principle of natural justice that no man shall be condemned unheard

Introduction

It is a basic principle of natural justice that no man shall be condemned unheard and every man has a right to an impartial adjudicator. Arbitration process inculcates this principle and it requires a fundamental policy that arbitrator should remain neutral, independent and impartial. International Court of Arbitration provides that due process and fair hearing is required for passing independent and impartial arbitration awards. Though it appears to be simple, there are practical difficulties when applying the doctrine of impartiality and neutrality in international arbitration. On the outside or prima facie, these concepts appear to be on equal footing, but the coverage of both the terms is sometimes difficult to determine. They appear to overlap, but are intrinsically different. In reality, they may encompass values and principles, or personal belief and duties. However, the ultimate goal of arbitration is to achieve fairness of awards in an international arbitration process.

There are various international arbitration tribunals or authorities that deal with international disputes. These include UNCITRAL, Stockholm Chamber of Commerce, International Chamber of Commerce, International Court of Arbitration, the London Court of International Arbitration and the American Arbitration Association. Such tribunals may follow similar rules or deviate in interpretation of rules of arbitration, but the main consistent doctrine is that arbitrators shall be impartial to evoke confidence of their prospective clients and the business community. This essay explores and explains the two doctrines, that is, the doctrines of impartiality and neutrality in order to demonstrate the fundamental differences between the two. The essay argues that the doctrine of impartiality is the essential characteristic for a binding and valid arbitral award.

Impartiality and Neutrality: Significance and Points of Distinction

Impartiality as a term is defined as being completely receptive to parties’ arguments and there is concurrency absence of both the parties and outcome preferences.[1] Impartiality signifies that arbitrator shall have no significant interest in the cause or no preferences with the parties or the outcome.[2] Not only arbitrators shall be impartial, but they should appear to be impartial. This rule was down in cases such as Ebner v The Official Trustee in Bankruptcy,[3] and Clanae Pty Ltd. and Ors v Australia and New Zealand Banking Group Limited,[4] in which courts and tribunals have ruled that impartiality is a matter of appearances.

Impartiality as a term is defined as being completely receptive to parties’ arguments and there is concurrency absence of both the parties and outcome preferences.[1] Impartiality signifies that arbitrator shall have no significant interest in the cause or no preferences with the parties or the outcome.[2] Not only arbitrators shall be impartial, but they should appear to be impartial. This rule was down in cases such as Ebner v The Official Trustee in Bankruptcy,[3] and Clanae Pty Ltd. and Ors v Australia and New Zealand Banking Group Limited,[4] in which courts and tribunals have ruled that impartiality is a matter of appearances.

Further breaking down the term to see different aspects of impartiality, the doctrine of impartiality can be seen in two ways – first is impartiality of personal integrity and the second is political impartiality. First aspect is obviously understandable in that an arbitrator has to be unbiased throughout the arbitral proceedings. The second aspect is succinctly stated in the Statute of the Permanent Court of International Justice. Article 16 of the Statute lays down that members of the court may not exercise any political or administrative function. Article 17 states that no member can act as an agent counsel or advocate.[5] Drawbacks and issues can be drawn from the statute that in political impartiality, arbitrators may be more concerned of the interest of his nation. However, this may not be the case. In Alaska Boundary Disputes, arbitration award evidencing judicial impartiality was submitted by a tribunal comprising both British and American members.

International arbitration demands for neutral dispute resolution where international rules are applied. Neutrality in arbitration commands great importance from the stakeholders as it guarantees full disclosure and expeditious award to the parties. The term can be seen from two significant perspectives. Firstly, arbitration takes place in a country that is neutral where either party has no place of business or residence or the law of contract as adopted by between the parties is different from the law of the neutral place. This form of neutrality brings in an opportunity of equality between the parties where the neutral place does not pertain to a political, military or economic group.[7] Secondly, neutral arbitrators are chosen by the parties or through other agreed means, and they do not have shared outlook or are not from the same country as the parties. This policy can prove to be a vital factor for a healthy arbitration process as a neutral arbitrator will not have more sympathy towards the party appointing him.

