Independence and impartiallity: the essential cornerstone of arbitration

Written on 20 Jul 2016

It is commonly accepted that the strength of arbitration, as an instrument of conflict resolution, relies on its capacity for making decisions that, in the ligth of the parties, are considered impartial. To such extent, Act 60/2003, of 23 December, on Arbitration, as well as the relevant arbitration rules and the most recent case law, sets out the impartial and independent standards that shall be met in an arbitration process.

Although the arbitration practice has been fostered both domestically and internationally, reaching significant numbers for both businesses and individuals; some accumulated bad practices during the last decade have provoked that even today, in our country, there exists a certain amount of disbelief regarding domestic arbitration.

For this reason, it is important to remember that the overriding principles established for arbitration are the same ones that we encounter in judicial proceedings; namely: hearing and defence of the parties, the adversarial system and equality of arms… because, in the end, arbitration is little more than a jurisdictional equivalent, even though it lacks the objective conditions of independence and impartiality and, because of that, it is an essential requirement, in the quest to strengthen its image and continue its progression, to eliminate any suspicion of partiality or bias in the arbitration awards. This perception of impartiality largely comes from the correct conducting of the arbitration procedure as well as the compromise to meet the principles of any arbitration, independently of its nature or scope.

The most important aspect, to the extent that it has become the central issue for the future development of arbitration, is the election and appointment of the arbitrator, because it will be precisely the arbitrator who must meet the requirements of independence and impartiality. The terms “independence and impartiality” derive from the widely adopted Article 12 of the UNCITRAL Model Law on International Arbitration, which also sets out an appearances valuation test. This test is an indispensable and compelling requirement for those who want to be appointed arbitrators.

Likewise, Article 17.1 of Act 60/2003, of 23 December, on Arbitration (hereinafter, “AA“), states that the arbitrator “must be and remain independent and impartial throughout arbitration”. Moreover, it adds the following “they may not maintain any personal, professional or commercial relationship with the parties”. Accordingly, these principles are spelled out in numerous recent judgments; among which we highlight Sentence 66/2015 by the Madrid High Court of Justice, 23 September 2015. In this case, the Tribunal upheld the claim that challenged the award on the grounds that the proven facts constituted a rational doubt regarding the absence of neutrality.

This concept of “rational doubt” or “justifiable doubt” is precisely the touchstone of the IBA Guidelines on Conflicts of Interest in International Arbitration 2014. These guidelines, although not being legal provisions and do not override any applicable national law, have found broad acceptance within the arbitration community and they often assist arbitrators in dealing with the disclosure of information, the goal being for all the parties to be duly informed and avoid any rational doubts regarding impartiality and independence. It is also interesting to mention these IBA Guidelines because they offer applicable lists that are categorised depending on the relevance (red, orange or green). These lists or categories, despite not predicting all the possibilities, offer a wide range of different scenarios that can be faced within arbitration, both domestic and international.

So, from the relevant standards on arbitration exposed above, it may be inferred that it should be the arbitrator who should disclose the appropriate information to the parties, in an objective and exhaustive hearing (the “examination by a third person with good judgment”) aiming to protect his or her independence and impartiality. However, it is also possible that the parties can freely challenge the arbitrators. Failing an agreement between the parties and in accordance with Article 18 AA, a party who intends to challenge an arbitrator shall expose the grounds for such challenge. In this sense, unless the challenged arbitrator withdraws from office or the other party accepts the challenge, it will be the arbitrators who will decide on such challenge.

Finally, while it is true that the appointment of arbitrators is the most valued moment for protecting the impartiality and independence, it is also true that the prohibition of maintaining any relationship with the parties must remain during the whole proceedings. In fact, until the award is notified to the parties, the arbitrator must be aware of such prohibition. This is stated both in the IBA Guidelines and in the AA, in which the following is exposed in Article 17.2 : “Persons proposed to act as arbitrators must disclose any circumstances likely to give rise to justifiable doubts as to their impartiality or independence. From the time of their appointment, arbitrators will without delay disclose any such circumstances to the parties. At any time during arbitration, a party may ask arbitrators to clarify their relationships with any of the other parties”. Likewise, worth noting, in the light of challenging an arbitrator, are the abstention causes stated for Judges and Magistrates in Article 219 Organic Act of Judicial Power.

Ultimately, it is all about being aware of the past and present circumstances of the arbitrator as per analysing and determining if such circumstances can jeopardise his or her independence and impartiality, either previously or during the proceedings. This is all for contributing to a more impartial, independent, efficient and specialized administration of justice.