The Arbitrator DANIELA MIRANTE PHD STUDENT FDUNL October

The Arbitrator DANIELA MIRANTE – PHD STUDENT FDUNL October 28 th 2016

Arbitration Is Only as Good as the Arbitrator. Is this correct? What does it means?

«Arbitration stands and falls with the arbitral tribunal. This relates not only to the “right” selection of a tailor-made arbitral tribunal in the sense of necessary expertise and background adapted to the specific needs of the case. » Therefore, studying the arbitrator means to study a key-figure of arbitration.

«Even more importance must be attributed to the fact that the arbitrator administers justice and must therefore be given the same respect and position as a judge in a state court. This is why arbitration as a whole requires that the arbitrator be impartial and independent. Only if this basic requirement is fulfilled may arbitration and state court justice be treated as equivalent. »

The Arbitrator What is an arbitrator? Who can be an arbitrator? Is there any difference between an arbitrator appointed by the parties or a single arbitrator appointed by the joint nomination of both parties (or by an instituttion or a court)? What is the arbitrator status?

The Arbitrator The arbitrator is a decision maker, a private judge who will decide the conflict between the parties. «A person chosen to decide a dispute or settle differences, especially one formally empowered to examine the facts and decide the issue. »

Who can be an arbitrator? Article 9 of Portuguese Voluntary Arbitration Law – Arbitrators’ requirements « 1 - The arbitrators must be individuals and have full legal capacity. 2 - No person shall be precluded, by reason of that person’s nationality, from being appointed as an arbitrator, without prejudice to the provisions of article 10, paragraph 6, and the discretion of the parties. 3 - Arbitrators must be independent and impartial. »

Who can be an arbitrator? According to the Portuguese law only individuals (natural persons) can be appointed and act as arbitrators – Cfr. Art. 9, n. 1, first part. Therefore, it is not possible for legal entities (or judicial persons) to be designated or act as arbitrators. On the other hand, the arbitrator «must have full legal capacity» .

Who can be an arbitrator? Legally there are no other requirements in order to someone to be eligible as an arbitrator but the ones of article 9. Nevertheless, the parties may establish other qualifications or requirements to be fulfilled by the arbitrators. Always keep in mind that «(…) a dominant characteristic of the selection of the arbitral tribunal is the principle of party autonomy. » , Gary B. Born.

Who can be an arbitrator? The arbitrator needs to be a lawyer or someone with a deep legal knowledge? The law doesn’t establishes that requirement – in what the legal framework is concerned there is no specific academic formation demanded to be an arbitrator.

Who can be an arbitrator? The principle of party autonomy may suffer limitations in certain circumstances, e. g. : When the parties agree on accepting institutional arbitration rules and the institution has its own arbitrators closed list, i. e. , a list of arbitrators selected and maintained by the institution ( CAS, TAD, among others)

Who can be an arbitrator? On the other hand, one must not forget that Art. 9, n. 2 determines that: « 2 - No person shall be precluded, by reason of that person’s nationality, from being appointed as an arbitrator, without prejudice to the provisions of article 10, paragraph 6, and the discretion of the parties. »

Who can be an arbitrator? Art. 9, n. 3 defines the last requirement : « 3 - Arbitrators must be independent and impartial. » However, this is both a requirement and a duty/obligation of the arbitrators it will be analysed about the arbitrator status.

The Status of Arbitrators

The Status of Arbitrators The status of arbitrators: what is the meaning of this expression? «The arbitrator status’ may be defined as containing all the rights and duties of the arbitrators during the arbitration proceedings» , Mariana França Gouveia.

The Status of Arbitrators LAV devotes its Chapter II to both the arbitrators and the arbitral tribunal: Article 9 – Arbitrators’ requirements (N. 1, 2 and 3); Article 12 – Acceptance of mandate (N. 1 and 2); Article 13 - Grounds for challenge (N. 1, 2).

The Status of Arbitrators Art. 9, n. 3 - «Arbitrators must be independent and impartial. » This requirement for the arbitrators to be independent and impartial is generally accepted as a common standard in international and national arbitration. An arbitrator must be and remain independent an impartial through the entire proceedings: from the beginning until the end.