Seeing the complexities of arbitration cases and the purpose arbitration rules attempt to achieve, the description of neutrality appears to be very restrictive in nature. The ultimate requirement being to achieve the objective of impartial awards, the scope of the doctrine of neutrality needs to be broadened and further simplified. It is best to state that a neutral arbitrator is nonaligned to the countries of the parties, to political and legal systems and has an outlook that conforms to the global thought process.

From a historical perspective, impartiality was a difficulty goal to achieve or enforce. There was a means missing to make this happen. Attempts were eventually made by parties and arbitrators in arbitration process to find flaws in the then existing rules related to impartiality. If one reads the Optional Clause of Article 36 of the Statute of Permanent Court, there is positive outlook to impartiality, but also provides an exception to the rule of impartiality in that it has flexible exceptions that lead to claims being made for lack of impartiality. In Alabama and Behring Sea arbitrations, such claims were made with demands to form tribunals composed on neutral arbitrators were brought to the table.[9] This leads to issues in enforcing impartiality in arbitration. Besides bringing definite improvement in the machinery of arbitral settlement, appointing neutral arbitrators can be claimed to be a means to enforce impartiality. To further concretise this concept, development was made with the formation of a tribunal with neural arbitrator under Article 87 of the Hague Convention of 1907 for Pacific Settlement of International Disputes.

By now, questions may be raised to determine the equation between impartiality and neutrality in enforcing arbitration awards. A combination of neutrality with the element of impartiality empowers arbitrators to find solution to the challenge of inefficiency of arbitration proceedings. Many efforts have been put in place to ensure the basic fundamental elements are intact. Policies covering international arbitration are laid down in IBA Guidelines on Conflicts of Interests in International Arbitration approved by the International Bar Association on May 22, 2004. A social policy of neutrality and impartiality towards the parties and the subject matter is the assurance for delivery of justice.

The term and requirement of neutrality in arbitration process cannot be ignored. It plays an important role in bringing up the requirement of impartiality at the level of being mandatory in arbitral process. In international arbitration where the subject matter attracts heated arguments, legal procedures may not come to effect to the level intended and the doctrine of neutrality plays the facilitating factor to finding a resolution to a dispute. Example can be given of Stockholm seat as the designated neutral place for arbitration during the Cold War.

The following events will show that impartiality and not neutrality is the binding force to determine validity of an arbitration award. Though it is left to the consensus of the parties to appoint or not appoint neutral arbitration, appointing a neutral arbitrator is one of the means to ensure enforceability of awards to a great extent. As per Article 11 (9) of the Arbitration Act, 1996 and UNCITRAL Rules, 1976, while appointing arbitrator, appointing authority has discretion to consider the factor of nationality of the arbitrators, and determine the level of advantages to the parties. This factor does not seem to bind with the requirement to have impartial arbitrator. Reiterating further, in the Stockholm Chamber of Commerce arbitration rules, where article 16.8 requires the sole arbitrator to be of a different nationality, “unless the parties have agreed differently or if otherwise deemed appropriate by the SCC Institute”.[12] This evidently shows having a neutral nationality is a general but not a mandatory practice and there is no guarantee that a neutral arbitrator will not be partial. Requirement of neutrality was established to convince parties of neutrality of arbitrators and it could be waived by consenting parties.

On the other hand, challenge can be made against validity of an award based on lack of impartiality. Article 10(1) of UNCITRAL Arbitration Rules states that the circumstances leading to doubt of arbitrators’ impartiality will lead to challenge of awards. Such lack of impartiality stems from various causes. One such cause is conflict of interest. Parties to a dispute can raise an objection if they believe that there is an alleged conflict of interest related to the arbitrator. One way of avoiding this situation is for the arbitrator to disclose any doubt about an arbitrator’s impartiality due to available facts prior to appointment.[14] International arbitration rules normally require the disclosure from the arbitrator of any circumstances or facts that may influence a reasonable person against one of the parties.[15] Otherwise, an arbitrator can be removed on the based on lack of impartiality.[16] It has been stated that from January 2005 through December 2007, 411 arbitral proceedings were initiated at the Stockholm Chamber of Commerce. In those proceedings, there were a total of 21 challenges to arbitrators out of which ten led to the removal of an arbitrator.

