ‘he ruling sclof be company’s ‘elamsen, aie sbitration enged tie rocedusl wteey te the xo > samaidin the Cont nanoti- smeoF 9 ETHICAL RULES FOR ARBITRATORS The LCTA European Council Symposium on 14 November 2001 consid- cred the decision of the Swedish Court to render an (interim) award void onthe grounds that a bteach of confidentiality constituted a violation of an essential element ofthe agreement fo arbitrate aid therefore rendered the agreement to arbitrate null and void, was in error. Confidentiality isan element of erbitration agreements but unless it can be shown thatthe parties agreed to elevate con dentialty to an essential element of the agreement to arbitrate a viclation of (his prineipfe should not result inthe arbitration agreement beeorning, void. A debated question concerning confidentiality isthe relationship between an arbitrating party and its holding or associated companies. In what cireum- stances, for example, can an arbitrating company communicate to its holding company what is happening in the arbitration without breaching confiden- tiality? ‘There are then some arguments in favour that there should be no breach of confidentiality when parties to whom disclosure is contemplated are under the same beneficia! ownership and management a8 the party in arbitration, asthe ced to qualify accounts in consequence of advice given in relation tothe arbi- tration. The advantage of confidentislity does not therefore come without some srawbacks that must be considered. In considering these issues, careful con- sideration must be given to he specifics before a strategy for addressing them can be determined, for example, who are the parties to the communications? ‘What is thei relationship? What are their mutual or divergent interests? What will the communication be? 6.4. Exceptions to confidentiality Even when itexists, the duty of confidentiality is not absolute. There ae cas- 5 in which confidentiality may be broken, The commentators mention: ac- 4 countably, threats repors of eine and abuse, whistle blowing and oer However, as it happens with the confidentiality duty inthe legal profession, justifiable, asthe case may be, we must be carefut to expand the confidentiali- ty exceptions since people might be discouraged to use the process © Nichols Baste, "Some issues concerning confidentiality ofebitraters in English Law", ICC United Kingdom. members handbook. vl Vp. 4S and the English court decision: ite Ali Shipping Corp. V Shippard Togit 1999] !WLR 314, szociaed Elecricel and Gas Bie ropean Reassurance, City of Gotha v Sothebys 1998} IWLR 114. Kevin Gibson, "Confidentiality in mediation, A moral reassessment, Diypute Resolution, 1992 Ramon Mallerat, "Lawyers: between maintaining trust, keeping gates and lowing whis- les, speech atthe International Symposium on Gtskeeper Reguliton of Practising AtOneys, Tokyo, 2003 tas RAMON MULLBRAT BALMARA 65. Rules Amongst the rules, which contain the most complete regulations on conti- dentility, the following may be highlighted: ‘The LCIA Rules, in addition to providing for hearings to be in private (unless the parties agree otherwise), upon revising its rules in 1998, in- cluded as art, 30 the following provision: "30.1 Unless the parties expressly agree in writing to the contrary, the parties undertake as a general principle to keep confidential all ‘awards in their arbitration, together with all materials in the pro- ceedings created for the purpose ofthe arbitration and all other docu ‘ments produced by another party inthe proceedings not otherwise in the public domain, — save and to the extent, that disclosure may be required of a party by legal duty, fo protect or pursue a legal right or 10 enforce or challenge an award in bona fide legal praceedimgs be- forea State Court or other judicial authority. 30.2 The deliberations of the Arbitral Tribunal are likewise confiden- tial to its members, save and to the extent that disclosure of an arbi- ‘trator’ refusal to participate in the arbitration is required ofthe other ‘members of the Arbitral Tribunal 30.3 The LCIA Court does not publish any award or any part of an ‘award without the prior written consent ofall partes and the Arbi- tral Tribunal”. —The AAA International Arbitration Rules, as amended on 1 Novem- ber, 2001, provide that hearings are private, ewards may not be made public and that confidential information disclosed during the proceed- ings may not be divulged by the tribunal. Interestingly this latter re- quirement is not imposed on the parties themselves. art. 4 provides “Confidential information disclosed during the proceedings by the parties or by witnesses shall not be divulged by an arbitrator or by the administrator. Unless, otherwise agreed by the parties, or required by application of law, the members of the tribunal and the edministra- tor shall keep confidential all matters relating to the arbitration or the award”, — Arts. 5.5 and 14.2 Rules of Arbitration of the International Arbitral Cen- tre of the Austrian Federal Economie Chamber provide similar prot tion to that set out in the AAA Rules. Arbitrators are bound to “observe secrecy in respect ofall matters that come to their notie inthe course of their duties”, but no such duty is expressly imposed ypon the parties. Hearings may not be held in public. 