HOW TO SELECT AN ARBITRATOR?
© Louis B. Buchman
Avocat (Paris) and Attorney at Law (New York)
Introduction: a central, but difficult question
Surprisingly, there is not much published material on this question. This is surprising, because, to quote Jim Zimmermann, a partner of Morisson & Foerster LLP in Beijing, “Many attorneys actively involved with international arbitration will agree that the selection of an arbitrator is the most important step in an arbitration proceeding”.
Why is that so? Simply because, no matter how excellent are the counsels to the parties in the arbitration, the arbitrator is ultimately the producer of the award.
To quote Fali Nariman, "Successful awards are the product of discernment, sensitivity and good judgement, not learnt in schools of law, but in the down to earth school of experience".
The operative word here is of course "experience".
The down to earth school of experience has indeed many different classes, and to select an arbitrator is in fact like making sure that the pupil attended many, if not all, of the classes.
So it is a difficult question. How difficult? Well, to select an arbitrator is about as easy as selecting a proper spouse for your child (in those rare cultures where parents still have anything to say about such choices).
Can we learn to make a good choice from the way others have been selected? Would it be a proper method to ask the arbitrators in this room how they got selected?
That would at best be indicative, but certainly not conclusive (one may be selected for the wrong reasons, and still do a commendable job).
1 Two Caveats:
1.1 Beware of a pseudo-scientific approach on how or why arbitrators are selected:
For instance, a U.S. professor of law once sent to arbitrators worldwide a questionnaire asking them to reply whether or not they would agree to refund in whole or in part the fees received, in the event the parties settle the dispute before the award is rendered.
That would be as valid a criterion to select an arbitrator as to decide to purchase a car solely because of its mileage per liter or gallon of gasoline.
1.2 Beware of reasoning in the abstract:
Look at the facts and circumstances of the case at hand:
What is the arbitration about? Are the issues in the arbitration technical or legal ones, and if both, as is often the case, which ones really govern the outcome?
Is a subject matter specialist needed or someone whose unspecialized background will actually be an asset?
Also, the selection criteria should depend on whether the arbitration at hand is an ad hoc arbitration or an arbitration administered by an institution or a center, whether one is seeking to find a suitable a co-arbitrator in a dispute to be adjudicated by a three-member panel or whether the discussion is about selecting the chairperson of the panel, and last but not the least, whether the arbitration clause at hand gives the arbitrators the power to decide ex aequo et bono, i.e. in equity, without express reference to legal norms.
These diverse situations may lead to widely differing choices.
2 The Elements of the Equation: the need for trust and the proper selection criteria
What is being sought? A person to be trusted.
Trusted to do what? To do a job unlike any other, i.e. to render a fair judgement.
There are many conflicting views about the ability of humans to properly mete out justice (Divine justice is easier to believe in).
But most of these views encompass the concept of equity or some similar notion of mitigating the effects of a “Dura Lex, Sed Lex” approach to resolving disputes.
So one seeks an active, perceptive person.
But how does one obtain somebody else’s trust?
Trust is the end-product of a combination of several elements, all of which must be present to varying degrees:
If the potential nominee has been involved in arbitrations before, he/she will hit the ground running, and there is less of a process of learning on the job.
It is therefore important to examine one’s credentials and for instance, to ask whether the experience has been primarily:
(i) in domestic, or in international arbitrations (not the same);
(ii) in ad hoc or in institutional arbitrations (not at all the same);
(iii) if in institutional arbitrations, which institutions;
(iv) as counsel or as arbitrator;
(v) if as arbitrator, sole arbitrator, institution-appointed or party-appointed arbitrator?
Double checking, or independently corroborating the answers to these questions is generally advisable.
But experience of the arbitral process, which is certainly useful, is not enough, as experience of the subject matter of the dispute may also be relevant, or knowledge of the industry in which the parties are operating.
In this respect, there are several schools of thought regarding the kind of experience sought in potential appointee.
Some consider that an academic, because of his or her superior knowledge of the law, can be as effective, or more effective, than for instance, an engineer who masters all the technical aspects of a dispute.
Others hold that on the contrary, a technical person is better suited to adjudicate certain disputes in his or her technical field, and still others believe that lawyers, being practitioners, are generally apt at applying the law to the facts and at grasping the business consequences of the award they would have to draft at the end of the day.
It is an endless debate, and there is not one answer to it.
It is debatable whether this old-fashioned notion still is a valid criterion, but by and large, a person who does not generate anything better than a frown each time his/her name is mentioned is not the best choice to be made.
Also remember that a good reputation is hard to gain and easy to loose.
Reputation is of course a relative notion, as it comes through the eyes of another.
But a reputation of integrity is to be valued above any other.