As a follow through, neutrality seems to be equated with impartiality. However, they are intrinsically different. Impartiality is subjective in that the arbitrator is considered to be apparently unbiased either in favour of the party or in favour of the issues. Neutrality, being a non-mandatory element in validating arbitration award as seen earlier, has no more decisive importance than impartiality where the factor of confidence is paramount. This is further strengthened by Article 6(4) of the UNCITRAL rules 1976 that rules out disqualification of an arbitrator because of his nationality and it is stated that the provision of appointing neutral arbitration is not a mandatory provision. UNCITRAL Model Law lays down impartiality as a mandatory provision.[18] So, even if a neutral arbitrator shares the same outlook with either of the parties, it cannot induce him to overlook his conscience in giving impartial awards.

A case that brings out the importance of impartiality and the complexity of a judge’s position in remaining impartial throughout the course of arbitral proceedings was Re Judge Broms. The arbitral award in a US-Iran arbitration was handed down by the IUSCT in 2000, with the dissenting opinion given by Judge Broms, in which he recited the terms of discussion that the members had on the merits of the case. This was objected to by the US on the ground that the divulging of the information meant that Judge Broms has breached the tribunal rules on secrecy of deliberations. Furthermore, the US argued that this disclosure also revealed Judge Broms’ bias towards Iran.[20] While dismissing the challenge of the US, the appointing authority, Sir Robert Jennings made some insightful observations, that are relevant here:

A case that brings out the importance of impartiality and the complexity of a judge’s position in remaining impartial throughout the course of arbitral proceedings was Re Judge Broms. The arbitral award in a US-Iran arbitration was handed down by the IUSCT in 2000, with the dissenting opinion given by Judge Broms, in which he recited the terms of discussion that the members had on the merits of the case. This was objected to by the US on the ground that the divulging of the information meant that Judge Broms has breached the tribunal rules on secrecy of deliberations. Furthermore, the US argued that this disclosure also revealed Judge Broms’ bias towards Iran.[20] While dismissing the challenge of the US, the appointing authority, Sir Robert Jennings made some insightful observations, that are relevant here:

“The materials put before the appointing authority do not anywhere suggest that Judge Broms is so beholden in some way to the Iranian government such that he has lost his independence of thought and action. The question of impartiality is more difficult. There is no doubt, judging by his opinion in Case A 28, that he strongly sympathises with what he sees as the Iranian position and that he is correspondingly, to that extent, opposed to what he sees as the United States position. But any judge, though he ought to begin in an impartial stance, is required as a matter of judicial duty eventually and on the basis of the presented arguments to become partial to the one side or the other. To remain neutral to the end, would be a dereliction of duty.”

Such deduction of legal principle can be seen in the international arbitration cases such as Getma International, Nct Necotrans, Getma International Investissements & Nct Infrastructure & Logistique v The Republic of Guinea.[22] In Universal Compression International Holdings, S.L.U. v The Bolivarian Republic of Venezuela, it was laid down that independence and impartiality of an arbitrator were not affected by his employment relationship four years ago with one of claimant’s counsel’s associates.[23] The 1998 version of LCIA Rules lays down that impartiality is the suitable test,[24] and the test of “evident partiality" is applied to arrive to an enforceable award.

The requirement of impartiality is significantly focused under UNCITRAL, ICC, ICSID and LCIA, AAA and IBA.[26] LCIA court all challenges related to impartiality that were considered had arisen from arbitrations seated in England. Mention may be made here of the following English cases:

English Court of Appeal decision in Jivraj v Hashwani that discussed nullity of arbitration clause that requires nationality.

Possibility test for apparent bias was laid down in Porter v Magill.

McGonnell v UK[29] laid down that the mere fact that Bailiff presided over legislature when relevant regulation was adopted casted doubt about impartiality.

In a 2015 judgment in Sierra Fishing Company and others v Hasan Said Farran and others,[30] the English Court passed an order to remove an arbitrator under s.24 of the Arbitration Act 1996, and referring to the IBA Guidelines on Conflicts of Interest in International Arbitration that provides for existence of circumstances giving rise to justifiable doubts of impartiality.