66. Co Upto tors not t lated to withhold ceeding.” substantis bbunal has communi adispute cout prejuc ticularly tion teibu balancing claimed a Nom! Low Review neonfi. 1 private 998, in vonirary, intial all the pro» erdoce. 2 may be “right or tings be- an ari ‘he other artof sn ‘he Arti- Noven- bbe maie sroceel- latter rovides s by te or of by eequird ninistn- on or te tra, a 1 prote- “obsexre sourseof > partis. [ETHICAL RULES FOR ARBTTRATORS Athol Chamber of Commerce Arbitration Rules provide that Jnstitute and the Tribunal but aot expressly the parties — should keep the arbitrstion confidential (arts. 9 and 20(3). — Act, 43(1) German Institution of Arbitration Rules provides that the parties, the arbitrators and the persons atthe DIS Secretariat involved in the administration of the arbitral proceedings shall maintain confiden- tality to all persons reganding the conduct of arbitral proceedings and, in particular, regarding the parties involved, the witnesses, the experts and other evidentiary materials. Persons acting on behalf of any person involved in te arbitral proceeding shall be obligated to maintain contfi- dentiality. — The China International Economic and Trade Arbitration Commission (CIETAC") Arbitration Rutes expressly stipulate that the partes, wit- nesses, tribunal and secretariat “shall not disclose to outsiders the sub= stantive nature ofall procedural matters ofthe case. - Art. 7 Rules of Commercial Conciliation and Arbitration of the Dubai Chamber of Cprimerce and Industry provide: “All information provided by the parties requesting... arbitration shal! be considered confidential, and a person who becomes aware of such information due to his position shall not divulge its contents except with the consent of the parties or pursuant to an order of a competent judicial authority”. 6.6. Confidential evidence Up to here we have analysed confidentiality as aright and duty for arbitra- tors not to disclose the information that they have received in the course or e- tated to the arbitration proceedings. A separate issue is the legal privilege to withhold certain testimonial or documentary evidence from an arbitration pro- ceeding, There 's no universal approach t the question and evidence rules vary substantially from jurisdiction to jurisdiction, Therefore the arbitration tri- bunal has the ultimate power to determine procedural rules. Another is the communications between lawyers with the purpose to attempt to compromise a dispute between the party (what in common law tradition is known as “with- ‘out prejudice"). Again the attinide ofthe different jurisdictions is different, par- ticularly between civil law and common law traditions, Therefore, the arbitra tion tribunal will have to decide whether to admit or refuse such evidence balancing in each case the need for the information against the privilege claimed and other tircumstances of the case. “ Norah Gallagher. “Lega privilege in international arbitration”, InferationalArbiation Law Review 2003, sue 2, p45 107 RAMON MULLERAT BALMARA 7. Dedication ‘The time consuming process, witich resorting to ordinary justice involves is one of the main reasons why parties decide to goto arbitration. By using arbi- ‘ration, the parties wish to obtain a fair but quick and economical solution. Asides ftom being competent, the arbitrator must also have sufficient time and use the necessary diligence in order to sufficiently impulse the arbitration procedure, A prospective arbitrator should aecept an appointment only ithe is able to give the arbitration the time and attention which the partes ae reason- able entitled to expect (art. 2.3 IBA Ruledand shal! do his best to conduct the arbitration in such a manner that costs do not rise to an unreesonable propor- tion of interest at stake art. 2.5 y 6, CLARB, Guidelines of Good Practice, art. 9 ICC Rules; art. 10.2 Geneva Arbitration Rules; art, 13 Milan Code of Ethics, tc.) at, 19 Spanish Arbitration Act 2003 deems as a ground for revocation of ‘an arbitrator isthe non-exercise of his powers within a reasonable period” Having sufficient time is an element ofthe necessary dedication, With re- gard to lawyors art 3.1.2 CCBE Code provides that “A lawyer