Arbitrator Integrity: Self-Interested Arbitrator in International Commercial Arbitration

Hakemin Tarafsızlığı: Uluslararası Ticari Tahkimde Sorumsuz Hakem

Erman EROĞLU

Arbitration is mostly a fair trial; nevertheless, it may accommodate malfunctioning. Arbitrator self-interest is one of the most important malfunctions incorporated into arbitration. It is defined as arbitrator’s act of abusing their power, which is originally rendered to them to be used in fair arbitration only, to almost force the parties to engage in actions to arbitrator’s liking or to gain unfair profit. Arbitrator self-interest is evaluated under three major categories in this study; namely, arbitrators’ failure to disclose, unreasonable fee increases, and delayed award. After elucidating self-interested arbitrator in detail, suggestions, sanctions targeting arbitrator’s reputation and arbitrators’ civil liability, are proposed for dealing with these problems.

Arbitrator Ethics, Self-Interest in Arbitration, Self-Interested Arbitrator, The Power of Arbitrators, Arbitrators’ Liability

Tahkim yargılaması alternatif uyuşmazlık çözüm yöntemleri içerisinde etkin kullanılan bir yargılama biçimidir. Ancak gelişmekte olan tahkim çeşitli sorunlar ihtiva etmektedir. Tahkim yargılamasını yürütmekle görevli olan hakemlerin, tarafların iradelerinin hilafına, şahsi menfaati doğrultusunda işlemlerde bulunması bu sorunlardan birisini oluşturmaktadır. Bu bağlamda, hakemin şahsi menfaatleri üç ana kategoride değerlendirilmektedir. Bu kategoriler; hakemin tarafsızlığını etki edecek durumları açıklamaması, makul olmayan hakem ücreti artışları ve geciktirilmiş hakem kararıdır. Bu makalede, sorumsuz hakem kavramı irdelendikten sonra bu kavramdan kaynaklanan sorunların çözümü için hakemin itibarına ilişkin yaptırımlar ve hakemin hukuki sorumluluğu esas alınarak çözüm önerilerinde bulunulmaktadır.

Tahkimde Etik, Sorumsuz Hakem, Hakemin Tarafsızlığı, Hakemin Yetkisi, Hakemin Hukuki Sorumluluğu.

I. Introduction

Arbitration is a special, generally informal, and nonjudicial procedure for resolving disputes.¹ It is preferred over court litigation because it offers simplicity, efficiency, supranational neutrality, flexibility, and speed.² Even if arbitration ensures favorable conditions for settling disputes and creates competitive and effective alternative to national courts, justice and fairness should not be sacrificed to enjoy the benefits of arbitration.³ The impartiality of the arbitrators plays a significant role in this context since an award rendered by neutral tribunal⁴ may provide justice.⁵ Arbitrators have strong influence on arbitration proceedings due to the arbitral tribunal’s authority.⁶ Arbitrators may exercise their power to shape the proceedings more firmly, if they have clarity on which powers this actually entails.⁷ Nevertheless, in some circumstances, arbitrators use this authority not in favor of resolving the dispute between the parties but in their own interest, which causes the impartiality of arbitrators, by analyzing the reasons behind the lack of impartiality of arbitrators, arbitrators’ financial expectations,⁸ which can manifest in various forms, including self-interest, which is arbitrator’s act of using their power in their own interest, play a vital role.

