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Facts to disclose: What could lead to the challenge of the arbitrator
The role of the arbitrator is to decide the dispute devolved by the parties. Arbitrators are acting as judges; they have a semi-judicial power and, they must be impartial and independent during all the stages of the proceedings. Arbitrators have to disclose any fact that could affect their impartiality and independence. This duty is included in the arbitration rules provided by arbitration centres.
What are the facts that must be disclosed?
Facts need to be disclosed because they can raise suspicion regarding the impartiality and independence of the arbitrator, such as the following:
1. Comparison with the grounds for challenging a judge sets in the Civil Procedure Code
In the Arbitration Act 1987, Section 14 paragraph 3 provided for the opportunity to challenge the arbitrator using the same grounds set in the Civil Procedure Code for challenging the judge. In 2002, a new Arbitration Act came into force. This Act does not set grounds for the challenge of an arbitrator, so it is possible to infer that the interpretation of the previous Arbitration Act is still valid. According to Art. 11 and Art. 12 of the Civil Procedure Code, a judge can be challenged for different grounds. For instance, a direct interest of the judge in the decision, a relationship between the judge and one of the parties, or involvement of the judge in another proceeding connected. These circumstances could affect the judge’s impartiality and independence in a way that he/she could not decide the case. Since an arbitrator is performing a duty similar to a judge, it is reasonable to use the same grounds for his/her challenge.
2. International Bar Association (IBA) Guidelines on conflicts of interest in international arbitration.
Conflict of interest could affect parties, arbitrators and the arbitral proceedings. For this reason, arbitrators shall disclose any fact, that could endanger their impartiality and independence. In international arbitration, conflict of interest has always been seen as a ground to challenge the arbitrator. The International Bar Association (IBA), the foremost organization for international legal practitioners, bar associations and law societies, created the IBA Guidelines on conflict of interest in international arbitration (Guidelines).
Starting from the principle that arbitrators in performing their duties have to remain impartial and independence from the appointment until the end of the arbitration, the Guidelines laid down cases in which the impartiality and independence of arbitrators could be endangered. The circumstances set in the Guidelines are divided into four groups, each of them reflects a different level of severity of the conflict of interest.
(1) Non-Waivable Red List
In these circumstances, an objective conflict of interest exists from a reasonable third person knowing the relevant facts and circumstances. The arbitrator must refuse his/her appointment because such circumstances affect his/her capacity of deciding the case. For instance, there is an identity between a party and the arbitrator, or the arbitrator is a legal representative or employee of an entity that is a party in the arbitration; the arbitrator is a manager, director or member of the supervisory board, or has a controlling influence on one of the parties or an entity that has a direct economic interest in the award to be rendered in the arbitration; or the arbitrator has a significant financial or personal interest in one of the parties, or the outcome of the case. Lastly, the arbitrator or his/her firm regularly advises the party or an affiliate of the party, and the arbitrator or his/ b her firm derives significant financial income therefrom.
(2) Waivable Red List
The Waivable Red List covers 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, expressly state their willingness to have such a person act as arbitrator. For instance, The arbitrator has given legal advice, or has provided an expert opinion, on the dispute to a party or an affiliate of one of the parties; a close family member of the arbitrator has a significant financial interest in the outcome of the dispute; or the arbitrator is a lawyer in the same law firm as the counsel to one of the parties. Lastly, the arbitrator regularly advises one of the parties or an affiliate of one of the parties, but neither the arbitrator nor his/her firm derives a significant financial income therefrom.
(3) Orange list
The Orange List is a non-exhaustive list of specific situations that, depending on the facts of a given case, may, in the eyes of the parties, give rise to doubts as to the arbitrator’s impartiality or independence, with the consequence that the arbitrator has 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. For instance, the arbitrator has, within the past three years, served as counsel against one of the parties, or an affiliate of one of the parties, in an unrelated matter; the arbitrator and another arbitrator are lawyers in the same law firm or the arbitrator’s law firm is currently acting adversely to one of the parties or an affiliate of one of the parties. Lastly, The arbitrator holds a position with the appointing authority concerning the dispute.
(4) Green List
The Green List is a non-exhaustive list of specific situations where no appearance and no actual conflict of interest exists from an objective point of view. Thus, the arbitrator has no duty to disclose situations falling within the Green List. For instance, the arbitrator has previously expressed a legal opinion concerning an issue that also arises in the arbitration; a firm, in association or alliance with the arbitrator’s law firm, but that does not share significant fees or other revenues with the arbitrator’s law firm, renders services to one of the parties, or an affiliate of one of the parties, in an unrelated matter. The arbitrator and counsel for one of the parties have previously served together as arbitrators, or the arbitrator has a relationship with one of the parties or its affiliates through a social media network.
It is fundamental to notice that the Guidelines are not binding unless explicitly chosen by the parties and provides only guidelines that could help arbitrator in deciding what to disclose and parties if a circumstance could raise a doubt about the arbitrator’s impartiality and independence.
3. Guidelines from the Thailand Supreme Court’s judgements
The Thailand Supreme Court confirmed the principle that an arbitrator in performing its duties has to remain impartial and independent. This can be found in the decision n. 2231-2233/2553, where judges state that impartiality and independence are important qualities that ensure justice to parties. When an arbitration proceedings lack impartiality and independence, it leaves the room open for different types of challenges, including the one of the arbitrator and the one of the award.
(1) In the case, an arbitrator is a former shareholder of the company involved in the dispute
The Supreme Court Decision n.2231-2233/2553 states that an arbitrator has to disclose all the circumstances that can influence his/her impartiality and independence, including the one in the past. In the case at hand, a dispute among shareholders arose and they decided to appoint a former shareholder as an arbitrator and the latter failed to disclose he previously was a shareholder. The Supreme Court found that irrespective of the fact that he sold his shares and consequently he has no interest in the dispute is irrelevant. He should have disclosed such circumstances since these could affect his impartiality and independence, accordingly to Section 19 of the Arbitration Act 2002. In conclusion, he could not act as an arbitrator in the present dispute.
(2) In the case, an arbitrator acted as a counsel in a related court dispute
The Supreme Court decision n. 3542/2561 concerns an insurance case in which the president of the arbitral tribunal used to act also as counsel in related court dispute based on the same facts. In the said court dispute, the arbitrator expresses his opinion regarding the accident and the related insurance damages. This opinion is in contrast with his impartiality and independence as arbitrator in the related arbitration, having expressed a precise opinion on the facts that concern both the arbitration and the litigation in court, his impartiality is not present anymore. The arbitrator failed to disclose this circumstance to the parties of the arbitration, preventing them to take any action to challenge him. Knowing in advance his opinion expressed in the other case in the court, the parties of the arbitration could have challenged him based on Section 19 of the Arbitration Act 2002. The Supreme Court set aside the award because it is in contrast with Section 40 of the Arbitration Act regarding the public policy.
Since it could be used as a ground for challenging the arbitrator, disclosing facts that could raise doubts about the arbitrator’s impartiality and independence is very important for the continuation of the proceedings. Therefore, clarifying what are the facts and the circumstances that have to be disclosed will be helpful for every arbitrator. Arbitrators disclosing the mentioned facts and circumstances, not only preserve the arbitration proceeding but also their reputation since no objection could be raised once all facts are disclosed. For this reason, the Thailand Supreme Court needs to keep working on the interpretation of the definition of impartiality and independence and the clarification of the grounds for the challenge.