The Status of Arbitrators «The term independence relates to externally (objectively)perceptible relationships or connections of a financial, economic or social kind between an arbitrator and one of the parties. » Independence relates to any type of external influence that maybe be exercised on the arbitrator by one of the parties.

The Status of Arbitrators One the other hand, «impartiality relates to internal (subjective) factor in the form of an actual or possible bias on the part of an arbitrator in relation to the dispute or against one of the parties» . May be harder to prove that a an arbitrator is impartial than to prove that he is dependent: if the arbitrator is able to conceal his inner conceptions about one of the parties or the object of the dispute.

The Status of Arbitrators Prof. Mariana França Gouveia states in Manual de Resolução Alternativa de Litígios that: «It is usual to distinguish independence from impartiality, relating the first with the absence of a relation between the arbitrator and the parties and the latter with the lack of a relation between the arbitrator and object of the dispute» .

The Status of Arbitrators The duty of independence and impartiality incudes two dimensions: 1) It requires the arbitrator to be free from any subjective biases, preconceptions, inclinations or affinities that may, in any way, interfere with a fair and impartial decision of the parties’ dispute; 2) On the other hand, it requires the arbitrator to be objectively independent, which means that the arbitrator must be free of personal, contractual, institutional or other relationships that would compromise his or her independence.

The Status of Arbitrators «Essential elements of the arbitrators’ obligation to resolve the parties’ dispute in an adjucative matter are related duties: to be an remain impartial and independent and conduct the arbitration impartially and independently. » This duty of independence an impartiality remains during the entire arbitral proceeding.

And what about the party nominated arbitrator? Article 10 - Appointment of arbitrators « 3 - In an arbitration with three or more arbitrators, each party shall appoint an equal number of arbitrators and the arbitrators thus appointed shall appoint a further arbitrator, who shall act as chairman of the arbitral tribunal. » Is the party nominated arbitrator (árbitro de parte) also bound to the obligation of be independent and impartial?

And what about the party nominated arbitrator? The main question is: are all the arbitrators bond to the same level of independence and impartiality or, on the contrary, the arbitrators nominated by the parties have lesser standards? Is there possible to have a partial and dependent arbitrator according to the Portuguese law? What is the status of party nominated arbitrators?

And what about the party nominated arbitrator? Is there any difference from the chairperson or sole arbitrator appointed by a joint nomination of the parties, by an institution or a state tribunal? This answer is no: each member of the arbitral tribunal – regardless of the source of its nomination – has to satisfy the same standards of independence and impartiality.

And what about the party nominated arbitrator? Our Portuguese Voluntary Arbitration Law is clear about this, Cfr. Article 9 - Arbitrators’ requirements: « 3 – Arbitrators must be independent and impartial. » The legal text makes no exception: the duty of independence an impartiality lies on all the arbitrators.

And what about the party nominated arbitrator? Portuguese Arbitration Association (Associação Portuguesa De Arbitragem) Arbitrators’ Code of Ethic Art. 3 – Impartiality and Independence « 2. The arbitrator nominated by a party is not his or hers representative or agent and is, in all circumstances, subject to the ethical obligations provided in this Code. »

The Status of Arbitrators «The role of an arbitrator as an adjudicator is incompatible with the role of a lawyer (or other agent) acting on behalf of a client: an arbitrator is required to resolve a dispute between two (or more) parents, in a adjudicatory manner after hearing both parties’ submissions, generally with duties of independence and impartiality» , Gary B. Born

The Status of Arbitrators «It is fundamental in virtually all legal systems that an (…) arbitrator in not party to an attorney-client or lawyer-client relationship with any of the parties to an arbitration» , Gary B. Born.

And what about the party nominated arbitrator? An arbitrator has to be independent and impartiall due to his jurisdictional fuction. Arbitral tribunals have sovereign power, they are tribunals (Cfr. Art. 209, n. 2 CRP). Therefore, independence is a constitutional requirement for all tribunals (Art. 203 CRP – Tribunals are independent and subject only to law. )

The Status of Arbitrators Article 13 - Grounds for challenge « 1 - When a person is invited to act as an arbitrator, he or she shall disclose any circumstances that may give rise to justifiable doubts as to his or hers impartiality and independence. » It lies with the arbitrator an obligation of disclosure about any and every fact that may give rise to justifiable doubts regarding his or hers impartiality and or independence.