Arbitrator’s self-interest in international commercial arbitration can be classified into three main categories; failure to disclose, fee increase, and delayed award. Failure to disclose is the arbitrator’s nondisclosure of their relations, affecting the arbitrator’s impartiality and independence.⁹ In such cases, arbitrators do not explicitly reveal any fact or information that would affect their impartiality and independence in an effort to get the benefit.¹⁰ This is referred to as the arbitrator’s self-interest by nondisclosure. Secondly, there are cases where arbitrators pursue self-interest by increasing fees. When parties accept arbitration under an institute instead of ad hoc arbitration, they intrinsically accept that they will abide by the institute’s rules. Similarly, arbitrators are expected to abide by the rules as well. Including the decisions on their fees, arbitrators follow the rules that the institutes set. Nevertheless, in some cases, arbitrators believe that the fees set by the institutes are too low and raise their fees, claiming that they are entitled to higher fees. Such cases are referred to as arbitrator’s self-interest by the fee increase. Thirdly, there are cases where arbitrators pursue self-interest by delaying awards. The cases where arbitrators delay awards by prolonging the arbitration processes are referred to as arbitrator’s self-interest by delayed awards.

Since there are no specific rules stipulating the term and the concept of “self-interested arbitrator”, it can be regulated under the arbitrator’s independence and impartiality in national laws. Thus, this study discusses the term “self-interested arbitrator” and its concept in international commercial arbitration instead of concentrating on a specific legal system, and focuses on how self-interest interferes with arbitrator’s impartiality and independence in international commercial arbitration. The remainder of this paper is divided into three sections. The first section presents the arbitrator’s pursuit of self-interest through failure to disclose, fee increase; and delayed award. The second section considers practical solutions for dealing with such arbitration cases and the enforceability of arbitral awards rendered by self-interested arbitrators. Finally, the third section provides concluding remarks and makes some proposals for future research.

II. Arbitrator’s Integrity and Taxonomy of Arbitrators’ Self-Interest

As the parties’ mutual expectation¹² is the impartiality¹³ and independence of arbitrators, they act as a cornerstone¹⁴ in the arbitration process¹⁵ ; therefore, arbitrator’s impartiality and independence must be described and disclosed explicitly.¹⁶

The impartiality of an arbitrator means both their unbiasedness towards the parties and the lack of prejudice in their approach to the subject of arbitration.¹⁷ As its definition suggests, the arbitrator’s impartiality is certainly not based on objective criteria. For arbitrator’s independence, on the other hand, this is hardly the case. Arbitrator’s independence is defined by their lack of financial, professional, or personal relation with any of the parties.¹⁸ By definition, arbitrator’s independence is based on clear and objective standards, which leaves no room for doubt. In contrast, arbitrator impartiality is in a way analogous to walking on slippery ground as it is not defined based on objective criteria unlike arbitrator independence.¹⁹ Therefore, forming a concept based on an objective evaluation of arbitrator impartiality is a must for fair trials.²⁰ In order to come up with such a concept, the definition of arbitrator impartiality has to be revised and placed on a solid basis first. There are various opinions about what these impartiality criteria should be. An opinion is that an arbitrator cannot act as the representative of any of the parties.²¹ Even if the parties themselves select the arbitrator, the arbitrator cannot act partially after being appointed.²² In fact, arbitrators must break off with the parties completely. According to another opinion in literature, after an arbitrator is selected, they must act as impartially as a juror.²³ The impartiality that is expected from an arbitrator is at a level similar to how a juror would act disinterestedly and how many relations a juror would have with the parties. In a sense, since the arbitrator is a “special judge,”²⁴ they must be as impartial as²⁵ a judge²⁶ or jury²⁷ . According to another opinion, arbitrators must decide impartially; however, the party-appointed arbitrator shall be aware of the legal position of the party which appointed them and shall convey the legal arguments to the other arbitrators.²⁸ Another argument says that the impartiality condition is satisfied provided that one arbitrator is impartial rather than all the arbitrators in a trial. It is mentioned that the arbitrators that the parties appoint do not have to be impartial.²⁹ Lastly, other views are uttering that arbitrators’ ethical responsibilities are very particular due to their role.³⁰ Although this role looks fairly similar to one of judges’, it is different in various aspects.³¹

In this section, self-interest under three subtitles based on the main ways through which arbitrators pursue it is investigated. This way, the issue can be better understood, and the related solutions can be better explained.