This piece was originally published on blog of the American Review of International Arbitration at Columbia Law School at: https://aria.law.columbia.edu/subject-bias-the-blurring-lines-between-practitioners-and-arbitrators/

Introduction

Impartiality is one of the core principles of arbitration law, a sentiment recently echoed by the English Commercial Court in Aiteo Eastern E & P Company Limited v Shell Western Supply and Trading Limited and Ors. Over the years, disputants, institutions, and courts alike have increasingly emphasized an arbitrator’s responsibility to conduct a reasonable investigation into potential nontrivial conflicts, and disclose the same. This insistence may be traced to the principle of Kompetenz-Kompetenz, which largely eliminates the possibility of court intervention once the arbitral proceedings commence. Unless touching upon the eligibility of arbitrators, parties are typically not permitted to raise judicial challenges relating to arbitrators until the award is rendered. This results in a situation where there are no winners, as even if the challenge is successful, the entire arbitration is rendered fruitless.

To this end, while it is relatively easy to identify and address concerns of apparent bias stemming from financial or personal connections, complications arise when such concerns relate to subject bias. Sometimes termed as “issue conflict”, it stems from an arbitrator having previously expressed views on a legal or factual issue relevant to the dispute at hand, raising concerns about the arbitrator’s ability to approach the case with an open mind. Arbitrators often wear multiple hats, simultaneously working as practicing counsel, professors, tribunal secretaries, etc. This dual role may lead to a potential conflict of interest, particularly where the arbitrators’ other engagements intersect with the subject-matter of the arbitration at hand.

Subject bias, which rests on two competing interests, raises an interesting predicament: the need for impartial decision-makers who can approach each case without any unconscious bias versus the inherent value of, and inclination towards, appointing arbitrators who have developed and possess field expertise.

To this effect, this article aims to understand the manner in which subject bias ought to be addressed.

Test of Bias

One of the most widely accepted tests of bias is whether a fair-minded and informed observer, having considered the facts of a case, would conclude that there is a real possibility of bias. As held by the UK Supreme Court in Halliburton Company v Chubb Bermuda Insurance Ltd, this is an objective assessment. When an arbitrator accepts appointments in multiple references concerning the same or overlapping subject-matter with only one common party, it may reasonably cause an objective observer to conclude that there is a real possibility of bias. However, whether an objective observer will reach such a conclusion will depend on the facts of each case, as well as the custom and practice in the relevant field.

In Australia, as observed in Hancock v Hancock Prospecting Pty Ltd, the test is of ‘a real danger of bias’. This test is premised on whether on the known facts there is a real risk that the arbitrator would not bring an impartial mind to the questions at hand. This is a stricter standard than the test laid down in the Halliburton case, which views this question from a reasonable person perspective.

In contrast, the ICC Arbitration Rules prescribe a subjective test, requiring arbitrators to disclose “any facts or circumstances which might be of such a nature as to call into question the arbitrator’s independence in the eyes of the parties”. Thus, the ICC views bias from the viewpoint of the concerned party, rather than a fair-minded observer.

In India, the [Indian] Arbitration and Conciliation Act, 1996, requires arbitrators to disclose all past or present relationships with interest in any of the parties or subject-matter of the dispute, whether financial, business, professional or any other kind, likely to give rise to justifiable doubts as to their independence or impartiality. The Act further borrows from the IBA Guidelines on Conflicts of Interest in International Arbitration to list the instances which may give rise to such doubts.

In practice, these varying standards mean that a subject-matter bias challenge could be viewed differently on a case-to-case basis, depending on the governing law, seat of the arbitration and institutional rules.

Past Challenges

As mentioned above, subject bias comes up when an arbitrator has a predisposition towards a particular legal or factual issue due to his or her prior involvement in similar cases, academic work, or public statements. For instance, in Republic of Ghana v. Telekom Malaysia Berhad, an arbitrator’s nomination was challenged on the ground that he had been instructed to act as a counsel in an action aimed at annulling a judgment, upon which the party had premised its allegation. Initially, the District Court of the Hague opined that until the arbitrator ceased to act as counsel in the annulment action, there would be legitimate doubts about his impartiality. Subsequently, the arbitrator ceased to act in the annulment action. However, the party still alleged that the arbitrator was recently involved in the annulment action. Consequently, as a lawyer, he had adopted a position which was contrary to the party. The court finally dismissed the challenge, clarifying that there was no automatic appearance of partiality vis-à-vis a party arguing an opposite proposition from the one the arbitrator previously argued as a counsel.

Similarly, in Urbaser v. Argentina, a challenge based on the arbitrator’s previous academic publications on legal issues relevant to the arbitration was raised. However, the co-arbitrators dismissed the challenge, noting that the expression of legal opinions in an academic context did not, on its own, demonstrate bias.

However, in Caratube v. Kazakhstan, the disqualification of an arbitrator was upheld because his special knowledge of the facts acquired from the prior arbitration, and against the same respondent, created a real possibility that he would pre-judge the issues in the current arbitration. Similarly, in CC/Devas v. India, a challenge was upheld on the ground of “repeated involvement” in similar matters, alongside strong academic opinions, that led to doubts about the arbitrator’s impartiality.

Thus, in cases where subject-matter bias is coupled with other grounds for concern, such as repeated appointments in similar cases or past relationship with parties it may lead to a conflict. This is possibly because subject-matter bias, on its own, can be difficult to substantiate as a definitive indicator of partiality.

When Does Subject Bias Become a Ground for Challenge?

As can be seen, subject bias presents an interesting conundrum in the field of arbitration, particularly given the diverse tests of bias discussed above. However, certain indicative factors can be used as guidelines to assess when subject bias becomes a ground for challenge. This includes the arbitrator having extensively engaged with the specific legal or factual issues central to the current dispute, either through advocacy as counsel, or public statements strongly and unequivocally indicating a pre-formed opinion on the matter at hand, including through publication of focused academic work. As observed in Telekom Malaysia, the arbitrator’s continued involvement as counsel would also be a determining factor when considering such a challenge. Another factor could be arbitrators having a significant economic or professional interest in maintaining consistency with a prior position taken by them regarding an issue which is the subject-matter of the arbitration. This could include ongoing consultancy work or pending publications.

Conclusion

In conclusion, one must adopt a balanced approach when dealing with such challenges. Courts and tribunals should be conscious of the fact that overcautious disqualifications may lead to an “empty chair” problem, resulting in removal of subject-matter experts. This would deprive the parties the benefit of having their disputes adjudicated by subject-experts, leading to less qualified decision-makers, which in turn would undermine the overall quality of arbitral awards.