shall not cep instructions umless he can discharge those instructions promptly having regard to the pressure of other work”. & Diligence "Justice delayed is worse than injustice ™* The speed of the dispute settlement is another bencfit that the partes look. for in an arbitration. This benefit is particularly significant in business activi ties because timely resolution ofa dispute may also secure prompt continuation of business operations and stopping freezing assets unnecessarily. On accept ing his appointment, the arbitrator undertakes to work diligently. A breach of this daty, would include the situation where, an arbitrator forming part ofan a bitration panel abstains from attending meetings or deliberations of the panel. (Fouchard, op. cit). ‘The IBA Rules of Ethics (art. 1) stato asa fundamental rule thatthe arbitra tors shall proceed diligently and efficiently to provide the parties with a just and offective resolution of their disputes art. | professional standard of the CIARB, Guidelines of Good Practice for Arbitrators; Canon I, G, ABAIAAA Code; art, 23 a WIPO Arbitration Rules; 17 a London Maritime Arbitrators’ © Council of the Bars and Law Societies ofthe European Unior (CBE), Code of onde inthe EU adopted in 1988 and arene in 1908 and 2002, Joseph L Baran, A Trensury’of Jewish quotations, 1956 fe 108 Associati Arbitrati The a termina should pe nomicall eumstane of Condy Under poet toi tion to de from the ply toit.: impose te Alef rassment the partie should ne required ( the agree Most fraud (see 9. Duty Tn ord dence int responsib and must the proce: sponsibili other part Aft should av lationship fect itnpat orbias (C The ar bitral pros hearings { solvesis ng atbi- tion. ent tine sitration 7 iff is duct the proper- ze, art 9 FEthies, sation of od! With re- xe pt Bheird ties look 1s activi- jnuation accent rreachot ofanar- ve pare. s arbita- tha jist dof he AA >itratrs’ of coneict ETHICAL RULES FOR ARBIFRATORS fF Association; art. 7, German institution of Arbitration, Guide to the Condi Abitration Proceedings. 5 The arbitration must ensure the just, expeditious, economical and final de termination of the dispute (art. 5.1 CLARB Arbitration Rules). An arbitrator should perform duties diligently, conduct a proceeding as effectively and eco- nomically as possible, and conduct a case as efficiently and promptly as the cir- cumstances reasonably permit (Canon 1, B National Arbitration Forum Code of Conduct). Under the Spanish Arbitration Act 2003 a maximam requitement wit res pect to diligence is found in art. 37.2 that imposes onthe arbitrators the oblige tion to decide the dispute within the period agreed by the parties or six months from the date of the repiy to the claim or from the expiration of the time to re- ply to it. art. 33 English Arbitration Act (996 and most other legislations also impose to arbitrators avoiding unnecessary delay or expense. ‘All efforts must be taken by the arbitrators to prevent delaying tactics, ha- rassment of the parties, or any other disruption ofthe arbitration process. When the parties set forth the arbitrator's authority in their agreement, the arbitrator should neither exceed nor fall short ofthe mandated authority. The arbitrator is required to exercise authority completely and to comply with all provisions of the agreement, Most rules exempt iawyers ftom liability from negligence but not from finud (see Second, 1) 9. Duty to act professionally: integrity and fairness of the proceedings In order for arbitration to be effective, there must be broad publie confi- dence in the integrity and faimess ofthe process. Therefore, an arbitrator has a responsibility not only to the parties but also tothe process of arbitration itself, and must observe high standards of conduct so that the integrity and fairness of the process will be preserved. Accordingly, an arbitrator should recognize a te- sponsibility to the public, to the parties whose rights will be decided, and toall other participants in the proceeding. After accepting appointment and while serving as an arbitrator, 2 person should avotd entering into financial, business, professional, family or social re- lationships, or acquiring any financial or personal interest, which is likely to a. fect impartiality or which might reasonably create the appearance of partiality orbias (Canon I, D, ABA/AAA Code). ‘The arbitrator shall encourage « serene and positive development of the ar~ bitral proceedings. In particular, he shail decide on the date and manner af the hearings for parties to fully participate therein, in compliance with the princi- 109 RAMON MULLERAT BALMARA, ple of equal tieatment and adversariat proceedings (rufe 12 Code of Ethics for

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