The Status of Arbitrators Article 13 - Grounds for challenge « 2 - The arbitrator shall, throughout the arbitral proceedings, disclose without delay to the parties and the remaining arbitrators any of the circumstances referred to in the preceding paragraph that arise subsequently, or of which he only became aware after accepting the mandate. » The disclosure obligation remains during the entire arbitration proceedings, so the arbitrator must reveal any facts or circumstances that: a) only arose subsequently to his/hers acceptance of the mandate; b) Those he/she only find out or became aware after his/hers acceptance;

The Status of Arbitrators What are «circumstances that may give rise to justifiable doubts as to his or hers impartiality and independence» ? It is hard to present a compete list of circumstances that may cause justifiable doubts – the analysis must be done case by case. It can be very useful to look into the IBA Guidelines of Conflict of Interest in International Commercial Arbitration, which provides three list: a green, a yellow and a red.

The Status of Arbitrators Red list – situations that most unequivocally bring questions about an arbitrator independence and impartiality; Orange list – facts, circumstances or situations that may rise questions about the arbitrators independence and impartially and, therefore, must have a concrete analysis. Green list – situations, facts or circumstances that do not affect or cause any questions about the arbitrator independence and impartiality.

The Red List consists of two parts Non-waivable Red List The nonwaivable Red List includes situations deriving from the overriding principle that no person can be his or her own judge. Therefore, disclosure of such a situation cannot cure the conflict. Waivable Red List The waivable Red List encompasses situations that are serious but not as severe. Because of their seriousness, unlike circumstances described in the Orange List, these situations should be considered waivable only if and when the parties, being aware of the conflict of interest situation, nevertheless expressly state their willingness to have such a person act as arbitrator.

Non waivable red list 1. 1. There is an identity between a party and the arbitrator, or the arbitrator is a legal representative of an entity that is a party in the arbitration. 1. 2. The arbitrator is a manager, director or member of the supervisory board, or has a similar controlling influence in one of the parties. 1. 3. The arbitrator has a significant financial interest in one of the parties or the outcome of the case. 1. 4. The arbitrator regularly advises the appointing party or an affiliate of the appointing party, and the arbitrator or his or her firm derives a significant financial income therefrom.

Waivable red list 2. 1. Relationship of the arbitrator to the dispute 2. 2. Arbitrator’s direct or indirect interest in the dispute. 2. 3. Arbitrator’s relationship with the parties or counsel.

Green List Orange List Is a non-exhaustive enumeration of specific situations which (depending on the facts of a given case) in the eyes of the parties may give rise to justifiable doubts as to the arbitrator’s impartiality or independence. The Orange List thus reflects situations that arbitrator has a duty to disclose such situations. In all these situations, the parties are deemed to have accepted the arbitrator if, after disclosure, no timely objection is made. The Green List contains a nonexhaustive enumeration of specific situations where no appearance of, and no actual, conflict of interest exists from the relevant objective point of view. Thus, the arbitrator has no duty to disclose situations falling within the Green List.

Orange List 3. 1. Previous services for one of the parties or other involvement in the case; 3. 2. Current services for one of the parties; 3. 3. Relationship between an arbitrator and another arbitrator or counsel; 3. 4. Relationship between arbitrator and party and others involved in the arbitration; 3. 5. Other circumstances.

Green List 4. 1. Previously expressed legal opinions; 4. 2. Previous services against one party; 4. 3. Current services for one of the parties; 4. 4. Contacts with another arbitrator or with counsel for one of the parties; 4. 5. Contacts between the arbitrator and one of the parties.