Going from the English case to the international arena, some cases related to issue of impartiality are discussed as follows:

• Opic Karimum Corporation v The Bolivarian Republic Of Venezuela[31] wherein previous arbitrator appointment by respondent in ISCID and non-ICSID cases create chances of undue influence and unfair advantage that may have apparent lack of impartiality.
• In Conoco Phillips v Bolivarian Republic of Venezuela[32] filed at the World Bank’s International Center for Settlement of Investment Disputes (“ICSID”), application of delaying tactics involving multiple attempts by Venezuela to disqualify arbitrators leading to frequent changes in arbitrators attracted penalty against Venezuela for those attempts.
• Víctor Pey Casado and Foundation “Presidente Allende” v Republic of Chile was a case involving allegation of a bias award against Chile, and violation of Article 52(1)(d) of the ICSID Convention.

In order to achieve the goal of impartial awards, besides the rules around impartiality, neutrality, or independence of arbitrators, proper administrative and operational planning encompassing appointment, conduct, presentation of facts, and involvement of government authorities and national court should also be laid down and mutually agreed upon. This is particularly necessary for cases where there are heated arguments and disruptive tactics being followed by parties that the goal of achieving efficient and impartial awards is not served. Boundaries and limitation are to be set and understood in order that there is a healthy debate and all round effort to drive justice at its right place. The consequence of not having proper administrative policies can be seen in Buraimi Oasis arbitration, where there was a misunderstanding of the roles of arbitrators and heated argument ensued between the parties. This led to the abandonment of the proceedings.

Most neutral arbitrators may start the arbitration proceeding with more sympathy towards the party that appointed them. Even no-neutral arbitrators appointed by the parties may rarely abuse the arbitral parties and they may see the facts and law in similar facts and law as seen by the parties appointing them. Nonetheless, as stated by Judge Richard Mosk and Tom Ginsberg, there is no implication that arbitrators will deviate from the rule of impartiality.[35] As also seen in the judgement of the Appointing authority in Re Judge Broms case, by the end of the proceedings, the judge has to be partial to one party or the other, as it is also required as a matter of judicial duty. The judge ought to begin impartially, but as the arguments are presented, it is natural and required that the judge should become partial to the one side or the other, as neutrality at the end would be a dereliction of duty.

Conclusion

Alternative dispute resolution mechanism has come a long way in achieving a higher level of justice. It has played a significant and substantive role in delivering cost-effective and efficient resolution of disputes. It aims for peaceful resolution keeping in mind confidentiality and economic factors of the parties involved in a case. Arbitration, as one means of alternative dispute resolution, survives on the principle of trust. The preservation of arbitral institution to sustain as an effective alternative dispute resolution mechanism depends on stakeholders giving optimum importance to arbitrators’ respect of professional ethics.[36] This will not only bring impartial and effective awards, but as a long term goal, will bring a sense of consistency and stability. The element of trust in the arbitration system stems from the only foundation that arbitrators appointed are assumed to be neutral, independent and most importantly, impartial. Not only should arbitrators be neutral, independent and impartial; they must be seen to be as such. Here, the concepts of neutrality, independence and impartiality may seem to be similar, they are not. Nor are these concepts on equal footing as the discussion in this essay has shown. The coverage of independence and impartiality is sometimes difficult to determine. They do appear to overlap, but are intrinsically different.

In a world of complex political and economic relationships between international entities, parties are looking up to international bodies to govern political and commercial undertaking in the most effective way. Hence, international arbitration tribunals look for the most practical purposes. As the need of the hour, these visions and objectives are best achieved where the determining factor is mainly or rightly put, solely the doctrine of impartiality. This doctrine cannot be equated with, overlapped with or read together with another doctrine such as neutrality. Impartiality or apparent impartiality is the ultimate binding factor for determining the validity of an international arbitration award. Therefore, the concepts of impartiality, independence and neutrality are all essential to the arbitration process, although these concepts cannot be said to be at an equal footing.

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