Conversely, any hint of corruptibility is a no, no.
Character has to do with one’s personality.
Having a friendly demeanour (or at least a non abrasive one) is a plus for any human being, but especially so for an arbitrator because of the delicate chemistry to be nurtured within the arbitral tribunal and among the parties and their counsels.
On the other hand, an arbitrator should not be too friendly (he/she should be able to keep a distance and say no politely but firmly if need be).
In other words, what is sought is an iron fist in a velvet glove.
2.4 Linguistic skills
Knowing more than one’s mother tongue often reveals some exposure to more than one culture (hence the greater probability of encountering the qualities of open-mindedness, tolerance, lack of initial bias, and understanding).
Moreover, such skills may be of great import in the context of a multi-cultural, international arbitration.
However, such skills, when they are claimed, should be checked, as hyperbole is not uncommon.
At the risk of stating the obvious, it should also be checked whether the languages claimed to be known by any potential appointee include the language or languages stated to be the language(s) of the arbitration, if any, or likely to become the language of the arbitration.
Ignoring this may give rise to challenges against the arbitrator later, if he/she is found not to possess the language of the arbitration (and thus be unable to correctly discharge his/her duties as arbitrator).
The availability of the arbitrator has a direct bearing on the speed with which the dispute shall be adjudicated.
It serves no useful purpose to select the most experienced arbitrator of the highest reputation, enjoying the best character and truly multilingual, if he/she has thirty or fifty arbitrations (or court cases) presently pending.
So checking by merely asking what is the potential nominee’s schedule for the coming months is no offense.
To sum up, Fali Nariman should again be quoted: “While selecting the arbitrators, we should keep in mind that the essential qualifications of an arbitrator should be honesty, integrity, impartiality and his competence, and he must demonstrate his ability to exercise these qualities faithfully and diligently”.
3 A practical, step by step, methodology
Pre-selection by counsels is much preferable to selection by institutions, because counsels generally know much more about the facts and circumstances of the case than any committee ever will.
The pre-selection process may be made in various ways: by consulting biographies in guides (there are many), rosters published by or available at arbitration institutions, and very often, by word of mouth, while talking to colleagues. Shy away in any event from those institutions which have a closed list of arbitrators. The pool to draw from is likely to be stale.
The field is then narrowed down to a shortlist, and of course clients are being consulted.
Incidentally, if the process is about selecting the chair of an arbitral tribunal, the exchange of shortlists by the party-appointed arbitrators should be a favoured method, until they find a common ground, and a mutually suitable name emerges.
3.2 Informal approach
Once the nominees have been identified and approved by the clients, they must be contacted, preferably by counsel.
An initial telephone contact is often enough to determine whether there is any interest in serving as an arbitrator, and if so, whether the nominee is capable of being sufficiently available.
A telephone interview, which is usual, may be followed by a request for a face to face interview.
There is nothing objectionable per se in such interviews, as long as their purpose is to convince the selecting counsel that the nominee has the required qualities.
But an arbitrator should be wary of counsels wanting to gauge what would be his/her position faced with this or that hypothetical situation.
There is a growing trend to probe and select based on the answers given during such interviews.
This is not in my view the best evaluative process, because most of the time, the interviewee is unable to form any educated view, for lack of a straight set of facts, and any answers given do not, in any event, inform on whether the potential arbitrator is likely or not to change his/her position later.
Conversely, the interviewee should not want to know too much, too soon, for fear of appearing too eager to be selected.
3.3 Formal request and acceptance
Once a potential arbitrator is selected, his/her acceptance to serve should be formally requested.
At this point, the appointee should make sure to disclose any and all prior contacts, be they professional or even chance social encounters with parties in an extended sense (including holding and affiliates) and their counsels, or with the counsels’ law firms.
The effect of an incomplete or inaccurate disclosure of such facts can be devastating and enable later a challenge of the arbitrator or, worse, of the award.
Conclusion: The pitfalls of a scarce resource
The combination in a single person of all the qualities needed in an arbitrator is rare.
This probably explains why so many of the best arbitrators tend to be appointed without interruption. The resource is scarce.
Could the stock be increased in size, given that so many genuinely believe they are fit for the job?
Possibly, but slowly, because of the experience factor, which cannot be hastened.
To appoint someone who is lacking in experience is, I agree, not an appealing proposition.
Are there any innovative solutions in view?
Not really, except that in order to maintain and safeguard in the long run the viability of arbitration as the primary means of international commercial dispute resolution, it is important that all players understand that it is in their best interest to try and give the younger generation a chance to prove its mettle.
To summarize, precisely because an arbitration award will only be as good as the arbitrator who drafted it, please pay attention to its careful selection.