The Status of Arbitrators When can an arbitrator be challenge? Article 13 - Grounds for challenge « 3 - An arbitrator may only be challenged if circumstances exist that give rise to justifiable doubts as to the arbitrator’s impartiality or independence, or if the arbitrator does not possess the qualifications agreed to by the parties. A party may only challenge an arbitrator appointed by it, or in whose appointment it has participated, for reasons of which it becomes aware after the appointment has been made. »

Article 14 - Challenge procedure « 1 - The parties are free to agree on a procedure for challenging an arbitrator, subject to the provisions f paragraph 3 of this article. 2 - Failing such agreement, the party intending to challenge an arbitrator shall, within fifteen days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of the circumstances referred to in article 13, send to the arbitral tribunal a written statement of the reasons for the challenge. If the challenged arbitrator does not withdraw from office and the party that appointed such arbitrator insists that the arbitrator continues in office, the arbitral tribunal, including the challenged arbitrator, shall decide on the challenge. 3 - If a challenge under any procedure agreed upon by the parties or under the procedure of paragraph 2 of this article is not successful, the challenging party may request, within 15 days after having received notice of the decision rejecting the challenge, the competent State court to decide on the challenge, which decision shall be subject to no appeal. While such a request is pending, the arbitral tribunal, including the challenged arbitrator, may continue the arbitral proceedings and make an award. »

Article 46 – Application for setting aside « 3 - An arbitral award may be set aside by the competent State court only if: a) The party making the application furnishes proof that: iv) The composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Law from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Law, and, in any case, this inconformity had a decisive influence on the decision of the dispute. »

What are the arbitrator other duties? The arbitrator also has a duty of care, diligence and expedition: These duties include devoting the necessary time and attention to the process, also well as the analysis of the submissions and evidence with the necessary skills and ability; Article 12 indicates precisely this duty.

« 1 - No person may be compelled to act as an arbitrator; but if the mandate has been accepted, withdrawal shall only be legitimate if it is based on a supervening impossibility of the appointee to perform said appointee’s functions, or in case of non-conclusion of the agreement referred to in article 17, paragraph 1. 2 - Unless otherwise agreed by the parties, each appointed arbitrator shall, within 15 days from the notice of his or her appointment, declare in writing the acceptance of the mandate to whomever appointed him or her; if within such period the arbitrator neither declares his or her acceptance, nor in any other way reveals his or her intent to act as an arbitrator, such arbitrator shall be deemed not to accept the appointment. 3 - The arbitrator who, having accepted the mandate, unjustifiably withdraws from exercising his or her office shall be liable for the damages caused. »

What are the arbitrator other duties? The arbitrator also has: a duty of disclosure any circumstances that may give rise to justifiable doubts (Article 13); A duty to adjudicate the dispute, i. e. , to towards the final resolution of the dispute; A duty of confidentiality (Article 30, n. 5).

What are the arbitrator other duties? Obligation of confidentiality (Article 30, n. 5). « 5 - The arbitrators, the parties and the arbitral institutions, if such is the case, are obliged to maintain confidentiality regarding all information obtained and documents brought to their attention in the course of the arbitration proceedings, without prejudice to the right of the parties to make public procedural acts necessary to the defence of their rights and to the duty to communicate or disclose procedural acts to the competent authorities, which may be imposed by law. »

What are the arbitrator rights’? An arbitrator as the right to receive his/hers fees (Article 17). «An arbitrator’s contract entitles the arbitrator to financial remuneration by the parties in return for performance of his or her mandate» , Gary B. Born. The mount of an arbitrator’s remuneration is a matter of contract and negotiation between the arbitrator himself and the parties. The arbitration may take place according to an institute rules, therefore this rules will be applicable also to the remuneration.

What are the arbitrator rights’? An arbitrator as the right to cooperation: Gary B. Born states that the arbitrators also are «entitled to the parties’ good faith cooperation in resolving their dispute and conducting the arbitration. This is not rhetoric, but is a fundamental aspect of the parties’ agreement to arbitrate and the arbitrators’ contract. » The author continues and also says «(…) by agreeing to arbitrate, parties commit themselves to resolving their dispute through arbitration, including through cooperative efforts to ensure an efficient, fair and binding arbitral proceeding. »

What are the arbitrator rights’? An arbitrator as the right to immunity: Article 9 - Arbitrators’ requirements « 4 - Arbitrators can not be held liable for damages resulting from their decisions, save for those situations in which judges may be so. »

Thank you very much for your attention! danielamirante@gmail. com Lisbon, October 28 th