Tuesday, October 14, 2008

Arbitrator or “Arbitraitor”? Part 2

Loyalty Against Honour:

There are many arbitrators who are members of many arbitration institutions around the world at the same time. Some try so very hard to be selected on a panel of an astounding arbitral institution. As mentioned by Dr. iur Pierre A. Karrer [1]:

“Getting on the lists of arbitral institutions- is not that important, because that is not where the appointments come from. Many of these lists are just the lists of the ambitious who pester the institution long enough to get on the list, and then they think they will get appointed, and they get disappointed, not appointed.”

This does not pose a problem at all. In fact, that is evidence of personal development as it is not easy to be welcomed on to the panel of the high class arbitral institutions.

The problem of an “Arbitraitor” is when one starts to cast negative comments against the arbitral institution, of which, he is a member, when he subsequently become “disappointed”. In the niche market of arbitration, there are many who become disappointed.

There is a fine line between constructive criticism and a plain detestation remark. Unfortunately, that fine line seems hazy in the eyes of an “Arbitraitor” who does not care to be circumspect.

Divulging the Confidential:

Arbitration is known for its confidentiality principle. Parties in an arbitration matter do not want to reveal that they are having a dispute. This hope is hopeless when they mistakenly or accidentally appoint an “Arbitraitor” to arbitrate as he would be boasting away about the matter to gain further popularity or “reputation”.

An “Arbitraitor” is without integrity. Integrity comes naturally from persons who are trustworthy and honest. This quality enables them to elude temptations at all times and everywhere. Without integrity, the confidentiality principle in arbitration crumbles.

Avarice or Greed dulls the faculties of judgment and wisdom:

The dictates of justice demand that a proper balance should be maintained between the rights and obligations of the people. Whatever is their right should be conceded to them, and steps should be taken to ensure that whatever is their obligation is duly fulfilled.

An arbitrator should be paid handsomely for his excellent services and world class Awards. There was an arbitrator who made his pile through the huge fees, in one matter. Today, even his grandchild continues to benefit from such fees. But, mind you, not everyone is as lucky as he was.

Most arbitrators start off with their scale of very low fees. As one delivers more Awards and gains more experiences, one’s fees rise accordingly.

But there are instances of arbitrators who overcharge. I have heard that an “Arbitraitor” actually charged high fees whenever there is a postponement of an arbitration proceeding, initiated by the “Arbitraitor” himself! There are cases whereby an “Arbitraitor” intentionally holds longer hearing sessions without any concrete reasons until his allowances were way higher than his agreed fees!

Greed also covers the number of cases that one has agreed to handle. Some arbitrators, who do not want to disappoint the parties appointing them, agree to all the cases offered to them. This is not natural for reputable arbitrators with good case management history.

Good values dictate that one should be truthful enough to realize that one has too many matters under one’s responsibilities and that extra cases would not only frustrate the parties concerned but also tarnish one’s reputation.

An “Arbitraitor” on the other hand, goes all out to look for arbitration cases and accepts all of the cases he bumps into until he has no time to conduct the cases expeditiously. Not only does this disrupt the speed of arbitration but it also tarnishes the arbitration’s reputation as an alternative dispute resolution. On top of that, he seeks interim payments even though it was agreed differently during appointment.

One of the many lessons that Dato’ P. G. Lim, the previous Director of the KLRCA, imparted to me was not to be greedy! Greed by itself craves for a wide definition. It includes insatiable desire for wealth. When greed is not controlled, it becomes a disease. When one suffers from this disease, personal interests will overtake all other aspects of life.

The Clash of Interests:

According to the IBA Guidelines on Conflicts of Interest in International Arbitration 2004, 4th edition, p. 556:

Explanation to General Standard 3: Disclosure by the Arbitrator

“… In determining what facts should be disclosed, an arbitrator should take into account all circumstances known to him or her, including to the extent the culture and the customs of the country of which the parties are domiciled or nationals.
(b) Disclosure is not an admission of a conflict of interest. An arbitrator who has made a disclosure to the parties considers himself or herself to be impartial or independent of the parties, despite the disclosed facts, or else he or she would have declined the nomination or resigned. An arbitrator making disclosure thus feels capable of performing his or her duties. It is the purpose of disclosure to allow the parties to judge whether or not they agree with the evaluation of the arbitrator and, if they so wish, to explore the situation further.

The “conflict of interest”[2] that the “Arbitraitor” has may give rise to justifiable doubts as to the “Arbitraitor’s” impartiality or independence and he may be challenged should either one of the parties realize or become aware of the conflict of interest after the appointment has been made.[3]

An honest arbitrator will divulge his interest to the parties. Once disclosed, the parties may still wish to have the same arbitrator based on his impartial reputation.

According to Part I: General Standards Regarding Impartiality, Independence and Disclosure of the IBA Guidelines on Conflicts of Interest in International Arbitration;

(1) General Principle

Every arbitrator shall be impartial and independent of the parties at the time of accepting an appointment to serve and shall remain so during the entire arbitration proceeding until the final award has been rendered or the proceeding has otherwise finally terminated.

Then again, an “Arbitraitor” will hide his agenda! If he did reveal, the parties would know his wicked intention to gain unjustified profits from another’s dispute. Can we not be right when we say that an “Arbitraitor”, in such circumstances, is a traitor to the arbitration profession?[4]

A Master With Servant Responsibilities:

An arbitrator is a master of his arbitration (albeit that he adheres to the rules and regulations). Be that as it may, he has a wide discretion to apply in making the award.

Being appointed by the parties, the parties have placed their trust in him to hear and decide on their disagreement justly and fairly. At the KLRCA, arbitration is regarded as a service to the commercial world to settle their disputes conveniently. This means that the arbitrators appointed are expected to serve the parties in delivering a fair and just award and at the same time benefit from his fees for his time, expertise and fair reasoning.

To some individuals or institutions, arbitration is regarded as a money making business. Some people have no qualms with this perspective. Business is fine just as long as it consists of a fair consideration and not oppressive on the parties.

As mentioned by Dato’ Seri George KS Seah[5]:

“For me, I have always regarded arbitration as a service to the community & to that end, I have arranged to fix my fees in accordance with the scale of Arbitrators’ Fees laid down by the KLRCA”

[1]Dr. iur Pierre A. Karrer, originally published in The Journal of the World Intellectual Property; Vol. 6, March 2003, No. 2, pp 13-15.

[2] The definition of “conflict of interest” can also be found in Part I: General Standards Regarding Impartiality, Independence and Disclosure of the IBA Guidelines on Conflicts of Interest in International Arbitration (http://www.ibanet.org/images/downloads/InternationalArbitrationGuidelines.pdf)
[4] Refer to the introduction of this paper.
[5] Chapter V of The Essentials in Arbitration – Experienced Arbitrators Sharing Their Knowledge, Philosophy and Skills, (published by the KLRCA in 2005) [This book is available at the KLRCA for RM120]

0 obiter dictum: